INSTITUTE OF BUSINESS MANAGEMENT

A SUMMER INTERNSHIP PROJECT

REPORT ON
“DESCRIPTIVE STUDY OF FINANCIAL PRODUCT
DISTRIBUTION”

Undertaken at

VARANASI BRANCH

Submitted To
Dr.ALOK SINGH

Submitted By
RAM ACHAL MAURYA
M.B.A (591)

2
 Certificate by the Organization

This is to certify that Mr. Ram Achal Maurya, pursuing MBA at

INSTITUTE OF BUSINESS MANAGEMENT VBS PURVANCHAL
UNIVERSITY, JAUNPUR has worked under my supervision and
guidance on his dissertation entitled “DESCRIPTIVE STUDY OF
FINANCIAL PRODUCT DISTRIBUTION” at Reliance Money
Limited,Varanasi from May JUN 01, 2009 to July 20th 2009. To the best
of my knowledge this is an original piece of work.

Name of Guide

Signature

Date

Certificate by the faculty guide

3
This is to certify that the project report entitled “DESCRIPTIVE STUDY
OF FINANCIAL PRODUCT DISTRIBUTION” at Reliance Money
Limited, Varansi is a bonafide record of work done by Ram Achal
Maurya, and submitted in partial fulfillment of the requirements of MBA
program of INSTITUTE OF BUSINESS MANAGEMENT V.B.S.
PURVANCHAL UNIVERSITY JAUNPUR.

Name of Faculty

Signature

Date

STUDENT’S DECLARATION

4
I, Ram Achal Maurya,, student of MBA , here by declare
that project entitled “DESCRIPTIVE STUDY OF FINANCIAL
PRODUCT DISTRIBUTION “ submitted in the partial
fulfillment of the degree for “Master Of Business
Administration” to “INSTITUTE OF BUSINESS
MANAGEMENT V.B.S. PURVANCHAL UNIVERSITY
JAUNPUR“ is of my own accurate work.

I further declare that all the facts and figures

furnished in this project report are the outcome of my
own intensive research and findings.

Ram Achal Maurya,

MBA (2008-10)
RO
LL NO-591

5
 ACKNOWLEDGEMENT

“Expression of feelings by words

makes them less significant when
it comes to make statement of
gratitude”
It gives me pleasure to express my most profound regards and
sense of great indebtedness and sincere gratitude to my Corporate
Guide Mr. Pawan Kumar Sahu (Cluster Head Sales, Reliance
Money ltd. Varanasi),Mr. Ashish Tiwary and Mr. Fahad
Rahman.

I would thank to my faculty guide Dr. ALOK SINGH &

Dr. S. BAINERJI for her guidance in preparing this report.

I would also like to thank my co employees who gave guidance

and support during the completion of the project.

Ram Achal Maurya,

6
 EXECUTIVE SUMMARY
In few years Mutual Fund has emerged as a tool for ensuring one’s financial
well being. Mutual Funds have not only contributed to the India’s growth
story but have also helped families tap into the success of Indian Industry. As
information and awareness is rising more and more people are enjoying the
benefits of investing in mutual funds. The main reason the number of retail
mutual fund investors remains small is that nine in ten people with incomes
in India do not know properly about mutual funds. But once people are
aware of mutual fund investment opportunities, the number who decide to
invest in mutual funds increases to as many as one in five people. The trick
for converting a person with no knowledge of mutual funds to a new Mutual
Fund customer is to understand which of the potential investors are more
likely to buy mutual funds and to use the right arguments in the sales process
that customers will accept as important and relevant to their decision. This
Project gave me a great learning experience and at the same time it gave me
enough scope to implement my analytical ability. The analysis and advice
presented in this Project Report is based on market research on the saving
and investment practices of the investors and preferences of the investors for
investment in Mutual Funds. This Report will help to know about the
investors’ Perception about Mutual Funds in the context of their trading
preference, explore investor’s risk perception & find out their preference
over Top Mutual funds.

This Project as a whole can be divided into two parts. The first part gives an
insight about Mutual Fund and its various aspects, the Company Profile,

7
Objectives of the study, Research Methodology. One can have a brief
knowledge about Mutual Fund and its basics through the Project. The second
part of the Project consists of data and its analysis collected through survey
done on 100 people. For the collection of Primary data I made a
questionnaire and surveyed of 100 people. I also taken interview of many
People those who were coming at the Reliance Money Branch where I done
my Project. I visited other AMCs in VARANASI to get some knowledge
related to my topic. This Project covers the topic “DESCRIPTIVE STUDY
OF FINANCIAL PRODUCT DISTRIBUTION” The data collected has
been well organized and presented. I hope the research findings and
conclusion will be of use.

8
 CONTENTS

Certificate by the Organization 2

Certificate by the faculty guide 3
Student’s Declaration
4
Acknowledgement
5
Executive Summary 6

CHAPTER 1 Company Profile 10-17

Vision & Mission 11
Organizational Structure 12
Product Offering 13

CHAPTER 2 INTRODUCTION 18-48

About Mutual Funds 19

Organization of Mutual Fund 22
Advantages of Mutual Fund 31
Disadvantages of Mutual Fund 33
History of Indian Mutual Fund Industry 35
Types of Mutual Fund 41
Bank vs. Mutual Fund 47

CHAPTER3 EVALUVATION and STRATAGIES 49-60

Investment Strategies 49
Performance Evaluation 50
Risk vs. Return 60

CHAPTER 4 MAJOR PLAYERS 61-68

9
 About major Mutual Funds Companies 61
Competition in Mutual Fund Industry 67

CHAPTER 5 OBJECTIVES AND METHODOLOGY 69-72

Significance of the Study 69

Managerial Usefulness of the Study 69
Objectives 70
Scope of the Study 70
Research Methodology 71

CHAPTER 6 DATA ANALYSIS AND INTERPRETATION 73

Findings 86
Limitations 87
Recommendations 89

CHAPTER APPENDIX 91-94

Questionnaire 91
Bibliography 94

10
 COMPANY PROFILE

The Reliance – Anil Dhirubhai Ambani Group (ADAG) is among India’s top
three private sector business houses on all major financial parameters, with a
market capitalization of Rs.325,000 crores (US$ 81 billion), net assets in
excess of Rs.115,000 crores (US$ 29 billion), and net worth to the tune of
Rs.55,000 crores (US$ 14 billion).

Reliance Money is promoted by Reliance Capital; one of India's leading

and fastest growing private sector financial services companies, ranking
among the top 3 private sector financial services and banking companies, in
terms of net worth. Reliance Capital Ltd. has interests in asset management,
life and general insurance, private equity and proprietary investments, stock
broking and other financial services. Reliance Capital is a part of the
Reliance Anil Dhirubhai Ambani Group.

Thus, Reliance Money provides a comprehensive platform, offering an

investment avenue for a wide range of asset classes. Its endeavor is to change
the way India transacts in financial market and avails financial services.
Reliance Money offers a single window facility, enabling you to access
amongst others, Equities, Equity and Commodity derivatives, Offshore
Investments, IPO’s, Mutual Funds, Life Insurance and General Insurance
products, Money Transfer, Money Changing and Credit Cards.

11
 VISION

To build a global enterprise for all our stakeholders, and

A great future for our country,

To give millions of young Indians the power to shape their destiny,

The means to realize their full potential…

MISSION

To create and nurture a world-class, high performance environment aimed at

delighting our customers by providing endless financial products in all part
of the country.

12
 ORGANIZATIONAL STRUCTURE
National
Head

Zonal Zonal
Zonal Zonal Head
Head Head Head

Regional
Regional Regional Regional
Head
Head Head Head

Cluster Cluster
Head Head

Centre Centre
Manager Manager

BDEs BDEs BDEs BDEs BDEs

13
National Level : National Head

Zonal Level : Zonal Head

Regional Level : Regional head

Divisional level : Cluster Head

Branch Level : Center Manager

Area Level : Business Development Executives & Freelancers

Advantages offered by Reliance money over other companies:

• Cost Effective

• Convenience

• Security

• Single Window for Multiple Products

• 3 in 1 Integrated Access

• Demat Account with Reliance Capital

• Other Services like research, live news from Reuter and Dow

Jones etc.

PRODUCT OFFERING
1. Trading Portal (with almost negligible brokerage)
• Equity Broking

• Commodity Broking

14
 • Derivatives ( Futures & Options )

• Offshore Investments (Contract For Differences)

• D-Mat Account.

2. Financial Products
• Mutual Funds

• Life Insurance

o ULIP plan

o Term Plan

o Money Back Plan

• General Insurance

o Vehicle/Motor Insurance

o Health Insurance

o House insurance

• IPO’s

• NFOs

3. Value-Added Services
• Retirement Planning

• Financial Planning

• Tax Saving

• Children Future Planning

15
4. Credit Cards

5. Gold coins retailing

TRADING PORTAL

Online trading refers to buying and selling of the shares / stocks / contracts /
bonds with the use of internet. In this shares are not issued in physical form
rather they are transferred in the dematerialized form in the Demat account
directly.

DEMAT ACCOUNT
In India, a Demat account, the abbreviation for dematerialize account, is a
type of banking account which dematerializes paper based physical stock
shares. The dematerialized account is used to avoid holding physical shares:
the shares are bought and sold through a broker. This account is popular in
India. The Securities and Exchange Board of India (SEBI) mandates a
Demat account for share trading and for opening a DEMAT account a
Permanent Account Number (PAN) is also mandatory.

What are the benefits of opening a Demat account?

Demat account has become a necessity for all categories of investors for the
following reasons/ benefits:

16
 • SEBI has made it compulsory for trades in almost all scrip’s to be
settled in Demat mode. Although, trades up to 500 shares can be
settled in physical form, physical settlement is virtually not taking
place for the apprehension of bad delivery on account of mismatch of
signatures, forgery of signatures fake certificates, etc.

• It is a safe and convenient way to hold securities compared to holding

securities in physical form..

• No stamp duty is levied on transfer of securities held in Demat form.

• Instantaneous transfer of securities enhances liquidity.

• It eliminates delays, thefts, interceptions and subsequent misuse of

certificates.

• Change of name, address, registration of power of attorney, deletion of

deceased's name, etc. - can be effected across companies by one single
instruction to the DP.

• Each share is a market lot for the purpose of transactions – so no odd

lot problem.

Any number of securities can be transferred/delivered with one delivery

order. Therefore, paperwork and signing of multiple transfer forms is done
away with. It facilitates taking advances against securities on low margin/low
interest.

How Reliance Money Scored Over Others?

1. Two Way Authentication: Reliance offers its customers with a
token (an electronic gadget) that generates a password, which are a third

17
level of security in addition to the customer log in and a password provided.
The password generated by the token is valid only for a period of 32 seconds.
If the web page expires, for the fresh login, a new password generated by the
token has to be keyed in by the customer.

2. Lowest Brokerage: Reliance offers the lowest brokerage of 1 paisa

which is very less with respect to the other DPs in the market.

3. User friendly software: The portal offered is very easy to understand

and use.

4. Forex and offshore investment: Reliance provides the offshore

facility which no other AMC is providing in the market.

5. Better research and news: Reliance offers news from the DOW
JONES and REUTERS.

Seeking to bring share trading closer to consumers just like ATMs, Reliance
Capital's stock brokerage arm Reliance Money launched Internet trading
services through web-enabled retail kiosks.

18
 INTRODUCTION

Investment in share markets are influenced by the analysis & reasoning

which help in predicting the market to some extent. Over the past years a
number of technical & theories for analysis have evolved, these combined
with modern technology guides the investor. The big players in the market,
like Foreign Institutional Investors, Mutual Funds, etc. have the expertise for
various analytical tools & make use of them. The small investors are not in a
position to benefit from the market the way Mutual Funds can do. Generally
a small investor’s investments are based on market sentiments, inside
information, through grapevine, tips & intuition. The small investors depend
on brokers and brokerage house for his investments. They can invest through
the Mutual Funds who are more experienced and expert in this field than a
small investor himself.

In recent years a large number of players have entered into his market. The
project has been carried out to have an overview of Mutual Fund Industry
and to understand investor’s perception about Mutual Funds in the context of
their trading preference, explore investor’s risk perception & find out their
preference over Top Mutual

19
 MUTUAL FUNDS

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

A
Mutual
Fund is
a body

corporate registered with the Securities and Exchange Board of India

(SEBI) that pools up the money from individual/corporate investors and

20
invests the same on behalf of the investors/unit holders, in Equity shares,
Government securities, Bonds, Call Money Markets etc, and distributes the
profits. In the other words, a Mutual Fund allows investors to indirectly
take a position in a basket of assets.

Mutual Fund is a mechanism for pooling the resources by issuing units to

the investors and investing funds in securities in accordance with objectives
as disclosed in offer document. Investments in securities are spread among
a wide cross-section of industries and sectors thus the risk is reduced.
Diversification reduces the risk because all stocks may not move in the
same direction in the same proportion at same time. Investors of mutual
funds are known as unit holders.

The investors in proportion to their investments share the profits or losses.

The mutual funds normally come out with a number of schemes with
different investment objectives which are launched from time to time. A
Mutual Fund is required to be registered with Securities Exchange Board of
India (SEBI) which regulates securities markets before it can collect funds
from the public.

21
22
 ORGANISATION OF A MUTUAL FUND:

There are many entities involved and the diagram below illustrates the
organizational set up of a Mutual Fund:

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.

23
Unit Trusts – Constituents:
A Mutual Fund is set up in the form of a Trust which has the following
constituents:-

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.

24
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.

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

25
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:

 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.

26
  Trustees must ensure compliance with SEBI Regulations.

ASSET MANAGEMENT COMPANY (AMC)

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

27
respectively, the AMC will earn Rs.3.25 crore (1.25+2) as fund
management fee that year.

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.

28
  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:

 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.

29
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 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

30
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 longas 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.

 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.

31
 Advantages of Mutual Fund
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.

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

32
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

Investors get regular information on the value of their investment in

addition to disclosure on the specific investments made by their 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.

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

33
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.

No Entry Load

Entry load is the commission charged (1.25%) at the time of buying the
fund to cover the cost of selling, processing etc. but now SEBI has
eliminated this entry load which will be applicable from August 1, 2009

Disadvantages of Mutual Fund

Exit load

It is the commission or charged paid when an investor exits from a mutual

fund, it is imposed to discourage withdrawals. It takes 1% before 1 year and
nill after 1 year.

No control over costs

The costs of the fund management process are deducted from the fund. This
includes marketing and initial costs deducted at the time of entry itself,
called, ‘Load’. Then there is the annual asset management fee and
expenses, together called the expense ratio. Usually, the former is not
counted while measuring performance, while the latter is. A Standard 2
percent expense ratio means that, everything else being equal, the fund
manager under performs the benchmark index by an equal amount.

34
No tailor-made portfolio
The portfolio of a fund does not remain constant. The extent to which the
portfolio changes is a function of the style of the individual fund manager
i.e. whether he is a buy and hold type of manager or one who aggressively
churns the fund. It is also depends on the volatility of the fund size i.e.
whether the fund constantly receives fresh subscriptions and redemptions.
Such portfolios changes have associated costs of brokerage, custody fees,
registration fees etc. that lowers the portfolio return commensurately.

No Guarantee of return

No investment is risk free. If the entire stock market declines in value, the
value of mutual fund shares will go down as well, no matter how balanced
the portfolio. Investors encounter fewer risks when they invest in mutual
funds than when they buy and sell stocks on their own. However, anyone
who invests through a mutual fund runs the risk of losing money.

Taxes

During a typical year, most actively managed mutual funds sell anywhere
from 20 to 70 percent of the securities in their portfolios. If your fund
makes a profit on its sales, you will pay taxes on the income you receive,
even if you reinvest the money you made.

Management risk

When you invest in a mutual fund, you depend on the fund's manager to
make the right decisions regarding the fund's portfolio. If the manager does
not perform as well as you had hoped, you might not make as much money
on your investment as you expected. Of course, if you invest in Index
Funds, you forego management risk, because these funds do not employ
managers.

35
 HISTORY OF INDIAN MUTUAL FUNDS INDUSTRY

The mutual fund industry in India started in 1963 with the formation of
Unit Trust of India, at the initiative of the Government of India and Reserve
Bank the. The history of mutual funds in India can be broadly divided into
four distinct phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament.
It was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In
1978 UTI was de-linked from the RBI and the Industrial Development
Bank of India (IDBI) took over the regulatory and administrative control in
place of RBI. The 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)

36
 With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI
were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.

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

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

The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the 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

In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of
Rs.29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The
Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.

37
 The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB
and LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March
2000 more than Rs.76,000 Crores of assets under management and with the
setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different private
sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004, there were 29
funds, which manage assets of Rs.153108 Crores under 421 schemes. The
graph indicates the growth of assets over the years.

38
Note:

While UTI was bifurcated into UTI Mutual Fund and the Specified
Undertaking of the Unit Trust of India effective from February 2003. The
Assets under management of the Specified Undertaking of the Unit Trust of
India has therefore been excluded from the total assets of the industry as a
whole from February 2003 onwards.

39
The Assets Under Management of UTI was Rs. 67bn. by the end of 1987.
The performance of mutual funds in India through figures is appreciable.
From Rs. 67bn. the Assets Under Management rose to Rs. 470 bn. in March
1993 and the figure had a three times higher performance by April 2004. It
rose as high as Rs. 1,540bn.

The net asset value (NAV) of mutual funds in India declined when stock
prices started falling in the year 1992. Those days, the market regulations
did not allow portfolio shifts into alternative investments. There was rather
no choice apart from holding 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
transparent rules in the whereabouts rocked confidence among the
investors.

Funds now have shifted their focus to the recession free sectors like
pharmaceuticals, FMCG and technology sector. Funds performances are
improving. Funds collection, which averaged at less than Rs100bn per
annum over five-year period spanning 1993-98 doubled to Rs210bn in
1998-99. In the 2000 mobilization had exceeded Rs300bn. Total collection
for the financial year ending March 2000 reached Rs450bn.

India had been at the first stage of a revolution that has already peaked in
the U.S. The U.S. boasts of an Asset base that is much higher than its bank
deposits. In India, mutual fund assets are not even 10% of the bank
deposits, but this trend is beginning to change. The figures indicate that in

40
the first quarter of the year 1999-2000 mutual fund assets went up by 115%
whereas bank deposits rose by only 17%. (Source: Thinktank, The
Financial Express September, 99) This is forcing a large number of banks
to adopt the concept of narrow banking wherein the deposits are kept in
Gilts and some other assets which improves liquidity and reduces risk. The
basic fact lies that banks cannot be ignored and they will not close down
completely. Their role as intermediaries cannot be ignored. It is just that
Mutual Funds are going to change the way banks do business in the future

41
 TYPES OF MUTUAL FUNDS

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

By Structure:
Open Ended Fund :
As the name implies the size of the scheme (fund) is open – i.e. not
specified or pre-determined. Entry to the fund is always open, the investor
who can subscribe at anytime. Such fund stands ready to buy or sell its
securities at anytime. The key feature of Open-ended schemes is Liquidity.
It implies that the capitalization of the fund is constantly changing as
investors sell or buy their shares. Further, the shares or units are normally
not traded on the stock exchange but are repurchased by the funds at
announced rates. Open-ended schemes have comparatively better liquidity
despite the fact that these are not listed. The reason is that investors can any
time approach mutual fund for sale of such units. No intermediaries are
required. Moreover, the realizable amount is certain since repurchase is at a
price based on declared net asset value (NAV). The portfolio mix of such
schemes has to be investments, which are actively traded in the market.
Otherwise it will not be possible to calculate NAV. This is the reason that
generally open-ended schemes are equity based. In Open-ended schemes,
the option of dividend reinvestment is available.

42
Close Ended Fund:
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 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 Scheme:
Interval Schemes combine the features of both open-ended and close-ended
schemes. They are open for sale or redemption during pre-determined
intervals at NAV based prices.

By Investment Objective:
Growth/Equity Oriented Schemes:
The aim of growth funds is to provide capital appreciation over the medium
to long term. Such schemes normally invest a major part of their corpus in
equities. Such funds have comparatively high risks. These schemes provide
different options to the investors like dividend option; capital appreciation
etc. and the investors may choose an option depending on their preference.
The investor must indicate the option in the application form. The mutual
funds also allow the investors to change the options at a later date. Growth

43
schemes are good for investors having a long-term outlook seeking
appreciation over a period of time.

Income/Debt oriented Schemes:

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, government securities and money market
instruments. Such funds are less risky compared to equity schemes. These
funds are not affected because of fluctuations in equity market. However,
opportunities of capital appreciation are also limited in such funds. The
NAVs of such funds are affected because of change in interest rates in the
country. If the interest rates fall, NAVs of such funds are likely to increase
in the short run and vice versa. However, long-term investors may not
bother about these fluctuations.

Balanced Fund:
The aim of balanced funds is to provide both growth and regular income as
such schemes invest both in equities and fixed income securities in the
proportion indicated in their offer documents. These are appropriate for
investors looking for moderate growth. They generally invest 40-60% in
equities and debt instruments. These funds are also affected because of
fluctuations in share prices in the stock markets. However, NAVs of such
funds are likely to be less volatile compared to pure equity funds.

• Debt-oriented funds- Investment below 65% in equities

• Equity-oriented funds - Invest at least 65% in equities, remaining in

debt

Money market / Liquid fund:

44
These funds are also income funds and their aim is to provide easy
liquidity, preservation of capital and moderate income. These schemes
invest exclusively in safer short-term instruments such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money,
government securities etc. Returns in these schemes fluctuate much less
compared to other funds. These funds are appropriate for corporate and
individual investors as a means to park their surplus funds for short periods.

Others Scheme:
Tax Saving (ELSS) Schemes:
All the mutual funds floated by public sector banks and insurance
companies have launched tax saving schemes. These schemes are designed
on the basis of tax policy with special tax incentives to tax taxpaying
investors. These schemes offer tax rebates to the investors under specific
provisions of the Income Tax Act, 1961 as the government offers tax
incentives for investment in specified avenues. E.g., Equity Linked Savings
Schemes (ELSS). Pension Schemes launched by the mutual funds also offer
tax benefits. These schemes are growth oriented and invest predominantly
in equities. Their growth opportunities and risks associated are like any
equity-oriented scheme.

Sector Specific Schemes:

45
These are the schemes, which invest in the securities of only those sectors
or industries as specified in the offer documents. E.g. Pharmaceuticals,
Software, Fast Moving Consumer Goods (FMCG), Power or Infrastructure
etc. The return sin these funds are dependent in the performance of the
respective sector/ industries. While these funds may give higher returns,
they are more risky compared to diversified funds. Investors need to keep a
watch in the performance of those sectors/industries and must exit at an
appropriate time. They may also seek advice of an expert.

Index funds:
Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the
securities in the same weightage comprising of an index. NAVs of such
schemes would rise or fall in accordance with the rise or fall in the index,
though not exactly by the same percentage due to some factors known as
"tracking error" in technical terms. Necessary disclosures in this regard are
made in the offer document of the mutual fund scheme.

Equity diversified funds:

100% of the capital is invested in equities spreading across different sectors
and stocks.

Dividend yield funds:

It is similar to the equity diversified funds except that they invest in
companies offering high dividend yields.

Thematic funds:

46
Invest 100% of the assets in sectors which are related through some theme.
E.g. an infrastructure fund invests in power, construction, cements sectors
etc.

Gilt funds:
These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate due to
change in interest rates and other economic factors as is the case with
income or debt oriented schemes

Floating rate funds:

Invest in short-term debt papers. Floaters invest in debt instruments which
have variable coupon rate.

Arbitrage fund :

They generate income through arbitrage opportunities due to mispricing

between cash market and derivatives market. Funds are allocated to
equities, derivatives and money markets. Higher proportion (around 75%)
is put in money markets, in the absence of arbitrage opportunities.

MIPs:
Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities.

FMPs:
Fixed monthly plans invest in debt papers whose maturity is in line with
that of the fund.

Load or no-load Fund:

47
A Load Fund is one that charges a percentage of NAV for entry or exit.
That is, each time one buys or sells units in the fund, a charge will be
payable. This charge is used by the mutual fund for marketing and
distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as
well as exit load charged is 1%, then the investors who buy would be
required to pay Rs.10.10 and those who offer their units for repurchase to
the mutual fund will get only Rs.9.90 per unit. The investors should take
the loads into consideration while making investment as these affect their
yields/returns. However, the investors should also consider the performance
track record and service standards of the mutual fund which are more
important. Efficient funds may give higher returns in spite of loads. A no-
load fund is one that does not charge for entry or exit. It means the
investors can enter the fund/scheme at NAV and no additional charges are
payable on purchase or sale of units.

BANKS V/S MUTUAL FUNDS:

Mutual Funds are now also competing with commercial banks in the race
for retail investor’s savings and corporate float money. The power shift
towards mutual funds has become obvious. The coming few years will
show that the traditional saving avenues are losing out in the current
scenario. Many investors are realizing that investments in savings accounts
are as good as locking up their deposits in a closet. The fund mobilization
trend by mutual funds indicates that money is going to mutual fund in a big
way.

48
India is at the first stage of a revolution that has already peaked in the U.S.
The U.S. boasts of an Asset base that is much higher than its bank deposits.
In India, mutual fund assets are not even 10 per cent of the bank deposits,
but this trend is beginning to change. This is forcing a large number of
banks to adopt the concept of narrow banking wherein the deposits are kept
in Gilts and some other assets which improves liquidity and reduces risk.
The basic fact lies that banks cannot be ignored and they will not close down
completely. Their role as intermediaries cannot be ignored. It is just that
mutual funds are going to change the way banks do business in the future.

CATEGORY BANKS MUTUAL FUNDS

Returns Low High
Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Interest calculation Minimum balance Everyday
between 10th & 30th of
every month
Guarantee Maximum Rs.1 lakh on None
deposits

INVESTMENT STRATEGIES

Systematic Investment Plan (SIP): under this a fixed sum is invested each
month on a fixed date of a month. Payment is made through post dated
cheques or direct debit facilities. The investor gets fewer units when the

49
NAV is high and more units when the NAV is low. This is called as the
benefit of Rupee Cost Averaging (RCA)

Systematic Transfer Plan (STP):

They allow the investors to transfer on a periodic basis a specified amount

from one scheme to another within the same fund family meaning two
schemes belonging to the same mutual fund. A transfer will be treated as
redemption of units from the scheme from which the transfer is made .Such
redemption or investment will be at the applicable NAV. This service
allows the investor to manage his investment actively to achieve his
objectives. Many funds do not even charge even any transaction feed for
this service an added advantage for the active investor.

Systematic Withdrawal Plan (SWP):

These plans are best suited for people nearing retirement. In these plans an
investor invests in a mutual fund scheme and is allowed to withdraw a fixed
sum of money at regular intervals to take care of expenses.

Performance Evaluation
PARAMETERS OF MUTUAL FUND EVALUATION:

 Risk

 Returns

 Liquidity

 Expense Ratio

 Composition of Portfolio

50
Risks Associated With Mutual Funds:

Investing in mutual funds as with any security, does not come without risk.
One of the most basic economic principles is that risk and reward are
directly correlated. In other words, the greater the potential risk, the greater
the potential return. The types of risk commonly associated with mutual
funds are:

Market Risk:

Market risk relate to the market value of a security in the future. Market
prices fluctuate and are susceptible to economic and financial trends, supply
and demand, and many other factors that cannot be precisely predicted or
controlled.

Political Risk:

Changes in the tax laws, trade regulations, administered prices etc. is some
of the many political factors that create market risk. Although collectively,
as citizens, we have indirect control through the power of our vote,
individually as investors, we have virtually no control.

Inflation Risk:

Inflation or purchasing power risk, relates to the uncertainty of the future

purchasing power of the invested rupees. The risk is the increase in cost of
the goods and services, as measured by the Consumer Price Index.

Interest Rate Risk:

Interest Rate risk relates to the future changes in interest rates. For instance,
if an investor invests in a long term debt mutual fund scheme and interest
rate increase, the NAV of the scheme will fall because the scheme will be
end up holding debt offering lowest interest rates.

51
Business Risk:

Business Risk is the uncertainty concerning the future existence, stability

and profitability of the issuer of the security. Business Risk is inherent in all
business ventures. The future financial stability of a company can not be
predicted or guaranteed, nor can the price of its securities. Adverse changes
in business circumstances will reduce the market price of the company’s
equity resulting in proportionate fall in the NAV of mutual fund scheme,
which has invested in the equity of such a company.

Economic Risk :

Economic Risk involves uncertainty in the economy, which, in turn can

have an adverse effect on a company’s business. For instance, if monsoons
fall in a year, equity stocks of agriculture bases companies will fall and
NAVs of mutual funds, which have invested in such stocks, will fall
proportionately.

There are 3 different methods with the help of which we can measure the
risk.

Measurement of risk

I. Beta Coefficient Measure of Risk:

Beta relates a fund’s return with a market index. It basically measures the
sensitivity of funds return to changes in market index.

If Beta = 1 then Fund moves with the market i.e. Passive fund

If Beta < 1 then Fund is less volatile than the market i. e Defensive Fund

If Beta > 1 then Funds will give higher returns when market rises & higher
losses when market falls i.e. Aggressive Fund

52
II. Ex –Marks or R-squared Measure Of Risk :

Ex –Marks represents co relation with markets. Higher the Ex-marks lower

the risk of the fund because a fund with higher Ex-marks is better
diversified than a fund with lower Ex-marks.

III. Standard Deviation Measure Of Risk :

It is a statistical concept, which measures volatility. It measures the

fluctuations of fund’s returns around a mean level. Basically it gives you an
idea of how volatile your earnings are. It is broader concept than BETA. It
also helps in measuring total risk and not just the market risk of the
portfolio.

How to Calculate the Value of a Mutual Fund:

The investors’ funds are deployed in a portfolio of securities by the fund

manager. The value of these investments keeps changing as the market
price of the securities change. Since investors are free to enter and exit the
fund at any time, it is essential that the market value of their investments is
used to determine the price at which such entry and exit will take place. The
net assets represent the market value of assets, which belong to the
investors, on a given date. Net Asset Value or NAV of a mutual fund is the
value of one unit of investment in the fund, in net asset terms.

NAV = Net Assets of the scheme / Number of Units Outstanding

Where Net Assets are calculated as:-

(Market value of investments + current assets and other assets + Accrued

income –current liabilities and other liabilities – less accrued expenses) /
No. of Units Outstanding as at the NAV date

53
NAV of all schemes must be calculated and published at least weekly for
closed-end schemes and daily for open-end schemes.

The major factors affecting the NAV of a fund are:

 Sale and purchase of securities

 Sale and repurchase of units

 Valuation of assets

 Accrual of income and expenses

SEBI requires that the fund must ensure that repurchase price is not lower
than 93% of NAV (95% in the case of a closed-fund). On the other side, a
fund may sell new units at a price that is different from the NAV, but the
sale price cannot be higher than 107 % of NAV. Also the difference
between the repurchase price and the sale price of the unit is not permitted
to exceed 7% of the sale price.

Measuring Mutual Fund Performance:

We can measure mutual fund’s performance by different method:

• Absolute Return Method:

Percentage change in NAV is an absolute measure of return, which finds

the NAV appreciation between two points of time, as a percentage. e .g: If
NAV of one fund changes from Rs.20 to Rs.22 in 12 months then

Absolute return = (22 – 20)/20 X 100 =10%

• Simple Annual Return Method :

Converting a return value for a period other than one year, into a value for
one year, is called as annualisation. In order to annualize a rate, we find out

54
what the return would be for a year, if the return behaved for a year, in the
same manner it did, for any other fractional period.

E .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months then

Annual Return = (22 – 20) /20 X 12/6 X 100 = 20%

• Total Return Method:

The total return method takes into account the dividends distributed by the
mutual fund, and adds it to the NAV appreciation, to arrive at returns.

Total Return =

(Dividend distributed + Change in NAV)/ NAV at the start X 100

e .g: If NAV of one fund changes from Rs.20 to Rs.22 in 6 months if in

between dividend of Rs. 4 has been distributed then

Total Return = {4 + (22 – 20)}/20 X 100 = 30%

• Total Return when dividend is reinvested:

This method is also called the return on investment (ROI) method. In this
method, the dividends are reinvested into the scheme as soon as they are
received at the then prevailing NAV (ex-dividend NAV).

= ((Value of holdings at the end of the period/ value of the holdings at the
beginning) –1)*100

E.g. An investor buys 100 units of a fund at Rs. 10.5 on January 1, 2009.
On June 30, 2009 he receives dividends at the rate of 10%. The ex-dividend

55
NAV was Rs. 10.25. On December 31, 2009, the fund’s NAV was Rs.
12.25.

Value of holdings at the beginning period= 10.5*100= 1050

Number of units re-invested = 100/10.25 = 9.756

End period value of investment = 109.756*12.25 = 1344.51 Rs.

Return on Investment = ((1344.51/1050)-1)*100

= 28.05%

• Compounded Average Annual Return Method:

This method is basically used for calculating the return for more than 1
year. In this method return is calculated with the following formula:

A = P X (1 + R / 100) N

Where P = Principal invested

A = maturity value

N = period of investment in years

R = Annualized compounded interest rate in %

R = {(Nth root of A / P) – 1} X 100

E. g: If amount invested is Rs. 100 & in the end we get return of Rs. 200 &
period of investment is 10 years then annualized compounded return is

200 = 100 (1 + R / 100) 10

Rate = 7.2 %

RETURNS:

56
Returns have to be studied along with the risk. A fund could have earned
higher return than the benchmark. But such higher return may be
accompanied by high risk. Therefore, we have to compare funds with the
benchmarks, on a risk adjusted basis. William Sharpe created a metric for
fund performance, which enables the ranking of funds on a risk adjusted
basis.

Sharpe Ratio = Risk Premium / Funds Standard Deviation

Treynor Ratio = Risk Premium / Funds Beta

Risk Premium = Difference between the Fund’s Average return and Risk
free return on government security or treasury bill over a given period .

LIQUIDITY:

Most of the funds being sold today are open-ended. That is, investors can
sell their existing units, or buy new units, at any point of time, at prices that
are related to the NAV of the fund on the date of the transaction. Since
investors continuously enter and exit funds, funds are actually able to
provide liquidity to investors, even if the underlying markets, in which the
portfolio is invested, may not have the liquidity that the investor seeks.

EXPENSE RATIO:

Expense ratio is defined as the ratio of total expenses of the fund to the
average net assets of the fund. Expense ratio can actually understate the
total expenses, because brokerage paid on transactions of a fund are not
included in the expenses. According to the current SEBI norms, brokerage
commissions are capitalized and included in the cost of the transactions.

Expense ratio = Total Expenses / Average Net Assets

57
COMPOSITION OF THE PORTFOLIO:

Credit quality of the portfolio is measured by looking at the credit ratings of

the investments in the portfolio. Mutual Fund fact sheets show the
composition of the portfolio and the investments in various asset classes
over time. Portfolio turnover rate is the ratio of lesser of asset purchased or
sold by funds in the market to the net assets of the fund. If Portfolio ratio is
100% means portfolio has been changed fully. When Portfolio ratio is high
means expense ratio is high.

Portfolio Ratio = Total Sales & Purchase / Net Assets of fund

In order to meaningfully compare funds some level of similarity in the

following factors has to be ensured:

 Size of the funds

 Investment objective

 Risk profile

 Portfolio composition

 Expense ratios

Fund evaluation against benchmark:

Funds can be evaluated against some performance indicators which are

known as benchmarks.

There are 3 types of benchmarks:

 Relative to market as whole

58
 Relative to other comparable financial products

 Relative to other mutual funds

 Relative to market as whole:

There are different ways to measure the performance of fund w.r.t market
as

Equity Funds

Index Fund – An Index fund invests in the stock comprising of the index
in the same ratio. This is a passive management style.

For example,

Market Index Fund - BSE Sensex

Nifty Index Fund – NIFTY

The difference between the return of this fund and its index benchmark can
be explained by “TRACKING ERROR”.

Active Equity Funds:

The fund manager actively manages this fund. To evaluate performance in

such case we have to select an appropriate benchmark. Large diversified
equity fund – BSE 100,

Sector fund - Sectoral Indices

Debt Funds:

Debt fund can also be judged against a debt market index e.g. I-BEX

59
RISK V/S. RETURN:

60
MAJOR PLAYERS IN MUTUAL FUNDS INDUSTRY

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO
Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO

61
Asset Management (India) Ltd. was incorporated on November 4, 2003.
Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and
Sun Life Financial. Sun Life Financial is a global organization evolved in
1871 and is being represented in Canada, the US, the Philippines, Japan,
Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund
follows a conservative long-term approach to investment. Recently it crossed
AUM of Rs. 10,000 Crores.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30,
1992 under the sponsorship of Bank of Baroda. BOB Asset Management
Company Limited is the AMC of BOB Mutual Fund and was incorporated
on November 5, 1992. Deutsche Bank AG is the custodian.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsor namely
Housing Development Finance Corporation Limited and Standard Life
Investments Limited.

HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and
Capital Markets (India) Private Limited as the sponsor. The Board of
Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual
Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same
named Trustee Company. It is a joint venture of Vysya and ING. The AMC,
ING Investment Management (India) Pvt. Ltd. was incorporated on April 6,
1998.

62
Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America,
one of the largest life insurance companies in the US of A. Prudential ICICI
Mutual Fund was setup on 13th of October, 1993 with two sponsors,
Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential
ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management
Company Limited incorporated on 22nd of June, 1993.

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial
Corporation Ltd. as the sponsor. Sahara Asset Management Company Private
Limited incorporated on August 31, 1995 works as the AMC of Sahara
Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.

State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to
launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr.
approximately. Today it is the largest Bank sponsored Mutual Fund in India.
They have already launched 35 Schemes out of which 15 have already
yielded handsome returns to investors. State Bank of India Mutual Fund has
more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8
Lakhs spread over 18 schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The
sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment
Corporation Ltd. The investment manager is Tata Asset Management
Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management
Limited is one of the fastest in the country with more than Rs. 7,703 Crores
(as on April 30, 2005) of AUM.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of

KMBL. It is presently having more than 1, 99,818 investors in its various
schemes. KMAMC started its operations in December 1998. Kotak Mahindra

63
Mutual Fund offers schemes catering to investors with varying risk - return
profiles. It was the first company to launch dedicated gilt scheme investing
only in government securities.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14,

2003, manages the UTI Mutual Fund with the support of UTI Trustee
Company Private Limited. UTI Asset Management Company presently
manages a corpus of over Rs.20000 Crore. The sponsors of UTI Mutual
Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank
of India (SBI), and Life Insurance Corporation of India (LIC). The schemes
of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management
Funds, Index Funds, Equity Funds and Balance Funds.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts
Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance
Capital Trustee Co. Limited is the Trustee. It was registered on June 30,
1995 as Reliance Capital Mutual Fund which was changed on March 11,
2004. Reliance Mutual Fund was formed for launching of various schemes
under which units are issued to the Public with a view to contribute to the
capital market and to provide investors the opportunities to make
investments in diversified securities.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by
Standard Chartered Bank. The Trustee is Standard Chartered Trustee
Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt.
Ltd. is the AMC which was incorporated with SEBI on December 20,1999.

Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based

company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is
one of the largest financial services groups in the world. Investors can buy or
sell the Mutual Fund through their financial advisor or through mail or

64
through their website. They have Open end Diversified Equity schemes,
Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax
Saving schemes, Open end Income and Liquid schemes, Closed end Income
schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in

the market in securities, investment management and credit services. Morgan
Stanley Investment Management (MISM) was established in the year 1975.
It provides customized asset management services and products to
governments, corporations, pension funds and non-profit organizations. Its
services are also extended to high net worth individuals and retail investors.
In India it is known as Morgan Stanley Investment Management Private
Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund
(MSMF). This is the first close end diversified equity scheme serving the
needs of Indian retail investors focusing on a long-term capital appreciation.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance
Limited as its sponsor. The Trustee Company is Escorts Investment Trust
Limited. Its AMC was incorporated on December 1, 1995 with the name
Escorts Asset Management Limited.

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with
Alliance Capital Management Corp. of Delaware (USA) as sponsorer. The
Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital
Asset Management India (Pvt.) Ltd. with the corporate office in Mumbai.
Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial
Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt.
Ltd. as the Trustee Company. Incorporated on October 16, 2000 and
headquartered in Mumbai, Benchmark Asset Management Company Pvt.
Ltd. is the AMC.

Canara Bank Mutual Fund

65
Canara bank Mutual Fund was setup on December 19, 1987 with Canara
Bank acting as the sponsor. Canara bank Investment Management Services
Ltd. incorporated on March 2, 1993 is the AMC. The Corporate Office of the
AMC is in Mumbai.

Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment &

Finance Company Ltd. was setup on January 3, 1997. Cholamandalam
Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC
Limited.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June
1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC
Mutual Fund was constituted as a Trust in accordance with the provisions of
the Indian Trust Act, 1882. . The Company started its business on 29th April
1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima
Sahayog Asset Management Company Ltd as the Investment Managers for
LIC Mutual Fund.

GIC Mutual Fund

GIC Mutual Fund, sponsored by General Insurance Corporation of India

(GIC), a Government of India undertaking and the four Public Sector
General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The
New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC)
and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in
accordance with the provisions of the Indian Trusts Act, 1882.

Fidelity Investments
Fidelity Investments was founded in 1946. Fidelity Investments is an
international provider of financial services and investment resources that
help individuals and institutions meet their financial objejectives

66
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 pl
ayers.

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

67
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.

68
 OBJECTIVES AND METHODOLOGY

Significance:

Significance of the project is to find out prospect investors of Mutual Funds

and also to provide key information about the investor’s perception and
preferences by Mutual Fund industry. The study will help in getting
information about their performance at distributors as well as at their own

69
investment center or why people go for Mutual Fund for investments.
Studies will also helps in finding out the problems related to distribution.

Managerial Usefulness of Study:

• The study also provides the problems related to distribution of

Mutual Fund so that they can improve the service rendered by them
as a distributor.

• The study will also give information about prospective investors both
individual as well as institutional clients in areas of surrey where they
can get lead.

• The study provides the complete information about all close

competitors in Mutual Fund investment.

• It provides the AMC a feedback from customers regarding their

problems and perception about investing in mutual funds so that they
can improve their services

Objectives:

 To study the Mutual funds industry in detail

 To study the Investment procedure in Mutual funds

 To study the Accounting and Valuation methods of Mutual Funds

 To study in brief various Mutual funds promoted by Reliance Money

70
  To study the investors Preference regarding Investment in Mutual
Funds

Scope of the Study:

• In current scenario, the bank rates have been cut down rapidly due to
severe competition, so people are not going for contemporary
deposits because that cannot provide them the better returns or the
desired interest rates. So, they can look for some other investment
options like Mutual Funds, which can provide them higher returns in
medium to long term and can easily meet their financial goals.

• To look out for new prospective customers who are willing to invest
in Mutual Funds.

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 investor’s perception regarding their investment preferences
about investment in Mutual Funds.

71
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 investor’s

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 investor’s
perception about Mutual Funds in the context of their trading preference
and explore investor’s 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.

SOURCE OF DATA COLLECTION

Primary data is the first hand information collected directly from the
respondents. The tool used here is questionnaire. Primary Data is collected
through survey among existing clients along with the other investors. I had
prepared a questionnaire for collecting the primary data.

72
Secondary data is collected through internet, books, magazines and fact
sheets.

73
 DATA
ANALYSIS
AND

INTERPRETATIO
N

74
 INVESTMENT IN MUTUAL FUNDS

9%
yes

28% no

63% earlier,now
stopped

Interpretation:- The major part of the sample taken has invested in the
Mutual Funds. The demand for the mutual funds have increased in the past
few years with many Foreign players entering in the Indian market, Fidelity,
Franklin Templeton, DSP Meryll Lynch to name few. Still there are few who
are not investing in MF.

75
 EXPERIENCE IN THE MARKET

Experience

Less Than a Year

26%

1-4 Years
53%

21% 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. The achievement of 20,000 mark by
SENSEX was motivational force in this. Major part was having vast
experience that is of more than 4 years. These are the ones who have been
in the market and saw it rising to conquer the 10.000 peak

76
 Trading Preference of the Investors

Trading Preference

16% 28%
Speculation
Investment
Both
56%

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.

77
 Average Investment Period of Investors

Average Investment Period

50% 42%

23% 25%
10%
S1
0%
Less Than 3-9 Months 9 months - More Than
3 months 2 Year 2 Year
Investment Period

Less Than 3-9 Months 9 months - More Than

Series1 23% 10% 42% 25%

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 over 2 years. The least responded
to the 3-9 months period.

78
 Factors Influencing the Investment Decision of Investors

Factors Influencing Investment

40%
32% 30%
30%

20% 20%

10% 10%
6%
2%
0%
Broke News Magzi Frien Self Other
Series1 32% 10% 6% 20% 30% 2%

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 brokers most for the investment decisions. The
“Self-Evaluation” is the next major factor. The experienced person trust
himself thereafter he/she invests. Magazines and current News also matters.
Any bad news can make a person change his/her decision.

79
 RISK TAKING

Moderate

High

Low

0% 20% 40% 60%

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.

80
 Expected Rise in Income

Expected Rise In Income

8%
12%
Upto 15%
48%
15-25%
25-35%
32% More than 35%

Interpretation:- The optimism is shown in the attitude of the respondents.

The confidence was appreciable with which they are looking forward to a
rise in their investments. Major part of the sample feels that the rise would
be of around 15%. Only 8% of the respondents were confident enough to
expect a rise of upto 35%.

81
 Preference In Mutual Funds

Preference in Mutual Funds

Equity Balanced Income Money Market
ELSS SIP Others

2% 19%
17%

15% 18%
9%
20%

Interpretation:- There are different types of mutual funds available in the

market according to the needs of the investors. There are Equity funds, SIP,
Income Funds, Balanced Funds, etc. The highest sought after fund is the
Income fund which offers a regular income through investments in the
Govt. Bonds. The risk is also low in this. It was followed by the Equity
Fund which offers higher returns but it is riskier also. Some people would
like to have Equity Linked Saving Schemes (ELSS). This provides some
exemption in the Tax also.

82
 Investor’s willingness to take Loss

Loss Willing To Take

60% 53%
50%
40% 35%
Percentage 30%
20%
12%
10%
0%
Less than 5% 5-10% More Than
10%
Category

Interpretation:- The willingness to bear the loss was not high. Most of the
investors were not willing to bear a loss of more than 5%. Very few agreed
to be able to bear a loss of more than 10%. The desire for having profits is
higher but nobody was ready to take loss.

83
 Types of Schemes

Type of Schemes

44%

56%

Closed Ended Funds Open Ended Funds

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

84
 BRAND NAME EFFECTIVENESS

56%
60%

50%

40%

30% 23% 21%

20%

10%

0% Can't Say
Yes NO

Interpretation:- From the data collected it is clear that most of the people
are not influenced by the company name while investing in a Fund

85
 INFLUENCE BY RETURN OR NAV

60% 56%

50%

40%

30%
23% 21%
20%

10%

0%
BY NAV RETURNS Both

Interpretation:- From the data collected it is clear that most of people

look at the returns that the Mutual funds are providing .They look at the
returns not the current NAV However there is some class of people who
look at these parameters and their percentage is 23% and some consider
both factors while investing in funds and their percentage is 21%.

86
 FINDINGS

The study done was a tool to analyze the present setup and to know the
investors perception regarding investment in Mutual Funds . The study
proved fruitful and many facts came to the light. The following were the
findings of the study:

• People with less experience were inclined towards investment in the

Mutual Funds. It attracted as a safer avenue as compared to share
market.

• 48% respondents reflected confidence and optimism in the context of

their investments.

• Mutual Funds are more of an investment option than the speculative

avenue. People tend to gain through long investments rather than
through short term.

• Income funds and ELSS are among the few top funds

• People are not willing to take much risk and bear loss.

• Broker’s advice matters to as much as 32% of the people. Major part

of people preferred self-evaluation as best.

• Most of the people look at the returns that are given by a Funds56%
are in this favour and only 23% people are there who consider Fund
name and current NAV of the fund before investing into a Mutual
Fund

Experience was the main factor that made a person invest in mutual
funds

87
 LIMITATIONS

There were certain limitations faced during the study.

 Some people were not willing to disclose the investment profile

 The biased ness was being taken care of.

 The area of sample was decided after taking into consideration the
major factors like

 Availability of investors

 Approachability,

 Time available with investor for interaction, etc.

CORPORATE LEARNINGS
To be a part of Reliance Money was the best opportunity for me to had:

 A practical exposure of financial world.

 Independently handling of clients.
 Came to know the practical problems of clients.
 Learnt corporate culture.

 Learnt the technical procedures and analysis of various research systems,

such as marketing research and equity research.

88
 Achievements

 Applauded by the management team of Reliance Money

.
 Opened D-Mat and Trading Accounts which is an achievement.

 Selling 5 Reliance Infrastructure Fund (NFO) worth Rs. 40,000

 Opening the two SIP worth Rs. 1000 & 500.

 Generated revenues for the organization by performing heavy trading

on behalf of the self developed clients.

89
 Recommendations
What I recommend firstly there should be

[1] First Aid Kit for New Entrant into Securities Market

This will be a new step towards a good service provider in

this field. After all, this market depends on the after sales
service. After seeing such a boost in the share market, not
only our Adult generation but also the young generation is
also so much excited to enter the share market. Now the
actual problem starts specially with the young ones in
excitement initially they invests the money & due to lack of
experience they loose big block of money in one go & later
they blames the company about the loss. So, to make them
train in the field we should provide them the initial
precautions that they should take while enter into the
market.

“The More You Care For Your Customer More The

Faith Will Get Develop From Customer Side”

[2] Provision for Class Room training for the new investors

For the above reason same thing to boost there moral and
to give them some thing related to the market will help
them. Also some tips can also be given to these investor
during the session as a precautions.

90
[3] Toll Free Number

Customers generally want to call to the respective branch for asking some
problems or give orders, a customer can save the money by dialing on the
toll free number. It gives a feeling to the customer that company care for
them.

[4] Customer Care for general query handle

Initially customer want to solve his or her problem at the moment as it

arises. Our relationship manager many times don’t have that much time to
discuss all that details on phone, they may sometime get busy with the
meeting with client. So for general query handle we can have a separate
section.

(5) More Appointments of Relationship Managers

There should be more appointments by RM so that every customer get

equalized attention

Note:
The recommendations which I have listed here above are
strictly based on the knowledge of the securities market that
I have acquired during my training of two months duration.
All the recommendations are for the improvement in the
functioning of the front end operations of the Reliance Money
Ltd. (Varanasi Branch).
The recommendations are purely based on the problems that
I had faced as a Management Trainee.

91
 ANNEXURE – 1
QUESTIONNAIRE

Name: ...…………………….. Occupation: ………………………

Phone: ...……………………..

Investment Presently Held:

Please list the value of the assets in your total investments portfolio :( in Rs.)

Stocks: ______ Mutual Funds: _______

Bonds: ______ Bullion: _______
Options: ______ Govt. Securities:_______
Real Estate: ______ Bank Deposits: _______

(1) Do you invest in Mutual Funds?

Yes No Earlier, now stopped

(2) What is your Experience in the market?

Less than a year 1-4 years More than 4 years

(3) What is your Trading Preference?

Speculation Investment Both

(4) What is your Average investment period?

Less than 3 months. 3 to 9 months.

9 months to 2 year. More than 2 year.

92
(5) Factors influencing the investment decisions?
Advice from Broker Current news
Reviews in Financial Magazines Advice from Friends
Self Evaluation Others___________

(6) How much Risk are you willing to take?

High Low Moderate

(7) How much Appreciation do you expect from your Investments?

Up to 15% 15%-25% 25%-35%

More than 35%

(8) What is your preference in Mutual Funds?

Equity Income
Money Market Funds ELSS
Balanced Funds SIP
Others

(9) How much loss are you willing to take?

High Moderate Low

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

Open Ended Schemes Closed Ended Schemes

93
(11) Do you get influenced by the name of Company promoting Mutual
Funds?

Yes No Can’t Say

(12) Do you get influenced by the returns given by a fund or by the current
NAV of a fund?

By NAV By Returns Both

(13) Any suggestions:

……………………………………………………………........
…………………………………………………………………

Thank You Signature

94
 BIBLIOGRAPHY

Sites visited

1. www.Reliance money.com

2. www.mutualfundsindia.com

3. www.indiainfoline.com

4. www.amfiindia.com

5. www.valueresearchonline.com

Books Referred

AMFI Mutual Fund

95
96