Analysis of Investment in Mutual Funds

INDEX

CHAPTER TOPIC
NO.
1. Executive summary
2. Industry Profile
2.1 Introduction to Mutual Funds
2.2 Benefits of Mutual Fund investment
2.3 Types of Mutual Funds
2.4 Risk associated with Mutual Funds
2.5 Competition in Mutual Funds Industry
2.6 Major players in Mutual Funds Industry

3. Company profile
3.1 Introduction to AnandRathi company
3.2 Milestones
3.3 AnandRathi core strength
3.4 Management team
3.5 Different branches in INDIA
3.6 List of products
3.7 Mission & Vision

4. Objectives & limitations of the project

5. Methodology & objectives
6. Analysis & Interpretation
7. Conclusions
8. Suggestions
9. Bibliography
10. Annexure

1
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

EXECUTIVE
SUMMARY

2
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

EXECUTIVE SUMMARY

I have completed my training on the topic of Analysis of Investment in Mutual Funds. I have
collected my data for analysis through personal contacts which helped me lot in collecting
primary data.

Role of financial system is to enthusiast economic development. As investors are getting more
educated, aware & prudent they look for innovative investment instruments so that they are
able to reduce investment risk, minimize transaction costs, & maximize returns along with
certain level of convenience as a result there has been as advent of numerous innovative
financial instrument such as bonds, company deposits, insurance, & mutual funds. All of which
could be matched with individual’s investment needs. Mutual funds score over all other
investment options in terms of safety, liquidity, returns, & are as transparent, convenient as it
can get. Goal of a mutual fund is to provide an efficient way to make money. In India there are
36 mutual funds with different investment strategies & goals to choose from different mutual
funds have different risks, which differ because of funds manager, & investment styles.

DEFINATION OF RESEARCH

According to PHILIP KOTLER “Marketing Research is the systematic design, collection, analysis,
& reporting of data & findings relevant to a specific marketing situation facing the company”.
This is Marketing Research.

3
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

OBJECTIVES OF THE STUDY

 The objective of the research is to study & analyze the awareness level of investors of
mutual funds.
 To measure the satisfaction level of investors regarding mutual funds.
 To know the mutual funds performance levels in the present market.

LIMITATIONS OF THE STUDY

 Found respondents unaware of Mutual funds investment.
 Respondents were not having time to fill the questionnaire.
 Some respondents give fake answers which are not correct & is difficult to analyze the
data & solve the problem.

RESEARCH PROCESS

My research project has a specified framework for collecting the data in an effective manner.
Such framework is called “RESEARCH DESIGN”. The research process which was followed by me
consisted following steps:
A. PROBLEM:
The problem at hand was to study & measure the awareness level of people regarding
mutual funds in the city.
B. DEVELOPING THE RESEARCH PLAN:
The development of research plan has the following steps:
 DATA SOURCES: Two types of data were taken into consideration i.e. Secondary
data & Primary data. My major emphasis was on gathering the primary data. The
secondary data has been used to make things more clear.

4
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 PRIMARY DATA: Direct collection of data from the source of information,

technology, including personal interviewing, survey.
 SECONDARY DATA: Indirect collection of data from sources containing
past or recent past information like books, magazines, internet etc.

 RESEARCH INSTRUMENT
My research instrument was my questionnaire by which I did survey & collected
my data for solving my research problem. Questionnaire consisting of a set of
questions made to be filled by various respondents.

 SAMPLING PLAN
The sampling plan calls for three decisions.
 SAMPLING UNIT: I have completed my survey in Kribhco township,
Reliance township, & in Banks.
 SAMPLE SIZE: The sample consisted of 100 respondents. The sample was
collected from every & any customer as it was open for all. The selection
of the respondents was done on the basis of simple random sampling.
 CONTACT METHODS: I have contacted the respondents through personal
interviews.
 COLLECTING THE INFORMATION
After this, I have collected the information from the respondents with the help of
questionnaire.

 ANALYZE THE INFORMATION

The next step is to extract the relevant findings from the collected data. I have
tabulated the collected data & developed proportion distributions. Thus, the
whole data was grouped aspect wise & was presented in tabular form. Thus,
percentages were prepared to render impact of the study.

5
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 PRESENTATIONS OF FINDINGS
This was the last step of the survey.

CONCLUSION

 Found around 15% of investors were unknown from investing in Mutual Funds.

 Some more investors didn’t found profits in investing in mutual funds, rather
many of them were sayings that in mutual funds we don’t earn much profits as
the percentages on interest is less than other preferences of investing.

 Many of them invests so they compared ICICI PRUDENTIAL BANK WITH HDFC
BANK. They said that ICICI is more better than HDFC as their services,
percentages are more better than HDFC & also it is very convenient to invest as
their small branches are scattered on each & every place but HDFC has their
limited branches.

SUGGESTIONS
 I suggest that the government should increase the percentages & give
more benefits in comparison to other preferences of investing so that the
more investors could get attract towards investing in mutual funds.
 Government should give more advertisements on investing in
preferences so that the majority should get aware of investing their
money in such preferences so that they could enjoy their benefits.
 HDFC bank should increase their branches on every place & provide more
good services so that investors could get fascinated towards their bank &
invest their money.

6
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

INDUSTRY
PROFILE

7
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

WHAT IS MUTUAL FUND???

A Mutual Fund is a trust that pools the savings of a number of investors who share a common
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 is 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 broadly the working of a mutual fund

 The structure of Mutual Funds in India is governed by SEBI (Mutual Fund) Regulations, 1996.

8
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 It is mandatory to have a three tier structure of Sponsor – Trustee – Asset Management

Company.
 The trust is established by a Sponsor or more than one sponsor who is like a promoter of a
company. He appoints the Trustees who are responsible to the investors of the fund.
 The Trustees of the mutual fund hold its property for the benefit of the unit holders.
 Asset Management Company (AMC) approved by SEBI is the business face of the mutual
fund as it manages all the affairs of the fund by making investments in various types of
securities.
 Custodian, who is registered with SEBI, holds the securities of various schemes of the
funds in its custody.

THE SCENARIO—HOW
SCENARIO IT STARTED AND HOW IS IT TODAY
MUTUAL FUNDS - THE GLOBAL PERSPECTIVE
Mutual Funds as a concept developed in the early 20 th century. But the idea of pooling together
money for investment purposes started in Europe in the mid-1800s mainly in Netherlands and
Scotland followed by Belgium, England and France. Though today the largest market of Mutual
Funds is USA yet the first Mutual Fund that was launched in USA is the New York Stock Trust in
1889 followed by the widely known open-ended Massachusetts Investors Trust in 1924, now
called the MFS. These developments led to the establishment of Fidelity Investments which
today is the world’s largest Mutual Fund Company and other companies like Pioneer, Scudder
and Putnam funds. Mutual Funds were initially termed as trusts.

MUTUAL FUNDS INDUSTRY IN INDIA

Mutual Fund industry started in India in 1963 at the initiative of the Government of India and
the Reserve Bank of India which led to the formation of UTI (Unit Trust of India).

The Mutual fund industry can be broadly put into four phases:

9
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 First Phase (1964-87) - UTI commenced its operations from July 1964 with a view to
encouraging savings and investment and participation in the income, profits and gains
accruing to the corporation from the acquisition, holding management and disposal of
securities. The first scheme launched by UTI was called the UNIT Scheme 1964 more
popularly US-64.
 Second Phase (1987-1993) - Initially, the growth was slow but it accelerated from the
year 1987. In 1987, public sector Mutual Funds was setup by public sector banks, the LIC
(Life Insurance Corporation of India) and the GIC (General Insurance Corporation of
India). SBI (State Bank of India) launched the first non-UTI Mutual Fund in 1987 followed
by other public sector banks.
 Third Phase (1993-2003) - In 1993 the first private sector Mutual Fund was launched by
Kothari Pioneer which now has merged with Franklin Templeton. 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
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 assets under management was
way ahead of other mutual funds.
 Fourth Phase (Since February 2003) - UTI was bifurcated into two separate entities. One
is the Specified Undertaking of the Unit Trust of India with assets under management of
Rs.29835 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

10
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

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 first Mutual Fund regulations were formed in 1993 which was the SEBI (Mutual Fund)
Regulations 1993. The present day Mutual Fund industry is governed by the SEBI (Mutual Fund)
Regulations 1996.

The following figure shows the growth in AUM (Asset under Management) of the Indian Mutual
Fund Industry as on March 2009.

11
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

Today there are over 30 AMC’s offering a huge number of schemes giving the investor a huge
horizon to choose from. The market has become very competitive with the companies fighting
tooth and nail to attract and keep the investor from investing in their competitor’s schemes.
Today, Reliance Mutual Funds is the leading company in this sector with total assets under
management being Rs.46, 307 crores while Prudential ICICI being in the second position with
Rs.37, 870 crores. The following graph shows the composition of five of the top AMC’s in India-

Basic Organisation of a Mutual Fund

There are many entities involved and the diagram below illustrates the organizational set up
of a Mutual Fund. These entities will be explained later in the report.

Mutual Funds diversify their risk by holding a portfolio of instead of only one asset. This is
because by holding all your money in just one asset, the entire fortunes of your portfolio
depend on this one asset. By creating a portfolio of a variety of assets, this risk is substantially
reduced.

Mutual Fund investments are not totally risk free. In fact, investing in Mutual Funds contains
the same risk as investing in the markets, the only difference being that due to professional
management of funds the controllable risks are substantially reduced. A very important risk
involved in Mutual Fund investments is the market risk. However, the company specific risks
are largely eliminated due to professional fund management.

IMPORTANT CHARACTERISTICS OF A MUTUAL FUND

 A Mutual Fund actually belongs to the investors who have pooled their
Funds. The ownership of the mutual fund is in the hands of the Investors.

12
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 A Mutual Fund is managed by investment professional and other

Service providers, who earns a fee for their services, from the funds.

 The pool of Funds is invested in a portfolio of marketable investments.

 The value of the portfolio is updated every day.

 The investor’s share in the fund is denominated by “units”. The value

Of the units changes with change in the portfolio value, every day. The
Value of one unit of investment is called net asset value (NAV).

 The investment portfolio of the mutual fund is created according to The stated
Investment objectives of the Fund.

OBJECTIVES OF A MUTUAL FUND

 To Provide an opportunity for lower income groups to acquire without

Much difficulty, property in the form of shares.
 To cater mainly of the need of individual investors who have limited means.
 To Manage investors portfolio that provides regular income, growth,
Safety, liquidity, tax advantage, professional management and diversification.

13
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

BENEFITS OF MUTUAL FUND INVESTMENT

Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.

Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries and
sectors. This diversification reduces the risk because seldom do all stocks decline at the same
time and in the same proportion. You achieve this diversification through a Mutual Fund with
far less money than you can do on your own.

Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad
deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save
your time and make investing easy and convenient.
14
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as
they invest in a diversified basket of selected securities.

Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing in the
capital markets because the benefits of scale in brokerage, custodial and other fees translate
into lower costs for investors.

Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value related
prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange
at the prevailing market price or the investor can avail of the facility of direct repurchase at
NAV related prices by the Mutual Fund.

Transparency
You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and
the fund manager's investment strategy and outlook.

Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs
and convenience.

15
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund
because of its large corpus allows even a small investor to take the benefit of its investment
strategy.

Choice of Schemes
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI.

TYPES OF MUTUAL FUNDS

Mutual fund schemes may be classified on the basis of its structure and its investment
objective.

By Structure:
Open-ended Funds
An open-end fund is one that is available for subscription all through the year. These do not
have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")

related prices. The key feature of open-end schemes is liquidity.

Closed-ended Funds
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years.
The fund is open for subscription only during a specified period. Investors can invest in the

16
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

scheme at the time of the initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one
of the two exit routes is provided to the investor.

Interval Funds
Interval funds combine the features of open-ended and close-ended schemes. They are open
for sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective:
Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to long- term. Such
schemes normally invest a majority of their corpus in equities. It has been proven that returns
from stocks, have outperformed most other kind of investments held over the long term.
Growth schemes are ideal for investors having a long-term outlook seeking growth over a
period of time.

Income Funds
The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures and
Government securities. Income Funds are ideal for capital stability and regular income.

Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the NAV

17
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

of these schemes may not normally keep pace, or fall equally when the market falls. These are
ideal for investors looking for a combination of income and moderate growth.

Money Market Funds

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 for short periods.

Load Funds
A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or
sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1%
to 2%. It could be worth paying the load, if the fund has a good performance history.
No-Load Funds
A No-Load Fund is one that does not charge a commission for entry or exit. That is, no
commission is payable on purchase or sale of units in the fund. The advantage of a no load fund
is that the entire corpus is put to work.

Other Schemes:
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 Schemes are 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 Mutual Funds, provided the capital asset
has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.
18
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

Special Schemes
Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in the offer document. The
investment of these funds is limited to specific industries like InfoTech, FMCG, and
Pharmaceuticals etc.

Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex
or the NSE 50.

Sectoral Schemes:-
Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries
or various segments such as 'A' Group shares or initial public offerings.

Structure of the Indian Mutual Fund industry

The largest categories of Mutual Funds are the ones floated by the private sector and by
Foreign Asset Management Companies. The largest of these are Prudential ICICI AMC and Birla
Sun Life AMC. The aggregate corpus of assets managed by this category of AMCs is in excess of
Rs.350 bn.
Earlier the Indian Mutual Fund industry was dominated by the Unit Trust of India which has a
total corpus of Rs.700 bn collected from more than 20 million investors. The UTI has many
funds/schemes in all categories i.e. equity, balanced, income etc. with some being open-ended
and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is
a balanced fund, is the biggest scheme with a corpus of about Rs.200 bn. UTI was floated by
financial institutions and is governed by a special Act of Parliament. Most of its investors believe

19
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

that the UTI is government owned and controlled, which, while legally incorrect, is true for all
practical purposes.
The second largest categories of mutual funds are the ones floated by nationalized banks.
Canara bank Asset Management floated by Canara Bank and SBI Funds Management floated by
the State Bank of India are the largest of these. GIC AMC floated by the General Insurance
Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent
ones. The aggregate corpus of funds managed by this category of AMCs is about Rs.200 bn.

WHY MUTUAL FUNDS???

 An investor normally prioritizes his investment needs before undertaking an investment.

So different goals will be allocated different proportions of the total disposable amount.
Investments for specific goals normally find their way into the debt market as risk
reduction is of prime importance. This is the area for the risk-averse investors and here,
mutual funds are generally the best option. The reasons are not difficult to see.

 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
in the Company 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.

 They can manage the maturity of their portfolio by investing in instruments of varied
maturity profiles. Since there is no penalty on pre-mature withdrawal, as in the cases of
fixed deposits, debt funds provide enough liquidity.

20
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 Moreover, mutual funds are better placed to absorb the fluctuations in the prices of the
securities as a result of interest rate variation and one can benefits from any such price
movement.

 Apart from liquidity, these funds have also provided very good post-tax returns on year
to year basis. Even historically, we find that some of the debt funds have generated
superior returns at relatively low level of risks. On an average debt funds have posted
returns over 10 percent over one-year horizon. The best performing funds have given
returns of around 14 percent in the last one-year period.

 In nutshell we can say that these funds have delivered more than what one expects of
debt avenues such as post office schemes or bank fixed deposits. Though they are
charged with a dividend distribution tax on dividend payout at 10 percent (plus a
surcharge of 10 percent), the net income received is still tax free in the hands of investor
and is generally much more than all other avenues, on a post tax basis.

 Moving up in the risk spectrum, we have people who would like to take some risk and
invest in equity funds/capital market. However, since their appetite for risk is also
limited, they would rather have some exposure to debt as well. For these investors,
balanced funds provide an easy route of investment.

 Armed with the expertise of investment techniques, they can invest in equity as well as
good quality debt thereby reducing risks and providing the investor with better returns
than he could otherwise manage. Since they can reshuffle their portfolio as per market
conditions, they are likely to generate moderate returns even in pessimistic market
conditions.

 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. They can
21
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

manage the maturity of their portfolio by investing in instruments of varied maturity

profiles. Since there is no penalty on pre-mature withdrawal, as in the cases of fixed
deposits, debt funds provide enough liquidity.

 Moreover, mutual funds are better placed to absorb the fluctuations in the prices of the
securities as a result of interest rate variation and one can benefits from any such price
movement.

 Next come the risk takers.

 Risk takers by their very nature, would not be averse to investing in high-risk
avenues. Capital markets find their fancy more often than not, because they
have historically generated better returns than any other avenue, provided, the
money was judiciously invested.

 Though the risk associated is generally on the higher side of the spectrum, the
return-potential compensates for the risk attached.

 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 analyze the
valuations of the stocks will solve this problem for an investor.

22
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 Mutual funds specialize in identification of stocks through dedicated experts in

the field and this enables them to pick stocks at the right moment. Sector funds
provide an edge and generate good returns if the particular sector is doing well.

 Next problem is that of funds/money. A single person can’t 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.

 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

How are the Mutual Funds Structured?

The Mutual Funds are structured in two forms: Company form and Trust form.

 Company Form: These forms of mutual funds are more popular in US.
 Trust Form: In India, mutual funds are organized as Trusts. The Trust is either managed
by a Board of Trustees or by a Trustee Company.
There must be at least 4 members in the Board of Trustees and at least 2/3 of the
members of the board must be independent.
Trustee of one mutual fund cannot be a trustee of another mutual fund.

Unit Trusts – Constituents

A Mutual Fund is set up in the form of a Trust which has the following constituents:-

23
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

1. Fund Sponsor
2. Mutual Fund as Trust
3. Asset Management Company
4. Other Fund Constituents
4.1. Custodian and Depositors
4.2. Brokers
4.3. Transfer Agent
4.4. Distributors

FUND SPONSOR

What a promoter is to a company, a sponsor is to a mutual fund. The sponsor initiates the idea
to set up a mutual fund. It could be a financial services company, a bank or a financial
institution. It could be Indian or foreign. It could do it alone or through a joint venture. In order
to run a mutual fund in India, the sponsor has to obtain a license from SEBI. For this, it has to
satisfy certain conditions, such as on capital and profits, track record (at least five years in
financial services), default-free dealings and a general reputation for fairness. The sponsor must
have been profit making in at least 3 years of the above 5 years.

The Sponsor appoints the Trustees, Custodian and the AMC with the prior approval of SEBI and
in accordance with SEBI Regulations.

Like the company promoter, the sponsor takes big-picture decisions related to the mutual fund,
leaving money management and other such nitty-gritty to the other constituents, whom it
appoints. The sponsor should inspire confidence in you as a money manager and, preferably, be
profitable. Financial muscle, so long as it is complemented by good fund management, helps, as
money is then not an impediment for the mutual fund- it can hire the best talent, invest in
technology and continuously offer high service standards to the investors.

24
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

In the days of assured return schemes, sponsors also had to fulfill return promises made to the
unit holders. This sometimes meant meeting shortfalls from their own pockets, as the
government did for UTI. Now that assured return schemes are passed, such bailouts won’t be
required. All things considered, choose sponsors who are good money managers, who have a
reputation for fair business practices and who have deep pockets.

TRUST

The Mutual Fund is constituted as a Trust in accordance with the provisions of the Indian Trusts
Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.
The Trust appoints the Trustees who are responsible to the investors of the fund.

TRUSTEES

Trustees are like internal regulators in a mutual fund, and their job is to protect the interests of
the unit holders. Trustees are appointed by the sponsors, and can be either individuals 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 any association with the sponsor.

Trustees appoint the AMC, which subsequently, seeks their approval for the work it does, and
reports periodically to them on how the business being run. Trustees float and market schemes,
and secure necessary approvals. They check if the AMCs investments are within defined limits
and whether the fund’s assets are protected. Trustees can be held accountable for financial
irregularities in the mutual fund.

Rights of the Trustees:

25
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 Trustees appoint the AMC in consultation with the sponsor and according to the SEBI
Regulations.
 All Mutual Fund Schemes floated by the AMC have to be approved by the Trustees.
 Trustees can seek information from the AMC regarding the operations and compliance
of the mutual fund.
 Trustees can seek remedial actions from AMC, and in cases can dismiss the AMC.
 Trustees review and ensure that the net worth of the AMC is according to the stipulated
norms, every quarter.

Obligations of the Trustees:

 Trustees must ensure that the transactions of the mutual fund are in accordance with
the trust deed.
 Trustees must ensure that the AMC has systems and procedures in place.
 Trustees must ensure due diligence on the part of AMC in the appointment of
constituents and business associates.
 Trustees must furnish to the SEBI, on half yearly basis a report on the activities of the
AMC.
 Trustees must ensure compliance with SEBI Regulations.

ASSET MANAGEMENT COMPANY (AMC)

26
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

TOP 5 AMC's

13%
Reliance
27%
Prud ICICI
17%
UTI MF
HDFC MF

22% Franklin
21% Templeto
n

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 trustees sign an investment agreement with the AMC, which spells
out the functions of the AMC. It is the AMC that employs fund managers and analysts, and
other personnel. It is the AMC that handles all operational matters of a mutual fund – from
launching schemes to managing them to interacting with investors.

The people in the AMC who should matter the most to you are those who take investment
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), who shapes the fund’s
investment philosophy, and fund managers, who manages its schemes. They are assisted by a
team of analysts, who track markets, sectors and companies.
Although these people are employed by the AMC, its you, the unit holders, who pays their
salaries, partly or wholly. Each scheme pays the AMC an annual ‘fund management fee’, which
is linked to the scheme size and results in a corresponding drop in your return. If a scheme’s
corpus is up to Rs.100 crores it pays 1.25% of its corpus a year; on over Rs.100 crores, the fee is
1% of the corpus. So, if a fund house has two schemes, with a corpus of Rs.100 crores and
Rs.200 crores respectively, the AMC will earn Rs.3.25 crore (1.25+2) as fund management fee
that year.

27
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

If an AMCs expenses for the year exceed what it earns as fund management fee from its
schemes, the balance has to be met by the sponsor. Again, financial strength comes into play: a
cash-rich sponsor can easily pump in money to meet short falls, while a sponsor with less
financial clout might force the AMC to trim costs, which could well turn into an exercise in
cutting corners.

Regulatory requirements for the AMC:

 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.
 An AMC cannot be an AMC or Trustee of another Mutual Fund.
 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.
 The 4th schedule of SEBI Regulations spells out rights and obligations of both trustees
and AMCs.

Obligations of the AMC:

 Investments have to be according to the investment management agreement and SEBI

regulations.
 The actions of its employees and associates have to be as mandated by the trustees.
 AMCs have to submit detailed quarterly reports on the working and performance of the
mutual fund.
 AMCs have to make the necessary statutory disclosures on portfolio, NAV and price to
the investors.

Restrictions on the AMC:

28
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 AMCs cannot launch a scheme without the prior approval of the trustees.
 AMCs have to provide full details of the investments by employees and Board members
in all cases where the investment exceeds Rs.1 lakh.
 AMCs cannot take up any activity that is in conflict with the activities of the mutual
fund.

Conditions under which two AMCs can be merged:

SEBI Regulations require the following:

 SEBI and Trustees of both the funds must approve of the merger.
 Unit holders should be notified of the merger, and provided the option to exit at NAV
without load.

Conditions under which an AMC can be taken over:

SEBI approval is required for the change of ownership and unit holders have to be informed of
the takeover.

Scheme take over: If an existing mutual fund scheme is taken over by another AMC, it is called
as scheme take over. The two mutual funds continue to exist. Trustee and SEBI approval and
notification of the unit holders are required for scheme take over.

CUSTODIAN

A custodian handles the investment back office of a mutual fund. Its responsibilities include
receipt and delivery of securities, collection of income, and distribution of dividends and
segregation of assets between the schemes. It also track corporate actions like bonus issues,
right offers, offer for sale, buy back and open offers for acquisition. The sponsor of a mutual
fund cannot act as a custodian to the fund. This condition, formulated in the interest of

29
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

investors, ensures that the assets of a mutual fund are not in the hands of its sponsor. For
example, Deutsche Bank is a custodian, but it cannot service Deutsche Mutual Fund, its mutual
fund arm.

BROKERS

Role of Brokers in a Mutual Fund:

 They enable the investment managers to buy and sell securities.

 Brokers are the registered members of the stock exchange.
 They charge a commission for their services.
 In some cases, provide investment managers with research reports.
 Act as an important source of market information.

REGISTRAR OR TRANSFER AGENTS

Registrars, also known as the transfer agents, are responsible for the investor servicing
functions. This includes issuing and redeeming units, sending fact sheets and annual reports.
Some fund houses handle such functions in-house. Others outsource it to the Registrars; Karvy
and CAMS are the more popular ones. It doesn’t 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 investor service centers of their own in some cities.

Some of the investor – related services are:-

 Processing investor applications.

 Recording details of the investors.

30
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 Sending information to the investors.

 Processing dividend payout.
 Incorporating changes in the investor information.
 Keeping investor information up to date.

DISTRIBUTORS

Role of Selling and Distribution Agents:

 Selling agents bring investor’s funds for a commission.

 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 commission which is paid depending on the time the
investor stays with the fund.

RISKS ASSOCIATED WITH MUTUAL FUND

31
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

The most important relationship to understand is the risk-return trade-off. Higher the risk
greater the returns/loss and lower the risk lesser the returns/loss.
Hence it is up to you, the investor to decide how much risk you are willing to take. In order to
do this you must first be aware of the different types of risks involved with your investment
decision.

MARKET RISK
Sometimes prices and yields of all securities rise and fall. Broad outside influences
Affecting the market in general lead to this. This is true, may it be big corporations or smaller
mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (“SIP”) that
works on the concept of Rupee Cost Averaging (“RCA”) might help mitigate this risk.

CREDIT RISK
The debt servicing ability (may it be interest payments or repayment of principal) of a company
through its cash flows determines the Credit Risk faced by you. This credit risk is measured by
independent rating agencies like CRISIL who rate companies and their paper. An ‘AAA’ rating is
considered the safest whereas a ‘D’ rating is considered poor credit quality. A well-diversified
portfolio might help mitigate this risk.

INFLATION RISK
Things you hear people talk about: “Rs. 100 today is worth more than Rs. 100 tomorrow.”
“Remember the time when a bus ride costed 50 paisa?” “Mehangai Ka Jamana Hai.”
The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of times
people make conservative investment decisions to protect their capital but end up with a sum
of money that can buy less than what the principal could at the time of the investment. This
happens when inflation grows faster than the return on your
Investment. A well-diversified portfolio with some investment in equities might help mitigate
this risk.

32
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

INTEREST RATE RISK

In a free market economy interest rates are difficult if not impossible to predict. Changes in
interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of
bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate
environment. A well-diversified portfolio might help mitigate this risk.

POLITICAL RISK

Changes in government policy and political decision can change the investment environment.
They can create a favorable environment for investment or vice versa.

LIQUIDITY RISK

Liquidity risk arises when it becomes difficult to sell the securities that one has purchased.
Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as
internal risk controls that lean towards purchase of liquid securities. You have been reading
about diversification above, but what is it? Diversification The nuclear weapon in your arsenal
for your fight against Risk. It simply means that you must spread your investment across
different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.)
and different sectors (auto, textile, information technology etc.). This kind of a diversification
may add to the stability of your returns,

ACCOUNTING AND VALUATION

Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of the assets fund net of its
liabilities. In other words, if the fund is dissolved or liquidated by selling off all the assets in the
fund, this is the amount that the shareholders would collectively own. This gives rise to the
33
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

concept of net asset value per unit, which is the value represented by the ownership of one unit
in the fund. It is calculated simply by dividing the net asset value of the fund by the number of
units. However, most people refer loosely to the NAV per unit as NAV, ignoring the “per unit”.
We also abide by the same convention.

Calculation of Net Asset Value

The most important part of the calculation is the valuation of the assets owned by the fund.
Once it is calculated, the NAV is simply the net value of assets divided by the number of the
units outstanding. The detailed methodology for the calculation of the net asset value is given
below:
NAV = Market value of investments + Current assets and other assets + Accrued income
- Current liabilities and other liabilities - Accrued expenses

BETA RATIO

A high beta is good or bad depending on the state of the market. If the market sentiments are
bullish, i.e., the market is seeing a rise in general, then a high beta stock is better and if the
market sentiment is bearish then low beta is preferred.
A beta of 1 indicates that the security's price will move with the market. A beta less than 1
means that the security will be less volatile than the market. A beta greater than 1 indicates
that the security's price will be more volatile than the market.

R_SQUARED

A statistical measure that represents the percentage of a fund's or security's movements that

are explained by movements in a benchmark index. R-squared values range from 0 to 100. An

34
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

R-squared of 100 means that all movements of a security are completely explained by
movement in index.
A higher R-squared value will indicate a more useful beta figure.

SHARP RATIO

High returns are generally associated with a high degree of volatility. The Sharpe ratio
represents this trade off between risk and returns. At the same time it also factors in the desire
to generate returns, which are higher than those from risk free returns.

The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance is.
Sharpe Index = (Ri – Rf) / Si
Where,
Ri = Return on Fund.
Rf = Risk free rate of Return.
Si = Standard Deviation of the fund.

EXPENSE RATIO

The percentage of total fund assets that is used to cover expenses associated with the
operation of a mutual fund. This amount is taken out of the fund's assets and lowers the return
that fund holders achieve. These expenses include management fees and operating expenses
. So lesser the expense ratio the better it is for the investors

COMPETITION IN MUTUAL FUNDS INDUSTRY

The most important trend in the mutual fund industry is the aggressive expansion of the
foreign owned mutual fund companies and the decline of the companies floated by
nationalized banks and smaller private sector players.
35
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

Many nationalized banks got into the mutual fund business in the early nineties and got off
to a good start due to the stock market boom prevailing then. These banks did not really
understand the mutual fund business and they just viewed it as another kind of banking
activity. Few hired specialized staff and generally chose to transfer staff from the parent
organizations. The performance of most of the schemes floated by these funds was not
good. Some schemes had offered guaranteed returns and their parent organizations had to
bail out these AMCs by paying large amounts of money as the difference between the
guaranteed and actual returns. The service levels were also very bad. Most of these AMCs

have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring
a few exceptions, they have serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian companies was also
very similar. They quickly realized that the AMC business is a business, which makes money
in a long term and requires deep-pocketed support in the intermediate years. Some have
sold out to foreign owned companies, some have merged with others and there is general
restructuring going on.

The foreign owned companies have deep pockets and have come in here with the
expectation of a long haul. They can be credited with introducing many new practices such
as new product innovation, sharp improvement in service standards and disclosure, usage
of technology, broker education and support etc. In fact, they have forced the industry to
upgrade itself and service levels of organizations like UTI have improved dramatically in the
last few years in response to the competition provided by these.

36
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

MAJOR PLAYERS IN MUTUAL FUNDS INDUSTRY

37
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

COMPANY PROFILE

38
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

ORGANIZATION HISTORY

About AnandRathi

39
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

AnandRathi (AR) is a leading full service securities firm providing the entire gamut of financial
services. The firm, founded in 1994 by Mr. AnandRathi, today has a pan India presence as well
as an international presence through offices in Dubai and Bangkok. AR provides a breadth of
financial and advisory services including wealth management, investment banking, corporate
advisory, brokerage & distribution of equities, commodities, mutual funds and insurance,
structured products - all of which are supported by powerful research teams.

The firm's philosophy is entirely client centric, with a clear focus on providing long term value
addition to clients, while maintaining the highest standards of excellence, ethics and
professionalism. The entire firm activities are divided across distinct client groups: Individuals,
Private Clients, Corporate and Institutions and was recently ranked by Asia Money 2006 poll
amongst South Asia's top 5 wealth managers for the ultra-rich.

In year 2007 Citigroup Venture Capital International joined the group as a financial partner.

Equity & Derivatives Brokerage

AnandRathi provides end-to-end equity solutions to institutional and individual investors.

Consistent delivery of high quality advice on individual stocks, sector trends and investment strategy
has established us a competent and reliable research unit across the country.

Clients can trade through us online on BSE and NSE for both equities and derivatives. They are
supported by dedicated sales & trading teams in our trading desks across the country. Research and
investment ideas can be accessed by clients either through their designated dealers, email, web or SMS

Milestones

40
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

1994 started activities in consulting & institutional equity sales with staff of 15
1995 set up a research desk & empanelled with major institutional investors
1997 introduced investment banking business
retail brokerage services launched
1999 lead managed first IPO & executed first M & A deal
2001 initiated wealth management services
2002 retail business expansion recommences with ownership model
2003 wealth management assets cross Rs.1500 crores
Insurance broking launched
Launch of wealth management services in Dubai
Retail branch network exceeds 50
2004 Commodities brokerage & real estate services introduced
wealth management assets cross Rs.3000 crores
Institutional equities business re-launched & senior research team put in place
Retail branch network expands across 100 locations within India
2005 Real estate private equity fund launched
Retail branch network expands across 200 locations within India exchange
(DGCX)
2006 AR middle east, WOS acquires membership of Dubai gold & commodity
exchange ()
Ranked amongst South Asia’s top 5 wealth managers for the ultra-rich by Asia
Money 2006 poll
Ranked 6th in FY2006 for all India Broker Performance in equity distribution in
the high net worth individuals (HNI) category
Ranked 9th in the Retail category having more than 5% market share
completes its presence in all states across the country with offices at 300+
locations within India
2007 Citigroup Venture capital international picks up 19.9% equity stake
Retail customer base crosses 100 thousand Establishes presence in over 350
locations

ANANDRATHI Core Strengths

Breadth of Services

41
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

In line with its client-centric philosophy, the firm offers to its clients the entire spectrum of
financial services ranging from brokerage services in equities and commodities, distribution of
mutual funds, IPO’s and insurance products, real estate, investment banking, merger and
acquisitions, corporate finance and corporate advisory.

Clients deal with a relationship manager who leverages and brings together the product
specialists from across the firm to create an optimum solution to the client needs.

Management Team

AR brings together a highly professional core management team that comprises of individuals
with extensive business as well as industry experience.

In-Depth Research

Our research expertise is at the core of the value proposition that we offer to our clients.
Research teams across the firm continuously track various markets and products. The aim is
however common - to go far deeper than others, to deliver incisive insights and ideas and be
accountable for results.

Management Team
The senior Management comprises a diverse talent pool that brings together rich experience
from across industry as well as financial services.

ORGANIZATIONAL HIERACHY

42
LN College Of Management & Technology, Surat
N
H
C
I
V
T
U
G
E
D
A
R
P
.
r
M
V
M

I C
.
r

ECH
Analysis of Investment in Mutual Funds

A
PR

GU
ADEEP

PT A

R
I M AN

LN College Of Management & Technology, Surat

43
 Analysis of Investment in Mutual Funds

In India where ANANDRATHI is present in 10 STATES:

44
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

LIST OF PRODUCTS:
PRODUCTS

45
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

46
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

OBJECTIVES
&
LIMITATIONS
OF
THE PROJECT

OBJECTIVES OF THE PROJECT

47
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

During training I learned many things practically. I was able to put my most of the theory
knowledge into practical. I learned many new things like some new schemes of mutual funds,
new financial terms etc. which i was not aware of it. Many of them were there who bolster me
a lot. Following are the objectives of the project & during my training also are:

Primary Objectives

 The objective of the research is to study & analyze the awareness level of investors of
mutual funds.
 To get insight knowledge about mutual funds.

Secondary Objectives

 I got to know about market that how many of them are investing in mutual funds, their
trading preferences, about their sources of investing & by which features they get
attract to invest in mutual funds.

48
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

LIMITATIONS OF THE PROJECT

During my training I faced many problems, like:

 During survey I found very difficulty in filling up the questionnaire because the
respondents were busy.

 Found some respondents unaware about schemes & benefits of mutual funds, so the
respondents found difficulty in filling up the questionnaire.

 Some respondents were not willing to disclose their investment profile.

 Respondents gives bias answers & sometimes do not co-operate or because of illiteracy
they do feel comfortable in filling questionnaire.

49
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

METHODOLOGY
&
OBJECTIVES

50
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

RESEARCH METHODOLOGY

AN INTRODUCTION

MEANING OF RESEARCH

Research in common parlance refers to a search for knowledge. Once can also define research
as a scientific & systematic search for pertinent information on a specific topic. In fact, research
is an art of scientific investigation. The Advanced Lerner’s Dictionary of current English lays
down the meaning of research as “a careful investigation or inquiry especially through search
for new facts in any branch of knowledge.” Redman & Mory define research as a “systematized
effort to gain new knowledge.” Some people consider research as a movement, a movement
from the known to the unknown. It is actually a voyage of discovery. We all possess the vital
instinct of inquisitiveness for, when the unknown confronts us, we wonder & our
inquisitiveness makes us probe & attain full & fuller understanding of the unknown. This
inquisitiveness is the mother of all knowledge & the method, which man employs for obtaining
the knowledge of whatever the unknown, can be termed as research.

Research is an academic activity & as such the term should be used in a technical sense.
According to Clifford Woody research comprises defining & redefining problems, formulating
hypothesis or suggested solutions, collecting, organizing & evaluating data; making deductions
& reaching conclusions; & at last carefully testing the conclusions to determine whether they fit
the formulating hypothesis. D.slesinger & M. Stephenson in the Encyclopedia of social sciences
define research as “the manipulation of things, concepts or symbols for the purpose of
generalizing to extend, correct or verify knowledge, whether that knowledge aids in
construction of theory or in the practice of an art”. Research is, thus, an original contribution to
the existing stock of knowledge making for its advancement. It is the pursuit of truth with the
help of study, observation, comparison & experiment. In short, the search for knowledge

51
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

through objective & systemic method of finding solution to a problem is research. The
systematic approach concerning generalization & the formulation of a theory is also research.
As such the term ‘research’ refers to the systematic method consisting of enunciating the
problem, formulating a hypothesis, collecting the facts or data, analyzing the facts & reaching
certain conclusions either in the form of solutions(s) towards the concerned problem or in
certain generalizations for some theoretical formulation.

RESEARCH PROCESS

Before embarking on the details of research methodology and techniques, it seems appropriate
to present a brief overview of the research process. Research process consists of series of
actions or steps necessary to effectively carry out research and the desired sequencing of these
steps.

52
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

RESEARCH PROCESS IN FLOW CHART

53
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

Research process is described as below:

 DEFINE RESEARCH PROBLEM: This is process in which the researcher has to define its
problem on which the researcher is working. In this process my problem is to analyze
that how many investors are unaware of investments in mutual funds. Where I found
that about 15% of people are still unaware about investment in mutual funds.

 DEVELOPING RESEARCH PLAN: This is the second process in which the researcher
collects his/her data i.e. is the sources of collecting data. According to this process I have
researched by simple method. My data is collected by two different sources are: Primary
data & Secondary data.

 Primary data: This source was collected by personal contacting with the
respondents.
 Secondary data: This source was collected by different books, internet, and
newspaper.

 SMAPLING PLAN: A sampling plan is a very important part of research process. The
marketing researcher has to decide whether it will be a sample survey or a census. In my
research sampling plan consists of three decisions are:
 SAMPLING UNIT: I have done survey in the area of Kribhco township, Reliance
township & in Banks.
 SAMPLING SIZE: My sampling size is 100. I have completed my survey by
receiving data from 100 respondents.
 CONTACTING METHODS: I have completed my survey by contacting personally
going to everyone & make them to fill questionnaire in order to collect data.

54
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

 RESEARCH INSTRUMENT: This is the third process which involves many different
methods of collecting data. There are two methods of collecting data are: Observational
method & Survey method. My research method was Survey method & instrument was
questionnaire. Through which I collected my primary data which was very helpful in my
researching my problem.

 INTERPRET & REPORT: This is last step of research process in which the researcher
analyzes the whole data & reports the solutions to his/her problem. I have analyzed my
problem by survey method & interpret the whole data. The report has been written
with objectivity, clarity in the presentation of the ideas & used charts, & diagrams.

55
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

ANALYSIS
&
INTERPRETATION

56
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

DATA ANALYSIS

KINDS OF INVESTMENTS

PARTICULAR DATA IN PERCENTAGE

Provident Fund 17%
Fixed Deposit 15.03%
Insurance 14.02%
Mutual Fund 11%
National Saving Certificate 9%
Shares/Debentures 12%
Bullion 13.43%
Real Estate 9%

KINDS OF INVESTMENTS
17.00%
15.03% 14.02%
16% 13.43%
11.00% 12.00%
12% 9.00% 9.00%
8%
4%
0%

INTERPRETATION: By this graph we can interpret that majority is investing their money in
provident funds & only 11% of investors are investing in mutual fund. Only 9% of people
believe to invest their money in real estate & national saving certificate. So many of them are
unaware of benefits & schemes of mutual funds.

SUGGESTIONS: I suggest that the investors who are unaware of investing in mutual funds or
in other preferences should increase their knowledge about the schemes of other preferences also
because many other preferences also provides lots of benefits with greater profits.

57
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

EXPECTATIONS OF CONSUMERS

PARTICULARS DATA IN PERCENTAGE

Liquidity 14%
Low Risk 28%
High Return 10%
Company Reputation 48%

EXPECTIONS OF CONSUMERS

14%

Liquidity
48%
Low Risk
28% High Return
Company Reputation

10%

INTERPRETATION: Majority of the investors invest in mutual fund by getting attracted

towards company reputation & for the most part of them invest from the point of view of low or
stumpy risk.

58
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

EXPERIENCE IN THE MARKET

PARTICULARS DATA IN PERCENTAGE

Less than 1 year 20%
1-4 years 56%
more than 4 years 24%

EXPERIENCE IN THE MARKET

60%

50%

40%

30%
56%

20%

24%
10% 20%

0%
less than 1 year 1-4 years more than 4 years

Interpretation: - The experience in the market was the factor which influenced the investments.
There are very few who have experience of less than a year. These are those investors who
entered into the market after noticing the rise in the market. Major part was having vast
experience that is of 1-4 years. These are the ones who have been in the market and saw it rising
to conquer the 10,000 peak.

SUGGESTIONS: I suggest that the investors should look for their profits, best schemes &
should consult with many people who else is investing & clear all the doubts related to
investment so that they bare with low risk in the market. The investors should always updated so
that they can earn more & more profits.

59
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

KINDS OF COMPANIES FOR INVESTING

PARTICULARS DATA IN PERCENTAGE

public companies 42%
private companies 58%

KINDS OF COMPANIES FOR INVESTING

42%
public companies
private companies
58%

INTERPRETATION: Through this graph we can interpret that majority are investing in
private companies. As most of them think that while investing in private companies is very
profitable instead of investing in public companies.

SUGGESTIONS: I suggest that the investors should also invest in public companies too as it
also has the advantages such as investors who hold stock in such companies typically have a
liquid asset; buying & selling shares of public companies is relatively easy to do as compared to
private companies.

60
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

FACTORS INFLUENCING INVESTMENT

PARTICULARS DATA IN PERCENTAGE

Advertisements 0%
Peer Group 4%
Banks 11%
Financial Advisors 12.04%
Broker 30.12%
Friends 7.23%
Current News 36.14%
Self Evaluation 0%

FACTORS INFLUENCING INVESTMENT

40% 36%
35% 30%
30%
25%
20%
15% 11% 12%
7%
10%
4%
5% 0% 0%
0%
ts p s rs er ds s n
en ou nk iso ok ew tio
m r Ba v r r ien N a
se rG Ad
B F en
t alu
rti ee l rr Ev
v e P cia Cu lf
Ad na
n Se
Fi

Interpretation: - There are many factors which influence the investment decision of the
investors. It may be the current news (political, technological, financial, etc.), Magazines,
friends, etc. in the study it proved that many people trust the current news & broker most for the
investment decisions. These are the ones who have less experience. The “Self-Evaluation” &
“Advertisements” are the next major factor. The experienced person trust himself thereafter
he/she invests. Banks & Financial advisors also matters. Any bad news can make a person
change his/her decision.

61
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

INFLUENCED BY COMPANY NAME

PARTICULARS DATA IN PERCENTAGE

YES 94%
NO 6%

INFLUENCED BY COMPANY NAME

6%

YES
NO

94%

INTERPRETATION: Greater part of the investors are mainly get influenced by company
name.

SUGGESTION: I suggest that other companies should also increase their awareness in the
market so that investors get attracted towards them can the company could hold their
reputation in the market.

62
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

TYPES OF SCHEMES

PARTICULARS DATA IN PERCENTAGE

Open-ended scheme 74%

Close-ended scheme 26%

TYPES OF SCHEME

Chart Title

26%
open
ended

74%

Interpretation: - The schemes offered in the market are of two types, closed ended and open
ended. The more demand was for the Open ended funds with a locking period of around 2-3
years. The exit load avoid doing the person from quit sting earlier.

SUGGESTION: According to me, I suggest that the company should increase their benefits in
other schemes also. They should give importance to each & every schemes at the same level.

63
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

TRADING PREFERENCE IN MUTUAL FUNDS

PARTICULARS DATA IN PERCENTAGE

Speculation 26%
Investments 50%
Both 24%
TRADING PREFERENCE IN MUTUAL FUNDS

24% 26%

Speculation
Investments
Both

50%

Interpretation: - The presence in the market is because of two reasons. Either the investors
prefer to speculate and benefit out of it or it is simply to have it as one more investment avenue
just like the fixed deposits, etc. Main purpose of investment in MF by people was not to
speculate. They considered it as a safer avenue for investment rather than going to Share Market
which is much risky as compared to MF. Few still prefer to speculate and wait for NAVs to
appreciate.

SUGGESTION: Company should give more benefits in speculation preference of mutual funds
also. They should make people aware about other preferences by advertising & by using many
more methods.

64
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

BANKS OF INVESTING

PARTICULARS DATA IN PERCENTAGE

SBIMF 5%
UTI 14%
HDFC 28%
ICICI PRUDENTIAL FUNDS 33%
JM MUTUAL FUNDS 4%
OTHERS 16%

BANKS OF INVESTING

35% 33%

30% 28%

25%

20%

15% 14% 16%

10%
5%
5%
4%
0%

INTERPRETATION: We can interpret that large number of investors believe in investing in

mutual funds in “ICICI PRUDENTIAL FUNDS” as it provides good services & give interests
more better than other banks. Than comes “HDFC” banks, many other investors prefer to invest
in this bank. As it also provides better services but there is only difference in percentages in
interest.

65
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

SUGGESTION: Other banks also should increase their hold in the market. They should increase
their branches on every place so that investors could find easy to invest in their company.

MODE OF MUTUAL FUND

PARTICULARS DATA IN PERCENTAGE

One time investment 26%
systematic investment plan 74%

MODE OF MUTUAL FUND

74%

One time investment

systematic investment plan
26%

INTERPRETATION: We can interpret that large number of investors are using only systematic investment
plan as mode of mutual funds but some number of investors find benefits in investing through one time
investment as mode of mutual fund.

SUGGESTION: Government should give preference to one time investment also. They should
increase benefits in every modes also.

66
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

AVERAGE INVESTMENT PERIOD

PARTICULARS DATA IN PERCENTAGE

0-3 MONTHS 24%
3-9 MONTHS 30%
9-2 YEARS 36%
MORE THAN 2 YEARS 10%

INVESTMENT OF PERIOD

36%

0-3 MONTHS
30% 3-9 MONTHS
9-2 YEARS
MORE THAN 2 YEARS
10%

24%

INTERPRETATION: - The investment period is very important to increase the profits. The
timing must be right enough to benefit from fluctuations. The smart investor decides it in
advance for how much time he would be keeping his money in the market and when he should
leave squaring-up. Many people consider the investment for 9 months – 2 years as a right
option. Still some want to be invested for 3-9 months. The least responded to the more than 2
years months period.

67
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

RISK WILLING TO TAKE

PARTICULAR DATA IN PERCENTAGE

High 52%
Moderate 30%
Low 18%

RISK WILLING TO TAKE

18%

High
52% Moderate
Low

30%

INTERPRETATION: - “The higher the Risk, the more the Profits”. The people need to take
the risk to enjoy the benefits. Some investors were willing to take lower risk and this was the
reason they gave for investing in the MF. Most of the people would like moderate level of risk
in there investments.

68
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

RECEIVE THE RETURNS

PARTICULARS DATA IN PERCENTAGE

Dividend payout 16%
Dividend re-investment 26%
Growth in NAV 58%
RECEIVE THE RETURNS

16%

Diviend payout
Dividend re-investment
58% 26% Growth in NAV

INTERPRETATION: From the data collected it is clear that most of people look at the current
NAV & not in dividend payout.

SUGGESTION: As many of them are receiving their returns at the current NAV so company
should look after other types of returns.

69
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

CONCLUSIONS

From this study, I conclude that around 15% of respondents are still unaware about the
investments. Many of them are investing in Mutual Funds but still large number of investors
does not find profits in investing in mutual funds. According to the investors private companies
are best to invest their money. High numbers of investors are ready to take risk by investing
money into the market.
Majority of investors depends on the current net asset value (NAV) in respect to their returns.
Usually investors invest their money in the average time period of between 9-2 years, & only
10% of them are investing more than 2 years. Most of the people prefer to invest only in ICICI
Prudential banks because its branches are easily available to every place where they find
convenient to invest easily & they provide services to the satisfaction level.

SUGGESTIONS
After analyzing the whole problem & studying the whole market I would like to suggest that
government should make people aware about investments, for their savings so that majority of
people can make their investments at safe site & earn more & more profits. Government
should increase the percentages of interests in other sources also so that investors would invest
in other preferences also. Government should increase the benefits of public companies so that
everyone would invest in it.
Company should increase the benefits of other modes, schemes so that everyone would be
able to use them with some risks. I suggest that other banks should also increase their branches
on every place so that investors find easy to invest into other banks also & bank would be able
to hold their reputation in the market.

70
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

BIBLOGRAPHY

SITES VISITED

1. www.anandrathi.in

2. www.mutualfundsindia.com

3. www.indiainfoline.com

4. www.amfiindia.com

5. www.sebi.gov.in

BOOKS REFERRED

 Amfi Mutual Fund

 Marketing Research
 by Philip Kotler,
 millennium edition, tenth edition
 PUBLICATION?????????????
 Marketing management
 Publication of Mc Graw-Hill,
 second edition

71
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

ANNEXURE

72
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

QUESTIONNAIRE

Dear Sir / Madam,

I, RAKHEE DUBEY, student of LN COLLEGE OF MANAGEMENT & TECHNOLOGY am conducting

this survey, as a part of our project from ANANDRATHI COMPANY in the field of Market
Research. The purpose of this activity is to provide awareness of the Mutual funds. Therefore I
kindly request you to spare some of your precious time to answer the following questions.
Thank you,

1. What kind of investments you prefer most? Pl tick (√). All applicable

a. PF b. Fixed deposits c. Insurance d. Mutual Fund

e. Post Office-NSC f. Shares/Debentures g. Gold/ Silver h. Real Estate

2. While investing your money, your expectations?

Liquidity Low Risk High Return Company reputation

(3) From how many years you are investing in the market?
 Less than a years  1-4 years  More than 4 years

(4) Where do you find your knowledge level about mutual funds?

Totally ignorant []

Partial knowledge of mutual funds []

Aware only of any specific scheme in which you invested []

Fully aware []

(5) In which kind of mutual fund you would like to invest?

73
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

Public companies [ ] Private companies [ ]

(6) How do you come to know about investing in Mutual Fund?

Advertisements Peer Group

Banks Financial Advisors
Advice from Broker Advice from Friends

Current news Self Evaluation

Others___________________________________________________

(7) Which mutual fund scheme have you used?

Open-ended Close-ended

Liquid fund Mid- Cap

Growth fund Regular Income fund
Long-Cap Sector fund

(8) Do you get influenced by the name of Company promoting Mutual Funds?
 No  Yes
If no, why___________________________________________
(9) What is your Trading Preference?
 Speculation  Investments  Both

(10) Which feature of the mutual funds attracts you most?

Diversification []

Better return and safety []

Reduction in risk and transaction cost []

Regular Income []

Tax benefit []

74
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

(11) In which Mutual Fund you have invested? Please tick (√). All applicable.

SBIMF UTI HDFC

ICICI PRUDENTIAL FUNDS JM MUTUAL FUNDS

OTHERS_____________________________________________________

(12) When you invest in Mutual Funds which mode of investment will you prefer?
a.On
e Time Investment b. Systematic Investment Plan (SIP)

(13) What is your Average investment period?

 Less than 3 months.  3 to 9 months.  9 months to 2 year.  More than 2 year.

(14) What is your preference in Mutual Funds?

A. Equity B. Income C. Money Market Fund

D. ELSS E. Balanced Fund F. SIP G. Others

(15) From which source you purchase mutual funds?

Directly from the AMCs [ ]

Brokers only []

Brokers/ sub-brokers []

Other sources ______________________

75
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

(16) How would you like to receive the returns every year?

[ ] Dividend payout [ ] Dividend re- [ ] Growth in NAV

investment

12. How much Risk are you willing to take?

 High  Moderate  Low

Personal Details:
Name: ...…………………….. Occupation: ………………………
Phone: ...…………………….. Age: 18-20 21-25 More than 25
Income (p.a): 1 lacs- 2 lacs 2 lacs-3lacs More than 3 lacs

THANK YOU

76
LN College Of Management & Technology, Surat
 Analysis of Investment in Mutual Funds

77
LN College Of Management & Technology, Surat