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A Thesis on A

systematic and comprehensive analysis about awareness of mutual funds in Udaipur


Submitted in partial fulfillment of MBA Degree of Mohan Lal Sukhadia University In the Faculty of Management Studies

By ABHISHEK JAIN

Under the Supervision of Dr. ANIL KOTHARI ASSOCIATE PROFESSOR

FACULTY OF MANAGEMENT STUDIES MOHAN LAL SUKHADIA UNIVERSITY UDAIPUR (2009-2011)

CERTIFICATE
I feel great pleasure in certifying that the thesis entitled A systematic and comprehensive analysis about awareness of mutual funds in Udaipur embodies a record of the results of investigations carried out by ABHISHEK JAIN under my guidance. I am satisfied with the analysis of data, interpretation of results and conclusions drawn. I recommend the submission of MRP.

---------------------------------------------Date: Supervisor Dr. ANIL KOTHARI Associate PROFESSOR

DECLARATION
I hereby declare that the work incorporated in the present thesis entitled A systematic and comprehensive analysis about awareness of mutual funds in Udaipur is my own work and is original. This work (in part or in full) has not been submitted to any university in partial fulfillment of the award of a degree or diploma.

DATE:

/0 /2011

-----------------------------ABHISHEK JAIN

ACKNOWLEDGEMENT
It is good to have knowledge: it is good to have enthusiasm, but in order to achieve effectiveness , it is essential to have training

(Pandit Jawaharlal Nehru) I would also like to thank my project guide DR. ANIL KOTHARI sir whose able guidance this project reached its completion, who helped me at, various instance and had been kind enough to offer invaluable information about their company profile and details of their vast product range. Last but not least, I am indebted to my college, Faculty of management studies for giving me the opportunity to work on this project and avail an opportunity to learn about and interest with such a prestigious organization.

TABLE CONTENT
1. Declaration 2. Preface 3. Acknowledgement 4. Industry Profile 5. Products and service 6. Mutual fund 7. Assets management company 8. Formulation and regulation 9. Investing Strategies 10. ULIP v/s Mutual fund 11. data analysis 12. facts and finding 13. Conclusion 14. Suggestions 15. Questionnaire 16. Bibliography

INDUSTRIAL PROFILE
Introduction of Stock Market
Indian stock market is one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealing in India are meagre and obscure. The East India company was the dominate institution in those days and business in its loan securities used to be transacted towards the close of the 18th century.By1830s business stocks and shares in Bank and cotton presses took place in Bombay. Though the trading list was broader in 1839. There were only half a dozen broker recognized by banks and merchants during 1840and 1850. The 1850s witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field &by1860the number of brokers increased into 60. In 1860-61 the American civil war broke out &cotton supply from United States of Europe was stopped: thus the Share Mania in India begun. The number of brokers increased to about 200to 250.however, at the end of the American civil war in 1865, a disastrous slump began. (EX. Bank of Bombay share which had touched Rs.2850 could only be sold at Rs.87). In India they formally established in Bombay, the Native Share &Stock brokers Association (which is alternative known as The Stock Exchange).In 1895, the stock Exchange acquired a premises in the same street and it was inaugurated in 1899. Thus the Stock Exchange at Bombay was consolidated.

Placing Order

fund of securities

Trade excution

Transation Cycle

Sattelment of traders

clearing of traders

A person holding assets (securities/ funds), either to meet his liquidity needs or to reshuffle his holding in response to changes in his perception about risk &return of the assets, decided to buy/sell order the securities. He selects a broker and instructs him to place buy/sell order on an exchange. The order is converted to a trade as soon as it finds a matching sell/buy order. At the end of the trade cycle, the traders are netted to determine the obligations of the trading members Securities/ funds and acquire ownership of the securities.

A Securities translation Cycle is presented above, just because of this Transaction cycle, the whole business of Securities and stock broking has emerged. And as a reshuttle his holding in response to changes in his perception about risk and return of the assets, decides to buy or sell the securities He selects a broker and instructs him to place buy/sell order. The order is converted to a trade as soon as it finds a matching sell/buy order. At the end of the trade cycle, the traders are netted to determine the obligations of the trading members securities and receive securities /funds and acquire ownership of the Securities.

A Securities transaction cycle is presented above. Just because of this Transaction cycle, the whole business of securities and stock Broking has emerged. And as an Extension of Stock Broking, the business of online stock broking/online trading/ E-Broking has emerged.

At the end of the American civil war, the broker who thrived out of civil war in 1874, found a place in a street (now appropriately called as Dalal Street ) where establishment in Bombay, The Native Share& Stock Brokers Association (Which is alternatively known as The Stock Exchange) acquired a premise in the same street and it was inaugurated in 1899. The stock Exchange at Bombay was Consolidated.

What is an Index?
An Index shows how a specified portfolio of share prices is moving in order to give an indication of market trends. It is a basket of securities and the average price movement of the basket of securities indicates the index movement, whether upwards or downwards.

CHARACTERISTICS OF STOCK EXCHANGES IN INDIA


Traditionally, a stock exchange has been an association of individual members called member brokers (or simply members or brokers), formed for the express purpose of regulating and facilitating buying and selling of securities by the public and institution at large. A stock exchange in India operates with due recognition from the government under the Securities and Contracts (Regulations) Act, 1956. The member brokers are essentially the middlemen who carry out the desired transactions in securities on behalf of the public (for a commission) or on their own behalf. New membership to a Stock Exchange is through election by the governing board of that stock exchange. At present, there are 23 stock exchanges in India, the largest among them being the Bombay Stock Exchange. BSE alone accounts for over 80% of the total volume of transactions in shares. Typically, a stock exchange is governed by a board consisting of directors largely elected by the member brokers, and a few nominated by the government. Government nominee include representatives of the ministry of finance, as well as some public representatives, who are expected to safeguard the public interest in the functioning of the exchanges. The overall development and regulation of the securities market has been entrusted to the Securities and Exchange Board of India (SEBI) by an act of parliament in 1992. All companies wishing to raise capital from the public are required to list their securities on at least one stock exchange. Thus, all ordinary shares, preference shares and debentures of the publicly held companies are listed in the stock exchange.

ROLE OF SEBI
The SEBI, that is, the Securities and the Exchange Board of India, is the national regulatory body for the securities market, set up under the securities and Exchange Board of India act, 1992, to protect the interest of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith and incidental too. SEBI has its head office in Mumbai and it has now set up regional offices in the metropolitan cities of Kolkata, Delhi, and Chennai. The Board of SEBI comprises a Chairman, two members from the central government representing the ministries of finance and law, one member from the Reserve Bank of India and two other members appointed by the central government. As per the SEBI act, 1992, the power and functions of the Board encompass the regulation of Stock Exchanges and other securities markets; registration and regulation of the working stock brokers, sub-brokers, bankers to an issue (a public offer of capital), trustees of trust deeds, registrars to an issues, merchant bankers, under writers, portfolio managers, investment advisors SEBI as the watchdog of the industry has an important and crucial role in the market in ensuring that the market participants perform their duties in accordance with the regulatory norms. The Stock Exchange as a responsible Self Regulatory Organization (SRO) function to regulate the market and its prices as per the prevalent regulations. SEBI and the Exchange play complimentary roles to enhance the investor protection and the overall quality of the market.

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PRODUCT
Products:--

D SERVICES:

Service
           Dail research report and market review(Hi h Noon& Eagle Eye) Pre-market Report (Morning cuppa) Daily trading calls based on Technical Analysis Cool trading products (Daring Derivatives and Market Strategy) Personalised Advice Live Market information Depository service: Demat and Remat transactions Derivative trading (Future and option) Commodities Trading IPOs &Mutual funds Distribution Internet-based Online trading: Speed Trade

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MISSION
1) 2) 3) 4) 5) 6) We shall strive to deliver value for money to the customer in all our business segments. Fostering a Customer centric approach. Facilitating Ease of transaction by leveraging technology. Providing Professional and unbiased counseling. Ensuring Transparent dealings . To provide Services in the Segment of investment: (a)Equity (b)Debt (c)Commodity (d) Currency future

VISION
1) 2) 3) To be the most trusted business house adopting a professional approach par excellence and heralding new standards in the quality of services. To be one of the most preferred organizations for wealth maximization of all our stake holders including customers, employees and channel partners. To create management systems that adopts global standards of corporate governance Corporate Social Responsibility.

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VALUE

1) 2) 3) 4) 5) 6) 7)

Customer First. Pursuit of Excellence Fairness to all Stakeholders. Transparent and Ethical conduct of business. Leveraging all business opportunities. Team work, based on mutual trust. Continuous Innovation.

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MUTUAL FUNDS
MUTUAL FUNDS: AN INTRODUCTION
y y y y y

A Mutual Fund actually belongs to the investors who have pooled their Funds. The ownership of the mutual fund is in the hands of the Investors. A Mutual Fund is managed by investment professional and other Service providers, who earn a fee for their services, from the funds. The pool of Funds is invested in a portfolio of marketable investments. The value of the portfolio is updated every day. The investors share in the fund is denominated by units. The value of the units changes with change in the portfolio value, every day. The value of one unit of investment is called net asset value (NAV). The investment portfolio of the mutual fund is created according to The stated Investment objectives of the Fund.

OBJECTIVES OF A MUTUAL FUND


y y y

To provide an opportunity for lower income groups to acquire without much difficulty, property in the form of shares. To cater mainly of the need of individual investors who have limited means. To manage investors portfolio that provides regular income, growth, safety, liquidity, tax advantage, professional management and diversification.

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MUTUAL FUNDSTRUCTURE

Sponsor

Trustees

Mutual fund

ASSET MANAGEMENT COMPANY

Custodian

Registrar

A mutual fund is structured as mentioned above. Firstly, the investor invests his money in the fund. Every mutual fund organization has a sponsor who is required to contribute a minimum of 40% of the net worth of the AMC. It is the duty of the sponsor to establish a fund and apply to SEBI for its registration. A person or a group of persons known as trustee is given an overall authority over the fund managers. They basically safeguard the assets of the fund. The fund is created which is managed by the AMC which is given the powers to take all decisions relating to the investment. There is another entity known as the custodian, who basically stocks a funds securities and other assets. The registrar is an institution which maintains a register of all the unit holders of a fund along with their ownership. Finally, the SEBI is the ultimate authority.

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ORGANIZATION AND MANAGEMENT OF MUTUAL FUNDS In India Mutual Fund usually formed as trusts, three parties are generally involved viz.
y y y y

Settler of the trust or the sponsoring organization. The trust formed under the Indian trust act, 1982 or the trust company registered under the Indian companies act, 1956 Fund mangers or The merchant-banking unit Custodians.

MUTUAL FUNDS TRUST:


Mutual fund trust is created by the sponsors under the Indian trust act, 1982, which is the main body in the creation of Mutual Fund trust. The main functions of Mutual Fund trust are as follows:
j j j j j

Planning and formulating Mutual Funds schemes. Seeking SEBIs approval and authorization to these schemes. Marketing the schemes for public subscription. Seeking RBI approval in case NRIs subscription to Mutual Fund is Invited Attending to trusteeship function. This function as per guidelines can be assigned to separately established trust companies too. Trustees are required to submit a consolidated report six monthly to SEBI to ensure that the guidelines are fully being complied with trusted are also required to submit an annual report to the investors in the fund.

FUND MANAGERS OR THE ASSET MANAGEMENT COMPANY (AMC)


AMC has to discharge mainly three functions as under: I. Taking investment decisions and making investments of the funds through market dealer/brokers in the secondary market securities or directly in the primary capital market or money market instruments. II. Realize fund position by taking account of all receivables and realizations, moving corporate actions involving declaration of dividends etc. to compensate investors for their investments in units; and III. Maintaining proper accounting and information for pricing the units and arriving at net asset value (NAV), the information about the listed schemes and the transactions of units in the secondary market. AMC has to feed back the trustees about its fund management operations and has to maintain a perfect information system.

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CUSTODIANS OF MUTUAL FUNDS:Mutual funds run by the subsidiaries of the nationalized banks had their respective sponsor banks as custodians like Canara bank, SBI, PNB, etc. Foreign banks with higher degree of automation in handling the securities have assumed the role of custodians for mutual funds. With the establishment of stock Holding Corporation of India the work of custodian for mutual funds is now being handled by it for various mutual funds. Besides, industrial investment trust company acts as sub-custodian for stock Holding Corporation of India for domestic schemes of UTI, BOI MF, LIC MF, etc.

RESPONSIBILITY OF CUSTODIANS:j j j j

Receipt and delivery of securities Holding of securities. Collecting income Holding and processing cost

FUNCTIONS OF CUSTODIAN:j j j j

Safe custody Trade settlement Corporate action Transfer agents

MUTUAL FUND: FORMATION AND REGULATIONS


1. Mutual funds are to be established in the form of trusts under the Indian trusts act and are to be operated by separate asset management companies (AMCs) 2. AMCs shall have a minimum Net worth of \ 5 crores; 3. AMCs and Trustees of Mutual Funds are to be two separate legal entities and that an AMC or its affiliate cannot act as a manager in any other fund; 4. Mutual funds dealing exclusively with money market instruments are to be regulated by the Reserve Bank Of India 5. Mutual fund dealing primarily in the capital market and also partly money market instruments are to be regulated by the Securities Exchange Board Of India (SEBI) 6. All schemes floated by Mutual funds are to be registered with SEBI

SCHEMES:1. Mutual funds are allowed to start and operate both closed-end and open-end schemes; 2. Each closed-end schemes must have a Minimum corpus (pooling up) of \ 20 crore; 3. Each open-end scheme must have a Minimum corpus of \ 50 crore
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4. In the case of a Closed End scheme if the Minimum amount of \ 20 crore or 60% of the target amount, which ever is higher is not raised then the entire subscription has to be refunded to the investors;

INVESTMENT NORMS:1. No mutual fund, under all its schemes can own more than five percent of any companys paid up capital carrying voting rights; 2. No mutual fund, under all its schemes taken together can invest more than 10 percent of its funds in shares or debentures or other instruments of any single company; 3. No mutual fund, under all its schemes taken together can i nvest more than 15 percent of its fund in the shares and debentures of any specific industry, except those schemes which are specifically floated for investment in one or more specified industries in respect to which a declaration has been made in the offer letter. 4. No individual scheme of mutual funds can invest more than five percent of its corpus in any one companys share; 5. Mutual funds can invest only in transferable securities either in the money or in the capital market. Privately placed debentures, securitized debt, and other unquoted debt, and other unquoted debt instruments holding cannot exceed 10 percent in the case of growth funds and 40 percent in the case of income funds. DISTRIBUTION: Mutual funds are required to distribute at least 90 percent of their profits annually in any given year. Besides these, there are guidelines governing the operations of mutual funds in dealing with shares and also seeking to ensure greater investor protection through detailed disclosure and reporting by the mutual funds. SEBI has also been granted with powers to over see the constitution as well as the operations of mutual funds, including a common advertising code. Besides, SEBI can impose penalties on Mutual funds after due investigation for their failure to comply with the guidelines.

MUTUAL FUNDWHO INVESTS? INVESTOR PROFILE:


An investor normally prioritizes his investment needs before undertaking an investment. Different goals will be allocated to different proportions of the total disposable amount. Investments for specific goals normally find their way into the debt market as risk reduction is of prime importance, this is the area for the risk-averse investors and here, Mutual Funds are generally the best option. One can avail of the benefits of better returns with added benefits of anytime liquidity by investing in open-ended debt funds at lower risk, this risk of default by any company that one has chosen to invest in, can be minimized by investing in Mutual Funds as the fund managers analyze the companies financials more minutely than an individual can do as they have the expertise to do so.

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Moving up the risk spectrum, there are people who would like to take some risk and invest in equity funds/capital market. However, since their appetite for risk is also limited, they would rather have some exposure to debt as well. For these investors, balanced funds provide an easy route of investment, armed with expertise of investment techniques, they can invest in equity as well as good quality debt thereby reducing risks and providing the investor with better returns than he could otherwise manage. Since they can reshuffle their portfolio as per market conditions, they are likely to generate moderate returns even in pessimistic market conditions. Next comes the risk takers, risk takers by their nature, would not be averse to investing in high-risk avenues. Capital markets find their fancy more often than not, because they have historically generated better returns than any other avenue, provided, the money was judiciously invested. Though the risk associated is generally on the higher side of the spectrum, the return-potential compensates for the risk attached.

MUTUAL FUNDTYPES 1. OPEN-ENDED MUTUAL FUNDS:The holders of the shares in the Fund can resell them to the issuing Mutual Fund company at the time. They receive in turn the net assets value (NAV) of the shares at the time of resale. Such Mutual Fund Companies place their funds in the secondary securities market. They do not participate in new issue market as do pension funds or life insurance companies. Thus they influence market price of corporate securities. Open-end investment companies can sell an unlimited number of Shares and thus keep going larger. The openend Mutual Fund Company Buys or sells their shares. These companies sell new shares NAV plus a Loading or management fees and redeem shares at NAV. In other words, the target amount and the period both are indefinite in such funds.

2. CLOSED-ENDED MUTUAL FUNDS:A closedend Fund is open for sale to investors for a specific period, after which further sales are closed. Any further transaction for buying the units or repurchasing them, Happen in the secondary markets, where closed end Funds are listed. Therefore new investors buy from the existing investors, and existing investors can liquidate their units by selling them to other willing buyers. In a closed end Funds, thus the pool of Funds can technically be kept constant. The asset management company (AMC) however, can buy out the units from the investors, in the secondary markets, thus reducing the amount of funds held by outside investors. The price at which units can be sold or redeemed Depends on the market prices, which are fundamentally linked to the NAV. Investors in closed end Funds receive either certificates or Depository receipts, for their holdings in a closed end mutual Fund.

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MUTUAL FUND SCHEME TYPES


j EQUITY DIVERSIFIED SCHEMES:-

These schemes mainly invest in equity. They seek to achieve long-term capital appreciation by responding to the dynamically changing Indian economy by moving across sectors such as Lifestyle, Pharma, Cyclical, Technology, etc.

j SECTOR SCHEMES:These schemes focus on particular sector as IT, Banking, etc. They seek to generate longterm capital appreciation by investing in equity and related securities of companies in that particular sector.

j INDEX SCHEMES:These schemes aim to provide returns that closely correspond to the return of a particular stock market index such as BSE Sensex, NSE Nifty, etc. Such schemes invest in all the stocks comprising the index in approximately the same weightage as they are given in that index.

j EXCHANGE TRADED FUNDS (ETFS):ETFs invest in stocks underlying a particular stock index like NSE Nifty or BSE Sensex. They are similar to an index fund with one crucial difference. ETFs are listed and traded on a stock exchange. In contrast, an index fund is bought and sold by the fund and its distributors.

j EQUITY TAX SAVING SCHEMES:These work on similar lines as diversified equity funds and seek to achieve long-term capital appreciation by investing in the entire universe of stocks. The only difference between these funds and equity-diversified funds is that they demand a lock-in of 3 years to gain tax benefits.

j DYNAMIC FUNDS:These schemes alter their exposure to different asset classes based on the market scenario. Such funds typically try to book profits when the markets are overvalued and remain fully invested in equities when the markets are undervalued. This is suitable for investors who find it difficult to decide when to quit from equity.

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j BALANCED SCHEMES:-

These schemes seek to achieve long-term capital appreciation with stability of investment and current income from a balanced portfolio of high quality equity and fixed-income securities.

j DEBT SCHEMES:-

These schemes basically invest in debt.


o Medium-Term Debt Schemes:These schemes have a portfolio of debt and money market instruments where the average maturity of the underlying portfolio is in the range of five to seven years. o Short-Term Debt Schemes These schemes have a portfolio of debt and money market instruments where the average maturity of the underlying portfolio is in the range of one to two years. o Money Market Debt Schemes:These schemes invest in debt securities of a short-term nature, which generally means securities of less than one-year maturity. The typical short-term interest-bearing instruments these funds invest in Treasury Bills, Certificates of Deposit, Commercial Paper and InterBank Call Money Market. o Medium-Term Gilt Schemes:These schemes invest in government securities. The average maturity of the securities in the scheme is over three years. o Short-Term Gilt Schemes:These schemes invest in government securities. The securities invested in are of short to medium term maturities.

j FLOATING RATE FUNDS:They invest in debt securities with floating interest rates, which are generally linked to some benchmark rate like MIBOR. Floating rate funds have a high relevance when interest rates are on the rise helping investors to ride the interest rate rise.
j MONTHLY INCOME PLANS (MIPS):These are basically debt schemes, which make marginal investments in the range of 10-25% in equity to boost the schemes returns. MIP schemes are ideal for investors who seek slightly higher return that pure long-term debt schemes at marginally higher risk.

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DIFFERENT MODES OF MUTUAL FUND INVESTMENTS:


Mutual Funds offer three methods of receiving income:

j Growth Plan:In this plan, dividend is neither declared nor paid out to the investor but is built into the value of the NAV. In other words, the NAV increases over time due to such incomes and the investor realizes only the capital appreciation on redemption of his investment.

j Dividend Plan:In this plan, dividends are paid-out to the investor. In other words, the NAV only reflects the capital appreciation or depreciation in market price of the underlying portfolio.

j Dividend Re-investment Plan


In this case, dividend is declared but not paid out to the investor, instead, it is reinvested back into the scheme at the then prevailing NAV. In other words, the investor is given additional units and not cash as dividend.

MUTUAL FUND INVESTING STRATEGIES


1. SYSTEMATIC INVESTMENT PLANS (SIPS) These are best suited for young people who have started their careers and need to build their wealth. SIPs entail an investor to invest a fixed sum of money at regular intervals in the Mutual fund scheme the investor has chosen, an investor opting for SIP in xyz Mutual Fund scheme will need to invest a certain sum on money every month/quarter/half-year in the scheme. 2. SYSTEMATIC WITHDRAWAL PLANS (SWPS) 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 his expenses 3. SYSTEMATIC TRANSFER PLANS (STPS) They allow the investor 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 investments actively to achieve his objectives. Many funds do not even charge any transaction fees for his service an added advantage for the active investor.

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MUTUAL FUNDSRISK ASSOCIATED


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: 1) Market Risk:Market risk relates 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. 2) Political Risk:Changes in the tax laws, trade regulations, administered prices, etc are 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. 3) Inflation Risk:Interest rate risk relates to future changes in interest rates. For instance, if an investor invests in a long-term debt MF scheme and interest rates increase, the NAV of the scheme will fall because the scheme will be end up holding debt offering lower interest rates. 4) 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 cannot be predicted or guaranteed, nor can the price of its securities.. 5) Economic Risk:Economic risk involves uncertainty in the economy, which, in turn, can have an adverse effect on a companys business. For instance, if monsoons fail in a year, equity stocks of agriculture-based companies will fall and NAVs of Mutual Funds, which have invested in such stocks, will fall proportionately.

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MUTUAL FUNDBUT WHY??


Here are some of the Advantages offered by Mutual Funds-:

Number of available options Mutual funds invest according to the underlying investment objective as specified at the time of launching a scheme. So, we have equity funds, debt funds, gilt funds and many others that cater to the different needs of the investor. The availability of these options makes them a good option. While equity funds can be as risky as the stock markets themselves, debt funds offer the kind of security that is aimed for at the time of making investments. Money market funds offer the liquidity that is desired by big investors who wish to park surplus funds for very short-term periods. Balance Funds cater to the investors having an appetite for risk greater than the debt funds but less than the equity funds. Diversification Investments are spread across a wide cross-section of industries and sectors and so the risk is reduced. Diversification reduces the risk because all stocks dont move in the same direction at the same time. One can achieve this diversification through a Mutual Fund with far less money than one can on his own. Professional Management Mutual Funds employ the services of skilled professionals who have years of experience to back them up. They use intensive research techniques to analyze each investment option for the potential of returns along with their risk levels to come up with the figures for performance that determine the suitability of any potential investment. Liquidity Mutual Funds offer the benefit of liquidity which provides the investor with the option of easy conversion to money. As in the case of fixed deposits, where the investor can get his money back only on the completion of a fixed period, an investor can get his money back as and when he wants. Investors can redeem their money at the prevailing NAVs (Net Asset Values). Mutual funds directly re-purchase at the current NAV.

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Well Regulated Unlike the company fixed deposits, where there is little control with the investment being considered as unsecured debt from the legal point of view, the Mutual Fund industry is very well regulated. All investments have to be accounted for, decisions judiciously taken. SEBI acts as a true watchdog in this case and can impose penalties on the AMCs at fault. The regulations, designed to protect the investors interests are also implemented effectively. Transparency Being under a regulatory framework, mutual funds have to disclose their holdings, investment pattern and all the information that can be considered as material, before all investors. This means that the investment strategy, outlooks of the market and scheme related details are disclosed with reasonable frequency to ensure that transparency exists in the system. On the other hand, the investor is totally clueless in case of the other investment alternatives as nothing is disclosed. Savings Tax saving schemes of Mutual Funds offer investor a tax rebate under section 88 of the Income Tax Act. Under this section, an investor can invest up to \ 10,000 per Financial year in a tax saving scheme. The rate of rebate under this section depends on the investors total income

PERFORMANCE MEASURES OF MUTUAL FUNDS


Mutual Fund industry today, with about 40 players and more than six hundred schemes, is one of the most preferred investment avenues in India. However, with a plethora of schemes to choose from, the retail investor faces problems in selecting funds. Factors such as investment strategy and management style are qualitative, but the funds record is an important indicator too. Though past performance alone cannot be indicative of future performance, it is, frankly, the only quantitative way to judge how good a fund is at present. Therefore, there is a need to correctly assess the past performance of different Mutual Funds. Worldwide, good Mutual Fund companies over are known by their AMCs and this fame is directly linked to their superior stock selection skills. For Mutual Funds to grow, AMCs must be held accountable for their selection of stocks. In other words, there must be some performance indicator that will reveal the quality of stock selection of various AMCs. Return alone should not be considered as the basis of measurement of the performance of a Mutual Fund scheme, it should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them. Risk associated with a fund, in a general, can be defined as Variability or fluctuations in the returns generated by it. The higher the fluctuations in the returns of a fund during a given period, higher will be the risk associated with it. These fluctuations in the returns generated by a fund are resultant of two guiding forces. First, general market fluctuations, which affect all the securities, present in the market, called Market risk or Systematic risk and second, fluctuations due to specific securities present in the portfolio of the fund, called
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Unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is measured in terms of Beta, which represents fluctuations in the NAV of the fund vis--vis market. The more responsive the NAV of a Mutual Fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a Mutual Fund with the returns in the market. While Unsystematic risk can be diversified through investments in a number of instruments, systematic risk cannot. By using the risk return relationship, we try to assess the competitive strength of the Mutual Funds one another in a better way. In order to determine the risk-adjusted returns of investment portfolios, several eminent authors have worked since 1960s to develop composite performance indices to evaluate a portfolio by comparing alternative portfolios within a particular risk class.

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MUTUAL FUND COMPANIES IN INDIA


The concept of mutual funds in India dates back to the year 1963. The era between 1963 and 1987 marked the existence of only one mutual fund company in India with \ 67bn assets under management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund companies in India took their position in mutual und market. The new entries of mutual fund companies in India were SBI Mutual Fund, Canera bank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund. The succeeding decade showed a new horizon in Indian mutual fund industry. By the end of 1993, the total AUM of the industry was \ 470.04 bn. The private sector funds started penetrating the fund families. In the same year the first Mutual Fund Regulations came into existence with re-registering all mutual funds except UTI. The regulations were further given a revised shape in 1996. Kothari Pioneer was the first private sector mutual fund company in India which has now merged with Franklin Templeton. Just after ten years with private sector players penetration, the total assets rose up to \ 1218.05 bn. Today there are 40 mutual fund companies in India.

ULIPS VS MUTUAL FUNDS


ULIP INVESTMENT AMOUNTS MUTUAL FUND
Minimum investment amounts are determined by the fund house Upper limits for expenses chargeable to investors have been set by the regulator Quarterly disclosures are mandatory Entry/exit loads have to be borne by the investor Section 80C benefits are available only on investments in tax-saving funds

Determined by the investor and can be modified as well

No upper limits, expenses

EXPENSES

determined by the insurance company

PORTFOLIO DISCLOSURE MODIFYING ASSESTS ALLOCATION

Not mandatory

Generally permitted for free or at a nominal cost Section 80C benefits are

TAX BENEFITS

available on all ULIP investments

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DATA ANALYSIS All the above data and conclusions has been drawn based on the survey falling under the perview of the questionnaire
1. Investors choice while choosing an investment alternatives, ranked in the descending order with the highest preferred given the highest score a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver h. Real Estate I. PPF j. PF 10 9 8 7 6 7 7 3 2 1

a. Saving acco nt b. Fixed deposits

c. Ins rance d. Mutual Fund e. Post Office-NSC, etc f. Shares/Debentures


g. Gold/ Silver h. Real Estate

I. PPF j. PF

2. Factors affecting investors choice of decision while choosing an investment alternatives: Liquidity Low Risk High Return Company reputation 20 14 16 10

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Liqui i ty Low i sk

High eturn Com any re utation

3.No of people who have invested money into mutual funds ever?

Yes 51 No 9 a) perception of people about themselves regarding mutual fund investment? Totally ignorant Partial knowledge of mutual funds Aware only of any specific scheme in which you invested Fully aware 07 11 28 05

yes
o

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Partial k w ledge of mutual fu ds

Aware only of any specific scheme in which you invested Fully aware

b) Choice of type of mutual fund? Public 18 , Private 26 , both 7 c) Source of knowledge for mutual fund investors a. Advertisement 13 Advisors 18 b. Peer Group 12 c. Banks 8 d. Financial

a. Advertisement
b. Peer Group c. Banks d. Financial Advisors

d) Mutual fund schemes prefered by investors while inveesting? Open-ended Liquid fund 5 Close-ended Mid- Cap 8 Regular Income fund 12 Sector fund 8

Growth fund 12 Long-Cap 6

T tally ig

ra t

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If no, a) Reasons for not choosing mutual funds investment ? 9 Not aware of MF 6 Higher risk 2 Not any specific reason 1

Not a are of MF
igher risk

Not any s e cific reason

4. Feature of the mutual funds alluring the investors maximum Diversification Better return and safety Reduction in risk and transaction cost Regular Income Tax benefit 13 17 9 7 5

Diversification Better return an safety

Regular Income Tax benefit

Re uction in risk an transaction cost

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5. Investment in mutual funds under various AMCs a. SBIMF b. UTI c. HDFC d. Reliance e. ICICI prudential funds f. JM mutual fund g. Other. Specify 8 10 7 11 6 2 7

SBI UTI HDFC


Reliance ICICI

other

6. Mode of investment preferred by investors regarding investment in mutual funds a. One Time Investment b. Systematic Investment Plan (SIP)

One Time SIPs

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7. Convenience option chosen while purchasing units of any mutual fund ? Directly from the AMCs Brokers only Brokers/ sub-brokers Other sources [ 18] [ 11] [9 ] [ 13]

Directly from the AMCs Brokers only Brokers/ subbrokers Other sources

8. AMCs preferred by investors regarding choice of investment? Assets Management Co. a. SBIMF b. UTI c. Reliance d. HDFC e. Kotak f. ICICI g. JM finance 9 13 14 07 02 05 01

9. Choice of types of mutual funds on the basis of their policies and investment strategy i. Equity ii. Oil and petroleum iii. Gold fund iv. Diversified equity fund v. Power sector 6 3 4 12 5
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vi. Debt fund vii. Banking fund viii. Real estate fund

7 9 5
Equity Oil and etroleum Gold fund Diversified equity fund Power sector Debt fund Banking fund Real estate fund

10. Returns mode preferred by mutual fund investors? a. Dividend payout 7 b. Dividend re-investment 12 c. Growth in NAV 32

Dividend Payout Dividend Reinvest Grwot

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FACTS AND FINDINGS


By the above study, one can have a lot of findings regarding the performance of the funds in his portfolio. The comparison in performance of these mutual funds can be done easily. The following finding can be:
y

With a number of mutual funds scheme existing in the market, it is very difficult by an investor to choose the best among them. This paper provides a necessary and sufficient result to help to choose the best portfolio to get maximum return with minimum risk. Mutual Fund is worthy investment rather than equity market but people are unaware about it. Mutual Fund Return is Higher and safe than any available instrument in the market. There are large range of investment available of different AMCs from the risk & Return capacity of investor.

y y

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ANALYSIS & INTERPRETATION :


MUTUAL FUND CHEME PREFERED BY CLIENT

BALANCED 42%

EQUITY 45%

DEBT 13%

EQUITY DEBT BALANCED


 This analysis shows that debt mutual fund are preferred by very small percentage of people.  While majority of people prefers either equity or balanced mutual fund scheme.

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BENEFIT PREFERD BY PEOPLE AS MUTUAL FUND HOLDER

GROWTH & INCOME 25%

INCOME 22%

TAX BENEFITS 24%

BONUS 8%

GROWTH 21%

INCOME GROWTH BONUS TAX BENEFITS GROWTH & INCOME


 This analysis shows that except bonus almost all of the benefits are desired by the mutual fund holder which includes income, growth, and tax benefits.

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MUTU FUND

N R F R D

TH

ON TME INVESTMENT

SIP ONE TIME INVESTMENT


 This analysis shows that sip being the better of the two still is not a popular mean of investment. both of plans are almost being equally preferred by the people.

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FACTORS IMPORATANT IN SELECTING MUTUAL FUND SCHEME


RECOMMENDATIO N 15% PAST PERFORMANCE 23%

INVESTMENT OBJECTIVE 24% FUND MANAGER 17%

BRAND NAME 21%

PAST PERFORMANCE

BRAND NAME

FUND MANAGER

INVESTMENT OBJECTIVE RECOMMENDATION

 This analysis shows that recommendation & fund manager are being least considered by the people. While investment objective, past performance & brand name are being most influencing factor in selecting mutual funds.

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DISADVANTAGES OF MUTUAL FUNDS


Mutual funds are good investment vehicles to navigate the complex and unpredictable world of investments. However, even mutual funds have some inherent drawbacks. Understand these before you commit your money to a mutual fund. NO ASSURED RETURNS AND NO PROTECTION OF CAPITAL If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not offer assured returns and carry risk. For instance, unlike bank deposits, your investment in a mutual fund can fall in value. A scheme cannot make any guarantee of return, without stating the name of the guarantor, and disclosing the net worth of the guarantor. The past performance of the assured return schemes should also be given. RESTRICTIVE GAINS Diversification helps, if risk minimization is your objective. However, the lack of investment focus also means you gain less than if you had invested directly in a single security. Assume, Reliance appreciated 50 per cent. A direct investment in the stock would appreciate by 50 per cent. But your investment in the mutual fund, which had invested 10 per cent of its corpus in Reliance, will see only a 5 per cent appreciation. 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.

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CONCLUSION
From the analysis of the responses received from the investors in Udaipur, majorities of the investors are found to be conscious and enlightened regarding their investments, returns and growth. We have a good market in Udaipur, which comprises potential investors, but due to lack of basic promotions and publicity these investors are fully aware and whosoever is aware, their investments decision are done on the basis of security, analysis of risk yield and return. The Indian mutual fund industry needs to widen its range of products with affordable and competitive schemes to tap the semi-urban and rural markets in order to attract more investors. The industry has still not been able to penetrate among retail investors and it needs to share best practices from mature markets like US and Britain where mutual funds are the most preferred form of investment. Mutual fund companies need to introduce products for the semi-urban and rural markets that are affordable and yet competitive against low-risk assured returns of government sponsored saving schemes such as post office saving deposits. The industry is also overwhelmed by scarce technological infrastructure and needs to collaborate with other sectors of the economy such as banking and telecommunications. Mutual fund companies are also required take advantage of the growing opportunity in the commodities market. Further, the mutual funds could also enable the small investors to participate in the real estate boom through real estate mutual funds. With a strong regulatory framework, clear guidelines and the talent to back it up, the Indian mutual fund industry is in a position to cater to the new breed of investors who are keen to diversify their risks.

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RECOMMENDATION AND SUGGESTIONS


This study can be easily understand and help an investor in many ways. Some of the suggestions are below: It is not only fund or companys goodwill which can be taken into consideration while choosing a portfolio, the market factors like government policies, economic of sales and the trend in a particular sector should also be considered. Today investor is having enough funds to invest in a number of schemes. He is always in search of such statistical tools which can provide him maximum return with lower risk. In this regard, mutual fund is the best choice. - Marketing tools should be used at the point of purchase, advertisements through mass media like newspapers, magazines, exhibitions, SMS on mobiles, and on internets. - Organize programmes for customer awareness in developing areas and establish a confidence and belief among the customers residing their.

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APPENDIX QUESTIONNAIRE
A study of preferences of the investors for investment in mutual funds. 1. Have you ever invested your money in mutual fund? Yes No If yes, a) Where do you find yourself as a mutual fund investor? Totally ignorant [ ] Partial knowledge of mutual funds [ ] Aware only of any specific scheme in which you invested [ ] Fully aware [ ] b) In which kind of mutual you would like to invest? Public [ ] Private [ ] c) how do you come to know about Mutual Fund? a. Advertisement b. Peer Group c. Banks d. Financial Advisors d) Which mutual fund scheme have you used? Open-ended Close-ended Liquid fund Mid- Cap Growth fund Regular Income fund Long-Cap Sector fund If no, a) If not invested in Mutual Fund then why? Not aware of MF Higher risk

Not any specific reason

2. What kind of investments you prefer most? Pl tick (). All applicable a. Saving account b. Fixed deposits c. Insurance d. Mutual Fund e. Post Office-NSC, etc f. Shares/Debentures g. Gold/ Silver h. Real Estate I. PPF j. PF 3. While investing your money, which factor you prefer most? Any one: Liquidity Low Risk High Return Company reputation 4. which feature of the mutual funds allure you most? Diversification [ ] Better return and safety [ ] Reduction in risk and transaction cost [ ] Regular Income [ ] Tax benefit [ ]

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5. In which Mutual Fund you have invested? Please tick (). All applicable. a. SBIMF b. UTI c. HDFC d. Reliance e. ICICI prudential funds f. JM mutual fund g. Other. Specify 6. When you invest in Mutual Funds which mode of investment will you prefer? a. One Time Investment b. Systematic Investment Plan (SIP) 7. Where from you purchase mutual funds? Directly from the AMCs [ ] Brokers only [ ] Brokers/ sub-brokers [ ] Other sources [ ] . Which AMC will you prefer to invest? Assets Management Co. a. SBIMF b. UTI c. Reliance d. HDFC e. Kotak f. ICICI g. JM finance 9. Which sector are you investing in mutual fund sector? i. Equity ii. Oil and petroleum iii. Gold fund iv. Diversified equity fund v. Power sector vi. Debt fund vii. Banking fund viii. Real estate fund 10. How would you like to receive the returns every year? a. Dividend payout b. Dividend re-investment c. Growth in NAV

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BIBLIOGRAPHY
y y y y y y y

Magazines Business World Outlook Money Offer documents of different schemes Fund Fact Sheet Investment and Portfolio Management by Prassnna Chandra Research Methodology, C.R. Kothari

WEBSITES
y y y y y

www.moneycontrol.com/mutual funds www.amfiindia.com www.mutualfundsindia.com www.google.com www.investopedia.com

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