CHAPTER-I

INTRODUCTION

1
INTRODUCTION TO THE STUDY:

Parametric Analysis

This technique is used to determine a product's place in the marketplace alongside the
competition. Plots are made of different aspects of the product (E.g. the speed of a car against
cost) together with the corresponding aspects of competing products. This technique will show
relationships between different aspects which are sometimes not immediately obvious or known.
In order to be effective, a large number of different plots must be done. Most of these will show
no obvious relationships, however a few will reveal strong relationships between different
aspects. For instance, if a plot reveals that a product's cost is higher than the competitions when
plotted against the speed of the car, this suggests that the targeted cost for the product is too high.
This information helps to produce a product design specification for the new product.

This technique has the added advantage that it is relatively inexpensive, because plots are made
using readily available published data about competing products. A typical plot is shown. The
plot marked anomaly would suggest that this product needs further investigation to reveal why
its parameters depart so markedly from competing products.

Mutual Fund Industry which is a relatively of a post-economic reforms phenomena in

India, has been expanding during this Period in branch and bound Many commercial banks,
insurance companies entered into mutual fund industry apart from foreign players. In the early
years of evolution of mutual fund industry in the Indian financial market it was a monopoly and
continued to be the same till very recent time. Then many players both foreign and Indian
entered in the Mutual Fund Industry.
This increased the competition between the various firms working in the mutual fund
Industry The need for developing various new
schemes arises so as to attract investors towards the firm and equally encouraging them to invest.
This growth in the Mutual Fund Industry and scope of increasing markets has further increased
the competition between the firms in the industry.
The competitions had given raise to demand for specialized products and skills of
various individuals who can contribute towards the containment and growth of individual firms

2
in the mutual firm industry. This gave rise to various related organizations and individuals
working as specialized teams in the various areas of mutual funds. One such organization is
Sharekhan Securities limited it comes into pictures where the investors apply for the units in a
Mutual Fund schemes and verify the validity and eligibility of the investor and allots the units
The mutual fund companies now receive millions of applications if a new scheme is
launched.

This is due to the wide spread awareness created among the urban and rural Population of India.
It therefore becomes a Herculean task to Manage the flooding applications However it should be
noted that this is a Onetime activity similar to that of a short run project It is needless to State
that a given mutual fund firm will not be possessing The technological, human and knowledge
resources to take up such a gigantic task, it is in fact not needed by a mutual fund firm to create
such a vast organizational structure when it is seen from the point of view scale of economies.
Further to this problem, the mutual fund industry does not know where it stands in the current
volatile and turbulent environment. This may be The reason they prefer to hire the services of
professionals firm with specialized knowledge and Expertise.

These developments have led to an outcome that today, launching of mutual fund scheme has
become a well organized activity which is accomplished through the coordinated endeavors of
task groups.

The asset management companies have designed various schemes in accordance with the
requirements of the various sections on investors on basis of equity linked, debt instruments
linked, commodities linked and specific industry linked instruments. The investor today is given
a wide range of options to invest in various types of funds according to his interests and
capabilities.

Mutual funds enable even a small investor to investor to invest, as most of the mutual funds just
start from a minimum amount of investment of RS. 5000 hence even a small investor can invest
into a mutual fund and reap returns in the same proportions as the other big time investors. This
shows that mutual fund industry is one which aims at every section of the society. To deal with

3
this large population of investors and the competition, the asset management company has been
forced to develop and design new schemes and hire the services of professionals.

mutual fund industry involves various operations from the stage of identification of the target
group or defining a market segment, designing a scheme which comes up to the expectations and
aspirations of the target group or market segment, reaching the selected market through
launching the scheme which is thereby called NFO, till the stage of investing the amount raised
in accordance with the norms stipulated with offer document and distributing the returns to the
investor by way of dividend, after making adequate provision for taxation and other operating
costs. All this process is well organized and performed in a specific order. There are various
related organizations which specialize in the activities at various stages of the functioning of the
mutual funds.

It is therefore felt expedient to examine the various intricacies involved in the new fund offer
(NFO). Specifically the various documents that are being processed, the parameters evolve
either customarily or by legal mandate to scrutinize the applications. Various stages involved in
the scrutiny, the rejection criteria, the creation of human organization to monitor the activities,
the communication channel and the structure of the organized activities and the legal
environment of NFO to some extent. Such a dissertation would help to come out with a
comprehensive report which may serve as a guide for the prospective entrants into mutual fund
investment and to the existing mutual fund investors to some extent.

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NEED AND IMPORTENCE OF THE STUDY

 Mutual funds are dynamic financial intuitions which play crucial role in an economy by
mobilizing savings and investing them in the capital market.
 The activities of mutual funds have both short and long term impact on the savings in the
capital market and the national economy.
 Mutual funds, trust, assist the process of financial deepening & intermediation.
 To banking at the same time they also compete with banks and other financial intuitions.
 India is one of the few countries to day maintain a study growth rate is domestic savings.

SCOPE OF THE STUDY:

The study is limited to the analysis made on two major types of schemes offered by six banks. Each
scheme is calculated in term of their risk and return using different performance measurement
theories. The reasons for such performance in immediately analyzed in the commentary. Column
charts are used to reflect the portfolio risk and return.

OBJECTIVES OF THE STUDY:

 Study of Mutual funds in Sharekhan Securities Limited

 To study the technical, procedural, legal dimensions of the NFO
 To examine briefly the organizational structure, communication network, resource
requirements to launch a new fund
 To study a sample of application drawn from Reliance Mutual Fund.

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RESEARCH METHODOLOGY
To fulfill the objective of the study both primary and secondary data has been collected. Primary
data is the data collected specifically for the study. Data is collected directly from people and
organizations via questionnaires or surveys before being analyzed to reach conclusions
concerning the issues covered in the questionnaire or survey.

In this study primary data was collected through interaction with staff of Sharekhan Securities
Limited and the applications of Reliance equity fund.

Secondary data is the data collected previously by someone else for some other purpose which
can be analyzed and interpreted according to requirements. For example, sources of secondary
data are government publications, newspapers, worldwide web etc.

In this study the Secondary data is mainly taken from

* The company’s training material.

* Reconciliation statements.
* Other documents generated within the organization which have to Access

* www. Sharekhan.com, www.amfiindia.com,www.sebi.com.

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LIMITATIONS OF STUDY:

 Analysis of the applications is carried out by taking the applications from Reliance equity
Fund. The data available is therefore restricted by the design of the application.
 The inspection of applications is done on the basis of a sample of 120 applications.
Though the sample is drawn randomly, the possibility of sampling fluctuations affecting
the findings cannot be ruled out.
 Numerical data like number of applications received, total subscription amount received,
statement of accounts, investor details, etc are not available and therefore a description of
these aspects is given.
 NFO process may not be same for all mutual funds that are released. It may differ from
one fund to other depending upon the size like the no. of applications received,
subscription amount received, etc.

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 CHAPTER-II
INDUSTRY PROFILE
&
COMPANY PROFILE

8
History of the Indian Mutual Fund Industry:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank .The objective then is to
attract the small investors and introduce them to market investments. Since then, the history of
mutual funds in India can be broadly divided into four distinct phases.

First Phase – 1964-87:

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative control of
the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had
Rs.6,700 crores of assets under management. The mutual Funds Industry in India not only started
with UTI, but still count UTI as its largest Player with the largest corpus of investible funds
among all Mutual Funds currently opening in India.

For the period of 1987-88

Table No: 1 Source: Secondary Data

Amount Mobilized Assets Under Management (

(Rs.Crores) Rs.Crores)
2,175 6,700
UTI

Total 2,175 6,700

Second Phase – 1987-1993 (Entry of Public Sector Funds):

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed
by Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual

9
Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established
its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end
of 1993, the mutual fund industry had assets under management of Rs.47,004 crores. From
1987to 1992-93, the fund industry expanded nearly seven times in terms of Assets under
Management, as seen in the following figures:

For the period of 1992-93

Table No: 2 Secondary Data

Amount Mobilized Assets Under Management (

(Rs.Crores) Rs.Crores)
UTI 11,057 38,247
Public Sector 1,964 8,757
Total 13,021 47,004

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year
in which the first Mutual Fund Regulations came into being, under which all mutual funds,
except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged
with Franklin Templeton) was the first private sector mutual fund registered in July 1993.The
1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and acquisitions. As
at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.
The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of
other mutual funds.

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Fourth Phase – since February 2003:

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

The second is the UTI Mutual Fund 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
October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386
schemes. The graph indicates the growth of assets over the years

Unit holding pattern of mutual funds industry as on March 31, 2003

SEBI has done an analysis of the unit holding pattern of mutual funds industry as on March 31,
2003. The details are given below: -

A] Mutual Funds Industry Unit holding Pattern

From the data collected from the mutual funds, the following has been observed:-

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i) As on March 31, 2003 there are a total number of 1.6 crore investors accounts (it is
likely that there may be more than one folio of an investor which might have been
counted more than once and actual number of investors would be less) holding units of
Rs. 79,601 crore. Out of this total number of investors accounts, 1.56 crore are individual
investors accounts, accounting for 97.42% of the total number of investors accounts and
contribute Rs.32,691 crore which is 41.07% of the total net assets.

ii) Corporate and institutions who form only 2.04% of the total number of investors
accounts in the mutual funds industry, contribute a sizeable amount of Rs.45,470 crore
which is 57.12% of the total net assets in the mutual funds industry.

iii) The NRIs/OCBs and FIIs constitute a very small percentage of investors accounts
(0.54%) and contribute Rs.1440.18crore (1.81%) of net assets.

The details of unit holding pattern are given in the following table:

Table No: 3 Secondary Data

UNIT HOLDING PATTERN OF MUTUAL FUNDS INDUSTRY

No. Of % To Total NAV(Rs.Crore) %To Total

Category
Investors A/C Investors A/C NAV

Individuals 15,557,506 97.42 32,691.12 41.07

NRIs/OCBs 84,311 0.53 878.51 1.10

FIIs 2,058 0.01 561.67 0.71

Corporate/
Institutions/Othe
rs 324,979 2.04 45,469.53 57.12

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TOTAL 15,968,854 100.00 79,600.83 100.00

B] Unit holding Pattern – Private/Public Sector Mutual Funds:

From the analysis of data on unit holding pattern of Private Sector Mutual Funds and Public
Sector Mutual Funds, the following observations are made:-

1. Out of a total of 1.6 crore investors accounts in the mutual funds industry, (it is likely that
there may be more than one folio of an investor which might have been counted more than
once and therefore actual number of investors may be less) 42.93 lakh investors accounts i.e.
27% of the total investors accounts are in private sector mutual funds whereas the 1.17 crore
investors accounts ie.73% are with the public sector mutual funds which includes UTI
Mutual Fund. However, the private sector mutual funds manage 71.2% of the net assets
whereas the public sector mutual funds own only 28.8% of the assets.

2. UTI Mutual Fund has 97. 12 lakh investors’ accounts which is 60.82% of the total investor’s
accounts in the mutual funds industry.

Details of unit holding pattern of private sector and public sector mutual funds are:

Table No: 4 Secondary Data

UNIT HOLDING PATTERN OF PRIVATE SECTOR MFS

No. Of Investors % To Total NAV(Rs.Cr %To Total

Category
A/C Investors A/C ore) NAV

Individuals 4001841 93.23 17956.48 31.68

NRIs/OCBs 38416 0.89 723.02 1.28

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 FIIs 1317 0.03 528.51 0.93

Corporate/
Institutions/
Others 250972 5.85 37465.91 66.11

TOTAL 4292546 100.00 56673.92 100.00

Table No: 5 Secondary Data

UNIT HOLDING PATTERN OF PUBLIC SECTOR MFS (INCLUDING UTI MF )

NO. Of % To Total NAV(Rs.Cr %To Total

Category
Investors A/C Investors A/C ore) NAV

Individuals 11,555,665 98.97 14734.64 64.27

NRIs/OCBs 45895 0.39 155.49 0.68

FIIs 741 0.01 33.16 0.14

Corporate/
Institutions/
Others 74007 0.63 8003.62 34.91

TOTAL 11676308 100.00 22926.91 100.00

RECENT TRENDS IN MUTUAL FUND INDUSTRY:

The most important trend in the mutual fund industry is the aggressive expansion of the
foreign owned mutual fund companies and the decline of the companies floated by nationalized
banks and smaller private sector players.

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 Many nationalized banks got into the mutual fund business in the early nineties and got
off to a good start due to the stock market boom prevailing then. These banks did not really
understand the mutual fund business and they just viewed it as another kind of banking activity.
Few hired specialized staff and generally chose to transfer staff from the parent organizations.

The performance of most of the schemes floated by these funds was not good. Some
schemes had offered guaranteed returns and their parent organizations had to bail out these
AMCs by paying large amounts of money as the difference between the guaranteed and actual
returns.

The service levels were also very bad. Most of these AMCs have not been able to retain
staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have
serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian companies was also
very similar. They quickly realized that the AMC business is a business, which makes money in
the long term and requires deep-pocketed support in the intermediate years. Some have sold out
to foreign owned companies, some have merged with others and there is general restructuring
going on.

The foreign owned companies have deep pockets and have come in here with the
expectation of a long haul. They can be credited with introducing many new practices such as
new product innovation, sharp improvement in service standards and disclosure, usage of
technology, broker education and support etc. In fact, they have forced the industry to upgrade
itself and service levels of organizations like UTI have improved dramatically in the last few
years in response to the competition provided by these.

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 COMPANY PROFILE

SHAREKHAN

Share khan, India’s leading stock broker is the retail arm of SSKI, an organization with
over eighty years of experience in the stock market with more than 280 share shops in 120 cities
and big towns, and premier online trading destination www.sharekhan.com. Share khan offers
the trade execution facilities for cash as well as derivatives, on BSE and NSE, depository
services, commodities trading on the MCX(Multi Commodity Exchange of India Ltd) and
NCDEX (National Commodity and Derivative Exchange) and most importantly, investment
advice tempered by eighty years of broking experience.

Share khan provides the facility to trade in commodities through Share khan
Commodities Pvt.Ltd-a wholly owned subsidiary of its parent SSKI. Share khan is the member
of two major commodity exchanges MCX and NCDEX.

SSKI
Apart from Share khan, the SSKI group also comprises of institutional broking and corporate
finance. The institutional broking division caters to domestic and foreign institutional investors,
while the corporate finance division focuses on niche areas such as infrastructure, telecom and
media. SSKI owns 56% in Share khan and the balance ownership is HSBC, First Caryl and Intel
Pacific. SSKI has been voted as the top domestic brokerage house in the research category, twice
by Euro money survey and four times by Asia money survey.

SHAREKHAN STOCK BROKING COMPANY

Share khan is one of the leading retail brokerage of City Venture which is running successfully
since 1922 in the country. Earlier it was the retail broking arm of the Mumbai based SSKI
(SRIPAL SRAVANTHI KANTHILAL ISWARLAL)Group, which has over eight decades of
experience in the stock broking business. Share khan offers its customers a wide range of equity
related services including trade execution on BSE, NSE, Derivatives, depository services, online
trading, investment advice etc.

16
Earlier with a legacy of more than 80 years in the stock markets, the SSKI group ventured into
institutional broking and corporate finance 18 years ago. SSKI is one of the leading players in
institutional broking and corporate finance activities. SSKI holds a sizeable portion of the market
in each of these segments. SSKI’s institutional broking arm accounts for 7% of the market for
Foreign Institutional portfolio investment and 5% of all Domestic Institutional portfolio
investment in the country.

It has 60 institutional clients spread over India, Far East, UK and US. Foreign Institutional
Investors generate about 65% of the organization’s revenue, with a daily turnover of over US$
2million.The objective has been to let customers make informed decisions and to simplify the
process of investing in stocks.

“Mission” of the Share khan is

“To educate and empower the individual investor to make better investment decisions
through

 QUALITY ADVICE
 INNOVATIVE PRODUCTS and
 SUPERIOR SERVICE.”

WORK STRUCUTRE OF SHAREKHAN:

Share khan has always believed in investing in technology to build its business. The
company has used some of the best-known names in the IT industry, like Sun Microsystems,
Oracle, Microsoft, Cambridge Technologies, Nexgenix, Vignette, VeriSign Financial
Technologies India Ltd, Spider Software Pvt. Ltd. to build its trading engine and content. The
City Venture holds a majority stake in the company. HSBC, Intel & Carlyle are the other
investors.

On April 17, 2002 Sharekhan launched Speed Trade and Trade Tiger, are net-based

17
Executable application that emulates the broker terminals along with host of other information
relevant to the Day Traders. This was for the first time that a net-based trading station of this
caliber was offered to the traders. In the last six months Speed Trade has become a de facto
standard for the Day Trading community over the net. Share khan’s ground network includes
over 700+ Share shops in 130+ cities in India.

The firm’s online trading and investment site www.sharekhan.com - was launched on Feb
8, 2000. The site gives access to superior content and transaction facility to retail customers
across the country.

PRODUCT AND SERVICES OFFERD BY SHAREKHAN:

 Equity Trading Platform (Online/Offline).
 Commodities Trading Platform (Online/Offline).
 Portfolio Management Service.
 Mutual Fund Advisory and Distribution.
 Insurance Distribution.
 Forex

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REASON TO CHOOSE SAHREKHAN LIMITED
Experience
SSKI has more than eight decades of trust and credibility in the Indian stock market. In
the Asia Money broker's poll held recently, SSKI won the 'India's best broking house for 2004'
award. Ever since it launched Share khan as its retail broking division in February 2000, it has
been providing institutional-level research and broking services to individual investors.

Technology
With their online trading account one can buy and sell shares in an instant from any PC
with an internet connection. Customers get access to the powerful online trading tools that will
help them to take complete control over their investment in shares.

Knowledge
In a business where the right information at the right time can translate into direct profits,
investors get access to a wide range of information on the content-rich portal,
www.sharekhan.com. Investors will also get a useful set of knowledge-based tools that will
empower them to take informed decisions.

Convenience
One can call Share khan’s Dial-N-Trade number to get investment advice and execute
his/her transactions. They have a dedicated call-center to provide this service via a Toll Free
Number 1800 22-7500 & 39707500 from anywhere in India.

Customer Service
Its customer service team assist their customer for any help that they need relating to
transactions, billing, demat and other queries. Their customer service can be contacted via a toll
free number, email or live chat on www.sharekhan.com.

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Investment Advice
Sharekhan has dedicated research teams of more than 30 people for fundamental and
technical research. Their analysts constantly track the pulse of the market and provide timely
investment advice to customer in the form of daily research emails, online chat, printed reports
etc.

Benefits
 Free Depository A/c
 Instant Cash Transfer
 Multiple Bank Option.
 Secure Order by Voice Tool Dial-n-Trade.
 Automated Portfolio to keep track of the value of your actual purchases.
 Personalized Price and Account Alerts delivered instantly to your Mobile Phone & Email
address.
 Special Personal Inbox for order and trade confirmations.
 On-line Customer Service via Web Chat.
 Buy or sell even single share
 Anytime Ordering.

Share khan offers the following products :-

CLASSIC ACCOUNT
This is a User Friendly Product which allows the client to trade through website
www.sharekhan.com and is suitable for the retail investors who is risk-averse and hence prefers
to invest in stocks or who does not trade too frequently.

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Features
 Online trading account for investing in Equity and Derivatives via www.sharekhan.com
 Live Terminal and Single terminal for NSE Cash, NSE F&O & BSE.
 Integration of On-line trading, Saving Bank and Demat Account.
 Instant cash transfer facility against purchase & sale of shares.
 Instant order and trade confirmation by E-mail.
 Streaming Quotes (Cash & Derivatives).

SPEEDTRADE
SPEEDTRADE is an internet-based software application that enables you to buy and sell
in an instant. It is ideal for active traders and jobbers who transact frequently during day’s
session to capitalize on intra-day price movement.
Features
 Single screen trading terminal for NSE Cash, NSE F&O & BSE.
 Technical Studies & Multiple Charting.
 Market summary (Cost traded scrip, highest clue etc.)
 Alerts and reminders.
 Back-up facility to place trades on Direct Phone lines.

DIAL-N-TRADE
Along with enabling access for trade online, the CLASSIC and SPEEDTRADE
ACCOUNT also gives Dial-n-trade services. With this service, one can dial Share khan’s
dedicated phone lines 1800-22-7500, 3970-7500. Beside this, Relationship Managers are always
available on Office Phone and Mobile to resolve customer queries.

SHARE MOBILE
Sharekhan had introduced Share Mobile, mobile based software where one can watch
Stock Prices, Intra Day Charts, Research & Advice and Trading Calls live on the Mobile. (As per
SEBI regulations, buying-selling shares through a mobile phone are not yet permitted.)

21
PREPAID ACCOUNT
Customers pay Advance Brokerage on trading Account and enjoy uninterrupted trading
in their Account. Beside this, great discount are also available (up to 50%) on brokerage.
 Prepaid Classic Account: - Rs.750
 Prepaid Speed trade Account: - Rs.1000

IPO ON-LINE
Customers can apply to all the forthcoming IPOs online. This is quite hassle-free,
paperless and time saving. Simply allocate fund to IPO Account, Apply for the IPO and Sit Back
& Relax.

Mutual Fund Online

Investors can apply to Mutual Funds of Reliance, Franklin Templeton Investments, ICICI
Prudential, SBI, Birla, Sundaram, HDFC, DSP Merrill Lynch, PRINCIPAL and TATA with
Sharekhan.

Zero Balance ICICI Saving Account

Sharekhan had tied-up with ICICI bank for Zero Balance Account for Share khan’s
Clients. Now their customers can have a Zero Balance Saving Account with ICICI Bank after
your demat account creation with Sharekhan.

AWARDS:
 Rated among the top 20 wired companies along with Reliance, HLL, Infosys etc by
Business Today edition.
 PIONEERS of online trading in India.
 Amongst the top 3 online trading websites from India.
 Most preferred financial destination amongst online banking customers.
 Winner of ‘Best Financial Website Award

22
  Awarded to Share khan at the Ahwaz ‘Consumer Awards 2005’ in the "Stock Broking"
category. Research conducted by AC Nielsen-ORG MARG for Ahwaz.

SWOT ANALYSIS

Strengths

 Strong credibility among investors because of its heritage.

 Excellent reputation among the business society.
 Capability of providing superior customer service.
 Quality research team.
 Easier access to the customer due to largest ground network of 280 branded share shops
in 120 cities.
 Abundant information about economy and companies.
 Ability to attract and retain superior and quality personnel.
 Highly sophisticated infrastructure.
 Efficient research and analysis team, which by interpreting the economy and company’s
performance accurately is enhancing the profitability of the clientele.

Weaknesses

 Limited customer appeal as the company product line does not include mutual funds
which is increasingly becoming a preferred customer investment option.
 Inadequate product awareness among the retail investors.
 Limited customer appeal as the company does not have access to the BSE online space.
 Brand awareness is low in the financial market.
 Promotional activities conducted by the company are not at par with the other firms.

23
Opportunities
 Hyderabad covers only 3% of investors which gives huge potential for the market

penetration.
 Bullish phase of the market attracts investing public.
 Access to the BSE online space for the retail investors creates opportunity to increase
clientele base.
 An awareness campaign about online trading creates new market.

Threats

 Availability of Unit Linked Insurance Policies (ULIP’s) and mutual funds in the market.
 Threat of entry is high in this industry as the manpower required is less and capital
requirement is medium.

Observations:

 Fluctuations are more in secondary market than any other market.

 There are more speculators than investors.
 Information plays a vital role in the secondary market.
 Previously rolling settlement is T+5 days, now it changed to T+2 days and further it will
be changing to T+1 day.
 It was also observed that many broking houses offering internet trading allow clients to
use their conventional system as well just ensure that they do not loose them and this
instead of offering e-broking services they becomes service providers.
 The number of players is increasing at a steady rate and today there are over a dozen of
brokerage houses who have opted to offer net trading to their customers and prominent
among them are SHARE KHAN, India bulls, kotakstreet, ICICI direct and geojit.
 The Bombay stock exchange sensex zoomed past the 7700 barrier for the first time in
history to achieve new all time high of 7800 intra day trade and ended at a historic close
of 7732 points.

24
 CHAPTER-III
REVIEW OF LITERATURE

25
Parametric and Nonparametric Statistics

When analyzing data for a research project you’re often confronted with a decision about
what kind of statistical analysis to perform. There are literally hundreds of tests from which to
choose and you have to careful to select the one that is the most appropriate for your data. If
you select an inappropriate test then you may make an incorrect interpretation about your data
and your manuscript will likely be rejected during a journal review process. Although it is
impossible to give a definitive method for selecting appropriate tests in a brief article such as
this, one aspect of statistical tests that is often confusing will be discussed – the difference
between parametric and nonparametric statistical tests.

When you gather scientific data, one of the first statistics you’ll typically calculate is the
mean. This statistic is used to indicate average value of a population or sample. If the mean is
combined with another common statistic called the standard deviation, then the pair of
number tells the research both the central tendency of the group of number and their spread. A
large standard deviation reflects a large spread in the data – the numbers are diverse and far
apart. A small standard deviation reflects a tightness of the data – the numbers are close
together. However, before you can really depend on these statistics to give you accurate
information about the data, you’re required to make the assumption that the data are normally
distributed – that is, if you were to plot the data in a histogram, it would create a graph that
looks like the well-known bell-shaped curve. When data behave in this way you can make
some simple assumptions about the data. For example, the mean plus or minus one standard
deviation contains about 65% of the data, and the mean plus or minus two standard deviations
contains about 95% of the data. This information is often used to create a range of values in
which you might expect future sampled data to appear.

When statistics are calculated under the assumption that the data follow some common
distribution such as the normal distribution we call these parametric statistics. It follows that
statistical tests based on these parametric statistics are called parametric statistical tests. Thus,
when the data are normal, we can then use a host of well-known parametric statistical tests to

26
analyze our data -- such as t-tests, analysis of variance, linear regression, and others.

However, what happens when your data are not normally distributed? Suppose you create a
histogram of your data and it doesn’t look like the bell-shaped curve. Suppose it has two
humps or it has most of its data at one end of the distribution with some of the data trailing off
into a long tail. Now what can you do? There are several ways to approach non-normal data,
but we’ll only discuss one in this article – using a non-parametric test in lieu of a standard
parametric test. Non-parametric tests are also called distribution-free tests since they do not
make the assumption that the data follows some distribution.

For example, suppose you have two independent groups (corresponding to two drugs) on
which some measurement has been made – for example, the length of time until relief of pain.
You want to determine if one drug has a better overall (shorter) time to relief than the other
drug. However, when you examine the data it’s obvious that the distribution of the data is not
normal (You can test for normality of data using a statistical test.) If the data had been
normally distributed, you would have performed a standard independent group t-test on this
data. But since the assumption of normality cannot be made, what can you do? Fortunately for
almost every parametric test in the statistical toolbox, there is a corresponding non-parametric
test. In this case a corresponding nonparametric test is the Mann-Whitney test. Using the
Mann-Whitney test you can calculate a significance level to help you determine the answer to
your research question – are the values of the observations from one group significantly lower
than the observations from the other group? (Notice that we’re not comparing means.)

Other standard parametric tests also have corresponding non-parametric counterparts. The
Wilcoxon Signed Rank test can be used for the paired t-test. The Kruskal-Wallis test can be
used for a one-way independent group analysis of variance, and so on.

Why not just always use non-parametric tests? Since non-parametric tests do not make an
assumption about a distribution of the data, they have less information to use to determine
significance. Thus, they are less powerful than the parametric tests. That is, they have a more
difficult time finding statistical significance.

27
 Therefore, if a parametric test is appropriate it should be used because it gives you a better
chance of finding significances when they exist. If the parametric test is not appropriate, then
a non-parametric test is a reasonable substitute.

When using WINKS, you may refer to the diagrams in Appendix B (in the printed
manual) to help you determine which parametric or nonparametric test is appropriate for your
data

New fund offer (NFO):

When a mutual fund asset management company announces Public issue of units of a new
fund/scheme it is called a New Fund Offer (NFO).

When a mutual fund company plans for a new fund offer it first informs to the registrar or the
back office functions provider like INDIA INFO LINE through email. This is called as “NFO
Launching Information Mail” send by the fund manager of the asset management company to the
NFO coordinator of the INDIA INFOLINE. In this Mail the fund manager will ask the NFO
coordinator to get ready for the new fund with the required man power and software.

Later they send the sample application form, the key information memorandum (KIM) and offer
document to INDIA INFO LINE. This offer document sets forth concisely, necessary
information about the scheme for a prospective investor to make an informed investment
decision on the scheme described. The offer document contains the salient features of the
scheme like NFO opening date, NFO closing date, Scheme name, Scheme class, reopening date,
plans available banks involved, number of bank branches involved, minimum amount – fresh
purchase, maximum amount – fresh purchase, expected number of applications, entry load and
exit load. The unit manager or the NFO coordinator will arrange a meeting where the AMC
team, NFO expert’s team, Data entry team, Reconciliation team and the dispatch team will
discuss and fix the target dates by which the work has to be completed accordingly.

28
What is a mutual fund?

Mutual fund is a mechanism for pooling the resources by issuing to the investors and investing
funds in securities in accordance with objectives as disclosed in offer document.

Investments in securities are spread across a wide cross-section of industries and sectors and thus
the risk is reduced, Diversification reduces the risk because all stocks may not move in the same
direction in the same proportion at the same time. Mutual fund issues units to the investors in
accordance with quantum of money invested by them. Investors of mutual funds are known as
unit holders.

The profits or losses are shared by the investors in proportion to their investment. 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 and
Exchange Board of India (SEBI) which regulates securities markets before it can collect funds
from the public.

Mutual fund is a collection of stocks and / bonds. A mutual fund as a company brings together a
group of people and invests their money in stocks, bonds and other securities. Each investor
owns shares, which represent a portion of the holdings of the fund.

With increased uncertainties or fluctuations in the primary market and decreasing bank interest
rates, mutual funds are gaining popularity day by day Now-a- day’s mutual funds are performing
well will high returns to the investors. There are various types of schemes and plans available to
all type of investors.

Let us assume that you inertia million rupees over night and want to invest the same to
get better returns you can consider the following investment avenues that are popular in Indian
context
Company shares
Fixed deposits in banks
Government bonds
Fixed deposits in NBFC

29
 Chit fund
Real estate
Other local money lending options

Pros and con’s of the investments:

SNO. Investment Risk Return Effort required to

avenue track/maintain
investment
1. Company shares and High High High
stocks
2. Fixed deposits in Low Low Low
banks
3. Govt. bonds Medium Medium Medium
4. Fixed deposits in High Medium Medium
NBFC
5. Chit funds High Medium Medium
6. Real estate Medium Medium Medium
7. Other money lending Medium Medium Depends
options

How you can make money from a mutual fund?

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

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

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

30
Types of Funds:

Mutual funds also come in various sizes and shapes. There are about dozen fund classes but all
of them are derivatives of three basic classes are as follows.

Growth
Income
Liquidity

Growth: Long term growth, since these funds invest in equities, they are also called as equity
funds. Their risk level is high so is the return.

Income: This type of fund provides regular income by investing in debt instruments like bonds,
debentures etc., Because of their nature of investment, they are also called debt schemes. Their
risk and return levels are medium.

Liquidity: These are primarily invested in money market instruments and thus most volatile,
safer and give lower returns. These funds are also known as cash or money market funds.

In addition to the above type there are other derivative classes as listed below.

This type of fund... Invest in this area

Balanced fund Is an investment blend of equity and dept
Instruments

Index fund Invests in the companies that participate in stock market

indices in the same weight age comprising of an index

Sector fund Invests in companies pertaining to specific sectors

like health care, banking, FMCG, technology etc.
Ells / Tax funds Invests is Government bonds and generally long term in
nature. They provide tax benefits.

31
These are called mutual fund schemes. It is based on the investment objective. There is another
Classification based on the capitalization of funds. If the fund offers purchase or selling on a
Continuous basis it is called open ended mutual fund. On the contrary, if the fund is open only
for a particular period, it is called closed ended fund.

Differences: Open ended and Closed ended funds

SNO. Feature Open ended Closed ended

1. Capitalization Unlimited Limited
2. Any time entry Yes No
3. Any time exit Yes No
4. Tax advantage Yes No
5. Available for a fixed period No Yes
(with exemption of
FMP schemes)
6. Listed on the exchange Generally No Yes

Open ended funds gained popularity because of their flexibility and variety of features they offer.
For this reason, majority of the mutual funds are ‘open’ in nature.

Arms of a mutual fund:

Primarily mutual fund is formed as a trust by a group of sponsors. They are the owners of the
mutual funds and forms trust by a group of sponsors. They are the owners of the mutual funds
and forms trustees who in turn appoint AMC and manage the mutual fund.

SEBI regulations require that at least two at least two thirds of the directors of trustee company
or board of trustees must be independent i.e. they should not be associated with the sponsors.
Also, 50% of the directors of AMC must be independent. All mutual funds are required to be
registered with SEBI before they launch any scheme.

32
This entity… Does this…
Sponsor Forms Mf as a trust. Registers with
SEBI.
Trustees Holds funds invested in a form of units.
Ensure compliance with SEBI. Appoints
AMC
Asset management company Floats MF Schemes, Manages funds and
cash.
Registrar Holds investor data. Do services to
investors
Distributors Market various schemes of MF

Transaction types (commercial & non-commercial):

Let’s compare various transactions of mutual funds with those of banks.

In a bank, you will… In a mutual fund…

Open an account with initial deposit You subscribe in a scheme and buy units
Deposit money Do additional purchases
With draw money You redeem units
Opt for a recurring deposit Start a systematic investment plan

33
Since mutual fund offers many more options to investors, it will have many more transaction
types as well. Let us see some popular transactions in mutual funds

SNO. Transaction Description

1. New purchase New investment. Buying
units in a scheme
2. Additional purchase Buying additional units in
a scheme
3. Redemption Selling units and getting
money back.
4. Switch/shift Transferring investment
from one scheme to other.
5. Dividend When AMC announces
dividend in a scheme.
6. Systematic investment Investing fixed amounts
periodically like a
recurring deposit.
7. Systematic with drawl Reverse of systematic
investment Selling units
periodically
Rest are relating to general maintenance only. So they are non-commercial transactions.
Net asset value:

As you must have noticed, we always talk about ’units’ in a mutual fund and not money itself. A
unit is basic measure of investment n a mutual fund.
Each scheme / plan will have a different market value is called the Net asset value or simply
NAV. Since market value of the underlying securities changes every day, NAV of a scheme also
varies on a day to day basis.

NAV = Total assets – Total liabilities/Number of units

34
SEBI Guidelines on New Fund Offer:
1. Procedure for launching of schemes:
(1) No scheme shall be launched by the asset management company unless such scheme is
approved by the trustees and a copy of the offer document has been filed with the Board.
(2) Every mutual fund shall along with the offer document of each scheme pay filing fees as
specified in the Second Schedule.
2. Disclosures in the offer document:

(1) The offer document shall contain disclosures which are adequate in order to enable the
investors to make informed investment decision [including the disclosure on maximum
investments proposed to be made by the scheme in the listed securities of the group companies of
the sponsor].

(2) The Board may in the interest of investors require the asset management company to carry out
such modifications in the offer document as it deems fit.

(3) In case no modifications are suggested by the Board in the offer document within 21
[working] days from the date of filing, the asset management company may issue the offer
document.

(4) No one shall issue any form of application for units of a mutual fund unless the form is
accompanied by the memorandum containing such information as may be specified by the
Board.

3. Advertisement material:

(1) Advertisements in respect of every scheme shall be in conformity with the Advertisement
Code as specified in the Sixth Schedule and shall be submitted to the Board within 7 days from
the date of issue.

(2) The advertisement for each scheme shall disclose [investment objective for each scheme]

4. Misleading statements:

The offer document and advertisement materials shall not be misleading or contain any statement
or opinion, which are incorrect or false.

35
5. Listing of close ended schemes:

Every close ended scheme shall be listed in a recognized stock exchange within six months from
the closure of the subscription Provided that listing of close ended scheme shall not be
mandatory.

(a) If the said scheme provides for periodic repurchase facility to all the unit holders with
restriction, if any, on the extent of such repurchase; or

(b) if the said scheme provides for monthly income or caters to special classes of persons like
senior citizens, women, children, widows or physically handicapped or any special class of
persons providing for repurchase of units at regular intervals; or

(c) If the details of such repurchase facility are clearly disclosed in the offer document; or

(d) If the said scheme opens for repurchase within a period of six months from the closure of
subscription.

6. Repurchase of close ended scheme:

(1) The asset management company may at its option repurchase or reissue the repurchased units
of a close ended scheme.

(2) The units of close ended schemes referred to in the proviso to regulation may be open for sale
or redemption at fixed pre-determined intervals if the maximum and minimum amount of sale or
redemption of the units and the periodicity of such sale or redemption has been disclosed in the
offer document.

(3) The units of close ended scheme may be converted into open ended scheme.

(a) If the offer document of such scheme discloses the option and the period of such conversion;
or

(b) The unit holders are provided with an option to redeem their units in full.

(4) A close ended scheme shall be fully redeemed at the end of the maturity period [Provided that
a close ended scheme may be allowed to be rolled over if the purpose, period and other terms of
the roll over and all other material details of the scheme including the likely composition of

36
assets immediately before the roll over, the net assets and net asset value of the scheme, are
disclosed to the unit holders and a copy of the same has been filed with the Board.

Provided further, that such roll over will be permitted only in case of those unit holders who
express their consent in writing and the unit holders who do not opt for the roll over or have not
given written consent shall be allowed to redeem their holdings in full at net asset value based
price.

7. Offering Period:

No scheme of a mutual fund other than the [initial] offering period of any equity linked savings
schemes shall be open for subscription for more than 45 days

8. Allotment of Units and refund of money:

(1) The Asset management company shall specify in the offer document

(a) The minimum subscription amount it seeks to raise under the scheme and

(b) In case of over subscription the extent of subscription it may retain Provided that where the
asset management company retains the over subscription referred to in clause (b), all the
applicants applying up to five thousand units shall be given full allotment subject to the
oversubscription mentioned in clause (b).

(2) The mutual fund and asset Management Company shall be liable to refund the application
money to the applicants-

(i) If the mutual fund fails to receive the minimum subscription amount referred to in clause (a)
of sub-regulation (1);

(ii) If the moneys received from the applicants for units are in excess of subscription as referred
to in clause (b) of sub-regulation (1).

(3) Any amount refundable under sub-regulation (2) shall be refunded within a period of six
Weeks from the date of closure of subscription list, by Registered A.D and by cheque or Demand
Draft marked "A/C Payee" to the applicants.

37
(4) In the event of failure to refund the amounts within the period specified in sub-regulation (3),
the asset management company shall be liable to pay interest to the applicants at a rate of fifteen
percent per annum on the expiry of six weeks from the date of closure of the subscription list.
9. Unit certificates or Statement of Accounts:

The asset management company shall issue to the applicant whose application has been
accepted, unit certificates or a statement of accounts specifying the number of units allotted to
the applicant as soon as possible but not later than six weeks from the date of closure of the
[initial subscription list and or from the date of receipt of the request from the unit holders in any
open ended scheme].Provided that if an applicant so desires, the asset management company
shall issue the unit certificates to the applicant within six weeks of the receipt of request for the
certificate.

10. Transfer of units:

(1) A unit certificate unless otherwise restricted or prohibited under the scheme, shall be freely
transferable by act of parties or by operation of law.

(2) The asset management company shall, on production of instrument of transfer together with
relevant unit certificates, register the transfer and return the unit certificate to the transferee
within thirty days from the date of such production. Provided that if the units are with the
depository such units will be transferable in accordance with the provisions of the Securities and
Exchange Board of India (Depositories and Participants) Regulations, 1996.

11. Dispatch of warrants and proceeds:

Every mutual fund and asset management company shall,

(a) Dispatch to the unit holders the dividend warrants within [30 days] of the declaration of the
dividend.

(b) Dispatch the redemption or repurchase proceeds within 10 working days from the date of
redemption or repurchase.

38
(c) In the event of failure to dispatch the redemption or repurchase proceeds within the period
specified in sub-clause (b), the asset management company shall be liable to pay interest to the
unit holders at such rate as may be specified by Board for the period of such delay.

(d) Aside payment of such interest to the unit holders under sub-clause (c) the asset management
company may be liable for penalty for failure to dispatch the redemption or repurchase proceeds
within the stipulated time.

Wherever an application for a total value of RS. 50,000 or more, the applicant or in the case of
application in joint names, each of the applicants, should mention his/her permanent account
number (PAN) allotted under the Income Tax Act, 1961 or where the same has not been allotted,
the GIR number and the income-tax Circle/Ward/District should be mentioned. In case where
neither the PAN nor the GIR number has been allotted, the fact of non-allotment should be
mentioned in the application form. Any application form without these details should not be
accepted by the mutual fund. The above clarification is being issued in accordance with
Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996.

12. Instructions for filing scheme offer document with SEBI:

As advised in SEBI circular MFD/CIR/06/275/2001 dated July 9, 2001, while filing offer
document for launching a new scheme/revising and filing existing offer document with SEBI, the
mutual funds should highlight and clearly mention the page number of the offer document on
which each of the following observation has been incorporated. In case of any amendment to
Regulations, the new provisions should be incorporated in the offer documents.

39
 CHAPTER-IV
DATA ANALYSIS AND INTERPRETATION

40
NFO process:

When a mutual fund Assets Management Company (AMC) announces a public issue of units of
& new fund/scheme, it is called a new fund offer (NFO).
The new fund is planned and sources from where it should be collected and where the amount
should be invested is planned by the AMC.
According to the SEBI rules any new fund launched should be approved by SEBI. Once the
AMC get the approval of SEBI for the fund it does the marketing of the fund by it self or through
brokers. The investors who are willing to invest in a particular fund deposit the amount they plan
to invest in the bank as directed by the AMC.
These banks collect the application and amount and direct it towards the registrar specified by
the AMC. From this point India info line came into the picture as the registrar.
The role, responsibilities, activities, forms and reports involved in this process of NFO is general,
are AMC, fund manager, SIP I/c, Switches I/c., NFO Coordinator. Internal auditor,
Systems(S/W) dept. IPO Centre coordinator, IPO-RTI, IPO-EDP, Scanning and Printing &
Dispatching.

Teams involved in the NFO process-

 Mutual fund unit
 Technology team
 Data entry team
 Verification team
 External audit team
 Scanning team
 Franking and dispatching team

41
42
43
44
Description of NFO process:

Bank wise segregation:

The India info line branches collect the applications of the investors across India and abroad for
all the branches of the bank that is involved in this NFO. These applications are sent to India info
line processing center, Hyderabad. After receiving, these applications are segregated bank wise
and branch wise.

IH Numbering:

IH numbering is also called as In house Numbering. India info line gives this IH numbering to
those applications. This is done for their convenience in doing back office functions easily. All
the data on the application is entered into systems through software developed by India info line
technology team called K-Bolt. Later on, we can get any information of a particular application
or investor that we require by entering this IH number.

Binding:

All the applications that are received are given for binding. Binding of application is done by
segregating them according to the bank and branch fro which they are received. India info line
does this Binding because to keep all these applications safe, out of any damage and miss-place.

First Entry:
After finishing binding of applications they are sent to Date Entry team. Here the first time entry
is done. All the information or date of an investor that is available on the application like name
of the applicant, age, Address, PAN, Bank details, broker code, sub broker code, email
addresses, guardian name, amount invested, name of the scheme or plan invested in, etc., are
entered into the systems of India info line.

Second Entry:

After first entry the data is again sent for the second entry. Here in second entry, the data that is
entered in first entry is checked and the information what ever is missing is entered.

45
Online Matching:

After entering the data like applicant, age, Address, PAN, Bank details, broker code, sub broker
code, email addresses, guardian name, amount invested, name of the scheme or plan invested in,
etc., in the first entry and once again in the second entry it is sent to the online matching. Here in
online matching the physical form of application are kept side by an checking of data that was
entered in the first entry and second entry is done.

First time verification:

Data from online matching is sent to the verification team. This team verifies mistakes that are
left in online matching. Mistakes like blank address, PAN blank for amount greater than or equal
to 50000 RS. Name blank, bank details blank, invalid or blank broker code etc., are rectified in
the first time verification.

First time CCL:

First time check clearing list is in short is called as first time CCL. First Time CCL is prepared
based on the data that is provided after first time verification.

External Audit:

First time check-clearing list is sent to an external audit team. India info line appoints this team
before the NFO processes. They are nowhere related to the organization. This external audit team
will mainly check name of the investor, amount invested, bank details PAN number, name of the
scheme/plan and mode of holding (MOH). But in total they will check more than 30 characters

Second time verification:

If the external auditing is not satisfied and if they find any mistakes or missing information they
will send the first time CCL for second time verification. Here they verify the check list once
again and mistakes like invalid mode of folding (MOH), invalid email address, status minor
without guardian name, invalid date of birth for minor, invalid existing account number,
blank/null application number, NRI with blank account type, saving or current, investor
signature missing are rectified.

46
Second time CCL:

Second check the verification team prepares clearing after verifying the mistakes that are pointed
out by the external audit team. After preparing second time CCL it is again sent to external audit
team.

Integrity Check (NFO team):

Check clearing list will be given by the external audit team to the NFO team in India info line
This NFO team in India info line will once again check further mistakes like spelling mistakes in
the name of the applicant etc., and rectify them.

Integrity Check (by Audit):

After integrity check by the NFO team it is once checked by the internal audit team of India info
line.

Scanning Default Values, Verification of Mismatch cases:

Entire data is filtered at each and every step and finally it is given to the scanning team for
scanning here scanning team will detect and rectify any further default values and mismatch
cases.

Reconciliation, Rejections and Cheque returns:

Cheques of the investors are sent are sent by the balk to India info line Reconciliation team. Here
this team will verify bank details of the investor like PAN number, bank a/c number, comparing
the amount invested with that of the minimum amount that has to be invested cheques with out
hue signature of the investor bounced cheques etc., and they are rejected. These rejected cheques
are dispatched to the investors. A sample statement of accounts (SOA) is prepared by this
reconciliation team.

47
Handling over the data to MFS:

Entire data after getting filtered at each and every step will be handing over to mutual fund
services team. This MFS team will once again verify the data and the final data will come out
any mistakes and default values.

Porting in Task MF:

Task MF is the software developed by India info line Technology team. It is prepared according
to the suggestion given by AMC. This Task MF will resemble the style or Performa or outlook of
the statement of accounts. Final data that they got after filtering the mistakes and default values
is ported in the task MF.

Allotment of units:

Allotment of units is done as per the amount that is invested by investors. They will avail the
units taking the Net Asset Value (NAV) of that particular scheme as base.

Sample SOA verification by audit:

Statement of accounts (SOA) is picked up randomly from a huge lot and the audit team does
verification. This verification will result in preparing a statement of accounts which in cent
percent correct and exact.

This SOA contains data like:

* Name of the investor
* Address
* Bank details
* Pan Number
* Guardian name
* Broker code
* Sub broker code
* Nominee name
* Nominee addresses

* 2nd and 3rd applicant name

48
 * Amount invested
* No. Of units allotted
* Fund name, Scheme Name, Plan Name & A/c no
* Transaction type details
* Mode of redemption payment
* Mode of dividend payment
* Mode of dispatch
* Status, occupation.
* Current balance, average price, current cost, current NAV etc.,

Dispatch of SOA:

Statement of accounts (SOA) once prepared is dispatched to the investor. SOA’s are neatly
packed in an envelope and dispatched to the investors by the dispatch team through courier.

New Fund Report:

India info line will finally prepare New Fund Report. This new fund report has to be submitted to
the AMC. Then AMC will submit a copy of the same to the SEBI, which is mandatory. The new
fund report details like

1) Scheme details
* Scheme name
* Scheme type
* Date of opening
* Date of closing the scheme / initial subscription period
* Target amount
* Minimum amount to be raised
2) Subscription / Allotment details
* Number of applications received with in the country
* Number of NRI applications received
* Subscription amount received with in the country

49
 * Subscription amount received form NRI
* Date of allotment of units
3) Initial issue expenses
4) Date of dispatch of refund of refund orders
5) Unit holding pattern
6) Distribution schedule
7) Geographical Dispersion list

Holding profile of applicant:

Particulars Single Joint Anyone Total

No. of applicants 89 0 31 120

% of applicants 74 0 26 100

80
74

70

60

50
% of applicants

40

30 26

20

10

0
0
single Joint Anyone

Mode of holding

50
 Interpretation:
It can be seen that majority of the applicants prefer to hold the allotted units individually and
26% prefer to hold anyone/survivors. This corroborates with the age profile of the applicants.
Occupation profile of applicants:

Particular Business Service Student Professional Retired Housewife Others Total

No. of
34 46 2 4 7 23 5 120
applicants
% of
28 38 2 3 6 19 4 100
applicants

40 38
35
30 28
25
19
20
15
10 6
3 4
5 2
0

Occupation

Interpretation:

Majority of the applicants are from services personnel at 38%, next comes business People are 28%. The
housewife occupy 3rd highest at 19%. It is found that professionals and retired are at the lowest.

51
STATUS:

a) Residential status of individual applicants:

Particulars Resident NRI Total

No. of applicants 104 4 108
% of applicants 96 4 100

120

100 96
% of applicants

80

60

40

20
4
0
Resident NRI

Status

Interpretation:

It can be observed from the table and the chart that the majority of applicants are resident
individuals constituting 96% the applicants and remaining 4% are the Non-resident Indians.

52
 b) Status of non-individuals:

Particulars Partnership AOP/BOI Trust HUF Fll Banks

No. of applicants 1 0 0 10 0 0
% of applicants 10 0 0 80 0 0

Particulars Company Society Fl SME Others Total

No. of applicants 1 0 0 10 0 0
% of applicants 10 0 0 80 0 0

90
80
80
70
% of applicants

60
50
40
30
20
10 10
10
0 0 0 0 0 0 0 0
0

Non-indivisuals

Interpretation:
In the non-individuals category HUF occupied the highest at 80% and next 10% is for
partnerships. In others category 10% is found and all other non-individual entities have recorded
zero applications.

53
Age profile of the applicants:

Particulars Below 18 18-30 31-60 Above 60 Total

No. of 0 30 72 18 120
applicants
% of 0 25 60 15 100
applicants

70
60
60

50
% of applicants

40

30 25

20 15

10
0
0
Below 18 18-30 31-60 Above 60

Age

Interpretation:
The age profile of the applicants shows that the majority of the applicants fall into the age Group
31-60 years and the percentage of them being 60. This is followed by the age Group 18-30 years
and 15% of the applicants are above 60 years.

54
Investment profile of the applicants:

Particulars 5000- 25001- 50001- Above Total

25000 50000 100000 100000
No. of applicants 78 32 4 6 120
% of applicants 65 27 3 5 100

70 65

60

50
% of applicants

40

30 27

20

10 5
3
0
5000-25000 25001-50000 50001-100000 Above 100000

Amount invested

Interpretation:

Amount of investment is high at 65% in the range 5000-25000 and it is very low at 3% in 50001-
100000, but the next slab. Above 100000 has registered 5%.

55
Scheme profile of applicants:

Particulars Growth Bonus Dividend Dividend Total

option option reinvestment payout
No. of applicants 59 4 37 20 120
% of applicants 49 3 31 17 100

60

49
50

40
31
30

20 17

10
3
0
Growth oprion Bonus option Dividend reinvestment Dividend payout

Scheme

Interpretation:

Majority of the applicants Opted the growth option and the option of dividend reinvestment is
31%. This means that 80% of the applicants are not investing for income sake rather they look at
the accumulation

56
of profits.

Analysis of mode of payment:

Particulars Cheque DD Total

No. of applicants 119 1 120
% of applicants 99 1 100

120

99
100
% of applicants

80

60

40

20

1
0
Cheque DD

Mode of payment

Interpretation:

The mode of payment reflects upon the quality of applicants. On an average 99% have paid
through cheques and therefore the NFO is able to attract good quality retail investors.

57
Analysis of type of account:

Particulars SB Current NRO NRE FCNR Total

No. of 119 1 0 0 0 120
applicants
% of 99 1 0 0 0 100
applicants

120

99
100

80
% of applicants

60

40

20

1 0 0 0
0
SB Current NRO NRE FCNR
Type of account

Interpretation:

Majority of the payments have been made from Savings Bank account (SB). No payments have
been found from NRO, NRE, and FCNR even though 4% of the applicants are NRI s

58
Gender profile of the applicants:

Particulars Male Female Total

No. of applicants 89 31 120
% of applicants 74 26 100

80 74
70

60
% of applicants

50

40

30 26

20

10

0
Male Female

Gender

Interpretation:
The female participation in the NFO is low at 26%. The male applicants are very high at 76% as
is not normally found in found in institutional investments.

59
QUESTIONNAIR

1. ARE YOU INTERESTED IN MUTUAL FUNDS

(A)YES
(B)NO

70

60

50
YES
40
NO
30

20

10

(From the sampling of 100 people 70 percentage of people are really Interested in mutual
funds.)

2. WHAT IS YOUR AGE GROUP

(A)25-35
(B)35-45
(C)45-55
(D)55-65

40
35
30
25-35
25
20 35-45

15 45-55
10
55-65
5
0
AGE

(From the above chart we can understand the age group 55-65 people are more investing in to
the mutual funds).

60
3. WHAT IS YOUR OCCUPATION
(A)PRIVATE EMPLOYEE
(B)GOVERNMENT EMPLOYEE
(C)BUSINESS PERSON
(D)RETIRED

35

30 PRIVATE
EMPLOYEES
25
GOVERNMENT
20 EMPLOYEES
15
BUSINESS PERSON
10

5
RETIRED
0
OCCUPATION

(Here Number of Retired employees are investing more as they are concerns about their
future).

4. IN WHICH TYPE OF MUTUAL FUND DO YOU LIKE TO INVEST

(A)CLOSE ENDED
(B) OPEN ENDED

80
70
60
50
OPEN ENDED
40
30 CLOSE ENDED

20
10
0
MUTUAL
FUNDS

(Here open ended schemes are more flexible compare to close so Many people are
interested into open ended schemes).

61
5. WHAT PERCENT OF RETURN DO YOU EXPECT
(A) 10-15
(B) 20-25
(C) 30-40
(D) DOUBLING YOUR AMOUNT

60

50 10-15 %

40
20-30%
30

20
30-40%
10

0 DOUBLING YOUR
EXPECTING AMOUNT
PERCENTAGE

(Here Number of people likes to double their amount.)

6. WHICH TYPE OF FUND ALLOCATION DO YOU LIKE

(A) 100 PERCENT EQUITY
(B) 80 PERCENT EQUITY & 20 PERCENT DEBT
(C) 70 PERCENT EQUITY 20 PERCENT DEBT & 10 PERCENT MONEY
MARKET
(D) 100 PERCENT DEBT

50

40
1OO% EQUITY

30
80% EQUITY & 20 % DEBT
20
70% EQUITY 20% DEBT &
10 10%MONEY MARKET

100% DEBT
0
FUND
ALLOCATION

(Here many investors are love to invest in 100 percent equity fund Allocation scheme.)

62
7. IN WHICH OF THE UTI SCHEME YOU HAVE INVESTED
(A)UTI WEALTH BUILDER FUND
(B)UTI INFRASTRUCTURE ADVANTAGE FUND
(C)UTI LONG TERM ADVANTAGE FUND
(D)NONE

60
50 UTI WEALTH BUILDER
40 FUND

30 UTI INFRASTRUCTURE
ADVANTAGE FUND
20
UTI LONG TERM
10 ADVANTAGE FUND

0 NONE
UTI SCHEMES

(Here the investors are likely to invest in infrastructure advantage fund as this sector is in a
booming stage.)

8. ARE YOU SATISFIED WITH THE RETURNS OF WHICH UTI IS GIVING

(A)YES
(B)NO
(C)CANNOT SAY
45
40
35
30
25 YES
20
15 NO
10
5 CANNOT SAY
0
SATISFIED
WITH RETURNS

(The above chart is clearly saying that today according to market situation many people are
quite satisfied with the return they are Getting.)

63
9. HAD YOU INVESTED IN ANY OTHER MUTUAL FUNDS
(A)RELIANCE MUTUAL FUNDS
(B)J M FINANCIAL
(C)FEDILITY MUTUAL FUNDS
(D)HSBC

70
60
RELIANCE MUTUAL
50 FUNDS

40 J M FINANCIAL
30
20 FEDILITY MUTUAL
FUNDS
10
HSBC
0
OTHER MUTUAL
FUNDS

(As people are specialized in market more the investors they all are Investing in HSBC if not
in UTI because HSBC is the world’s local bank And international old more than 200 year old
company)
10. DO YOU ADVICE PEOPLE TO INVEST IN MUTUAL FUNDS
(A)YES
(B)NO
(C)CANNOT SAY

35
34
33
32
31 YES
30 NO
29 CANNOT SAY
28
27
ADVICE TO
OTHERS

NOTE:
As mutual funds is the subject to market so people generally does not Like to give advice to
others as it is a risky business.

64
 CHAPTER-V

FINDINGS AND CONCLUSIONS

SUGGESTIONS
BIBLIOGRAPHY

65
FINDINGS AND CONCLUSIONS:

* The NFO is found to be a complex activity calling for creating an organization

polling the knowledge and expertise of people in different areas.
* The NFO process is simple and well structured as long as it is to investor to investor,
but thereafter the process is lengthy time consuming and found to be overlapping at
some stages.
* The SEBI regulations governing NFO are comprehensive and protect investor's
interest at each level.
* Different funds have been designing different forms of applications for NFO.
* An analysis of sample of applications revealed the following
O Majority applicants prefer to hold the units individually.
O Majority of the applicants are in service.
O NRI s share is about 4% of the total.

O More than 2/3 rd of the applicants are HUF s.

O The model age group is 31-60.
O The most common investment amount is 5000-25000.
O About half of the applicants prefer Growth option.
O Almost all applicants make the payments by cheques.
O There were no NRO, NRE and FCNR accounts.
O Majority the applicants are male, and.

66
SUGGESTIONS and recommendations:
* Different funds have been using different forms of applications. A standardized form
of application maybe designed by the competent authority and should be made
mandatory for all funds to use the standard application form.
* The NFO process is very complex and there is a need to simplify the process by
eliminating certain unnecessary steps in the process ie instead of carrying out audit for
three times and appropriate internal check system maybe devised to keep the errors
within the tolerance limits.
* The NRI subscribers to the fund may be encouraged to make the payments from NRO,
NRE and FCNR accounts.
* The application from institutional investors and foreign institutional investors are to be
encouraged through a package of incentives.
* The participation of senior citizens in the NFO s may be encouraged as they are likely
to hold more surpluses compared to others.
* The holding of units in joint names shall be encouraged.

* There is a need to investigate the reasons for HUF s occupying more than 2/3rd share
in the non-individual applications as its not a body corporate.
* A savings from all channels of India / World are to be tapped by the NFO rather than
one or two states applying for a loin share of the option.

67
BIBLIOGRAPHY

BOOKS
1. DONALDE, FISHER & RONALD J.JODON

SECURITIES ANALYSIS AND SECURITY MARKET LINE,6TH EDITION

2. V.K.BHALLA

INVESTMENTS MANAGEMENT S. CHAND PUBLICATION.

3. V.A.AVADHANI.

INVESTMENT MANAGEMENT

* www.Sharekhan.com
* www.sebi.com
* www.amfiindia.com
* NFO propeller of HDFC Mutual Fund.
* NFO records of Reliance Mutual Fund.
* Mutual Funds in India by H SADHAK.

68