CONTENTS

PARTICULARS Page No.

1) Declaration 2
2) Acknowledgement 3
3) Abstract 4
4) PART-I ( Study Of Mutual Fund ) 5
5) Introduction 6-7
6) The Scenario 8-10
7) Organisation Structure 11
8) Characteristics & Objectives Of Mutual Fund. 12
9) MF-> but why?(Advantages & Disadvantages) 13-16
10) Mutual Fund-> structure 17
11) Mutual Fund-> who invests 18
12) Organization & Management Of Mutual Fund 19-20
13) Formations & Regulations 21-22
14) Mutual Fund-> Types 23
15) Mutual Fund Schme-> Types 24-26
16) Modes Of Income 27
17) Investment Strategies 28
18) Mutual Fund-> risk associated 29-30
19) Performance Measures 31-36
20) Mutual Fund Companies In India 37-41
21) Mutual Fund-> Do’s and Don’t’s 42-44
22) Future Of Mutual Fund Industry In India 45-46
23) Role OF AMFI 47
24) SEBI guidelines For Mutual Fund 48-49
25) ULIP VS Mutual Fund 50-53
26) PART-II ( Company Profile ) 54-71
27) PART-III ( Market Research & Analysis) 72-84
28) Conclusion 85
29) Recommendations 86
30) Bibliography 87

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 DECLARATION

I hereby declare that this project report is the result of hard core study done by
Potentiality Of Mutual Fund Business In Current Scenario team –> Rahul Das,
Subir Das, Satabdi Biswas..

This is to further declare that this project report is authentic and not being submitted
by any other student previously.

DATE: Date: Date:

Signature Signature Signature

(Dilip Chowdhury) (Ujjwal Banerjee) (Debojyoti Debnath)

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 ACKNOWLEDGEMENT
We here by offer our sincere and profound thanks to Mr. Ujjwal Banerjee – Branch Manager, NJ

India Invest, who gave us such a challenging project and guided us through out our project

including analysis and presentation of the same. Without him we would not been able to complete

our project successfully.

We are also thankful to Mr. Debojyoti Debnath, Sr. Executive HR, for allowing us to do the
project in NJ India Invest, Kolkata.

We would also like to acknowledge our immense gratitude to our honorable Head Of The
Department Of Management, Prof. Dilip Chowdhury & Placement Officer Mr. Kousik Hazra,
who has given us this opportunity to work on this Internship Project.

Last but not least we would like to thank all the respondents for giving their precious time and
relevant information and experience, we required. Without which the Project would have been
incomplete.

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 ABSTRACT

The report basically deals with Mutual funds. It would enable the reader to get
an insight into the world of Mutual Funds. It gives a general overview of Mutual
Funds giving the definition, the objectives, characteristics, benefits, types and
the risk involved in Mutual Funds.

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INTRODUCTION TO MUTUAL FUNDS

5
A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such as
shares, debentures and other securities. The income earned through these investments and the
capital appreciations realized are shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost.
The flow chart below describes broadly the working of a Mutual Fund.

A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India
(SEBI) that pools up the money from individual/corporate investors and invests the same on behalf
of the investors/unit holders, in Equity shares, Government securities, Bonds, Call Money Markets
etc, and distributes the profits. In the other words, a Mutual Fund allows investors to indirectly take
a position in a basket of assets.

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

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 Mutual Funds are essentially investment vehicles where people with similar investment
objective come together to pool their money and then invest accordingly. Each unit of any scheme
represents the proportion of pool owned by the unit holder (investor). Appreciation or reduction in
value of investments is reflected in net asset value (NAV) of the concerned scheme, which is
declared by the fund from time to time. Mutual fund schemes are managed by respective Asset
Management Companies (AMC). Every AMC assigns a fund manager the duties and
responsibilities with regard to the schemes.
As we all know that mutual funds are pools of savings of investors,these investors in
proportion to their investments share the profits or losses. Buying a mutual fund is like buying a
small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the fund’s
gains, losses, income and expenses. The mutual funds normally come out with a number of
schemes with different investment objectives which are launched from time to time. A Mutual
Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates
securities markets before it can collect funds from the public.

THE SCENARIO—HOW IT STARTED AND HOW IS IT TODAY

MUTUAL FUNDS - THE GLOBAL PERSPECTIVE

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

MUTUAL FUNDS INDUSTRY IN INDIA

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

The Mutual fund industry can be broadly put into four phases:
• First Phase (1964-87) - UTI commenced its operations from July 1964 with a view to
encouraging savings and investment and participation in the income, profits and gains accruing to the
corporation from the acquisition, holding management and disposal of securities. The first scheme
launched by UTI was called the UNIT Scheme 1964 more popularly US-64.
• Second Phase (1987-1993) - Initially, the growth was slow but it accelerated from the year 1987.
In 1987, public sector Mutual Funds were setup by public sector banks, the LIC (Life Insurance Corporation
of India) and the GIC (General Insurance Corporation of India). SBI (State Bank of India) launched the first
non-UTI Mutual Fund in 1987 followed by other public sector banks.
• Third Phase (1993-2003) - In 1993 the first private sector Mutual Fund was launched by Kothari
Pioneer which now has merged with Franklin Templeton. The number of mutual fund houses went on
increasing, with many foreign mutual funds setting up funds in India and also the industry has
witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual
funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of
assets under management was way ahead of other mutual funds.
• Fourth Phase (Since February 2003) - UTI was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under management of Rs.29835 crores
as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and

8
certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come under the
purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by
SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than
Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage
assets of Rs.153108 crores under 421 schemes.

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

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

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

TOP 5 AMC's

13% Reliance
27%
Prud ICICI
17%
UTI MF

HDFC MF

21% 22% Franklin

Templeton

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

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

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

IMPORTANT CHARACTERISTICS OF A MUTUAL FUND

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

• A Mutual Fund is managed by investment professional and other

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

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

• The value of the portfolio is updated every day.

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

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

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

OBJECTIVES OF A MUTUAL FUND

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

much difficulty, property in the form of shares.

• To cater mainly of the need of individual investors who have limited means.
• To Manage investors portfolio that provides regular income, growth,
safety, liquidity, tax advantage, professional management and diversification.

MUTUAL FUND—BUT WHY??

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

Number of available options

Mutual funds invest according to the underlying investment objective as specified at the time of
launching a scheme. So, we have equity funds, debt funds, gilt funds and many others that cater to
the different needs of the investor. The availability of these options makes them a good option.
While equity funds can be as risky as the stock markets themselves, debt funds offer the kind of
security that is aimed for at the time of making investments. Money market funds offer the liquidity
that is desired by big investors who wish to park surplus funds for very short-term periods. Balance
Funds cater to the investors having an appetite for risk greater than the debt funds but less than the
equity funds.

Diversification

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Investments are spread across a wide cross-section of industries and sectors and so the risk is
reduced. Diversification reduces the risk because all stocks don’t move in the same direction at the
same time. One can achieve this diversification through a Mutual Fund with far less money than
one can on his own.

Professional Management
Mutual Funds employ the services of skilled professionals who have years of experience to back
them up. They use intensive research techniques to analyze each investment option for the potential
of returns along with their risk levels to come up with the figures for performance that determine
the suitability of any potential investment.

Liquidity
Mutual Funds offer the benefit of liquidity which provides the investor with the option of easy
conversion to money. As in the case of fixed deposits, where the investor can get his money back
only on the completion of a fixed period, an investor can get his money back as and when he wants.
Investors can redeem their money at the prevailing NAV’s (Net Asset Values). Mutual funds
directly re-purchase at the current NAV.

Well Regulated
Unlike the company fixed deposits, where there is little control with the investment being
considered as unsecured debt from the legal point of view, the Mutual Fund industry is very well
regulated. All investments have to be accounted for, decisions judiciously taken. SEBI acts as a
true watchdog in this case and can impose penalties on the AMCs at fault. The regulations,
designed to protect the investors’ interests are also implemented effectively.

Transparency

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Being under a regulatory framework, mutual funds have to disclose their holdings, investment
pattern and all the information that can be considered as material, before all investors. This means
that the investment strategy, outlooks of the market and scheme related details are disclosed with
reasonable frequency to ensure that transparency exists in the system. On the other hand, the
investor is totally clueless in case of the other investment alternatives as nothing is disclosed.

Savings
Tax saving schemes of Mutual Funds offer investor a tax rebate under section 88 of the Income
Tax Act. Under this section, an investor can invest up to Rs.10,000 per Financial year in a tax
saving scheme. The rate of rebate under this section depends on the investor’s total income

Flexible and Affordable

Mutual Funds offer a relatively less expensive way to invest when compared to other avenues such
as capital market operations. The fee in terms of brokerages, custodial fees and other management
fees are substantially lower than other options and are directly linked to the performance of the
scheme. Investment in mutual funds also offers a lot of flexibility with features such as regular
investment plans, regular withdrawal plans and dividend reinvestment plans enabling systematic
investment or withdrawal of funds. Even the investors, who could otherwise not enter stock
markets with low investible funds, can benefit from a portfolio comprising of high-priced stocks
because they are purchased from pooled funds.

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 Disadvantages of mutual funds
Mutual funds are good investment vehicles to navigate the complex and unpredictable world of
investments. However, even mutual funds have some inherent drawbacks. Understand these before
you commit your money to a mutual fund.

No assured returns and no protection of capital

If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not offer
assured returns and carry risk. For instance, unlike bank deposits, your investment in a mutual fund
can fall in value. In addition, mutual funds are not insured or guaranteed by any government body
(unlike a bank deposit, where up to Rs 1 lakh per bank is insured by the Deposit and Credit
Insurance Corporation, a subsidiary of the Reserve Bank of India). There are strict norms for any
fund that assures returns and it is now compulsory for funds to establish that they have resources to
back such assurances. This is because most closed-end funds that assured returns in the early-
nineties failed to stick to their assurances made at the time of launch, resulting in losses to
investors. A scheme cannot make any guarantee of return, without stating the name of the
guarantor, and disclosing the net worth of the guarantor. The past performance of the assured return
schemes should also be given.

Restrictive gains
Diversification helps, if risk minimization is your objective. However, the lack of investment focus
also means you gain less than if you had invested directly in a single security.

Assume, Reliance appreciated 50 per cent. A direct investment in the stock would appreciate
by 50 per cent. But your investment in the mutual fund, which had invested 10 per cent of its
corpus in Reliance, will see only a 5 per cent appreciation.

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

Management risk
When you invest in a mutual fund, you depend on the fund's manager to make the right decisions
regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you

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might not make as much money on your investment as you expected. Of course, if you invest in
Index Funds, you forego management risk, because these funds do not employ managers.

MUTUAL FUND—STRUCTURE

Sponsor

Trustees Mutual fund

ASSET
MANAGEMENT
COMPANY

Custodian Registrar

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

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 MUTUAL FUND—who invests?

Investor Profile:

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

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

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

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

• Settler of the trust or the sponsoring organization.

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

MUTUAL FUNDS TRUST:-

Mutual fund trust is created by the sponsors under the Indian trust act, 1982, which is the main
body in the creation of Mutual Fund trust.The main functions of Mutual Fund trust are as
follows:
♦ Planning and formulating Mutual Funds schemes.
♦ Seeking SEBI’s approval and authorization to these schemes.
♦ Marketing the schemes for public subscription.
♦ Seeking RBI approval in case NRI’s subscription to Mutual Fund is Invited
♦ Attending to trusteeship function. This function as per guidelines can be assigned to
separately established trust companies too. Trustees are required to submit a consolidated report
six monthly to SEBI to ensure that the guidelines are fully being complied with trusted are also
required to submit an annual report to the investors in the fund.

FUND MANAGERS (OR) THE ASSET MANAGEMENT COMPANY (AMC)

AMC has to discharge mainly three functions as under:
I. Taking investment decisions and making investments of the funds through market
dealer/brokers in the secondary market securities or directly in the primary capital market or
money market instruments.
II. Realize fund position by taking account of all receivables and realizations, moving
corporate actions involving declaration of dividends,etc to compensate investors for their
investments in units; and

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III. Maintaining proper accounting and information for pricing the units and arriving at net
asset value (NAV), the information about the listed schemes and the transactions of units in the
secondary market. AMC has to feed back the trustees about its fund management operations and
has to maintain a perfect information system.

CUSTODIANS OF MUTUAL FUNDS:-

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

RESPONSIBILITY OF CUSTODIANS:-
♦ Receipt and delivery of securities
♦ Holding of securities.
♦ Collecting income
♦ Holding and processing cost
♦ Corporate actions etc

FUNCTIONS OF CUSTOMERS:-
♦ Safe custody
♦ Trade settlement
♦ Corporate action
♦ Transfer agents

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 FORMATION AND REGULATIONS:-

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

Schemes:-

1. Mutual funds are allowed to start and operate both closed-end and open-end schemes;
2. Each closed-end schemes must have a Minimum corpus (pooling up) of Rs 20 crore;
3. Each open-end scheme must have a Minimum corpus of Rs 50 crore
4. In the case of a Closed –End scheme if the Minimum amount of Rs 20 crore or 60%
of the target amount, which ever is higher is not raised then the entire subscription has to be
refunded to the investors;
5. In the case of an Open-Ended schemes, if the Minimum amount of Rs 50 crore or 60
percent of the targeted amount, which ever is higher, is no raised then the entire subscription has
to be refunded to the investors.

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Investment norms:-

1. No mutual fund, under all its schemes can own more than five percent of any company’s
paid up capital carrying voting rights;
2. No mutual fund, under all its schemes taken together can invest more than 10 percent of
its funds in shares or debentures or other instruments of any single company;
3. No mutual fund, under all its schemes taken together can invest more than 15 percent of
its fund in the shares and debentures of any specific industry, except those schemes which are
specifically floated for investment in one or more specified industries in respect to which a
declaration has been made in the offer letter.
4. No individual scheme of mutual funds can invest more than five percent of its corpus in
any one company’s share;
5. Mutual funds can invest only in transferable securities either in the money or in the
capital market. Privately placed debentures, securitized debt, and other unquoted debt, and other
unquoted debt instruments holding cannot exceed 10 percent in the case of growth funds and 40
percent in the case of income funds.

Distribution:

Mutual funds are required to distribute at least 90 percent of their profits annually in any given
year. Besides these, there are guidelines governing the operations of mutual funds in dealing with
shares and also seeking to ensure greater investor protection through detailed disclosure and
reporting by the mutual funds. SEBI has also been granted with powers to over see the
constitution as well as the operations of mutual funds, including a common advertising code.
Besides, SEBI can impose penalties on Mutual funds after due investigation for their failure to
comply with the guidelines.

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 MUTUAL FUND—TYPES

1. OPEN-ENDED MUTUAL FUNDS:-

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

2. CLOSED-ENDED MUTUAL FUNDS:-

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

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 MUTUAL FUND SCHEME TYPES:

Equity Diversified Schemes:-

These schemes mainly invest in equity. They seek to achieve long-term capital appreciation by

responding to the dynamically changing Indian economy by moving across sectors such as

Lifestyle, Pharma, Cyclical, Technology, etc.

♦ Sector Schemes:-

These schemes focus on particular sector as IT, Banking, etc. They seek to generate long-term
capital appreciation by investing in equity and related securities of companies in that particular
sector.

♦ Index Schemes:-

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

♦ Exchange Traded Funds (ETFs):-

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

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♦ Equity Tax Saving Schemes:-

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

♦ Dynamic Funds:-

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

♦ Balanced Schemes:-

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

♦ Debt Schemes:-
These schemes basically invest in debt.

♦ Medium-Term Debt Schemes

These schemes have a portfolio of debt and money market instruments where the average
maturity of the underlying portfolio is in the range of five to seven years.

25
♦ Short-Term Debt Schemes
These schemes have a portfolio of debt and money market instruments where the average maturity
of the underlying portfolio is in the range of one to two years.

♦ Money Market Debt Schemes:-

These schemes invest in debt securities of a short-term nature, which generally means securities of
less than one-year maturity. The typical short-term interest-bearing instruments these funds invest
in Treasury Bills, Certificates of Deposit, Commercial Paper and Inter-Bank Call Money Market.

♦ Medium-Term Gilt Schemes:-

These schemes invest in government securities. The average maturity of the securities in the
scheme is over three years.

♦ Short-Term Gilt Schemes:-

These schemes invest in government securities. The securities invested in are of short to medium
term maturities.

♦ Floating Rate Funds:-

They invest in debt securities with floating interest rates, which are generally linked to some
benchmark rate like MIBOR. Floating rate funds have a high relevance when interest rates are on
the rise helping investors to ride the interest rate rise.

♦ Monthly Income Plans (MIPS):-

These are basically debt schemes, which make marginal investments in the range of 10-25% in
equity to boost the scheme’s returns. MIP schemes are ideal for investors who seek slightly higher
return that pure long-term debt schemes at marginally higher risk.

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DIFFERENT MODES OF RECEIVING THE INCOME
EARNED FROM MUTUAL FUND INVESTMENTS

Mutual Funds offer three methods of receiving income:

♦ Growth Plan:-

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

♦ Income Plan:-

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

♦ Dividend Re-investment Plan

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

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 MUTUAL FUND INVESTING STRATEGIES:

1. Systematic Investment Plans (SIPs)

These are best suited for young people who have started their careers and need to build their
wealth. SIPs entail an investor to invest a fixed sum of money at regular intervals in the Mutual
fund scheme the investor has chosen, an investor opting for SIP in xyz Mutual Fund scheme will
need to invest a certain sum on money every month/quarter/half-year in the scheme.

2. Systematic Withdrawal Plans (SWPs)

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

3. Systematic Transfer Plans (STPs)

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

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

1) MARKET RISK:-

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

2) POLITICAL RISK:-

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

3) INFLATION RISK:-

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

29
4) BUSINESS RISK:-

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

5) ECONOMIC RISK:-

Economic risk involves uncertainty in the economy, which, in turn, can have an adverse effect on
a company’s business. For instance, if monsoons fail in a year, equity stocks of agriculture-based
companies will fall and NAVs of Mutual Funds, which have invested in such stocks, will fall
proportionately.

30
 PERFORMANCE MEASURES OF MUTUAL FUNDS:

Mutual Fund industry today, with about 30 players and more than six hundred schemes, is one of
the most preferred investment avenues in India. However, with a plethora of schemes to choose
from, the retail investor faces problems in selecting funds. Factors such as investment strategy
and management style are qualitative, but the funds record is an important indicator too.
Though past performance alone cannot be indicative of future performance, it is, frankly, the only
quantitative way to judge how good a fund is at present. Therefore, there is a need to correctly
assess the past performance of different Mutual Funds. Worldwide, good Mutual Fund companies
over are known by their AMC’s and this fame is directly linked to their superior stock selection
skills.

For Mutual Funds to grow, AMC’s must be held accountable for their selection of stocks. In
other words, there must be some performance indicator that will reveal the quality of stock
selection of various AMC’s.

Return alone should not be considered as the basis of measurement of the performance of a
Mutual Fund scheme, it should also include the risk taken by the fund manager because different
funds will have different levels of risk attached to them. Risk associated with a fund, in a general,
can be defined as Variability or fluctuations in the returns generated by it. The higher the
fluctuations in the returns of a fund during a given period, higher will be the risk associated with
it. These fluctuations in the returns generated by a fund are resultant of two guiding forces. First,
general market fluctuations, which affect all the securities, present in the market, called Market
risk or Systematic risk and second, fluctuations due to specific securities present in the portfolio
of the fund, called Unsystematic risk. The Total Risk of a given fund is sum of these two and is
measured in terms of standard deviation of returns of the fund.

Systematic risk, on the other hand, is measured in terms of Beta, which represents fluctuations in
the NAV of the fund vis-à-vis market. The more responsive the NAV of a Mutual Fund is to the
changes in the market; higher will be its beta. Beta is calculated by relating the returns on a
Mutual Fund with the returns in the market. While Unsystematic risk can be diversified through

31
 investments in a number of instruments, systematic risk cannot. By using the risk return
relationship, we try to assess the competitive strength of the Mutual Funds one another in a better
way. In order to determine the risk-adjusted returns of investment portfolios, several eminent
authors have worked since 1960s to develop composite performance indices to evaluate a
portfolio by comparing alternative portfolios within a particular risk class.

The most important and widely used measures of performance are:

• The Treynor’Measure
• The Sharpe Measure
• Jenson Model
• Fama Model

1) The Treynor Measure:-

Developed by Jack Treynor, this performance measure evaluates funds on the basis of Treynor's
Index. This Index is a ratio of return generated by the fund over and above risk free rate of return
(generally taken to be the return on securities backed by the government, as there is no credit risk
associated), during a given period and systematic risk associated with it (beta). Symbolically, it
can be represented as:

Treynor's Index (Ti) = (Ri - Rf)/Bi.

Where,
Ri represents return on fund,
Rf is risk free rate of return, and
Bi is beta of the fund.

32
 All risk-averse investors would like to maximize this value. While a high and positive Treynor's
Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor's Index
is an indication of unfavorable performance.

2) The Sharpe Measure :-

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a ratio of
returns generated by the fund over and above risk free rate of return and the total risk associated
with it.
According to Sharpe, it is the total risk of the fund that the investors are concerned about. So, the
model evaluates funds on the basis of reward per unit of total risk. Symbolically, it can be written
as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where,
Si is standard deviation of the fund,
Ri represents return on fund, and
Rf is risk free rate of return.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a
low and negative Sharpe Ratio is an indication of unfavorable performance.

33
 Comparison of Sharpe and Treynor
Sharpe and Treynor measures are similar in a way, since they both divide the risk premium by a
numerical risk measure. The total risk is appropriate when we are evaluating the risk return
relationship for well-diversified portfolios. On the other hand, the systematic risk is the relevant
measure of risk when we are evaluating less than fully diversified portfolios or individual stocks.
For a well-diversified portfolio the total risk is equal to systematic risk. Rankings based on total
risk (Sharpe measure) and systematic risk (Treynor measure) should be identical for a well-
diversified portfolio, as the total risk is reduced to systematic risk. Therefore, a poorly diversified
fund that ranks higher on Treynor measure, compared with another fund that is highly
diversified, will rank lower on Sharpe Measure.

3) Jenson Model:-

Jenson's model proposes another risk adjusted performance measure. This measure was
developed by Michael Jenson and is sometimes referred to as the differential Return Method.
This measure involves evaluation of the returns that the fund has generated vs. the returns
actually expected out of the fund1 given the level of its systematic risk. The surplus between the
two returns is called Alpha, which measures the performance of a fund compared with the actual
returns over the period. Required return of a fund at a given level of risk (Bi) can be calculated
as:

Ri = Rf + Bi (Rm - Rf)
Where,
Ri represents return on fund, and
Rm is average market return during the given period,
Rf is risk free rate of return, and
Bi is Beta deviation of the fund.

After calculating it, Alpha can be obtained by subtracting required return from the actual
return of the fund. Higher alpha represents superior performance of the fund and vice versa.
Limitation of this model is that it considers only systematic risk not the entire risk associated

34
 with the fund and an ordinary investor cannot mitigate unsystematic risk, as his knowledge of
market is primitive.

4) Fama Model:-

The Eugene Fama model is an extension of Jenson model. This model compares the performance,
measured in terms of returns, of a fund with the required return commensurate with the total risk
associated with it. The difference between these two is taken as a measure of the performance of
the fund and is called Net Selectivity.

The Net Selectivity represents the stock selection skill of the fund manager, as it is the excess
returns over and above the return required to compensate for the total risk taken by the fund
manager. Higher value of which indicates that fund manager has earned returns well above the
return commensurate with the level of risk taken by him.

Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)

Where,
Ri represents return on fund,
Sm is standard deviation of market returns,
Rm is average market return during the given period, and
Rf is risk free rate of return.

35
 The Net Selectivity is then calculated by subtracting this required return from the actual
return of the fund.

Among the above performance measures, two models namely, Treynor measure and Jenson model
use Systematic risk is based on the premise that the Unsystematic risk is diversifiable. These
models are suitable for large investors like institutional investors with high risk taking capacities as
they do not face paucity of funds and can invest in a number of options to dilute some risks. For
them, a portfolio can be spread across a number of stocks and sectors. However, Sharpe measure
and Fama model that consider the entire risk associated with fund are suitable for small investors,
as the ordinary investor lacks the necessary skill and resources to diversify. Moreover, the selection
of the fund on the basis of superior stock selection ability of the fund manager will also help in
safeguarding the money invested to a great extent. The investment in funds that have generated big
returns at higher levels of risks leaves the money all the more prone to risks of all kinds that may
exceed the individual investors' risk appetite.

36
 Mutual Fund Companies in India
The concept of mutual funds in India dates back to the year 1963. The era between 1963 and 1987
marked the existance of only one mutual fund company in India with Rs. 67bn assets under
management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the end of
the 80s decade, few other mutual fund companies in India took their position in mutual fund
market.
The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank Mutual Fund,
Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund.
The succeeding decade showed a new horizon in indian mutual fund industry. By the end of 1993,
the total AUM of the industry was Rs. 470.04 bn. The private sector funds started penetrating the
fund families. In the same year the first Mutual Fund Regulations came into existance with re-
registering all mutual funds except UTI. The regulations were further given a revised shape in
1996.
Kothari Pioneer was the first private sector mutual fund company in India which has now merged
with Franklin Templeton. Just after ten years with private sector players penetration, the total assets
rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in India.

Major Mutual Fund Companies in India:-

ABN AMRO Mutual Fund:-

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd.
as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was
incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual
Fund.

Birla Sun Life Mutual Fund:-

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

Bank of Baroda Mutual Fund (BOB Mutual Fund):-

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

37
HDFC Mutual Fund:-

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

HSBC Mutual Fund:-

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

ING Vysya Mutual Fund:-

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

Prudential ICICI Mutual Fund:-

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

Sahara Mutual Fund:-

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

State Bank of India Mutual Fund:-

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

38
Tata Mutual Fund:-

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

Kotak Mahindra Mutual Fund:-

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently

having more than 1,99,818 investors in its various schemes. KMAMC started its operations in
December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying
risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in
government securities.

Unit Trust of India Mutual Fund:-

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI
Mutual Fund with the support of UTI Trustee Company Privete Limited. UTI Asset Management
Company presently manages a corpus of over Rs.20000 Crore. The sponsorers of UTI Mutual Fund
are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life
Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income
Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds.

Reliance Mutual Fund:-

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

Standard Chartered Mutual Fund:-

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

39
Franklin Templeton India Mutual Fund:-

The group, Frnaklin Templeton Investments is a California (USA) based company with a global
AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in
the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail
or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity
schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid
schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India:-

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

Escorts Mutual Fund:-

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

Alliance Capital Mutual Fund:-

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

Benchmark Mutual Fund:-

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

40
Canbank Mutual Fund:-

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

Chola Mutual Fund:-

Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd.
was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC
is Cholamandalam AMC Limited.

LIC Mutual Fund:-

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

GIC Mutual Fund:-

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

41
 MUTUAL FUNDS- DO’s and DONT’s
We all have come across ads which say that “Mutual Funds are subject to market risk, please read
the offer document carefully before investing”. Likewise there are many do’s and dont’s one has to
keep in mind before getting into investing in mutual funds. The following points might help one to
optimize his/her investment decision—

Assess yourself:
Self-assessment of one’s needs; expectations and risk profile is of prime importance failing which;
one will make more mistakes in putting money in right places than otherwise. One should identify
the degree of risk bearing capacity one has and also clearly state the expectations from the
investments. Irrational expectations will only bring pain.

Try to understand where the money is going:

It is important to identify the nature of investment and to know if one is compatible with the
investment. One can lose substantially if one picks the wrong kind of mutual fund. In order to
avoid any confusion it is better to go through the literature such as offer document and fact sheets
that mutual fund companies provide on their funds.

Don't rush in picking funds, think first:

One first has to decide what he wants the money for and it is this investment goal that should be the
guiding light for all investments done. It is thus important to know the risks associated with the
fund and align it with the quantum of risk one is willing to take. One should take a look at the
portfolio of the funds for the purpose. Excessive exposure to any specific sector should be avoided,
as it will only add to the risk of the entire portfolio. Mutual funds invest with a certain ideology
such as the "Value Principle" or "Growth Philosophy". Both have their share of critics but both
philosophies work for investors of different kinds. Identifying the proposed investment philosophy
of the fund will give an insight into the kind of risks that it shall be taking in future.

42
Invest. Don’t speculate:
A common investor is limited in the degree of risk that he is willing to take. It is thus of key
importance that there is thought given to the process of investment and to the time horizon of the
intended investment. One should abstain from speculating which in other words would mean
getting out of one fund and investing in another with the intention of making quick money. One
would do well to remember that nobody can perfectly time the market so staying invested is the
best option unless there are compelling reasons to exit.

Don’t put all the eggs in one basket:

This old age adage is of utmost importance. No matter what the risk profile of a person is, it is
always advisable to diversify the risks associated. So putting one’s money in different asset classes
is generally the best option as it averages the risks in each category. Thus, even investors of equity
should be judicious and invest some portion of the investment in debt. Diversification even in any
particular asset class (such as equity, debt) is good. Not all fund managers have the same acumen
of fund management and with identification of the best man being a tough task, it is good to place
money in the hands of several fund managers. This might reduce the maximum return possible, but
will also reduce the risks.

Be regular:
Investing should be a habit and not an exercise undertaken at one’s wishes, if one has to really
benefit from them. As we said earlier, since it is extremely difficult to know when to enter or exit
the market, it is important to beat the market by being systematic. The basic philosophy of Rupee
cost averaging would suggest that if one invests regularly through the ups and downs of the market,
he would stand a better chance of generating more returns than the market for the entire duration.
The SIPs (Systematic Investment Plans) offered by all funds helps in being systematic. All that one
needs to do is to give post-dated cheques to the fund and thereafter one will not be harried later.
The Automatic investment Plans offered by some funds goes a step further, as the amount can be
directly/electronically transferred from the account of the investor.

43
Find the right funds:
Finding funds that do not charge much fees is of importance, as the fee charged ultimately goes
from the pocket of the investor. This is even more important for debt funds as the returns from
these funds are not much. Funds that charge more will reduce the yield to the investor. Finding the
right funds is important and one should also use these funds for tax efficiency. Investors of equity
should keep in mind that all dividends are currently tax-free in India and so their tax liabilities can
be reduced if the dividend payout option is used. Investors of debt will be charged a tax on
dividend distribution and so can easily avoid the payout options.

Keep track of your investments:

Finding the right fund is important but even more important is to keep track of the way they are
performing in the market. If the market is beginning to enter a bearish phase, then investors of
equity too will benefit by switching to debt funds as the losses can be minimized. One can always
switch back to equity if the equity market starts to show some buoyancy.

Know when to sell your mutual funds:

Knowing when to exit a fund too is of utmost importance. One should book profits immediately
when enough has been earned i.e. the initial expectation from the fund has been met with. Other
factors like non-performance, hike in fee charged and change in any basic attribute of the fund etc.
are some of the reasons for to exit. For more on it, read "When to say goodbye to your mutual
fund."

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 FUTURE OF MUTUAL FUND INDUSTRY IN INDIA
Why Invest in Gold?

Historically, gold has been a proven method of preserving value when a national currency was
losing value. If your investments are valued in a depreciating currency, allocating a portion to gold
assets is similar to a financial insurance policy. In the past year, the climb in the price of gold
above $700 per ounce is due to many factors, one being that the dollar is losing value.

Reasons favoring to invest to Gold

* The dollar is weak and getting weaker due to national economic policies which don't appear to
have an end.

* Gold price appreciation makes up for lost interest, especially in a bull market.

* The last four years are the beginning of a major bull move similar to the 70's when gold moved
from $38 to over $800.

* Central banks in several countries have stated their intent to increase their gold holdings instead
of selling.

* All gold funds are in a long term uptrend with bullion, most recently setting new all-time highs.

* The trend of commodity prices to increase is relative to gold price increases.

* Worldwide gold production is not matching consumption. The price will go up with demand.

* Most gold consumption is done in India and China and their demand is increasing with their
increase in national wealth.

* Several gold funds reached all-time highs in 2006 and are still trending upward.

* The short position held by hedged gold funds is being methodically reduced.

Gold Mutual funds

A relatively safe method of buying and owning gold stocks allows the owner to diversify among
many stocks and allows the investing decisions to be made by a professional. Investment methods
vary among funds and provide many different styles of portfolio management for an investor to
choose from. Prices move faster and further in both directions than the price of gold.

* Provide professional management and diversification within the gold sector.

* Are more volatile than the S&P index.

45
* May or may not have any correlation with the general market.

* Move daily with the price of gold, but not always.

* Move proportionally more than gold, up and down.

* If you believe in 'buy low, sell high', gold is still low, but climbing.

The real estate sector and the road ahead

Real Estate Mutual Funds ('REMFs')

The SEBI Board has now approved the guidelines for the much awaited Real Estate Mutual Funds.
"Real Estate Mutual Fund Scheme" is defined to mean a scheme of a mutual fund which has
investment objective to invest directly or indirectly in real estate property.

Governing Law

It is proposed that REMFs will be governed by the provisions and guidelines issued under SEBI
(Mutual Funds) Regulations. REMFs, shall initially, be close ended. The units of REMFs shall be
compulsorily listed on the Stock Exchanges and Net Asset Value (NAV) of the scheme shall be
declared daily.

Custodian

The REMFs would be required to appoint a Custodian who has been granted a Certificate of
Registration to carry on the business of Custodian of securities by the SEBI Board. The custodian
would safe keep the title of real estate properties held by the REMFs.

Investment Criterion:

It is proposed that REMFs could invest in the following: -

* Directly in real estate properties within India;

* Mortgage (housing lease) backed securities;

* Equity shares / Bonds / Debentures of listed / unlisted companies which deal in properties and
also undertake property development; and in

* Other securities.

Role of ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

46
With the increase in mutual fund players in India, a need for mutual fund association in India was
generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI)
was incorporated on 22nd August 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with
SEBI. Till date all the AMCs are that have launched mutual fund schemes are its members. It
functions under the supervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a
professional and healthy market with ethical lines enhancing and maintaining standards. It follows
the principle of both protecting and promoting the interests of mutual funds as well as their unit
holders.

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has
certain defined objectives which juxtaposes the guidelines of its Board of Directors.

The objectives are as follows:

This mutual fund association of India maintains a high professional and ethical standard in all areas
of operation of the industry.

♦ It also recommends and promotes the top class business practices and code of conduct
which is followed by members and related people engaged in the activities of mutual fund and asset
management. The agencies who are by any means connected or involved in the field of capital
markets and financial services also involved in this code of conduct of the association.
♦ AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund
industry.

♦ Association of Mutual Fund of India does represent the Government of India, the
Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry.

♦ It develops a team of well qualified and trained Agent distributors. It implements a

programme of training and certification for all intermediaries and other engaged in the mutual fund
industry.

♦ AMFI undertakes all India awareness programme for investors in order to promote
proper understanding of the concept and working of mutual funds.

♦ At last but not the least association of mutual fund of India also disseminate information
on Mutual Fund Industry and undertakes studies and research either directly or in association with
other bodies.

SEBI guidelines for mutual fund:

47
Mutual funds cannot invest more than 10 per cent of the total net assets of a scheme in the short-
term deposits of a single bank, the Securities and Exchange Board of India said on Monday.
Announcing guidelines for parking of funds in short-term deposits of scheduled commercial banks
(SCBs) by mutual funds, the regulator said that investment cap would also take into account the
deposit schemes of the bank's subsidiaries.
The Sebi has also defined 'short term' for funds' investment purposes as a period not exceeding 91
days.
Besides, the parking of funds in short-term deposits of all SCBs has been capped at 15 per cent of
the net asset value (NAV) of a scheme, which can be raised to 20 per cent with prior approval of
the trustees.
The parking of funds in short-term deposits of associate and sponsor SCBs together should not
exceed 20 per cent of total deployment by the MF in short-term deposits, it added.
The Sebi said that these guidelines are aimed at ensuring that funds collected in a scheme are
invested as per the investment objective stated in the offer document of an MF scheme.
The new guidelines would be applicable to all fresh investments whether in a new scheme or an
existing one. In cases of an existing scheme, where the scheme has already parked funds in short-
term deposits, the asset management company have been given three-months time to conform with
the new guidelines.
The Sebi has also asked the trustees of a fund to ensure that no funds are parked by a scheme in
short term deposit of a bank, which has invested in that particular scheme.
The Sebi guidelines say that asset management companies (AMCs) shall not be permitted to charge
any investment and advisory fees for parking of funds in short-term deposits of banks in case of
liquid and debt-oriented schemes.

What are the new SEBI guidelines all

about?
Relevant extract of the SEBI circular released on June 30, 2009
(SEBI/IMD/CIR No. 4/168230/09) is as follows:
'In order to empower the investors in deciding the commission paid to
distributors in accordance with the level of service received, to bring about
more transparency in payment of commissions and to incentivise long term
investment, it has been decided that:
There shall be no entry load for all mutual fund schemes
The scheme application forms shall carry a suitable disclosure to the

48
 effect that
the upfront commission to distributors will be paid by the investor
directly to the distributor, based on his assessment of various factors
including the service rendered by the distributor
Of the exit load or CDSC charged to the investor, a maximum of 1% of
the
Redemption proceeds shall be maintained in a separate account which
can be used by the AMC to pay commissions to the distributor and to
take care of other marketing and selling expenses. Any balance shall be
credited to the scheme immediately
The distributors should disclose all the commissions (in the form of trail
commission or any other mode) payable to them for the different
competing
schemes of various mutual funds from amongst which the scheme is
being
recommended to the investor.

This circular shall be applicable for :

Investments in mutual fund schemes (including additional purchases
and
switch-in to a scheme from other schemes) with effect from August 1,
2009
Redemptions from mutual fund schemes (including switch-out from
other
schemes) with effect from August 1, 2009
New mutual fund schemes launched on and after August 1, 2009; and
Systematic Investment Plans (SIPs) registered on or after August 1,
2009'

49
 ULIPs vs Mutual Funds: Who's better?
Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest to mutual funds in
terms of their structure and functioning. As is the case with mutual funds, investors in ULIPs are
allotted units by the insurance company and a net asset value (NAV) is declared for the same on a
daily basis.

Similarly ULIP investors have the option of investing across various schemes similar to the ones
found in the mutual funds domain, i.e. diversified equity funds, balanced funds and debt funds to
name a few. Generally speaking, ULIPs can be termed as mutual fund schemes with an insurance
component.

However it should not be construed that barring the insurance element there is nothing
differentiating mutual funds from ULIPs.

How ULIPs can make you RICH!

Despite the seemingly comparable structures there are various factors wherein the two differ.

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum investments or investing using
the systematic investment plan (SIP) route which entails commitments over longer time horizons.
The minimum investment amounts are laid out by the fund house.
ULIP investors also have the choice of investing in a lump sum (single premium) or using the
conventional route, i.e. making premium payments on an annual, half-yearly, quarterly or monthly
basis. In ULIPs, determining the premium paid is often the starting point for the investment
activity.
This is in stark contrast to conventional insurance plans where the sum assured is the starting point
and premiums to be paid are determined thereafter.
ULIP investors also have the flexibility to alter the premium amounts during the policy's tenure.
For example an individual with access to surplus funds can enhance the contribution thereby
ensuring that his surplus funds are gainfully invested; conversely an individual faced with a
liquidity crunch has the option of paying a lower amount (the difference being adjusted in the
accumulated value of his ULIP). The freedom to modify premium payments at one's convenience
clearly gives ULIP investors an edge over their mutual fund counterparts.

2. Expenses

50
In mutual fund investments, expenses charged for various activities like fund management, sales
and marketing, administration among others are subject to pre-determined upper limits as
prescribed by the Securities and Exchange Board of India.
For example equity-oriented funds can charge their investors a maximum of 2.5% per annum on a
recurring basis for all their expenses; any expense above the prescribed limit is borne by the fund
house and not the investors.
Similarly funds also charge their investors entry and exit loads (in most cases, either is applicable).
Entry loads are charged at the timing of making an investment while the exit load is charged at the
time of sale.
Insurance companies have a free hand in levying expenses on their ULIP products with no upper
limits being prescribed by the regulator, i.e. the Insurance Regulatory and Development Authority.
This explains the complex and at times 'unwieldy' expense structures on ULIP offerings. The only
restraint placed is that insurers are required to notify the regulator of all the expenses that will be
charged on their ULIP offerings.
Expenses can have far-reaching consequences on investors since higher expenses translate into
lower amounts being invested and a smaller corpus being accumulated. ULIP-related expenses
have been dealt with in detail in the article "Understanding ULIP expenses".

3. Portfolio disclosure
Mutual fund houses are required to statutorily declare their portfolios on a quarterly basis, albeit
most fund houses do so on a monthly basis. Investors get the opportunity to see where their monies
are being invested and how they have been managed by studying the portfolio.
There is lack of consensus on whether ULIPs are required to disclose their portfolios. During our
interactions with leading insurers we came across divergent views on this issue.
While one school of thought believes that disclosing portfolios on a quarterly basis is mandatory,
the other believes that there is no legal obligation to do so and that insurers are required to disclose
their portfolios only on demand.
Some insurance companies do declare their portfolios on a monthly/quarterly basis. However the
lack of transparency in ULIP investments could be a cause for concern considering that the amount
invested in insurance policies is essentially meant to provide for contingencies and for long-term
needs like retirement; regular portfolio disclosures on the other hand can enable investors to make
timely investment decisions.

4. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the mutual funds segment and ULIPs segment are largely
comparable. For example plans that invest their entire corpus in equities (diversified equity funds),
a 60:40 allotment in equity and debt instruments (balanced funds) and those investing only in debt
instruments (debt funds) can be found in both ULIPs and mutual funds.
If a mutual fund investor in a diversified equity fund wishes to shift his corpus into a debt from the
same fund house, he could have to bear an exit load and/or entry load.

51
On the other hand most insurance companies permit their ULIP inventors to shift investments
across various plans/asset classes either at a nominal or no cost (usually, a couple of switches are
allowed free of charge every year and a cost has to be borne for additional switches).
Effectively the ULIP investor is given the option to invest across asset classes as per his
convenience in a cost-effective manner.

This can prove to be very useful for investors, for example in a bull market when the ULIP
investor's equity component has appreciated, he can book profits by simply transferring the
requisite amount to a debt-oriented plan.

5. Tax benefits

ULIP investments qualify for deductions under Section 80C of the Income Tax Act. This holds
good, irrespective of the nature of the plan chosen by the investor. On the other hand in the mutual
funds domain, only investments in tax-saving funds (also referred to as equity-linked savings
schemes) are eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds (for example
diversified equity funds, balanced funds), if the investments are held for a period over 12 months,
the gains are tax free; conversely investments sold within a 12-month period attract short-term
capital gains tax @ 10%.
Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while a short-term
capital gain is taxed at the investor's marginal tax rate.
Despite the seemingly similar structures evidently both mutual funds and ULIPs have their unique
set of advantages to offer. As always, it is vital for investors to be aware of the nuances in both
offerings and make informed decisions.

SUMMERY-:

52
 ULIPs vs Mutual Funds

ULIP MUTUAL FUND

Minimum investment
Determined by the
INVESTMENT amounts are
investor and can be
AMOUNTS determined by the fund
modified as well
house
No upper limits, Upper limits for
expenses determined expenses chargeable to
EXPENSES
by the insurance investors have been set
company by the regulator
PORTFOLIO Quarterly disclosures
Not mandatory
DISCLOSURE are mandatory
MODIFYING Generally permitted Entry/exit loads have
ASSESTS for free or at a nominal to be borne by the
ALLOCATION cost investor
Section 80C benefits
Section 80C benefits
are available only on
TAX BENEFITS are available on all
investments in tax-
ULIP investments
saving funds

53
54
 Service Standards Of NJ India Invest.

Service in words, service in action

Service is the key to unlocking customer satisfaction, which again is key for sustainability of any
business. At NJ we understand this very well. NJ has set strict processes in place to deliver quality
services to customers. At NJ strict quality service standards are set and a well-defined process is
established and followed religiously by our quality customer service teams. Performance is
evaluated on a frequent basis and glitches are ironed out.

But quality service also involves quality people in addition to processes. NJ gives significant focus
to the proper training and development of the people involved in the service delivery chain.

Further we,

• Have well-defined "Privacy Policy" to keep clients’ information confidential & internal
audits done on the same at regular intervals
• Receive various statistics which are analysed on an ongoing basis to improve the service
standards

We are committed to improve and enhance our services and undertake new service initiatives. Such
and other services differentiate us with other service providers in the industry.

NJ’s..Service..Commitments…

The service commitments are to guide the actions of the people at NJ. Clearly stated, advisors can
freely communicate any such actions/events wherein they feel that any of the following
commitments have been breached / compromised. At NJ we desire to honour our commitments at
all points of time and to all our advisors without any bias.

• To provide advisor-focussed need-based valued services

• To provide reliable, accurate and timely information
• To maintain all records in privacy
• To optimise services/benefits at least justifiable cost
• To develop and grow the advisors’ business
• To provide constructive after sales service
• To honour our service commitments.

55
 360° – Advisory Platform

NJ believes in “360° – Advisory Platform” philosophy …

With this philosophy, NJ try to offer all possible products, services and support which an Advisor
would need in his business.

The support functions are generally in the following areas …

• Business Planning and Strategy

• Training and Development – Self and of employees
• Products and Service Offerings
• Business Branding
• Marketing
• Sales and Development
• Technology
• Advisors Resources - Tools, Calculators, etc..
• Research
• Communications

With this comprehensive supporting platform, the NJ Fundz Partners stays ahead of the curve in
each respect compared to other Advisors/competitors in the market.

Needless to say, the complete NJ Fundz offering is hard to resist

Technology Sales Support

Marketing Support Research Desk

Support 360°
Advisory Support

Training Support Customer Support

Self Development HR Consultancy

56
 360° Platform

Marketing Support

• Marketing Support
• Sales & Development
• Printshop
• Communications
• Business Planning

Technology Support

• Technology
• Partner’s Desk

Training & Support

• I-Gurukul
• NJ Research Support
• Financial Tools

Customer Care

• NJ Advantage

• Mock Amfi Test

57
TERMS OF USE

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of the terms mentioned herein, you should exit the site immediately.
The term NJ IndiaInvest Pvt. Ltd. or njindiainvest.com or web site is used interchangeably
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58
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All rights, title and interest in this web site and any content as well as the design and
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other use of the information contained in this site requires the prior written consent of NJ
IndiaInvest
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service marks of IndiaInvest Pvt. Ltd. The names of other companies and third-party products or
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are prohibited from using any marks for any purpose including, but not limited to use as metatags
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The users of the web sites have no right to use the Intellectual Property in any manner whatsoever
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59
4)Security:

Unauthorized use of NJ IndiaInvest’s web site and systems, including, but not limited to,
unauthorized entry into NJ IndiaInvest’s systems, online accounts, Client Desks, Partners &
Distributor Desks, misuse of passwords or misuse of any other information, is strictly prohibited.
You may not use this web site in any manner that could damage, disable, overburden, or impair any
NJ IndiaInvest’s site or service or interfere with any other party's use and enjoyment of any NJ
IndiaInvest’s site, service or online accounts. You may not attempt to gain unauthorized access to
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agree that you will not engage in any activities related to this web site that are contrary to the
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The users of online accounts including Client Desks, Partners & Distributor Desks have the
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IndiaInvest cannot be responsible for the loss of such information, or for any act, omission,
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NJ IndiaInvest Pvt. Ltd. may use certain technology on its web sites to collect information from
visitors and may compile aggregate statistical information about how visitors use its web sites,
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5)Service..Delays:
NJ IndiaInvest Pvt. Ltd. reserves its right, in its sole discretion, without any obligation and
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or change any product or service or online user accounts described in or offered on this web site or
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Neither njindiainvest.com (including its and their directors, employees, affiliates, agents,
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60
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continue.

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YOU EXPRESSLY AGREE THAT THE USE OF THE WEB SITE IS AT YOUR SOLE RISK
The information and materials on this web site may contain typographical errors or
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IndiaInvest Pvt. Ltd. does not undertake any obligation or responsibility to update or amend any
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IS, WITH ALL FAULTS", "WHERE IS" and "WHERE AVAILABLE" basis. NJ IndiaInvest Pvt.
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the event of any failure or interruption of this web site, or resulting from the act or omission of any
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Under this User Agreement, you assume all risk of errors and/or omissions in
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YOU AGREE THAT, NJ IndiaInvest Pvt. Ltd. (Including its and their officers, directors,
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61
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9)Entire..Agreement

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62
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63
10)Jurisdiction:

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without limitation this paragraph.

MUTUAL FUND ADVISOR

There exists a great potential & opportunity to establish your own mutual fund advisory practice in
India. If you are an existing provider of other investment or insurance solutions then you can add
mutual funds to your basket and move towards being a 'complete financial advisor'.

NJ FUNDZ PARTNER
NJ Fundz Network is a dedicated platform offering comprehensive and unique products and
services for the growth & development of independent financial advisors. NJ's 360° Advisory
Platform, offers advisors with cutting edge solutions and effective support to create business brand
and offer quality value-added services to clients.

360° - Advisory Platform

NJ offers you with a unique, comprehensive business platform to help you grow & develop your
advisory practice in a powerful, effective way. The platform delivers much more to you, keeping
you above curve - both on your business front and on client services.

People & Culture

People:

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Enthusiasm, Enterprise, Education and Ethics form the four pillars at NJ. At NJ one can witness the
vibrant energy, enthusiasm and the enterprising drive to excel flowing freely throughout the
organization. At NJ can also experience the creativity, one-to-one responsiveness, collaborative
approach and passion for delivering value.

At NJ people evolve to be more effective, efficient, and result oriented. Knowledge is inherent due
to the education-centric approach and the experience in handling different clients groups across
diverse product profiles.

NJ understands that the people are the most important assets of the company and it is not the
company that grows but the people. NJ hence undertakes rigorous training and educational
activities for enhancing the entire team at NJ. NJ also believes in the ‘Learning through
Responsibility’ concept for its employees.

For people at NJ success is not a new word, but is a regular stepping-stone to realising the one
vision that everyone shares.

Culture:

At NJ we believe in transforming the lives of our customers. We exist to create a difference – a

change towards a better life. The culture at NJ reflects this responsibility, this dream of
transforming lives. And we at NJ are always excited and enthused in doing so.

We believe in keeping ‘You First’, providing you with products and services that meet your stated
and unstated needs. Client satisfaction and client service is the Mantra we constantly recite. This
service oriented philosophy runs throughout the organization, from top to bottom.

Employees are given ample freedom in their work. The objective is to keep an open, healthy
environment with ample scope for enterprise, improvement, innovations and out-of-the box
solutions

Our efforts are constantly engaged in improving our existing services, offering new and innovative
solutions that go beyond your expectations. This focus has made us one of the most respected and
preferred service providers, especially in the mutual fund industry.

Services offered

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A good product/service offering, targeted at meeting the needs of the clients, lies at the center
of any business. With customers today expecting single window solutions and services,
successful and easy integration of products is the need of the hour.

Any Advisor should wake up to this and other crucial changes taking place and try to adapt himself
to this change to avoid being out-dated and out-serviced.

At NJ we try to foresee such changes and develop solutions that are new, needed and well
appreciated in the industry. The services offered on the NJ Fundz Network are unique in the
industry. The services are designed to equip the independent advisors with all the support and tools
needed for a successful business. NJ provides services and support where an advisor may feel ill
equipped and make them their strengths. The Partner on the NJ Fundz Network instantly beats
competition by being on the Network itself. It’s a new paradigm.

Products..Presently..on..offers …

At the basic product level NJ has a basket of the following

• Mutual funds – covering all AMCs & schemes,

• Life Insurance (Prudential ICICI)
• Fixed deposits of companies,
• Government/RBI bonds,
• Infrastructure Bonds,
• Approved securities for charitable trusts, etc
• Real Estate

Above this, we have a comprehensive offering for Independent Financial Advisors who wish to
transform and grow their business.

Opportunities

• If you are a 'Fresher' - Being an AMFI Certified Mutual Fund Advisor

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We would provide you with complete Training and educational material to appear and successfully
clear the AMFI Mutual Funds Advisors Module, which is a prerequisite for advising and
distribution of Mutual Fundz. On successful completion on the same you become a Certified
Mutual Fund Advisor. The AMFI training programmes are conducted throughout the year to the
various NJ centers across India.

• If you are already a Mutual Fund Advisor - Being an NJ Fundz Network Partner

NJ offers you with all the products, services and support that you may need to become a truly
sought after professional advisors. At the very basic level, we
would..help..you..with..the..following…

1)Enrich..your..service..offerings
2)Offer..Technological..Solutions
3) Provide Business Planning, Development and Sales Support .

Opportunities

 Opportunities for you

 Mutual Fund Advisor

 NJ Fundz Partner

 Careers at NJ

 Life at NJ

Management:
The management at NJ brings together a team of people with wide experience and knowledge in
the financial services domain. The management provides direction and guidance to the whole
organization. The management has strong visions for NJ as a globally respected company
providing comprehensive services in financial sector.

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The ‘Customer First’ philosophy in deeply ingrained in the management at NJ. The aim of the
management is to bring the best to the customers in terms of

• Range of products and services offered

• Quality Customer Service

All the key members of the organization put in great focus on the processes & systems under the
diverse functions of business. The management also focuses on utilizing technology as the key
enabler for all the activities and to leverage the technology for enhancing overall customer
experience.

The key members of the management are:

Mr.Neeraj..Choksi ………………Jt.Managing..Director
Mr. Jignesh Desai Jt. Managing Director

Sales Team:

Mr. Misbah Baxamusa National Head

Mr. Kulbhushan Nandwani A.V.P.
Mr. Prashant Kakkad A.V.P.

Executive Team:

Mr. Shirish Patel Information Technology

Mr. Vinayak Rajput Finance & Operations
Mr. Abhishek Dubey Marketing & Development
Mr. Viral Shah Research

Philosophy:
At NJ our Service and Investing philosophy inspire and shape the thoughts, beliefs, attitude,
actions and decisions of our employees. If NJ would resemble a body, our philosophy would
be our spirit which drives our body.

Service Philosophy:

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Our primary measure of success is customer satisfaction … We are committed to provide our
customers with continuous, long-term improvements and value-additions to meet the needs in an
exceptional way. In our efforts to consistently deliver the best service possible to our customers, all
employees of NJ will make every effort to:

• think of the customer first, take responsibility, and make prompt service to the customer a
priority
• deliver upon the commitments & promises made on time
• anticipate, visualize, understand, meet, exceed our customer’s needs
• bring energy, passion & excellence in everything we do
• be honest and ethical, in action & attitude, and keep the customer’s interest supreme
• strengthen customer relationships by providing service in a thoughtful & proactive manner
and meet the expectations, effectively

Investing..Philosophy:
We aim to provide Need-based solutions for long-term wealth creation…….We aim
to provide all customers of NJ, directly or indirectly, with true, unbiased, need-based solutions and
advice that best meets their stated & un-stated needs. In our efforts to provide quality financial &
investment advice, we believe that …

• Clients want need-based solutions, which fits them

• Long-term wealth creation is simple and straight
• Asset-Allocation is the ideal & the best way for long-term wealth creation
• Educating and disclosing all the important facets which the customer needs to be aware of,
is important
• The solutions must be unbiased, feasible, practical, executable, measurable and flexible
• Constant monitoring and proper after-sales service is critical to complete the on-going
process
• At NJ our aim is to earn the trust and respect of the employees, customers, partners,
regulators, industry members and the community at large by following our service and
investing philosophy with commitment and without exceptions.

Growth and development

NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financial products and
services in India. Established in year 1994, NJ has over a decade of rich exposure in financial
investments space and portfolio advisory services. From a humble beginning, NJ over the years has

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evolved out to be a professionally managed, quality conscious and customer focused financial /
investment advisory & distribution firm.

NJ prides in being a professionally managed, quality focused and customer centric organization.
The strength of NJ lies in the strong domain knowledge in investment consultancy and the delivery
of sustainable value to clients with support from cutting-edge technology platform, developed in-
house by NJ.

At NJ we believe in …

• having single window, multiple solutions that are integrated for simplicity and sapience
• making innovations, accessions, value-additions, a constant process
• providing customers with solutions for tomorrow which will keep them above the curve,
today

NJ Fundz Network was established in year 2003 as a dedicated platform offering comprehensive
services and support to the independent financial advisors. The services offered by NJ Fundz
Network are increasingly recognized as the best and most comprehensive in nature. The scope,
depth, and quality of the services and support is unmatched in the industry. NJ Fundz Network is
proud to be the pioneers in India in providing the 360° Advisory platform to independent advisors.
With this NJ has managed to successfully transform the business of many independent financial
advisors, bringing them on equal footing or even better than the strongest
competitors..in..the..industry.

NJ has over 7,100* NJ Fundz Network Partners and over 4,000* normal advisors associated with
us. NJ presently has over Rs. 5,200* Crores of assets under advice. NJ has over 85* PSCs (Partner
Service Centers) in 18* states spread across India. The numbers are reflections of the trust,
commitment and value that NJ shares with its clients.

At NJ, our experience, knowledge and understanding enables us to provide you with the expected
value, in an enhanced way. As a leading player in the industry, we continue to successfully meet
the expectations of our clients, through meaningful and comprehensive solutions offered by NJ
Fundz Network

OBJECTIVE OF COMPANY

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 Vision of NJ:-

To be the leader in our field of business through,

• Total Customer Satisfaction

• Commitment to Excellence
• Determination to Succeed with strict adherence to compliance
• Successful Wealth Creation of our Customers

Mission of NJ:-

Ensure creation of the desired value for our customers, employees and associates, through constant
improvement, innovation and commitment to service & quality. To provide solutions which meet
expectations and maintain high professional & ethical standards along with the adherence to the
service commitments.

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 RESEARCH METHODOLOGY

Interview of 70 people were taken who

were investor in mutual fund to find out

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certain things as shown in questioner
below.

QUESTIONEER

Study on Mutual Funds

This questionnaire is intended to serve the following two purposes:
1. The purpose of this questionnaire is to find out the attitude of investor,
towards bank and mutual fund based on selected attitudinal parameters and
individual characteristics.

Instructions to respondents
1. Please answer all the questions, i.e. to the maximum extent possible.
2. Please be as accurate as possible in answering the questions.
3. If you do not know an answer or it does not apply to you please write, Not
Applicable (NA).
4. Any suggestions will be welcomed and would be appreciated.

1. How many times you visit your bank in a month? (Please tick app. Choice)
Onc 2-3 4-5 5+
e times times times

2. How important is the following benefit to you being an account holder of bank?
Very Important Partially Not
Bank Features Important Important Important
Internet & phone
banking
Financial advisor
365 days working
ATM cum Debit card
Credit card
Door step banking

3. You avail the services of

One 2-3 4 or more
bank Banks banks

4. Does your bank play the role of an investment advisor for you?
Yes No
If no please specify whose advice do you consider for investment……………………….

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5. How much do you save annually, (approximately)?
Up to 10- 21- 31% and
10% 20% 30% above

6. Which of the following mutual fund scheme would you prefer?

Equity Debt Balanced

7. How important are the following benefits to you, being an investor for Mutual
funds?
Benefit Very Important Partially Not
Important Important Important
Income
Growth
Bonus
Tax Benefits
Growth and
Income

8. Which plan do you prefer while investing in Mutual Fund? (Please tick app. Choice)
SIP (systematic investment One Time
plan) Investment

9. How important are the following factors in selecting for mutual funds
Factors Very Important Partially Not Important
Important Important
Past performance
Brand name
Fund manager
Investment
objective
Recommendation

10. How satisfied are you with your investments in Mutual Funds?
Highly Satisfied Somewhat Not
Satisfied satisfied satisfied

11. Rank the following investment options in order of preference (Rank 1 for most
preferred and 6 for the least preferred)
Investment Rank
Options
Shares
Bonds
Fixed Deposits
Insurance Plans
Saving Account
Any

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Other__________

12. How important is the role of the financial planner in providing the following
services?
Services provided by Financial Planner Very Important Partially Not
Important Important Important
Appropriate portfolio
recommendation
Effective database management
Extended hour personal support
Online Service and query solving
Alliances with other financial
companies
High on promptness and
responsiveness

13. How satisfied are you with your overall investments?

Highly Satisfied Satisfied Somewhat Not
satisfied satisfied

Personal Details:

1. Name:………………………………………………..…………

2. Gender: Male Female

3. Age: 18-25 26-35 36-60 60+

4. Education:
School Level Diploma Graduation Professional Degree

5. Occupation:
Self Employed Government/ Defense Private Any Other

6. Annual Income:
Up to 4 Lakhs 4 Lakhs-8 Lakhs 8Lakhs-12 Lakhs 12 Lakhs +

Thank You So Much For Your Valuable Time and Responses!!!

ANALYSIS

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 Number of visits by client in months

24% 22%

once
2-3 times
4-5 times
15% 5+ times

39%

 This proves majority of customer visits bank 2-3 times in

a month.

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 A CCOUNT FE A TURE M OS T P REFE RE D B Y A CCOUNT HOLDE R

internet & phone

door s tep bank ing baking
20% 13% internet & phone bak ing
financ ial advisor
financial advis or
8%
365 day working
c redit c ard
ATM cum debit c ard
16% 365 day work ing
21% credit card
A TM c um debit door s tep banking
card
22%

 This prove that customer prefer less of financial advice

from bank.

 Most important feature as desired by client include ATM

cum debit card, 365 day working & door step banking.

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 N U M B E R O F B A N K F O R W H IC H S E R V IC E IS A V A IL E D (IN
P E R C E N TAGE )

4 or m o re ba nk on e b an k
9% 2 3%

2-3 ba nk
68%

on e bank 2-3 ban k 4 or m o re b ank

 This again clearly shows that more than 68% client avail
the service 2-3 bank.

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 M U TU A L F U N D S C H E M E P R E F E R E D B Y C L IE N T

B A LA NCE D E Q U ITY
42% 45%

DEBT
13%

E Q U ITY D E B T B A L A N C E D

 THIS ANALYSIS SHOWS THAT DEBT MUTUAL FUND ARE

PREFERED BY VERY SMALL PERCENTAGE OF PEOPLE

 WHILE MAJORITY OF PEOPLE PREFERS EITHER EQUTY OR

BALANCED MUTUAL FUND SCHEME.

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 B E N E F IT P R E F E R D B Y P E O P L E A S M U TU A L F U N D H O L D E R

G R O W TH &
IN C O M E IN C O M E
25% 22%

G R O W TH
TA X B E N E F ITS 21%
BONUS
24%
8%

IN C O M E G R O W THB O N U S TA X B E N E F ITS
G R O W TH & IN C O M E

 THIS ANALYSIS SHOWS THAT EXCEPT BONUS ALMOST

ALL OF THE BENEFITS ARE DESIRED BY THE MUTUAL
FUND HOLDER WHICH INCLUDES INCOME, GROWTH, AND
TAX BENEFITS.

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 M U TU A L F U N D P L A N P R E F E R E D B Y TH E P E O P L E

S IP
47%
O N E TIM E
IN V E S TM E N T
53%

S IP O N E TIM E IN V E S TM E N T

 THIS ANALUSIS SHOWS THAT SIP BEING THE BETTER OF

THE TWO STILL IS NOT A POPULAR MEAN OF INVESTMENT.
BOTH OF PLANS ARE ALMOST BEING EQUALLY PREFERED
BY THE PEOPLE.

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 FAC T OR S IMP OR ATAN T IN S E LE C TIN G MU T U AL FU N D
S C H E ME

RE COM M E NDA TIO PAST

N P E RFORM A NCE
15% 23%

INV E S TM E NT
OB JE CTIV E
B RA ND NA M E
24%
FUND M A NA GE R 21%
17%

P A S T P E RFORM A NCE B RA ND NA M E FUND M A NA GE R

INV E S TM E NT OB JE CTIV ERE COM M E NDA TION

 THIS ANALYSIS SHOWS THAT RECOMMENDATION & FUND

MANAGER ARE BEING LEAST CONSIDRED BY THE PEOPLE. WHILE
INVESTMENT OBJECTIVE, PAST PERFORMANCE & BRAND NAME
ARE BEING MOST INFLUENCING FACTOR IN SELECTING MUTUAL
FUND.

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 FEATURE DESIRED IN FINACIAL PLANNER

appropriate portfolio
high on promptness recommendation
& responsiveness 25%
29%

effective database
alliance with other
management
financial companies
11%
6%

online service extended hour

15% personal support
14%

appropriate portfolio recommendation effective database management

extended hour personal support online service
alliance with other financial companies high on promptness & responsiveness

 THIS ANALYSIS MAJORITY OF PEOPLE DESIRES HIGH ON

PROMPTNESS & RESPONSIVE SERVICE AS WELL AS APPROPRIATE
PORTFOLIO RECOMMENDATION FROM FINANCIAL PLANNER.

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 P E R C E N T A G E O F P E O P L E S A T IS F IE D W IT H T H E IR
IN V E S M E N T

0% 8%
31 %

61 %

H IG H L Y S A TIS F IE D
S A TIS F IE DS O M E W H A T S A TIS F IE
NOD T S A TIS F IE D

 THIS RESEARCH SHOWS THAT NEARLY 61 %(MAJORITY)

OF INVESTOR ARE SATISFIED WITH THERE
INVESTMENTS & ONLY 8% INVESTOR ARE HIGHLY
SATISFIED.

 WHILE, NONE OF THE INVESTOR ARE DISSATISFIED

WITH THERE INVESTMENT.

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 CONCLUSION
From the analysis of the responses received from the investors in Kolkata, majorities of the
investors are found to be conscious and enlightened regarding their investments, returns and
growth.

We have a good market in Kolkata, which comprises potential investors, but due to lack of basic
promotions and publicity these investors are fully aware and whosoever is aware, their investments
decision are done on the basis of security, analysis of risk yield and return.

The Indian mutual fund industry needs to widen its range of products with affordable and
competitive schemes to tap the semi-urban and rural markets in order to attract more investors.
The industry has still not been able to penetrate among retail investors and it needs to share best
practices from mature markets like US and Britain where mutual funds are the most preferred form
of investment. Mutual fund companies need to introduce products for the semi-urban and rural
markets that are affordable and yet competitive against low-risk assured returns of government
sponsored saving schemes such as post office saving deposits.
The industry is also overwhelmed by scarce technological infrastructure and needs to collaborate
with other sectors of the economy such as banking and telecommunications.
Mutual fund companies are also required take advantage of the growing opportunity in the
commodities market. Further, the mutual funds could also enable the small investors to participate
in the real estate boom through real estate mutual funds. With a strong regulatory framework, clear
guidelines and the talent to back it up, the Indian mutual fund industry is in a position to cater to
the new breed of investors who are keen to diversify their risks.

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 RECOMMENDATIONS

• Marketing tools should be used at the point of purchase, advertisements

through mass media like newspapers, magazines, exhibitions, SMS on
mobiles, and on internets.

• Organize programmes for customer awareness in developing areas and

establish a confidence and belief among the customers residing their.

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 BIBLIOGRAPHY

• Magazines
• Business World
• Offer documents of different schemes
• Fund Fact Sheet
• Investment and Portfolio Management by Prassnna Chandra

WEBSITES

• www.moneycontrol.com/mutual funds
• www.amphindidia.com
• www.mutualfundsindia.com
• www.ask.com
• www.goole.com
• www.njindiainvest.com
• www.investopedia.com/articles/stocks/04/113004.asp

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