TO STUDY THE OUTLOOK OF CUSTOMERS TOWARDS

INVESTMENT IN MUTUAL FUNDS, COMPARSION WITH BANK

FIXED DEPOSIT IN BHOPAL CITY
AT

KARVY STOCK BROKING LIMITED

Submitted by

VEDIKA KESHARI

(MBA F.T. Course Semester II)

BATCH: -2018-2020

Submitted in Partial Fulfillment of the requirements

Of VNS Faculty of Management for the Award of the degree in

Master of Business Administration

VNS FACULTY OF MANAGEMENT

BARKATULLAH UNIVERSITY

(YEAR 2019)
 ACKNOWLEDGMENT

As everyone who has helped in a project work, it is quite impossible to

acknowledge every individual by name who has played some part in this work.
I feel difficult to express in words my profound sense of gratitude to most
respected persons who helped me to make this work possible.

This project report is a sincere attempt to carefully and systematically gather

facts about “Karvy Stock Broking Limited” as part of course curriculum of
Master of Business Administration (MBA). I acknowledge my gratitude to
respected Principle Maam Dr. Roopali Bajaj has been kind enough to suggest
improvement of this work and make it broad based.

I would like to express my sincere regards and thanks to Director Academics

Dr. Sulakshana Tiwari Maam, and entire faculty members for their guide and
support. I would like to thank everyone who contributed to this project.
Especially my mentor Miss Suchita Khushalani who helped me to understand
market situation during the internship program. Finally, of course, great debts
are owed to all my friends and family whose whole hearted support has given
me the inspiration and dedication to complete this work.

Sincerely,

VEDIKA KESHARI
Place: Bhopal
Date:
 DECLARATION FOR PROJECT REPORT

I do hereby solemnly declare that the work presented in this Project Report entitled “To
Study The Outlook Of Customers Towards Investment In Mutual Fund, Comparision
With Bank Depasit In Bhopal City” is a bona fide work done by me and has not been
previously submitted to any other University, College, and Organization for any academic
Qualification, Certificate and Bachelor of Management Studies Degree.

I hereby warrant that the work I have presented do not breach any existing copyright acts.
The work confirms to the guidelines for presentation and style set out in the relevant
documentation.

Date:

Signature:
(Name: Vedika Keshari)
MBA FULL TIME II Semester
VNS Faculty of Management

1
S. No. Particulars Page No.

1 Introduction about the project 1-6

1.1 Objectives of the study 4-7

1.2 Research Methodology 8

1.3 Sampling Method 9

1.4 Scope of the study 10

1.5 Limitations 10

2 Introduction of the company 11-29

3 Mutual Fund Overview 31-50

4 SIP Calculator 51-52

5 Bank Deposits and its comparision 53-56

6 Data Analysis and Interpretation 57-74

7 Learnings 75-78
2
8 References and Appendix 79-84

1
INTRODUCTION ABOUT THE PROJECT

 Overview about Mutual Fund

 Objectives of Project Report
 Research Methodology
 Sampling method
 Scope Of The Study
 Time Frame
 Geographical Area
 Limitations

3
 1
1.1 Overview about Mutual Fund

A mutual fund is professionally managed investment fund that pools money from many
investors to purchase securities. These investors may be retail or institutional in nature.
Essentially, the money pooled in by a large number of people, is what makes up a mutual
fund. This fund is managed by Professional Fund Manager.

The mutual fund industry started in India in a small way with the UTI Act creating what was
effectively a small savings division within the RBI. Over a period of 25 years this grew fairly
successfully and gave investors a good return, and therefore in 1989, as the next logical step,
public sector banks and financial institutions were allowed to float mutual funds and their
success emboldened the government to allow the private sector to foray into this area.

It is a trust that collects money from a number of investors who share a common investment
objective. Then, it invest the money in equities, bonds, money market instruments and/or
other securities. Each investor owns units, which represent a portion of the holding of fund.
The income/gains generated from this collective investment is distributed proportionately
amongst the investors after deducting certain expenses, by calculating a schemes Net Asset
Value (NAV).

Many of us dread the thought of managing our own investments. With a professional fund
management company, people are put in charge of various functions based on their
educations, experience and skills.

As an investor, you can either manage your finances yourself, or hire a professional firm.

Professional Fund management is one of the best benefits of Mutual Funds. The infographic
on the left highlights all the others. Given the reasons why one should look at any other
investment avenue.

TYPES OF MUTUAL FUND

1. Equity or Growth Funds

 These invest predominantly in equities i.e. shares of companies
 The primary objectives is Wealth Creation or Capital Appreciation

4
  They have the potential to generate higher return and are best for long term
investments
 Examples would be
 “Large Cap” funds which invest predominantly in companies that run large
established business
 “Mid Cap” funds which invest in mid-sized companies
 “Small Cap” funds that invest in small sized companies
 “Multi Cap” funds that invest in a mix of large, mid and small sized
companies.
 “Sector” funds that invest in companies that are related to one type of
business. For e.g. Technology funds that only invest in technology companies
 “Thematic” funds that invest in common themes. For e.g. Infrastructure funds
that invest in companies that will benefit from the growth in the infrastructure
segment
 Tax Saver Fund it includes (Equity Linked Saving Scheme)
2. Income or Bonds or Fixed Income Funds
 These invest in fixed income securities, like Government Securities or Bonds,
Commercial Papers and Debentures, Bank Certificates of Deposits and Money
Market instruments like Treasury Bills, Commercial Paper, etc.
 These are relatively safer investments and are suitable for income generation/
 Examples would be Liquid, Short Term, Floating Rate, Corporate Debts, Dynamic
Bonds, Gilt Funds , etc.
3. Hybrid Funds
 These invest in both equities and fixed incomes, thus offering the best and both,
Growth Potential as well as income generation.
 Examples would be Aggressive Balanced Funds, Conservative alanced funds,
Pension Fund, Child Plans, Monthly Income Plans etc.

UTI mutual funding, ICICI Prudential Mutual Fund and SBI Bluechip Fund are considered to
be most reliable mutual funds in India. People want to invest in these institutions because
they know that these institutions will never dissatisfy them at any cost. You should always
keep this into your mind that if particular mutual funding scheme is on larger scale then next

5
time, you might not get the same results so being a careful investor you should take your
major step diligently otherwise you will be unable to obtain the high return.

Share market plays a very vital role in growing one country’s economy. It provides a means
for the investors to extract the best from their idle money kept with them which in turn is
used by the corporate in productive activity. Mutual Fund is the safest to invest the money
in share market as it carries less risk and has promising returns. Thus keeping the above thing
in mind, this report has been prepared to understand the mindset of the investors towards
mutual fund and this project will also entail the ways through which the investment in mutual
funds can be increased so as to further help in growth of the country’s economy.

6
1.2 Project Objectives:

The objective of the study is to ascertain people mind set for the investment, their
understanding and involvement in investment opportunities to make use of their idle money
kept in their banks. To gain an overview of the current performance trends of the Indian
mutual fund industry and investors’ preference, the present thesis is intended to evaluate the
performance of mutual funds and its impact of diversification of portfolio on risk and risk
potential of mutual funds, in particular. It is felt necessary to understand the preferences of
mutual funds with respect to the risk tolerance, return expectation, tenure of investment and
investment influencing factors etc. in relation to age, qualification, gender, marital status,
occupation and income levels. The objectives of the study are:

1. To present the trends in the growth of Indian mutual funds.

2. To find the relationship of age, qualification, gender, occupation and income with the
preferences of mutual funds.

3. To study the customer investment portfolio about mutual fund.

4. To suggest suitable measures for strengthening investment in mutual funds in India.

5. To discover the relationship between the risk and investment activities of the investor.

7
 1.3 Research Methodology

This report is based on primary as well as secondary data, however primary data collection
was given more important since it is overhearing factor in attitude studies.

One of the most important users of Research Methodology is that it helps in identifying the
problem, collecting, analyzing the required information or data and providing an alternative
solution to the problem. It also helps in collecting the vital information that is required by the
Top Management to assist them for the better decision making both day to day decisions and
critical ones.

a) Research Design: The research is descriptive in nature. The data has been collected
through structured questionnaire and conclusion has been drawn solely for the understanding
of the researcher. The data used for the purpose of drawing is primary and secondary data.

b) Data Collection Method: The data collection method used was structured questionnaire
and personal interviews.

b.1) Primary Data:

 Questionnaire

b.2) Secondary Data

 Newspapers/ journals
 Websites
 Mutual Funds Brochures

c) Sample Area: Bhopal

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1.4 Sampling Method: The sample was collected through convenient sampling. The
sample includes the customers of Karvy Stock Broking Limited, Lake View, M.P. Nagar, DB
City Mall and the investors in share market.

a) Sample Size: 100 respondents

b) Sampling Unit: Businessmen, Government Servant, Retired Individuals

c) Data Source: Primary data and Secondary data

d) Data Collection: The data was collected through personal interview/structured

questionnaire.

e) Data interpretation: For case of understanding and making meaningful inferences, the
data has been compiled in tables/graphs/diagrams.

f) Duration Of The Study: The study was carried out for a period of 45 days, from 15th May
2019 To.30thJune 2019

g) Tools and Techniques: For the purpose of hypothesis testing, Chi Square test is used and
percentage and average has been calculated wherever necessary.

9
 1.5 Scope of the Study

Karvy Stock Broking Limited is one of the top stock brokers in India. The report covers the
understanding of the stock market by common individuals and their attitude towards mutual
fund investment, their mind set towards the industry and their involvement in this economic
process to make use of their redundant money. In India mutual fund industry is growing at a
rapid speed after liberalization of policy of the government. There are total 46 mutual fund
houses in India out of which 38 are private sector AMCs and the remaining are public sector
and UTI AMCs. The private sector mutual funds are Indian, Foreign, Joint venture
predominantly Indian and Joint venture predominantly Foreign. Hence, the public sector
sponsored mutual funds along with UTI is facing severe competition. Banking companies and
Insurance companies also entered into mutual funds industry which is another reason for
severity of competition. As the private sector mutual funds are offering a wide array of
schemes with different structures and objectives, the risk and returns vary. There is a wide
scope to evaluate the performance of mutual funds in various dimensions like risk-return, risk
adjusted return and return from alternative investments.

1.7 Time Frame:

The total time frame for the project period was 6 weeks i.e. 45 days (from 15-05-2019 to 30-
06-2019) 1.8 Geographical Area:

The study area is confined within the boundaries of city of Bhopal.

1.9 Limitations:

The study includes the following limitations:

1. All the possible efforts have been taken to reduce/avoid the biasness by the
respondents, but it may still include some.
2. Time frame is limited for making meaningful inferences.
3. Respondents were selected based on convenience sampling, hence the drawbacks
attached to the convenience sampling shall accrue to the report.
4. The interpretations are solely based on researcher understanding
5. Geographical area is confined to Bhopal, therefore the findings/ suggestions should
not be generalised.

10
 2
INTRODUCTION OF THE COMPANY

 Company Overview
 Karvy Story
 Karvy Group Companies
 Awards and Accolades
 Promoters and Management Team

11
 2

2.1 Company Overview

Karvy Group

The Karvy Group is a premier integrated financial services provider, ranked among the top-5
in the country across its business segments. The Group services over 70 million individual
investors in various capacities, and provides investor services to over 600 corporate houses.
Karvy Group established its presence through a wide network of over 450 branches, (or 900
offices) covering in excess of 400 cities and towns.

Karvy covers the entire spectrum of financial services, viz stock broking, depository
participant, distribution of financial products (including mutual funds, bonds and fixed
deposits), commodities broking, personal finance advisory services, merchant banking &
corporate finance, wealth management, NBFC, among others.

The Group is professionally managed and ranks among the best in technology, operations and
research across the financial industry. The Karvy Group has evolved over the last
three decades and today it assumes many avatars. Broadly the group pursues two lines of
businesses and can be represented as follows:

Financial Services
 Equity Broking
 Depository Participant
 Wealth Management
 Commodities Broking
 Currency Derivatives
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 Non-banking Financial Services
 Distribution of Financial Products
 Realty
 Registry services for Corporate
and Mutual funds
 Investment Banking
 Insurance Repository
 The Finapolis
 Forex & Currencies

Non-Financial Services

 Data Management Services

 International BPO
 Alternate Energy
 Data Analytics
 Market Research

2.2 Karvy Story

One fateful evening in the summer of 1982, 5 young men who worked for a renowned
chartered accountancy firm decided that it was time they struck out on their own to create an
enterprise that would someday become an iconic name in the financial services space.

They came from ordinary middle class backgrounds. They had two assets; one was their
education and the other an unquenchable desire to succeed. They had a lot stacked against
them: the environment was not conducive to entrepreneurship; technology was not fully
supportive, financial markets were largely unregulated, they were based out of Hyderabad
while most key players in the financial world were in Mumbai or other metros and the wolf
was at the door. The odds seemed insurmountable.

These remarkable young men’s “Never say die” approach held them in good stead over the
years. They stuck to their dreams, burnt the midnight oil, embraced technology and made it
work for them and through sheer dint of determination, eventually overcame all obstacles.

13
First came the registry business, followed by broking, and the rest became a lesson for every
young individual to emulate.

The Karvy Group is today a well diversified conglomerate. Its businesses straddle the entire
financial services spectrum as well as data processing and managing segments. Since most of
its financial services were retail focused, the need to build scale and skill in the transaction
processing domain became imperative. Also during stressed environment in the financial
services segment, the non financial businesses bring in a lot of stability to the group’s
businesses.

Karvy’s financial services business is ranked among the top-5 in the country across its
business segments. The Group services over 70 million individual investors in various
capacities, and provides investor services to over 600 corporate houses, comprising the best
of Corporate India.

The Group offers stock broking, depository participant, distribution of financial products
(including mutual funds, bonds and fixed deposits), commodities broking, personal finance
advisory services, merchant banking & corporate finance, wealth management, NBFC (loans
to individuals, micro and small businesses), Data management, Forex & currencies, Registrar
& Transfer agents, Data Analytics, Market Research among others.

Karvy prides itself on remaining customer centric as all times through a combination of
leading edge technology, Professional management and a wide network of offices across
India.

Karvy is committed to its quest as an Equal Opportunity Employer and believes in the rights
for differently-abled persons. We have over 12% employees who are challenged in some
form in one of our prominent businesses.

Karvy’s business entities address a heterogeneous swathe of population from the super rich,
to the nouveau riche, the ubiquitous middle class, the lower classes (the SEC E3 according to
the new Social Economic Classification), urban and the rural folks. All of whom either make
a living through large business (corporate world), SMEs, professional services, traders,
farmers, labour, blue and white collar jobs and the government.

Another key feature of Karvy has been its ability to offer leading edge advice based on
incisive ideas that are strongly rooted in high quality research on every conceivable aspect of

14
investments be it equities, forex, commodities, bonds, fixed returns, debt instruments or any
other investment grade asset class.

The customer has always been at the centre of every Karvy initiative.

15
2.3 Karvy Companies

Karvy Stock Broking LTD

Equity Broking, Depository Participant, Distribution of Financial Products (Mutual Funds,
FD and Bonds), Wealth Management Services, Currency Derivatives, Portfolio Management
Services

Karvy Comtrade LTD

Commodities Broking

Karvy Capital LTD (Formerly Karvy Capital Private LTD)

NBFC & Portfolio Manager

Karvy Investment Advisory Services LTD (Formerly known as Karvy Insurance

Broking LTD)
Investment Advisory Services

Karvy Holdings LTD

Core Investment Company

Karvy Middle East LLC

Wealth Management Products for NRI’s

Karvy Realty (India) LTD

Realty Services

Karvy Financial Services LTD

Non Banking Financial Services

Karvy Insurance Repository LTD

Insurance Repository services

Karvy Forex & Currencies Private LTD

Currency and forex services

Karvy Consultants LTD

Consultancy and Advisory Services, Publications

16
Karvy Computershare Private LTD
Registrar and Share Transfer agent

Karvy Computershare W.L.L (Formerly known as Fakhro Karvy Computershare

W.L.L)
Agent for Custody & Registration of Securities, Registered Administrator

Karvy Data Management Services LTD

Data Management Services

Karvy Investor Services LTD

Merchant Banking and Corporate Finance

Karvy Insights LTD

Market Research

Karvy Analytics LTD

Analytics

Karvy Solar Power LTD

Power Generation

Karvy Global Services LTD

Business Process Outsourcing

Karvy Global Services Inc, USA

Business Process Outsourcing

Karvy Inc, USA

Institutional Broking

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2.4 Awards & Accolades

Karvy Comtrade Limited received “Market Excellence Award, Commodities – Metal” in

Zee Market Excellence Awards 2016 held at the Taj Mahal Palace Hotel, Mumbai on 6th
August. The Hon’ble Union Minister for Power, Renewable Energy and Mining, Mr. Piyush
Goyal handed over the prestigious award to KCTL representative.

Mr. Rajat Parthasarathy, Director, Karvy Group and Mr. Rajiv Ranjan Singh, Vice-President
& Business Head – Stock Broking receiving awards from India’s premier stock exchange
BSE – the SKOCH – BSE Order of Merit award and the SKOCH – BSE Aspiring
Nation award – in recognition of its efforts to educate, empower and help create an
enlightened corps of financial market investors.

18
Mr. Sudhendoo Gandhi, GM, KSBL, receiving the “NSDL Star Performer Award
2014” for Highest Asset Value

Mr. Sushil Sinha, Business Head, KCTL & Mr. Suresh Raval, General Manager, KCTL
receiving the ‘Broker with Best Corporate Desk for Commodity Broking’ award from
Hon’ble Finance Minister then – Sri Pranab Mukerjee at the Bloomberg UTV Financial
Leadership Awards 2011

Mr. C Parthasarathy, Chairman, Karvy Group, receiving the ‘Largest E-Broking House in
India’ award at the Dun & Bradstreet – BSE Equity Broking Awards 2010

Karvy Stock Broking Limited

2014

Won the prestigious “NSDL Star Performer Award 2014 for Highest Asset Value”.
Organized by the National Securities Depository, the NSDL Star Performers Awards
recognize the best performers in the securities and depositories space. The award ceremony
was organized on Saturday, December 20, 2014, at Taj Coromadel, Chennai. Karvy has won
this award consecutively for last two years.

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2010

“Largest E-Broking House in India” at BSE Equity Broking Awards 2010 by Dun &
Bradstreet held in ITC Grand Maratha, Mumbai. This award is based on the study carried out
by the world’s leading provider of business information, knowledge and insight, Dun &
Bradstreet in association with the oldest stock exchange in India, the Bombay Stock
Exchange.

The BSE-D&B Equity Broking Awards recognizes the brokerage firms based on the number
of online accounts, volume of online trade, and service delivery of their online trading
platform. Karvy Stock Broking Limited has won this prestigious award for its state of the art,
in-house developed KarvyOnline, a comprehensive online investment platform that enables
investors to invest, anytime from anywhere.

2007

Bagged ace award by receiving the coveted Annual Award for 2006 for “Best CEO,
Initiating HR Practices”, by, the Uttar Pradesh Chapter of National Institute of Personnel
Management (NIPM). The Award has been conferred to Mr. C Parthasarathy, CMD, Karvy
Group, for his contribution to HR practices in Lucknow, organized by UP chapter of NIPM.

2007

“Amity Corporate Excellence” award at the 9th International Business Summit and
Research Conference-INBUSH (International Business Horizon) which was held at a
glittering function in Noida. This award was conferred by Amity International Business
School, Noida.

2006

ISTD – “Vivekananda National Award” for Excellence in HRD & Training

2004

“Best Depository Participant in the country” award

20
Karvy Comtrade Limited

2014

Won the prestigious ZEE Business Award for the “Best Agri. Analyst” 2014 in the fifth
edition of India’s Best Market Analyst Awards on Saturday, 13th Dec. 2014 at The LaLit in
Mumbai.

2011

Awarded the “Broker with Best Corporate Desk for Commodity Broking” at the
prestigious Bloomberg UTV Financial Leadership Awards 2011 held in Hotel Taj
Landsend, Mumbai. Hon’ble Finance Minister of India then, Shri. Pranab Mukerjee was the
Chief Guest. The awards have been decided by eminent jury consisting of reputed
economists, management & financial consultants.

Bloomberg UTV Financial Leadership Awards have been instituted to acknowledge the
contribution of the country’s financial champions for extraordinary work done in financial
sector. This award is a reflection of Karvy Comtrade – Corporate Desk’s unparalleled
strengths in providing unique risk management strategies and hedging calculators for
Corporates. Karvy Comtrade’s ability to handle large volumes of trade. Efficiently with
prompt, accurate and tailor-made services by a talented pool of professionals ensures that
Karvy remains relevant to client at all times.

2011

Adjudged as the “Best Analyst in Base Metal Category” at the prestigious “Best Market
Analysts Awards 2011” by Zee Business in association with NCDEX (National Commodity
& Derivatives Exchange Limited). The award ceremony was graced with the presence of
eminent dignitaries.

Zee Business Best Market Analyst Awards have been instituted to honour the contributions
of India’s leading financial experts in empowering the retail investors. The Nominations for
the Awards were invited from Commodities & Stock Broking companies and Fund houses
and were being judged on overall returns achieved for the Stocks, Commodities, Sectors and
Companies, the analysts tracked from April 2010 to December 2010.

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2.5 Promoters & Management Team

Mr. C. Parthasarathy
Chairman & Managing Director

Mr. C. Parthasarathy is the Chairman and Managing Director of the diversified financial
services Karvy group. C Parthasarathy (CP as he is better known in the Industry), has the
uncanny knack of staying ahead of the curve and the foresight to spot opportunities that seem
invisible on the horizon for the others. Karvy’s entire history is a case study of turning
adversity into opportunity. CP is a chartered accountant by qualification, whose
entrepreneurial energy drove him to co-found Karvy in 1983 with a less-than-modest capital
of Rs 150,000.

Over the years CP’s vision and leadership skills have helped the group navigate through the
turbulent times with a strong sense of purpose and clarity of thought.

CP is one of the pioneers of financial inclusion. Under his leadership Karvy has won
numerous industry awards and accolades. He also is an independent Director in many listed
companies.

Mr. M. Yugandhar
Managing Director

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Mr. M Yugandhar, Managing Director is a founder member of the KARVY Group. He is a
Fellow Member of the Institute of Chartered Accountants of India and has varied experience
in the field of financial services spanning over 30 odd years.
Yugandhar has helped position and build a strong brand for the group in the registry and
other financial services businesses. The registry business of Karvy is one of its flagship
businesses and with the collaboration with Computershare has grown to become the largest
registrar in India for over two decades. Yugandhar has played a key role in building strong
relationships with public sector banks and other PSUs which has helped Karvy win some
important mandates from some of India’s renowned companies.

Karvy under his guidance has helped create the equity cult and substantially built retail
investor wealth. He is an Independent Director on the board of several reputed companies.

Mr. M. S. Ramakrishna
Director

Mr. M S Ramakrishna, Director, founder member of KARVY GROUP, he is the orchestrator

of technology initiatives such as the call center in the service of the customer.

Mr. Ramakrishna was a member of the Hyderabad Stock Exchange and has more than 30
years of experience in the financial services arena. He has helped KARVY diversify into the
field of medical transcription leveraging on the company’s core competency of transaction
processing.

He is an Independent Director on the board of several reputed companies.

23
MANAGEMENT TEAM

Mr. V.Mahesh
Managing Director – Karvy Data Management

Mr. V Mahesh, is the Managing Director of Karvy Data Management and has work
experience spanning over 2 decades with in depth exposure to operations on most financial
services businesses. Commencing his professional stint with the Registry business where he
has to his credit managing over 300 IPOs and other forms of offerings, he was amongst the
first few to work closely on the Book Building process initiated by SEBI in 1995. After
initially working with MCS as an Assistant Vice President, he moved to Karvy. He was also
responsible to initiate the process of setting up the Depository participant business in Karvy
and was responsible for both the operations and the marketing of the business. He has been
nominated by the NSDL to various committees which addressed key changes to the overall
processes and policies for the Demat business.

Nurturing the passion for understanding and interpreting technology and processes, he was
responsible to create and set up the centralized broking platform, centralized back office
operations for all financial products and creating a network of over 500 branches covering
over 300 locations for Karvy. He is also instrumental in creating and launching the Online
platform of Karvy Stock Broking Limited.

He is a Post Graduate in Commerce from University of Madras (M.Com). and also

completed Post Graduate Diploma in Computer Applications.

24
Mr. V. Ganesh
CEO – Karvy Computershare

Mr. V Ganesh is a Chartered and Cost Accountant by profession and has over 2.5 decades of
experience in the financial services space and is part of Karvy Group’s leadership team.
Before joining KARVY, he was associated with ITC’s risk management and financial audit
services department. Earlier he was associated with Proctor and Gamble and was responsible
for product pricing and financial support functions for P&G’s soaps and health care
businesses.

He was instrumental in setting up the Mutual Fund registry business for Karvy. At KARVY,
for over 2 decades, Ganesh has been instrumental in building a strong techno-commercial
base with emphasis on establishing a pan India branch network, back office processing, call
center, web initiatives, online trading, B2B interfaces etc., in the transfer agency and BPO
businesses.

Mr. Sushil Sinha

Wholetime Director – Karvy Comtrade

Mr. Sushil Sinha, the Country Head of Karvy Comtrade Ltd, has successfully made Karvy
Comtrade a force to reckon with in the marketplace. With over 10 years of expertise in the
broking sector, he is a well-known face today in the electronic and print media. Under his
aegis, the company has won numerous honours and awards nationwide, including the UTV

25
Bloomberg Leadership Award 2011 and India’s Best Market Analyst Award—for two
consecutive years—by Zee Business.

Having joined Karvy Comtrade in December 2005 as Senior Manager (Business

Development), he has steadily climbed up the organizational ladder to head the business now.
Before joining KCTL, he worked in Geojit Financial Securities for two years. Prior to that, he
had worked with the Agriculture department in the Government of Jharkhand under various
capacities for four years.

A science graduate, Mr. Sinha has completed two MBAs, one majoring in Personnel
Management & Industrial Relations from Patna University and the other in Agri Business
Management from IIPM, Bangalore, a Ministry of Commerce, Government of India
institution.

Mr. P. B. Ramapriyan
Vice President & Head – Financial Product Distribution

Mr. Ramapriyan is working with Karvy for over 2 decades, He has strength of sorts in the
distribution of Financial products including Equity, Bonds, Fixed Deposits and Auto
Finance. He has successfully marketed several financial products for large number of
corporate of various sizes. He is also responsible for managing the Pan India Network of
brokers and sub-brokers. He has been instrumental in Karvy’s success in distribution of debt
products.

26
Mr. Rajiv R. Singh
Vice President & Business Head – Karvy Stock Broking Limited

Mr. Rajiv R. Singh is the Vice President & Business Head of the Equity Broking business.
He has been associated with Karvy for more than a decade. He joined Karvy in 2001 and
moved up the corporate ladder with his sheer dedication, commitment and hard work.

Rajiv, with an enormous experience in finance industry leads the responsibility of all aspects
of Karvy’s equity broking business which includes strategy, revenue generation, business
development and overall customer satisfaction. Rajiv is widely regarded as a results-driven
leader who plays a key role in building the stock broking business of KSBL and make it one
of the largest stock broking houses in the country. Rajiv also plays a key role in identifying
skills and motivating staff in providing outstanding client service.

Rajiv is a Certified Management Accountant–CMA.

Mr. J. Ramaswamy
Group Head – Corporate Affairs

Mr. Ramaswamy, the Group Head for Corporate Affairs, is the official spokesperson for the
Karvy Group. Mr. Ramaswamy has more than 25 years of experience in various spheres of
the financial services industry, of which 10 years has been in the Legal and Secretarial
division of Reliance, handling various public issues, mergers, monitoring performance of

27
various departments, liaising with regulatory bodies and outside agencies (viz., the stock
exchange, SEBI, DCA and others), and coordinating all the board meetings.

The Corporate Affairs Division is involved in integration and strategic planning of all the
business divisions of Karvy. Mr. Ramaswamy’s job responsibility encompasses monitoring
the performance of all divisions through regular reviews, initiating and implementing new
business initiatives, corporate communication and media relations, acting as official
spokesperson for the entire Group, conceptualizing various policies and procedures to
improve the internal work environment, and working on a parallel platform with the HR
department to develop models for raising productivity and cost-effectiveness. He oversees the
international business of Karvy Global Services.

Mr. Deepak Gupta

Group Head – HR

Mr. Deepak Gupta brings with him over 20 years of experience in HR, spanning financial
services, Ites and manufacturing. Prior to joining Karvy, he was Chief People Officer, Human
Resources, with Bajaj Finance Limited, a Rahul Bajaj Group Company, based at Pune. He
has also had a successful career with a few prominent corporate, including SREI, Enam,
CRISIL, CEAT Financial Services and Reliance Industries.

Deepak holds a Master’s degree in Human Resources Development from Jamnalal Bajaj
Institute of Management and a diploma in Business Management and Industrial Relations.

28
Mr. G. Krishna Hari
Group Head – Finance

Mr. G. Krishna Hari holds a Bachelors degree in Commerce and is associate member of the
Institute of Chartered Accountants of India (ICAI). He has over 27 years of experience in the
areas of finance and accounts functions encompassing fund raising, financial reporting,
management accounting, working capital management, taxation, budgeting and forecasting
and financial due diligence reviews for mergers & acquisitions and investment proposals.

He has been associated with the Karvy Group for the past 15 years and is currently
designated as the Vice President- Finance & Accounts at Karvy Stock Broking Limited. Prior
to joining Karvy, he was the head of finance & accounts division in Asia Pacific Investment
Trust Limited, Hyderabad (Formerly Nagarjuna Investment Trust Limited) an NBFC
Company.

29
 3

Mutual Funds Overview

 Introduction to Mutual Funds.
 Why invest in Mutual Funds.
 Advantages of Mutual Funds
 Disadvantages of Mutual Funds
 How to choose Mutual Funds
 Mutual Fund operations flow chart
 Types of Mutual Fund
 Net Asset Value
 Types of returns on Mutual Funds
 Mutual Funds distribution channel
 Marketing strategies for Mutual funds
 Working of mutual funds
 Structure of a mutual fund
 Regulatory structure of the mutual funds in India
 Mutual Funds History in India

30
 3

3.1 Introduction to Mutual Fund?

A mutual fund is an investment vehicle, which pools money from investors with common
investment objectives. It then invests their money in multiple assets, in accordance with the
stated objective of the scheme. The investments are made by an ‘asset management company’
or AMC.

 In this segment, we will understand mutual funds and how to trade in them.

 History of mutual funds in India

Mutual funds in India have come a long way since 1964 when the Unit Trust of India was the
only player.

31
By the end of 1988, UTI had total assets worth Rs 6,700 crore. Soon after, eight funds were
established by banks, LIC and GIC between 1987 and 1993. The total number of schemes
went up to 167 and total money invested – measured by Assets under Management (AUM) –
shot up to over Rs 61,000 crore.

In 1993, private and foreign players entered the industry, marking the third phase. The first
entrant was Kothari Pioneer Mutual fund, which launched in association with a foreign fund.

The Securities and Exchange Board of India (SEBI) formulated the Mutual Fund Regulation
in 1996, which, for the first time, established a comprehensive regulatory framework for the
mutual fund industry. Since then, several mutual funds have been set up by the private and
joint sectors.

Currently there are around 45 mutual fund organizations in India together handling assets
worth nearly Rs 10 lakh crore. Today, the Indian mutual fund industry has opened up many
exciting investment opportunities for investors. As a result, we have started witnessing the
phenomenon of savings now being entrusted to the funds rather than in banks alone. Mutual
Funds are now perhaps one of the most sought-after investment options for most investors.

As financial markets become more sophisticated and complex, investors need a financial
intermediary who can provide the required knowledge and professional expertise on taking
informed decisions. Mutual funds act as this intermediary.

32
3.2 Why Invest In Mutual Funds

Investing in mutual funds offers a multitude of benefits. Let’s have a look:

 Professional Investment Management:

When you invest in a mutual fund, your money is managed by professional experts. This is
one of the primary benefits of investing in mutual funds. Being full-time, high-level
investment professionals, a good investment manager is more resourceful and capable of
monitoring the companies the mutual fund has invested in, rather than individual investors.

The managers have real-time access to crucial market information and are able to execute
trades on the largest and most cost-effective scale. Simply put, they have the know-how to
trade in the markets that retail investors may not possess.

 Low Investment Threshold

33
A mutual fund enables you to participate in a diversified portfolio for as little as Rs 5000, and
sometimes even lesser. And with a no-load fund, you pay little or no sales charges to own
them.

For example, some bonds and fixed deposits have a minimum investment amount of Rs
25,000. Instead, you can give your money to a mutual fund, which will in turn invest in the
bonds and fixed deposits. This could be done for as little as Rs 1000.

 Professional Investment Management:

When you invest in a mutual fund, your money is managed by professional experts. This is
one of the primary benefits of investing in mutual funds. Being full-time, high-level
investment professionals, a good investment manager is more resourceful and capable of
monitoring the companies the mutual fund has invested in, rather than individual investors.

The managers have real-time access to crucial market information and are able to execute
trades on the largest and most cost-effective scale. Simply put, they have the know-how to
trade in the markets that retail investors may not possess.

 Convenience

Investing in mutual funds has its own convenience. You save up on additional paper-work
that comes with every transaction, the amount of energy you invest in researching for the
stocks, as well as actual market-monitoring and conduction of transactions. With a mutual
fund, you don’t have to do any of that.

Simply go online or place an order with your broker to buy a mutual fund. Another big
advantage is that you can move your funds easily from one fund to another, within a mutual
fund family. This allows you to easily rebalance your portfolio to respond to significant fund
management or economic changes.

34
3.3 Advantages of Mutual Funds

 Liquidity:

In open-ended schemes, you can get your money back at any point in time at the prevailing
NAV (Net Asset Value) from the Mutual Fund itself.

This makes mutual fund investments highly liquid. Compare that with a fixed deposit or a
bond which may have a fixed investment duration.

 Variety

While investing in mutual funds, you are spoilt for choice. You have a number of mutual
fund schemes to choose from, which may invest in a whole range of industries and sectors,
different kinds of assets, and so on. You can find a mutual fund that matches just about any
investment strategy you select.

35
There are funds that focus on blue-chip stocks, technology stocks, bonds, or a mix of stocks
and bonds. In fact, the greatest challenge can be sorting through the variety and picking the
best for you.

 Transparency

SEBI regulations for mutual funds have made the industry very transparent. You can track
the investments that have been made on your behalf to know the sectors and stocks being
invested in.

In addition to this, you get regular information on the value of your investment. Mutual funds
are mandated to publish the details of their portfolio regularly.

3.4 Disadvantages Of Investing In Mutual Funds

1. No Control Over Costs:

An investor in a mutual fund has no control of the overall costs of investing. The investor
pays investment management fees as long as he remains with the fund, albeit in return for the
professional management and research. Fees are payable even if the value of his investments
is declining. A mutual fund investor also pays fund distribution costs, which he would not
incur in direct investing. However, this shortcoming only means that there is a cost to obtain
the mutual fund services.

2. No Tailor-Made Portfolio:

Investors who invest on their own can build their own portfolios of shares and bonds and
other securities. Investing through fund means he delegates this decision to the fund
managers. The very-high-net-worth individuals or large corporate investors may find this to
be a constraint in achieving their objectives. However, most mutual fund managers help
investors overcome this constraint by offering families of funds- a large number of different
schemes- within their own management company. An investor can choose from different
investment plans and constructs a portfolio to his choice.

36
3. Managing A Portfolio Of Funds:

Availability of a large number of funds can actually mean too much choice for the investor.
He may again need advice on how to select a fund to achieve his objectives, quite similar to
the situation when he has individual shares or bonds to select.

4. The Wisdom Of Professional Management:

That’s right, this is not an advantage. The average mutual fund manager is no better at
picking stocks than the average nonprofessional, but charges fees.

5. No Control:

Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of
somebody else’s car

6. Dilution:

Mutual funds generally have such small holdings of so many different stocks that insanely
great performance by a fund’s top holdings still doesn’t make much of a difference in a
mutual fund’s total performance.

7. Buried Costs:

Many mutual funds specialize in burying their costs and in hiring salesmen who do not make
those costs clear to their clients.

37
 3.7 Types Of Mutual Funds Schemes In India

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position,
risk tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a
collection of many stocks, an investors can go for picking a mutual fund might be easy. There
are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual
funds in categories, mentioned below.

TYPES OF MUTUAL
FUNDS

BY INVESTMENT
BY STRUCTURE BY NATURE OTHER SCHEMES
OBJECTIVE

Open - Ended Tax Saving

Equity Fund Growth Schemes
Schemes Schemes

Close - Ended
Debt Funds Income Schemes Index Schemes
Schemes

Sector Specific
Interval Schemes Balanced Funds Balanced Schemes
Schemes

Money Market
Schemes

BY STRUCTURE

1. Open – Ended Schemes:

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.

38
2. Close – Ended Schemes:

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.

3. Interval Schemes:

Interval Schemes are that scheme, which combines the features of open-ended and close-
ended schemes. The units may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals at NAV related prices.

By Nature

1. Equity Fund:

These funds invest a maximum part of their corpus into equities holdings. The structure of the
fund may vary different for different schemes and the fund manager’s outlook on different
stocks. The Equity Funds are sub-classified depending upon their investment objective, as
follows:

 Diversified Equity Funds

 Mid-Cap Funds

 Sector Specific Funds

 Tax Savings Funds (ELSS)

39
Equity investments are meant for a longer time horizon, thus Equity funds rank high on the
risk-return matrix.

2. Debt Funds:

The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers. By
investing in debt instruments, these funds ensure low risk and provide stable income to the
investors. Debt funds are further classified as:

 Gilt Funds: Invest their corpus in securities issued by Government, popularly known
as Government of India debt papers. These Funds carry zero Default risk but are
associated with Interest Rate risk. These schemes are safer as they invest in papers
backed by Government.

 Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.

 MIPs: Invests maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market. These
scheme ranks slightly high on the risk-return matrix when compared with other debt
schemes.

 Short Term Plans (STPs): Meant for investment horizon for three to six months.
These funds primarily invest in short term papers like Certificate of Deposits (CDs)
and Commercial Papers (CPs). Some portion of the corpus is also invested in
corporate debentures.

 Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments
like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are
meant for short-term cash management of corporate houses and are meant for an
investment horizon of 1day to 3 months. These schemes rank low on risk-return
matrix and are considered to be the safest amongst all categories of mutual funds.

3. Balanced Funds:

40
As the name suggest they, are a mix of both equity and debt funds. They invest in both
equities and fixed income securities, which are in line with pre-defined investment objective
of the scheme. These schemes aim to provide investors with the best of both the worlds.
Equity part provides growth and the debt part provides stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds
objective and invest accordingly.

By Investment Objective:

Growth Schemes:

Growth Schemes are also known as equity schemes. The aim of these schemes is to provide
capital appreciation over medium to long term. These schemes normally invest a major part
of their fund in equities and are willing to bear short-term decline in value for possible future
appreciation.

Income Schemes:

Income Schemes are also known as debt schemes. The aim of these schemes is to provide
regular and steady income to investors. These schemes generally invest in fixed income
securities such as bonds and corporate debentures. Capital appreciation in such schemes may
be limited.

Balanced Schemes:

Balanced Schemes aim to provide both growth and income by periodically distributing a part
of the income and capital gains they earn. These schemes invest in both shares and fixed
income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes:

41
Money Market Schemes aim 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.

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:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to
time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings
Scheme (ELSS) are eligible for rebate.

Index Schemes:

Index schemes attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that
constitute the index. The percentage of each stock to the total holding will be identical to the
stocks index weightage. And hence, the returns from such schemes would be more or less
equivalent to those of the Index.

Sector Specific Schemes:

These are the funds/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), Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors/industries. While these funds may give higher returns,

42
they are more risky compared to diversified funds. Investors need to keep a watch on the
performance of those sectors/industries and must exit at an appropriate time.

3.3 Net Asset Value (NAV):

Since each owner is a part owner of a mutual fund, it is necessary to establish the value of his
part. In other words, each share or unit that an investor holds needs to be assigned a value.
Since the units held by investor evidence the ownership of the fund’s assets, the value of the
total assets of the fund when divided by the total number of units issued by the mutual fund
gives us the value of one unit. This is generally called the Net Asset Value (NAV) of one
unit or one share. The value of an investor’s part ownership is thus determined by the NAV
of the number of units held.

3.9 Types of Returns on Mutual Fund:

There are three ways, where the total returns provided by mutual funds can be enjoyed by
investors:

 Income is earned from dividends on stocks and interest on bonds. A fund pays out
nearly all income it receives over the year to fund owners in the form of a distribution.

 If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.

If fund holdings
increase in price but are not
sold by the fund manager,
the fund’s shares increase
in price. You can then sell
your mutual fund shares for
a profit. Funds will also usually
give you a choice either to
receive a check for distributions or to reinvest the earnings and get more shares.

43
3.12 Working Of Mutual Funds

The mutual fund collects money directly or through brokers from investors. The money is
invested in various instruments depending on the objective of the scheme. The income
generated by selling securities or capital
appreciation of these securities is passed on
to the investors in proportion to their
investment in the scheme. The investments
are divided into units and the value of the
units will be reflected in Net Asset Value
or NAV of the unit. NAV is the market
value of the assets of the scheme minus its
liabilities. The per unit NAV is the net
asset value of the scheme divided by the
number of units outstanding on the
valuation date. Mutual fund companies provide daily net asset value of their schemes to their
investors. NAV is important, as it will determine the price at which you buy or redeem the
units of a scheme. Depending on the load structure of the scheme, you have to pay entry or
exit load.

3.13 Structure Of A Mutual Fund

India has a legal framework within which Mutual Fund have to be constituted. In India open
and close-end funds operate under the same regulatory structure i.e. as unit Trusts. A Mutual
Fund in India is allowed to issue open-end and close-end schemes under a common legal
structure. The structure that is required to be followed by any Mutual Fund in India is laid
down under SEBI (Mutual Fund) Regulations, 1996.

44
The Fund Sponsor:

Sponsor is defined under SEBI regulations as any person who, acting alone or in combination
of another corporate body establishes a Mutual Fund. The sponsor of the fund is akin to the
promoter of a company as he gets the fund registered with SEBI. The sponsor forms a trust
and appoints a Board of Trustees. The sponsor also appoints the Asset Management
Company as fund managers. The sponsor either directly or acting through the trustees will
also appoint a custodian to hold funds assets. All these are made in accordance with the
regulation and guidelines of SEBI.

As per the SEBI regulations, for the person to qualify as a sponsor, he must contribute at least
40% of the net worth of the Asset Management Company and possesses a sound financial
track record over 5 years prior to registration.

Mutual Funds as Trusts:

A Mutual Fund in India is constituted in the form of Public trust Act, 1882. The Fund sponsor
acts as a 45ettler of the Trust, contributing to its initial capital and appoints a trustee to hold

45
the assets of the trust for the benefit of the unit-holders, who are the beneficiaries of the trust.
The fund then invites investors to contribute their money in common pool, by scribing to
“units” issued by various schemes established by the Trusts as evidence of their beneficial
interest in the fund.

It should be understood that the fund should be just a “pass through” vehicle. Under the
Indian Trusts Act, the trust of the fund has no independent legal capacity itself, rather it is the
Trustee or the Trustees who have the legal capacity and therefore all acts in relation to the
trusts are taken on its behalf by the Trustees. In legal parlance the investors or the unit-
holders are the beneficial owners of the investment held by the Trusts, even as these
investments are held in the name of the Trustees on a day-to-day basis. Being public trusts,
Mutual Fund can invite any number of investors as beneficial owners in their investment
schemes.

Trustees:

A Trust is created through a document called the Trust Deed that is executed by the fund
sponsor in favor of the trustees. The Trust- the Mutual Fund – may be managed by a board of
trustees- a body of individuals, or a trust company- a corporate body. Most of the funds in
India are managed by Boards of Trustees. While the boards of trustees are governed by the
Indian Trusts Act, where the trusts are a corporate body, it would also require to comply with
the Companies Act, 1956. The Board or the Trust company as an independent body, acts as a
protector of the of the unit-holders interests. The Trustees do not directly manage the
portfolio of securities. For this specialist function, the appoint an Asset Management
Company. They ensure that the Fund is managed by ht AMC as per the defined objectives
and in accordance with the trusts deeds and SEBI regulations.

The Asset Management Companies:

The role of an Asset Management Company (AMC) is to act as the investment manager of
the Trust under the board supervision and the guidance of the Trustees. The AMC is required
to be approved and registered with SEBI as an AMC. The AMC of a Mutual Fund must have
a net worth of at least Rs. 10 Crores at all times. Directors of the AMC, both independent and
non-independent, should have adequate professional expertise in financial services and
should be individuals of high morale standing, a condition also applicable to other key
personnel of the AMC. The AMC cannot act as a Trustee of any other Mutual Fund. Besides

46
its role as a fund manager, it may undertake specified activities such as advisory services and
financial consulting, provided these activities are run independent of one another and the
AMC’s resources (such as personnel, systems etc.) are properly segregated by the activity.
The AMC must always act in the interest of the unit-holders and reports to the trustees with
respect to its activities.

Custodian and Depositories:

Mutual Fund is in the business of buying and selling of securities in large volumes. Handling
these securities in terms of physical delivery and eventual safekeeping is a specialized
activity. The custodian is appointed by the Board of Trustees for safekeeping of securities or
participating in any clearance system through approved depository companies on behalf of
the Mutual Fund and it must fulfill its responsibilities in accordance with its agreement with
the Mutual Fund. The custodian should be an entity independent of the sponsors and is
required to be registered with SEBI. With the introduction of the concept of dematerialization
of shares the dematerialized shares are kept with the Depository participant while the
custodian holds the physical securities. Thus, deliveries of a fund’s securities are given or
received by a custodian or a depository participant, at the instructions of the AMC, although
under the overall direction and responsibilities of the Trustees.

Bankers:

A Fund’s activities involve dealing in money on a continuous basis primarily with respect to
buying and selling units, paying for investment made, receiving the proceeds from sale of the
investments and discharging its obligations towards operating expenses. Thus the Fund’s
banker plays an important role to determine quality of service that the fund gives in timely
delivery of remittances etc.

Transfer Agents:

Transfer agents are responsible for issuing and redeeming units of the Mutual Fund and
provide other related services such as preparation of transfer documents and updating
investor records. A fund may choose to carry out its activity in-house and charge the scheme
for the service at a competitive market rate. Where an outside Transfer agent is used, the fund
investor will find the agent to be an important interface to deal with, since all of the investor
services that a fund provides are going to be dependent on the transfer agent.

47
3.14 Regulatory Structure Of Mutual Funds In India:

The structure of mutual funds in India is guided by the SEBI. Regulations, 1996.These
regulations make it mandatory for mutual fund to have three structures of sponsor trustee and
asset Management Company. The sponsor of the mutual fund and appoints the trustees. The
trustees are responsible to the investors in mutual fund and appoint the AMC for managing
the investment portfolio. The AMC is the business face of the mutual fund, as it manages all
the affairs of the mutual fund. The AMC and the mutual fund have to be registered with
SEBI.

3.15 Mutual Funds History in India

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

First Phase – 1964-1987

Unit Trust of India (UTI) was established in 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.

48
At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004
crores.

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

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

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.

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

The second is the UTI Mutual Fund, 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

49
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.

The graph indicates the growth of assets over the years.

50
 4
How SIP is calculated
Compound interest arises when interest is added to the principal, so that, from that moment on, the interest that
has been added also earn interest. This addition of interest is compounding. It will be simpler to calculate with
the SIP Calculator.

How compounding works?

Rohini invests Rs. 50000 in an instrument that yields 10% returns. She chooses to invest her returns, and thus is
added to the principal amount invested.

The principal amount spurt up with every passing year. The interest gained on investing for year 1 is 5000.
However, in the second year the principal amount becomes 55000 (principal amount+interest). The interest is
now calculated on this renewed principal amount. So, if initially 10% interest rate seems insignificant, fret not,
because as time passes by it will prove to be propitious. This is the power of reinvesting i.e. compounding.

Compounding with SIP

For someone who wishes to build up capital over the longer term and is not familiar with equity
markets, investing regularly through a SIP in a mutual fund is one strategy that can ensure success to a
large extent. What it really means is that you invest a fixed sum from savings every month, instead of
making a heavy one-time investment. Over the years, an SIP can add up to give really substantial
returns. For example, a monthly SIP of Rs. 1000 @ 9% would grow to Rs. 6.69 lakhs in 10 years, Rs.
17.83 lakhs in 30 years and Rs. 44.20 lakhs in 40 years. The true benefit of SIP is reaped by investing
at lower levels.

A SIP is a powerful tool to fight market volatility and benefit from enormous potential of
compounding method.

51
SIP Calculator

52
 5
5.1 BANK FIXED DEPOSIT
A fixed deposit is a financial instrument provided by banks which provides investors
with a higher rate of interest than a regular saving account, until the date of maturity
date. It may or may not require the creation of a separate account.

It is also term as TERM OR TIME Deposit. They are considered to be very safe
investment as it denotes a larger class of investments with varying levels of liquidity.
Here, interest rate varies between from 4 to 11 percent. The tenure of a Fixed Deposit a
vary from 7, 15, or 45 days to 1.5 years and can be high as 10 years.

5.2 TYPES OF FIXED DEPOSIT :

BASICALLY THERE ARE TWO TYPES OF DEPOSIT:

A. DEMAND DEPOSIT:- The money we keep in our saving accounts is like a medium
of exchange and this is called Demand Deposit. There is no fixed term to maturity for
demand deposits.

B. TIME DEPOSIT:- If we deposit our money has an FD in the bank it becomes a Time
Deposit on which No cheque is drawn. They are paid on maturity at a particular time.

a. FIXED DEPOSIT:-A fixed rate of interest is paid at fixed, regular intervals.

b. RECURRING DEPOSIT:-Fixed amount is deposited at regular intervals for

a fixed term and the repayment of principal and accumulated interest is made at the
end of the term.

53
5.3 ADVANTAGES OF BANK FIXED DEPOSIT

A. SAFETY :-The fixed deposits of reputed banks and financial institution regulated by
RBI the banking regulator in India are very secure and considered as one of the
safest investment methods.

B. REGULAR INCOME:-Fixed deposit earn fixed interest rates for their entire tenure,
which is usually compounded quarterly. So, those who want an income on a regular
basis can invest into fixed deposit and use the interest rate as their income. This
makes a fixed deposit very popular way of investing money for retirees.

C. LIQUIDITY:-Bank deposits have good liquidity. They can be closed and the
principal withdrawn within a few hours in some banks to a couple of days in others.

The other option is to take a loan on the fixed deposit. Banks lend up to 90% of the principal of
the deposit. Interest charged for this is only about 1 to 2 per cent and only for the period that we
have used the cash (The feature works like an over-draft against the fixed deposit).

5.4 DISADVANTAGES OF BANK FIXED DEPOSIT

A. CAPITAL APPRECIATION:-Capital appreciation does not

apply to bank fixed deposits. Only the principal invested is returned back at the
time of maturity.

B. TAX TREATMENT:-Bank fixed deposits are not tax efficient.

The interest is taxed. Also there is no benefit from making the investment. There
are the 5-year bank deposits (tax saving) that give benefit under section 80C of
the Income Tax Act. But the benefits such as partial withdrawal or closure, and

54
 loan facility are not available. The deposit rates are also lower compared to the
normal fixed deposits. This effectively negates the tax saved.

C. RISK:-Perhaps the main reason for investment in bank deposits is safety of the
principal. The capital (only up to Rs1,00,000 though) has the highest safety
compared to any other investment as it is guaranteed by the Deposit Insurance &
Credit Guarantee Scheme of India. All banks operating in India are covered
under this scheme.

5.5 IN SHORT

The risk faced when investing in bank deposits is the interest rate risk. This is associated with the
lost opportunity to invest in an instrument that has a higher return. Getting out of a fixed deposit
can be costly (up to 1 per cent of the principal), when we exit prematurely. So we may have to
forgo potential earnings when the interest rate has risen only by about 1 per cent.
The highest risk faced with fixed deposits is the effect of inflation. The real return after adjusting
for inflation is very less or sometimes negative for fixed deposits of banks. This is a big burden,
particularly for retired people, who have invested their retirement proceeds to get regular
income. Their income may be regular and steady but the money's worth keeps going down
during the tenure of the fixed deposit.
The bank deposit primarily serves us to preserve capital. Banks now-a-days have added a lot of
additional benefits to the traditionally benign service. Retired people could make the best use of
this avenue for securing a fixed and steady income.
The caution is not to use the fixed deposit as a long term investment avenue. The reason is that
the real return is very less when adjusted for inflation. The tax treatment of the interest also eats
into the return.

55
5.6 COMPARISON BETWEEN MUTUAL FUNDS AND
FIXED DEPOSITS

PARAMETERS MUTUAL FUNDS FIXED DEPOSITS

A.Rate Of Returns No Assured Returns Fixed Returns

B.Inflation Adjusted Potential For High Usually Low InflationAdjusted

InflationAdjusted Returns Returns
Returns
C.Risk Medium To High Risk Low Risk

D.Liquidity Liquid Medium To Low Liquidity

E.Premature Allowed With Exit Load Allowed With Penalty

Withdrawal
F.Cost Of Investment Management Cost No Cost

G.Tax Status Favorable Tax Status As Per Tax Slab

56
 6
Data Analysis and Interpretation
Data Analysis and Interpretation
Q. 1) What is your age?
Table No. 1

Age 18-40 41-52 53-65 65 +

No. of 42 30 20 8
respondents

Pie Chart No. 1

Interpretation: This pie chart depicts that majorly investment is done by the age group of
18-40, no doubt with high risk appetite they are able to gain high returns. Thereby it is
followed by the age group of 41-52 which covers 30% of the population 12% less than the
former. It clearly shows that the risk appetite and investment habit reduces with age.

57
Q. 2) What is your Occupation?
Table No. 2

Occupation Govt. Sector Pvt. Sector Bus. Other

Nos. 16 46 16 20

Pie Chart No. 2

Interpretation: It can be seen from the pie chart above that majorly people who
belong to private sector are interested in investment in share market, through equity or
mutual funds. It is followed by Govt employees and businessmen.

58
Q. 3) Where do you invest your money?

Table No. 3

Investment Equity/Deb. Gold/Silver Real FD Mutual

Estate Fund
No. of 16 20 10 20 34
respondents

Pie Chart No. 3

Respondent
Eq./Deb. Gold/Silver Real Estate FD Mutual Fund

16%
34%

20%

20% 10%

Interpretation: If we see the table and chart we can observe that lowest investment is in real
estate 10% and highest investment is in mutual fund 34%, it means that people are getting
interested in MFs and further wanted to invest in that. They wanted to know more about MF.

59
Q. 4) What do you consider the most important parameter while investing?

Table No. 4

Factor Liquidity High Return Low Risk Co’s Repo

No. of respondents 8 52 24 16

Pie Chart No. 4

Interpretation: : The above chart visibly proves that the population is interested in high
returns regardless of high risk associated with the investment. It is followed by low risk
option which is comprised by 24%. More than half that is 52% of the population are
interested in returns.

60
Q. 5) Are you aware of mutual fund?

Table No. : 5

YES NO
80 20

Pie Chart No. : 5

YES
NO

Interpretation: Most of the people know about about mutual fund like we can see in
chart that 80% of the population which we have covered know about Mutual Fund.
People are getting interested in this because it has many advantages for an investor.

61
 Q. 6) What appropriate time you prefer for investment?

Table No. : 6

Investment Short Term Long Term

No. of respondents 75 25

Pie Chart No. : 6

Long Term
25%

Short Term
75%

Interpretation: According to survey people wanted to invest for short term, instead of long
term. But actually there is most probably the need of the person by which he\she can invest
according which they can invest.

62
Q. 7) How long have you been investing?

Table No. 7
Equity/Debenture

3 and above
Time <1 1-2 years 2-3 years
years
No. 2 5 4 5

Table No. 8
Gold/Silver
3 and above
Time <1 1-2 years 2-3 years
years
No. 4 6 3 7

Table No. 9

Real Estate

3 and above
Time <1 1-2 years 2-3 years
years
No. 1 2 2 5

Table No. 10

Fixed Deposit

3 and above
Time <1 1-2 years 2-3 years
years
No. 4 3 3 10

63
 Table No. 11

Mutual Fund

3 and above
Time <1 1-2 years 2-3 years
years
No. 8 10 6 10

Bar Graph No. 1

35
30
25
20
Respondents
15
%
10
5
0
<1 1 to 2 2 to 3 3&
above

Bar Graph No. 2

40
35
30
25
20 Respondent
15
%
10
5
0
<1 1 to 2 2 to 3 3&
above

64
 Bar Graph No. 3

35
30
25
20
Respondent
15
%
10
5
0
<1 1 to 2 2 to 3 3 & above

Bar Graph No. 4

35
30
25
20
Respondent
15
%
10
5
0
<1 1 to 2 2 to 3 3 & above

Bar Graph No. 5

35

30

25

20
Respondent
15
%
10

0
<1 1 to 2 2 to 3 3&
above

65
Interpretation: We can see in the chart and table that people are interested in mutual fund
i.e. 34 people out of 100 are interested and to proportition with that they are also interested in
investing in equities and debenture i.e. 16 out of 100. FD and gold\silver are equal which lies
to 20 out of 100. More investment options are like real estate which lies to 10 out of 100,
lowest to all of them.

Q. 8) Which investment avenue has generated higher returns?

Table No. 12

Investment Equity Scrip’s Mutual Funds

No. of respondents 76 24

Pie Chart No. 7

Interpretation: Equity scrip with high risk also carries high return and hence the population
also knows about it. This shows that the population presumes that the security level differs
with the investment from equity to mutual funds and so does the return.

66
 Q. 9) How do you come to know about Mutual Fund?
Table No. 12

Medium Advertisement Peers Banks F.A

No. 20 34 24 22

Pie Chart No. 8

Interpretation: From the chart it is clear that advertisement medium is underperforming and
awareness drive should be spread through advertisement channels.

67
 Q. 10) Are you aware that mutual fund company's (AMC's) will invest your money in
scrips?

Table No. 13

Answer Yes NO
No. 66 34

Pie Chart No. 9

Interpretation: The inference drawn from this is that population does not know about the
fund manager concept and believe that they are investing it in the same way as investment in
equity scrips. From further personal interview it was instituted that people see it as
investment in equity with low risk facility and thus low return. People investing in mutual
fund only invest as they have a perception that their fund is secured.

68
 Q. 11) How do you rate the risks associated with Mutual Funds?
Table No. 14

Risk Low Moderate High

No. 20 20 60

Pie Chart No. 10

Interpretations: The above chart depicts that half of the population is well aware of the risk
that mutual fund carries but as understood from the Q. 9 that they are not aware of the fund
manager proves that they are not properly educated about the mutual funds and investment in
mutual funds may rise with the educating the investors of the same.

69
 Q. 12) Is there a need for creating awareness among the public of Bhopal about the
benefits of investing in Mutual Funds?
Table No. 14

Strongly Strongly
View Agree Neutral Disagree
Agree Disagree

No. 32 30 34 4 0

Pie Chart No. 11

Interpretation: The above chart exhibits that 17 out of 50 are impartial of the awareness
drive for mutual funds. It is followed by people who strongly agree for the awareness drive
and subsequently 30% people agree for the awareness programs thus in total 62% of the

70
population agree for the programs and hence have sense that people are not well aware of
mutual funds and consequently don’t put their hard earned money in it to earn wealth.

Q. 13) Which are the primary sources of your knowledge about Mutual Funds as an
investment option?
Table No. 15
Television
Rating 1 2 3 4 5
Nos. 12 20 28 28 12

Table No. 16
Internet
Rating 1 2 3 4 5
Nos. 22 22 30 26 0

Table No. 17
Newspaper/ journal
Rating 1 2 3 4 5
Nos. 16 36 32 14 2

Table No. 18
Friends and Family
Rating 1 2 3 4 5
Nos. 16 28 30 24 2
Bar Graph No. 2

71
Interpretation: The bar chart above shows that people get information from all the possible
sources but it can be seen from Q. 9 that people are not fully literate in mutual funds but they
are familiar with this term.

Q. 14) Do you think that investors should be educated about the mutual funds?

Table No. 19

Response Yes No May Be

No 58 14 28

Pie Chart No. 13

Interpretation: The above chart shows that majority of the population want to know more
about the mutual fund and desire for some mutual fund awareness campaign. There are many
mutual fund schemes and investors wish to understand the schemes.

72
 Q. 15) Do you know the features of Mutual Fund?

Table No. 20

Response Yes No May Be

No 24 38 38

Pie Chart No. 14

Interpretation: About 38% of the population believes that they are not been educated about
mutual funds and they do not know all the features and benefits of mutual fund. This may be
one of the major reasons for low investment in mutual fund. Considering it the safest mode to
invest in share market, it may draw huge investments and thus increase in wealth as well as
contribute in the country’s economy.

73
Hypothesis Testing

Options Equity Scrip Mutual Fund Total

Male 56 6 62
Female 26 12 38
Total 82 18 100

Residual Residual2
Options Observed Expected (O-E)2/Exp
2
(O-E) (O-E)
Male
Equity Scrip 56 36 20 100 2.777778
Mutual
6 14 -8
Fund 64 4.571428
Female
Equity Scrip 26 24 2 4 0.1666667
Mutual
12 26 -14
Fund 196 7.538461
Total 100 100 15.054334

Degree of Freedom (√) = (r-1) (c-1) i.e. (2-1) (2-1)

=> (√) = 1

The table value of chi square at degree of freedom (df) = 1 and significance level at the rate of 5 % is
3.841 and the calculated value is 15.05. Since the calculated value is higher than the table value the
hypothesis "There is no significant difference in the risk level of mutual fund and share
trading as presumed by customers " , stands false and the alternate hypothesis "There is
significant difference in the risk level of mutual fund and share trading as presumed by
customers", stands true

74
 7

Learnings

 Findings
 Conclusion
 Recommendations

75
 7
7.1 FINDINGS

Through this research the inferences drawn are:-

 People belonging to age group of 18-40 are more likely to invest in share market.
 Investors like investing in equity market as they head for higher returns.
 Private sector individuals are more likely to make investment; it is then followed by
govt. sector employees and businessmen, which shows that risk appetite in private
sector employees is high.
 The null hypothesis, “There is no significant difference in the risk level of mutual
fund and share trading as presumed by customers” stands false as it can be seen
from Q. 4, people believe that equity scrip is more risky.
 But on the other hand, as inference drawn from Q. 8, investors also believe that equity
has higher returns for which reason they invest in equity scrips.
 Also, people are not fully literate in mutual funds and invest in it due to low risk but
have no knowledge about the product.
 People would like to know more about the product, as seen from Q. 12 and Q. 14.
 Mutual fund is a great avenue for investment and lack of circulation of product
knowledge hinders the investment.

76
7.2 CONCLUSION

Mutual Funds represent perhaps most appropriate investment opportunity for most investors.
As financial markets become more sophisticated and complex, investors need a financial
intermediary who provides the required knowledge and professional expertise on successful
investing. As the investor always try to maximize the returns and minimize the risk. Mutual
fund satisfies these requirements by providing attractive returns with affordable risks. The
fund industry has already overtaken the banking industry, more funds being under mutual
fund management than deposited with banks. With the emergence of tough competition in
this sector mutual funds are launching a variety of schemes which caters to the requirement
of the particular class of investors. Risk takers for getting capital appreciation should invest
in growth, equity schemes. Investors who are in need of regular income should invest in
income plans.

The stock market has been rising for over three years now. This in turn has not only protected
the money invested in funds but has also helped to grow these investments.

This has also instilled greater confidence among fund investors who are investing more into
the market through the MF route than ever before.

77
7.3 Recommendation

1. As seen from Q. 13 very few people come to know about mutual funds from
Television, newspaper and journals, thus, AMFI should conduct adequate awareness
programmes about the benefits of investing in mutual funds and provide information
to public regarding different new schemes.
2. As seen from Q. 13, AMFI, brokers and SEBI should come up with some aggressive
marketing strategies to penetrate the Indian market which has a great potential to tap
onto.
3. As seen from Q. 15, people do not affirm their knowledge in mutual funds and thus
should be educated.

78
 8
References & Appendix

 Bibliography
 Appendix

79
 8
8.1 Bibliography

 Karvy Story, Retrieved from, https://www.karvy.com/our-story

 Karvy Promoters and Management Team, Retrieved from

https://www.karvy.com/promoters-management-team

 Karvy Group Companies, retrieved from,

https://www.karvy.com/our-companies

 Karvy Group Awards and Accolades, retrieved from

https://www.karvy.com/awards-accolades

 Analysis of mutual fund HDFC top 200 chart, retrieved from,

http://www.moneycontrol.com/mutual-funds/nav/hdfc-top-200-fund/MZU009

 Mutual Fund in India, retrieved from,

https://en.wikipedia.org/wiki/Mutual_funds_in_India

 Mutual Funds Histrory, retrieved from, https://www.amfiindia.com/research-

information/mf-history

80
8.2 Annexure
Questionnaire
Q. 1) What is your name?

Q. 2) What is your age *

o 18-40
o 41-52
o 53-65
o 65 and above

Q. 3) What is your contact number?

Q. 4) What is your gender? *

o Male
o Female

Q. 5) What is your highest level of education completed?

o 10th
o 12th
o Graduate
o Post Graduate and above

Q. 6) Are you Employed, full time, part time, not employed, retired?
o Full time
o Part time
o Not Employed
o Retired

Q. 7) What is your annual income? *

81
o <2,00,000
o 2,00,000-5,00,000
o 5,00,000-10,00,000
o 10,00,000 and above

Q. 8) What is your occupation?

o Govt Sector
o Private Sector
o Business
o Others

Q. 9) Which option do you prefer for investment? *

o Equity Scrips
o Mutual Funds

Q. 10) Which according to you is more risky as investment? *

o Equity Scrips
o Mutual Funds

Q. 11) How long have you been investing?

3 and above
>1 year 1-2 years 2-3 years
years
Equity Scrips
Mutual Funds

Q. 12) Which investment avenue has generated higher returns? *

o Equity Scrips
o Mutual Funds

Q. 13) What do you prefer as your investment strategies? *

o Planned Investment
o Unplanned Investment

82
Q. 14) While investing your money which factor you prefer most? *
o Liquidity
o High Return
o Low Risk
o Company Reputation

Q. 15) Are you aware that mutual fund company's (AMC's) will invest your money in
scrips? *

o Yes
o No

Q. 16) How do you rate the risks associated with Mutual Funds? *
o Low
o Moderate
o High

Q. 17) Is there a need for creating awareness among the public of Bhopal about the
benefits of investing in Mutual Funds?
o Strongly agree
o Agree
o Neutral
o Disagree
o Strongly disagree

Q. 18) Do you think that investors should be educated about the mutual funds? *
o Yes
o No
o Maybe

Q. 19) Which are the primary sources of your knowledge about Mutual Funds as an
investment option? *

83
 (Corresponding to your choices how would you rate their influence on your final
Mutual Fund purchase decision. Please rank them on a scale of 1-5 with 1
representing minimal influence and 5 representing Strong influence)

1 2 3 4 5
Television
Internet
Newspaper/
Journals

Friends and
Family

Financial
Advisors

Q. 20) Do you know the features of Mutual Fund?

o Yes
o No
o May be

84