project report on finance investments

7/30/2019 project report on finance investments

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A study on

PERCEPTION OF INVESTORS TOWARDS THEMUTUAL FUNDS IN BANGALORE

Dissertation submitted in partial fulfillment of the requirements for theaward of the Degree of

MASTER OF BUSINESS ADMINISTRATIONOF

BANGALORE UNIVERSITY

By

MUJEEB K.MReg No: 06ACCM6047

Under the Guidance ofMrs.GHOUSIA KHATOON

AL-AMEEN INSTITUTE OF MANAGEMENT STUDIES

Hosur Road, Near Lalbagh Main Gate, BANGALORE-560027

2007-2008


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CONTENTS

CHAPTERS TITLE PAGENO.

Chapter-1 Introduction 1

Chapter-2 Research Design 25

Statement of the Problem 26

Objectives 26

Scope 27

Limitations 27

Methodology 27

Chapter-3 Industry & Company profile 29

Chapter-4 Analysis & Interpretations 44

Chapter-5 Findings , suggestions&Conclusions 81

Bibliography 87

Annexure 89


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LIST OF TABLES

SL

NO.

TITLE PAGE NO.

1 Age Profile of the Respondents 45

2 Occupation profile of the respondents 47

3 Number of Family Dependents of theRespondent

49

4 Income Profile of the respondents 51

5 Awareness of Investment options amongrespondents

53

6 Investment Profile of the respondents 55

7 Reason for not investing in Mutual Funds 57

8 Annual investment of the respondents 59

9 Popular Mutual Fund Products among therespondents

61

10 Ranking of factors for Investment 63

11 Investment Opinion of respondents if thereturns are between 15 % to 25% and above

65

12 Investing Option among the respondentsbetween risk and return

67

13 Awareness of Mutual Fund advertisementsamong the respondents

69

14 most common Mutual Fund CompanyAdvertisement

71

15 Influence of Brand among respondents whileinvesting in Mutual Fund

73

16 Opinion of respondents on returns in MutualFunds compared to Shares/Derivatives

75

17 Investment Firms transparency in recent

times

77

18 Performance of funds according torespondents

79


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LIST OF GRAPHS

SL

NO.

TITLE PAGE NO.


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1 Age Profile of the Respondents 46

2 Occupation profile of the respondents 48

3 Number of Family Dependents of theRespondent

50

4 Income Profile of the respondents 52

5 Awareness of Investment options amongrespondents

54

6 Investment Profile of the respondents 56

7 Reason for not investing in Mutual Funds 58

8 Annual investment of the respondents 60

9 Popular Mutual Fund Products among therespondents

62

10 Ranking of factors for Investment 64

11 Investment Opinion of respondents if thereturns are between 15 % to 25% and above

66

12 Investing Option among the respondentsbetween risk and return

68

13 Awareness of Mutual Fund advertisementsamong the respondents

70

14 most common Mutual Fund CompanyAdvertisement

72

15 Influence of Brand among respondents while

investing in Mutual Fund

74

16 Opinion of respondents on returns in MutualFunds compared to Shares/Derivatives

76

17 Investment Firms transparency in recenttimes

78

18 Performance of funds according torespondents

80


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HISTORICAL REVIEW OF MUTUAL FUNDS

In the early commercial history, Egyptians and Phoenicians sold shares in vessels and

caravans in order to spread the risk of there venture. On the same lines the idea of mutual fundhas its formal origin in Belgium, here the idea was used in transportation of ships. In 1822

Societes Generale de Belgique was started as first investment company to finance investments

in national industries with high associated risks.

Later, in Switzerland and in France similar agencies took birth, still later in 1860s it also

moved to England, in 1868, the foreign and colonial government trust was established.

In USA, the idea took root in the beginning of the 20 century and there was little activity up-

till 1924, in 1924 three investment companies were organized

Massacheusells Investment Corporation.

State Stree Investment Corporation.

US and foreign securities corporation.

All these institutions are still operating. Investment companies Act of 1940 was enacted to

protect the public investment. There are over 5000 mutual fund schemes with total assets of over

US $1million will prefer to mutual fund route to investing in equity instead of direct

participation in share market. Fidelity Investment, is the largest fund, the annual growth rate is

20-25% the trend is almost similar in all Europe.

In 1920, it entered Canada, Canadian Investment Fund in 1932, was the first mutual fund in

Canada, later on it spread to almost all countries of the world.

In U.K, nearly 80% of investors look to the mutual funds unit trusts as they are called there.

The unit trust is leading bank deposits.


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Mutual funds in the U.K. are divided into two namely,

1. Unit trusts are essentially open ended funds.

2. Investment trusts are close ended funds.

Japanese Trusts are of two kinds:

1. Unity type investment centers.

2. Open type investment centers.

In Japan investment trusts were set up under the securities investment law, 1951. The unique

characteristic difference between Japanese investment trusts and American mutual funds is the

fact tat the mutual fund industries in America evolved in response to market needs, whereas the

development of the Japanese investment trusts has been in response to Government Policy. In

recent years mutual fund in Japan and Far East countries have been showing excellent

performance. Mauritius and Netherlands are emerging as tax heavens for off shore mutual funds.


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HISTORY OF MUTUAL FUNDS IN INDIA

Mutual funds entered Indian Market in 1963. Unit trust of India was set up under the

UTI Act, 1963. It operates both as a Financial Institution and as an Investment Trust.

Unit scheme 64 was the first scheme started with a basic objective of mobilizing savings

though the sale of units and invests them in equities and other securities. It offered three-

dimensional benefits namely high yield, capital appreciation and liquidity.

The history of mutual fund in India till the mid 80s in virtually synonymous with the

history of UTI. In 1986, the UTI launched first growth scheme. Master shares which was listed

and treated in stock exchanges.

The monopoly of the UTI was broken in 1987. Public sector banks entered the scene

with their mutual funds schemes with much fun fair i.e. in 1987, five banks

State Bank of India

Canara Bank

Bank of India

Indian Bank

Punjab National Bank

Along with LIC and GIC came out with their mutual funds.

Mutual funds sponsored by the banks and other public sector financial institutions

became popular on account of

Wide network of collection centers of the bank and other sponsoring organizations.

Guaranteed returns.

Trust in the ability and reliability of the sponsors.

Accessibility and familiarity with the sponsor bank/ organizations.


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Till 1992, the scene was well as the stock market was in a boom and share prices were rising

quite sharply. So there was a great demand for equities, the investors could have never even

thought in their wildest dreams to deliver. The investors rushed to buy at what ever was on offer

they were not bothered about the risk associated with the quality of the funds on offer their

objectives and track records of the fund managers. This irrational action on the part of the

investors cost them heavily, when the bubble of Securities Scam burst in 1992, as the rise in the

prices of the stock were not because of the business performance but because of handiwork of

few brokers it was destined to meet its logical tragic end. And when this happened the market

reacted in a great panic, which led prices to fall like rune pins.

After this, SEBI issued guidelines to Mutual Fund Industry in Mutual Fund Industry in

1993 and due to the Economic Reforms, Private sector and foreign companies entered into this

sector.

The reasons for private mutual fund to enter maybe-

1. Poor servicing, in ordinate delays in the receipt of unit certificates and divided

warranties.

2. Indifferent performance of most of the mutual fund schemes, which under performed the

market thus denying the investor, reasonable returns.

3. Absence of adequate disclosure norms.

4. Lack of an investor friendly approach in general.

Kothari pioneer was the first privates company to launch its mutual fund in 1993 and

Morgan Stanley was the first foreign company to enter into the Indian market which is one of the

worlds largest mutual funds.


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Briefly the categories of players can be divided into four types, viz

UTI

Public sector banks

Insurance companies / All India financial institutions.

Private sector- inclusive of foreign companies and joint ventures.

Private sector funds are performing well in the market. A fund mobilized by private

sector is more than UTI and public sector.

RESOURCES MOBILISED BY MUTUAL FUNDS

According to data available on provisional basis, the mutual funds mobilized

Rs.22710.73 crore without adjustment of repurchase redemption during the financial year 1997-

1998. However, it is important to note that in case of open ended schemes, there was a

continuous sale and repurchase of mutual funds, and there was redemption of some of the

schemes as specially of unit 64 scheme of UTI. Consequently investible resources of mutual

funds declined to that extent. Thus after adjustment of repurchases and redemptions, there was an

outflow of funds of Rs.949.67 crore during 1998-1999. Further analysis of data shows that while

there was a net inflow of funds of Rs.1452.70 crore and Rs.315.16 crore in case of privates

sector mutual funds and public sector mutual funds, respectively, there was a net outflow of

Rs.2737.53crore in case of the UTI the largest mutual fund. The outflow would have been still

larger for the year but for sharp increase in net mobilization during March 1999. Details are

given in the following table:


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Table showing Resources Mobilization by Mutual Funds (Rs. In crore)

Private Sector MFs Public Sector MFs UTI Gran

Tota

Open

end

Close

end

Total Open

end

Close

end

Total Open

end

Close

end

Total

obili

ation

Funds

7769.59 76.91 7846.5 364.1 1307.1 1671.3 6820.23 6372.66 13192.9 227

pur

hase

mount

1101.93 36.73 1138.66 291.85 404.16 696.01 9773.41 546.26 10319.67 1215

demion Amount

5180.98 74.16 5255.14 0.27 639.90 640.17 0.00 5610.75 5610.75 1150

t In/

ut

w

Funds

1486.77 -

33.98

1452.70 72.03 263.13 335.16 -

2953.18

215.65 -2737.53 -949

CLASSIFICATION OF MUTUAL FUNDS


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Based on advantages and services offered to various sections of the society, mutual funds

can be classified into three broad categories. Viz.,

Functional Classification

Portfolio Classification

Geographical classification

FUNCTIONAL CLASSIFICATION

It is based on the basis characteristics of the mutual fund schemes opened for the public

subscription; it can be classified as;

A. OPEN ENDED MUTUAL FUNDS:

It is a scheme in which a investor can buy and sell units on daily basis, where in the

scheme have perpectual existence and a flexible ever changing corpus. Investors are free to buy

and sell any number of units at any point of time, at prices, which are linked, to NAV of the

units. As the NAV changes with time, so do the prices at which the investors can buy and sell

these units it gives complete flexibility to the investor as he can invest or dis-invest at any time.

The fund is not listed in the stock market.

The investor can buy and sell these units form and to the mutual fund. In accordance

with the recent changes, the fund manager has the option to list the fund in the stock market in

addition to repurchase and resale.

B. CLOSE ENDED MUTUAL FUND:

It is a fund where in it has a fixed corpus and operates for fixed duration at the end of

which the entire corpus is disinvested and proceeds are distributed to the various unit holders in

proportion of their holdings. The fund can also make interim payments if it so decides. Thus it


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ceases the exist after final distribution. The units are issued like any other companys new issues,

listed and quoted at the stock exchange.

The units of close-ended funds are not always redeemable at their NAV. Market prices are

determined by demand and supply and not solely by NAV. If the fund manager so chooses, he

can offer repurchase facility. So also he can resume resale to the extent of repurchase.

All the schemes discussed below are either open ended or close ended.

PORFOLIO CLASSIFICATION;

Mutual funds differ with reference to the type of instruments in which the money can be

invested. These are specified in the offer documents/ prospectus and accordingly the fund is

structured for a particular purpose.

A. BOND FUNDS:

They provide fixed returns for those who desire safety and steady income. The Fund is

invested in Government securities and Bonds. It is more liquid, diversified and conservative

investment with regular income and moderate capital gains. The price of units of a Mutual Fund

fluctuates with changing interest rates.

B.STOCK FUNDS:

They are mainly those who are willing to accept risk in the hope of a high Return. These

are called Common Stock Fund. They are of two types Growth Funds and Go-Go Funds. The

former consists of investments in Blue Chips and the latter is High Risk Stocks.

C.INCOME FUNDS:


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They are mainly to maximize the current income of investors. They are two types of

funds Low Investment Risk with steady income and High Risk Investment with maximum

income.

Investment would typically be in fixed income securities to greater extent; and in shares,

to a smaller extent. Capital appreciation in such schemes may be limited. It is ideal for retired

people and others with a need for capital stability and regular income, and investors who need

some income to supplement their earnings. As most of Investors prefer income Funds, the sales

of this fund had dominated the other types of funds.

D.MONEY MARKET MUTUAL FUNDS:

Investments are predominantly in Money Market Instruments like, Certificate of

Deposits, Commercial Paper, Treasury Bills etc. They are short term in tenure, highly liquid with

high safety. This fund is an alternative to saving account of high bracket savers. The fund cannot

invest the corpus in shares, debentures and other such papers. Returns on these schemes may

fluctuate depending upon the interest rates prevailing in the market.

E. SPECIALISED FUNDS:

These funds invest in securities of certain industries/ specific set of or specific income

producing securities. They carry more risk due to lack of diversification.

F. LEVERAGE FUNDS:

The funds borrow money in order to increase the size of the corpus and there by increase

the benefit to the Unit Holders by operating with a larger corpus than the money collected. Now

doubt the cost of borrowing funds, which have to be more than compensated by returns on

investments.

G. BALANCE FUNDS:

Here the assets are made up of a judicious mixture of industries, Stock and Bonds. To

secure reasonable rate of return, the funds are employed in high-grade common stock and

conservative fixed income securities like debentures, bonds and preference shares. In a rising


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stock market, the NAV of these schemes may not normally keep pace or fall equally when the

market falls. It is ideal for investors looking for a combination of income and moderate growth.


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H. PENSION FUNDS:

These Funds provide for long term investments out of individuals investors

superannuation savings. They take advantage of tax rate available for such investors.

I. INDEX FUNDS:

Investments are made in the index scripts with the same proportion and weight age as that

of index. The performance of fund will be in the line with the index.

J. TAX SAVING SCHEMES:

These schemes offer tax rebate to the investors under tax laws as prescribed from time to

time. This is made possible because the government offer tax incentives for investment in

specific avenues. Recent amendments to the Income Tax Act provide further opportunities to

investors to save capital gains by investing in Mutual Funds. This scheme is ideal for investors

seeking tax rebate.

MUTUAL FUND FRAME WORK

SPONSOR

Approval by SEBI

Sound track record

Experience in Financial Services

Professional Competence, Financial Soundness, Reputation, etc

Contribution to AMC Capital 40% minimum

TRUSTEE

Names to be approved by SEBI

Legally responsible for administering the Trust and Compliance

with Regulations

Norms for Trustees


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Experience in Financial Services

Minimum 4 members on the board and 50% of the members not to be connected with the

sponsor

ASSET MANAGEMENT COMPANY (AMC)

Responsible for

Launching schemes

Managing funds for schemes

Performing Accounting Function

All day-to-day affairs of the Mutual Funds

Income of an AMC/ AM fee

1.25% of weekly average NAV (Net asset value) of each scheme up to Rs 1000 crore of

assets managed.

1.00% greater than 100 crore

Infrastructure expenses to be borne by the AMC

CUSTODIAN

RESPONSIBILITIES

Safe keeping of the assets held by the Fund

Receives and Delivers Securities for payment

Follow up on Corporate benefits

Provide an independent means of control

TRANSFER AGENTS

Issue of Account Statements to Investors

Arranges payment to Investors when they redeem


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Takes care of non commercial transactions like change of address, loss of account

statement etc.

REGISTRAR

The registrar maintains the investment account of the Unit holders and also handles the

complaints and grievances from the investors relating to dividend, purchase and sale of units.

REGULATION OF MUTUAL FUNDS

The Mutual Funds operating in India was governed by a number of Regulations and

guidelines issued by various Agencies viz., UTI Act 1963 and UTI Guidelines, the Indian Trust

Act 1882, Income Tax Act 1961 etc. Mutual Funds sponsored by Banks were governed by

guidelines dated June 28,1990 and Revised Version dated February 14,1992.

The Ministry of Finance and Government of India realized the need for a set of common

rules governing entire Mutual Fund Industry, appointing a Committee under the Chairmanship of

Dr.S.A.Dave, who was the Chairman of UTI. The Committee submitted its report in 1992, based

on these recommendations SEBI issued guidelines for the Mutual Fund Industry in January 1993.

And these are known as Securities and Exchange Board of India (Mutual Funds) Regulations

1993.

After the issue of these guidelines by SEBI, Mutual Fund Industry was opened for private

sector to enter the field. And all the Mutual Funds controlled by SEBI except UTI.

Brief details of the SEBI Guidelines are:-

Mutual Funds are to be established in the form of Trust under the Indian Trust Act.

Funds and assets are to be managed by an Asset Management Company.

ASSET MANAGEMENT COMPANY

AMC shall have minimum net worth of Rs.10 Crores. AMC and Trustee of Mutual Funds

are two separate legal entities.


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AMC should furnish SEBI their respective Memorandum and Articles of association for

approval.

AMC or its affiliate can undertake activities like management and advertising services to

Pension Funds, Provident Funds, Venture Capital Funds, Financial Consultancy and

Research, but should not act as manager for any other Fund.


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SCHEMES:

All schemes floated by Mutual Funds are to be registered with SEBI.

A standard format of Schemes prospectus has to be introduced.

All the investors up to 5,000 Units will be given full allotment in case of over

subscription.

Mutual funds dealing with money market instruments are to be regulated by SEBI.

.

Other Mutual Funds Schemes, which invest partly in money

market and partly in Capital market, are regulated by SEBI.

INVESTMENT LIMITATIONS:

No Mutual Funds, under all its schemes should own more than 10% of any companys

paid up capital carrying voting rights.

Mutual Funds may invest in another scheme managed by the same AMC or others to the

extent of 5% of the NAV.

Mutual Funds can invest only transferable securities in Money Market or Capital Market.

Investment in debt instrument should generally be in those rated an investment grade and

above.

INCOME DISTRIBUTION:

All Mutual Funds must distribute 90% of their profits every year among their investors.

MARKETING OF MUTUAL FUNDS

Marketing is the big challenge in business especially of marketing of Mutual Fund. The

challenge is that with the same product and customers with diversified profile. Mutual Funds

deal with small investors hard-earned money, a sensitive commodity and only service is

involved in selling the product. Since mutual Funds interacts with lakhs of investors who are


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likely to be associated for a longer tenure, post issue services plays an important role in customer

satisfaction.

Along with four Ps namely, product, price, place, and promotion, Mutual Fund has one

more P i.e., Portfolio.

The marketing division has to design the product according to the needs of the investors

and place it in right market, in right manner, targeted to the right segment. Formalities of

marketing Mutual Funds starts with taking permission from Agencies like Ministry of Finance,

RBI, SEBI etc. Gazette Notification of Schemes is then done.

Marketing division has to evaluate the strengths, potentials, opportunities and weakness

of the market. According to the market condition it has to design the products i.e., the Scheme.

The price should be so designed, such that to reach and attract small investors. The price of one

scheme will differ from the other according to its segments of customers. Various techniques are

used to reach the unaware pocket of investors like direct mailers to full-fledged marketing

campaigns, the Fund will spend lakhs of rupees to mobilize investments and consequently

marketing cost will increase. So a marketing division should always balance its costs with the

price of the scheme. The expenses of the fund should not increase the income from the fund.

A Mutual Fund is an investment vehicle for those who want to spread their risks and seek

returns, which are than those available from Bank deposits or other investment avenues. Such

investors from should be educated to avoid facing situations of loss of faith in investments or

heavy off-loading in the huge discount of NAV.

Positioning of Mutual Fund is very important. Mr. G.D.Shenai, Managing Director,

Canara bank Mutual Fund states that Most funds have targeted the wrong segment of

customers, he feels mutual offer a solution to those people who do not have access to the Stock

Market, due to lack of time or because of geographical spreads limitations. It is this segment of

investors, which should be trapped through television. Rural markets could be penetrated with

special schemes aimed at this population. Also the wide Canara Bank network in the rural areas

could serve this clientele.


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The portfolio of investments made by fund should be regularly reviewed by calculating

the returns from each segment of the portfolio, their present market positions, evaluate their

future market position etc. if one segment is not up to the target then the portfolio should be

changed.

The portfolio should be so designed which satisfies the Schemes need. The portfolio of a

debt scheme will have more equities and less debt, liquid funds has money market instruments

and debt of very short-term tenure.

Marketing of Mutual Fund is not deal based, but it is relationship based. The psychology

of investors needs deep insight; understanding and responding to present investor will obviously

bring new investors beside retaining present investors. Thus data based marketing should be

emphasized for open-ended schemes.

PRICING OF MUTUAL FUND UNITS

Pricing is a very concept of marketing mix. Pricing of financial products is a complicated

issue. Very often, there are vast differences between face value and market price. There are some

legal restrictions on pricing of units.

SEBI Experts Committee on pricing units:

An Expert Committee was set up by SEBI under the Chairmanship of Mr.L.C.Gupta. The

Committee has suggested two options namely,-

1. The purchase and sale price can be determined with a fixed discount and premium

respectively on the NAV.

2. The AMC should have the discretion to fix the repurchase and sale prices as long as they

are anchored to the NAV i.e., the repurchase price is not lower than 93% of the NAV,

provided that the spread between repurchase price and the sale price does not exceed 7%

calculated on the sale.


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Thus the Committee has opined the repurchase and sale prices in the case open ended

schemes should be nearer to NAV after suitable adjustments for expenses in connection with

entry and exit to or from the scheme as the case may be.

SOME TERMS RELATING TO PRICE

1. Entry load or front end load A sales fee charged at the time of purchase.

2. Exit load or back end load A fee charged at the time of redemption of repurchase of

units.

3. Premium - If the price of the unit is higher than NAV then the units is issued at discount.

4. Discount - If the NAV is higher than the price of the unit then the unit is issued at

discount.

5. Managed Fees The percentage changed for portfolio management. This expense will be

stated in Funds prospectus. This expenses may decline proportionately as the Funds

asset base increases.

6. Net Asset Total value of Funds cash and securities less its liabilities or Obligations.

7. Expenses Ratio The annual expenses of a Fund include the Management fee,

Administrative costs, dividend by net assets.

8. Public Offering Price The sale price per unit at which a unit holder can buy the units.

POP = NAV / 1 Sales Load

1. Redemption Price The sales price per unit at which a unit holder can sell the units of

open ended scheme.

REDEMPTION PRICE = NAV / 1 + Exit Load

2. Repurchase Price It is the price at which a close-ended scheme repurchased its units

and it may include a back end load.


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Benefits of Mutual Funds

1. Professional Management:

Availing of the services of experienced and skill professionals who are backed by a dedicated

investment research team which analyses the performance and prospectus of Companies and

select suitable investments to achieve the objectives of the Scheme.

2. Diversification:

Mutual Funds invest in a number of companies across, aboard cross section of industries and

sectors. This diversification reduces the risk because seldom do all stocks time and in the same

proportion. Investors can achieve this diversification through Mutual Fund with far less money

he can do on his own.

3. Convenient Administration:

Investing in a Mutual Fund reduces the paper work and helps in avoiding many problems such as

bad deliveries, delay payment and unnecessary follow up with brokers and companies. Mutual;

Fund save time and make investing easy and convenient.

4. Return Potential:

Over a medium of long term, Mutual Funds have the potential to provide a higher as they invest

in a diversified basket of selected securities.

5. Low Cost:

Mutual Funds are a relatively less expensive way to invest, compared to directly investing in the

Capital Market, because the benefits of scale in brokerage, custodian and other fees translate into

lower costs for investors.


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6. Liquidity:

In open-ended schemes, one can get their money back promptly at Net Asset Value related prices

from the Mutual Fund itself. Close ended schemes units can be sold in a Stock Exchange at the

prevailing market price or avail the facility of direct repurchase at NAV related prices which

some close ended and interval schemes offer.

7. Transparency:

Investor can get regular income information on the value of their investment in addition to

disclosure on the specific investment made by the scheme, the proportion invested in each class

of assets and the fund managers investment strategy and outlook.

8. Flexibility:

Through features such as regular investment plans, regular withdrawal plans and dividend

reinvestment plans one can systematically invest or withdraw according to their needs and

convenience.

9. Choice of Scheme:

Mutual Funds offer a family of schemes to suit the varying needs of different types of investors.

10. Well Regulated:

All Mutual Funds are registered with SEBI and they function within the provision or strict

regulations designed to protect the investors investment. The operations of Mutual Funds are

regularly monitored by SEBI.


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11. Managing Risk:

While risk cannot be eliminated. Skillful management can minimise risk. Mutual funds help to

reduce risk through diversification and professional management. The experience and expertise

of Mutual Fund manages in selecting fundamentally sound securities and timing their purchases

and sales help them to build a diversified portfolio that minimizes risk and maximizes returns.

12. Tax Benefit:

At present investment in mutual fund schemes enjoy the following tax benefits

1. Since, April 1, 2003, all dividends declared by debt-based mutual funds are tax-free in

the hands of the investor. A dividend distribution tax of 12.5% (including surcharge) is be

paid by the mutual fund on the dividends declared by the fund.

2. Investors in ELSS (equity-linked savings schemes) can avail rebate under Section 88 of

the Income Tax Act, 1961 on investment up to Rs 10,000 subject to the various

conditions laid down in the said Section.

3. Under Section 10(38) of the Act, long-term capital gains arising from transfer of a unit of

mutual fund is exempt from tax if the said transaction is undertaken after October 1, 2004

and the securities transaction tax is paid to the appropriate authority.

4. Under Section 111A of the Act, short-term capital gains arising from transfer of a unit of

mutual fund is chargeable to tax @ 10% (plus applicable surcharge) if the said

transaction is undertaken after October 1, 2004 and the securities transaction tax is paid.


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However, such securities transaction tax will be allowed as rebate under Section 88E of the

Act if the transaction constitutes business income.

Under Section 112 of the Act, capital gains, not covered by the exemption under Section

10(38), chargeable on transfer of long-term capital assets are subject to following rates of

tax:

Resident Individual & HUF --- 20% plus surcharge.

Partnership Firms & Indian Companies --- 20% plus surcharge.

Foreign Companies --- 20% (no surcharge).

Capital gains will be computed after taking into account cost of acquisition as adjusted by

Cost Inflation Index notified by the central government.

Under Section 115AB of the Income Tax Act, 1961, long-term capital gains in respect of

units purchased in foreign currency by an overseas financial organization held for a period of

more than 12 months will be chargeable at the rate of 10%. Such gains will be calculated without

indexation of cost of acquisition. No surcharge is applicable for taxes under section 115AB, in

respect of corporate.

PROBLEMS FACED BY MUTUAL FUNDS;

The problems in mutual fund industry are as follows:

Volatility in Indian economy:

Shares prices in Indian stock changes frequently. Thus a fund manager has to change the

portfolio according to the changes of share prices.

Investors education:


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Many investors are not aware of the benefits from mutual funds, they are not aware of the

characteristics return risk trade off in investing in a mutual fund many investors are inactive and

ignorant.

3. Incapable fund managers:

Many fund managers lack the knowledge economy, industries and companies many playing with

investors money, they are not capable of Judge between investment choices and review

portfolio.

4. Non co-operation between organisational committee:

Sponsors, custodians, fund managers are not working hand in hand.

5. Transparency:

SEBI guidelines say mutual fund has to maintain transparency in its operations, but many funds

are not transparent to its investors, government and public.

6. After sales service:

Mutual funds are not providing after sales services to investors like give details for reference,

NAV disclosure etc.,

7. Direct launching of equity:

This may be the reason for the failure of mutual funds. In USA debt schemes were first incepted

and then equity schemes were started, but in India due to boom in share market direct equity

schemes were started and then debt schemes were introduced.

8. High risk, low return:


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The return, which a investor gets from mutual fund, is low, but the risk is high. Return earned

from fund has to be distributed among the unit holders only after deduction for maintenance of

the fund, thus the return will be low.

New trends in mutual fund industry

Systematic investment plan (SIP):

Unit holders can benefit by investing specified rupee accounts at regular intervals for a

continuous periods, for purchasing additional units of the schemes at NAV based prices. By this

unit holder can take advantage of the benefits of rupee cost averaging.

Systematic withdrawal plan (SWP):

SWP allows the unit holders to withdraw a specific sum of money each month/ quarter/ half

year/ yearly from his investments in the schemes. The amount thus withdrawn by redemption

will be converted into units at applicable NAV based prices and the numbers of units so arrived

at will be subtracted from the units balance to the credit of the unit holder.

Switching options:

Unit holders under one scheme can switch or all of their holdings in the schemes to another,

which is available for investment at that time.

Dividend at short intervals:Dividends from liquid funds are now coming thick and fast, with funds promising fortnightly and

even weekly, pay-outs, liquid funds mainly targets companies and high net worth individuals.

Loans against Mutual Funds:


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Birla Global finance offers loans against mutual fund units. The company tracks 10 best

performing open ended mutual funds and grant loans against units of these funds. Investors have

to pledge their units at interest rate of 17.5%. the company will disburse loan up to 60% of the

value of equity fund up to 85-90% of the debt fund units. Term of the loan is a minimum of 15

days up to a maximum of a year.

Electronic clearance:

Reserve bank of India has introduced a new method of payment which promises, investors an

option to collect periodic interest/ dividend/ repurchase/ redemption directly through bank

account. In this system payment instruction would be issued electronically through bank to the

clearing authority and the clearing authority would supply credit reports to the bank with which

investors maintain the specified account. The branch will credit the account directly and an ECS

entry will appear in the passbook. A payment advice will also be send to investors. This facility

will help kin avoiding cases of pilferage, fraudulent encashment etc.,


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The scope of the study is extended to study investors perception towards the mutual fund

schemes and preparations of feasibility report based on study conducted by the research in

Bangalore during the period of 2007&2008

LIMITATIONS OF THE STUDY

Efforts were made to see that the data collected and analysed were as accurate as possible. In

spite of all precautions taken, certain limitations of the study can be observed.

1. The sample size taken for research may not give exact figure or may not cover the entire

population artificially or that the respondent may be biased.

2. The second constrain is that the respondent may skip some questions. Also they may not

respond to every question correctly.

3. The third and important constrain is the time limit. Since the study had to be conducted in

a short span of time, the accuracy may be affected.

4. Finally the techniques used in data analysis may not be as accurate as other software

applications.


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RESEARCH METHODOLOGY:

In due course of data collection for covering the above stated objectives, the study

methodologies followed are:

Direct interview with unit holders.

Discussion with persons who have knowledge about mutual funds.

Discussion with brokers.

In-depth study of various books on mutual funds, magazines, journals and newspapers.

TOOLS USED IN DATA COLLECTION:

Primary data:-

Primary data was collected through:

Questionnaire .

Discussion with persons who have knowledge about this subject.

Secondary data:-

Secondary data was obtained from:-

Magazines, journals and newspapers.

Internet.


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. Reports of SEBI, RBI etc..

SAMPLE

It includes investors who are investing mutual fund and money market.

SAMPLE SIZE

Sample size is 50 respondents and method of sampling is random sampling.


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In the U.S the mutual fund business is growing at an annual rate of twenty to twenty-

five per cent. According to a review conducted by Gold man Sachs, a leading U.S

merchant banker, mutual funds are now the markets driving force, having brought

eighty-four per cent of all shares acquired on 1993.

The great diversity if mutual fund schemes in the U.S is illustrated by the Amana funds,

the first and apparently the only U.S mutual fund operating according to strict Islamic guidelines

reportedly. Since Islamic law prohibits a guaranteed return on investment, the fund holds no

bond orpreferred stock, and keeps its cash in checking accounts, which pay no interest. Thus

fund, however, invests in stocks, which rise and fall in value and can rise, lower or eliminate any

dividend.

In all of Europe, too, the trend is similar. The major stock exchange at Luxembourg which has

developed specialized skills in euro-issues, had 67 mutual funds, funds commons as they are

known, listed in 1984 with net assets of LUF 24,690 billion. In 1990,the number of funds

increased to 268 and their net assets to LUF 1,38,660 billion. In keeping with general trend there

was a dramatic surge in mutual funds investments.Obviously with such a large choice, the

western investors has a wide variety of options and doesnt have to rely on the same stereotyped

schemes popularly known as plain vanilla schemes.

Mutual Funds in India

Mutual funds first made their entry in India in 1964 with the Unit Scheme 64 launched by the

Unit Trust of India (UTI). UTI was set up under the UTI Act, 1963, to operate both as a financial

institution and investment trust. Unit Scheme 64 turned out to be extremely popular, initially as a

vehicle for domestic savings, but subsequently as an instrument for corporate holding as well. By

1964, the investable funds in this scheme had crossed Rs. 12,000 crores.

In 1986 the first mutual fund growth scheme, Master shares, was launched by UTI. This was

successfully listed and traded in the stock exchange. Encouraged by this venture, other players

emerged. In 1987 The State Bank of India Mutual Fund (SBI MF) and Canara Bank Mutual

Fund (Canbank MF) started their operations, followed by the mutual funds sponsored by the

Bank of India, Indian Bank and Punjab National Bank. Not to lag behind, Life Insurance

Corporation of India (LIC) and General Insurance Corporation (GIC), too, sponsored their

respective mutual fund schemes.


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Seven institutions in the Public Sector -five banks and two insurance companies thus followed

UTI. They all had the inherent advantage of basic infrastructure, an overflow of funds and

customer service outlets. By the end of March 93, the total corpus of the big eight was

approximately Rs 50,000 crores. With UTI alone, accounting for Rs 40,000 crores.

The spectacular surge came in 1992-93 when the total number of investors increased from 18

million to 32 million and the combined corpus rose to Rs 38,000 crores. Much of it was no doubt

account for by UTI Master Gain 92 which netted in Rs 4,791.79crore winning for itself a place in

Guinness book of records. This increase has to be viewed against the background of net assets of

a measly Rs4, 000 crore in 1987 for the entire eight-fund put together.

Phase of development of mutual fund in India

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the

initiative of the Government of India and Reserve Bank the. The history of mutual funds in India

can be broadly divided into four distinct phases.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the

Reserve Bank of India and functioned under the Regulatory and administrative control of the

Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development

Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The


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first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700

crores of assets under management

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and

Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).

SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by

Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank

Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC

established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990

At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in

which the first Mutual Fund Regulations came into being, under which all mutual funds, except

UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with

Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual

Fund) Regulations 1996

The number of mutual fund houses went on increasing, with many foreign mutual funds setting

up funds in India and also the industry has witnessed several mergers and acquisitions. As at the


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end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The

Unit Trust of India withRs.44,541 crores of assets under management was way ahead of other

mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated

into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets

under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the

assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of

Unit Trust of India, functioning under an administrator and under the rules framed by

Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered

with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the

erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management

and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund

Regulations, and with recent mergers taking place among different private sector funds, the

mutual fund industry has entered its current phase of consolidation and growth. As at the end of

September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421

schemes

The graph indicates the growth of assets over the years:-

GROWTH IN ASSETS UNDER MANAGEMENT


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Private mutual funds

However, the monopoly of the big eight was ended by the new economic policy

spearheaded by Dr. Manmohan Singh from 1991. The process of liberalization threw the doors

open to players in the private sector to provide the

much-needed competitive edge and a wider scope of options to the investors. The existing

mutual funds, it was felt, had failed to live up to the expectations of common investors due to:

(a) Poor servicing, inordinate delays in the receipt of unit certificates and dividend warrants;

(b) Indifferent performance of most of the mutual fund schemes which under-performed the

market thus denying the investors a reasonable return;

(c) Absence of adequate disclosure norms; and

(d) Lack of an investor-friendly approach in general.

Hence the securities and Exchange Board of India (SEBI) accorded approval to a number of

players in the private sector to sponsor mutual funds. These include some of the biggest

heavyweights of Indian corporate sector.


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An important feature of the private sector mutual funds-at least the first few-was their

collaboration with foreign investment and fund managers. Thus Kothari tied up with Pioneer, the

oldest fund in the US managing $8 billion, 20th century with Kemper Corporations which

claimed to be the eight largest fund manager in USA managing assets over $70 billion. Credit

capital asset managers inc. that launched the Taurua Starshare had for its partners, apart from

Commonwealth Development Corporation, London and Asian Development Bank, Manila,

International Finance Corporation, Washington (Rs 22.50 crore), and Edinburgh Fund Managers,

U.K (Rs 24 crores).

While many Indian private sector mutual funds collaborated with foreign partners, Morgan

Stanley, which manages funds worth $44.2 billion, chose to go it alone. Its issue was a runaway

success. There was serious controversy and the apex court had to intervene. The issue was

heavily over-subscribed netting in Rs 1,000 crore against the target Rs 300 crore.

The vital aspect of a strong research capability of foreign collaborators had been recognized and

the public sector GIC Mutual Fund, too, reacted to the winds of change and tied up with he U.S

Soros Fund Management headed by the legendary George Soros who manages funds worth

$10billion.

ICICI Mutual Funds had merged with Prudential, Tata Mutual Funds with Toronto Dominion

(TD). Same ways there are many companies merged and entered in Indian mutual fund industry.

Important Domestic Mutual Fund Players

I) SBI Mutual Fund

SBI Mutual Fund draws strength from India's premier and largest bank; the State Bank of India.

Set up on July 1, 1955, the State Bank of India is the largest banking operation in the country.

SBI Mutual Fund has grown tremendously in terms of corpus as well as number of investors.


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Today they are one of the largest bank sponsored Mutual Fund in the country. SBI have launched

35 Schemes, of which 15 have been redeemed, yielding handsome returns to investors.

SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset

Management, one of the worlds leading fund management companies that manage over

US$ 330 Billion worldwide.

They were also the first Bank sponsored Mutual Fund to launch an offshore fund, the India

Magnum Fund, with a corpus of around Rs. 225 Crores.. Today, the fund manages over Rs.

16500 crores of assets and has a diverse profile of investors actively parking their

investments across 30 active schemes. With a large network over 100 collection branches, 26

Investor Service Centres, 28 Investor Service Desks and 52 District Organizers, SBI constantly

endeavour to get closer to their growing family of investors.

SBI gives the investors the following options:

1) Open ended schemes

Equity schemes

Magnum Equity Fund

Magnum Tax gain
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Magnum Index Fund

Magnum Sector Funds Umbrella

Magnum Multiplier Plus Scheme

Magnum Global Fund

Debt Schemes

Magnum NRI Investment Fund

Magnum Income Plus Fund

Magnum Income Fund

Magnum Children's Benefit Plan

Magnum Monthly Income Plan

Magnum Gilt Fund

2) Closed schemes

Magnum Tax Profit 1994

Magnum Equity Linked Savings Scheme 95

Magnum Equity Linked Savings Scheme 96

II) Birla Sun Life

Birla Sun Life Financial Services offers a range of financial services for resident Indians and

Non Resident Indians. Brought together by two large, powerful and reputed business houses, the

Aditya Birla Group and Sun Life Financial, the aim is to offer diverse and top quality financial
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services to customers. The Mutual Fund and Insurance companies provide wealth management

and protection products to customers while the Distribution and Securities companies provide

brokerage and trading services for investment in equities, debt securities, fixed deposits, etc.

Birla Sun Life Asset Management Company Limited

Birla Sun Life Mutual Fund follows a conservative long-term approach to investment, which is

based on identifying companies that have good credit-worthiness and are fundamentally strong.

It places a lot of emphasis on quality of management and risk control. This is done through

extensive analysis that includes factory visits and field research. It has one of the largest team of

research analysts in the industry.

Investment options:

Equity Schemes

Debt Schemes

Balanced Schemes

Offshore Schemes

III) Reliance Mutual Fund

Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act, 1882

with Reliance Capital Limited (RCL), as the Settlor/Sponsor and Reliance Capital Trustee Co.

Limited (RCTCL), as thetrustee.

RMF has been registered with the Securities & Exchange Board of India (SEBI). The name of

Reliance Capital Mutual Fund has been changed to Reliance Mutual Fund effective 11th. March

2004. Reliance Mutual Fund was formed to launch various schemes under which units are issued

to the Public with a view to contribute to the capital market and to provide investors the

opportunities to make investments in diversified securities.

Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Assets Under

Management (AUM) of Rs. 39019 crore (AUM as on 31st Jan 2007) and an investor base of over


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3.1 million.RMF offers investors a well-rounded portfolio of products to meet varying investor

requirements and has presence in 115 cities across the country.

OPTIONS AVAILABLE TO AN INVESTOR

DEBT SCHEMES

Reliance Monthly Income Plan

Reliance Income Fund

Reliance Medium Term Fund

Reliance Liquid Fund

Reliance Short Term Fund

Reliance Gilt Securities Fund

Reliance Fixed Term Scheme

Reliance Floating Rate Fund

EQUITY SCHEMES

Reliance Growth Fund

Reliance Vision Fund

SECTOR SPECIFIC SCHEMES

Reliance Banking Fund

Reliance Diversified Power Sector Fund

Reliance Pharma Fund

IV) ICICI PRUDENTIAL MUTUAL FUNDS


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Prudential ICICI Asset Management Company, (55%:45%) a joint venture between Prudential

Plc, UK's leading insurance company and ICICI Bank Ltd, India's premier financial institution.

The joint venture was formed with the key objective of providing the Indian investor mutual

fund products to suit a variety of investment needs. The AMC has already launched a range of

products to suit different risk and maturity profiles.

Prudential ICICI Asset Management Company Limited with asset over Rs.37906.24 crore as on

march 31, 2008. Both Prudential and ICICI Bank Ltd have a strategic long-term commitment to

the rapidly expanding financial services sector in India.

Options

Equity funds

The funds offered under this category are the Prudential ICICI Growth Plan, Prudential ICICI

FMCG Fund, Prudential ICICI Technology Fund, Prudential ICICI Tax Plan, Prudential ICICI

Index Fund and Prudential ICICI Power.

Debt funds

The funds offered under this category are the Prudential ICICI Income Plan, the Prudential ICICI

Gilt-Treasury Fund, The Prudential ICICI Gilt-Investment Fund, Prudential ICICI Liquid plan,

Prudential ICICI Fixed Maturity Plan, Prudential ICICI Short Term Plan, Prudential ICICI Long

Term Plan and Prudential ICICI Sweep Plan


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Balanced fund

The funds offered under this category are the Prudential ICICI Balanced Fund and Prudential

ICICI Child Care Plan.

V) TATA MUTUALFUND

Corporate Profile

Tata Asset Management Limited is one of India's fastest growing fund management companies

with more than Rs. 12562.65(31st august 2006) crores of assets, from about 0.3 million

investors.

Tata Asset Management Ltd. is a part of the Tata group - one of India's largest and most

respected industrial group. The Tata Group is one of India's best-known conglomerate in the

private sector with a turnover of around US $ 11.2 billion Long known for its adherence to

business ethics, it is India's most respected private business group. With 210,443 employees

across 93 companies, it is also India's largest employer in the private sector.

The Group has always believed in returning wealth to the society which it serves. Thus, nearly

two-thirds of the equity of Tata Sons, the Group's promoter company, is held by philanthropic

trusts which have created a host of national institutions in natural sciences, medical care, energy

and the arts, and which give substantial annual grants and endowments to deserving individuals

and institutions in the areas of education, healthcare and social Upliftment.


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Investment Process

Every aspect of this process is tightly controlled and monitored to optimize returns for the

investors.

The investment process is built around four key principles:

The investment and risk control process concentrates on Fundamentals, Exposure, Liquidity and

Tenure. Tata Mutual Fund call it the FELT process of Investment and risk control.

Products

Equity Products Balanced Products Debt Products

Tata Pure Equity Fund Tata Balanced Fund Tata Liquid Fund

Tata Tax Saving Fund Tata Young Citizens' Fund Tata Short Term Bond Fund

Tata Select Equity Fund Tata Gilt Securities Fund

Tata Life Sciences &

Technology Fund Tata Income Fund

Tata Equity Opportunities

Fund

Tata Income Plus Fund

Tata Index Fund Tata Fixed Horizon Fund

Tata Growth Fund Tata Monthly Income Fund
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VI) KOTAK MAHINDRA MUTUAL FUND

Kotak Mahindra is one of India's leading financial institutions, offering complete financial

solutions that encompass every sphere of life. From commercial banking, to stock broking, to

mutual funds, to life insurance, to investment banking, the group caters to the financial needs of

individuals and corporates

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary

of KMBL, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). The group has a net

worth of around Rs.2,900 crore and employs around 8,800 employees across its various

businesses servicing around 2 million customer accounts through a distribution network of

branches, franchisees, representative offices and satellite offices across 282 cities and towns in

India and offices in New York, London, Dubai and Mauritius. KMMF offers schemes catering to

investors with varying risk- return profiles and was the first fund house in the country to launch a

dedicated gilt scheme investing only in government securities.

Products

Debt

Kotak Bond

Kotak Dynamic Income

Kotak Floater Short Term

Kotak Floater Long Term

Kotak Gilt

Kotak Income Plus

Balance

Kotak Balance

Equity

Kotak Equity FOF

Kotak Global India


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DATA ANALYSIS AND INTERPRETATION

TABLE NO: 1

Table showing Age Profile of the Respondents

Age No. Of Respondents Percentage

18-25 07 14

26-30 09 18

31-35 24 48

36 & Above 10 20

Total 50 100

Analysis: This table is designed to measure the Age Profile of the respondents. 48% of

the respondents are of 31-35 age groups. 20% of these falls under 36 and above age group. 18%

of the respondents are of 26-30 age groups. Remaining 14% belong to 18-25 age groups.

Interpretation:

From the Age Profile of the respondents, it is clear that people are investing once they earn a

regular income. 86% are above 26 years which means people invest once they are settled.


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GRAPH: 1

Graph showing Age Profile of the Respondents


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TABLE No: 2

Table showing Occupation profile of the respondents

Occupation No. Of respondents Percentage

Business 06 12

Profession 19 38

House wife 08 06

Service 18 36

Others 04 08

Total 50 100

Analysis:

In occupation profile there are five groups namely business, profession, housewife, services and

others. Here professional respondent are 38%, services 36 %, business people 12 %, others 8%

and housewives 6%.

Interpretation:

This data shows that respondents from profession and service category are aware of mutual funds

and have also invested in it, whereas business people are aware of mutual funds but they are not

ready to invest. Whereas, in case of others (student) and housewives investment is lesser. Thus

this implies that respondents from professional and services category are good contributors to

mutual funds.


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GRAPH: 2

Graph showing Occupation profile of the respondents


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TABLE NO: 3

Table Showing Number of Family Dependents of the Respondent

SLNO SIZE NO %

1 0-2 18 18

2 3-4 48 48

3 5 & Above 34 34

Analysis:

In the above table, 48% of the respondents have family dependents.With in the range of 3-

4, 34% of the respondents have 5 and above dependents, 18% of the people have family

dependents in the range of 0-2.

Interpretation:

As most of the respondents are having their dependents in range of 3-4 and 5 & above they

are more serious in investing their savings for the future of their dependents.


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GRAPH-3

Graph Showing Number of Family Dependents of the Respondent


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TABLE No : 4

Table showing Income Profile of the respondents

Income No. Of respondents Percentage

Below 5000 00 00

6000 to 15000 05 10

16000 to 25000 21 42

26000 to 35000 15 30

36000 and above 09 18

Total 50 100

Analysis:

It is clear from the table that 42% of investors fall in the income bracket of 16000-25000. 30% of

the investors have income of 26000-35000; where as 18% of the investors have income of 36000

and above. The remaining 10% of the investors fall in the income bracket of 6000-15000.

Interpretation:

90% of the respondents earn Rs.16000/- or more every month. The more they earn the

more they can invest and vice versa. People earning less can invest in small amounts, whereas

people earning more can go for higher investments and take higher risks for higher returns.


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GRAPH No: 4

Graph showing Income Profile of the respondents


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TABLE No : 5

Table showing Awareness of Investment options among respondents

Investment Option No. Of respondents aware Percentage

Insurance 45 90

Bonds 40 80

Real Estate 20 40

Stock 42 84

Mutual Fund 43 86

Analysis:

In the above table it is found that 90% of the respondents are aware of insurance,80% are aware

of bonds,40% for real estate,84%on stocks and 86% are aware of Mutual Funds.

Interpretation:

This table gives you idea about awareness on investment options among all the respondents.

Here it is indicated that mutual fund is popular, second only to insurance. This study is

conducted for general public and mutual fund investors. Mutual funds are not as old as insurance

in India. From this table it is clear that 86 % of respondents are aware of mutual funds.


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GRAPH No: 5

Graph showing Awareness of Investment options among respondents


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TABLE No : 6

Table showing Investment Profile of the respondents

Investment Option No. Of respondents Percentage

Insurance 25 50

Bonds 15 30

Real Estate 05 10Stock 25 50

Mutual Funds 33 66

Analysis:

In a sample size of 50, 66% of the respondents are mutual fund investors and rest of them have

not invested in mutual funds. They have invested in various options like insurance, bonds, real

estate and stocks.(34%)

Interpretation:

Most of the respondents have invested in Mutual funds with bonds and stocks coming

second. This means the awareness about Mutual funds have prompted more and more persons to

invest in Mutual funds, since it has a high return. Stocks and Mutual funds are high risk areas

with high returns. So people are ready to take more risks for more returns.


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GRAPH No: 6

Graph ShowingInvestment Profile of the respondents


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GRAPH:7

Graph showing reason for not investing in mutual funds


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TABLE: 8

Table showing annual investment of the respondents

SLNO ANNUAL INVESTMENT NO %

1 Less than 5,000 14 14

2 5,000-10,000 44 44

3 10,000-20,000 20 20

4 Above 20,000 22 22

Analysis:

In the above table most of them invest/ save between 5,000 to 10,000 - 44% . 22% of the people

save/invest above 20,000, 20% of the respondents save/invest between 10,000 to 20,000 and

14% of them invest less than 5,000.

Interpretation:

As many respondents income lie below Rs 1,00,000 p.a they are possible to save/invest only for

about five to ten thousand rupees p.a. The higher they invest, the higher is the return and vice

versa.


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GRAPH:8

Graph showing the annual investment of the respondents


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TABLE No: 9

Table showing Popular Mutual Fund Products among the respondents

Mutual Fund Products No.of respondents Percentage

Prudential ICICI 29 88

Kotak Mahindra 15 45

HDFC Mutual Fund 19 57

Birla Sun life 17 51

SBI Mutual Fund 09 27

LIC Mutual Fund 08 24

Canbank Mutual Fund 08 24

Franklin Templeton M.F 21 63

Analysis:

The most popular mutual funds among the respondents are, Prudential ICICI with 88%, Franklin

Templeton mutual funds with 63%, HDFC mutual funds 57%, Birla Sun Life 51%, Kotak

Mahindra mutual funds 45%, and rest of them are with average of around 24%and 27%. This is

applicable for only mutual investors.

Interpretation:

From the above its clear that ICICI and Franklin Templeton are popular among investors.

This is because of the aggressive advertisements they employ. Advertisements help a company to

have a brand image which is very important in the field of Mutual funds.


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\

GRAPH No: 9

Graph Showing Popular Mutual Fund Products among the respondents


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TABLE No: 10

Table Showing Ranking of factors for Investment

Factors Simple average Ranks

Assured Return 7 02

Risk Cover 4 05

Government Guarantee 5 04

High Return 7 01

Voting right 2 06

Liquidity 5 03

Analysis:

This table is designed to study the most important factors for investors to invest in various

investment options. Investors have ranked High Return, Assured Return, Liquidity, Government

Guarantee, Risk Cover and Voting Right as the important factors for investments respectively.

Interpretation:

Returns are the most sought after criteria for investment. In other words, returns are the key for

investments. The investors are not worried about the risk involved. Mutual funds are high risk


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areas with high returns. People are ready to take more risks for more returns. They are not

bothered about voting powers or taxation aspect either.

GRAPH No: 10

Graph Showing Ranking of factors for Investment


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Table No: 11

Table showing Investment Opinion of respondents if the returns are between 15 % to 25% and

above

Opinion No. Of respondents Percentage

Consider 12 71

Ignore 05 29

Total 17 100

Analysis:

This table is constructed to know the opinion of the respondents if the returns are between 15%

to 25%. These respondents have not invested in Mutual Funds. If the return is 15% to 25 %, then

71% of the respondents say that they may consider investing in mutual funds. Where as 29% of

them say they ignore.

Interpretation:

From this also it is clear that investors care primarily about one thing only Returns. If they are

assured of a certain return, people who usually dont invest 0r also ready to invest. So return is

the buzz word for investments. A company who can provide consistent returns can attract more

number of investors.


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Graph No: 11

Graph showing Investment Opinion of respondents if the returns are between 15 % to 25% and

above


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Table No: 12

Table showing Investing Option among the respondents between risk and return

Returns No. Of

respondents

Percentage

15% to 20% return with moderate

risk

04 33

20% to 30% with high risk 06 50

30% to 40% with very high risk 02 17

Total 12 100

Analysis:

This table shows the expectations of investor on the returns, the data show that 33% are

interested in 15 %to 20 % returns with moderate risk. 50% say 20% to30% with high risk and

finally 17% respondents want 30% to 40% with very high risk.

Interpretation:

Even a high risk is okay for the respondents, as 50% suggested. More than three fourth of the

respondents are not concerned about risk if they get returns for the risk taken. This once again

proves the fact that investors care more for returns and not for risks.


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Graph No 12

Graph showing Investing Option among the respondents between risk and return


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Table No: 13

Table showing Awareness of Mutual Fund advertisements among the respondents

Awareness No. Of respondents Percentage

Yes 39 78

No 11 22

Total 50 100

Analysis:

Data analysis says that 78% are aware of mutual fund Advertisements and 22% say that they are

not aware.

Interpretation:

Awareness about the product is very important for financial service marketing, in particular, to

succeed in modern competitive world. The more the advertisements, the more it helps the

company to have a proper brand image and brand is the key to success in Mutual funds as people

like to invest in a popular and well known company.


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Graph No: 13

Graph showing Awareness of Mutual Fund advertisements among the respondents


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Table No: 14

Table showing The most common Mutual Fund Company Advertisement

Mutual Fund Company No.of respondents Percentage

ICICI Prudential 28 72

Kotak Mahindra 09 23

HDFC Mutual Fund 07 18

Birla Sun life 19 49

SBI Mutual Fund 18 46

LIC Mutual Fund 06 15

Canbank Mutual Fund 04 10

FranklinTempleton M.F 26 67

Analysis:

72% of the respondents have voted Prudential ICICIs advertisement as the most popular one

closely followed by Templeton. Birla and SBI, with Canbank getting the least percentage.

Interpretation:

This table is designed to study the most common advertisement of Mutual Fund companies

among the respondents. Prudential ICICI and Franklin Templeton are the popular companies as


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far as advertisement goes. Theses advertisements have helped these two companies to be the

most respected brands in this field.

Graph No: 14

Graph showing The most common Mutual Fund Company Advertisement


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Table showing Influence of Brand among respondents while investing in Mutual Fund

Influence No. Of respondents Percentage

Yes 44 88

No 06 12

Total 50 100

Analysis:

This table is designed to study the Influence of Brand name while investing. According to thestudy it is clear that 88% of respondents say that branding is very important to build investors

confidence, and 12% of respondents say that brand name is not important for them while

investing.

Interpretation:

Brand name comes along with experience, quality, trust worthiness and most importantly

by advertisements. A company acquiring all the above features will have a good brand name. In

Mutual funds, investors look for the brand before investing as 88% said. Therefore if the

company has to be in the top, creating a brand name is very important.


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Graph No: 15

Graph showing Influence of Brand Name among respondents while investing in Mutual Fund

Table No: 16


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Table showing Opinion of respondents on returns in Mutual Funds compared to

Shares/Derivatives

Opinion No. Of respondents Percentage

Yes 31 62

No 19 38

Total 50 100

Analysis:

This table shows that 62%of respondent say that mutual funds returns are better than shares or

derivatives. 38% of respondents say that mutual funds returns are not good compared to shares or

derivatives.

Interpretation:

All the three are having good returns, as well as unpredictable returns. But Mutual funds

seem to have an impression in the respondents mind as they think its unpredictability is less

compared to the other two. In shares or derivatives the volatility is much more, where as in

Mutual funds consistency of returns is more.


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Graph No: 16

Graph showing Opinion of respondents on returns of Mutual Funds compared to

Shares/Derivatives


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Table No: 17

Table showing Investment Firms transparency in recent times

Transparency No. of respondents Percentage

Yes 36 72

No 14 28

Total 50 100

Analysis:

As far as transparency is concerned the survey says that 72% of the respondents say that firmsare transparent presently and 28% say that firms are not transparent as compared to earlier times.

Interpretation:

People now a days want everything to be revealed. A hidden agenda makes them conspicuous.

So in the best interest of the firm its better to have transparencies in their transactions.

Graph No: 17


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Graph showing Investment Firms transparency in recent times


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Graph No: 18

Graph showing Performance of funds according to respondents

.


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FINDINGS

The main finding of the study is that, there is no dependency of income level over investment

in Mutual Funds. Therefore income being high or low is not the major criteria for Mutual Fund

investments.

The awareness towards Mutual Fund is good, but not excellent. For this study the

collected sample size was 50. out of them 33 are mutual fund investors.

Next finding is that the brand name of investment firm is very important to gain or

attract customers. Out of 50-sample size 44 respondents said that brand name is required. Only 6

respondents said that brand name is not required.

From investors point, the popular mutual fund companies are Prudential ICICI, and

Franklin Templeton mutual funds.

Most common advertisements of Mutual Funds Companies from investors point of vieware Prudential ICICI with 71.79% and Franklin Templeton with 66.66%. This shows that

aggressiveness on advertisements in Mutual Funds could make the company a hit, as these two

companies are the two popular ones as well.


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Investors have ranked High Return, Assured Return, Liquidity, Government Guarantee,

Risk Cover and Voting Right as the important factors for investments respectively. Tax benefit,

surprisingly, doesnt find place in the top five.

The transparency is the order of the day. The overall perception about this matter is that

72% of the respondents say that these days firms are more transparent than in old days.

Private sector Mutual Funds are on a rampage. The market share of private sector mutual

funds is increased.

From existing mutual fund investors it is found that the debt funds and gilt funds are

performing better than last year.

Investors are worried and confused about the legal formalities of the Mutual Fund as it is

complicated compared to other investment avenues like bank deposits.

The launching up of new schemes by Mutual Fund companies has increased the number

of investors.

Mutual Fund has become the buzz word currently. More and more people are investing in

Mutual Funds lately. Shares, Real Estate, and Insurance are presently other hot areas for

investment.


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SUGGESTIONS / RECOMMENDATIONS

Mutual Fund companies should be more transparent while declaring their dividends, Net

Asset Value, administration charges and their accounting norms.

Brand name of investment firm is very important to gain or attract customers. MutualFund companies should make their advertisements more aggressively, so that the common public

should come to know about their product features and there position in the market.

It is the perception of investors that the Mutual funds will not give any surety on returns.

This perception should be removed from their mind. For this the Mutual fund companies need to

formulate some marketing strategies.

This analysis shows that Mutual fund returns are better than shares or derivatives. So the

existing investors are satisfied with their returns, so the mutual fund companies should make

efforts to retain the existing investors.


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The launching up of new schemes by Mutual Fund companies has increased the number

of investors. More and more schemes, both attractive as well as effective, need to be introduced

on a frequent basis so as to increase the investor base.

Investors are worried and confused about the legal formalities of the Mutual Fund as it is

complicated compared to other investment avenues like bank deposits. Therefore legal

formalities need to be minimised and the dealings have to be simplified.

Mutual Funds need itself to be differentiated from other hot investment avenues. Mutual

Funds must offer to the public more returns, safety and tax benefits so as to attract investors into

investing in Mutual Funds rather than in Shares or Real-est

project report on finance investments

Documents

Transcript of project report on finance investments