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PROJECT REPORT ON

SUBMITTED TO
PUNJABI UNIVERSITY, PATIALA

As the partial fulfillment of the requirement of the award of


the degree of MASTER OF FINANCE & CONTROL (MFC)
Session: 2006-2008

SUBMITTED BY: Zahir Abass University Roll No. 419 MFC_II (4th Semester)

UNDER THE SUPERVISION OF: Dr. Manjit Singh Lecturer, Deptt. of Commerce

DEPARTMENT OF COMMERCE
PUNJABI UNIVERSITY, PATIALA 1

STUDENTS DECLARATION
I here by declare that project report entitled AWARENESS AND INVESTORS PERCEPTION REGARDING MUTUAL FUND IN KASHMIR VALLEY submitted in the partial fulfillment of the requirement for the degree of MASTER OF FINANCE (MFC) to the department of Commerce , Punjabi University Patiala is my original work and has not been submitted for the award of any other degree, diploma or fellowship.

Dated:

(Zahir Abass) MFC_II Roll no: 419

Counter signed: Dr. Manjit Singh (Supervisor) Lecturer, Deptt. of Commerce Punjabi University Patiala

ACKNOWLEDGEMENT After the various efforts made for the completion of this project. It is with a sense of great pleasure that I perform the agreeable duty of acknowledging the obligations of those who have rendered valuable guidance to me. I am greatly thankful to the Department of Commerce, Punjabi University Patiala without which this report would not have been written. I am highly thankful to Dr.Manjit Singh ,Lecturer , Department of commerce, Punjabi University Patiala, who supported me in all possible ways and rendered his valuable guidance along with all possible functions that I needed to successfully complete this project. I offer my heartiest appreciation to all my friends and other well wishers for their ever willing cooperation, moral support and assistance wherever and whenever needed and best for successfully taking the study. I wish them best in their life. I find no word to acknowledge in so formal manner the sacrifice, love, inspiration and help rendered by my parents to take up this study. (Zahir Abas) MFC- 4th Sem Roll No. 419

CONTENTS ACKNOWLEDGEMENT CONTENTS

S.NO
1.

CHAPTER INTRODUCTION GROWTH OF MUTUAL FUNDS IN INDIA REVIEW OF LITERATURE RESEARCH METHODOLOGY (i)
(ii) (iii) (iv) (v) (vi)

2. 3. 4.

Need of study Objective of the study Research design Universe of the study Selection of sample Tools for data analysis

(vii) Limitation Of The Study

5.

AWARENESS & INVESTORS PERCEPTION REGARDING MUTUAL FUNDS

6.

IMPACT OF ISLAMIC BANKING PERSPECTIVE ON MUTUAL FUND INVESTMENT IN VALLEY.

7.
8.

FINDINGS AND SUGGESTIONS BIBLIOGRAPHY ARTICLES WEBSITES QUESTIONNAIRE

INTRODUCTION A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (pro rata). Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an inventible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.( Vaid,Seema (1994)) A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc.(Chandra ,Prasanna(1995))

A mutual fund is the answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. In effect, the mutual fund vehicle exploits economies of scale in all three areas - research, investments and transaction processing. While the concept of individuals coming together to invest money collectively is not new, the mutual fund in its present form is a 20th century phenomenon. In fact, mutual funds gained popularity only after the Second World War. Globally, there are thousands of firms offering tens of thousands of mutual funds with different investment objectives. Today, mutual funds collectively manage almost as much as or more money as compared to banks. ( Gupta,L.C(1993),) A draft offer document is to be prepared at the time of launching the fund. Typically, it pre specifies the investment objectives of the fund, the risk associated, the costs involved in the process and the broad rules for entry into and exit from the fund and other areas of operation. In India, as in most countries, these sponsors need approval from a regulator, SEBI (Securities exchange Board of India) in our case. SEBI looks at track records of the sponsor and its financial strength in granting approval to the fund for commencing operations.A sponsor then hires an asset management company to invest the funds according to the investment objective. It also hires another entity to be the custodian of the assets of the fund and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.
7

In the Indian context, the sponsors promote the Asset Management Company also, in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life Asset Management Company Ltd., which has floated different mutual funds schemes and also acts as an asset manager for the funds collected under the schemes.

Historical perspective
Massachusetts Investors Trust (now MFS Investment Management) was founded on March 21, 1924, and, after one year, it had 200 shareholders and $392,000 in assets. The entire industry, which included a few closed-end funds, represented less than $10 million in 1924. The stock market crash of 1929 hindered the growth of mutual funds. In response to the stock market crash, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require that a fund be registered with the Securities and Exchange Commission (SEC) and provide prospective investors with a prospectus that contains required disclosures about the fund, the securities themselves, and fund manager. The SEC helped draft the Investment Company Act of 1940, which sets forth the guidelines with which all SEC-registered funds today must comply. With renewed confidence in the stock market, mutual funds began to blossom. By the end of the 1960s, there were approximately 270 funds with $48 billion in assets. The first retail index fund, the First Index Investment

Trust, was formed in 1976 and headed by John Bogle, who conceptualized many of the key tenets of the industry in his 1951 senior thesis at Princeton University. It is now called the Vanguard 500 Index Fund and is one of the largest mutual funds ever with over $100 billion in assets. One of the largest contributors of mutual fund growth was individual retirement account (IRA) provisions added to the Internal Revenue Code in 1975, allowing individuals (including those already in corporate pension plans) to contribute $2,000 a year. Mutual funds are now popular in employer-sponsored defined contribution retirement plans (401(k)s), IRAs and Roth IRAs. As of October 2007, there are 8,015 mutual funds that belong to the Investment Company Institute (ICI), the national association of investment companies in the United States, with combined assets of $12.356 trillion. (http://www.amfiindia.com/showhtml.asp?page=mfindustry)

GROWTH OF MUTUAL FUNDS IN INDIA

The Evolution The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the year 1963. The primary objective at that time was to attract the small investors and it was made possible through the collective efforts of the Government of India and the Reserve Bank of India.

The history of mutual fund industry in India can be better understood divided into following phases: Phase 1. Establishment and Growth of Unit Trust of India - 1964-87 Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate under the regulatory control of the RBI until the two were de-linked in 1978 and the entire control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the largest number of investors in any single investment scheme over the years. UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare (Indias first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700 crores. Phase II. Entry of Public Sector Funds - 1987-1993 The Indian mutual fund industry witnessed a number of public sector players entering the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual

10

Fund and PNB Mutual Fund. By 1993, the assets under management of the industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% market share.

1992-93

Amount Mobilized

Assets

Under

Mobilization as % of gross Domestic Savings

Management

UTI Public Sector Total

11,057 1,964 13,021 [source:geojit.com:

38,247 8,757 47,004

5.2% 0.9% 6.1%

http://www.geojit.indiacoe.com/Geojit_LP.htm?

gclid=CMDI85PXyZMCFQUXewodqGltoA&clkid=vp_483d9150176cf] Phase III. Emergence of Private Sector Funds 1993-96

The permission given to private sector funds including foreign fund management companies (most of them entering through joint ventures with Indian promoters) to enter the mutual fund industry in 1993, provided a wide range of choice to investors and more competition in the industry. Private funds introduced innovative products, investment techniques and investorservicing technology. By 1994-95, about 11 private sector funds had launched their schemes.
11

Phase

IV.

Growth

and

SEBI

Regulation

1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after the year 1996. The mobilization of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds. Investors' interests were safeguarded by SEBI and the Government offered tax benefits to the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted all dividend incomes in the hands of investors from income tax. Various Investor Awareness Programmes were launched during this phase, both by SEBI and AMFI, with an objective to educate investors and make them informed about the mutual fund industry. In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal status as a trust formed by an Act of Parliament. The primary objective behind this was to bring all mutual fund players on the same level. UTI was re-organised into two parts: 1. The Specified Undertaking, 2. The UTI Mutual Fund Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past schemes (like US-64, Assured Return Schemes) are being gradually wound up. However, UTI Mutual Fund is still the largest player in the industry. In 1999, there was a significant growth in mobilization of funds from investors and assets under management which is supported by the following data:

12

GROSS FUND MOBILISATION (RS. CRORES) PUBLI FROM TO U TI C SECT OR 3101-April98 Ma rch99 3101-April99 Ma rch00 3101-April00 Ma rch01 3101-April01 Ma rch02 01-April02 31Jan -03 3101-Feb.03 Ma rch03 3101-April03 Ma rch68,558
13

PRIVA TE SECTO R TOTA L

11, 67 9 1,732 7,966 21,377

13, 53 6 4,039 42,173 59,748

12, 41 3 6,192 74,352 92,957

4,6 43

13,613

1,46,267

1,64,52 3

5,5 05

22,923

2,20,551

2,48,97 9

7,259*

58,435

65,694

5,21,632

5,90,19 0

ASSETS UNDER MANAGEMENT (RS. CRORES) U AS ON T I 31March-99 53,32 0 PUBLIC SECTO R 8,292 PRIVAT E SECTOR 6,860 TO TA L 68, 472

[source:amfiindia.com:http://www.amfiindia.com/pushowfundwiseaum.asp?admin=yn]

Phase

V.

Growth

and

Consolidation

2004

Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutual fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29 funds as at the end of March 2006. This is a continuing phase of growth

14

of the industry through consolidation and entry of new international and private sector players.

Latest Asset Under Management for all Mutual Fund houses, increase or decrease in corpus, sales & redemption figures..

Amount in Rs. Crores Mutual Fund Name No. of Schemes* As on ABN AMRO Mutual Fund AIG Global Investment Group Mutual Fund Benchmark Mutual Fund Birla Mutual Fund 350 12 54 337 Apr 30, 2008 Apr 30, 2008 Feb 29, 2008 Apr 30, 42,722.5 9 4,954.72 4,525.50 6,081.74 Mar 31, 2008 Mar 31, 2008 Jan 31, 2008 Mar 31, 34,750.0 0 7972.59 5,611.00 -656.276 3,148.63 1376.87 6,675.73 Corpus As on Corpus Net inc/dec in corpus -593.99 Asset Under Management

15

BOB Mutual Fund Canara Robeco Mutual Fund DBS Chola Mutual Fund Deutsche Mutual Fund DSP Merrill Lynch Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund Franklin Templeton Investments HDFC Mutual Fund HSBC Mutual Fund

22

2008 Apr 30, 2008 Apr 30, 2008 Apr 30, 2008 Apr 30, 2008 Feb 29, 2008 Feb 29, 2008 Apr 30, 2008 Feb 29, 2008 Feb 29, 2008 Apr 30,

73.16

2008 Mar 31, 2008 Mar 31, 2008 Mar 31, 2008 Mar 31, 2008 Jan 31, 2008 Jan 31, 2008 Mar 31, 2008 Jan 31, 2008 Jan 31, 2008 Mar 31,

70.34

2.812

54

3,341.37

2,484.28

857.09

80

1,790.23

1,963.92

-173.69

187

12,740.0 0 19,940.4 0 146.93

11,996.0 0 19,136.0 0 175.80

744

211

804.396

26

-28.872

40

8,943.36

8,294.05

649.31

234

29,424.5 8 46,291.9 7 17,701.8 3


16

29,604.3 3 43,762.7 0 13,953.0 8

-179.756

401

2529.274

232

3748.754

ICICI Prudential Mutual Fund ING Mutual Fund JM Financial Mutual Fund JPMorgan Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Lotus India Mutual Fund Mirae Asset Mutual Fund Morgan Stanley Mutual Fund PRINCIPAL Mutual Fund

435

2008 Apr 30, 2008 Mar 31, 2008 Apr 30, 2008 Apr 30, 2008 Apr 30, 2008 Feb 29, 2008 Feb 29, 2008 Apr 30, 2008 Apr 30, 2008 Apr 30,

57,575.0 2 8,608.29

2008 Mar 31, 2008 Feb 29, 2008 Mar 31, 2008 Mar 31, 2008 Mar 31, 2008 Jan 31, 2008 Jan 31, 2008 -

51,810.8 5 9,844.71

5764.17

266

-1236.42

171

12,686.7 3 2,646.22

11,032.9 3 2,081.42

1653.8

564.8

200

21,228.9 6 15,103.0 0 9,763.88

16,135.5 2 13,387.4 0 10,057.1 0 -

5093.44

118

1715.602

230

-293.218

35

2,186.04

3,561.65

Mar 31, 2008 Mar 31,

3,172.00

389.65

156

15,506.5 5
17

11,780.0 2

3726.53

Quantum Mutual Fund Reliance Mutual Fund Sahara Mutual Fund SBI Mutual Fund Standard Chartered Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund UTI Mutual Fund

2008 Apr 30, 2008 Feb 29, 2008 Apr 30, 2008 Feb 29, 2008 Apr 30, 2008 Feb 29, 2008 Mar 31, 2008 Apr 30, 2008 Mar 31, 2008

65.71

2008 Mar 31, 2008 Jan 31, 2008 Mar 31, 2008 Jan 31, 2008 Mar 31, 2008 Jan 31, 2008 Feb 29, 2008 Mar 31, 2008 Feb 29, 2008

64.22

1.49

353

93,531.6 8 262.84

77,210.0 4 180.38

16321.638

45

82.464

177

29,492.9 7 14,676.1 0 14,356.0 0 19,517.4 5 348.22

27,581.5 4 11,364.5 0 13,285.0 4 19,422.6 1 318.53

1911.428

261

3311.6

224

1070.96

395

94.84

16

29.69

319

48,347.6 0

52,464.7 1

-4117.114

[Source: Mutualfundsindia Research Team:


18

http://www.mutualfundsindia.com/Assets%20_under%20_Management.asp]

TYPES OF MUTUAL FUNDS

General Classification of Mutual Funds Open-end Funds Funds that can sell and purchase units at any point in time are classified as

19

Open-end Funds. The fund size (corpus) of an open-end fund is variable (keeps changing) because of continuous selling (to investors) and repurchases (from the investors) by the fund. An open-end fund is not required to keep selling new units to the investors at all times but is required to always repurchase, when an investor wants to sell his units. The NAV of an open-end fund is calculated every day.

Closed-end Funds

Funds that can sell a fixed number of units only during the New Fund Offer (NFO) period are known as Closed-end Funds. The corpus of a Closed-end Fund remains unchanged at all times. After the closure of the offer, buying and redemption of units by the investors directly from the Funds is not allowed. However, to protect the interests of the investors, SEBI provides investors with two avenues to liquidate their positions: 1. Closed-end Funds are listed on the stock exchanges where investors can buy/sell units from/to each other. The trading is generally done at a discount to the NAV of the scheme. The NAV of a closed-end fund is computed on a weekly basis (updated every Thursday). Closed-end Funds may also offer "buy-back of units" to the unit holders. In this case, the corpus of the Fund and its outstanding units do get changed.

Load Funds

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Mutual Funds incur various expenses on marketing, distribution, advertising, portfolio churning, fund manager's salary etc. Many funds recover these expenses from the investors in the form of load. These funds are known as Load Funds. A load fund may impose following types of loads on the investors:

Entry Load - Also known as Front-end load, it refers to the load charged to an investor at the time of his entry into a scheme. Entry load is deducted from the investor's contribution amount to the fund. Exit Load - Also known as Back-end load, these charges are imposed on an investor when he redeems his units (exits from the scheme). Exit load is deducted from the redemption proceeds to an outgoing investor. Deferred Load - Deferred load is charged to the scheme over a period of time. Contingent Deferred Sales Charge (CDSC) - In some schemes, the percentage of exit load reduces as the investor stays longer with the fund. This type of load is known as Contingent Deferred Sales Charge.

No-load Funds All those funds that do not charge any of the above mentioned loads are known as No-load Funds. Tax-exempt Funds

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Funds that invest in securities free from tax are known as Tax-exempt Funds. All open-end equity oriented funds are exempt from distribution tax (tax for distributing income to investors). Long term capital gains and dividend income in the hands of investors are tax-free.

Non-Tax-exempt Funds Funds that invest in taxable securities are known as Non-Tax-exempt Funds. In India, all funds, except open-end equity oriented funds are liable to pay tax on distribution income. Profits arising out of sale of units by an investor within 12 months of purchase are categorized as short-term capital gains, which are taxable. Sale of units of an equity oriented fund is subject to Securities Transaction Tax (STT). STT is deducted from the redemption proceeds to an investor.

BROAD MUTUAL FUND TYPES

22

1. Equity Funds Equity funds are considered to be the more risky funds as compared to other fund types, but they also provide higher returns than other funds. It is advisable that an investor looking to invest in an equity fund should invest for long term i.e. for 3 years or more. There are different types of equity funds each falling into different risk bracket. In the
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order of decreasing risk level, there are following types of equity funds:
a. Aggressive Growth Funds - In Aggressive Growth Funds, fund

managers aspire for maximum capital appreciation and invest in less researched shares of speculative nature. Because of these speculative investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than other equity funds.
b. Growth Funds - Growth Funds also invest for capital appreciation

(with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in companies that are expected to outperform the market in the future. Without entirely adopting speculative strategies, Growth Funds invest in those companies that are expected to post above average earnings in the future.
c. Specialty Funds - Specialty Funds have stated criteria for investments

and their portfolio comprises of only those companies that meet their criteria. Criteria for some specialty funds could be to invest/not to invest in particular regions/companies. Specialty funds are concentrated and thus, are comparatively riskier than diversified funds.. There are following types of specialty funds:
i.

Sector Funds: Equity funds that invest in a particular sector/industry of the market are known as Sector Funds. The exposure of these funds is limited to a particular sector (say Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is why they are more risky than equity funds that invest in multiple sectors.

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ii.

Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one or more foreign companies. Foreign securities funds achieve international diversification and hence they are less risky than sector funds. However, foreign securities funds are exposed to foreign exchange rate risk and country risk. Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds. Market

iii.

Capitalization of Mid-Cap companies is less than that of big, blue chip companies (less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies have market capitalization of less than Rs. 500 crores. Market Capitalization of a company can be calculated by multiplying the market price of the company's share by the total number of its outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of Large-Cap Companies which gives rise to volatility in share prices of these companies and consequently, investment gets risky.

iv.

Option Income Funds*: While not yet available in India, Option Income Funds write options on a large fraction of their portfolio. Proper use of options can help to reduce volatility, which is otherwise considered as a risky instrument. These funds invest in big, high dividend yielding companies, and then

25

sell options against their stock positions, which generate stable income for investors. Diversified Equity Funds - Except for a small portion of investment in liquid money market, diversified equity funds invest mainly in equities without any concentration on a particular sector(s). These funds are well diversified and reduce sector-specific or companyspecific risk. However, like all other funds diversified equity funds too are exposed to equity market risk. One prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times. ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time of filing the income tax return. ELSS usually has a lock-in period and in case of any redemption by the investor before the expiry of the lock-in period makes him liable to pay income tax on such income(s) for which he may have received any tax exemption(s) in the past.
d. Equity Index Funds - Equity Index Funds have the objective to

match the performance of a specific stock market index. The portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index. Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and therefore, are more risky.
e. Value Funds - Value Funds invest in those companies that have

sound fundamentals and whose share prices are currently under26

valued. The portfolio of these funds comprises of shares that are trading at a low Price to Earning Ratio (Market Price per Share / Earning per Share) and a low Market to Book Value (Fundamental Value) Ratio. Value Funds may select companies from diversified sectors and are exposed to lower risk level as compared to growth funds or specialty funds. Value stocks are generally from cyclical industries (such as cement, steel, sugar etc.) which make them volatile in the short-term. Therefore, it is advisable to invest in Value funds with a long-term time horizon as risk in the long term, to a large extent, is reduced. Equity Income or Dividend Yield Funds - The objective of Equity Income or Dividend Yield Equity Funds is to generate high recurring income and steady capital appreciation for investors by investing in those companies which issue high dividends (such as Power or Utility companies whose share prices fluctuate comparatively lesser than other companies' share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as compared to other equity funds.

2. Debt / Income Funds Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial institutions, governments and other entities belonging to various sectors (like infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors
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3. Diversified Debt Funds Debt funds that invest in all securities

issued by entities belonging to all sectors of the market are known as diversified debt funds. The best feature of diversified debt funds is that investments are properly diversified into all sectors which results in risk reduction. Any loss incurred, on account of default by a debt issuer, is shared by all investors which further reduces risk for an individual investor.
a. Focused Debt Funds* - Unlike diversified debt funds, focused debt

funds are narrow focus funds that are confined to investments in selective debt securities, issued by companies of a specific sector or industry or origin. Some examples of focused debt funds are sector, specialized and offshore debt funds, funds that invest only in Tax Free Infrastructure or Municipal Bonds. Because of their narrow orientation, focused debt funds are more risky as compared to diversified debt funds. Although not yet available in India, these funds are conceivable and may be offered to investors very soon. High Yield Debt funds - As we now understand that risk of default is present in all debt funds, and therefore, debt funds generally try to minimize the risk of default by investing in securities issued by only those borrowers who are considered to be of "investment grade". But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those issuers who are considered to be of "below investment grade". The motive behind adopting this sort of risky strategy is to earn higher interest returns from these issuers. These funds are more volatile and bear higher default risk, although they may earn at times higher returns for investors.

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b. Assured Return Funds - Although it is not necessary that a fund will

meet its objectives or provide assured returns to investors, but there can be funds that come with a lock-in period and offer assurance of annual returns to investors during the lock-in period. Any shortfall in returns is suffered by the sponsors or the Asset Management Companies (AMCs). These funds are generally debt funds and provide investors with a low-risk investment opportunity. However, the security of investments depends upon the net worth of the guarantor (whose name is specified in advance on the offer document).
c. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-

end schemes having short term maturity period (of less than one year) that offer a series of plans and issue units to investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the exchanges. Fixed term plan series usually invest in debt / income schemes and target short-term investors. The objective of fixed term plan schemes is to gratify investors by generating some expected returns in a short period.

4. Gilt Funds

Also known as Government Securities in India, Gilt Funds invest in government papers (named dated securities) having medium to long term maturity period. Issued by the Government of India, these investments have little credit risk (risk of default) and provide safety of principal to the investors. However, like all debt funds, gilt funds too are exposed to interest rate risk. Interest rates and prices of debt securities are inversely related and any change in the interest rates
29

results in a change in the NAV of debt/gilt funds in an opposite direction. 4. Money Market / Liquid Funds Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt instruments. These securities are highly liquid and provide safety of investment, thus making money market / liquid funds the safest investment option when compared with other mutual fund types. However, even money market / liquid funds are exposed to the interest rate risk. The typical investment options for liquid funds include Treasury Bills (issued by governments), Commercial papers (issued by companies) and Certificates of Deposit (issued by banks). 5. Hybrid Funds As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities, debts and money market securities. Hybrid funds have an equal proportion of debt and equity in their portfolio. There are following types of hybrid funds in India:
a. Balanced Funds - The portfolio of balanced funds include assets like

debt securities, convertible securities, and equity and preference shares held in a relatively equal proportion. The objectives of balanced funds are to reward investors with a regular income, moderate capital appreciation and at the same time minimizing the risk of capital erosion. Balanced funds are appropriate for conservative investors having a long term investment horizon.

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b. Growth-and-Income Funds - Funds that combine features of growth

funds and income funds are known as Growth-and-Income Funds. These funds invest in companies having potential for capital appreciation and those known for issuing high dividends. The level of risks involved in these funds is lower than growth funds and higher than income funds.

c. Asset Allocation Funds - Mutual funds may invest in financial assets like equity, debt, money market or non-financial (physical) assets like real estate, commodities etc.. Asset allocation funds adopt a variable asset allocation strategy that allows fund managers to switch over from one asset class to another at any time depending upon their outlook for specific markets. 6. Commodity Funds Those funds that focus on investing in different commodities (like metals, food grains, crude oil etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a commodity fund that invests in all available commodities is a diversified commodity fund

31

7. Real Estate Funds Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized assets of housing finance companies, are known as Specialized Real Estate Funds. The objective of these funds may be to generate regular income for investors or capital appreciation.

8. Exchange Traded Funds (ETF) Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like a single stock at index linked prices. The biggest advantage offered by these funds is that they offer diversification, flexibility of holding a single share (tradable at index linked prices) at the same time. Recently introduced in India, these funds are quite popular abroad. 9. Fund of Funds Mutual funds that do not invest in financial or physical assets, but do invest in other mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a portfolio comprising of units of other mutual fund schemes, just like conventional mutual funds maintain a portfolio comprising of equity/debt/money market instruments or non financial assets.

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Risk Hierarchy of Different Mutual Funds Thus, different mutual fund schemes are exposed to different levels of risk and investors should know the level of risks associated with these schemes before investing. The graphical representation hereunder provides a clearer picture of the relationship between mutual funds and levels of risk associated with these funds:

33

[source:http://finance.indiamart.com/india_business_information/mutual_fun ds_industry.html Advantages of Mutual Funds: Professional Management - The primary advantage of funds (at least theoretically) is the professional management of your money. Investors

34

purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments. Diversification - By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds you own, the less any one of them can hurt you (think about Enron). Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money. Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than you as an individual would pay. Liquidity - Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time. Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds, and the minimum investment is small. Most companies also have automatic purchase plans whereby as little as $100 can be invested on a monthly basis. Disadvantages of Mutual Funds:

35

Professional Management- Many investors debate over whether or not the so-called professionals are any better than you or I at picking stocks. Management is by no means infallible, and, even if the fund loses money, the manager still takes his/her cut. Costs - Mutual funds don't exist solely to make life easier--all funds are in it for a profit. The mutual fund industry is masterful at burying costs under layers of jargon.

Dilution - It's possible to have too much diversification because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

Taxes - When making decisions about money, fund managers don't consider personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability.

REVIEW OF LITERATURE

36

In this section the literature study has been done by analyzing the various research studies done by the various researchers in this regard i.e the investors perception and awareness regarding the mutual fund investment from time to time. By In India, one of the earliest attempts was made by NCAER in 1964 when a survey of households was undertaken to understand the attitude towards and motivation for saving of individuals. Another NCAER study in 1996 analyzed the structure of the capital market and presented the views and attitudes of individual shareholders. SEBI NCAER Survey (2000) was carried out to estimate the number of households and the population of individual investors, their economic and demographic profile, portfolio size, and investment preference for equity as well as other savings instruments. This is a unique and comprehensive study of Indian Investors, for; data was collected from 3,00,0000 geographically dispersed rural and urban households. Some of the relevant findings of the study are: Households preference for instruments match their risk perception; Bank Deposit has an appeal across all income class; 43% of the non-investor households equivalent to around 60 million households (estimated) apparently lack awareness about stock markets; and, compared with low income groups, the higher income groups have higher share of investments in Mutual Funds (MFs) signifying that MFs have still not become truly the investment vehicle for small investors. Nevertheless, the study predicts that in the next two years (i.e., 2007 hence) the investment of households in MFs is likely to increase. (Note : Behavior is a reaction to a situation. So as situation changes, behavior gets
37

modified. Hence, findings and predictions of behavior studies should be viewed accordingly).

Dr Gursharan Singh Kainth and Manpinder Kaur:

INVESTORS

PERCEPTION To examine the investors perception, a sample of 300 investors of Jalandhar investing in mutual fund was selected. 34 per cent of the target population included business class, 50 per cent service class and the remaining 16 per cent were professionals who have invested in mutual funds. Nearly three-fourth of the target population was in the age group of 25 to 50 years of age. One fourth of the target population was above 50 years of age and the balance 6 per cent below 25 years of age. Furthermore, onefourth of the investors fall between the income group of Rs. 40,000 to 50,000; 16 per cent in above 50,000 income class. Majority of the investors (58 per cent) fall between the income groups of Rs.10, 000 to 40,000 per month. On the other hand, one-fifth of the respondents are not satisfied with their investment due to poor service after sales (9 per cent), other better paying avenues in the market (6 per cent) and longer redemption period (21 per cent).One half of the investors believe bright future of mutual fund industry. Only 5 per cent believe to be dark and 9 per cent it is a risky avenue. One-tenth of the investors believe that most of the people are not aware about the functioning of the mutual fund industry. Some generally people have a traditional mind set of investing in banks, post offices and government securities. In the era of declining interest rates, investors are looking foe at other avenues and mutual funds is the foremost avenue.

38

Sujit Sikidar and Amrit Pal Singh (1996) carried out a survey with an objective to understand the behavioral aspects of the investors of the North Eastern region towards equity and mutual funds investment portfolio. The survey revealed that the salaried and self employed formed the major investors in mutual fund primarily due to tax concessions. UTI and SBI schemes were popular in that part of the country then and other funds had not proved to be a big hit during the time when survey was done.

kavitha Ranganathan 2006 A Study of Fund Selection Behavior of Individual Investors Towards Mutual Funds - with Reference to Mumbai City Consumer behaviors from the marketing world and financial economics has brought together to the surface an exciting area for study and research: behavioral finance. The realization that this is a serious subject is, however, barely dawning. Analysts seem to treat financial markets as an aggregate of statistical observations, technical and fundamental analysis. A rich view of research waits this sophisticated understanding of how financial markets are also affected by the 'financial behaviors' of investors. With the reforms of industrial policy, public sector, financial sector and the many developments in the Indian money market and capital market, Mutual Funds which has become an important portal for the small investors, is also influenced by their financial behaviors. Hence, this study has made an attempt to examine the related aspects of the fund selection behaviors of individual investors towards Mutual funds, in the city of Mumbai. From the researchers and academicians point of view, such a study will help in developing and expanding knowledge in this field.

39

Shanmugham (2000) conducted a survey of 201 individual investors to study the information sourcing by investors, their perceptions of various investment strategy dimensions and the factors motivating share investment decisions, and reports that among the various factors, psychological and sociological factors dominated the economic factors in share investment decisions Ippolito (1992) says that fund/scheme selection by investors is based on past performance of the funds and money flows into winning funds more rapidly than they flow out of losing funds. De Bondt and Thaler (1985) while investigating the possible psychological basis for investor behaviors, argue that mean reversion in stock prices is an evidence of investor over reaction where investors overemphasize recent firm performance in forming future expectations. Gupta (1994) made a household investor survey with the objective to provide data on the investor preferences on MFs and other financial assets. The findings of the study were more appropriate, at that time, to the policy makers and mutual funds to design the financial products for the future.

Madhusudhan V Jambodekar (1996) conducted a study to assess the awareness of MFs among investors, to identify the information sources influencing the buying decision and the factors influencing the choice of a particular fund. The study reveals among other things that Income Schemes
40

and Open Ended Schemes are more preferred than Growth Schemes and Close Ended Schemes during the then prevalent market conditions. Investors look for safety of Principal, Liquidity and Capital appreciation in the order of importance; Newspapers and Magazines are the first source of information through which investors get to know about MFs/Schemes and investor service is a major differentiating factor in the selection of Mutual Fund Schemes. Syama Sunder (1998) conducted a survey to get an insight into the mutual fund operations of private institutions with special reference to Kothari Pioneer. The survey revealed that awareness about Mutual Fund concept was poor during that time in small cities like Vishakhapatnam. Agents play a vital role in spreading the Mutual Fund culture; open-end schemes were much preferred then; age and income are the two important determinants in the selection of the fund/scheme; brand image and return are the prime considerations while investing in any Mutual Fund.

Anjan Chakarabarti and Harsh Rungta (2000) stressed the importance of brand effect in determining the competitive position of the AMCs. Their study reveals that brand image factor, though cannot be easily captured by computable performance measures, influences the investors perception and hence his fund/scheme selection.
41

Shankar (1996) points out that the Indian investors do view Mutual Funds as commodity products and AMCs, to capture the market should follow the consumer product distribution model. Since 1986, a number of articles and brief essays have been published in financial dailies, periodicals, professional and research journals, explaining the basic concept of Mutual Funds and highlight their importance in the Indian capital Market environment. They touch upon varied aspects like Regulation of Mutual Funds, Investor expectations, Investor protection, Trend in growth of Mutual Funds and some are critical views on the performance and functioning of Mutual Funds.

Mariassunta Giannetti

&

Andrei Simonov

June 2004 Which

Investors Fear Expropriation? Evidence from Investors' Portfolio Choices Using a data set that provides unprecedented detail on investors' stockholdings, we analyze whether investors take the quality of corporate governance into account when selecting stocks. We find that all categories of investors who generally enjoy only security benefits (domestic and foreign, institutional and small individual investors) are reluctant to invest in companies with weak corporate governance. In contrast, individuals who are well connected with the local financial community because they are board members or hold large blocks of at least some listed companies behave differently. They seem not to care about the expected extraction of private benefits and even prefer to invest in companies where there is more scope
42

for it. These findings shed new light on the determinants of investor behavior and portfolio choice, and suggest that it is important to distinguish between investors who enjoy private benefits or access private information and investors who enjoy only security benefits. Bhagat, Sanjai June 22 1999 Why Consumers Choose Managed

Mutual Funds Over Index Funds: Hypotheses from Consumer Behavior. Much evidence exists which suggests that the vast majority of equity mutual fund managers do not possess differential information (or skills) which allow them to achieve above average market returns for their investors. Thus, when investors pay fees to equity mutual fund managers for investment advice and management, the very probable outcome is that they are reducing the return that they would otherwise achieve by investing in a no managed index fund that tracks the total stock market (e.g., Wilshire 5000) or some significant portion of it (e.g., the Standard & Poor's 500). The long-term negative consumer welfare implications are large, very possibly in the hundreds of thousands of dollars for individual consumer investors. Drawing largely on insights from the psychology, consumer behavior, and behavioral finance literatures, we offer a series of hypotheses that may partially account for such consumer choices. We conclude with a call for increased government- and employer-sponsored education programs aimed at creating a more informed consumer investor.

Peles, Nadav

June 22 1997 Cognitive dissonance and mutual fund

investors. One of the greatest mysteries in the mutual fund industry is why some investors stay with funds that consistently perform poorly. Several

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researchers note that investor dollars flow into winning funds more rapidly than they flow out of losing funds. This differential is taken as evidence of irrationality (Ippolito (1992)), differential management services and high transactions costs (Sirri and Tufano (1992)), and a failure of investor probability heuristics (Harliss and Peterson (1994)). In this paper we provide evidence that investor psychology may affect the fund-switching decision. Questionnaires taken from two groups of mutual fund investors suggest that investor aversion to switching from poor performers may be explained by overly optimistic perceptions of past mutual fund performance. Samples of both educated and casual mutual fund investors show that investor recollections of past performance are consistently biased above actual past performance. This recollection bias may be why investors justify remaining in funds that consistently perform poorly. Although investor inertia might actually be due to high economic switching costs, our evidence suggests that investors nonetheless adjust their beliefs to support past decisions

Falkenstein, Eric(1996)

Preferences for Stock Characteristics as

Revealed by Mutual Fund Portfolio Holdings This investigation of the cross-section of mutual fund equity holdings for the years 1991 and 1992 shows that mutual funds have a significant preference towards stocks with high visibility and low transaction costs, and are averse to stocks with low
44

idiosyncratic volatility. These findings are relevant to theories concerning investor recognition, a potential agency problem in mutual funds, tests of trend-following and herd behavior by mutual funds, and corporate finance. Lunde, Timmermann, and Blake (1999), in The Hazards of Mutual Fund Underperformance: A Cox Regression Analysis, investigate the relationship between funds conditional probability of closure and their return performance. The authors explain that the process of fund attrition rates is important because: (1) survivorship bias is impacted by the funds lives and their relative performance; (2) duration profiles of funds is important for understanding fund managers incentive environments; and (3) termination processes may provide information about investor reaction to poor performance. The paper measures the importance of various factors influencing the process and rate by which funds are terminated. After examining a data set of dead and surviving funds (973 and 1402, respectively), the authors present some reasons why funds are terminated: (1) not reaching critical mass in capitalization, (2) merging a poorly performing fund with a similar, more successful fund, and (3) merging or closing a poorly performing fund to improve family group performance overall. All of these are related to fund performance, which the authors use to explain fund deaths. Treynor and Mazuy (1966), in Can Mutual Funds Outguess the Market?, discuss how investors frequently expect managers to be able to anticipate market moves, and the dilemma of whether or not managers should try to time the market. In addressing the issue, they explain that the only way a fund can translate ability to outguess the market into higher

45

shareholders returns is to vary the funds systematic volatility in a manner that results in an upwardly concave characteristic line. Returns for 57 funds (1953-1962) are employed to determine if the volatility of a fund is higher in up-years than in years when the market does poorly. They compute a characteristic line wherein a managed funds return is plotted against the rate of return for a suitable market index

From the above review it can be inferred that Mutual Fund as an investment vehicle is capturing the attention of various segments of the society, like academicians, industrialists, financial intermediaries, investors and regulators for varied reasons and deserves an indepth study.

RESEARCH METHODOLOGY For this study a survey conducted by collecting information from various sources. For the purpose of collecting information both primary and secondary data was used. The study is manly aims to now the

46

AWARENESS

AND

INVESTORS

PERCEPTION

RERGARDING

MUTUAL FUND IN THE KASHMIR VALLEY. The study undertaken is of exploratory in nature. The present chapter deals with the database and research methodology. This chapter explains the research design, universe of the study, selection of sample, data collection techniques and tools used in data analysis.

NEED OF THE STUDY The need of study has been aroused Kashmir valley The mutual funds industry has grown by leaps and bounds in last couple of years. Following the strengthening of regulatory framework there is now greater transparency and credibility in the functioning of mutual funds and has been successful in regaining investors faith. But to sustain the momentum it should start focusing on the areas where greater accountability and transparency could propel the industry towards a new growth trajectory. As of now big challenge for the mutual fund industry is to mount on investor awareness and to spread further to the semi-urban and rural areas. These initiatives would help towards making the Indian mutual fund industry more vibrant and competitive. To make this happen it calls for a greater role not only part of the regulator but also on industry and distributors and ensure that investor confidence is maintained through consistent performance and best business practices.
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in order to see the preference,

awareness and the investors perception regarding the mutual funds in the

Mutual Funds have emerged as an important segment of financial markets and so far have delivered value to the investors. But no industry can flourish without a proper regulatory mechanism in the place. SEBI has played a vital role in regularizing the mutual fund business. From time to time it has tried to plug the loopholes prevailing in the system and safeguard the interest of investor who has been the backbone of this unprecedented growth. OBJECTIVES OF THE STUDY The study has been undertaken and various objectives have been determined. These objectives are as follows: To evaluate the Awareness and investors perception regarding the

mutual funds in the Kashmir valley. To evaluate the impact of Islamic banking perspective on mutual funds in Kashmir valley

Research Design A research design is an arrangement of condition for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. A good research design has the characteristics like; problem definition, specific method of data collection and analysis, a
48

research design is purely and simply the frame work or planned for a study that guides the collection and analysis of data.

Scope of the study The Primary study is conducted in the city of Srinagar and some rural areas of Kashmir also. Due to time and resources constraints, the primary study is limited to certain boundaries. But secondary study has been made with the help of various literatures. Data Collection Both primary and secondary data has been collected for meeting the objectives of the research.

Primary data Primary data has been collected by conducting personal interviews and administering an undisguised, unbiased structured questionnaire to the respondents. Primary data was collected, by getting filled the questionnaires from the respondents. A copy of the questionnaire has been attached in the appendix.

Secondary data The secondary data has been collected from secondary sources of information that included websites, books and previous reports, brochures, journals, magazines, newspapers.
49

Procedure of data collection The procedure, which has been used for data collection, is through Questionnaire. Universe of the study The universe of present study was taken as the rural as well as the urban people of the valley. Selection of sample A sample of 70 respondents were taken from the universe. The respondents of both genders belonging to different age groups, occupation and having different education qualification were taken for the study. Random sampling technique was used for collecting the sample and the respondents were personally interviewed for the data collection. Random sampling refers to that fraction of population being investigated, which is selected by the convenience of the investigator.

Sample Size: The sample size for this project is 70 on the basis of the questionnaire. Tools for data analysis: For analyzing Awareness and investors perception regarding mutual fund in Kashmir valley percentage analysis is used. This has been done through bar charts.
50

Tables are useful when comparative percentage and analysis has to be made. Limitations Of the study Although the report has been made on the relevant facts and figures but certain problems have been faced, which are as follows: Sample size taken is small (70) and may not be sufficient to predict the results with 100% accuracy. 1. Due to paucity of time, money and resources the sample size is limited to. Respondents which may bring bias in the results. 2. The respondents were sometimes biased while answering the questions. 3. In certain cases the respondents were lazy and they filled the questionnaire without any seriousness.
4. The study only covers the

particular area of the Kashmir valley that

may not be applicable to other areas. 5. Unpredictable customers psychology in itself is another limitation of every consumer behavior study including the present one.

AWARENESS & INVESTORS PERCEPTION

REGARDING MUTUAL FUNDS

51

This section deals with the research part of he study. I have categories the study into various phases. experience and the preference. I have categorize the investors on the basis of their age as follows. as I have taken the sample of 70 investors, the age of the investors follows as: 1 .AGE STRUCTURE (i) up to 30 years-Y1 (ii) 31-45 years Y2 (iii) 46-60 years Y3 (iv) Above 60-Y4 I have distribute the investors into various categorize i.e on the basis of their age, occupation, education, nature,

Table: 1 AGE GROUP WISE DISTRIBUTION OF INVESTORS

52

Age Y1 Y2 Y3 Y4 TOTAL

Number of investors 25 26 14 05 70

% of investors 35.71% 37.14% 20.01% 07.14% 100%

After analyzing the above table ,it can be extracted that the maximum percentage of the investors falls in the 31-45 years of age i.e 37.14%.which is followed by the age group of 30 years i.e 35.71%,and the least investors falls in the category of Y4 i.e only 05 investors and i.e 07.14%

Table: 2 2. OCCUPATION WISE DISTRIBUTION OF INVESTORS

53

OCCUPATION SERVICE BUSINESSMEN PROFESSION AGRICULTURE OTHERS TOTAL

Number of investors 37 18 10 03 02 70

% of investors 52.87% 25.71% 14.21% 04.28% 02.85% 100%

As far as the occupation of the investors is concerned, this can be seen from the above mentioned table that the maximum number of investors falls in the service class i.e 37(52.87%)which is followed by the businessmen i.e 18(25.71%) and then the profession 10(14.21%).so business class form a major portion in the mutual fund investment. because they also have to save their tax in one form or the other. businessmen also invest their surplus funds in one or the other fund in order to save themselves from the income tax liability. because of the less knowledge of the investment in mutual funds the agriculturist form the least portion in the investment. Table: 3 3. QUALIFICATION WISE DISTRIBUTION OF INVESTORTS

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EDUCATION UNDERGRADUATES GRADUATES POST GRADUATES PROFESSIONALS TOTAL

Number of investors 05 28 13 24 70

% of investors 07.01% 40.04% 18.67% 34.28% 100%

As far as the qualification is concerned it can be depicted from the above table that the maximum number of the investors falls in the category of graduates i.e 28(40.04%) which is followed by professionals i.e 24(34.28%),which further is followed by post graduates 13(18.67%) and the least falls in the category of the undergraduates i.e 05(07.01%).as far as the literacy rate of the Jammu and Kashmir is concerned we can see that The average rural literacy rate of Jammu and Kashmir is 48.22% while the urban literacy rate marks an exemplary figure of 71.27%.

Table: 4 4. INVESTMENT EXPERIENCE WISE DISTRIBUTION OF INVESTORS

55

EXPERIENCE IN YEARS < 1 YEAR (E1) 1-3 years (E2) 3-5 years (E3) Above 5Years (E4) Total

Number of investors 16 25 12 17 70

% of investors 22.18% 35.91% 17.34% 24.57% 100%

From the above table it can be extracted that the maximum number of investors (25)are having the experience of 1-3 years(E2),which is followed by the E4 and after that E1 i.e 16(22.18%),and the least falls I the category of E3(12)17.34%.so we can see from the above table that there is not too much of experience regarding the mutual fund investment in the valley among the investors. because still there is beginning of this mutual fund industry. but no doubt that the mutual fund sector is getting speed in the valley day by day and the awareness in the investors is also increasing.

Table: 5

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5. PREFRENCE TOWARDS VARIOUS FINANCIAL ASSETS OPTED FOR INVESTMENT BY INVESTORS

FINANCIAL ASSETS Mutual funds Equity shares Debentures Bonds Bank deposits Kisan Vikas patra Post office time deposits Public provident fund LIC policies National saving certificate

1 9 11 9 8 20 5 10 16 6 9

2 8 4 6 12 10 7 9 7 8 5

3 2 8 12 4 6 9 8 5 7 6

RANKS 4 5 6 7 14 4 7 4 5 9 8 7 10 9 6 3 8 3 4 5 12 4 10 12 8 4 8 7 11 7 7 12 13

WAS RANKS 7 5 10 8 7 6 2 5 8 4 6 8 9 7 9 6 3 7 5 3 6 4 9 6 5 6 9 2 10 4 7 3 7 10 6 7 4 8 3 6 3 3 5 2 7.20 7.18 7.47 7.00 9.09 6.92 8.12 8.18 7.56 7.16
VI VII V IX I X III II IV VIII

NOTE: 1)Weights equal to 10,9,8,7.1 have been assigned to ranks 1,2,3,4..10 respectively to calculate weighted average score 2) weighted average score has been assigned ranks in the descending order

On the basis of the weighted average score, We can see from the above table that the people of Jammu and Kashmir are more concerned towards the

57

traditional method of investment in bank deposits which makes a major portion of investment i.e 9.09 which is followed by the public provident fund 8.18 and the post office time deposits 8.12 and LIC 7.56 as far as the investment in mutual fund is concerned we can see that there is only a less percentage of people who knows mutual funds alternate for investment i.e only 7.20.but the trend is changing day by day. people are getting aware and they are changing their preference of investment in other different schemes and mutual fund is one of them. Table: 6 6. SECTOR WISE PREFERENCE OF INVESTORS Sector Public Private Both Total Number of investors 49 12 09 70 % of investors 70.00% 17.09% 12.91% 100%

People of Kashmir valley are very much sensitive .On analyzing the past many private investment companies enter into the valley they get the money from the people but with the passage of time most of the companies were fraudulent companies and they ran away after getting a huge sum of money, most among them were the local companies also. so people are afraid of putting their money in other investment alternate rather than the bank deposits and the post office time deposits. and people mostly rely and

58

believe upon the public sector. we can see from the above table that the major portion of sector preference is of public sector i.e 49(70%)which is followed by the private sector i.e 12 out of 70(17.09%).so the people of Kashmir valley mostly depend upon the public sector companies rather than the private sector companies, in spite of that the private sector companies provide better service to them. Table: 7 (i) SECTOR WISE PREFERENCE OF INVESTORS BELONGING TO VARIOUS AGE GROUPS Age Group Sector Public Private Both Total 20 15 10 04 49 (70.00) 12 (17.14) 09 (12.85) 70 Y1 Y2 Y3 Y4 TOTAL

(40.81) (30.61) (20.40) (08.16) 06 03 02 01 (50.00) (25.00) (16.67) (08.33) 03 03 02 01 (33.33) (33.33) (22.22) (11.11) 29 21 14 06

The above table shows the sector wise performance of investor belonging to various age groups. The above table reflects that the most of the investors falls in the category of Y1 i.e 20 which is followed by the Y2 i.e 15 and then the Y3 and Y4. Table: 8

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(ii) SECTOR WISE PREFERENCE OF INVESTORS BELONGING TO VARIOUS OCCUPATION GROUPS Service Occupation Sector Public Private Both 21 (42.85) 03 (25.00) 03 (33.33) Total 27 02 agricultur e 02 (04.08) -businessme n 15 (30.61) 03 (25.00) 04 (44.44) 22 Professiona Others TOTAL l 06 (12.24) 06 (50.00) 01 (11.11) 13 01 (11.11) 06 05 (10.2) 49 (70.00) 12 (17.14) 09 (12.85) 70

It is clearly reflected from the above table that the service class and the business class 21 and 15 form the major portion of investors for the mutual fund investment in the public sector also and the professionals 06 form the major portion in the private sector which is followed by the business class.

Table:9 (iii)SECTOR WISE PREFERENCE OF INVESTORS BELONGING TO VARIOUS EDUCATION GROUPS

60

Education Sector Public Private Both Total

Under graduate 03 (09.09) 01 (03.12) 01 (20.00) 05

Graduate

Post Graduate

Professional

TOTAL

14 (42.42) 11 (34.37) 03 (60.00) 28

06 (12.24) 07 (21.87) 13

10 (30.30) 13 (40.62) 01 (20.00) 24

33 (47.14) 32 (45.71) 05 (07.14) 70

From the above table it can be analyzed that the graduates (14)form the major portion in the public sector which is followed by the professionals (10).and in the private sector the professionals form the major part (13) followed by the graduates.

Table: 10 (iv)SECTOR WISE PREFERENCE OF INVESTORS BELONGING TO VARIOUS EXPERIENCE GROUPS

61

Experience Sector Public Private Both Total

E1

E2

E3

E4

TOTAL

05 (12.82) 08 (34.78) 03 (37.50) 16

14 (35.89) 07 (30.43) 04 (50.00) 25

09 (23.07) 02 (8.69) 01 (12.50) 12

11 (28.20) 06 (26.08) 17

39 (55.71) 23 (32.85) 08 (11.42) 70

As far as the experience regarding the various sector is concerned, The Study from the above table shows that the major part is made by the E2 group i.e 14 people followed by the E4 group i.e 11.and in the private sector the E1 group forms the major part as far as the experience is concerned followed by the E2.

Table: 11 7. NATURE WISE PREFERENCE OF INVESTORS

62

Nature

Number of investors

Percentage of investors

Open ended Close ended Both TOTAL

51 08 11 70

72.00% 12.00% 16.00% 100%

It is a trend of the whole india that the majority of the people prefer the open ended schemes so is the case in the valley also. Shown in the above table that the majority of the people i.e 51(72%)prefer the open ended schemes which is followed by the close ended schemes 08(12%).this also shows that people prefer the liquidity of the investment also because in the open ended schemes they can withdraw their money at any time of their need.

Table: 12 8. CATAGORY WISE PREFRENCE OF INVESTORS

63

CATEGORY Growth schemes Sector specific schemes Balanced schemes Tax saving schemes More than one Total

Number of investors 27 03 06 12 22 70

Percentage of investors 38.07% 04.12% 08.15% 17.24% 31.42% 100%

The above table depicts that the major part of the investors invest in the schemes of growth 27(38.07%) and the tax rebate schemes 12 (17.24%)because to save the tax. they dont go for the speculation purpose and because of the less knowledge they cant invest in the particular sector.

Table: 13 9. PURPOSE BEHIND MAKING INVESTMENT IN MUTUAL FUND

64

PURPOSE OF INVESTMENT

Regular income Growth Liquidity Speculation Tax saving

1 21 22 18 08 19

2 11 12 13 13 12

RANKS 3 09 14 12 17 14

WAS 4 15 16 14 20 15 5 14 06 13 12 10 14.66 15.86 14.60 12.33 15.00

RANKS III I IV V II

NOTE:

Weights equal to 5,4,3.1 have been assigned to ranks 1,2,..5 respectively to calculate weighted average score Weighted average score has been assigned ranks in the descending order

On the basis of weighted average score , it is clear from the above table that the major portion of the investment purpose is of the growth i.e 15.86 followed by the tax saving schemes and the regular income schemes i.e 15.00 and 14.66 respectively. for the liquidity purpose

65

also i.e 14.60 invest in the mutual fund. Speculation is the least portion in the purpose in investing in the mutual funds i.e 12.33 Table: 14 10. INVESTORS PERCEPTION ABOUT BENEFITS OFFERED Highly satisfied BENEFITS Return Safety Liquidity Diversification 09 (12.85) 07 (10.00) 15 (21.42) 06 (08.57) 25 (35.71) 20 (28.57) 30 (42.85) 15 (21.42) 15 (21.42) 18 (25.71) 15 (21.42) 25 (35.71) satisfied average Not satisfied 13 (18.57) 14 (20.00) 06 (08.57) 14 (20.00) Highly unsatisfied 08 (11.42) 11 (15.71) 04 (05.71) 10 (14.28) 70 70 70 70 TOTAL

Well Said that the mutual fund returns are based on the market conditions and their so is always written a note in the offer documents that the investment in mutual fund are subject to market risk, please read the offer document carefully before investing so as far as the returns and the satisfaction level is concerned most of the people are satisfied with the returns, safety and the liquidity. we can also see that the liquidity forms a major preference in the mutual fund investment. Table: 15
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11. FACTORS CONSIDERING WHILE MAKING SELECTION FOR A MUTUAL FUND

Preference Factor
Promoters Name Past performance Sector where investment would be made Size of corpus Lock in period Entry-exit load

RANKS 1 11 17 09 2 13 14 16 3 14 08 12 4 16 09 13 5 05 12 11 6 11 10 09

WAS RANKS

12.19 12.61 12.00

II I III

13 12 07

09 14 15

15 15 10

12 09 11

07 08 16

14 12 11

11.76 11.38 11.09

IV V VI

NOTE:

Weights equal to 6,5,4.1 have been assigned to ranks 1,2,..6 respectively to calculate weighted average score Weighted average score has been assigned ranks in the descending order As far a the sensitivity of the people of valley is concerned, they see the past performance of a particular fund and the scheme and of course of the company Only then they invest. so here also the past performance of the scheme i.e 12.61 people analyze the past

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performance which is followed by the promoters name like the SBI and the UTI. Table: 16 12. SOURCES RELIED UPON BY INVESTOR FOR GETTING INFORMATION WHILE INVESTING
SOURCES RELIED UPON

Broker/sub-broker Prospectus/newsletter Friends/relatives Professional magazines/newspapers Advertisements

1 21 18 18 08 11

RANKS 2 3 4 15 14 11 15 16 15 15 13 12 23 16 09 11 14 17

WAS RANKS 5 09 15 13 10 11 15.86 14.80 15.00 13.80 13.86 I III II V IV

NOTE:

Weights equal to 5,4,3.1 have been assigned to ranks 1,2,3..5 respectively to calculate weighted average score Weighted average score has been assigned ranks in the descending order On the basis of the weighted average score, After analyzing the above table we can see that the brokers and the sub brokers made a major portion of the source for the investor to invest in a particular fund. in the valley there are almost 30 plus brokers(ARN holders) almost in every district. so here also the brokers form the major portion i.e 15.86
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which is followed by the information given by the friends and the relatives i.e 15.00.other wise there are no other such means of advertisement and the sources which can attract the people of valley towards the mutual fund. Now some private limited companies of mutual fund like the reliance and the ICICI mutual fund stress upon these things to make advertisement in somewhat different manner. they are using the radios and the news channels in order to promote and advertise their schemes which is still lacking in the public sector mutual funds.

Table: 17 13. INVESTORS PREFRENCE REGARDING MUTUAL FUNDS


NAME OF FUND UTI MF JM MF LIC MF SBI MF

WAS RANKS RANKS 1 2 3 4 5 6 7 8 9 10 11 12 13 08 10 02 03 06 05 09 07 02 03 02 6.98 I 06 01 02 08 09 04 06 05 10 07 05 07 5.30 X

07 09 08 07 06 03 02 02 07 06 08 05 6.20 09 08 07 05 09 04 06 03 02 05 06 06 6.44

IV II

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HDFC MF PRINCIPLE MF FRANKLION TEMPLTON MF RELIANCE MF BIRLA SUN LIFE MF ALLIANCE MF TATA MF ICICI PRU MF

03 05 07 05 09 07 06 06 04 05 07 06 5.69 02 03 04 04 06 06 06 12 09 07 06 05 5.11 10 07 05 08 07 04 05 03 05 06 04 06 5.12

VII XII XI

10 06 07 06 05 09 03 04 05 03 07 05 6.39 03 04 07 05 08 03 06 10 09 05 06 04 5.55 02 07 03 07 05 04 09 06 11 10 02 04 5.48 04 05 08 03 07 07 08 09 02 03 06 08 5.70 07 08 08 04 04 05 03 04 06 07 08 06 5.89

III VIII IX VI V

NOTE:

Weights equal to 12,11,10,9,8.1 have been assigned to ranks 1,2,3,4,5..12 respectively to calculate weighted average score Weighted average score has been assigned ranks in the descending order

Depicted from the above table that the people mostly believe in the public sector ,so as per the weighted average score same is the case here people mostly prefer the UTI and the SBI 6.98 and 6.39 for their investment which is followed by the RELIANCE 6.39 and the LIC 6.20 and other private companies. Table: 18 14. REGARDING SATISFACTION LEVEL

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SECTOR

Very satisfied

Reasonably neutral Satisfied

Somewhat unsatisfactory

Very unsatisfactory

Total

Public Private Both Total

05 (12.5) 06 (30.00) 03 (30.00) 14

25 (62.5) 11 (55.00) 07 (70.00) 43

----02 (10.00) ----02

07 (17.5) 01 (05.00) ----08

03 (07.5) --------03

40 (57.14) 20 (28.57) 10 (14.29) 70

Majority of the people are reasonably satisfied with both the sectors and what differs them is the after sale service by the sector companies, which is preferred for the private sector only. their are some reasons why the people are somewhat unsatisfied it is because still it is the beginning of the mutual fund in the valley and the problems of redemption, statements and other online problems in the SIP makes the people somewhat unhappy. but these things will go away with the passage of time. Table: 19 15. REGARDING DEFICIENCIES IN MUTUAL FUND S.NO 1 DEFICIENCY Functioning Unclear PUBLIC SECTOR 05 (07.14) PRIVATE SECTOR 11 (15.71)

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Procedural complexities

15 (21.42) 35 (50.00) 07 (10.00) 06 (08.57) 02 (02.85) 70

17 (24.28) 25 (35.71) 08 (11.42) 07 (10.00) 02 (02.85) 70

Service dissatisfaction

Awareness lacking

5 6 TOTAL

More than one none

In valley, the service offered by the companies to the investor after the investment is not satisfactory. This is what the negative point becomes for both the sector companies. Many of the mutual funds dont have their offices in the valley they are doing their business with the help of a particular broker or an agent or a brokerage house. Because that the PAN card has been made mandatory by the SEBI it becomes the major problem for the invest to invest in the fund because there is a negligible awareness of the PAN among the people, and the negative perception regarding the PAN is being found among the people. Table: 20 16. REGARDING FUTURE OF MUTUAL FUND

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CATAGORY

VERY BRIGHT

BRIGHT CANT BLACK SAY 15 (45.45) 18 (48.64) 33 06 (18.18) 05 (13.51) 11 03 (09.09) 02 (05.40) 05

VERY BLACK 01 (03.03) 01 (02.70) 02

TOTAL

PUBLIC

08 (24.24)

33 (47.14) 37 (52.86) 70

PRIVATE

11 (29.72)

TOTAL

19

It can be extracted from the above tables that it is still beginning of mutual fund industry in the Kashmir valley. but the future of the mutual fund is bright in the valley as far as the perception of the people is concerned. it will take time to spread the wings in the valley with the passage of time. Their are very other religious factors/reasons for the hindrance and slow start of the mutual fund in he valley. But the concept of the Islamic banking has also open the windows for the people to invest somewhat in the stock market an in the mutual funds also. But overall with the advancement and the changing perception of the people of the valley mutual fund is growing at a good rate and is making a good space in the minds of the people of the valley. not only he public sector mutual funds is being preferred by the people but the private sector mutual fund is also gearing up in this field. They are competing with the other mutual fund which has already made entry in the valley. So future is bright for both of the sector and it depends upon the service and the transparency of the fund in the future. People are

73

getting aware and the knowledge about the mutual fund is spreading day by day among the people.

IMPACT OF ISLAMIC BANKING PERSPECTIVE ON MUTUAL FUND INVESTMENT The term Islamic Investment means a joint pool wherein the investors contribute their surplus money for the purpose of its investment to earn HALAL profits in strict conformity with the precepts of Islamic Shariah. The subscribers of the Fund may receive a document certifying their subscription and entitling them to the pro-rata profits actually accrued to the Fund. These documents may be called certificates units shares or may be given any other name, but their validity in terms of Shariah, will always be subject to two basic conditions:

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Firstly, instead of a fixed return tied up with their face value, they must carry a pro-rata profit actually earned by the Fund. Therefore, neither the principal nor a rate of profit (tied up with the principal) can be guaranteed. The subscribers must enter into the fund with a clear understanding that the return on their subscription is tied up with the actual profit earned or loss suffered by the Fund. If the Fund earn s huge profits, the return on their subscription will increase to that proportion; however, in the case the Fund suffers loss, they will have to share it also, unless the loss is caused by the negligence or mis -management, in which case the management, and not the Fund, will be liable to compensate it. Secondly, the amounts so pooled together must be invested in a business acceptable to Shariah. It means that not only the channels of investment, but also the terms agreed with them must conform to the Islamic principles. Keeping these basic requisites in view, the Islamic Investment Funds may accommodate a variety of modes of investment, which are discussed briefly in the following paragraphs. (SOURCE:http://iio.moneycontrol.com/principles.php) Equity Fund In an equity fund the amounts are invested in the shares of joint stock companies. The profits are mainly achieved through the capital gains by purchasing the shares and selling them when their prices are increased.

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Profits are also achieved by the dividends distributed by the relevant companies. It is obvious that if the main business of a company is not lawful in terms of Shariah, it is not allowed for an Islamic Fund to purchase, hold or sell its shares, because it will entail the direct involvement of the share holder in that prohibited business. Moreover, when a company is financed on the basis of interest, its funds employed in the business are impure. Similarly, when the company receives interest on its deposits an impure element is necessarily included in its income which will be distributed to the shareholders through dividends. However, a large number of the present day scholars do not endorse this view. They argue that a joint stock company is basically different from a simple partnership. In partnership, all policy decisions are taken by the consensus of all the partners, and each one of them has a veto power with regard to the policy of the business. Therefore, all the actions of a partnership are rightfully attributed to each partner. Conditions for investment in Shares/units In the light of the foregoing discussion, dealing in equity shares can be acceptable in Shariah subject to the following conditions: 1. The main business of the company is not volatile of Shariah. Therefore, it is not permissible to acquire the shares of the companies providing financial
76

services on interest, like conventional banks, insurance companies, or the companies involved in some other business not approved by the Shaiah, such as the companies manufacturing, selling or offering liquors, pork haram meat, or involved in gambling, night club activities, pornography etc. 2. If the main business of the companies is halal, like automobiles, textiles etc, but they deposit their surplus amounts in an interest-bearing account or borrow money on interest, the share-holder must express his disapproval against such dealings, preferably by raising his voice against such activities in the annual general meeting of the company. 3. If some income from interest-bearing accounts is included in the income of the company, the proportion of such income in the dividend paid to the shareholder must be given to charity, and must not be retained by him. For example, if 5% of the whole income of a company has come out of interestbearing deposits, 5% of the dividend must be given to charity. 4. The shares of a company are negotiable only if the company owns some illiquid assets. If all the assets of a company are in liquid form, i.e. in the form of money, they cannot be purchased or sold except on par value, because in this case the share represents money only and the money cannot be traded in except at par. Some scholars are of the view that the ratio of illiquid assets must be 51% at the least. They argue that if such assets are less than 50%, the most of the assets are in liquid form, therefore, all its assets should be treated as liquid on the basis of the juristic principle:

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The majority deserves to be treated as the whole of a thing Some other scholars have opined that even if the illiquid asset of a company are 33%, its shares can be treated as negotiable. Firstly, the illiquid part of the mixture must not be in ignorable quantity. It means that it should be in a considerable proportion. Subject to these conditions, the purchase and sale of shares is permissible in Shariah. An Islamic Equity Fund can be established on this basis. The subscribers to the Fund will be treated in Shariah as partners inter se. All the subscription amounts will form a joint pool and will be invested in purchasing the shares of different companies. The profits can accrue either through dividends distributed by the relevant companies or through the appreciation in the prices of the shares. In the first case i.e. where the profits earned through dividends, a certain proportion of the dividend, which corresponds to the proportion of interest earned by the company, must be given in charity. The contemporary Islamic Funds have termed this process as purification.
INVESTING IN MUTUAL FUND FROM ISLAMIC POINT

OF VIEW OCCUPATION Can invest freely SERVICE 15 Can invest under norms 13 07 01 (02.70) 01 (02.70) 37 (52.85) Cant say Prohibited Strictly prohibited TOTAL

(40.54) (35.13) (18.91)


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PROFESSION

05

03

02

02 (11.11) 01 (50.00) 04

01

10 (14.28) 03 (04.28) 18 (25.71) 02 (02.85) 70

(50.00) (30.00) (20.00) AGRICULTURE 01 02 BUSINESSMEN OTHERS TOTAL (33.33) 04 04 (66.67) 08

(22.22) (22.22) (44.44) 01 25 (50.00) 21 19

Islamic investment is a major part of the Islamic Banking industry. Parsoli Islamic Equity (PIE) Index tracks Shariat compliant stocks from listed equities on Indian Stock Exchanges and offers an opportunity to the Muslim investors to invest in Shariat compliant stocks.

The Parsoli Corporation Limited held the first Islamic Investment Conference in Srinagar on June 2. Talha Sareshwala Chief Financial Officer, PCL, talks to Nissar Bhat on Islamic financial solutions and investment avenues for Muslims in the stock exchange. Excerpts: Equity investment is the best hedging instrument against inflation. So when they come they get the risk profile of an investor, that is what is the risk bearing capacity of the client. putting all the money in stock market is like putting all the eggs in one basket. Depending on the risk profile of the clients, the company advise them to put 60 per cent in secondary market that is pure investment, 10 per cent in mutual fund, 15 per cent in commodity or

79

insurance products and for rest to keep that in their hand but not in the liquid form Commodities is a very good Shariat compliant. And so far as insurance is concerned, ten years before it was haram. Why it was initially haram was because the corpus of the amount which was collected in the form of premium was invested in fixed instruments. So that was the main issue for the Ulema to term insurance as non-Islamic. But now recently with insurance sector opening up there are some products which are Shariat compliant. Unit Linked Insurance Policy, for example, it is a monthly insurance policy. Suppose if your premium is Rs 2000/month, you will see in their statement it is clearly mentioned that Rs 400 goes towards your premium, Rs 200 goes towards your administrative expenses and Rs 1400 goes towards your units and you are allotted the mutual fund units equivalent to that. So when you take a ULIP product the risk part which has been covered in the insurance you consider that as a bonus, that would be your bonus, your main purpose is to invest in a long term perspective, because that mutual fund investment is a long term investment and it is a very good tax saving instrument. See if you are not saving tax you are losing. So when you have some tax saving instrument why pay tax and not go for investment. So insurance we consider as an investment avenue for Muslims. So you can park some of your money into insurance investment, some in mutual fund, some in secondary market and rest in primary market. So this is the way we create the asset allocation for individual clients.

In Kashmir valle`y the company has done in-house research. Kashmir is a very prominent place at par with other places in terms of making
80

investments. Because of the turmoil there was some problem, but the research suggests that there is lot of scope in Kashmir for stock market investment. There are 35 terminals in Kashmir valley from all the major share brokering houses including ICICI, Asit Mehta etc. Why they are here because Kashmiri people have money and they are investing and they want to invest. In India if you want to do any sort of investment, it is such a regulatory environment. You have to open a Demat account, you have to open a trading account and for that you have got a set of documents prescribed by the authorities and that is called the KYC (know your customer) norms and in that the most basic document is PAN card. In fact the government intends to make this PAN card a common universal document for any government related or any other work. And yet people dont know what is a PAN card. For any sort of investment in India, you need to aware the people. In the finance capital of India, Mumbai, Muslims dont know what is PAN card. So you dont believe in the first month in December when we did conference we got 460 PAN card issued through our company The second option for the management is to act as an agent for the subscribers. In this case, the management may be given a pre-agreed fee for its services. This fee may be fixed in lump sum or as a monthly or annual remuneration. According to the contemporary Shariah scholars, the fee can also be based on a percentage of the net asset value of the fund. For example, it may be agreed that the management will get 2% or 3% of the net value of the fund (1) at the end of every financial year. However, it is necessary in Shariah to determine any one of the aforesaid methods before the launch of the fund. The practical way for this would be
81

to disclose in the prospectus of the fund on what basis the fees of the management will be paid. It is generally presumed that whoever subscribes to the fund agrees with the terms mentioned in the prospectus. Therefore, the manner of paying the management will be taken as agreed upon by all the subscribers. (Source: http://www.parsoli.com/pie_index.aspx)

FINDINGS AND SUGGESTIONS The Nilamata Purana describes the Valley's origin from the waters, Ka means "water" and Shimir means "to desiccate". Hence, Kashmir stands for "a land desiccated from water". There is also a theory which takes Kashmir to be a contraction of Kashyap-mira or Kashyapmir or Kashyapmeru, the "sea or mountain of Kashyapa", the sage who is credited with having drained the waters of the primordial lake Satisar, that Kashmir was before it was reclaimed. The Nilamata Purana gives the name Kashmira to the Valley considering it to be an embodiment of Uma and it is the Kashmir that the world knows today.

82

As far as this project is concerned,I have analysed many things during this session.some points I am going to share with you as summary and suggestions. Time has changed a lot in the valley,it is clearly reflected from the past that what the kahmir had faced. But the new sun is almost ready to rise in the valley.as far as the mutual funds investment in the valley is concerned,as I have already mentioned that the people in the valley are very sensitive,emotional and somewhat innocent.people are still dealing with the old and traditional method of saving their money in the banks and in the post offices.the concept of mutual fund is somewhat new to the people of kashmir.even the branch managers ,the employees or the person who is dealing with the mutual funds and sell the mutual fund to the investors dont know much about the mutual fund,the basic concepts and the process how to deal with a particular fund.still it is a beginning of this concept in the valley.but slow and steady this is getting pace.people are getting involved in investing in the mutual fund.
1) Salaried

persons,the professionals the students and the

businessmen are the people who are dealing with the mutual funds to some extent and obviously there are many reasons for investment and tax is the main reason.
2)

The persons who are investing mainly prefer the open ended schemes.because it gives him/her the option to redeam at any time.

3)

People are still relied upon the sorces like the brokers,the relatives,friends etc.
83

4) People prefer mainly the public sector mutual funds because

there is a sort of faith on the public ,and they thought that the private companies are somewhat aggressive and they dont believe at their transperancy(because of the past experience). 5) Their is a negligible concept of mutual fund in the rural areas.
6) The problem which is currently faced by the people of kashmir

during the investment is the un-avaibility of the PAN card.because there is no concept of PAN card among the people.even the salaried persons and the reputed officers dont have PAN card.
7) Another thing is regarding the service provided by the mutual

funds which are already existing in the valley,like the SBI and The UTI ,RELIANCE, etc. as this is the beginning of the mutual fund in the valley most of the mutual funds dealing in valley dont have their offices in the valley. They cant provide the better service to the investors after the investment.
8) The concept of Islamic banking has also helped to a great extent

to the people of valley in investing in the shares and the units and other investment alternatives .they made this concept clear that in which particular fund or in a particular company a person can invest. They show the path of Halal and Haram to the investor. This thing have also helped the person to invest in any alternate. Any person who is going to deal with the mutual fund must have the proper knowledge about that company, the fund and the risk associated with that fund.
9) As per the 2001 census, Jammu and Kashmir's literacy rate was

55.5 per cent (Male: 66.6 per cent; Female: 43 per cent).which
84

has improved a lot their after which reflects the educated persons can help to enhance the growth of mutual fund in the valley.
10) The Mutual funds in valley has the scope of penetrating into

the rural and semi urban areas also. 11)People are financially strong and they are in search of various investment alternatives in which mutual fund can become one.

Some recommendations for the promotion of mutual funds in Kashmir valley are given as follows: 1)The trend is changing now, people are getting more aware and the knowledge regarding the mutual fund investment is also increasing among the people day by day. 2) Govt. of Jammu and Kashmir must do some awareness programmes with the mutual fund companies in order to make the people more knowledgably and aware. 3) The mutual funds which are already running in the valley must upgrade, enhance their programmes, their transparency and must educate the people of the valley to some extent.

85

4) People should invest In the mutual funds because it has been seen that the Islam also allows investing in the mutual funds under particular norms. 5) There is a great field and opportunities for this industry in the valley so it should be flourished and run in a better way in the valley 6) Media or other source of advertisement can also play their role in the publicity of these investment alternatives Still it a beginning of mutual fund in the valley it means that there is a lot of scope for this particular business and I suggest other companies to enter into the valley and get the benefit of the business. Development can also come by this in the valley.

BIBLIOGRAPHY

Avadhani,V.A. (1997), Capital Market Management, Himalaya Publishing House,New Delhi. Bansal L.K.(1996) ,Mutual Funds: Management And Working, Deep And Deep publications, New Delhi Bhalla,V.K And Tuteja,S.K(1992),Investment Management, S.Chand & Company, New Delhi

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Chandra, Prasanna(1995),The Investment Game: How To Win? Tata McGraw Hill, New Delhi. Griffeth Bill (1995) The Mutual Fund Masters, Vision Books, New Delhi. Gupta,L.C(1993),Mutual Fund And Asset Preference Household Investors Survey, Society For Capital Market, research And Development ,New Delhi,1993 Gupta, Santosh (2003),Research Methodology And Statistical Techniques, Deep And Deep Publications, New Delhi. Kumar, Ranjit(1999),Research Methodology: A Step By Step Guide For Beginners, Sage Publications Ltd. ,New Delhi

Sadhak H.(1997) ,Mutual Funds In India: Marketing Strategic And Investment Practices, Response Books, Sage Publications, Inc. Sapsford,Roger(1997)Survey Research, Sage Publication Ltd. Singh, Preeti(1995)Investment Management, Himalaya Publishing House, New Delhi Vaid,Seema (1994),Mutual Fund Operations In India,Rishi Publications, Varanasi.

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ARTICLES Ahmad Nazir (2002),Investors Perception Of Mutual Fund, An

Investigation. Ahmad Nazir(2001),Operational Performance Of Mutual Funds, An Analysis. Agrwal,G.D.(1992)Mutual Fund In India-Emerging Trends The Chartered Secretary,Vol.22,No.1,January.

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Bajpai,B.L (2000)Financial And Economic Appraisal Of Investment In Infrastructure In A Rural Market ,Finance India,vol.xiv,no.3,september. Bansal,L.K.(1995),Signals From Annual Reports Of Mutual Funds, Chartered Secretary,25. Batra,Gurdeep Singh: And Bhatia,B.S(1992)Challenges In Management Of Mutual Funds In India, Business Analyst,13(1),July-December. Carhart,Mark M.,(1997),On Persistence In Mutual Fund

Performence,Journal Of Finance 52(1),March. Carlson,s. Robert(1970),Aggregate Performance Of Mutual Funds 19481967,Journal Of Financial And Quantitative Analysis,no.5,march Dutta,Abhijit(2001),Investors Reaction to Good And Bad News In Secondary Market:A Study Relatingto Investors Behaviour ,Finance India ,vol.xv,no.2,June Edelen,Roger M.(1999),Investor Flows And The Assessed Performance Of Open-End Mutual Funds ,Journal Of Financial Economics,53.

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WEBSITES www.researchonline.com www.mutualfundsindia.com www.sebi.gov.in www.sbimf.com www.timesofmoney.com

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www.thehindubusinessline.com www.amfiindia.com www.moneycontrol.com www.geojit.com www.morningstar.com www.ShareKhan-FirstStep.com www.onlineresearch.com

QUESTIONNAIRE (1)Personal Information (a) Name & Address:____________________________ ____________________________ ____________________________ ____________________________ ____________________________ (b)Age: (d) Marital Status: (e) Gender: ____________________________ Single Male Married Female
91

(c) Educational qualification:_______________

(f) Monthly Income: < 10000 < 100000 (g) Total annual saving:
Less than 60000

< 25000

< 50000

Between 60001 to Rs More than 250000

120000

Between 120001 to Rs 250000

(h)

Occupation:

Business Profession Agriculture Student Service Other

(2) Did you have the PAN? Yes No if no, mention the reason___________________________ (3)Recall names of some of the mutual fund in India? ___________________________________________ ____________________________________________ ____________________________________________ (4)You make investment in mutual fund because (rank in order of preference) Regular income Capital appreciation Tax saving Growth Liquidity
92

Speculation (5) Which scheme you prefer? Open ended Closed ended Growth Debt Equity ELSS

(6)Rank the following financial assets in order of your preference (rank 1 to be given to most preferred asset) Mutual funds Equity shares Debentures Bonds Bank deposits Kisan vikas patra Post office time deposits Public provident fund LIC policies National saving certificate

(7)Your satisfaction level regarding returns in mutual fund: Highly satisfied Satisfied Average Unsatisfied

Highly unsatisfied

(8)How long you have been investing in the mutual funds? Less than 1 years Above 5 years 1-3 years 3-5 years 1-2 months

(9)Mutual funds are?


93

Highly Risky Risky Average (10)The first mutual fund in India was? SBI UTI IDBI LIC

Low Risky Safe

(11) Which mutual fund sector you mainly prefer? Private owned mutual fund Public owned mutual funds both none

(12)Your satisfaction regarding the promises made by any MF/agent/broker/distributor to an individual before and after the investment: Highly Satisfied Satisfied Average Unsatisfied Highly Unsatisfied (13)What Is Your Criteria For Selecting The Mutual Fund?(Rank in order of preference) (i) Promoters Name (ii) Past performance (iii) Sector where investment would be made (iv) Professional magazines/newspapers (v) Advertisement (vi) Any other
94

(14) What according to you is the major deficiency in the working of mutual funds? (i) Functioning Unclear (iv) Awareness lacking (ii) Procedural complexities (v) Any other (iii) Service dissatisfaction

(15)Please assign ranks in order of preference for mutual funds. (i)LIC MF (ii)GIC MF (iii)CANBANK MF (iv) SBI MF (v) HDFC MF (vi) PRINCIPLE MF (vii) FRANKLIN TEMPLTON MF (viii) RELIANCE MF (ix) BIRLA SUN LIFE MF (x) ALLIANCE MF (xi) TATA MF (xii) ICICI PRU MF (16) What do you think is the future of the mutual fund in the valley? Very Bright Bright Cant Say
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Black Very Black (17)What would be your suggestions regarding proper functioning of mutual funds?
_______________________________________________

_________________________________________ (Thanking you)

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