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A SUMMER TRAINING REPORT ON

SYSTEMATIC INVESTMENT PLAN

By

SUNDARAM BNP FINANCE

Submitted to

Under the guidance of

,


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DECLARATION

I, the under signed Miss. DHARA R. KOTECHA hereby declare that the research work

presented in this summer internship project is my own contribution and has been carried

out under the supervision of Dr. CHINNAM REDDY, Dean and Faculty of Management,

Marwadi Education Foundations Group of Institutions, Rajkot.

This is an original contribution in every respect and has not been previously submitted to

any university for any degree.

Date:

Place: Rajkot (DHARA R. KOTECHA)


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PREFACE

MBA is a stepping-stone to the management carrier and to develop good manager. It

is necessary that the theoretical must be supplemented with exposure to the real environment.

Theoretical knowledge just provides the base and its not sufficient to produce a good

manager thats why practical knowledge is needed.

Therefore the research product is an essential requirement for the student of MBA.

This research project not only helps the student to utilize his skills properly learn field

realities but also provides a chance to the organization to find out talent among the budding

managers in the very beginning. Investing money where the risk is less has always been risky

to decide. The first factor, which an investor would like to see before investing, is risk factor.

Diversification of risk gave birth to the phenomenon called Mutual Fund. The Mutual FundIndustry is in the growing stage in India, which is evident from the flood of mutual funds

offered by the Banks, Financial Institutes & Private Financial Companies. In accordance with

the requirement of MBA course I have summer training Research project on the topic

SYSTAMATIC INVESTMENT PLAN

For conducting the research project sample size of 120 customers of Mutual Funds

were selected. The information regarding the project research was collected through the

questionnaire formed by me which was filled by the investors of Mutual Funds.


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ACKNOWLEDGEMENT

Expression of feelings by words makes them less significant when it comes to make

statement of gratitude

I take this opportunity to express my gratitude to all the people who have guidedand

helped me directly or indirectly in the course of completion of my project. I feel immensepleasure to express a deep sense of gratitude to my Dean Dr. S Chinnam Reddy who has

given me an opportunity to do my internship in Reliance Mutual Fund. I would also thankful

to my Faculty Guide Dr. S Chinnam Reddy for his constant support and guidance. His

valuable suggestions and helping hands has helped me to complete my projectsuccessfully.

I am also very thankful to Mr. Rohan Dhruv, Relationship Manager, Reliance

Mutual -Fund, for his cooperation in providing me all the necessary information for doingthis project.

Date:

Place: Rajkot (DHARA R. KOTECHA)


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CONTENTS

CHAPTER S Description Page No.

1 Introduction

Research Methodology

Objectives

Limitations of the study

2 Industry profile

3 company profile

4 Theoretical Frame Work

5 Analysis and Interpretation of Collected Data

6 Findings & Recommendation

Suggestions

Bibliography

Annexure


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INTRO DUCTION

SYSTEMATIC INVESTMENT PLAN

Systematic Investment Plan is an approach to investing within managed

investments which involves investing a set of amount at regular intervals rather than

investing a larger lump sum amount in one shot. By investing this way you are not

attempting to capture the highs and lows of the market but rather the cost of your

investment is averaged over a period of time. The essence of SIPs is that when the

markets fall investors automatically acquire more units. Likewise they acquire lesser

units when the market rises. This means that you buy less when the price is high

whereas you buy more the price is low. Hence the average cost per unit drops down

over a period of time.

Systematic Investment Plan (SIP) is a convenient way to accumulate wealth in a

disciplined manner over a long-term period. It helps you to invest regularly in small

installments and thereby build wealth over a period of time.

SIP is a method of investing in a mutual funds scheme. Mutual fund schemes are

offered by the Asset Management companies (AMC) to customers through a distributor.

The Bank acts as a distributor of Mutual Fund products for the AMC to the customers. A

customer wanting to invest in a mutual fund scheme can avail of the Systematic

Investment Plan.

The Systematic Investment Plan (SIP) is a simple and time honored investment

strategy for accumulation of wealth in a disciplined manner over long term period. The

plan aims at a better future for its investors as an SIP investor gets good rate of returns

compared to a one time investor.

A Systematic Investment Plan (SIP) is a vehicle offered by mutual funds to help

you save regularly. It is just like a recurring deposit with the post office or bank where

you put in a small amount every month. The difference here is that the amount is

invested in a mutual fund. The minimum amount to be invested can be as small as Rs

100 and the frequency of investment is usually monthly or quarterly.


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What is Systematic Investment Plan

y A specific amount should be invested for a continuous period at regular intervals

under this plan.

y SIP is similar to a regular saving scheme like a recurring deposit. It is a method ofinvesting a fixed sum regularly in a mutual fund.

y SIP allows the investor to buy units on a given date every month. The investor

decides the amount and also the mutual fund scheme.

y While the investor's investment remains the same, more number of units can be

bought in a declining market and less number of units in a rising market.

y The investor automatically participates in the market swings once the option for

SIP is made.

SIP ensures averaging of rupee cost as consistent investment ensures that average

cost per unit fits in the lower range of average market price. An investor can either give

post dated cheques or ECS instruction and the investment will be made regularly in the

mutual fund desired for the required amount. SIP generally starts at minimum amounts

of Rs.1000/- per month and upper limit for using an ECS is Rs.25000/- per instruction.

For instance, if one wishes to invest Rs.1, 00,000/ - per month, then they need to do it on

four different dates.

How to invest in SIP?

Step 1: Select a mutual fund scheme of your choice with the payment option as SIP

Step 2: Decide the Investment periodicity (frequency of making payments). You can

choose to make your investment on a monthly or quarterly basis.

Step 3: Select the minimum investment amount. For instance, if you choose to invest Rs

12,000 every year with a monthly SIP Option. Therefore you would be investing Rs

1,000 every month in your fund. By the end of a year, you would have invested Rs

12,000 in your fund.

Step 4: The amount gets converted into units, depending on the Net Asset Value (NAV).

NAV is the market value per unit of a fund. If the NAV in the first month is Rs 20, you

will get 50 units. Similarly in the next month if the NAV is Rs 25, you will get 40 units.

The following month if the NAV is Rs 18, then you will get 55.56 units. So, after three

months, you would have 145.56 units. On an average, you would have paid around Rs

21 per unit.

Step 5: The units get accumulated over a period of time. You can stay invested till the

time you wish and redeem your units when you wish to exit from the scheme. The units

are redeemed at the market value (NAV) and you get back your money with returns.


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WHY INVEST IN SIPS RIGHT NOW?

y The current scenario in equity market is dominated by negative sentiment,which has led to fundamentals being ignored.

y This scenario has created volatility in the markets and uncertainty of future

outlook.y The prudent way to invest in this scenario is to benefit from the volatility and

this can be done by investing through SIPs

y A monthly SIP helps in averaging out the cost of purchase and benefit frompower of compounding.

y It also helps in creating wealth over a longer time period.

ADVANTAGES OF SIP

Power of Compounding - The longer the period of your investment, the more

wealth you accumulate because of the power of compounding. Thats why it makes

sense to start investing early. Simply put, the incremental returns that you earned onyour principal plus the accrued gains is compounding.

Rupee Cost Averaging - Most investors want to buy stocks when the prices are low

and sell them when the prices are high. But timing the market is time consuming and risky. A

more successful investment strategy is to adopt this method called Rupee Cost Averaging. By

investing in an SIP you end up buying more units when the price is low and fewer when the

price is high.

Convenience and Regularity - SIP gives you the convenience to pay throughAxis Bank Electronic clearance service (ECS) or Auto Debit. You can decide the amount

and the mutual fund scheme. A fixed amount will automatically get debited from your

account on a date specified by you.

Disciplined approach towards investment - Since you invest regularly, it

makes you disciplined in your savings, which leads to wealth accumulation. Disciplined

investing is vital to earning good returns over a longer time frame.

DISADVANTAGES OF SIP

Tax planning: Yes, setting up a SIP in a tax planning mutual fund will help you

reduce taxes, but if you invest the same amount at one go in the same mutual fund youwill get the same tax benefit. Tax benefit is not something exclusive to a SIP.

SIP lead to building wealth: Good saving and investing habits are more likely to

help you accumulate wealth in the long run, but there is no guarantee that you will end

up doing so. Especially, if you invest in equity mutual funds.


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HOW AN SIP WORKS

An SIP allows you to take part in the stock market without trying to second-

guess its movements.

An SIP means you commit yourself to investing a fixed amount every month.Let's say it is Rs 1,000.

When the Market price of shares fall, the investor benefits by purchasing more

units; and is protected by purchasing less when the price rises. Thus the average cost of

units is always closer to the lower end. { NAV : Net Asset Value , or the price of one unit

of a fund. Can be computed as follows : NAV = [ market value of all the investments in

the fund + current assets + deposits - liabilities ] divided by the number of units

outstanding.}

Date NAV Approx number of units

you will get at Rs. 1000

Jan 1 10 100

Feb 1 10.5 95.23

Mar 1 11 90.90

Apr 1 9.5 105.26

May 1 9 111.11

Jun 1 11.5 86.95

Within six months, you would have 5,89.45 units by investing just Rs 1,000 every

month. Over the long run, you make money

Let's say you invested in Prudential ICICI Technology Fund during the dotcom

and tech boom.

Say you began with Rs 1,000 and kept investing Rs 1,000 every month. This

would be the result:

Investment period

y Mar 2000 to Mar 2005

Monthly investment

y Rs 1,000

Total amount invested

y Rs 61,000

Value of investment of Mar 7, 2005

y Rs 1,09,315


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Return on investment

y 23.87%

Had you bought the units on March 13, 2000 at Rs 10.88 per unit (that was the NAV

then), you would have lost because the NAV was just 7.04 on March 7, 2005. Butbecause you spaced out your investment, you won.

HOW AN SIP SCORES

It makes you disciplined in your savings. Every month you are forced to keep

aside a fixed amount. This could either be debited directly from your account or you

could give the mutual fund post-dated cheques.

As you see above, it helps you make money over the long term. Since you get

more units when the NAV drops and fewer when it rises, the cost averages out over

time. So you tide over all the ups and downs of the market without any drastic losses.

Also, a number of mutual funds do not charge an entry load if you opt for an SIP.

This fee is a percentage of the amount you are investing. And if you do not exit (sell your

units) within a year of buying the units, you do not h ave to pay an exit load (same as an

entry load, except this is charged when you sell your units).

If, however, you do sell your units within a year, you would be charged an exit

load. So it pays to stay invested for the long-run.

The best way to enter a mutual fund is via an SIP. But to get the benefit of an SIP,

think of at least a three-year time frame when you won't touch your money.

Of course you would lose money if your units lost value over time.

What most SIP Mutual funds don't tell you is that they recover their fees as

monthly charges by selling your units, so while you are buying more units when the

market is down, more of your units are also being sold to fund the monthly charges of

the Mutual fund. Also the Bid and Offer of the Mutual Fund is aro und 7% and this is the

front load or expense you pay for buying the units each month. Also sometimes the

Mutual fund will have annual fee charges.

In spite of the above drawbacks the retail investors' benefit in the long term

horizon of 5-8 years is enormous. Only make sure that you can switch your funds from

stock market to money market at short notice when the markets are really in a

correction phase to safeguard the profits which you have made when the market was in

a booming phase.


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Consider the following example of two rational people who each invest the same

amount of money into a managed fund over a period of time.

Investor A decides to invest Rs. 10000 now.

Investor B decides to invest by way of an SIP - Rs. 1000 each month.

Month Investor A(In Rs.)

UnitsPurchased

Investor B(In Rs.)

UnitsPurchased

Unit Price

1 10000 1000 1000 100.0 10.0

2 0 0 1000 105.3 9.5

3 0 0 1000 114.3 8.8

4 0 0 1000 115.6 8.7

5 0 0 1000 118.3 8.5

6 0 0 1000 125.0 8.0

7 0 0 1000 117.6 8.5

8 0 0 1000 107.5 9.3

9 0 0 1000 95.2 10.5

10 0 0 1000 90.9 11.0

TotalInvestment

Rs.10000 1000 Rs. 10000 1089.8

Total Value Rs.11000 Rs. 11988

The table shows that Investor B is in a better position by investing through a Systematic

Investment. It shows that at the end of the investment period of 10 months Investor A

who made an Lump sump investment has 1000 units in his portfolio has a market value

of Rs. 11000.Whereas, Investor B who made investments through an SIP has 1090 units

in his portfolio which has a market value of Rs. 11988.


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ABOUT MUTUAL FUND

A Mutual fund is the ideal investment vehicle for today's complex and modem

financial scenario. Markets for equity shares, bonds and other fixed income instruments, realestate, derivatives and other assets have become mature and information driven. Price

changes in these assets are driven by global events occurring in faraway places. A typicalindividual is unlikely to have the knowledge, skills, inclination and time to keep track of

events, understand their implications and act speedily. An individual also finds it difficult tokeep track of ownership of his assets, investments, brokerage dues and bank transaction etc.

CHARECTERISTIC:

A mutual fund actually belongs to the investors who have pooled their funds.

A mutual fund is managed by investment professionals and other service providers,who earn a fee for their services, from the fund

The pool of funds is invested m a portfolio of marketable investments. The value of

the portfolio is updated every day The investor's share m the fund is denominated by 'units'. The value of the units

changes with change m the portfolio's value, every day. The value of one unit of

investment is called the Net Asset Value or NAV.

WHY MUTUAL FUND?

One can avail of the benefits of better returns with added benefits of anytime

liquidity by investing in open-ended debt funds at lower risk. Many people have burnt their

fingers by investing in fixed deposits of companies who were assuring high returns but

have gone bust in course of time leading to distraught investors as well as pending cases incompany law board.

This risk of default by any company that one has chosen to invest in, can be

minimized by investing in mutual funds as the fund managers analyze the

companies financials more minutely than an individual can do as they have the expertise

to do so.

Capital markets interest people, albeit not all for there are several problems

associated. First issue is that of expertise. While investing directly into capital market

one has to be analytical enough to judge the valuation of the stock and understand the

complex undertones of the stock. One needs to judge the right valuation for exiting the

stock too. It is very difficult for a small investor to keep track of the movements of the

market. Entrusting the job to experts, who watch the trends of the market and analyzethe valuations of the stocks will solve this problem for an investor. Mutual funds

specialize in identification of stocks through dedicated experts in the field and thisenables them to pick stocks at the right moment. Sector funds provide an edge and

generate good returns if the particular sectors is doing well.


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INVESTORS

Pool their money

with

RETURNS

SECURITIES FUND MANAGER

Generates

Invest in

Mutual Fund

Operation Flow

Next problem is that of funds/money. A single person cant invest in multiple

high-priced stocks for the sole reason that his pockets are not likely to be deep enough.

This limits him from diversifying his portfolio as well as benefiting from multiple

investments.

Here again, investing through MF route enables an investor to invest in many good

stocks and reap benefits even through a small investment. This not only diversifies the

portfolio and helps in generating returns from a number of sectors but reduces the risk as

well. Though identification of the right fund might not be an easy task, availability of good

investment consultants and counselors will help investors take informed decision.

WHAT IS MUTUAL FUND?

A Mutual Fund is a trust that pools the savings of a number of investors who share acommon financial goal. The money thus collected is then invested in capital market

instruments such as shares, debentures and other securities. The income earned through these

investments and the capital appreciation realized are shared by its unit holders in proportion

to the number of units owned by them. Thus a Mutual Fund is the most suitable investment

for the common man as it offers an opportunity to invest in a diversified, professionally

managed basket of securities at a relatively low cost. The flow chart below describes broadlythe working of a mutual fund.


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HOW MUTUAL FUND IS ST UCTURED?

T Structure Consists:

The st t e of mutual funds m India is governed by the SEBI Regulations, 1996.

These regulations make it mandatory for mutual funds to have a 3-tier struc ture of

Sponsors-Trustee-AMC (AssetManagementCompany). The Sponsoris the promoter ofmutual fund, and appoints the Trustee. TheTrustees are responsible to the investors m

the mutual funds, and appointthe AMC for managing theinvestment portfolio. The AMCis the business face ofthe mutual funds, as it manages allthe affairs ofmutual funds. The

mutual funds and AMC have to be registered by the SEBI.


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Sponsor

Sponsor is the person who acting alone or in combination with another body

corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worthof the Investment Managed and meet the eligibility criteria prescribed under the

Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsoris not responsible or liable for any loss or shortfall resulting from the operation of the

Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund

Trust

The Mutual Fund is constituted as a trust m accordance with the provisions of the IndianTrusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration

Act, 1908

Trustee

Trustees are like internal regulators in a mutual fund, and their job is to protect theinterests of the unit holders. Trustees are appointed by the sponsors, and can be eitherindividuals or corporate bodies. In order to ensure they are impartial and fair, SEBI rules

mandate that at least two-thirds of the trustees be independent, i.e., not have anyassociation with the sponsor

Asset Management Company

An AMC is the legal entity formed by the sponsor to run a mutual fund. The AMC is

usually a private limited company in which the sponsors and their associates or joint

venture partners are the shareholders.

The people in the AMC who should matter the most to you are those who takeinvestment decisions. There is the head of the fund house, generally referred to as the Chief

Executive Officer (CEO). Under him comes the Chief Investment Officer (CIO), whoshapes the funds investment philosophy, and fund managers, who manages its schemes.

They are assisted by a team of analysts, who track markets, sectors and companies.

Only SEBI registered AMC can be appointed as investment managers of mutual funds.

AMC must have a minimum net worth of Rs. 10 crores at all times. AMCs cannot indulge in

any other business, other than that of asset Management. At least half of the members of the

Board of an AMC have to be independent.

Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar and TransferAgent to the Mutual Fund. The Registrar processes the application form, redemption

requests and dispatches account statements to the unit holders


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Some fund houses handle such functions in-house. Others outsource it to theRegistrars; Karvy and CAMS are the more popular ones. It doesnt really matter which

model your mutual fund opt for, as long as it is prompt and efficient in servicing you.Most mutual funds, in addition to registrars, also have investors service centers of their

own in some cities.

Some of the investor related services are:-

b Processing investor applications

b Recording details of the investors

b Sending information to the investors

b Processing dividend payout

b Incorporating changes in the investor information

b Keeping investor information up to date

Custodian

A custodian handles the investment back office of a mutual fund. Its responsibilities

include receipt and delivery of securities, collection of income, distribution of dividends,

and segregation of assets between schemes. The sponsor of a mutual fund cannot act as

a custodian to the fund. For example, Deutsche Bank is a custodian, but it cannot

service Deutsche Mutual Fund, its mutual fund arm

Distributors

Distributors appoint agents and other mechanisms to mobilize funds from the investors.

Banks and post offices also act as distributors The commission received by the distributors

is split into initial commission which is paid on mobilization of funds and trail commissionwhich is paid depending on the time the investor stays with the fund.


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T es of Mutual Funds Scheme in India

Subjectto the SEBI regulations, a Mutual Fund is free to design its scheme to suittheneeds ofthe various types ofinvestors. The Mutual Fund in India, from the point of view of

schemes, can be categori ed into:

1. Constitution2. Investment objective

1. AS PER CONSTITUTION

The Mutual Fund as perthe structure basis can be divided into:

Open-ended schemes

Itis a scheme in which an investor can buy and sell units on a daily basis. Such schemehas a perpetual existence and a flexible and ever changing corpus. The investor under such

scheme is free to buy and sell any number of units, at any point of time, as there is noboundation on to limited period or has no fixed maturity period. The scheme permits the

investors to withdraw their funds on to a continuing basis as it gives to the investor almost

instantli uidity. Such schemes as are notlisted on to the stock market can be bought and sold

only from, and to, the Mutual Fund.

Close- ended schemes

Itis a scheme in which the subscription period forthe Mutual fund kept open only for a

limited period, called the redemption period. Such schemes do not allow investors to

withdraw their funds as when they like as it has a fix maturity period (ranging from 2 to 15

years). These schemes are generally traded at discount to NAV; but closer to maturity, the


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discount narrows. The close-ended schemes are listed on to the stock exchanges for dealing

in the secondary markets.

Interval schemes

These combine the features of open-ended and close-ended schemes. They may be tradedon the stock exchange or may be open for sale or redemption during predetermined intervalsat NAV related prices.

2. AS PER INVESTMENT OBJECTIVE

The Mutual Funds according to investment objectives comprises of:

Equityorientedschemes

These schemes also commonly called Growth Schemes, seek to invest a majority of their

funds in equities and a small portion in money market instruments. Such schemes have the potential to deliver superior returns over the long term. However, because they invest in

equities these schemes are exposed to fluctuations in value especially in the short term.

Equity schemes are hence not suitable for investors seeking regular income or investors who

have a long term investment horizon.

General purpose

The investment objectives of general purpose equity schemes do not restrict them toinvest in specific industries or sectors. They thus have a diversified portfolio of companies

across a large spectrum of industries. While they are exposed to equity price risks, diversified

general purpose equity funds seek to reduce the sector or stock specific risks through

diversification. They mainly have market risk exposure. HDFC Growth Fund is a general

purpose equity schemes.

Sector Specific

The schemes restrict their investing to one or more pre-defined sectors. E.G.

technology sector. Since they depend upon the performance of select sectors only, these

schemes are inherently more risky than general purpose schemes. They are suited for

informed investors who wish to take a view and risk on the concerned sector.

Special schemes;

Index schemes

The primary purpose of an index is to serve as a measure of the performance of the

market as a whole, or a specific sector of the market. An index also serves as a relevant benchmark to evaluate the performance of mutual funds. Some investors are interested in

investing in the market in general rather than investing in any specific fund. Such investors

are happy to receive the returns posted by the market. As it is not practical to invest in each

and every stock in the market in proportion to its size, these investors are comfortable

investing in a fund that they believe is a good representative of the entire market. Index funds

are launched and managed for such investors.


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Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the

Indian Income Tax laws as the Government offers tax incentives for investment in specified

avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemesare allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides

opportunities to investors to save capital gains u/s 54EA and 54EB by investing in MutualFunds, provided the capital asset has been sold prior to April 1, 2000 and the amount is

invested before September 30, 2000.

Real Estate Fund

Specialized real estate funds would invest in real estate directly, or may fund real estatedevelopers or lend to them directly or buy shares of housing of finance companies or may

even buy their securitized assets.

DEBT BASED SCHEMES

These schemes are commonly called Income schemes, Invest in debt securities such as

corporate bonds, debentures and Govt. securities. The prices of these schemes tend to bemore stable compared with the equity schemes and most of the returns to the investors are

generated through dividend or steady capital appreciation. These schemes are ideal forconservative investors or those not in a position to take higher equity risks, such as retired

individuals. However, as compared to the money market schemes they do have a higher pricefluctuation risk and compared to a Gift fund they have a higher credit risk.

Income schemes

A pure income scheme aims at generating and distributing regular income to the

investors. These schemes generally invest a substantial portion (70% to 80%) of the corpus in

the fixed income securities such as bonds and corporate debentures. Declaration of regulardividends is the main objective of such schemes.

Liquid income schemes

Similar to the Income schemes but with a shorter maturity than Income schemes.

Money Market Schemes

The aim of money market funds is to provide easy liquidity, preservation of capital

and moderate income. These schemes generally invest in safer short-term instruments such as

treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on

these schemes may fluctuate depending upon the interest rates prevailing in the market. These

are ideal for Corporate and individual investors as a means to park their surplus funds forshort periods.

Gilt fund

This scheme primarily invests in Govt. Debt. Hence the investor usually does not have to

worry about the credit risk since Govt. Debt is generally credit risk free.


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HYBRID SCHEMES

These schemes are commonly known as balanced schemes. These schemes investin both

Equity as well as Debt. By investing in a mix of this nature, balanced schemes seekto attain

the objective of income and moderate capital appreciation and are ideal forinvestors with aconservative.

BENEFITS OF MUTUAL FUND INVESTMENT

Mutual Funds offer several benefits to an investorthat are unmatched by the other

investment options. Last six years have been the mostturbulent as well as exiting ones forthe industry. New players have come in, while others have decided to close shop by either

selling off or merging with others. Productinnovation is now pass6 with the game shifting

to performance delivery in fund management as well as service. Those directly associated

with the fund management industry like distributors, registrars and transfer agents, and

even the regulators have become more mature and responsible.


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DISADVANTAGES OF MUTUAL FUND INVESTMENT

No control overcost

Managing portfolio of fundsNo tailor- ade portfolio

Delay in redemption Non availability of funds

RISK INVOLVED IN MUTUAL FUND:


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LEGAL & REGULATORY FRAMEWORK OF MF

In the year 1992, securities and exchange Broad of India (SEBI) Act was passed. The

objectives of SEBI are to protect the interest of investors in securities and to protect the

development of and to regulate the securities market. SEBI formulates policies and regulates

the mutual funds to protect the interest of the investors .

Following are the regulators of Mutual Fund in India

AMFI ( Association Of Mutual Fund In INDIA)

It is Association of Mutual Fund in India. It promotes Mutual Fund among the mass

and give recommendations in order to uphold the interest of investors.

This Association conducts AMFI exam. Initially the Association gave rights ofconducting the exam to Bombay Stock Exchange (BSE) and National Stock Exchange

(NSE). Then rights were also given to the UTI (Unit Trust of India). Corporate

distributors are also given rights to conduct exam. It is compulsory for a person toclear AMFI exam in order to become advisor in Mutual Fund.

SEBI (Securities and Exchange Board of INDIA)

Securities and Exchange Board of India (SEBI), the capital market regulator has

clearly defined rules which govern mutual funds. These rules relate to the formation,administration, and management of mutual funds and also prescribe disclosure and

accounting requirements. Such a high level of regulation seeks to protect the interestof investors.

All Mutual Fund schemes are registered with SEBI and they follow the rules and

regulation as prescribed by SEBI. It registers every mutual fund scheme in order to

protect the interest of investors.

RBI (Reserve Bank of INDIA)

Reserve Bank of India was the regulator of Mutual Fund before SEBI. It regulated

mutual fund initially and there were only few schemes in the market. But now with

coming of SEBI, it has now become the main regulator of the Mutual Fund. RBI now

only governs the Bank Sponsored Mutual Fund.


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FREQUENTLY USED TERMS

Corpus:

The total amount of money invested in a scheme by all the investors.

Entry/Exit load :

Entry load is the load on purchase or switch-out of units

Exit load is load on redemptions Dividend switch out of units.

NET ASSET VALUE:

A mutual fund is a common investment vehicle where the assets of the fund belong directly

to the investors. Investors subscriptions are accounted for by the fund not as liabilities or

deposits but as Unit Capital. On the other hand, the investments made on behalf of the

investors are reflected on the assets side and are the main constituent of the balance sheet.

There are, however, liabilities of a strictly short- term nature that may be part of the balance

sheet. The funds Net Assets are therefore defined as the assets minus the liabilities. As thereare many investors in a fund, it is common practice for mutual funds to compute the share ofeach investor on the basis of the value of Net Assets Per Share/Unit, commonly known as the

Net Asset Value (NAV).

The following are the regulatory requirements and accounting definitions laid down by SEBI.

NAV = Market/ fair value of schemes investments + receivables + accrued income +other assets accrued expenses payables other liabilities

Number of units outstanding


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26

HISTORY AND ORGANIZATION OF MUTUAL FUNDS IN INDIA

The mutual fund industry in India started in 1963 with the formation of Unit Trust ofIndia, 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 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 morecomprehensive 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 mergersand acquisitions. As at the end of January 2003, there were 33 mutual funds with total

assets of Rs. 1,21,805 Crores. The Unit Trust of India with Rs.44,541 Crores of assetsunder management was way ahead of other mutual funds.


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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 oftheUnit Trust

of India with assets under management ofRs.29,835 crores as atthe end of January 2003,

representing broadly, the assets of US 64 scheme, assured return and certain otherschemes. 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

underthe purview ofthe Mutual Fund Regulations.

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

registered with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwh ile UTI which had in March 2000 more tha n Rs.76,000

Crores of assets under management and with the setting up of a UTIMutual Fund,

conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place

among different priva te sector funds, the mutua l fund industry has entered its

current phase of consolida tion and growth. As at the end of September, 2004, there

were 29 funds, which manage assets ofRs.153108 Croresunder 421 schemes. The net asset

value (NAV) of mutual funds in India declined when stock pricesstarted falling in theyear 1992. Those days, the market regulations did not allowportfolio shifts into alternative

investments. There was rather no choice apart fromholding the cash or to further continue

investing in shares. One more thing to be noted, since only closed-end funds were

floated in the market, the investors disinvested by selling at a loss in the secondary market.

The performance of mutual funds in India suffered qualitatively. The 1992 stock

market scandal, the losses by disinvestments and of course the lack of transparentrules in

the whereabouts rocked confidence among the investor.

The graph ind ica tes the growth of assets overthe years.

Graph 1: The graph showing Growth in assets under management through

Mutual Funds


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MUTUAL FUND(PLAYERS)SOLD BY COMPANY

The Indian mutual fund industry is mainly divided into three kinds of categories.

These categories include public sector players, nationali ed banks and private sector and

foreign players. UTI Mutual Fund was one ofthe leading Mutual Fund companies in India till

May 2006 with a corpus of more than Rs. 3 1, 000 Crore and it is the public sector mutual

fund. Bank ofBaroda, Punjab NationalBank, Can Bank and SBI are the major nationali ed

banks mutual fund. At present mutual fund industry is mainly dominatedby private and

foreign sector players which include major players like Prudential ICICI Mutual Fund,

HDFC Mutual Fund, Sundaram mutual fund etc. are private sector mutual funds players

while Franklin Templeton etc. are major foreign mutual fund players. At presentthere are

more than 33 players operating in Indian.

The briefintroduction of major players is given as follows

Alliance Capital Mutual Fund

Birla Mutual Fund

Cholamandalam Mutual Fund

DSP MerrillLynch Mutual Fund

Fidelity E uity Fund

Franklin Templeton Mutual Fund

HDFC Mutual Fund

HSBC Mutual Fund

IDBI Principal

IL & FS Mutual Fund

ING Savings Trust


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JM Mutual Fund

Prudential ICICI Mutual Fund

Reliance Capital

SBI Mutual

Sundaram Mutual Fund

Tata Mutual

Unit Trust Of India


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31

THEORETICAL FRAME WOREK

Mutual funds are as much about marketing as investing in the 1990s, which is why the

hoary clich Mutual funds are sold, not bought is as true as ever. As Glorianne Stromberg

once told Canadian Business magazine, the fund business may have started out in the

portfolio management business, but somewhere along the line, the marketers got hold of it,and the advisory function has been almost superseded by the sales function.

Jonathan Chevreau, the Wealthy Boomer

Successful fund marketing creates value for Fund companies, dealers and unit holders so that

each is satisfied. The definition goes much deeper than simply "selling something to

somebody". Fund marketeers must understand both the "Needs & Wants" side of the

equation and the "Product, Ideas, & Services" side of the equation. Not only must marketing

fully understand both sides of the equation, but it must also effectively communicate the

details of each in order to successfully bridge the gap between the two. Every facet of modernmarketing has been effectively employed to dramatically grow the Indian mutual fund

industry.

An Analysis of Investors Risk Perception towards Mutual Funds Services

Nidhi Walia, Ravi Kiran

Financial markets are constantly becoming more efficient by providing more promising

solutions to the investors. Being a part of financial markets although mutual funds industry is

responding very fast by understanding the dynamics of investors perception towards

rewards, still they are continuously following this race in their endeavor to differentiate their

products responding to sudden changes in the economy. Thus, it is high time to understand

and analyze investors perception and expectations, and unveil some extremely valuable

information to support financial decision making of mutual funds. Financial markets are

becoming more exhaustive with financial products seeking new innovations and to some

extent innovations are also visible in designing mutual funds portfolio but these changes need

alignment in accordance with investors expectations. Thus, it has become imperative to

study mutual funds from a different angle, i.e, to focus on investors expectations and

uncover the unidentified parameters that account for their dissatisfaction. Present research

proposes to identify critical gaps in the existing framework for mutual funds and further

extend it to understand realizing the need of redesigning existing mutual fund services by

acknowledging Investor Oriented Service Quality Arrangements (IOSQA) in order to

comprehend investors behavior while introducing any financial innovations.


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RESEARCH METHODOLOGY

I decided to do the project in two parts. The first part of the project is comprised of

the study of Mutual Funds as a whole and the second part deals with the investors perception

regarding their investment preferences about investment in Mutual Funds. The first part of

the project i.e. descriptive study is comprising an overall study of Mutual funds as what it is,

why to invest and where to invest, risk factor associated with it i.e. an overview of whole

Mutual fund industry. The second part of the project that is related to investors perception

about investment in Mutual funds available in market. Indian Stock market has undergone

tremendous changes over the years. Investment in Mutual Funds has become a major

alternative among Investors. The project has been carried out to understand investors

perception about Mutual Funds in the context of their trading preference and explore

investors risk perception . The first part of the project relating the study of Mutual funds is

collected through secondary data obtained from internet & books whereas the second part

relating the Investors perception about investment in Mutual Funds is covered using primary

data.


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RESEARCH METHODOLOGY

The Marke

Research Process adopted by me in the present study consists of the

following stages:

Flow chartofMarketing Research Process

Identifyingthe

Problem

Planningthe

ResearchDesign

Selecting aResearchMethod

Selecting aSamplingProcedure

DataCollection

DataEvaluation

Preparing

Thesis


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Identifying & Defining Problem:

The study undertaken by me is a study on investors perception about mutual fund of

Sundaram mutual fund in Rajkot city.

The main objective behind this particular study is to know about investors preference

about mutual fund. The study is based on Exploratory Research. It is undertaken in the initial

stage of the research process.

Planning the Research Design :

Once the problem is identified, the process of research design begins. This is the

crucial stage in research methodology as planning plays very important role in further

proceeding of the study.

As the study has to be carried out in Rajkot City, a detailed knowledge had to be

acquiring to gather the information regarding my Project Title.

I had successfully gathered the information which was directly affecting my study i.e.,

the major players prevailing in Rajkot City other than Sundaram mutual fund total

population, knowledge prevailing in the minds of people, their desire for Mutual Fund.

Here I needed to frame information regarding:

From where to get information

Time allotted for getting information

Budget allotted for getting information

Measurement techniques

Cost involved in conducting it

Availability of data sources

After gathering the above information, I had framed a design through which I got

sufficient information about my Project Title. But as there was a time constraint, the samplesize was not too large.


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Selecting the Research Method :

The research design method is chosen based on thee objectives of the study, the cost

involved in conducting the study, the availability of the data and finally the importance &

urgency of the decisions.

There are four main research methods:

Secondary Data studies

Surveys

Experiments

Observations

I have chosen mainly the Survey Method for my research work as the information can

only be gathered with the help of Questionnaire. I have conducted survey to get primary data

regarding the services of different Mutual Fund service providers. I got the data gathered first

hand to answer the research question being investigated.

I have prepared a questionnaire related to my study & had circulated to the walk in

customers at different Banks in Rajkot City. The questionnaire contained many important

questions.

I have also taken help of Secondary Data Studies in completion of my Project as it is

concerned with the analysis of already existing data that is related to the research topic.

Selecting Sampling Procedure :

Sampling is generally a part of the research design but it is considered separately in

the research process. Sampling is a process that uses a small number of items or a small

portion of population to draw conclusion regarding the whole population.

Alternatively, a sample can be considered as a subset of a larger set called

POPULATION.

In the present study, PROBABILITY SAMPLING has used and to be more precise,

SIMPLE RANDOM SAMPLING Method has used.

I have taken the sample size of 100 walk in customers randomly from different

Mutual Fund service Providers in Rajkot City.


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Data Collection :

After the research design, research method and Sampling procedure is decided, the

next main step is Collection of Data for related study with the help of Research Method

decided.

In this study, the research method decided by me is Survey Method and Secondary

Data Collection Method.

Survey Method provides primary Data i.e., first hand information by filling-up the

Questionnaires. The Questionnaires have filled-up from walk in customers at different

Mutual Fund service Providers in Rajkot City.

Secondary Data collected from different Brochures, books and internet.

SAMPLE PLAN

Population Walk in customers of bank in Rajkot City.

Sample Frame customers of different banks in Rajkot City.

Sampling Method Simple Random Sampling

Sample Size 120 people ( Due to time constraint )

LIMITATIONS

Though the present study aimed to achieve the above-mentioned objectives in full

earnest and accuracy, it was hampered due to certain limitation.

Some of the limitations of this study undertaken are as follows :

Sample of 120 customers was only taken randomly due to time constraint for the

preparation of project. A large sample size would have given an opportunity to get

more accurate over-all feedback from actual and prospective customers.

The research was limited to only bank in Rajkot City.

During my survey in Rajkot City, some people were having very reserved nature.

They were not so open. They avoid sharing their responses under the testing

condition.


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CHANCE OF RESPONSE ERROR

There are many respondents who have filled up questions. Chance of response error

might be possible. There might have been tendencies among the respondents to amplify or

filer their response under the testing condition.

In various banks some customers are regularly transactions in huge amount, so that

they can get extra facilities from it. There might be possibility that they make favor about

other option which actually not as satisfactory as his opinion for all customers.


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46

(1)Occupation of Investors.

Respondents in

Particulars Number Percentage

Business 56 47%

Service 45 38%

Other 19 15%

Total 120 100%

From the above chart suggests that out of 120 respondents 47% respondents invests their

money in mutual fund this shows thatinvestor choose mutual fund because they wantto earn

good return with some safety. Ratio of respondents who are from business 47% and service

37% is more than ratio of respondents who are from other 16%t had choose mutual fund as

theirinvestmenttools.

0%

0%

0%

0%

0%

0%

47%

37%

15%

Occupation

Business

ervice

ther


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47

(2)Age Group

Respondents in


18-22 14 12%

22-30 35 29%

30-40 42 35%

More than 40 29 24%

Total 120 100%

Out ofthese 120 people, 12% lie in the age group of 18-22 years, 29% in the age group of 22-

30 years, 35% in the age of 30-40 and 24% above 40 years of age. The age groups were

selected in this manner because a considerable change in the knowledge and investment

pattern was seen in these break-ups.

12%

29%

%

24%

Age Group

1 -22 22-

-4

re than 4


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48

(3) Income levelofInvestors

Respondents in


Less than 2 lakh 52 43%

2-3 lakh 55 46%

More than 3 lakh 13 11%

Total 120 100%

Here the highest group of people (46%) is earning annualincome ofRs. 2 to 3 lakh. While

the people having annual income of Rs. less than 2 lakh (43%) the people are mostly

professionals and businesspersons. We found thatthe annualincomes of more thanRs. 3 lakh

are of business class and are 11%.

43%

46%

11%

Income group

less than 2 lakh

2- 3 lakh

more than 3 lakh


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49

(4) Do you invest in mutual fund ?

Respondents in


Yes 92 77%

No 28 23%

Total 120 100%

From the above chart suggests that out of 100 respondents 77% respondentsinvests their

money in mutual fund this shows thatinvestor choose mutual fund because they wantto earn

good return with some safety. And 23% respondents are notinterested in investing in mutual

fund.

77%

23%

0%

20%

40%

60%

80%

Yes No

Inve ent n tua und


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50

(5) If No Then,

WHAT IS THE MOST IMPORTANT REASON FOR NOT INVESTING IN

MUTUAL FUNDS?

Respondents in


Lack of knowledge about MF 17 14%

Enjoys investing in other options 61 51%

Its benefits are not enough to drive

for investment

23 19%

No trust over fund managers 19 16%

Total 120 100%

23 out of 120 total respondents say they are not investing their money in mutual fund themain reason behind itthey enjoys investing in other options exceptthis investors didnt have

trust over the fund manager of the AMC companies . And very few respondents says they

have lack of knowledge about mutual funds.

14%

51%

19%

16%

Reasonsfor notinvestingin MF

Lack of knowledge aboutmutual funds

njoys investing in other

options

ts benefits are not enough to

driveyou for investment

No trust over the fund

managers


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51

(6) Please rank the following investment instruments according to your preference.(On

the basis of risk and return concept)

Respondents in


Fi ed Deposit 36 30%

Mutual Fund 17 14%

E uity 10 9%

Bonds 5 4%

ULIP7 6%

Govt. Securities 6 5%

LIC 20 17%

Post office 19 16%

Total 120 100%

People are habitualto invest and they have many investment options. But from our survey we

find that because of safety reasons people mostly investin Fixed Deposits (30%).People are

also investing in LIC(17%) as they found it the safer one. Post office and Mutual Fund are

also popular as an investment tool as share of both 15% and 14%.While Govt.Securities

and bonds is 5% & 4% and in equity there is 9% in the total survey.

30%

14%

9%

4%6%

5%

17%15%

0

5

10

15

20

25

30

Repondents

pre erenceto ard

svar ou

snts

ru ent

F !"

# $ % # & ' sit

Mutual Fund

Equity

B ' nds

UL( )

0 '

1

t S# 2

uritit # s

L( 3

) ' st ' ffic #


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(7) What is your Average investment period?

Respondents in


Less than 6 months 34 28%

6 to 12 months 39 33%

1 to 3 years 28 24%

More than 3 years 19 15%

Total 120 100%

The above graph reflects the average investment period for all the 120 respondents. 6 12

months is the most chosen option among allthe other options because of the current market

condition people are not interested in investing their money for short time like less than 6

months because return will be very less in shorttime period .Ifthey wantto earn more return

they need to investtheir money atleast more than 6 months or more than one year.

28%

33%

24%

15%

Average investmentperiod

4 ess than 6 m 5 nths 6 t 5 12 m 5 nths 1 t 5 3 years6 5

re than 3 years


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53

(8)How do you normally get information about Mutual Fund?

Respondents in


Television 12 10%

Internet 14 11%

Newspaper 19 14%

Financial Advisors 28 30%

Friends/Relatives 36 26%

Others 11 9%

Total 120 100%

The main source ofinformation for people is the financial advisors with 30% because they

directly approach to the customers. Friends/relatives who made investment and get benefit

also recommend others so their ratio is 26%. Now a day the Internet users are increasing day

by day and therefore 14% people are getting information through Internet. The respondents

preferto getthe routine specialinformation like daily NAV, dividend, bonus, changein assetmix etc., through Internet. While 11% people get knowledge from Newspaper.

10% 11%

14%

30%

26%

9%

0 7

5 7

107

157

207

257

307

Sources o n or ation

Televisi 8 n

Internet

Newspaper

Financial Advis 8 rs

Friends/Relatives

Others


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54

(9) Which are the main reasons for investing into MF?

Respondents in


Tax benefit 13 12%

High return 38 32%

Saving 24 20%

Tax benefit & high return 13 12%

Tax benefit & saving 10 7%

High return & saving 13 12%

All of above 5 3%

Others 4 2%

Total 120 100%

From the above graph we can analyze that 32% people want high returns in return oftheir

investment while 12% people invest forthe purpose oftax benefits. People preferring both

tax benefit as well as high return are 22% whereas people with tax benefit as well as saving

are 12%.

12%

32%

20%

12%

7%12%

3% 2%

Reasonsfor investingin MF

Tax benefit High return Saving

Tax benefit & High return Tax benefit & Saving High return & Saving

9 ll of above other


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(10) Do you get influenced by the name of Company promoting Mutualfunds?

Respondents in


Yes 94 78%

No 26 22%

Total 120 100%

Above graph suggests that AMC companies promoting their product well because 78% ofthe

total respondents are influenced by their promotional activities and very few are not

influenced.

78%

22%

Promotioninfluence

Yes

No


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56

(11) Which company influence you the most.

Respondents in


Reliance MF 25 20%SBI MF 6 5%

Birla Sun Life MF 14 11%

Principal PNB 4 3%

UTI MF 14 12%

HDFC MF 21 18%

ICICI Prudential 17 16%

Franklin Templeton 19 15%

Total 120 100%

Sundaram mutual fund is having the 1st

position among the 8 mutual fund companies. HDFC

and ICICI are on 2nd

and 3rd

position respectively while Franklin Templeton is on the 4th

position with 15%. SBI, Birla sun and PNB has 5% ,11% and 3% share respectively. As

Reliance has a good image in the mind of people who have faith in Reliance. So when

Reliance entered in Mutual Fund people invest more and it results in 1st rank among the all

MF Companies. Where HDFCMF is known for the its professionalism and for this reason

CRISIL has given the 1st

rank to HDFCMF. HDFCis assumed to be a bit conservative for

short-term investments. Thats why people prefer Reliance over HDFC because of its

aggressiveness.

20%

5%

11%

3%

12%

18%

16%15%

0 @

5 @

10 @

15 @

20 @

Investment preferenceto ards various companies

Reliancemutual fund

SBI mutual fund

Birla sun lifemutual fund

Principal PNB

UTI mutual fund

HA F B mutual fund

ICICI prudential

Franklin Templet C n


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(12) Where do you find yourself as a mutual fund investor?

Respondents in


Totalignorant 6 5%%

Partial knowledge of MF 72 60%

Aware only of any specific scheme in

which you invested

30 25%

Fully aware 12 10%

Total 120 100%

Above graph suggests that most of the respondents have partial knowledge about mutual fund

followed by some of the customer who are aware only of any specifics scheme in which they have

invested. Only 10% ofthe respondents are full ware and only 5% ofthe total respondent doesnt have

any knowledge about mutual fund.

5%

60%

25%

D 0%

Knowledge aboutmutual fund

Totally ignorant

Partial knowledge of mutual

funds

Aware only of anyspecific

scheme in which you invested

Fully aware


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(13)From where do you purchase mutual funds?

Respondents in


Directly from AMCs 28 23%

Brokers only 49 41%

Sub-brokers 25 20%

Other sources 18 16%

Total 120 100%

Brokers are very important role in the distribution channel of AMCS mostofthe respondents

buys theirinvestment produts from brokers. This shows the importance of brokers and they

also wantto earn money so they gave good service to theirinvestors and in the return they

gets good business. Only few ofthe investors knows thatthey can buy directly for AMCS.

24%

40%

20%

16%

Where dothey purchase?

E irectly from AMC's

Brokers only

Sub-brokersOther sources


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(14)According to you which is the most suitable stage to invest in mutual funds?

Respondents in


Young unmarried stage 28 23%

Young married with children 46 38%

Married with older children stage 34 28%

Pre-retirement stage 12 11%

Total 120 100%

As above graph reflects that whatever may be the profession but respondents thinkthat young

married age is the perfect age forinvestment when they dont have much responsibilities and

they have some extra amount forinvestment. Itis general observation that young people are

willing to take some risk and specially when they dont have any social responsibilities, Andatthe age of retirement people need fixed income because they are least interested in taking

risk as they have some fix amount which they gotto use after retirement.

Most suita le age or in estment

2 %

8%

28%

11%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Young unmarried stage

Young Married with children

stageMarried with older children

stage

Pre-retirement s tage


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(15) Feature of the mutual funds that attracts the most.

Respondents in


Diversification 43 36%

Professional management 30 25%

Reduction in risk and transaction cost 21 18%

Helps in achieving long term goals 26 21%

Total 120 100%

Above graph reflects that respondents need diversification because through this they can

reduce their risk and enjoy investing in other options. As graph shows that the ratio is 36

respondents choose it as their first priority option for investment.Mutual fund companies

investthe money butthey charge forthat so its not factifthey investin mutual fund they can

save their cost and above graph reflects the same thing that they gave 3rd

preference to

reduction in risk and cost because after all mutual fund are subject to market risk. And for

long term goals ratio is 21%.

36%

FG

%

H

I

%

F

H %

0%

10%

20%

30%

40%

Preference towards features of MF

Diversification

Professional management

Reduction in risk and

transaction cost

Helps in achieving long term

goals


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61

(16) How much return do you expect from your Investments?

Respondents in


5-10% 14 12%

10-15% 21 18%

15-25% 65 53%

25-35% 12 10%

More than 35% 8 7%

Total 120 100%

If any person invested their money in any option which are available in the market they

obviously look for good return but if they want to earn high return than high risk is also

associated with it as above graph suggests that most of the respondents choose the return

between 15% to 25% because they knows that the current market condition its good return

they can get and very few respondents choose more than 35% return which is actually verydifficultto get.

et rn e ecte in ercenta e

12%

18%

P

3%

10%Q

%

0%

10%

20%

30%

40%

50%

60%

5-10%

10-15%

15-25%

25-35%


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62

(17) Which type of Mutual funds do you prefer?

Respondents in


Open ended schemes 79 66%

Close ended schemes 41 34%

Total 120 100%

H0: Most of the investors invest in Open-Ended Schemes of Mutual Funds.

H1: Most of the investors do not invest in Open-Ended Schemes of Mutual Funds.

Above graph shows that no matterin which profession they are butthey choose open ended schemes.

In open ended schemes they can enter at any time or they can exit at any time. And as they knows

they with current market conditions no one wants to continue theirinvestmentifthey wont get good

return of negative return. Ratio of close ended schemes is very low. So we can say that H0 is

accepted.

66%

34%

Types of MF sc emes preferred by

respondents

Open ended schemes

ClR seended schemes


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(18) What is your preference in Mutual Funds?

Respondents in


E uity 9 8%

Money market fund 11 9%

Balanced fund 58 48%

Income funds 3 2%

ELSS (tax saver) 25 20%

SIP 14 13%

Total 120 100%

Above graph reflects thatthe respondents who are fromjob orthey have their own profession choose

equity fund more than other options available. And the respondents have their own business they

choose SIP more as theirinvestment product compare to two other groups because SIP is more safe

and convinent option forinvestment. ELSS (Tax Saver) is also choose by some respondents becausethey can getthe tax saving benefitifthey invests their money in it.

8%S

%

T

8%

U

%

U V

%

W 3%

0%

10%

20%

30%

40%

50%

Preference in mutual fund

Equity

Money market fund

Balanced fund

Income funds

ELSS(tax saver)

SIP


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65

TEST OF HYPOTHESIS

HYPOTHESIS:

A hypothesis is a statement about population parameter. Hypothesis testing/significance.

Testing is procedure that helps us to decide whether the hypnotized population parameter

value is accepted or rejected by making use of the information obtained from the sample.

Null hypothesis:

A statistical hypothesis which is stated for the purpose of possible acceptance is called null

hypothesis. It is usually denoted by H0, the null hypothesis may be expressed symbolically.

Null hypothesis is the hypothesis which is tested for possible rejection under the assumption

that it is true.

Alternative hypothesis:

Any hypothesis which is complementary to null hypothesis to the null

The following questions are taken to test the hypothesis using chi-square test.

CHI SQUARE TEST

Please rank the following investment instruments according to your

preference.(On the basis of risk and return concept) Which are the main reasons for investing into MF?

Which company influence you the most.

From where do you purchase mutual funds?

According to you which is the most suitable stage to invest in mutual funds? Rank the following feature of the mutual funds that attracts you most.

What is your preference in Mutual Funds?


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Please rank the following investment instruments according to your

preference.(On the basis of risk and return concept)

In India, the investment instrument other than mutual fund are still more popular than MF

Null hypothesis (Ho): All investment instrument are equally popular.

Alternative hypothesis(Ha): Other investment instruments are more popular than MF.

Total investment instrument covered under the survey 8

Equally population mean 1/8

Expected frequency(E = N * probability) =15(120*1/8)

Investment instrument Observed

frequency

Expected

frequency

O-E (O-E)2/E

Fixed Deposit 36 15 21 29.40

Mutual Fund 17 15 2 0.26

Equity 10 15 -5 1.67

Bonds 5 15 -10 6.67

ULIP 7 15 -8 4.26

Govt. Securities 6 15 -9 5.40

LIC 20 15 5 1.67

Post office 19 15 4 1.06

Total 120 50.39

Degree of freedom = 8-1 = 7

Level of significance = 1%

Critical value = 18.475

X2

cal > X2

critical

Therefore, Ho is rejected

Conclusion: Other investment instrument are more popular than MF.


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Which are the main reasons for investing into MF?

Null hypothesis (Ho): Investors invest in MF equally for various reasons like tax

benefit, high return n othersAlternative hypothesis(Ha): Investors invest for high return and saving




Various reasons Observed

frequency

Expected

frequency

O-E (O-E)2/E

Tax benefit 13 15 -2 0.27

High return 38 15 23 35.27

Saving 24 15 9 5.40

Tax benefit & high return 13 15 -2 0.27

Tax benefit & saving 10 15 -5 1.66

High return & saving 13 15 -2 0.27

All of above 5 15 -10 6.67

Others 4 15 -11 8.07

Total 120 57.88




X2

cal > X2

critical


Conclusion: Therefore, Investors invest for high return and saving.


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Which company influence you the most.

Reliance MF is most popular MF

Null hypothesis (Ho): All MF are equally popular

Alternative hypothesis(Ha): Reliance MF is more popular than other MF




Particulars Observed

frequency

Expected

frequency

O-E (O-E)2/E

Reliance MF 25 15 10 6.67

SBI MF 6 15 -9 5.4

Birla Sun Life MF 14 15 -1 0.06

Principal PNB 4 15 -11 8.07

UTI MF 14 15 -1 0.06

HDFC MF 21 15 6 2.4

ICICI Prudential 17 15 2 0.27

Franklin Templeton 19 15 4 1.06

Total 120 23.99




X2

cal > X2

critical


Conclusion: Therefore, Reliance MF is more popular than other MF.


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From where do you purchase mutual funds?

Null hypothesis (Ho): Investors purchase MF equally from all sources.

Alternative hypothesis(Ha): Investors purchase MFs mostly from broker.




Sources Observed

frequency

Expected

frequency

O-E (O-E)2/E

Directly from

AMCs

28 30 -2 0.13

Brokers only 49 30 19 12.03

Sub-brokers 25 30 -5 0.83

Other sources 18 30 -12 4.8

Total 120 17.79




X2 cal > X2 critical


Conclusion: Therefore, Investors purchase MFs mostly from broker.


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According to you which is the most suitable stage to invest in mutual funds?

Null hypothesis (Ho): Investors do not believe in any specific stage of life

suitable to invest in MF.

Alternative hypothesis(Ha): Most investors believe that Young married with children

stage of life is most suitable to invest in MF.







X2 cal > X2 critical


Conclusion: Therefore, Most investors believe that Young married with children stage of

life is most suitable to invest in MF.

Stages of life Observed

frequency

Expected

frequency

O-E (O-E)2/E

Young unmarried stage 28 30 -2 0.13

Young married with

children

46 30 16 8.53

Married with older

children stage

34 30 4 0.53

Pre-retirement stage 12 30 -18 10.8

Total 120 19.99


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Rank the following feature of the mutual funds that attracts you most.

Null hypothesis (Ho): All features are equally attracts to investors.

Alternative hypothesis(Ha): Diversification is the most popular feature of MF which

attracts to investors.




Features Observed

frequency

Expected

frequency

O-E (O-E)2/E

Diversification 43 30 13 5.63

Professional management 30 30 0 0

Reduction in risk and

transaction cost

21 30 -9 2.7

Helps in achieving long term

goals

26 30 -4 0.53

Total 120 8.86




X2

cal < X2

critical

Therefore, Ho is Accepted

Conclusion: Therefore, all features are also equally attracts to investors.


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What is your preference in Mutual Funds?

Null hypothesis (Ho): All type of MF schemes out of below are equally popular.

Alternative hypothesis(Ha): Balanced fund are more popular than other.




Particulars Observed

frequency

Expected

frequency

O-E (O-E)2/E

Equity 9 20 -11 6.05

Money market fund 11 20 -9 4.05

Balanced fund 58 20 38 72.2

Income funds 3 20 -17 14.45

ELSS (tax saver) 25 20 5 1.25

SIP 14 20 -6 1.8

Total 120 99.8




X2

cal > X2

critical


Conclusion: Therefore, balanced fund are more popular than other.


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SUNDARM FINANCE BALANCE SHEET 31 -3-2011

Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07

Sources of funds

X wner's fund

Equity share capital 55.55 55.55 55.55 27.78 27.78

Share application money 0.55 0.23 - - -

Preference share capital - - - - -

Reserves & surplus 1,473.79

1,260.5

7

1,097.1

2

1,015.1

5 850.1

Y oan funds

Secured loans 7,486.10

5,884.1

7

4,180.2

1

4,317.1

7

3,722.7

8

Unsecured loans 2,463.29

2,609.6

1

2,095.5

6

1,763.8

0

2,013.3

8

Total

11,479.2

9

9,810.1

4

7,428.4

4

7,123.8

9

6,614.0

5

Uses of funds

Fixed assets

Gross block 520.39 466.28 507.89 480.89 541.06

Y ess revaluation reserve - - - - -

Y ess accumulated depreciation 246.18 233.9 305.48 308.24 378.41

Net block 274.21 232.38 202.41 172.64 162.64

a apital work-in-progress - 160.06 107.15 - 226.27

Investments 946 537.45 511.89 456.46 449.54

Net current assets

a urrent assets, loans & advances

10,948.5

4

9,559.7

2

7,191.7

8

7,127.6

1

6,184.1

1

Y ess current liabilities & provisions 689.46 679.47 584.79 632.82 408.52

Total net current assets

10,259.0

8

8,880.2

5

6,606.9

9

6,494.7

9

5,775.5

9

Miscellaneous expenses not written - - - - -

Total

11,479.2

9

9,810.1

4

7,428.4

4

7,123.8

9

6,614.0

5

Notes

Book value of unquoted investments 779.24 381.38 396.16 359.24 362.13

Market value of quoted investments 276.48 237.86 150.95 193.82 228.97

a ontingent liabilities 79.48 82.77 42.94 40.52 84.71

Number of equity sharesoutstanding ( Y acs) 555.52 555.52 555.52 277.76 277.76


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Profit loss account

Mar ' 11 Mar ' 10 Mar ' 09 Mar ' 08

Mar '

07

Income

Operating income 1,354.46 1,196.69 1,082.78 890.36 631.58Expenses

Material consumed - - - - -

Manufacturing expenses - - - - -

Personnel expenses 112.67 100.11 94.08 88.22 61.35

Selling expenses - 2.05 2.69 3.31 3.34

Administrative expenses 130.09 119.66 105.76 80.54 52.77

Expenses capitalized - - - - -

Cost of sales 242.76 221.83 202.53 172.07 117.46

Operating profit 1,111.70 974.86 880.24 718.29 514.12

Other recurring income 79.63 41.13 31.66 121.16 30.88

Adjusted PBDIT 1,191.34 1,015.99 911.9 839.45 545

Financial expenses 707.82 633.8 645.44 497 374.66

Depreciation 54.69 44.82 37.76 30.12 21.57

Other write offs - - - - -

Adjusted PBT 428.83 337.38 228.7 312.34 148.76

Tax charges 135.14 96.73 68.98 90.35 42.97

Adjusted PAT 293.69 240.65 159.72 221.98 105.79

Nonrecurring items 1.54 -13.9 -8.99 -9.44 -5.32

Other non cash adjustments - - - - -

Reported net profit 295.23 226.75 150.73 212.54 100.47

Earnigs before appropriation 356.25 268.72 197.88 242.25 129.25

Equity dividend 77.77 55.55 36.11 41.66 29.16

Preference dividend - - - - -

Dividend tax 4.45 7.74 4.88 5.84 4.26

Retained earnings 274.03 205.42 156.89 194.75 95.83


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CHAPTER -6

Findings & Recommendation

After pleting yresearch I find that sundarammutual fundareperf rming quite well in

themarket ascompared toothercompanies.

In spite of not ha ing rand name only on the asis of itsperformance sundaram mutual

fund isgi ing toughcompetition to the topcompaniesofmutual fund

omeschemesofsundarammutual fund like

undaramselect madcap

undaramselect focus

undaram India leadership fundaregi ing est andhighreturn to theircustomers in

spite of downfall in the market when almost all the mutual fund goes negati e

sundarammidcap wasgi ing thepositi eandgoodreturn to thecustomers.

Recommendation:

Sundaram A C Ltd. can ecome a good rand name in the market on the asis of its

performance theneed is togi eemphasizeon the followingpoint

o Sufficient product material should ea ailable in theoffice.

o Proper and effecti e marketing should be done to spread awareness n the

market

o arketing material should be pro ided for advertise the brand name of the

company.


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Conclusion


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Conclusion

utual fundsareemergingasan important financial intermediary for the investingpublic in

India. Conceptuallyandoperationally theyaredifferent. he investorsneed tounderstand

the workingofamutual fundand the increasinglydiverseandcomplex in vestment options

brought to thembya largenumberofmutual funds.

hemutual fund industry in Indiastarted in 1963 with the formationof Unit rust of India, at

the initiativeof the Government of IndiaandReserve Bank the.

Sundaram utual hasasset sundermanagement helps investors toreach their

financial goalsbydeliveringcons istent performance through judicious investment

prac tices. It isclear throughco mpetitiveanalysis that inspiteofnot havingbr and

name sundarams fundsare performing q uite well in themarket and theneed isof

brandawarenessonly.

Limitations

y Project wasentirelybasedonsecondary informa tion.

y imerestraint isanother factor which limit mystudy

y Limitedresources wereavailable toconduct thisstudy.


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Refrences

Book- portfoliomanagement andmutual fund

Puplication ICFAI /august 2004

http://www.valueresearch.com

http:www.amfiindia.com

http://www.moneycontrol.com

http://www.sundarambnpparibas.in

http://www.google.com


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Thankyou

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