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CHAPTER-1
INRODUCTION
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1 9 6 4 • U n i t T r u s t o f I n d i a , s i n g l e M F e n t i t y i n I n d i a
1 9 8 7 - 1 9 9 3 • E i g t n e ! f u n d s e s t a " l i s e d " y " a n # s , $ I % a n d & I % '
• T o t a l n u ( " e r o f s ) e ( e s u * t o 1 6 7 '
1 9 8 8 • + s s e t s u n d e r M a n a g e ( e n t + U M g r o ! s t o . s ' 6 , 7 / / % r '
1 9 9 3 • + U M s o o t s u * t o . s ' 6 1 , / / / ) r o r e • 0 r i a t e a n d f o r e i g n s e ) t o r * l a y e r s e n t e r t e i n d u s t r y • 2 o t a r i * i o n e e r M u t u a l F u n d r s t e n t r a n t
1 9 9 6 • E 5 I f o r ( u l a t e s M u t u a l F u n d . e g u l a t i o n , a ) o ( * r e e n s i e
r e g u l a t o r y f r a ( e ! o r #
/ 1 • 4 4 ( u t u a l f u n d o r g a n i s a t i o n s • + U M n e a r l y . s ' 1 l a # ) r o r e '
1.1 INCEPTION
The first introduction of a mutual fund in India occurred in 1963, when the
Government of India launched Unit Trust of India (UTI). Until 198, UTI en!o"ed a
mono#ol" in the Indian mutual fund mar$et. Then a host of other %overnment&
controlled Indian financial com#anies came u# with their own funds. These included
'tate an$ of India, anara an$, and *un!a+ ational an$. This mar$et was made
o#en to #rivate #la"ers in 1993, as a result of the historic constitutional amendments
+rou%ht forward +" the then on%ress&led %overnment under the e-istin% re%ime of
i+erali/ation, *rivati/ation and Glo+ali/ation (*G). The first #rivate sector fund to
o#erate in India was 0othari *ioneer, which later mer%ed with ran$lin Tem#leton. In
1996, '2I formulated the utual und 4e%ulation which is a com#rehensive
re%ulator" framewor$.
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1.2 WHAT ARE MUTUAL FUNDS?
5 utual und is a trust that #ools the savin%s of a num+er of investors who share a
common financial %oal. The mone" thus collected is invested +" the fund mana%er in
different t"#es of securities de#endin% u#on the o+!ective of the scheme. These could
ran%e from shares to de+entures to mone" mar$et instruments. The income earned in
these investments and the ca#ital a##reciation reali/ed +" the scheme is shared +" its
unit holders in #ro#ortion to the num+er of units owned +" them. Thus a utual und
is the most suita+le investment for the common man as it offers an o##ortunit" to
invest in a diversified, #rofessionall" mana%ed #ortfolio at a relativel" low cost.
5n"+od" with an investa+le sur#lus of a few thousand ru#ees can invest in utual
unds. 2ach utual und scheme has a defined investment o+!ective and strate%".
5 mutual fund is the ideal investment vehicle for toda"s com#le- and modern
financial scenario. ar$ets for e7uit" shares, +onds and other fi-ed income
instruments, real estate, derivatives and other assets have +ecome mature and
information driven. *rice chan%es in these assets are driven +" %lo+al events
occurrin% in farawa" #laces. 5 t"#ical individual is unli$el" to have the $nowled%e,
s$ills, inclination and time to $ee# trac$ of events, understand their im#lications and
act s#eedil".
5 mutual fund is answer to all these situations. It a##oints #rofessionall" 7ualified and
e-#erienced staff that mana%es each of these functions on a fulltime +asis. The lar%e
#ool of mone" collected in the fund allows it to hire such staff at a ver" low cost to
each investor. In fact, the mutual fund vehicle e-#loits economies of scale in all three
areas research, investment and transaction #rocessin%.
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5 draft offer document is to +e #re#ared at the time of launchin% the fund. T"#icall", it
#re s#ecifies the investment o+!ective of the fund, the ris$ associated, the cost
involved in the #rocess and the +road rules for entr" into and e-it from the fund and
other areas of o#eration. In India, as in most countries, these s#onsors need a##roval
from a re%ulator, '2I in our case. '2I loo$s at trac$ records of the s#onsor and its
financial stren%th in %rantin% a##roval to the fund for commencin% o#erations.
5 s#onsor then hires an asset mana%ement com#an" to invest the funds accordin% to
the investment o+!ective. It also hires another entit" to +e the custodian of the assets
of the fund and #erha#s a third one to handle re%istr" wor$ for the unit holders of the
fund. In the Indian conte-t, the s#onsors #romote the 5sset ana%ement om#an"
also, in which it holds a ma!orit" sta$e. In man" cases a s#onsor can hold a 1:
sta$e in the 5sset ana%ement om#an" (5). 2.%. irla Glo+al inance is the
s#onsor of the irla 'un ife 5sset ana%ement om#an" td., which has floated
different mutual funds schemes and also acts as an asset mana%er for the funds
collected under the schemes.
5s #er '2I re%ulations, mutual funds can offer %uaranteed returns for a ma-imum
#eriod of one "ear. In case returns are %uaranteed, the name of the %uarantor and how
the %uarantee would +e honoured is re7uired to +e disclosed in the offer document.
Investments in securities are s#read across a wide cross§ion of industries and
sectors and thus the ris$ is reduced. ;iversification reduces the ris$ +ecause all stoc$s
ma" not move in the same direction in the same #ro#ortion at the same time. utual
fund issues units to the investors in accordance with 7uantum of mone" invested +"
them. Investors of mutual funds are $nown as unit holders.
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1.3 HOW MUTUAL FUNDS OPERATE
CHART 1.1
rom the a+ove chart, it can +e o+served that how the mone" from the investors flow
and the" %et returns out of it. <ith a small amount of fund, investors #ool their mone"
with the fund mana%ers. Ta$in% into consideration the mar$et strate%" the fund
mana%ers invest this #ool of mone" into relia+le securities. <ith u#s and downs in
mar$et returns are %enerated and the" are #assed on to the investors. The a+ove c"cle
should +e ver" clear and also effective.
The fund mana%er while investin% on +ehalf of investors ta$es into consideration
various factors li$e time, ris$, return, etc. so that he can ma$e #ro#er investment
decision.
1.4 DISTRIBUTION CHANNELS
Traditional Distribution Channels
Individual
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=istoricall", individual a%ents would distri+ute units of Unit Trust of India and
insurance #olicies of ife Insurance or#oration. The" would also facilitate
investments in Governments 'mall 'avin%s 'chemes. urther, the" would sell
i-ed ;e#osits and *u+lic Issues of shares of com#anies, either directl", or as
a su+&+ro$er of some lar%e +ro$er.
UTI, I or other issuer of the investment #roduct (often referred to in the
mar$et as >#roduct manufacturers?) would advertise throu%h the mass media,
while an all&India field force of a%ents would a##roach investors to %et
a##lication forms si%ned and collect their che7ues. The a%ents $new the
investors families #ersonall" the a%ent would often +e viewed as an
e-tension of the famil".
Institutional Channels
The chan%in% com#etitive conte-t led to the emer%ence of institutional
channels of distri+ution for a wide s#ectrum of financial #roducts. This
com#rised@
ro$era%e firms and other securities distri+ution com#anies, who widened
their offerin% +e"ond com#an" i-ed ;e#osits and #u+lic issue of shares.
an$s, who started viewin% distri+ution of financial #roducts as a $e"
avenue to earn fee +ased income, while addressin% the investment needs of
their customers.
The institutional channels started attractin% a%ents as su+&+ro$ers. an"
individual a%ents o#ted to associate with the institutional channels, so that the"
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could %ive their customers the +enefit of newer technolo%ies and services
(which the a%ents found too costl" to offer on their own).
Thus, the distri+ution setu# has %ot re&ali%ned towards a mi- of@
Inde#endent inancial 5dvisors (I5s), who are individuals. The +i%%er
I5s o#erate with su##ort staff who handles +ac$&office wor$, while the"
themselves focus on sales and client relationshi#s.
on&+an$ distri+utors, such as +ro$era%es, securities distri+ution
com#anies and non+an$in% finance com#anies
an$ distri+utors
Newer Distribution Channels
Internet
The internet %ave an o##ortunit" to mutual funds to esta+lish direct contact
with investors. ;irect transactions afforded sco#e to o#timi/e on the
commission costs involved in distri+ution.
Investors, on their #art, have found a lot of convenience in doin% transactions
instantaneousl" throu%h the internet, rather than %et +o%%ed down with #a#er
wor$ and havin% to de#end on a distri+utor to do transactions. This has #ut a
7uestion mar$ on the e-istence of intermediaries who focus on #ushin% #a#er,
+ut add no other value to investors.
5 few #rofessional distri+utors have ri%htl" ta$en the #ath of value added
advice and e-cellent service level to hold on to their customers and develo#
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new customer relationshi#s. an" of them offer transaction su##ort throu%h
their own we+sites.
5 lar%e mass of investors in the mar$et need advice. The future of
intermediaries lies in caterin% to their needs, #ersonall" and A or throu%h a
team and A or with su##ort of technolo%".
Stock Exchanges
The institutional channels have had their limitations in reachin% out dee# into
the hinterland of the countr". 5 dis#ro#ortionate share of mutual fund
collections has tended to come from cor#orate and institutional investors,
rather than retail individuals for whose +enefit the mutual fund industr" e-ists.
'toc$ e-chan%es, on the other hand, have mana%ed to ride on the e7uit" cult in
the countr" and the #ower of communication networ$s to esta+lish a cost&
effective all&India networ$ of +ro$ers and tradin% terminals. This has +een a
successful initiative in the hi%h&volume low mar%in model of doin% +usiness,
which is more a##ro#riate and +eneficial for the countr". Bver the last few
months, '2I has facilitated +u"in% and sellin% of mutual fund units throu%h
the stoc$ e-chan%es. oth '2 and '2 have develo#ed mutual fund
transaction en%ines for the #ur#ose. The low cost and dee#er reach of the
stoc$ e-chan%e networ$ can increase the role of retail investors in mutual
funds, and ta$e the mutual fund industr" into its ne-t wave of %rowth.
ontri+ution of und Inflow from channels
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GRAPH 1.1
1.5 ADVANTAGES & DISADVANTAGES OF MUTUAL FUNDS
ADVANTAGES
• *rofessional mana%ement
• *ortfolio ;iversification
• 4eduction A ;iversification of 4is$
• i7uidit"
•le-i+ilit" C onvenience
• 4eduction in Transaction cost
• 'afet" of re%ulated environment
• hoice of schemes
• Trans#arenc"
DISADVANTAGES
• o control over ost in the =ands of an Investor
• o tailor&made *ortfolios
• ana%in% a *ortfolio unds• ;ifficult" in selectin% a 'uita+le und 'cheme
CHART 1.2
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1.6 CATEGORIES OF MUTUAL FUNDS
CHART 1.3
M!"# $%' ("% )* (#"''+$+* "' $,##,
B"'* ,% !/*+0 '!0(!0*
• O*%-*%* $%' Investors can +u" and sell the units from the fund, at an"
#oint of time.
• C#,'*-*%* $%' These funds raise mone" from investors onl" once.
Therefore, after the offer #eriod, fresh investments cannot +e made into the
fund. If the fund is listed on a stoc$s e-chan%e the units can +e traded li$e
stoc$s (2.%., 'I ;ual 5dvanta%e 'eries). 4ecentl", most of the ew und
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Bffers of close&ended funds #rovided li7uidit" window on a #eriodic +asis
such as monthl" or wee$l". 4edem#tion of units can +e made durin% s#ecified
intervals. Therefore, such funds have relativel" low li7uidit".
B"'* ,% !/*+0 +%*'!*%! ,)*(!+*
+ E+!7 $%'@ These funds invest in e7uities and e7uit" related instruments. <ith
fluctuatin% share #rices, such funds show volatile #erformance, even losses.
=owever, short term fluctuations in the mar$et, %enerall" smoothens out in the
lon% term, there+" offerin% hi%her returns at relativel" lower volatilit". 5t the
same time, such funds can "ield %reat ca#ital a##reciation as, historicall", e7uities
have out#erformed all asset classes in the lon% term. =ence, investment in e7uit"
funds should +e considered for a #eriod of at least 3&D "ears. It can +e further
classified as@
+ I%*8 $%'& In this case a $e" stoc$ mar$et inde-, li$e '2 'ense- or ift"
is trac$ed. Their #ortfolio mirrors the +enchmar$ inde- +oth in terms of
com#osition and individual stoc$ wei%hta%es.
++ E+!7 +*0'+$+* $%'- 1: of the ca#ital is invested in e7uities s#readin%
across different sectors and stoc$s.
+++ D++*% 7+*# $%'- it is similar to the e7uit" diversified funds e-ce#t that
the" invest in com#anies offerin% hi%h dividend "ields.
+ T/*"!+( $%'- Invest 1: of the assets in sectors which are related
throu%h some theme.
e.%. &5n infrastructure fund invests in #ower, construction, cements sectors
etc.
S*(!,0 $%'- Invest 1: of the ca#ital in a s#ecific sector. e.%. & 5 +an$in%
sector fund will invest in +an$in% stoc$s.
+ ELSS& 27uit" in$ed 'avin% 'cheme #rovides ta- +enefit to the investors.
++ B"#"%(* $% Their investment #ortfolio includes +oth de+t and e7uit". 5s a result,
on the ris$&return ladder, the" fall +etween e7uit" and de+t funds. alanced funds
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are the ideal mutual funds vehicle for investors who #refer s#readin% their ris$
across various instruments. ollowin% are +alanced funds classes@
"D*)!-,0+*%!* $%' -Investment +elow 6D: in e7uities.
)E+!7-,0+*%!* $%' -Invest at least 6D: in e7uities, remainin% in de+t.
+++ D*)! $% The" invest onl" in de+t instruments, and are a %ood o#tion for
investors averse to idea of ta$in% ris$ associated with e7uities. Therefore, the"
invest e-clusivel" in fi-ed&income instruments li$e +onds, de+entures,
Government of India securitiesE and mone" mar$et instruments such as
certificates of de#osit (;), commercial #a#er (*) and call mone". *ut "our
mone" into an" of these de+t funds de#endin% on "our investment hori/on and
needs.
L++ $%'- These funds invest 1: in mone" mar$et instruments, a lar%e
#ortion +ein% invested in call mone" mar$et.
G+#! $%' ST- The" invest 1: of their #ortfolio in %overnment securities of
and T&+ills.
F#,"!+%9 0"!* $%' - Invest in short&term de+t #a#ers. loaters invest in de+t
instruments which have varia+le cou#on rate.
A0)+!0"9* $%- The" %enerate income throu%h ar+itra%e o##ortunities due to
mis&#ricin% +etween cash mar$et and derivatives mar$et. unds are allocated to
e7uities, derivatives and mone" mar$ets. =i%her #ro#ortion (around D:) is #ut in
mone" mar$ets, in the a+sence of ar+itra%e o##ortunities.
G+#! $%' LT- The" invest 1: of their #ortfolio in lon%&term %overnment
securities.
I%(,* $%' LT- T"#icall", such funds invest a ma!or #ortion of the #ortfolio in
lon%&term de+t #a#ers.
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MIP'- onthl" Income *lans have an e-#osure of :&9: to de+t and an
e-#osure of 1:&3: to e7uities.
FMP'- fi-ed monthl" #lans invest in de+t #a#ers whose maturit" is in line with
that of the fund.
1.: CURRENT SCENARIO OF MUTUAL FUNDS IN INDIA
;es#ite +ein% availa+le in the mar$et less than 1: of Indian households have
invested in mutual funds. 5 recent re#ort on utual und Investments in India
#u+lished +" research and anal"tics firm, oston 5nal"tics, su%%ests investors are
holdin% +ac$ from #uttin% their mone" into mutual funds due to their #erceived hi%h
ris$ and a lac$ of information on how mutual funds wor$. There are DF utual unds
as of ul" H1D.
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CHART 1.4
1.;
GROWTH DRIVERS OF THE INDUSTR<
• olatilit"
*erformance of the ca#ital mar$ets
G;* Growth
Inflation
Interest 4ate
1.= INVESTMENT STRATEGIES
1. S7'!*"!+( I%*'!*%! P#"% under this a fi-ed sum is invested each month on a
fi-ed date of a month. *a"ment is made throu%h #ostdated che7ues or direct de+it
facilities. The investor %ets fewer units when the 5 is hi%h and more units when
the 5 is low. This is called as the +enefit of 4u#ee ost 5vera%in% (45)
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2. S7'!*"!+( T0"%'$*0 P#"% under this an investor invest in de+t oriented fund and
%ive instructions to transfer a fi-ed sum, at a fi-ed interval, to an e7uit" scheme of the
same mutual fund.
3. S7'!*"!+( W+!/0""# P#"% if someone wishes to withdraw from a mutual fund
then he can withdraw a fi-ed amount each month.
1.1> NEED FOR MUTUAL FUNDS
utual funds offer +enefits, which are too si%nificant to miss out. 5n" investment has
to +e !ud%ed on the "ardstic$ of return, li7uidit" and safet". onvenience and ta-
efficienc" are the other +enchmar$s relevant in mutual fund investment. In the
wonderful %ame of financial safet" and returns are the tows o##osite %oals and
investors cannot +e nearer to +oth at the same time. The cru- of mutual fund investin%
is avera%in% the ris$.
an" investors #ossi+l" dont $now that considerin% returns alone, man" mutual
funds have out#erformed a host of other investment #roducts. utual funds have
historicall" delivered "ields avera%in% within 9: to HD: over a medium to lon% time
frame. The duration is im#ortant +ecause li$ewise, mutual funds return taste +itter
with the #assa%e of time. Investors should +e #re#ared to loc$ in their investments
#refera+l" for 3 "ears in an income fund and D "ears in an e7uit" funds. i7uid funds
of course, %enerate returns even in a short term.
1.11 RIS INVOLVED IN MUTUAL FUNDS
utual funds face ris$s +ased on the investments the" hold. or e-am#le, a +ond fund
faces interest rate ris$ and income ris$. ond values are inversel" related to interest
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rates. If interest rates %o u#, +ond values will %o down and vice versa. ond income is
also affected +" the chan%es in interest rates. ond "ields are directl" related to
interest rates fallin% as interest rates fall and risin% as interest rates.
'imilarl", a sector stoc$ fund is at ris$ that its #rice will decline due to develo#ments
in its industr". 5 stoc$ fund that invests across man" industries is more sheltered from
this ris$ defined as industr" ris$.
ollowin%s are %lossar" of some ris$s to consider when investin% in mutual funds@&
" COUNTR< RIS -
The #ossi+ilit" that #olitical events (a war, national election), financial #ro+lems
(risin% inflation, %overnment default), or natural disasters will wea$en a countr"s
econom" and cause investments in that countr" to decline.
) INCOME RIS -
The #ossi+ilit" that #olitical events (a war, national election), financial #ro+lems
(risin% inflation, %overnment default), or natural disasters will wea$en a countr"s
econom" and cause investments in that countr" to decline.
( MARET RIS - The #ossi+ilit" that stoc$ fund or +ond fund #rices overall will
decline over short or even e-tended #eriods. 'toc$ and +ond mar$ets tend to move in
c"cles, with #eriods when #rices rise and other #eriods when #rices fall.
RIS RETURN REWARD IN MUTUAL FUND
GRAPH 1.2
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This %ra#h shows ris$ and return im#act on various mutual funds. There is a direct
relationshi# +etween ris$s and return, i.e. schemes with hi%her ris$ also have #otential
to #rovide hi%her returns.
1.12 REGULATOR< BODIES OF MUTUAL FUNDS
ASSOCIATION OF MUTUAL FUNDS IN INDIA @AMFI
The 5ssociation of utual unds in India (5I) is dedicated to develo#in% the
Indian utual und Industr" on #rofessional, health" and ethical lines and to enhance
and maintain standards in all areas with a view to #rotectin% and #romotin% the
interests of mutual funds and their unit holders.
5I, the association of '2I re%istered mutual funds in India of all the re%istered
5sset ana%ement om#anies, was incor#orated on 5u%ust HH, 199D, as a non&#rofit
or%anisation. 5s of now, all the FF 5sset ana%ement om#anies that are re%istered
with '2I, are its mem+ers.
OBECTIVES
To define and maintain hi%h #rofessional and ethical standards in all areas of
o#eration of mutual fund industr".
To recommend and #romote +est +usiness #ractices and code of conduct to +e
followed +" mem+ers and others en%a%ed in the activities of mutual fund and
asset mana%ement includin% a%encies connected or involved in the field of
ca#ital mar$ets and financial services.
To interact with the 'ecurities and 2-chan%e oard of India ('2I) and to
re#resent to '2I on all matters concernin% the mutual fund industr".
To re#resent to the Government, 4eserve an$ of India and other +odies on all
matters relatin% to the utual und Industr".
To underta$e nation wide investor awareness #ro%ramme so as to #romote
#ro#er understandin% of the conce#t and wor$in% of mutual funds.
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To disseminate information on utual und Industr" and to underta$e studies
and research directl" andAor in association with other +odies.
To ta$e re%ulate conduct of distri+utors includin% disci#linar" actions
(cancellation of 54) for violations of ode of onduct. To #rotect the interest of investorsAunit holders.
SECURITIES ECHANGE BOARD OF INDIA @SEBI
It was esta+lished +" on 1H 5#ril 1988 and %iven statutor" #owers in 199H with '2I
5ct 199H +ein% #assed +" the Indian *arliament. '2I has its head7uarters at the
+usiness district of andra 0urla om#le- in um+ai, and has orthern, 2astern,
'outhern and <estern 4e%ional Bffices in ew
;elhi, 0ol$ata, hennai and 5hmeda+ad res#ectivel". It has o#ened local offices at
ai#ur and an%alore and is #lannin% to o#en offices at Guwahati, hu+aneshwar,
*atna, 0ochi and handi%arh in inancial Jear H13 & H1F.
ontroller of a#ital Issues was the re%ulator" authorit" +efore '2I came into
e-istenceE it derived authorit" from the a#ital Issues (ontrol) 5ct, 19F.
FUNCTIONS
The *ream+le of the 'ecurities and 2-chan%e oard of India descri+es the +asic
functions of the 'ecurities and 2-chan%e oard of India as K...to #rotect the interests
of investors in securities and to #romote the develo#ment of, and to re%ulate the
securities mar$et and for matters connected therewith or incidental theretoK.
'2I has to +e res#onsive to the needs of three %rou#s, which constitute the mar$et@
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the issuers of securities
the investors
the mar$et intermediaries.
'2I has three functions rolled into one +od"@ 7uasi&le%islative, 7uasi&!udicial and
7uasi&e-ecutive. It drafts re%ulations in its le%islative ca#acit", it conducts
investi%ation and enforcement action in its e-ecutive function and it #asses rulin%s
and orders in its !udicial ca#acit". Thou%h this ma$es it ver" #owerful, there is an
a##eal #rocess to create accounta+ilit". There is a 'ecurities 5##ellate Tri+unal which
is a three&mem+er tri+unal and is headed +" r. ustice * ;evadhar, a former !ud%e
of the om+a" =i%h ourt. 5 second a##eal lies directl" to the 'u#reme ourt. '2I
has ta$en a ver" #roactive role in streamlinin% disclosure re7uirements to
international standards.
POWERS
or the dischar%e of its functions efficientl", '2I has +een vested with the followin%
#owers@
1. to a##rove +"Llaws of stoc$ e-chan%es.
H. to re7uire the stoc$ e-chan%e to amend their +"Llaws.
3. ins#ect the +oo$s of accounts and call for #eriodical returns from reco%ni/ed
stoc$ e-chan%es.
F. ins#ect the +oo$s of accounts of a financial intermediaries.
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5. com#el certain com#anies to list their shares in one or more stoc$ e-chan%es.
1.13 FINANCIAL ASPECTS OF MUTUAL FUNDS
NAV @N*! A''*! V"#*
In the mar$et, when #eo#le tal$ of 5, the" refer to the value of each unit of the
scheme. This is e7uivalent to@
Unit&holders unds in the 'cheme M o. of Units
General ormula for calculation of 5.
5 N (alue of stoc$s O alue of +onds O alue of mone" mar$et instruments O
;ividend accrued +ut not received O Interest accrued +ut not received ees #a"a+le)
A o. of outstandin% units
T0"%'"(!+,% C/"09*'
In order to cater to #eo#le with small savin% #otential and to increase reach of mutual
fund #roducts in ur+an areas and smaller towns, '2I has allowed a transaction
char%e #er su+scri#tion of 4s. 1,A& and a+ove to +e #aid to distri+utors of the
utual und #roducts. =owever, there shall +e no transaction char%es on direct
investments. The transaction char%e, if an", is deducted +" the 5 from the
su+scri#tion amount and #aid to the distri+utorE and the +alance shall +e invested.
T"#e of Investor Transaction har%es (4s.)
(or #urchaseAsu+scri#tion of 4s. 1, and
a+ove)
irst time mutual fund investor 4s. 1DA&Investor other than first time mutual fund 4s. 1A&
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investor
=owever, Transaction har%e(s) will not +e deducted for the followin%@ &
P *urchaseA'u+scri#tion su+mitted +" investor at the desi%nated collection centres or
throu%h 5s we+site and which are not routed throu%h an" distri+utor.
P *urchaseA 'u+scri#tion throu%h a distri+utor for an amount less than 4s. 1,E
P Transactions such as 'witches, 'T* i.e. all such transactions wherein there is no
additional cash flow at a mutual fund level similar to *urchaseA'u+scri#tion.
P *urchaseA'u+scri#tions throu%h an" stoc$ e-chan%e.
E8*%'*'
Two $inds of e-#enses come u#@
" I%+!+"# I''* E8*%'*'
These are one&time e-#enses that come u# when the scheme is offered for the first
time (B). These need to +e +orne +" the 5.
Investors who review the financial statements of old schemes ma" find an item called
>Issue e-#enses not written off?. The +ac$%round to this is that earlier, schemes could
char%e initial issue e-#enses to the scheme, u# to 6: of the amount mo+ili/ed in the
B. Thus, if an B mo+ili/ed 4sDcrore, 4s3crore could +e char%ed to the
scheme as initial issue e-#enses, #rovided such e-#enditure was actuall" incurred.
If the entire amount were treated as an e-#ense, then, the 5 would %o down to that
e-tent Qfollows from the #rofita+ilit" metric discussed earlierR. Thus, a scheme whose
units have a face value of 4s1 would need to start with an 5 of 4s1 less 6: i.e.
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4s9.F, if the entire issue e-#enses were treated as an immediate e-#ense (in
accountin% terminolo%", the e-#ensin% is called >writin% off?S.In order to #revent
initial issue e-#enses from causin% a drastic fall in 5, the %uidelines #ermitted an
accountin% treatment called >deferred load?.
;eferred load o#erated on the #rinci#le that if the scheme were to last for F "ears,
then the initial issue e-#enses relate to mone" that will +e in the scheme for F "ears.
'o the initial issue e-#enses could +e written off over F "ears. That #art of the initial
issue e-#ense that related to #eriods that have #assed would +e written off (which will
reduce the 5)E the #art that related to a future time #eriod, was treated as an asset
of the scheme, called >Issue e-#enses not written off?. The followin% ta+le illustrates
the #oint, assumin% a F "ear scheme incurred initial issue e-#enses of 4s8rore.
2nd of Jear Issue 2-#enses <ritten Bff
(which reduces the 5)
Issue 2-#enses not <ritten Bff
(shown as asset in 'cheme
alance 'heet)
1 4s. Hcr 4s. 8cr less 4s. Hcr i.e. 4s. 6cr
H 4s. Hcr 4s. 6cr less 4s. Hcr i.e. 4s. Fcr
3 4s. Hcr 4s. Fcr less 4s. Hcr i.e. 4s. Hcr
F 4s. Hcr 4s. Hcr less 4s. Hcr i.e. 4s. Hcr
5s mentioned earlier, 5s need to +ear the initial issue e-#enses now. 'o, deferred
load is not a##lica+le for newer schemes.
4ecurrin% 2-#enses These can +e char%ed to the scheme. 'ince the recurrin%
e-#enses dra% down the 5, '2I has laid down the e-#enses, which can +e
char%ed to the scheme. 5n indicative list is as follows@
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ees of various service #roviders, such as Trustees, 5, 4e%istrar C
Transfer 5%ents, ustodian, C 5uditor
'ellin% e-#enses includin% scheme advertisin% and commission to the
distri+utors 2-#enses on investor communication, account statements, dividend A
redem#tion che7ues A warrants
istin% fees and ;e#ositor" fees
'ervice ta-
ro$era%e and transaction cost incurred for the #ur#ose of e-ecution of trade ma" +e
ca#itali/ed to the e-tent of .1H: for cash mar$et transactions and .D: for
derivatives transactions res#ectivel". 5n" #a"ment towards +ro$era%e and transaction
cost, over and a+ove the said #ercenta%e ma" +e char%ed to the scheme within the
ma-imum limit of Total 2-#ense 4atio (T24). 2-#enditure in e-cess of the said
#rescri+ed total e-#ense ratio limit
(Includin% +ro$era%e and transaction cost, if an") has to +e +orne +" the 5 or +"
the trustee or s#onsors.
Bther #rovisions with res#ect to service ta- are as follows@
utual funds A5s ma" char%e service ta- on investment and advisor"
fees to the scheme in addition to the ma-imum limit of total e-#ense
allowed for the scheme 'ervice ta- on e-#enses other than investment and advisor" fees, if an", is
to +e +orne +" the scheme within the ma-imum limit of total e-#ense
allowed for the scheme.
'ervice ta- on +ro$era%e and transaction cost #aid for e-ecution of trade, if
an", must +e within the #rescri+ed total e-#ense limit for the scheme, as
discussed earlier.
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The followin% e-#enses cannot +e char%ed to the scheme@
• *enalties and fines for infraction of laws.
• Interest on dela"ed #a"ment to the unit holders.
• e%al, mar$etin%, #u+lication and other %eneral e-#enses not attri+uta+le
to an" scheme(s).
• und 5ccountin% ees.
• 2-#enses on investment mana%ementA%eneral mana%ement.
• 2-#enses on %eneral administration, cor#orate advertisin% and
infrastructure costs.
• ;e#reciation on fi-ed assets and software develo#ment e-#enses.
R*(00+%9 E8*%'* L++!'
'2I has sti#ulated the followin% annual limits on recurrin% e-#enses (includin%
mana%ement fees) for schemes other than inde- schemes@
et 5ssets (4s crore) 27uit" 'chemes ;e+t 'chemesU# to 4s 1 crore H.D: H.HD:
e-t 4s 3 crore H.HD: H.:
e-t 4s 3 crore H.: 1.D:
2-cess over 4s crore 1.D: 1.D:
The a+ove #ercenta%es are to +e calculated on the avera%e dail" net assets of the
scheme.
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1.14 COMPAN< PROFILE
'I utual und is Indias lar%est +an$ s#onsored mutual fund and has an envia+letrac$ record in !udicious investments and consistent wealth creation.
The fund traces its linea%e to 'I & Indias lar%est +an$in% enter#rise. The institution
has %rown immensel" since its ince#tion and toda" it is Indias lar%est +an$,
#atroni/ed +" over 8: of the to# cor#orate houses of the countr". It has +een HD
"ears since 'I utual funds came into e-istence. It is a oint enture +etween 'tate
an$ of India ('I) Indias lar%est +an$ and 5U;I a rance +ased com#an"
ran$ed no. in 2uro#e and is in the field of asset mana%ement.
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4i%ht now 'I has over HHH *B5 (#oint of acce#tance) across India and ri%ht
now runnin% 3 schemes
5 total of over 6.8 million investors have re#osed their faith in the wealth %eneration
e-#ertise of the utual und. 'chemes of the utual fund have consistentl"
out#erformed +enchmar$ indices and have emer%ed as the #referred investment for
millions of investors and =Is.
Toda", the fund mana%es over 4s. 6F,16 crores of assets and has a diverse #rofile of
investors activel" #ar$in% their investments across 3 active schemes.
'I utual is the first +an$&s#onsored fund to launch an offshore fund 4esur%ent
India B##ortunities und.
• '#onsor@ 'tate an$ of India
• Trustee@ 'I utual und Trustee om#an" *rivate imited
• Investment ana%er@ 'I unds ana%ement *rivate imited 'tatutor"
;etails@ 'I utual und ('I)E constituted as a Trust with 'IT*
as the Trustee under the #rovisions of Indian Trusts 5ct, 188H, and re%istered
with '2I.
1.15 PRODUCTS OF SBI MUTUAL FUNDS
E+!7 '(/**'
The investments of these schemes will #redominantl" +e in the stoc$ mar$ets and
endeavor will +e to #rovide investors the o##ortunit" to +enefit from the hi%her
returns which stoc$ mar$ets can #rovide. =owever the" are also e-#osed to the
volatilit" and attendant ris$s of stoc$ mar$ets and hence should +e chosen onl" +"
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such investors who have hi%h ris$ ta$in% ca#acities and are willin% to thin$ lon%
term. 27uit" unds include diversified 27uit" unds, 'ectorial unds and Inde-
unds. ;iversified 27uit" unds invest in various stoc$s across different sectors
while sectorial funds which are s#eciali/ed 27uit" unds restrict their investments
onl" to shares of a #articular sector and hence, are ris$ier than ;iversified 27uit"
unds. Inde- unds invest #assivel" onl" in the stoc$s of a #articular inde- and the
#erformance of such funds move with the movements of the inde-.
• a%num B5 und
• a%num 27uit" und
• a%num Glo+al und
• a%num Inde- und
• a%num idca# und
• a%num ultica# und
• a%num ulti#lier #lus 1993
• a%num 'ectorial unds Um+rella
• 2mer%in% usiness und
• IT und
• *harma und
• ontra und
• G und
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• 'I 5r+itra%e B##ortunities und
• 'I lue chi# und
• 'I Infrastructure und & 'eries I
• 'I a%num Ta- %ain 'cheme 1993
• 'I B2 India und
D*)! '(/**'
;e+t unds invest onl" in de+t instruments such as or#orate onds, Government
'ecurities and one" ar$et instruments either com#letel" avoidin% an"
investments in the stoc$ mar$ets as in Income unds or Gilt unds or havin% a
small e-#osure to e7uities as in onthl" Income *lans or hildrens *lan. =ence
the" are safer than e7uit" funds. 5t the same time the e-#ected returns from de+t
funds would +e lower. 'uch investments are advisa+le for the ris$&averse investor
and as a #art of the investment #ortfolio for other investors.
1 a%num hildrens +enefit *lan
H a%num Gilt und
3 a%num Income und
F a%num Insta ash und
D a%num Income und& loatin% 4ate *lan
6 a%num Income *lus und
a%num Insta ash und &i7uid loater *lan
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8 a%num onthl" Income *lan
9 a%num onthl" Income *lan & loater
1 a%num 4I Investment und
11 'I *remier i7uid und
B"#"%(* S(/**'
a%num alanced und invests in a mi- of e7uit" and de+t investments. =ence
the" are less ris$" than e7uit" funds, +ut at the same time #rovide commensuratel"
lower returns. The" #rovide a %ood investment o##ortunit" to investors who do not
wish to +e com#letel" e-#osed to e7uit" mar$ets, +ut is loo$in% for hi%her returns
than those #rovided +" de+t funds.
• a%num alanced und
FOCUSSED SCHEMES
1. SBI B#*C/+ F%
Investment Objective
To #rovide investors with o##ortunities for lon% term %rowth in ca#ital
throu%h an active mana%ement of investments in a diversified +as$et of
e7uit" stoc$s of com#anies whose mar$et ca#itali/ation of at least e7ual to or
more than the least mar$et ca#itali/ed stoc$ of 'C* '2 1 Inde-.
Date of Inception
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1FAHAH6
Exit Load
or e-it within 1 "ear from the date of allotment 1:E for e-it after 1 "ear
from the date of allotment I
SI onthl" & inimum 1 C in multi#les of 1 thereafter for minimum si-
months (or) minimum D C in multi#les of 1 thereafter for minimum one
"ear
uarterl" & inimum 1D C in multi#les of 1 thereafter for minimum one
"ear
!uantitative Data
'tandard ;eviation@ 13.H
eta@ .8
4& '7uared@ .9
'har#e 4atio@ 1.HF
*ortfolio Turnover@ .63
2. SBI M"9% B"#"%(* F%
Investment Objective
To #rovide investors lon% term ca#ital a##reciation alon% with the li7uidit" of
an o#en&ended scheme +" investin% in a mi- of de+t and e7uit". This scheme
will invest in a diversified #ortfolio of e7uities of hi%h %rowth com#anies and
+alance the ris$ throu%h investin% the rest in a relativel" safe #ortfolio of de+t.
Date of Inception
31A1HA199D
Exit Load
or e-it within 1H months from the date of allotment 1:E for e-it after 1H
months from the date of allotment I (w.e.f a" 18, H1D)
SI
onthl" & inimum 1 C in multi#les of 1 thereafter for minimum si-
months (or) minimum D C in multi#les of 1 thereafter for minimum one
"ear
uarterl" & inimum 1D C in multi#les of 1 thereafter for minimum one
"ear !uantitative Data
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'tandard ;eviation @ 1.69:
eta @ .88
4& '7uared@ .6
'har#e 4atio@ 1.FD
*ortfolio Turnover@ .3
Total 2-#ense 4atio
4e%ular@ H.1H:
;irect@ 1.FH:
3. SBI M"9% M+C" F%
Investment Objective
To #rovide investors with o##ortunities for lon%&term %rowth in ca#ital alon%
with the li7uidit" of an o#en&ended scheme +" investin% #redominantl" in a
well&diversified +as$et of e7uit" stoc$s of ida# com#anies. Date of Inception
H9A3AHD
Exit Load
or e-it within 1H months from the date of allotment 1:E for e-it after 1H
months from the date of allotment I (w.e.f a" 18, H1D)
SI
onthl" & inimum 1 C in multi#les of 1 thereafter for minimum si-
months (or) minimum D C in multi#les of 1 thereafter for minimum one
"ear
uarterl" & inimum 1D C in multi#les of 1 thereafter for minimum one
"ear
!uantitative Data
i 'tandard ;eviation @ 1D.96:
ii eta @ .3
iii 4& '7uared@ .8
iv 'har#e 4atio@ 1.D
v *ortfolio Turnover@ .F3vi Total 2-#ense 4atio
•4e%ular@ H.H6:
•;irect@ 1.D1:
F. SBI M"9% T"8 9"+% S(/**
Investment Objective
The #rime o+!ective of this scheme is to deliver the +enefit of investment in a
#ortfolio of e7uit" shares, while offerin% deduction on such investments
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made in the scheme under 'ection 8 of the Income Ta- 5ct, 1961. It also
see$s to distri+ute income #eriodicall" de#endin% on distri+uta+le sur#lus.
Date of Inception
31A3A1993
Exit Load I
SI
D C in multi#les of D
!uantitative Data
'tandard ;eviation @ 1F.FD:
eta @ .89
4& '7uared@ .9
'har#e 4atio@ 1.
*ortfolio Turnover@ .19
1 Total 2-#ense 4atioo 4e%ular@ H.1:
o ;irect@ 1.D3:
1.16 COMPETITORS
'ome of the main com#etitors of 'I utual und are as ollows@
a. III utual und
+. 4eliance utual und
c. UTI utual und
d. irla 'un ife utual und
e. 0ota$ utual und
f. =; utual und
%. 'undaram utual und
h. I utual und
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i. *rinci#al
!. ran$lin Tem#leton
1.1: NEED OF THE STUD<
1 The stud" was underta$en to understand the customers +ehaviour towards
mutual funds and the awareness amon%st them a+out various mutual fund
#roducts.
H The need of the stud" aimed to $now the awareness in the #u+lic a+out the
various #roducts and services #rovided +" '..I&utual und.
3 5 stud" was also conducted to measure the #erformance of various funds on
the +asis of various #erformance measurin% ratios such as 'har#e ratio,
returns, standard deviation, eta.
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F The stud" was +asicall" underta$en to understand the financial needs of the
customer and to #rovide or su%%est them #roducts and services accordin% to
their financial needs.
1.1; SCOPE OF THE STUD<
G*,90"/+("# '(,*-
The %eo%ra#hical sco#e of the stud" is not limited. This stud" can +e im#lemented in
an" #art of the countr"E thou%h the sam#les ta$en were from HDFC B"% +ranch at
M,/"* A#+ R," B0"%(/ .
F%(!+,%"# '(,*-
This stud" can +e used to understand the +ehavioral as#ect of #eo#le who invest, what
is their investment #otential and how much ris$ can the" ta$e. The stud" throws some
li%ht on four focused schemes of '..I&utual und.
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1.1= OBECTIVES OF THE STUD<
To $now the awareness of mutual funds amon% #eo#le.
To see the interest of #eo#le in investin% in mutual funds.
To $now the investment +ehaviour of investors in mutual fund accordin% to
different a%e %rou#.
To ascertain the #ercenta%e of income the investors invest in mutual fund.
To $now the different attitudes of #eo#le re%ardin% ris$, rate of return, #eriod
of investment.
To $now the investors #referred financial #roduct for investment
CHAPTER-2
RESEARCH METHODOLOG<
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2.1 RESEARCH DESIGN
This *ro!ect 4e#ort is #re#are +" ta$in% into consideration +oth #rimar" as well as
secondar" data..
P0+"07 "!" (,##*(!+,%
In dealin% with real life #ro+lems it is often found that data in hand is inade7uate, and
hence, it +ecomes necessar" to collect data that is a##ro#riate. There are several wa"s
of collectin% the a##ro#riate data which differ considera+l" in conte-t of mone" costs,
time and other resources at the dis#osal of the researcher.
rimar" data can be collected either throu#h experiment or throu#h surve"$
The data collection for this study was done in the following manner:
Throu#h personal interviews%&
5 ri%id #rocedure was followed and I was see$in% answers to man" #re&conceived
7uestions throu%h #ersonal interviews.
Throu#h 'uestionnaire%&
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Information to find out the investment #otential and %oal was found out throu%h
7uestionnaires.
S*(,%"07 D"!" C,##*(!+,%
e)ondary data in)ludes infor(ation regarding *resent (ar#et s)enario,
Infor(ation regarding Mutual Funds and )o(*etitors are )olle)ted "y
internet, Magaines and e!s*a*er and "oo#s'
2.2 T<PES OF DATA
PRIMAR< DATA
The sam#lin% method chosen is (rea Samplin# . 5s the #rimar" sam#lin% unit
re#resents a cluster of units +ased on %eo%ra#hic area. The %eo%ra#hical area chosen
for individual customers was at =; an$ (ohammed 5li 4oad ranch.)
It is +asicall" a non&#ro+a+ilit" sam#lin% #rocedure which does not afford an" +asis
for estimatin% the #ro+a+ilit" that each item in the #o#ulation has of +ein% included in
the sam#le.
Under non&#ro+a+ilit" sam#lin% the or%ani/ers of the en7uir" #ur#osivel" choose the
#articular units of the universe for constitutin% a sam#le on the +asis that the small
mass that the" so select out of a hu%e one will +e t"#ical or re#resentative of the
whole.
.
SECONDAR< DATA
'econdar" research %athers e-istin% information throu%h availa+le sources.
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;ata collection was done throu%h reco%ni/ed sources and then com#ared..
2.3 SAMPLE DESIGN
The sam#le com#rised of 1 res#ondents.
The stud" is +ased on a surve" of 1 res#ondents throu%h a 7uestionnaire coverin%
different %rou#s of investors +ut I could collect 9 com#lete 7uestionnaire from
investors out of which 9 were ta$en as an effective sam#le and the data o+tained
were anal"/ed +" usin%, actor anal"sis and ;iscriminant anal"sis. The 7uestionnaire
has +een attached in the 5nne-ure.
2.3.1 P,#"!+,%
5 #o#ulation is the total of all the individuals who have certain characteristics and are
of interest to a researcher. " surve" com#rises of individuals from various classes of
societ" such as colle%e students, investors, individual, +usinessman, self&em#lo"ed
#eo#le is +een considered in #o#ulations.
2.3.2 S"#* S+*-
'am#le si/e is limited to 1 onl" thus sam#le si/e does not ade7uatel" re#resent the
national mar$et.
This stud" has not +een conducted over half month #eriod in which most of the time
it was slum# and fluctuations in the mar$et. Thus the res#onses of the investors are
li$el" to +e influenced +" the mar$et conditions
2.3.3 S"#+%9 M*!/,-
*ro+a+ilit" sam#lin% is a sam#lin% techni7ue wherein the sam#les are %athered in a
#rocess that %ives all the individuals in the #o#ulation e7ual chances of +ein%
selected.
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2.4. METHOD OF DATA COLLECTION
'urve" method has +een used while collectin% data from num+er of sam#le si/e or
res#ondents on the +asis of 7uestionnaire desi%ned.
2.4.1 I%'!0*%!' $,0 D"!" C,##*(!+,%-
*rinted uestionnaire was the instrument used for data collection on the +asis of
closed ended 7uestionnaire were +een as$ed to res#ondent.
2.4.2 D0"$!+%9 ,$ " *'!+,%%"+0*
<hile desi%nin% the 7uestionnaire the followin% ste#s were ta$en into consideration
which are follows@
D*(+'+,% R*9"0+%9 *'!+,%' The e-act data re7uirement was anal"sed and
7uestionnaire was then formed to #ut the 7uestions in the most suita+le manner..
T7*' ,$ *'!+,%' e-t ste# of draftin% the 7uestionnaire is to decide a+out the
wa" in which 7uestions have to +e as$edV uestions would +e on o#en or close
ended.
Simple Alternative Questions@ These 7uestions ma" +e answered +etween two
alternatives.
ultiple Choice Questions: ulti#le 7uestions can +e answered in a num+er of wa"s.
Specific Information Questions@ 'uch 7uestions are as$ed to o+tain some s#ecific
information
2.4.4 T*'!+%9 ,$ *'!+,%%"+0* P+#,! '0*7
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In order to chec$ the relia+ilit" and validit" of the data, some similar $ind of varia+les
in the 7uestionnaire li$e fund #erformance and fund mana%er #erformance as well as
securit" and attitude towards ris$ were $e#t. In order to increase the relia+ilit" and
validit", we have e-cluded the 7uestionnaires filled +" those res#ondents who had a
varied o#inion
The anal"sis methods are used for the followin% reasons@
1) )actor anal"sis is used to classif" similar varia+les under a +road headin%, as the
num+ers of inde#endent varia+les are ver" hi%h.
H) !iscriminant anal"sis is used to hi%hli%ht varia+les which effect the decision of
#eo#le investin% for less than a "ear and #eo#le who are investin% for more than a
"ear.
<e are %oin% to see how these selected factors affect the investment +ehaviour of the
e-istin% C #otential investors. 5+ove mentioned statistical tools have +een used to
anal"se this thin%. 5s we use actor anal"sis we can reduce the num+er of factors to
draw some clear #icture for the investors who are loo$in% to invest irres#ective of
mar$et conditions. actor anal"sis will reco%ni/e similar factors C clu+ them into one
%enerali/ed factor and this will hel# an" researcher to o+serve the most im#ortant
factors that contri+ute most to the investment +ehaviour of the investors.
.
2.5 DATA ANAL<SIS TECHNIUES
ethodolo%" 5do#ted for #rimar" ;ata 5nal"sis
*rimar" ;ata is anal"/ed +" usin%
;escri#tive <ei%hted actor ountin% ethod
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actor 5nal"sis
5nal"sis of ;emo%ra#hics of the investors
Throu%h #ie hcarts, +ar %ra#hs. etc.
ethodolo%" 5do#ted for 'econdar" ;ata 5nal"sis
or the first #art of anal"sis i.e. fund returns, I have ta$en five to# funds of same
cate%or" of different fund houses and com#ared their returns for 3 months, 6 months,
1"ear, H "ears 3 "ears and D "ears.
or the second #art of anl"sis i.e. ris$ #rofile, I have com#ared these five funds with
res#ect to their standard deviation, shar#e ratio, +eta, al#ha and r& s7uared..
The com#arison of the funds is done usin% the +ar charts and thus arrivin% at a
conclusion after anal"/in% those charts
'econdar" data is anal"/ed +" usin% the returns nta+les and %ra#hs.etc.
H.6 LIMITATIONS
There is a #ossi+ilit" of investors +ein% +iased
The surve" was conducted durin% a #eriod of half month when the mar$et was
slu%%ish.
The sam#le si/e was 7uite low to ta$e re#resentative sam#les from various sections of
the societ".
The surve" was conducted in um+ai where #eo#le are more aware of the financial
tools li$e mutual funds. =woever the scenario #an India ma" +e different.
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CHAPTER - 3
DATA ANAL<SIS & INTERPRETATION
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DESCRIPTIVE WEIGHTED FACTOR COUNTING METHOD
<e have ran$ed the inde#endent varia+les affectin% the +u"in% +ehavior of consumers
+" addin% the wei%hted factors. irstl", we have counted the res#onses under each
scale. 'econdl", we have assi%ned wei%hts to each of the scale %ivin% least wei%ht to 1
and ma-imum wei%ht to D. inall", we have added all the wei%hted res#onses and
ran$ed accordin%l" i.e. in descendin% order.
4an$in% were %iven after addin% all the wei%hts.
or. 2%
=istorical *erformance N .(1-H)O (H-F)O (3-9)O (F-FH)O (D-3D) N 39
RAN
INDEPENDENT VARIABLES 1 2 3 4 5
1 =istorical *erformance H F 9 FH 3D
H und 4eturn Bver ar$et 4eturn 3 D 1H 31 F1
3 5dvisor Influence H D HD 3D HD
F Ta- enefit 6 11 13 H9 33
D oc$ In *eriod 1 D 31 3H H3D 4e#utation 3 D H9 H8 H
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'ecurit" D D H F1 H1
8 T"#e Bf 'cheme F 6 HF 3D H3
9 4e%ular Income 8 1 1D 3H H
1 5um 3 H9 36 1
11 onvenience F 6 3 3D 11H 5ttitude Towards 4is$ 3 1 3H 3 1
13 ees 6 1H H3 31 H
13 5 6 11 HD 3 H
1D luctuation In 27uit" ar$et F 18 18 3F 18
16 *ersonal 5ttention F 1 3D 3H 11
1 *rior 2-#erience 11 11 HD H9 16
18 *ros#ectus 1 H HF HD 13
19 amil" 4ecommendation 1D H H HF 6
H und 4atin% HF H8 13 1D 1HH1 Internet 1D 3 H 11 9
HH *romotional am#ai%n HH HD H6 1F D
H3 ot 'i/e H 3 HD 1
HF *erformance Bf und ana%er HD 3 H6 6 D
HD 2conomic Car$et onditions HF 3D H1 8 F
H6 Trans#arenc" 33 3F 18 D H
TABLE 1.1
FACTOR ANAL<SIS
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5s the num+ers of inde#endent varia+les are ver" hi%h, we have tried to classif"
similar varia+les under a +road headin% throu%h factor anal"sis . These factors can +e
+roadl" classified as under@
VARIABLES FACTORS
*erformance of fund mana%er
T*(/%+("# $"(!,0'5U
5
T"#e of scheme
P'7(/,#,9+("# $"(!,0'*ersonal attention
*rior e-#erience
5dvisor influenceP0,,!+,%amil" recommendation
*romotional cam#ai%n
2conomic C ar$et condition
M"0*! (,%+!+,%luctuation in e7uit" mar$et
5ttitude towards ris$
TABLE 1.2
There are other factors also which consists of other varia+les +ut the" cannot +e
classified under a+road headin%s.
ive road factors have +een descri+ed in the followin% manner@&
" F+%"%(+"# F"(!,0' -This factor has 3 su+&factors namel" #erformance of the fund
mana%er, 5U, 5. Thus this factor tells us more of the technical side of an" %iven
fund under consideration. Investor who ran$s this factor or these su+&factors as the
most im#ortant is definitel" loo$in% for ver" %ood returns C %oin% to invest after
much research as he will definitel" loo$in% for a fund havin% a %ood #erformance and
decent returns o##ortunit".
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) C'!,*0 O0+*%!* F"(!,0' T"#e of scheme, #ersonal attention and #rior
e-#erience are the su+&factors that ma$e this +roader cate%or" to%ether. In this
cate%or" an investor is loo$in% for the different schemes under an" #articular fund.
Investor is also loo$in% for #ersonal attention +ein% %iven to his #ortfolio or
investments, he wants #ersonal attention in the sense that new investment
o##ortunities should +e informed to him or #ro#er entr" C e-it #oints should +e
recommended to him and the li$es.
( M"0*!+%9 F"(!,0' Investors who are %oin% to rate this +road cate%or" as the
most im#ortant for them are more inclined to the factors li$e advisor influence, famil"
recommendation and #romotional cam#ai%n. These $inds of investors are not much
e-#erienced as far as these investments are concerned.
E(,%,+( F"(!,0' This factor includes factors li$e mar$et condition,
fluctuations in the mar$et and attitude towards ris$. Investors who are more
concerned a+out these factors are ris$ averse investors. These investors wait for the
ri%ht moment to enter or to start investin% in funds. or these #eo#le ris$ is at the to#
most #riorit" and if returns are not that much then also its fine with these investors.
* S*(0+!7 F"(!,0' It includes ta- +enefits, #ros#ectus and securit" as far as their
ca#ital investment is concerned.
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DISCRIMINANT ANAL<SIS
Throu%h ;iscriminant anal"sis I have tried to hi%hli%ht varia+les which effect the
decision of a #eo#le investin% for less than a "ear and #eo#le who are investin% for
more than a "ear. The term 1 consists of the #eo#le who are investin% for less than a
"ear whereas term H consists of the #eo#le who are investin% for 1 to D "ears.
Throu%h %rou# statistics in +oth the terms standard deviation is 7uite hi%h and mean is
7uite low as seen in 5##endi-. Therefore, there is no difference in the factors
affectin% the +u"in% +ehavior +etween term 1 and term H #eo#le.
DEMOGRAPHIC FACTORS
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13:
/:1/:
7:
AGE
5E$;< 3/ 31-4/ 41-/ +5;=E /
CHART 2.1 AGE PROFILE
rom a+ove chart it can +e easil" inferred that #eo#le a%ed +etween 31&F #referred
mutual funds most +ecause of man" factors mainl" due to sta+ilit" in their earnin%s
and e-#osure to mar$ets.
/:
47:
33:
ACADEMIC QUALIFICATION
&.+>U+TI; 0;T &.+>U+TI; 0.;FFEI;+$
CHART 2.2 - ACADEMIC UALIFICATION
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8/:
/:
MARITAL STATUS
M+..IE> UM+..IE>
CHART 2.3 - MARITAL STATUS
6:
17:
/:
7:
OCCUPATION
0.;FEI;+$ +$+.IE> 5UIE
.ETI.E> ;T?E.
CHART 2.4 - OCCUPATION PROFILE
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1:
/:
1:
/:
ANNUAL INCOME
$E T?+ '//,/// ,//,//1-,//,///
,//,//1-1/,//,/// +5;=E 1/,//,///
CHART 2.5 ANNUAL INCOME RANGE
rom a+ove charts it can +e easil" inferred that@
• a!orit" of res#ondents are #ost&%raduates, therefore it remains to +e seen that
to what e-tent %raduates and #rofessionals have interest in mutual funds.
• a!orit" of res#ondents are married (8:), therefore it remains to +e seen that
how man" "oun% and unmarried investors have #reference towards mutual
funds.
• a!orit" of res#ondents have their occu#ation as a #rofessional +e it
4elationshi# an%ers, Insurance a%ents, Inde#endent inancial 5dvisors
(I5s), 5s etc. mainl" due to their hi%h level of awareness a+out financial
#roducts.
• rom a+ove chart it can +e easil" inferred that ma!orit" of res#ondents are
from the aove 1,, ran%e, due to their a+undanc" of mone" after
fulfillin% their +asic needs. 'o here lies the o##ortunit" for 5s to %enerate
hu%e volumes +" offerin% innovative funds throu%h 'I*s to lower income
%rou#s .
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FINANCIAL BEHAVIOUR OF THE RESPONDENTS
INVESTMENT OBECTIVES 5mon% %iven o#tions includin% >others? cate%or"
ma!orit" of res#ondents #refer 9,, 0*!0% as their #rimar" o+!ective of investment.
6:7:
7/:
17:
INVESTMENT OBJECTIVE
+FET@ T+A 5EEFIT $IBUI>IT@
&;;> .ETU. %+0IT+$ +00.E%I+TI;
CHART 2.6 INVESTMENT OBECTIVE
CHANNELS USED B< RESPONDENTS FOR INVESTING rom the stud" it
can easil" +e inferred that ma!orit" of res#ondents@:> now invest directl" in
mutual funds es#eciall" after '2I %uidelines came recentl" that sa"s there will not
+e an" 2T4J B5; for investors investin% in mutual fund schemes directl".
INVESTMENT HORION rom stud" it can +e concluded that ma!orit" of
res#ondents invest in mutual funds from JM,0* !/"% !/0** 7*"0K #ers#ective (D3:),
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thats means once a investor comes to "our service he will +e there for at least three
"ears, therefore it is ver" essential toda" that 5s and es#eciall" 'I should focus
on innovative wa"s to serve the customers li$e %ivin% %ood 7ualit" service and
assistance.
INVESTMENT AMOUNT rom #ilot stud" it can +e concluded that ma!orit" of
res#ondents (F6:) have investments in mutual funds in a ran%e of >ore than 1,
,? cate%or" which im#lies that over a #eriod of time if an investor see that his
ca#ital is %rowin% than the #ro+a+ilit" of his su+se7uent investment +ecomes ver"
stron%.
SCHEME PREFERENCES
ON THE BASIS OF ASSET CLASS
4/:
8:
18:
8: 6:
SCHEME PREFERENCES
EBUIT@ >E5T 5+$+%E> FM0 ;T?E.
CHART 2.: SCHEME PREFERENCES@A''*! C#"''
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<hen it comes to scheme #references ma!orit" of retail investors #refer E+!7
S(/**' @4> followed +" ;e+t 'chemes (H8:) with !ust 8: retail investor
#referrin% de+t or fi-ed income instruments li$e i-ed aturit" *lans (*s). It
shows that there is a hu%e #otential for de+t instruments in the mar$et which is
unearthed +" retail investors due to its com#le-it", low awareness etc.
PREFERABLE ROUTE FOR INVESTMENT IN MUTUAL FUNDS
1:
7:
1/:
7:
:
PREFERABLE ROUTE
F.IE>C U&&ETI; E$F >E%II; 5.;2E.D+&ET
E<0+0E.D M+&+IE TE$E=II; ;T?E.
CHART 2.; PREFERABLE ROUTE
5s a+ove chart clearl" e-#lains that ma!orit" of res#ondents (D:) ta$e self decision
once the" start investin% in mutual funds. Bnl" 1 : of res#ondents ta$e hel# of
ro$ersA5dvisors when it comes to final decision of investin%. Therefore, it shows
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that 5s in %eneral and 'I in #articular have to +e more informative so that the"
can #rovide +est material, service and information to facilitate su+se7uent investment
of retail investors.
SCHEME PREFERENCES
ON THE BASIS OF STRUCTURE
87:
13:
SCHEME PREFERENCES- STRUCTURE
;0E E>E> %$;E E>E> ITE.=+$
CHART 2.= SCHEME PREFERENCES - STRUCTURE
<hen it comes to scheme #reference on the +asis of its structure, ma!orit" of retail
investors #refer >B#en 2nded 'cheme > #rimaril" due to fle-i+ilit" of redem#tions,
investments, %ood return and li7uidit". one of the investors #refer >Interval
'cheme?, in fact some of the retail investors were confused a+out the ver" name of
>Interval 'chemes.?
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SAVING HABITS
<hen it comes to 'avin% =a+its of retail investors it comes out that ma!orit" of
res#ondents saves +etween 1D:&H: #.a. +asis followed +" >a+ove HD:? cate%or"
(H:), therefore at this sta%e it is ver" difficult to sa" an"thin% a+out savin%
#references a+out retail investors. Bthers cate%ories li$e 1&1D and H&HD are e7uall"
#referred +" res#ondents +ut it was a #ositive clue that onl" : of res#ondents save
+elow D:.
6:13:
17:
7:
17:
/:
SAVING HABBITS
5E$;< : -1/: 1/-1: 1-/: /-: +5;=E :
CHART 2.1> - SAVING HABBITS
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SBI AND OTHERS
M,'! P,#"0 F% $0, SBI@ U# till this sta%e the winner is >'I 552;
U;? which is #referred +" ma!orit" of res#ondents @6>, due to
1 ;iversification in investment +etween e7uit" C de+t
H) Good return with lesser ris$ involvement
3) a#ital 5##reciation
F) *ortfolio held
SATISFACTION LEVEL WITH SBI
17:
47:
33:
3:
SATISFACTION LEVEL
?I&?$@ +TIFIE> .E+;+5$@ +TIFIE> %;I>E.+5$@ +TIFIE>
U+TIFIE> ?I&?$@ U+TIFIE>
CHART 2.11 SATISFACTION LEVEL
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orm a+ove chart it can +e inferred that u# to this sta%e ma!orit" of res#ondents
(F:) are reasona+l" satisfied when the" were as$ed a+out overall e-#erience with
'I utual unds includin% funds, returns, services etc., +ut it remains to +e seen that
which cate%or" leads with the com#letion of surve" +ecause second +est cate%ories
#referred +" investors is JC,%'+*0")#7 S"!+'$+*K which means that there is more to
do on 'I +ehalf for C'!,*0 S"!+'$"(!+,%.
MOST POPULAR FUND HOUSE IN TERMS OF HIGHEST INVESTMENT%
7:
1:
7:
1/:
14:
1/:
POPULAR FUND HOUSE
5I .E$I+%E ?>F% I%I%I 5I.$+ ;T?E.
CHART 2.12 MOST POPULAR FUND HOUSE
<hen as$ed a+out hi%hest investment in an 5 ma!orit" of Investors (H:) %ave
the name of 'I which is followed +" 4eliance (H3:), III (H:), and rest in
>others? which is lead +" UTI. 'o there is a stiff com#etition in the mar$et and it
remains to +e seen that which fund house ta$e the leads with the com#letion of the
#ro!ect.
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INTER-FIRM COMPARISON
The main o+!ective of doin% Inter irm 5nal"sis is to !ud%e where 'I UTU5
U;' stands in com#arison to other 5sset ana%ement om#anies @AMC' as #er
different criterion which are e-#lained as follows.
I have chosen F different cate%or" unds@
*$ E!+IT, & -L+EC.I /0I1(0IL, L(02E C( )+NDS3
4$ E!+IT, & 1ID 5 S1(LL C(
6$ -(L(NCED /CO10ISIN2 -OT. E!+IT, 5 DE-T3
=. T(7 S(8IN2 SC.E1ES
The com#arative anal"sis of cate%ories mentioned a+ove is shown as follows "' ,%
22->:-15@
The followin% two #arameters are considered for com#arative anal"sis@
1 unds 4eturns
H 4is$ *rofile
A%"#7'+' ,$ !/* $%' ,% !/* B"'+' ,$ "0+,' 0"!+,'.
To understand this #ortion lets +rea$ it u# In two #arts, irst +ein% the #art where we
discuss a+out the financial tools that we will use as a #arameter and second where we
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com#are ma!or mutual funds of each cate%or" and see how are 'Is #roducts as
com#ared to its com#etitors.
*art I There are D #rinci#al ris$ measures@ 5l#ha, eta, sortino, standard deviation
and the 'har#e ratio. 2ach ris$ measure is uni7ue in how it measures ris$. <hen
com#arin% two or more #otential investments, an investor should alwa"s com#are the
same ris$ measures to each different investment in order to %et a relative #erformance
#ers#ective.
S!"%"0 D*+"!+,%
'tandard ;eviation is a##lied to the annual rate of return of an investment to measure
the investments volatilit". 'tandard deviation is also $nown as historical volatilit"
and is used +" investors as a %au%e for the amount of e-#ected volatilit".
'tandard deviation is a statistical measurement that sheds li%ht on historical volatilit".
or e-am#le, a volatile stoc$ will have a hi%h standard deviation while the deviation
of a sta+le +lue chi# stoc$ will +e lower. 5 lar%e dis#ersion tells us how much the
return on the fund is deviatin% from the e-#ected normal returns.
B*!"
5 measure of the volatilit", or s"stematic ris$ of a securit" or a #ortfolio in
com#arison to the mar$et as whole. 5 +eta +elow 1 can indicate an investment with
lower volatilit" than the mar$et.
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5 eta of 1 indicates that the securit"s #rice will move with the mar$et. 5 eta of
less than 1 means that the securit" will +e less volatile in com#arison to the mar$et. 5
eta of %reater than 1 indicates that the securit"s #rice will +e more volatile than the
mar$et. or e-am#le, if a stoc$s +eta is 1.H, it is theoreticall" H: more volatile
than the mar$et.
S/"0* R"!+,
The 'har#e ratio uses 'tandard deviation to measure a funds ris$ ad!usted returns.
The hi%her a funds 'har#e ratio, the +etter fund return have +een relative to the ris$ it
has ta$en on, +ecause it uses standard deviation. The 'har#e ratio can +e used to
com#are ris$ ad!usted return across all fund cate%ories.
The 'har#e ratio tells us whether a #ortfolios return are due to smart investment
decisions or a result of e-cess ris$. This measurement is ver" useful +ecause althou%h
one #ortfolio or fund can rea# hi%her returns than its #eers, it is onl" a %ood
investment if those hi%her returns do not come with too much additional ris$. The
%reater a #ortfolios 'har#e ratio, the +etter its ris$ ad!usted #erformance has +een. 5
ne%ative 'har#e ratio indicates that a ris$&less asset would #erform +etter than the
securit" +ein% anal"/ed.
S,0!+%,
The 'ortino su+tracts the ris$ free rate of return from the #ortfolios return and then
divides that +" the downward deviation. 5 hi%h 'ortino ratio indicates there is a low
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#ro+a+ilit" of a lar%e loss. 'ortino is +etter than when anal"/in% hi%hl" volatile
#ortfolios. 'har#e ratio is +etter for anal"/in% #ortfolio that has lower volatilit".
A#/"
5 measure of #erformance on a ris$ ad!usted #erformance to a +enchmar$ inde-. The
e-cess return of the fund relative to the return of the +enchmar$ inde- is a funds
al#ha. 5 #ositive al#ha of 1. means the fund has out#erformed its +enchmar$ inde-
+" 1:. orres#ondin%, a similar ne%ative al#ha would indicate an under#erformance
of 1:.
SBI BLUECHIP FUND
In com#arison with
1) III *rudential ocussed luechi# und
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H) ran$lin India B##ortunities und
3) CT 27uit" und
F) irla 'unife rontline 27uit"
RETURNS
S(/*
*
SBI
B#*(/+
ICICI F,('*
B#*(/+
F0"%#+% @I
O,0!.
L&T
E+!7
B+0#" SL
F0,%!#+%*
E+!7
3nths D.D: F.F: D.: 3.9: F.8:
6nths 6.3: &.3: 3.: .9: 1.F:
1 Jear H.9: 1.D: 3F.3: HF.D: H.6:
H Jears 33.D: H.: 3.D: 3H.3: 3.H:
3 Jears & HF.1: & & H.1:
D Jears & 1F.8: & & 1F.:
TABLE 3.1
Source :www"moneycontrol"com
The returns %iven +" 'I luechi# und has %iven the hi%hest returns in the #ast
3months i.e D.D:, 6 months i.e 6.3:. Its returns in the 1 "ear and H "ears cate%or"
are also %ood and there is not much difference in terms of returns from the to#
#erformer
RIS PROFILE
ar%e a# und ea
n
'tandard
;eviatio
n
'har#
e
4atio
'ortino eta 5l#ha
'I luehi# und HF.11 13.H 1.33 H.H8 .8F 9.6D
III ocus luehi# H.1 1F.D .9D 1.9 .9F F.8ran$lin Tem#leton 1.91 1F.H9 .8 1.6F .9F H.D3
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CT 27uit" H.93 1F.8H .96 1.68 .96 D.3
irla rontline HH.9 1D.18 1. H.16 1.1 6.9H
TABLE 3.2
S,0(e : www"moneycontrol"com
5nal"/in% the status of 'Is luechi# und loo$in% at each of the financial tool we
can see that 'I has maintain to #erform +est amon% all #arameters.
SBI MAGNUM MIDCAP FUND
In com#arison with
1) =; ida# B##ortunities undH) ran$lin *rima *lus und
3) irla 'unife idca# und
4 III *rudential idca# und
63
S(/** SBI
M+("
HDFC
M+C"
F0"%#+%
P0+"
B+0#" SL
M+("
ICICI
M+C"
3nths 8.F: 3.D: D.F: 8.: 6.1:
6nths 1H.3: 3.H: 3.9: 3.D: F.:
1 Jear FH.9: 3H.F: 3H.8: 6.D: 31.D:
H Jears D6.3: F8.8: 36.8: & D9.F:
3 Jears F1.: & H9.: & &
D Jears H1.1: & 1.1: & &
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RETURNS
TABLE 3.3
S,0(e : www"moneycontrol"com
The returns %iven +" 'I a%num id a# und has %iven the hi%hest returns in the
#ast 3months i.e 8.F:. , 3 "ears i.e F1.:, D "ears i.e H1.1:. Its returns in the
months, 1 "ear and H "ears cate%or" are also %ood and there is not much difference in
terms of returns from the to# #erformer.
id a# ean 'tandard
;eviatio
n
'har#
e
4atio
'ortino eta 5l#ha
'I a%num id a# 3D.FD 1D.96 1.D H.1 .8H H.8
=; id a# H.8 16.6 1.31 H.FD .88 1H.9F
ran$lin *rima 3.9F 1D.98 1.D1 H.D8 .9 1D.9
III ;iscover" H8.9 16.3D 1.3D H.33 .91 13.6irla id a# HD.36 1.D 1.6 1.D .96 9.8
RIS PROFILE
TABLE 3.4
S,0(e : www"moneycontrol"com
5nal"/in% the status of 'Is a%num ida# und loo$in% at each of the financial
tool we can see that 'I has maintain to #erform +est amon% all #arameters.
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SBI BALANCED FUND
In com#arison with
1) =; alanced und
H) III *rudential alanced und
3) T5T5 alanced und
F) CT India *rudence und
RETURNS
S(/** SBI
B"#"%(*
HDFC
B"#"%(*
ICICI
B"#"%(*
T"!"
B"#"%(*
L&T I%+"
P0*%(*
3nths 1.: 1.9: 3.D: 3.: 3.3:
6nths H.F: .8: 1.1: F.9: F.:
1 Jear HH.6: H.: H.8: H.: H6.1:
H Jears 3.: 3F.: 3.F: 33.H: 3H.9:
3 Jears & & & H6.: &
D Jears & & & 16.: &
TABLE 3.5
S,0(e : www"moneycontrol"com
Its returns have +een consistent and there is not much difference in terms of returns
from the to# #erformer in the cate%or".
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RIS PROFILE
alanced und ean 'tandard
;eviation
'har#e
4atio
'ortino eta 5l#ha
'I alanced und H3.3 1.69 1.DD H.3F .83 1.86
CT India *rudence H1.99 11.H 1.38 H.F3 .89 9.F
III alanced und H1. 11.18 1.H H.HD .9H .8F
=; alanced und H.FH 1H.F 1.13 H.HF .9H .HD
T5T5 alanced und HH.9F 1H.1H 1.3F H.36 .98 9.39 TABLE 3.6
S,0(e : www"moneycontrol"com
5nal"/in% the status of 'Is alanced und loo$in% at each of the financial tool we
can see that 'I has maintained to #erform +est amon% all #arameters e-ce#t 'ortino,
+ut onl" .9 is the difference so that is not that +ad.
SBI MAGNUM TAGAIN SCHEME
In com#arison with
1) irla 'un ife Ta- 'avin%s und
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H) =; Ta- 'aver und
3) Tata Ta- 'avin% und
F) 4eliance Ta- 'aver und
RETURNS
TABLE 3.:
S,0(e : www"moneycontrol"com
The returns %iven +" 'I Ta- Gain scheme has %iven the hi%hest returns in the #ast
3months i.e 6.6:. Its returns in the 6 months, 1 "ear and H "ears cate%or" are also
%ood and there is not much difference in terms of returns from the to# #erformer in
the cate%or".
RIS PROFILE
ar%e a# und ean 'tandard
;eviatio
n
'har#
e
4atio
'I a%num Ta- Gain H3.D 13.8 1.H1
irla Ta- 'avin%s H.8 1F.1H .99
=; Ta- 'aver H.1 1F.D .9D
Tata Ta- 'avin% und HH.DF 1H.1 .9
4eliance Ta- 'aver H.93 1F.8H .96
67
S(/** SBI T"8
G"+%
B+0#" T"8
S"+%9'
HDFC
T"8 S"*0
T"!" T"8
S"+%9
R*#+"%(*
T"8 S"*0
3nths 6.6: H.6: 1.6: D.1: .9:
6nths 3.6: 3.3: &3.6: D.F: &1.D:
1 Jear H3.6: H.9: 13.1: & HF.1:
H Jears 3F.9: 31.: 3F.: & F9.D:
3 Jears & HF.F: & & &
D Jears & 1H.H: & & &
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(2'')
TABLE 3.;
S,0(e : www"moneycontrol"com
5nal"/in% the status of 'Is alanced und loo$in% at each of the financial tool we
can see that 'I has maintain to #erform +est amon% all #arameters e-ce#t 'tandard
;eviation.
PERFORMANCE ANAL<SIS OF SOME OF THE E< STOCS HELD B<
SBI MUTUAL FUNDS
HDFC B"%
a!orit" of 'I utual und #roducts have hi%h share of holdin%s of =; an$ in
their #ortfolio
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GRAPH 3.1
S,0(e : www"moneycontrol"com
=; an$ has +een an out#erformer in the mar$et. rom the %ra#h it can +e seen
that it is consistent and "ielded some %reat returns. a!orit" of 'I utual und
#roducts have hi%h holdin%s of =; an$ in their #ortfolio.
SUN PHARMA
5fter =; an$, 'un *harma is one of the +i%%est holdin%s held +" 'I *roducts in
their #ortfolio
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GRAPH 3.2
S,0(e : www"moneycontrol"com
It can +e seen from the chart that 'U *harma has consistentl" +een movin% u#ward.
Thou%h it has seen a shar# downfall in the recent times. The stoc$ is e-#ected to start
recoverin% due to #ositive indicators for the #harma industr".
SWOT ANAL<SIS
5 t"#e of fundamental anal"sis of the health of a com#an" +" e-aminin% its
stren%ths('), wea$ness (<), +usiness o##ortunit" (B), and an" threat (T) or dan%ers it
mi%ht +e e-#osed to.
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STRENGTHS
• rand strate%"@ as o##osed to some of its com#etitors 'I o#erates a multi&
+rand strate%". The com#an" o#erates under numerous well&$nown +rand
names, which allows the com#an" to a##eal to man" different se%ments of the
mar$et.
• ;istri+ution channel strate%"@ 'I is continuousl" im#rovin% the distri+ution
of its #roducts. Its online and Internet&+ased access offers a com+ination of
e-cellent %rowth #ros#ects and its retail direct +usiness also saw immense
%rowth in the recent decade.
• arious sources of income@ 'I has man" sources of income throu%hout the
%rou#, and this diversit" within the %rou# ma$es the com#an" more fle-i+le
and resistant to economic and environmental chan%es.
• 2-#erienced mana%ers for lar%e num+er of Generics.
• ar%e #ool of s$illed and $nowled%ea+le man#ower.
• 5n increasin% li+erali/ation of %overnment #olicies.
WEANESS
• 2mer%in% mar$ets@ There is more investment demand in the United 'tates,
a#an and the rest of 5sia, 'I has limited e-#osure to these %lo+al mar$ets.
• utual funds are li$e man" other investments without a %uaranteed return@
there is alwa"s the #ossi+ilit" that the value of "our mutual fund will
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de#reciate. Unli$e fi-ed&income #roducts, such as +onds and Treasur" +ills,
mutual funds e-#erience #rice fluctuations alon% with the stoc$s that ma$e u#
the fund. <hen decidin% on a #articular fund to +u", "ou need to research the
ris$s involved !ust +ecause a #rofessional mana%er is loo$in% after the fund,
that doesnt mean the #erformance will +e stellar.
OPPORTUNITIES
• *otential mar$ets@ The Indian rural mar$et has %reat #otential. 5ll the ma!or
mar$et leaders consider the se%ments and real mar$ets for their #roducts. 5
senior official in a one of the leadin% com#an" sa"s fora" into rural India
alread" started and there has +een reali/ation that the rural mar$et is +oth #rice
and 7uantit" conscious.
THREATS
• =ed%e funds@ sometimes referred to as as hot mone", are also causin% a threat
for mutual funds have %ained worldwide notoriet" for +rin%in% the mar$ets
down. e it a crash in the currenc", 5 stoc$ or 5 +ond mar$et, 5 usuall" a
hed%e fund #rominentl" fi%ures somewhere in the #icture.
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CHAPTER 4
FINDINGS
0e#ardin# )unds%&
<hile dealin% with them I have o+served that the #erformance of the schemes of
'I are 7uite %ood and the demand for those schemes is also %ood. I came to
$now that 'I luechi# und C 'I alanced und are the most #o#ular funds
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amon% individual investors. 5ccordin% to them the 3"r and D"r returns of the funds
are ver" %ood. Bne of the reason for %reat demands of 5s fund is the rand alue
of 'I, as it is the lar%est +an$ of countr".
5t the same time the" we also o+served that unli$e other 5s li$e 4eliance,
=; etc. 'I is not ver" a%%ressive in mar$etin% of its funds.
0e#ardin# services%&
5#art from fund #erformance o+servations are also made re%ardin% the services of
'I, after anal"/in% the feed+ac$ of distri+utors I found that the services of
'I are not as %ood as other 5s and some of the field in which the" are
lac$in%
1. om#laints related to not deliverin% the account statements and +ro$era%e on
time.
H. *ro+lems related to material, li$e unavaila+ilit" of forms, fact sheets and other
#romotional matters, also there are some #ro+lems related to courier services.
3. The" have also com#lained that 5 do not #rovide an" frin%e +enefits on
%ood #erformance.
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CHAPTER - 5
CONCLUSION
The future of #rimar" mar$et is %rowin% at a ver" hi%h #ace. Ta$in% this thin% into
consideration, there are lots of o##ortunities for the 'I utual unds to ta# the
%olden o##ortunities from the Indian mar$et.
'I has emer%ed a ver" stron% #la"er in the mar$et and is %ivin% stiff com#etition
to all the #la"ers in the mar$et includin% the +an$s. It is e-#andin% its area of
+usiness, if the #ro%ress of 'I %oes in the same wa", than I can sa" that there is
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+ri%ht future for 'I in comin% "ears. The" have much #otential to e-#and their
distri+ution *an India.
The com#an" is currentl" followin% hu%e investment and %rowth strate%ies. 5#art
from the mar$et %rowth rate the distri+ution industr" doesnt seem so attractive.
=ence the firm should +e selective usin% %rowth strate%ies. This is not to undermine
the +ri%ht future of 'I , !ust a chec$ to +e a cautious.
There is little awareness a+out mutual fund in IndiaE #eo#le have acce#ted it as a one
of the ma!or investment avenue. utual funds will +ecome one of the sou%ht after
investment avenues. 5s far as the other investment #roducts mar$eted +" 'I are
concerned, the" have a read" mar$et. The onl" thin%, which it needs to focus on, is
that the" should have a stron% networ$ so that #rom#t services and availa+ilit" of
forms is made availa+le to the investor at a short notice, and if it $ee#s the traditional
+ase for mar$etin% in India, which is a #rice sensitive mar$et, we can sa" that 'I
has a %reat future ahead.
CO1(0ISON O) 1+T+(L )+NDS
(2(INST OT.E0 IN8EST1ENT (8EN+ES%
PRODUCT SAFET<CON LIUIDIT< RETURN VOLATILIT<
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VINENCE
27uit" ow =i%hAlow =i%h&od. =i%h
I onds =i%h oderate od.&=i%h oderate
;e+entures oderate ow od.&ow oderate
or#. ; ow ow oderate ow
an$ ;e#osit =i%h =i%h ow&=i%h ow
** =i%h oderate oderate ow
ife Ins. =i%h ow ow&od ow
Gold =i%h oderate od.&ow oderate
4eal 2state oderate ow =i%h&ow =i%h
=i%h =i%h =i%h oderate
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CHAPTER - 6
SUGGESTIONS & RECOMMENDATIONS
A THE GROUND RULES OF MUTUAL FUND INVESTING
The followin% are the 1 commandments that were to +e followed till eternit".
The world of investments too has several %round rules meant for investors
who are novices in their own ri%ht and wish to enter the m"riad world of
investments. These come in hand" for there is ever" #ossi+ilit" of losin% what
one has if due care is not ta$en.
A''*'' 7,0'*#$ 'elf&assessment of ones needsE e-#ectations and ris$ #rofile
is of #rime im#ortance failin% whichE one will ma$e more mista$es in #uttin%
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mone" in ri%ht #laces than otherwise. Irrational e-#ectations will onl" +rin%
#ain.
T07 !, %*0'!"% /*0* !/* ,%*7 +' 9,+%9 Bne can lose su+stantiall" if
one #ic$s the wron% $ind of mutual fund. In order to avoid an" confusion it is
+etter to %o throu%h the literature such as offer document and fact sheets that
mutual fund com#anies #rovide on their funds.
D,%! 0'/ +% +(+%9 $%' !/+% $+0'! one first has to decide what he
wants the mone" for and it is this investment %oal that should +e the %uidin%
li%ht for all investments done. It is thus im#ortant to $now the ris$s associated
with the fund and ali%n it with the 7uantum of ris$ one is willin% to ta$e. Bne
should ta$e a loo$ at the #ortfolio of the funds for the #ur#ose. 2-cessive
e-#osure to an" s#ecific sector should +e avoided, as it will onl" add to the
ris$ of the entire #ortfolio.
I%*'!. D,%! '*(#"!* 5 common investor is limited in the de%ree of ris$
that he is willin% to ta$e. It is thus of $e" im#ortance that there is thou%ht
%iven to the #rocess of investment and to the time hori/on of the intended
investment. Bne should a+stain from s#eculatin% which in other words would
mean %ettin% out of one fund and investin% in another with the intention of
ma$in% 7uic$ mone"
D,%! ! "## !/* *99' +% ,%* )"'*! This old a%e ada%e is of utmost
im#ortance. o matter what the ris$ #rofile of a #erson is, it is alwa"s
advisa+le to diversif" the ris$s associated. 'o #uttin% ones mone" in different
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asset classes is %enerall" the +est o#tion as it avera%es the ris$s in each
cate%or".
B* 0*9#"0 Investin% should +e a ha+it and not an e-ercise underta$en at
ones wishes, if one has to reall" +enefit from them. 5s we said earlier, since it
is e-tremel" difficult to $now when to enter or e-it the mar$et, it is im#ortant
to +eat the mar$et +" +ein% s"stematic. The 'I*s ('"stematic Investment
*lans) offered +" all funds hel#s in +ein% s"stematic. 5ll that one needs to do
is to %ive #ost&dated che7ues to the fund and thereafter one will not +e harried
later.
D, 7,0 /,*,0 It is im#ortant for all investors to research the avenues
availa+le to them irres#ective of the investor cate%or" the" +elon% to. This is
im#ortant +ecause an informed investor is in a +etter decision to ma$e ri%ht
decisions. =avin% identified the ris$s associated with the investment is
im#ortant and so one should tr" to $now all as#ects associated with it. 5s$in%
the intermediaries is one of the wa"s to ta$e care of the #ro+lem.
F+% !/* 0+9/! $%' indin% funds that do not char%e much fees is of
im#ortance, as the fee char%ed ultimatel" %oes from the #oc$et of the investor.
This is even more im#ortant for de+t funds as the returns from these funds are
not much. unds that char%e more will reduce the "ield to the investor.
indin% the ri%ht funds is im#ortant and one should also use these funds for
ta- efficienc".
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** !0"( ,$ 7,0 +%*'!*%!' indin% the ri%ht fund is im#ortant +ut even
more im#ortant is to $ee# trac$ of the wa" the" are #erformin% in the mar$et.
If the mar$et is +e%innin% to enter a +earish #hase, then investors of e7uit" too
will +enefit +" switchin% to de+t funds as the losses can +e minimi/ed. Bne
can alwa"s switch +ac$ to e7uit" if the e7uit" mar$et starts to show some
+uo"anc".
%, /*% !, '*## 7,0 !"# $%' 0nowin% when to e-it a fund too is
of utmost im#ortance. Bne should +oo$ #rofits immediatel" when enou%h has
+een earned i.e. the initial e-#ectation from the fund has +een met with. Bther
factors li$e non&#erformance, hi$e in fee char%ed and chan%e in an" +asic
attri+ute of the fund etc. are some of the reasons for to e-it.
B WHEN TO SELL <OUR MUTUAL FUND
While there are man" investment consultants, some +" #rofession, some self&
#rofessed, who su%%est on when to invest in a #articular avenue, there is a certain
#aucit" of #eo#le who tal$ of when to e-it. =ere are some situations when the
investor should consider withdrawin% their investments from the funds.
• F% +' %,! *0$,0+%9
This reason for sellin%, althou%h valid in certain conditions, is where most
investors ma$e a mista$e. <hen calculatin% #erformance one shouldnt loo$ at
too short a #eriod and ma$e a mista$e +" com#arin% a##les to oran%es. Bne
should com#are the returns #osted +" his fund with that of the #eers across
various hori/ons such as 1&"ear, 3&"ear and a+ove. 5 short&term view can
often lead to committin% hara&$iri, as it doesnt #resent the full #icture. If it
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has under#erformed the avera%e of its #eers in all cases, then it sure is one of
the +etter reasons to e-it from the fund.
A (/"%9* +% #+$* '!"9*
Investments are done with a certain o+!ective in mind and life sta%es are often
a determinin% factor of what a #erson needs. 5 "oun% man can afford to ta$e
more ris$s than a #erson nearin% his retirement can. In such cases, it #a"s to
withdraw mone" from the e7uit" investments made earlier and #ut them in
safer, more conservative de+t funds that offer sta+le returns without
com#romisin% on ris$. 'o a chan%e in life sta%es would +e one such reason to
consider switchin% into a fund that matches with ones needs.
• A ",0 (/"%9* +% "%7 )"'+( "!!0+)!* ,$ !/* $%
<hen the fund chan%es an" +asic attri+ute as mentioned +" it in its offer
documents, the investors have a choice of %ettin% out of it. 2ven '2I has
#rovided for an e-it route +ein% made availa+le to the investors. han%es li$e
a chan%e in 5sset ana%ement om#an" or in investment st"le of fund or
chan%e of structure sa" from closed&end to o#en&end etc. are %ood enou%h
reasons for an investor to consider switchin% or e-itin% from it as the" are
certainl" li$el" to affect the fund in a ma!or wa".
• F% ,*'%! (,#7 +!/ +!' ,)*(!+*
Bne of the im#ortant #arameters in the selection of the fund is ali%nment of
the ris$ #rofiles of the investor and fund. The o+!ective of the fund sa"s a lot
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a+out how the fund #lans to invest. If the o+!ective is not +ein% com#lied with,
it is one of the e-it #oints worth considerin%.
• T/* F%' E8*%'* R"!+, R+'*'
5 small rise in an e-#ense ratio is not a +i% deal, however a si%nificant rise can
result in su+stantial reduction of "ields and so it would +e +etter to e-it the
fund. In the case of +ond funds or mone" mar$et funds, it is hi%hl" unli$el"
that the fund can increase its returns enou%h to !ustif" an increase in the funds
e-#enses.
• T/* F% M"%"9*0 /"' (/"%9*
5 sim#le chan%e of fund mana%ers, in itself, is not enou%h reason to sell a
fund on a short&term +asis. If it is a #assivel" mana%ed fund (inde- fund),
then one has little to no reason to worr". =owever, if it is an activel" mana%ed
fund, then has to $ee# the e"es o#en on the new mana%er.
• E%,9/ /"' )**% *"0%*
=owever, nothin% is as im#ortant as to rein the horses in time. The #rimar"
#rinci#le +ehind safet" of investment is to ta$e ris$s that can +e tolerated. The
#rinci#le also is s#ecific on the e-#ectations that the investor must have from
an" investment. ust as it is im#ortant to set realistic tar%ets that one ho#es to
achieve from the investment, it is also im#ortant to e-it when tar%et as
e-#ected has +een achieved irres#ective of the fact that it mi%ht +e %eneratin%
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+etter returns in a short&term. <aitin% lon%er mi%ht not #rove +eneficial, as
one need not +e luc$" all the time.The a+ove list is certainl" not e-haustive
and individuals will have other +etter reasons to 7uit as well. Its !ust that most
dont $now when to a##l" thou%ht and so these would come in hand".
-I-LIO20(.,
oo$s C a%a/ines referred
W 'ecurit" 5nal"sis and *ortfolio ana%ement @ ;onald 2 ischer, 4onald ordan
W Butloo$ one"
W utual unds 4eview
W one" ife
W =ow to rate mana%ement of mutual funds @ =arvard usiness review
W 5ssociation of mutual funds in India (5I) *u+lications and 7uarterl" re#orts
W 'ecurities and 2-chan%e oard of India
W utual und *erformance @ <. 'har#eW ar$et Timin%, 'electivit", and utual und *erformance@ 5n 2m#irical
Investi%ation
W act sheets of different fund houses
<e+sites referred@
W www.mutualfundsindia.com
W www.amfiindia.com
W www.valueresearchonline.com
W www.s+imf.com
W www.+seindia.com
W www.nseindia.com
W www.%oo%le.com
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W www.wi$i#edia.com
W www.mone"control.com
(NNE7+0E
Q#ESTI$%%AI&E' (
(B4 I;II;U5 I2'TB4')
EEP INVESTING AND EEP SMILING
PERSONAL DETAILS
52@ T2.B@
1. SE@
H. AGE@ elow 3 31&F F1&D 5+ove D
3. ACADEMIC UALIFICATION@ Graduate *ost Graduate *rofessional
Bthers(*lease '#ecif"&&&&&&&&&&&&&&&&&&&&&&&&&&&)
F. M"0+!"# S!"!'@ arried Unmarried
D. O(("!+,%@ *rofessional 'alaried usiness 4etired
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6. A%%"# I%(,*@ ess than H,, H,,1&D,, D,,1&
1,, 5+ove1la$h
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.1. W/7 , 7, +%*'! +% !"# $%'? @T+( !/* O!+,%)
a)'afet" +) Good 4eturn c) Ta- enefit d) a#ital 5##reciation e) i7uidit"
f)Bthers (*lease '#ecif"XXXXXXXXXXXXXXX)
.2.W/+(/ $% $0, SBI /"* #"09*'! '/"0* +% 7,0 JPORTFOLIOK.
.3.T/0,9/ /+(/ (/"%%*#' , 7, +%*'! +% M!"# $%? @T+( !/* ,!+,%
a) ;irectl" +) Throu%h intermediaries
.4 H, (/ +' 7,0 +%*'!*%! /,0+,%? @T+( !/* ,!+,%
a) <ithin a "ear +)etween 1 3"ears c) ore than 3 "ears
.5 H, (/ ",%! , 7, +%*'! +% M!"# $%'? @T+( !/* ,!+,%)
a) Y 4s.D +) etween 4s.D& 4s.1 c)Z4s. 1
.6. A0* 7, +##+%9 !, !,#*0"!* *(0*"'*' +% !/* "#* ,$ 7,0 "((,%! $0, ,%*,%!/ !, !/* %*8!? @T+( !/* O!+,%
(a) ot at all (+) 'omewhat (c) ;efinitel"
.:.W/"! +' 7,0 0+' 0*$*0*%(*?
a) =i%h ris$ and hi%h return +) oderate ris$ and oderate return c) ow ris$ and
low return
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.;.H, '"!+'$+* 7, "0* +!/ 7,0 *8*0+*%(* ,$ +%*'!+%9 +% SBI M!"#
F%'?
=i%hl" 'atisfied onsidera+l" 'atisfied 4easona+l" 'atisfied Unsatisfied
=i%hl" Unsatisfied
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+!
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a) 27uit" +) ;e+t c) alanced d) i-ed aturit" *lan (*s) e) Bthers (*lease
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.11 S"+%9 P0*$*0*%(* @#*"'* 0"% !/*
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.12. P0*$*0")#* 0,!* !, M!"# F% I%*'!+%9 @T+( !/* ,!+,%
(a)riends 'u%%estion (+) ews#a#ersAa%a/ines (c) 'elf ;ecision (d) Television (e)
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.13.<, P0*$*0@
(a)B#en 2nded 'cheme (+) lose 2nded 'cheme (c) Interval 'cheme
.14.H, (/ ,$ 7,0 +%(,* 7, ")#* !, '"*@
elow D: D&1: 1&1D: 1D&H: H&HD: 5B2 HD
. 15.R"% $,##,+%9 $"(!,0' !/"! 7, (,%'+*0 /+#* '*#*(!+%9 " '(/**
a) 'cheme ualities li$e trac$ record, fund si/e, entr" load etc.
+) und ana%er 2-#erience
c) Investor 'ervices li$e disclosure of 5, 5A statements.
d) ar$etin% of funds throu%h +ill +oards, relatives, friends, +ro$ers etc.
.16.A%7 S99*'!+,% $,0 SBI M!"# F%' @P#*"'* *%!+,% +!
.1:. 4ate the followin% factors which influences "our investment in mutual funds on
the im#ortance scale where 1 +' #*"'! +,0!"%! 3 +' %*!0"# 5 +' ,'! +,0!"%!.
F"(!,0' 1 H 3 F D=istorical #erformance of fund
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unds returns over mar$et return
*erformance of und mana%er
urrent 2conomic and ar$et conditions
T"#e of schemes (%rowth, income, +alanced C others)
2-#ected ;ividend %oin% to +e deliver +" the fund
5dvisor or +ro$er or a%ent influence
onvenience in investin% in the fund
Trans#arenc" maintained +" the fund house
inimum investment or lot si/e
oc$ in #eriod in a fund
5sset under mana%ement
und ratin%
und #ros#ectus or offer document
Internet i.e. <e+site influence
*rior e-#erience with the fund house
luctuation in e7uit" mar$etsees ,load and e-#enses
4e#utation of fund house
'ecurit" #rovided +" the fund in terms of return
Ta- +enefit derivin% from investment in the fund
5 or #rice of funds unit
5ttitude towards ris$
riendAfamil" recommendation
*romotional cam#ai%n of the fund
Q#ESTI$%%AI&E')
(or an$ers)
1) what is the a%e %rou# of the investorsV• Under HD "rs
• HD to FD "rs
• FD to 6D "rs
• Bver 6D "rs
H) <hich are the +est #erformin% schemes in the mar$etV
• 'I utual und
• 4eliance utual und
• 0ota$ ahindra utual und
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• irla 'unife utual und
• ran$lin utual und
• =; utual und
• III utual und
•
Bthers (*lease s#ecif")
3) ;o the" want an" chan%es in the e-istin% or future schemesV
• 'ervices
• ;ividends
• *ortfolio
• Bthers(#lease s#ecif")
F) 'u%%est a #ortfolio for a dream schemeV
• IT sector
• G sector
• *harma sector
• Infrastructure
• ommodities
• 5utomo+ile
• 2ner%"
• Telecom
• inancial services
• edia C 2ntertainment
• Bthers(*lease s#ecif")
D) <hat is the a##ro-imate sales of the +est seller schemeV
• ess than 1 la$h
• 1 to H la$h
• H to 3 la$h
• ore than 3 la$h
6) <hat are the facilities that other an$sAutual und houses are #rovidin%V
• 'ervice
• ommission
• *roduct related information
• Bthers (*lease '#ecif")
) <hat are "our %rievances, if an"V
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8) <hat is the e-#ected return in that scheme (an" s#ecific scheme)V
'cheme name@ [[[[[[[[[[[[[[[[[[[
• ess than 1:
• 1&1D:
• 1D&H:
• H&HD:
• Bver HD:
9) 'u%%est wa"s +" which we can im#rove u#on our relationshi#.
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