A Project Study Report On

Training Undertaken at

MUTUAL FUND IS BETTER INVESTMENT

PLAN
Submitted in partial fulfillment for the Award of degree of

Master of Business Administration

Submitted By: Anand Kumar Sharma MBA 3rd Semester

Submitted To: Ms. Anshul Mathur Asst. Professor MBA

2010-12
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DECLARATION
I, the undersigned Anand Kumar sharma, a student of Final year MBA at Arya Institute of Engg. & Technology, Jaipur declare that the project work presented in this report is my own work. This work has not been submitted to any other university for any other examination.

(Anand Kumar Sharma)

PREFACE
The report has been intended to reflect some of the basic issues covered under the Mutual Fund as a Better Investment Plan of India Infoline Ltd., a first truly MNC in India. All the aspects have been formulated and presented on the basis of the ideas and information gathered by the investigator during the span of project training. This gives a practical exposure of the content under topic, what has already been studied in classroom in theoretical form.

After a thorough analysis of various facts and stand figures, a set of conclusion has been given the prime considerations, while compiling the report and are authoritative and authentic. We make sure that anyone who goes through the report will learn how much we have learnt so for, and can get the benefit of the same.

ACKNOWLEDGEMENT

If words are considered as a symbol of approval and token of appreciation then let the words play the heralding role expressing my gratitude The world of capital market war far from me but I got an opportunity to understand the Mutual fund at INDIA INFOLINE. . So I am very thankful to INDIA INFOLINE for giving me such opportunity. First of all I thank to that Gracie god who blessed me with all kinds of facilities that had been provided to me for completion of my report. I am also grateful to MR.ASHISH SHARMA for permitting me to take the training at INDIA INFOLINE PVT.LTD. I acknowledge my deepest sense of gratitude and sincere feeling of in debt ness divine all my faculty members and Mr. A.S.BHANDERKAR under whose guidance and through their sustained efforts and encouraging attitude IU was able to complete my project. It would have been difficult to achieve the results in such a short span of time. I want to express my sincere gratitude to all the staff members of INDIA INFOLINE for spending their precious time and sharing the value able information with me and in helping my project to be a success.

ANAND KUMAR SHARMA

CONTENTS

Introduction to the industry Introduction to the organization Research Methodology Title of the Study Duration of the project Objective of Study Sample Size and method of selecting sample Scope of Study Limitation of study

Facts and Finding Data Analysis & Interpretation SWOT Conclusion Recommendation and Suggestions Bibliography

Chapter 1

Introduction to the Industry

INTRODUCTION
Capital Market Overview A market consists of sellers of products and buyers thereof. Obviously the securities market refers to investors i.e. wealth savers, who mobilize their savings and search for a remunerative source of investment thereof on the one hand, and on the other the capital seekers, that is, business, industry or government. The two constitute the core elements of the securities/capital market. This is the function of organized capital market to regulate market forces to ensure fair dealings, to motivate savings on the part of the investors and to secure smooth flow of savings/capital from investors to capital seekers for productive needs. This supervisory and regulatory function is performed by SEBI, the market regulator cum market developer. Composition of Equity/Corporate Debt Market This is the market consisting of large number of individual investors, household savers, professionals, agriculturists, who are able to a retain a part of their current earnings. They form the class of capital providers. On the other side the Corporate bodies engaged in Industry, trade and other business ventures are the productive users of significant amount of capital. It is the Capital market that transforms the savings of large number of individuals to productive channel to meet the demands of capital for Industry, trade and business. Stock market is also referred to as the Corporate Debt or Capital Market. While the money market, which deals with short-term financial needs of business and industry is restricted to funds needed for a period of one year or less, instruments of the debt/capital markets are raised for medium or long term needs. Indian Stock Market consists of three distinct segments: 7

1. The Public Debt Market i.e. the market for Government securities (also called Giltedged Market). These are interest bearing and dated securities. This market is regulated by RBI, the Central Bank of the country and banker to the Government. 2. PSU Bonds Market i.e. Bonds floated by public Sector units, nationalised banks and financial Institutions for raising Tier-II capital and also debentures floated by corporate. This is represented as the Corporate Debt Market. 3. The Equity Market for raising of equity or preference share capital by all corporate. Money invested in company shares is not refundable, but if the shares are listed in a stock exchange these can be sold or purchased, thus providing liquidity to such investments. Shares do not carry interest, but shareholders can participate in sharing the profits of the corporate body declared by way of dividends, bonus shares etc. At this context it is relevant to mention about two categories of stock market, i.e.

Primary market covering new public issues of all categories of securities, including Gsec, bonds and equity/preference capital. Secondary market, which deals with already issued securities of all types.

Transactions of the secondary market are carried out through one of the authorized stock exchanges, where the traded security is listed. The Primary Stock Market It is also called the market for public issues. This market refers to the raising of new capital (equity or debt i.e. equity shares, preference shares, debentures or Rights Issues) by corporate. Newly floated companies or existing companies may tap the equity market by offering public issues. When equity shares are exclusively offered to the existing shareholders, it is called Rights Issue. When a Company after incorporation initially approaches the public for the first time for subscription of its public issue it is called Initial Public Officer (IPO). Successful floating of a new issue requires careful planning, timing of the issue and comprehensive marketing efforts. The services of specialized institutions, like underwriters, merchant bankers and registrars to the issue are available for the corporate body to handle this specialized job. 8

Secondary Stock Market The Secondary Market deals with the sale/purchase of already issued equity/debts by the corporate and others. The sale/purchase of these securities are carried out at the specific Stock Exchange(s), where the companies get their public issues listed for trading. The main function of the secondary market is to provide liquidity to the listed securities by enabling a holder to easily convert the securities into cash through the stock exchanges. An individual or an Institution can either hold a portfolio of securities as a permanent investment, or he can hold a basket of securities for short-periods and engage in buying and selling them to gain from market fluctuations. The secondary market also acts as an important indicator of the investment climate in the economy. When prices of existing securities are rising and there is large trading in the existing shares, such a boom in the secondary market correspondingly signifies that new issues if floated at that point of time would be successfully subscribed. Functions of the Capital Market 1. The organized and regulated capital market motivates individual to save and invest funds. The availability of safe and profitable source of investment is an essential criteria to create propensity to save and invest on the part of the earning public. 2. It provides the investors safe and productive channels for investment of savings and secures the recurring benefit of return thereon, as long as the savings are retained. 3. It provides liquidity to the savings of the investors, by developing a secondary capital market, and thus makes even short term savings, consistently available for long-term users 4. It thus mobilizes savings of large number of individuals, families and associations and make the same available for meeting the large capital needs of organized industry, trade and business and for progress and development of the country as a whole and its economy.

To discharge these functions, the organized capital market accepts a dual responsibility

To develop the market and to promote savings & Investment; To regulate the players in the market vis--vis the investor and to enforce market discipline, through market regulators and registered intermediaries. Such that the unorganized small man is able to deal through these regulatory bodies and the intermediaries, and need not necessarily has to come into direct contact with the ultimate seekers of his savings.

Composition of capital market 1. One the one hand are the innumerable, but not organized savers, and 2. At the other end are those seeking capital from the capital market; 3. Regulatory Body: SEBI (the Securities & Exchange Board of India) an autonomous and statutory body acts as the market regulator and market developer. It regulates and controls the capital users and all functionaries between the users and the investors. 4. The Stock Exchanges: There are 23 Stock Exchanges registered with SEBI and under its regulation. They provide a transparent and safe (risk-free) forum of a market for investors to transact and invest their funds.

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List of Stock Exchanges in India

The Ludhiana Stock Exchange Association Ltd

National Stock Exchange of India Ltd

The Gauhati Stock Exchange Association Ltd

Inter-Connected Stock Exchange of India Ltd

Bhubaneswar Stock Exchange Association Ltd

Vadodara Stock Exchange Ltd

The Uttar Pradesh Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Saurashtra Kutch Stock Exchange Association Ltd. Over The Counter Stock Exchange Of India

Bombay Stock Exchange Ltd

Ahmedabad Stock Exchange Ltd

The Pune Stock Exchange Ltd Coimbatore Stock Exchange Ltd

Bangalore Stock Exchange Ltd The Calcutta Stock Exchange Association Ltd

The Cochin Stock Exchange Ltd

The Delhi Stock Exchange Association Ltd.

Magadh Stock Exchange Association

The Hyderabad Stock Exchange Ltd

Madhya Pradesh Stock Exchange Ltd

Madras Stock Exchange Ltd

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5. The Depositories: The depositories are innovative institutions, who are able to render the market paperless by holdings securities electronically, providing ease and speed for those transacting in the market. 6. The Registered Intermediaries: They consist of brokers, sub-brokers, Trading and Clearing Members, portfolio managers, Bankers to Issue, merchant bankers, registrars, underwriters and credit rating agencies. They all provide a basket of services to the investors to lesson risk and make transacting earlier and smooth. They are all registered with SEBI and act under the regulation of SAEBI abiding by the Code of Conduct prescribed for each of them governing their respective roles. So vast and well established is the market that the daily turn over in the main Stock Exchange in the Country National Stock Exchange of India averages Rs.2000 Crores presently and bound to multiply further in the coming future.

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Market Intermediary Intermediaries of Capital Market

Capital Market
Primary Market
Merchant Banker

Secondary Market

Broker

Registrar To Issue And Transfer Agent

Sub Broker

Banker To An Issue

Debenture Trustee

Underwriter

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Primary Market Intermediaries

Merchant Banker Merchant Banker means any person who is engaged in the business of issue management either by making arrangement regarding selling, buying or subscribing to securities as manager, consultant, adviser or rendering corporate advisory service in relation to such issue management; Registrar to an issue a. Registrar to an Issue means the person appointed by a body corporate or any person or group of persons. Share Transfer Agent Share Transfer Agent meansi. Any person, who on behalf of any body corporate maintains the record of holders of securities issued by such body corporate and deals with all matters connected with the transfer and redemption of its securities. ii. A department or division (by whatever name called) of a body corporate performing the activities referred in sub-clause (i) if, at any time the total number of the holders of securities issued exceed one lakh.

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Banker to An Issue Banker to an Issue means a scheduled bank carrying on all or any of the following issue related activities namely:i. ii. iii. iv. acceptance of application and application monies; acceptance of allotment or call monies; refund of application monies; payment of dividend or interest warrants.

As per Rule 3 of the Rules- No person shall carry on any activity as a banker to an issue unless he holds a certificate granted by the Board under the regulations Debenture Trustee debenture trustee means a trustee of a trust deed for securing any issue of debentures of a body corporate; The trust deed is a prescribed formality to be executed by the body corporate in favour of the trustees named therein for floating new debenture issues. It is a measure to safeguard the interest of the debenture holders, who are themselves, not organized. Underwriter

Underwriting means an agreement with or without conditions to subscribe to the securities of a body corporate when the existing shareholders of such body corporate or the public do not subscribe to the securities offered to them.

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underwriter means a person, who engages in the business of underwriting of an issue of securities of a body corporate; Portfolio Manager Portfolio Manager means any person who pursuant to a contract or arrangement with a client, advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio manager or otherwise) the management or administration of a portfolio of securities or the funds of the client, as the case may be. Credit rating agency

credit rating agency means a body corporate which is engaged in, or proposes to be engaged in, the business of rating of securities offered by way of public or rights issue;

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Secondary Market Of Intermediaries Stock Broker

sub-broker means any person not being a member of a stock exchange who acts on behalf of a stock-broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock-brokers;

Obligations of Stock Brokers Every stock-broker shall keep and maintain the following books of accounts, records and documents namely; Register of transactions (Sauda Book); Clients ledger; General ledger; Journals; Cash book; Bank pass book; Documents register should include particulars of shares and securities received and delivered; Members contract books showing details of all contracts entered into by him with other members of the same exchange or counterfoils or duplicates of memos of confirmation issued to such other member; Counterfoils or duplicates of contract notes issued to clients; 17

 Written consent of clients in respect of contracts entered into as principals; Margin deposit book; Registers of accounts of sub- brokers; An agreement with a sub- broker specifying the scope of authority and responsibilities of the Stock-Broker and such sub- broker. Where it appears to the Board so to do, it may appoint one or more persons as inspecting authority to undertake inspection of the books of accounts, other records and documents of the stock- brokers. Sub-Brokers

sub-broker means any person not being a member of a stock exchange who acts on behalf of a stock-broker as an agent or otherwise for assisting the investors in buying, selling or dealing in securities through such stock-brokers;

Obligations of Sub-Broker a. Pay the fees as prescribed b. Abide by the Code of Conduct c. Enter into an agreement with the stock broker for specifying the scope of his authority and responsibilities.

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Big Players (Brokers) Of Jaipur

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Chapter 2 Welcome to IndiaInfoline

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Company profile

About IndiaInfoline IndiaInfoline Group The India Infoline group, comprising the holding company, India Infoline Limited and its whollyowned subsidiaries, straddle the entire financial services space with offerings ranging from Equity research, Equities and derivatives trading, Commodities trading, Portfolio Management Services, Mutual Funds, Life Insurance, Fixed deposits, GoI bonds and other small savings instruments to loan products and Investment banking. India Infoline also owns and manages the websites www.indiainfoline.com and www.5paisa.com. The company has a network of 596 branches spread across 345 cities and towns. It has more than 500000 customers. India Infoline Ltd. India Infoline Limited is listed on both the leading stock exchanges in India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) and is also a member of both the exchanges. It is engaged in the businesses of Equities broking, Wealth Advisory Services and Portfolio Management Services. It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. It is registered with NSDL as well as CDSL as a depository participant, providing a one-stop solution for clients trading in the equities market. It has recently launched its Investment banking and Institutional Broking business.

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A SEBI authorized Portfolio Manager; it offers Portfolio Management Services to clients. These services are offered to clients as different schemes, which are based on differing investment strategies made to reflect the varied risk-return preferences of clients.

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India Infoline Media and Research Services Limited The content services represent a strong support that drives the broking, commodities, mutual fund and portfolio management services businesses. Revenue generation is through the sale of content to financial and media houses, Indian as well as global. It undertakes equities research which is acknowledged by none other than Forbes as Best of the Web and a must read for investors in Asia. India Infolines research is available not just over the internet but also on international wire services like Bloomberg (Code: IILL), Thomson First Call and Internet Securities where India Infoline is amongst the most read Indian brokers. India Infoline Commodities Limited. India Infoline Commodities Pvt Limited is engaged in the business of commodities broking. Our experience in securities broking empowered us with the requisite skills and technologies to allow us offer commodities broking as a contra-cyclical alternative to equities broking. We enjoy memberships with the MCX and NCDEX, two leading Indian commodities exchanges, and recently acquired membership of DGCX. We have a multi-channel delivery model, making it among the select few to offer online as well as offline trading facilities. India Infoline Marketing & Services India Infoline Marketing and Services Limited is the holding company of India Infoline Insurance Services Limited and India Infoline Insurance Brokers Limited. (a) India Infoline Insurance Services Limited is a registered Corporate Agent with the Insurance Regulatory and Development Authority (IRDA). It is the largest Corporate Agent for ICICI Prudential Life Insurance Co Limited, which is Indias largest private Life Insurance Company. India Infoline was the first corporate agent to get licensed by IRDA in early 2001. (b) India Infoline Insurance Brokers Limited India Infoline Insurance Brokers Limited is a newly formed subsidiary which will carry out the business of Insurance broking. We have applied to IRDA for the insurance broking licence and the clearance for the same is awaited. Post the grant of license, we propose to also commence the general insurance distribution business. 23

India Infoline Investment Services Limited Consolidated shareholdings of all the subsidiary companies engaged in loans and financing activities under one subsidiary. Recently, Orient Global, a Singapore-based investment institution invested USD 76.7 million for a 22.5% stake in India Infoline Investment Services. This will help focused expansion and capital raising in the said subsidiaries for various lending businesses like loans against securities, SME financing, distribution of retail loan products, consumer finance business and housing finance business. India Infoline Investment Services Private Limited consists of the following step-down subsidiaries. (a) India Infoline Distribution Company Limited (distribution of retail loan products) (b) Moneyline Credit Limited (consumer finance) I India Infoline Housing Finance Limited (housing finance)

IIFL (Asia) Private Limited IIFL (Asia) Private Limited is wholly owned subsidiary which has been incorporated in Singapore to pursue financial sector activities in other Asian markets. Further to obtaining the necessary regulatory approvals, the company has been initially capitalized at 1 million Singapore dollars.

Chapter 3
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Theoretical Aspects of concepts

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INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS ASPECTS.

Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. The joint ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. 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 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. A Mutual Fund is an investment tool that allows small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined each day. 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. 26

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. 27

Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.

ADVANTAGES OF MUTUAL FUND

Portfolio Diversification Professional management Reduction / Diversification of Risk Liquidity Flexibility & Convenience Reduction in Transaction cost Safety of regulated environment Choice of schemes Transparency

DISADVANTAGE OF MUTUAL FUND

No control over Cost in the Hands of an Investor No tailor-made Portfolios 28

Managing a Portfolio Funds Difficulty in selecting a Suitable Fund Scheme

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. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the Industry. In the past decade, Indian mutual fund industry had seen a dramatic improvement, both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached the height if Rs. 1540 billion. The Mutual Fund Industry is obviously growing at a tremendous space with the mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under. 29

First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

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

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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. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.

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

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of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes 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. consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

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CATEGORIES OF MUTUAL FUND:

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Mutual funds can be classified as follow :

Based on their structure: Open-ended funds: Investors can buy and sell the units from the fund, at

any point of time.

Close-ended funds: These funds raise money from investors only once.
Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity.

Based on their investment objective:

Equity funds: These funds invest in equities and equity related instruments.
With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as: 34

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of

composition and individual stock weightages. ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks. iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields. iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc. v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks. vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.

Balanced fund:

Their investment portfolio includes both debt and equity. As a

result, on the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities. ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt. 35

Debt fund: They invest only in debt instruments, and are a good option for
investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures,

Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs. i) Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market. ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills. iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate. iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities. v) Gilt funds LT- They invest 100% of their portfolio in long-term government securities. 36

vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term debt papers. vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities. viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.

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INVESTMENT STRATEGIES
1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.

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RISK V/S. RETURN:

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Chapter 4 Research Methodology

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RESEARCH METHODOLOGY
This report is based on primary as well secondary data, however primary data collection was given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making both day to day decision and critical ones.

Data sources:
Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites.

Duration of Study:
The study was carried out for a period of 45days, from 15 may to 30st June 2011.

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Sampling:
Sampling procedure:

The sample was selected of them who are the customers/visitors of india infoline, Rajapark Branch, irrespective of them being investors or not or availing the services or not. It was also collected through personal visits to persons, by formal and informal talks and through filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical tool.

Sample size:

The sample size of my project is limited to 200 people only. Out of which only 120 people had invested in Mutual Fund. Other 80 people did not have invested in Mutual Fund.

Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs etc.

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Scope of the study

A big boom has been witnessed in Mutual Fund Industry in resent times. A large number of new players have entered the market and trying to gain market share in this rapidly improving market. The research was carried on in Jaipur. I had been sent at one of the branch of aIndia infoline ,Jaipur where I completed my Project work. I surveyed on my Project Topic A study of preferences of the Investors for investment in Mutual Fund on the visiting customers of the Infoline ,Rajapark Branch. The study will help to know the preferences of the customers, which company, portfolio, mode of investment, option for getting return and so on they prefer. This project report may help the company to make further planning and strategy.

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Limitation:

not

Some of the persons were not so responsive. Possibility of error in data collection because many of investors may have given actual answers of my questionnaire.

Sample size is limited to 200 visitors of India infoline , Rajapark Branch, Jaipur out of these only 120 had invested in Mutual Fund. The sample. size may not adequately represent the whole market.

Some respondents were reluctant to divulge personal information which can affect the validity of all responses.

The research is confined to a certain part of Dehradoon.

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Facts and Findings

In Jaipur in the Age Group of 36-40 years were more in numbers. The

second most Investors were in the age group of 41-45 years and the least were in the age group of below 30 years. In Jaipur most of the Investors were Graduate or Post Graduate and

below HSC there were very few in numbers. In Occupation group most of the Investors were Govt. employees, the

second most Investors were Private employees and the least were associated with Agriculture. In family Income group, between Rs. 20,001- 30,000 were more in

numbers, the second most were in the Income group of more than Rs.30,000 and the least were in the group of below Rs. 10,000. About all the Respondents had a Saving A/c in Bank, 76% Invested in

Fixed Deposits, Only 60% Respondents invested in Mutual fund. Mostly Respondents preferred High Return while investment, the

second most preferred Low Risk then liquidity and the least preferred Trust.

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Only 67% Respondents were aware about Mutual fund and its

operations and 33% were not. Among 200 Respondents only 60% had invested in Mutual Fund and

40% did not have invested in Mutual fund. Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told

there is not any specific reason for not invested in Mutual Fund and % told there is likely to be higher risk in Mutual Fund. 60% Investors preferred to Invest through Financial Advisors, 25%

through AMC (means Direct Investment) and 15% through Bank. 65% preferred One Time Investment and 35% preferred SIP out of

both type of Mode of Investment. The most preferred Portfolio was Equity, the second most was Balance

(mixture of both equity and debt), and the least preferred Portfolio was Debt portfolio. the Maximum Number of Investors Preferred Growth Option for returns, second most preferred Dividend Payout and then Dividend

Reinvestment. Most of the Investors did not want to invest in Sectoral Fund, only 21%

wanted to invest in Sectoral Fund.

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Analysis and Findings ANALYSIS & INTERPRETATION OF THE DATA

1. (a) Age distribution of the Investors of Jaipur

Age Group No. of Investors

Investors invested in Mutual Fund 35 30 25 20 15 10 5 0

<= 30 12

31-35 18

36-40 30

41-45 24

46-50 20

>50 16

30 24 18 12 20 16

<=30

31-35

36-40

41-45

46-50

>50

Age group of the Investors

Interpretation:
According to this chart out of 120 Mutual Fund investors of Jaipur the most are in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs. 47

(b). Educational Qualification of investors of Jaipur

Educational Qualification Graduate/ Post Graduate Under Graduate Others Total Number of Investors 88 25 7 120

48

6% 23%

71%

Graduate/Post Graduate

Under Graduate

Others

Interpretation:
Out of 120 Mutual Fund investors 71% of the investors in Jaipur are Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under HSC).

c). Occupation of the investors of Jaipur

49

Occupation
Govt. Service Pvt. Service Business Agriculture Others .

No. of Investors
30 45 35 4 6

50 No. of Investors 40 30 20 10 0 Govt. Service Pvt. Service Business 35 45 30 4 Agriculture 6 Others

Occupation of the customers

Interpretation:
In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.

50

(d). Monthly Family Income of the Investors of Jaipur. Income Group

<=10,000 10,001-15,000 15,001-20,000 20,001-30,000 >30,000
50 No. of Investors 40 30 20 10 0 5 <=10 28 12 10-15 15-20 20-30 >30 43 32

No. of Investors
5

12 28 43 32

Income Group of the Investorsn (Rs. in Th.)

Interpretation:
In the Income Group of the investors of Jaipur, out of 120 investors, 36% investors that is the maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly income group of below Rs. 10,000

51

(2) Investors invested in different kind of investments. Kind of Investments

Saving A/C

Fixed deposits Insurance Mutual Fund Post office (NSC) Shares/Debentures Gold/Silver Real Estate

No. of Respondents 195 148 152 120 75 50 30 65

20 5 20 0 No.of 10 5 R pondent es 0 s 10 5 0 0

1 95 2 14 15 8 12 0 7 5 50 30 65

Interpretation: From the above graph it can be inferred that out of 200 people,
97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed 52

Sa v Fix ing ed A/ De c po In sits su M ran u ce Po tual st Fu n Sh Of fic d ar e es / D (NS K indsof C eb Investm ent en ) t Go ure s ld /S ilv Re er al Es ta te

Deposits, 60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate.

3. Preference of factors while investing

Factors (a) Liquidity (b) Low Risk (c) High Return No. of Respondents 40 60 64 36 (d) Trust

18%

20%

32%

30%

L iquidity

Low R k is

H hR ig eturn

Trus t

Interpretation:
Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust

53

4. Awareness about Mutual Fund and its Operations

Response No. of Respondents

Yes 135

No 65

33%

67%

Y es

No

Interpretation:
From the above chart it is inferred that 67% People are aware of Mutual Fund and its operations and 33% are not aware of Mutual Fund and its operations.

54

5. Source of information for customers about Mutual Fund

Source of information Advertisement Peer Group Bank Financial Advisors No. of Respondents 18 25 30 62

7 0 6 0 5 0 4 0 3 0 2 0 2 5 1 0 1 8 0 Advertisem Peer Group ent

No. of R espondents

6 2 3 0 B nk a F ncia ina l Adv isors

S ourc of Inform tion e a

Interpretation:
From the above chart it can be inferred that the Financial Advisor is the most important source of information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund Through Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement.

6. Investors invested in Mutual Fund

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Response YES NO Total

No. of Respondents 120 80 200

No 40%

Yes 60%

Interpretation:
Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested in Mutual Fund.

7. Reason for not invested in Mutual Fund

56

Reason Not Aware Higher Risk Not any Specific Reason

No. of Respondents

65 5 10

13%

6%

81%
Not Aware H her R k ig is Not Any

Interpretation:
Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of Mutual Fund, 13% said there is likely to be higher risk and 6% do not have any specific reason.

8. Channel Preferred by the Investors for Mutual Fund Investment

Channel Financial Advisor Bank AMC 57

No. of Respondents

72

18

30

25%

15%
F ncia Advis ina l or B nk a AMC

60%

Interpretation:
Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through AMC and 15% through Bank.

9. Mode of Investment Preferred by the Investors

58

Mode of Investment No. of Respondents

One time Investment 78

Systematic Investment Plan (SIP) 42

35%

65%

One tim Inves ent e tm

S IP

Interpretation:
Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through Systematic Investment Plan.

10. Preferred Portfolios by the Investors Portfolio

Equity Debt Balanced

No. of Investors
56 20 44 59

37%

46%

17%

Equity

Debt

B alance

Interpretation:
From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17% preferred Debt portfolio

11. Option for getting Return Preferred by the Investors

Option No. of Respondents 60 Dividend Payout 25 Dividend Reinvestment 10 Growth 85

21%

8% 71%
D ividend Payout Dividend R einves ent tm Growth

Interpretation:
From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout and 8% preferred Dividend Reinvestment Option.

12. Preference of Investors whether to invest in Sectoral Funds Response Yes No No. of Respondents 25 95

61

21%

79%

Y es

No

Interpretation:
Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because there is maximum risk and 21% prefer to invest in Sectoral Fund.

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Chapter 5 Recommendation and Suggestions

63

Recommendation (On the basis of Industrial Trends)

The most vital problem spotted is of ignorance. Investors should be

made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing. Mutual funds offer a lot of benefit which no other single option could

offer. But most of the people are not even aware of what actually a mutual fund is? They only see it as just another investment option. So the advisors should try to change their mindsets. The advisors should target for more and more young investors. Young investors as well as persons at the height of their career would like to go for advisors due to lack of expertise and time. Mutual Fund Company needs to give the training of the Individual

Financial Advisors about the Fund/Scheme and its objective, because they are the main source to influence the investors.

Before making any investment Financial Advisors should first

enquire about the risk tolerance of the investors/customers, their need and

64

time (how long they want to invest). By considering these three things they can take the customers into consideration. Younger people aged under 35 will be a key new customer group into

the future, so making greater efforts with younger customers who show some interest in investing should pay off. Customers with graduate level education are easier to sell to and

there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality.

Systematic Investment Plan (SIP) is one the innovative products

launched by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.

Conclusion
Running a successful Mutual Fund requires complete understanding of

the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial
65

behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, Channels etc. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing. Brand plays important role for the investment. People invest in those

Companies where they have faith or they are well known with them. There are many AMCs in Jaipur but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and their Assets Under Management is larger than others whose Brand name are not well known like Principle, Sunderam, etc. Distribution channels are also important for the investment in mutual

fund. Financial Advisors are the most preferred channel for the investment in mutual fund. They can change investors mind from one investment option to others. Many of investors directly invest their money through AMC because
66

they do not have to pay entry load. Only those people invest directly who know well about mutual fund and its operations and those have time.

A study of preferences of the investors for investment in mutual funds.

1. Personal Details: (a). Name:(b). Add: (c). Age:(d). Qualification:67

Phone:-

Graduation/PG (e). Occupation. Pl tick () Govt. Ser Pvt. Ser

Under Graduate

Others

Business

Agriculture

Others

(g). What is your monthly family income approximately? Pl tick (). Up to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs. 30,001 Rs.10,000 15000 20,000 30,000 and above 2. What kind of investments you have made so far? Pl tick (). All applicable. a. Saving account b. Fixed deposits e. Post Officef. NSC, etc Shares/Debenture s c. Insurance g. Gold/ Silver d. Mutual Fund h. Real Estate

3. While investing your money, which factor will you prefer? . (a) Liquidity (b) Low Risk (c) High (d) Trust Return 4. Are you aware about Mutual Funds and their operations? Pl tick (). Yes No

5. If yes, how did you know about Mutual Fund? a. Advertisement b. Peer Group c. Banks d. Financial Advisors Yes No
68

6. Have you ever invested in Mutual Fund? Pl tick ().

7. If not invested in Mutual Fund then why? (a) Not aware of MF (b) Higher risk (c) Not any specific reason

8. If yes, in which Mutual Fund you have invested? Pl. tick (). All applicable. a. INDIA b. c. HDFC d. Reliance e. Kotak f. Other. specify

INFOLINE UTI

9. If invested in infolineMF, you do so because (Pl. tick (), all applicable). a. infoline MF is associated with INDIA INFOLINE. b. They have a record of giving good returns year after year. c. Agent Advice

10. If NOT invested in InfolineMF, you do so because (Pl. tick () all applicable). a. You are not aware of SBIMF. b. InfolineMF gives less return compared to the others. c. Agent Advice

11. When you plan to invest your money in asset management co. which AMC will you prefer?
69

Assets Management Co. A india infoline b. UTI c. Reliance d. HDFC e. Kotak f. ICICI

12. Which Channel will you prefer while investing in Mutual Fund? (a) Financial Advisor (b) Bank (c) AMC

13. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick (). a. One Time Investment b. Systematic Investment Plan (SIP)

14. When you want to invest which type of funds would you choose? a. Having only debt portfolio b. Having debt & equity portfolio. c. Only equity portfolio.

15. How would you like to receive the returns every year? Pl. tick (). a. Dividend payout b. Dividend reinvestment c. Growth in NAV

70

16. Instead of general Mutual Funds, would you like to invest in sectorial funds? Please tick (). Yes No

71

Bibliography

News Papers
Business Standard Times of India Economic Times Indian Express

Magazines
Business Today Dalal Street Business world

Reference Books
Capital Market Module Handbook

Websites
www.moneycontrol.com www.opec.com www.projectsyndicate.com www.economictimes.com www.business-standard.com
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