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Transcript of Mutual Funds Project
MUTUAL FUNDS IN INDIA
EXECUTIVE SUMMARY
Investment may be defined as an activity that commits funds in any
financial/physical form in the present with an expectation of receiving
additional return in the future. The expectation brings with it a probability that
the quantum of return may vary from a minimum to a maximum. The
possibility of variation in the actual return is known as investment risk. Thus
every investment involves a return and risk. The investor can choose the
investment funds he wants to invest his money, providing the investor an
opportunity to have a direct stake in the performance of the financial markets.
He can also benefit from attractive tax advantages.
A mutual fund is a professionally managed firm of collective investments that
collects money from many investors and puts it in stocks, bonds, short-term
money market instruments, and/or other securities. The fund manager, also
known as portfolio manager, trades the fund's underlying securities, realizing
capital gains or losses and passing any proceeds to the individual investors.
Today, the worldwide value of all mutual funds totals more than $26 trillion in
assets.
The principal paid are invested in fund/funds of the investor’s choice
(depending on the allocation rate) & units are allocated depending on the
price of units for the fund/funds.
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STATEMENT OF PROBLEM:
The premiums that are collected are invested in different funds like equity
fund, mid-cap fund, debt fund, balanced fund and cash fund. The funds must
be allocated such that their performance is stable and improves so that the
investor gets high returns. Due to the increasing competition it becomes
necessary that the companies fund is the best performing fund with highest
return. Among the different mutual funds this study is to find out the best fund
which will yield high returns to the investor and minimize there risk.
OBJECTIVES OF THE STUDY:
To study the different investment guidelines prescribed by IRDA.
To analyze the present performance of different mutual funds
To analyze the competition among different sectors for investment.
Based on the findings suitable suggestions are given.
PLACE OF THE STUDY:
The study was conducted at Deutsche asset management, Raheza tower,
M.G. Road, Bangalore. Also some of the software companies were covered
including Accenture, Oracle, HP, etc. Even bank ATM’s of Axis Bank in
Wilson garden and ICICI Bank in kormangala were covered.
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DEFINITIONS:-
EQUTY DIVERSIFIED:-
• Equity Fund – This fund provides the scope of high appreciation over a long
term. The fund will primarily invest in equities & is expected to match returns
given by NSE NIFTY. This fund will invest at least 90% in equities and
maximum 10% in cash.
• Equity Gain Fund - The investment objective of this Fund is to provide
capital appreciation through investment in select equity stocks that have the
potential
for high capital appreciation. This fund will invest at least 85% in equities and
maximum 15% in debt & cash instruments.
• Equity MidCap Fund - The Investment objective of this Fund is to achieve
capital appreciation by investing in a diversified basket of mid cap stocks and
large cap stocks. The fund shall primarily invest in mid cap stocks (at least
50% of the investment shall be in mid cap stocks).
Investment portfolio shall also include large cap stocks and cash with cash not
exceeding 20% of the portfolio value.
BALANCE:-
• Balanced Fund – The balanced fund is primarily for those who prefer a mix
of steady returns & growth. The balanced fund will invest 30% to 50% in the
equity fund and 50%to 70% in the debt fund.
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• Cash Fund – The cash fund will invest conservatively in money market &
short-term investments to ensure that return on investments shall never be
negative. 100% of this fund will be invested in money market instruments. The
price of the units in this fund is guaranteed never to go down.(i.e :- gold, govt.
securities, etc)
• Debt Fund - This fund provides the scope for steady returns at low risk
through investment in high quality fixed income securities. This fund will be
invested fully in debt instruments
EQUITY LINKED SAVING SCHEME
ELSS funds have a lock-in period of three years. This could be
restricting, but look at the other side of the picture -- the lock-in
period prevents unnecessary withdrawals and helps your money grow
over a period of time.
If you are wondering why a three-year lock-in period is necessary, it is
because you need to take a long-term view when you invest in equity. The
real potential of equities starts to show only after a few years. This allows
you to ignore the short-term slumps and stay invested for the long haul.
The tax benefit:
Investments in ELSSs fall under Section 80C.
The limit under this section is Rs 100,000.
This is irrespective of how much you earn and under which tax bracket
you fall.
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Also, there are no sub-limits under this overall Rs 100,000 amount.
The dividends you earn in an ELSS are tax free.
METHODOLOGY / RESEARCH DESIGN
Type of Study:
The study at Mahindra finance is a combination of analytical and practical
study. It is based on data collected from records of the company and is
administered to various departmental heads connected with Fund
Management.
Types of Data:
Primary Data: This data was collected from discussions and interactions with
respective departmental heads and clients.
Secondary Data: This data was collected through various newsletters,
publications through researchers in the field of fund management, journals
magazine reports and consolidated records from Mahindra finance.
Sampling plan:
The sampling universe consisted of various mutual funds and their returns.
CONTENT TABLE
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Chapter 1 – Introduction: It contains the subject background and
is a review of fund management.
Chapter 2 – Research Design: Under this a brief introduction
about the subject is given. The problem is formulated and a
suitable procedure is adopted to analyze the problem and arrive at
a feasible solution.
Chapter 3 – My Profile In Mahindra Finance : At Mahindra
Finance we have a wide range of products and services, with
something to suit everyone’s needs. Right from finance for two
wheelers, tractors, farm equipment, cars and utility vehicles to
commercial vehicles and construction equipment, we also have a
group of experts providing investment advice,(i.e.—MUTUAL
FUND, INSURANCE etc.)Surveying available market products
and choosing the most suitable to our customers’ needs.
Chapter 4 – Analysis and interpretation of data: The data
collected is tabulated and compared, analyzed in order to draw
inferences.
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Chapter 5 – Conclusion and recommendations: Based on the
above findings, suitable suggestions and recommendations are
proposed
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CHAPTER 1
INTRODUCTION
An investor earns or expects to earn additional monetary value from the mode
of investment that could be in the form of financial assets.
FUND Instead of directly buying equity shares or fixed income instruments an
investor can participate in various schemes floated by mutual fund. A Mutual
Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital
market instruments such as shares, debentures and other securities. The
income earned through these investments and the capital appreciation
realized are shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost. The flow
chart below describes broadly the working of a mutual fund:
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The advantages of investing in a Mutual Fund are:
Professional Management
Diversification
Convenient Administration
Return Potential
Low Costs
Liquidity
Transparency
Flexibility
Choice of schemes
Tax benefits
Well regulated
There are different types of mutual funds are available in the
investment market. An investor who wants to invest his money in
mutual funds must have the knowledge about different kinds of
mutual funds.
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GOALS OF THE FUND :
Many funds are designed to invest in companies that meet specific
investor goals, like growth, value, dividend or income to name a
few.
Only companies that meet certain criteria will be included in the
fund. For example, a growth fund looks for companies with
significant, untapped growth potential, whereas a value fund will
look for companies that are undervalued by the market as a way to
increase investor returns. Both of these types of funds are
designed for long-term capital appreciation.
If you need the funds to generate income either because you have
retired, are saving to buy a house or are unable to work, you need
to look at funds that will not only grow over time, but will also
provide you with an income. For example, dividend funds are
designed to pay you dividends on a quarterly or annual basis.
DIFFERENT TYPES OF FUNDS:
GROWTH FUNDS:
Are the type of funds where the collected money is invested in
different stocks in order to capital appreciation over a long term.
Value of these mutual funds increase with the upward in stock
market and decrease with a downfall in the stock market.
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The collected money is invested in common stocks of the
companies that have a solid growth rates, as well as a history of
consistent dividend payout.
BOND FUNDS / FIXED INCOME FUND:
Bond funds typically invest in bonds issued by governments and
large companies.
Bond fund returns are based on a combination of interest
payments and price changes of the bonds in the fund.
The market value of bonds is affected by prevailing interest rates.
When interest rates fall, existing bonds will generally rise in value;
when interest rates rise, bonds will generally fall in value. Overall,
bond funds are affected in the same way.
Fund managers attempt to control risk by managing the credit
quality and the average term of the bonds in the fund.
Fixed income funds generally have the potential for higher returns
than money market or guaranteed funds, but there tends to be a
greater risk of a loss.
The risk on a bond fund is that the bond issuer is not able to repay
the borrowed amount.
Under this category funds are invested in the opportunities that
can provide a regular profit on the invested money.
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BALANCED FUNDS / DIVERSIFIED FUND:
Balanced funds invest in a mix of stocks, bonds, and cash
investments. The mix will change as market conditions change, but
it usually stays within pre-determined ranges. (For example, stocks
40-60%, bonds 30-50%, cash 0-30%).
The benefit of a balanced fund is that it provides automatic
diversification by investing in a variety of asset classes and
thereby reduces the risk of one asset class performing poorly.
Balanced funds tend to be more risky than bond funds and less
risky than equity funds. The main objective is to earn a high rate of
return on the invested money.
MONEY MARKET FUND / GUARANTEED FUND:
Money market funds invest primarily in short-term (less than one
year) government Treasury Bills (also called T-Bills) and corporate
notes which pay a fixed rate of interest.
The rate of return of money market funds tends to be lower than
that of funds that are managed for long-term gains, but they are a
very low-risk investment.
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Money market funds are ideal for parking your cash while you
decide where to invest for the long haul, or for money you will need
in the near future.
ASSET ALLOCATION FUNDS :
Asset allocation funds are similar to balanced funds in that they
invest in all of the asset classes.
Asset allocation funds differ from balanced funds because the fund
manager isn't restricted to the percentage of the money they can
put in a specific type of investment (stocks, bonds, and so on).
A tactical asset allocation fund is one where the manager
frequently makes decisions about the best asset allocation,
sometimes every few months.
The manager of a strategic asset allocation fund will generally
revise the fund's asset allocation once a year.
Asset allocation funds provide a "one stop shopping" approach to
asset allocation.
INDEX FUND :
Index funds include stock or bond funds that closely match the
performance of a market index, such as the BSE.
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Over time, index fund performance will slightly lag that of the
actual index as result of cash flows and transaction costs.
Since index fund investments are not actively researched, the
management fees on index funds are generally very low.
The risks associated with index fund investing are similar to those
of bond and equity funds; however, index funds can have
significant exposure to individual stocks when the weighting in the
index is in excess of that allowed for actively managed funds. This
can reduce the diversification in the fund.
The risk level in this category is at the minimum level.
EQUITY FUNDS :
Equity funds invest primarily in stocks.
Because stocks have traditionally risen in value more than other
types of investments, they offer the greatest potential for long-term
growth.
Investing in stocks is also riskier than other investments as stock
prices can fluctuate more than other types of investments.
The market price of a stock will vary with the company's financial
performance, general economic conditions in the country in which
it operates, as well as investor perceptions.
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ALSO, PERHAPS MOST COMMONLY FUNDS ARE DIVIDED BY THEIR
GEOGRAPHIC MARKETS, COMPANY SIZE AND INDUSTRY.
GEOGRAPHY:
Specific countries: Funds can invest primarily in investments in
one country. For example, Canadian equity funds invest primarily
in Canadian companies.
International: These funds can generally invest in any country
around the world except for Canada. Most international funds
invest in the U.S., Europe, Australia and the Far East, sometimes
referred to as the EAFE countries.
Global funds: These funds invest in any country around the globe,
including Canada.
Foreign equity funds provide an opportunity to diversify across
many markets and reduce the risks associated with the health of
any one economy and its stock market.
These funds do have risks associated with political and market
conditions in other countries. In addition, foreign funds are
exposed to currency risk. If the Value of the Canadian dollar rises,
or the currencies of the countries the fund invests in fall, your
return calculated in Canadian dollars will be lower.
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Different accounting practices and securities regulations around
the world may affect the fund managers' ability to value and trade
in some securities. Portfolio managers seek to reduce these risks
by investing in different countries and industries.
COMPANY SIZE :
Many funds restrict the types of stocks they buy for the fund based
on the size of the company. The size of the company is measured
by its market capitalization (market cap - measures the company's
worth by multiplying its stock price by the number of shares
outstanding).
Generally speaking, small cap funds are more risky than large cap
funds as minor changes in a small cap company's stock price can
have a major impact on its market cap. However, if you can take
the ups and downs, there can be greater rewards for investors in
small cap funds.
INDUSTRY :
Some funds concentrate all their investments in a specific sector or
industry of the economy. For example, biotechnology,
communications, natural resources, etc. Industry specific funds
provide an opportunity to capitalize on the strength of a particular
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sector of the economy. Investing a significant portion of your
portfolio in one industry can be risky, especially if that industry falls
on hard times. However, the upside can be equally as good if the
industry performs well. (We have seen this in the technology
sector.) However, if you have a diversified portfolio you may be
able to reap some incremental returns by investing in an industry-
specific fund.
INVESTMENT ALTERNATIVES :
EQUITY SHARES: Equity shares represent ownership capital. As an equity
shareholder, you have an ownership stake in the company. This essentially
means that you have a residual interest in income and wealth. Perhaps the
most
romantic among various investment avenues, equity shares are classified
into the following broad categories by stock market analysts:
Blue chip shares
Growth shares
Income shares
Cyclical shares
Speculative shares
BONDS: Bonds or debentures represent long-term debt instruments. The
issuer of a bond promises to pay a stipulated stream of cash flows. Bonds
may be classified into the following categories:
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Government securities
Government of India relief bonds
Government agency securities
PSU bonds
Debentures of private sector companies
Preference shares
MONEY MARKET INSTRUMENTS: Debt instruments which have a maturity
of less than one year at the time of issue are called money market
instruments. The important money market instruments are:
Treasury bills
Commercial paper
Certificate of deposit
MUTUAL FUNDS: Instead of directly buying equity shares and / or fixed
income instruments, you can participate in various schemes floated by mutual
funds which, in turn, invest in equity shares and fixed income securities. There
are three broad types of mutual fund schemes:
Equity schemes
Debt schemes
Balanced schemes
LIFE INSURANCE: In a broad sense, life insurance may be viewed as an
investment. Insurance premiums represent the sacrifice and the assured sum
the benefit. The important types of insurance policies in India are:
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Endowment assurance policy
Money back policy
Whole life policy
Term assurance policy
INVESTMENT ATTRIBUTES
For evaluating an investment avenue, the following attributes are relevant.
Rate of return
Risk
Marketability/Liquidity
Safety
Tax Shelter
Convenience
RATE OF RETURN:
Investments are made with the primary objective of deriving a return. The
expectation of a return may be from income (yield) as well as through capital
appreciation. The dividend or interest from the investment is the yield.
Different types of investments promise different rates of return. The
expectation of return from an investment depends upon the nature of
investment, maturity period, market demand, and so on.
RISK:
Risk is inherent in any investment. Risk may relate to loss of capital, delay in
repayment of capital, nonpayment of interest, or variability of returns. While
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some investments such as government securities and bank deposits are
almost without risk, others are more risky. The risk of an investment is
determined by the investment’s maturity period, repayment capacity, nature of
return commitment, and so on.
SAFETY:
The safety of investment is identified with the certainty of return of capital
without loss of money or time. Safety is another feature that an investor
desires from investments. Every investor expects to get back the initial capital
on maturity without loss and without delay. Investment safety is gauged
through the reputation established by the borrower of funds. A highly reputed
and successful corporate entity assures the investors of their initial capital.
MARKETABILITY/LIQUIDITY:
An investment that is easily saleable or marketable without loss of money and
without loss of time is said to possess the characteristic of liquidity. Some
investments such as deposits in unknown corporate entities, bank deposits,
post office deposits, national savings certificates, and so on are not
marketable. Investment instruments such as preference shares and
debentures listed on a stock exchange are marketable. The extent of trading
however depends on the demand and supply of such instruments in the
market for the investors. Equity shares of companies listed on recognized
stock exchanges are easily marketable. A well-developed secondary market
for securities increases the liquidity of the instruments traded therein.
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TAX SHELTER:
Some investments provide tax benefits; others do not. They are of three
kinds.
Initial tax benefit referring to tax relief enjoyed at the time of making the
investment. For Eg:, when you make a deposit in a Public Provident Fund
account, we get a tax rebate under section 88 of the Income Tax Act..
Continuing tax benefit represents the tax shield associated with the periodic
returns from the investment. For Eg:, dividend income and income from
certain other sources is tax-exempt, up to a certain limit, in the hands of the
recipient.
Terminal tax benefit Refers to relief from taxation when an investment is
realized or liquidated. For E.g.: a withdrawal from a Public Provident Fund
account is not subject to tax.
CONVENIENCE:
The degree of convenience associated with investments varies widely. At one
end of the spectrum is the deposit in a savings bank account that can be
made
readily and that does not require any maintenance effort. At the other end of
the spectrum is the purchase of a property that may involve a lot of procedural
and legal hassles at the time of acquisition alIot a great deal of maintenance
effort subsequently.
An investor tends to prefer maximization of expected return, minimization of
risk, safety of funds and liquidity of investments
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FOR THE PURPOSE OF FUND MANAGEMENT TYPICALLY THERE IS:
A fund manager or investment manager who manages the investment
decisions.
A trustee or board who safeguards the assets and ensures compliance with
the laws and rules.
The shareholders or unitholders who own (or have rights to) the assets.
A "Marketing" or "Distribution" company to promote and sell the fund.
NET ASSET VALUE:
The Net Asset Value or NAV is the value of a scheme's assets less the value
of its liabilities. The per unit NAV is the net asset value of the scheme divided
by the number of units outstanding on the Valuation Date.The method for
calculating this varies between scheme types and jurisdiction and can be
subject to complex regulation.
OPEN-ENDED FUND:
An open-ended fund is equitably divided into shares (or units) which vary in
price in direct proportion to the variation in value of the funds net asset value.
Each time money is invested new shares or units are created to match the
prevailing share price; each time shares are redeemed the assets sold match
the prevailing share price. In this way there is no supply or demand created
for shares and they remain a direct reflection of the underlying assets.
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CLOSED-ENDED FUND:
A closed-ended fund issues a limited number of shares (or units) in an initial
public offering (or IPO). The shares are then traded on an exchange or
directly through the fund manager to create a secondary market subject to
market forces. If demand for the shares are high they may trade at a premium
to net asset value. If demand is low they may trade at a discount to net asset
value. Further share (or unit) offerings may be made by the scheme if demand
is high although this may affect the share price.The added element of market
forces tends to amplify the performance of the fund increasing investment
risk through increased volatility.
ADVANTAGES OF INVESTING THROUGH FUNDS:
DIVERSITY AND RISK:
One of the main advantages of investment through different fund is the
reduction in investment risk (capital risk) by diversification. An investment
in a single equity may do well, but it may collapse for investment or other
reasons. If your money is invested in such a failed holding you could lose your
capital. By investing in a range of equities (or other securities) the capital risk
is reduced.
The more diversified your capital, the lower the capital risk this investment
principle is often referred to as spreading risk. Collective investments by their
nature tend to invest in a range of individual securities. However, if the
securities are all in a similar type of asset class or market sector then there
is a systematic risk that all the shares could be affected by adverse market
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changes. To avoid these systematic risk investment managers may diversify
into different non-correlated asset classes. If any one of the three is failing,
because each is Non-correlated (i.e. behaves independently) then by logical
extension at least one of the other two is doing well.
REDUCED DEALING COSTS:
If one investor were to buy a large number of direct investments, the amount
they would be able to invest in each holding is likely to be small. Dealing costs
are normally based on the number and size of each transaction, therefore the
overall dealing costs would take a large chunk out of the capital (affecting
future profits). Pooling your money with that of other investors means you
have the advantages of buying in bulk making dealing costs an insignificant
part of the investment.
DISADVANTAGES OF INVESTING THROUGH FUNDS
COSTS:
The fund manager managing the investment decisions on behalf of the
investors requires remuneration. This is often taken directly from the fund
assets as a fixed percentage each year or sometimes a variable (performance
based) fee. If the investor managed their own investments, this cost would be
avoided.
Often the cost of advice given by a stock broker or financial adviser is built
into the scheme. Often referred to as commission or load (in the U.S.) this
charge may be applied at the start of the plan or as an ongoing percentage of
the fund value each year. While this cost will diminish your returns it could be
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argued that it reflects a separate payment for an advice service rather than a
detrimental feature of collective investment schemes. Indeed it is often
possible to purchase units or shares direct from the providers without bearing
this cost.
LACK OF CHOICE:
Although the investor can choose the type of fund to invest in, they have no
control over the choice of individual holdings that make up the fund.
LOSS OF OWNER'S RIGHTS:
If the investor holds shares directly, they may be entitled to shareholders'
perks (for example, discounts on the company's products) and the right to
attend the company's annual general meeting and vote on important matters.
Investors in a collective investment scheme often have none of the rights
connected with individual investments within the fund.
INVESTMENT AIMS AND BENCHMARKING:
Each fund has a defined investment goal to describe the remit of the
investment manager and to help investors decide if the fund is right for them.
The investment aims will typically fall into the broad categories of Income
(value)
investment or Growth investment. Income or value based investment tends to
select stocks with strong income streams, often more established businesses.
Growth investment selects stocks that tend to reinvest their income to
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generate growth. Each strategy has its critics and proponents; some prefer a
blend approach using aspects of each.
TYPES OF RISK:
Depending on the nature of the investment, the type of 'investment' risk will
vary. A common concern with any investment is that you may lose the money
you invest - your capital. This risk is therefore often referred to as capital risk.
If the assets you invest in are held in another currency there is a risk that
currency movements alone may affect the value. This is referred to as
currency risk.Many forms of investment may not be readily salable on the
open market (e.g. commercial property) or the market has a small capacity
and can therefore
may take time to sell. Assets that are easily sold are termed liquid therefore
this type of risk is termed liquidity.
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Why Mutual fund?
Investment
option
Rate of
interest (%)
Inflation (%) G D P (%) DIFFERENCE
SAVING A/C 3.75 6 8.5 -2.25(NEGATIVE
RETURN)
FIXED
DEPOSIT
8-9.5 6 8.5 THE
ACCOMMODATE
BY PRESENT
VALUE FACTOR
GOVT.
BOND
7-8 6 8.5 -0.5 (NEGATIVE
RETURN)
REAL
ESTATE
30+ 6 8.5 HIGH AMOUNT
OF MONEY
REQURIED FOR
PURCHASE OF
REAL ESTATE
KISSAN
VIKAS
PATRA
7-8 6 8.5 -1(NEGATIVE
RETURN)
POST
OFFICE
6.5-8.5 6 8..5 AVERAGE
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DEPOSIT
MUTUAL 20-30 6 8.5
CHAPTER 2
RESEARCH DESIGN
METHODOLOGY / RESEARCH DESIGN
Type of Study:
The study at Mahindra finance is a combination of analytical and practical
study. It is based on data collected from records of the company and is
administered to various departmental heads connected with Fund
Management.
Types of Data:
Primary Data: This data was collected from discussions and interactions with
respective departmental heads and clients.
Secondary Data: This data was collected through various newsletters,
publications through researchers in the field of fund management, journals
magazine reports and consolidated records from Mahindra finance.
Sampling Plan:
The sampling universe consisted of various mutual funds and their returns .
SWOT of the organization:-
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SWOT analysis of organizations to provide recommendations on their
performance and growth potential. It is a powerful tool for analyzing both
complex qualitative and quantitative facets of an investment decision.
The results of this analysis have been fed into marketing and organizational
strategic plans and have been highly successful in strategy formulation.
Through our SWOT analysis, our clients have been able to take advantage of
niche markets and focus on product innovation which allows them to capture
greater margins.
Our SWOT analysis identifies strengths and weaknesses and relates them
with forward looking opportunities and threats. This helps to identify company
and industry specific critical drivers and catalysts.
SWOT Analysis identifies your company’s:
Strengths - to build on
Weaknesses - to cover
Opportunities - to capture
Threats - to defend against
SWOT Analysis
Strengths:
* Rich experience of the management.
* Good brand equity
* Giving the very good return from inception
* Stabilized and loyal clients.
* Well combination of new energetic and experienced employees.
* Wide variety of investment product to match with every level of customer
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* Giving the mutual fund exposure
Weakness:
* Insufficient office equipments.
* Not all employees have his/her cabin.
* Work place (back office) is quite congested.
* Not very popular in rural area
Opportunities:
* Stability through increased brand awareness, market penetration and
Service offerings
* Across all categories of financial services.
* Increase in customer’s wallet share.
* Leveraging the latest technology for providing quality and client centric
Services.
Threats;
* Increasing interest rate scenario.
* Execution risk.
* Competition from local and multinational players.
* Rising inflation could reduce savings and investments
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CHAPTER 3
MY JOB PROILE IN DEUTSCHE ASSET
MANAGEMENT COMPANY
On Job Training:
Empanelment:
For empanelment we have to call up the IFA in the Bangalore from the data
base given by the company, have to fix the appointment then have to go for
empanelling them.
Interaction & Calling:
Had meetings with clients to check for their requirements which is based on
satisfying their queries about the companies profile, schemes and it’s
performance in the industry. The main work of the relationship manager is to
build a strong relation between the company and the IFA, keep motivating
them for giving the business to the company, assisting them to remain
updated about the market activities, as they don’t have any sources of getting
the updates of the market.
PERFORMANCE APPARAISAL:
It is the activity used to determine the extent to which an employee performs
work effectively. Other terms of performance evaluation include performance
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review, performance rating, performance appraisal, and employee appraisal
and employee evaluation.
PURPOSE OF PERFORMANCE APPRAISAL:
The purpose of performance appraisal is:
1. DEVELOPMENT:
It is used to find out which employee need training, helps in
subordinate-supervisor counseling relation and encourages subordinate
behavior to help employee.
2. MOTIVATION:
It encourages initiative, develops a sense of responsibility and
stimulates efforts to perform better.
3. COMMUNICATION:
It serves as a basis for ongoing discussion between superior and
subordinate about job related matters and thus they get to know each
other better.
4. LEGAL COMPLIANCE:
It serves as a legally defensible reason for promotion, transfer, reward
and discharges.
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WHO EVALUTE THE EMPLOYEE?
Employees can be evaluated by:
1. Committee of Several supervisors.
2. By employee peers.
3. By employees subordinate.
4. By someone outside the work environment.
5. Self evaluation.
6. By using number of approaches.
The performance appraisal used by the Mahindra finance is usually
done by a subordinate that is employee subordinate. The employee is
rated different areas. The areas are
1. Client interaction
2. Candidate interaction
3. Documentation
4. Job posting
5. Average CV received
6. Head hunting
7. Speed of Response
8. Client response
9. Performance against targets
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10.Attitude
11.Leadership
12.Attendance/Punctuality
13. Integrity
14.Loyalty
15.Additional areas of responsibility you would like to handle:
16.Overall rating
The employee is rated of the areas and finally a cumulative
sum is taken out. The employee would scored high is awarded best employee
of the month (per semester) and the employee scoring low is given training for
the improvement of the work.
COMPENSATION AND BENEFITS
COMPENSATION:
It is the human resource management function that deals with every
type of reward individuals receive in exchange for performing organizational
tasks. compensation consists of pay an employee receives in form of wages,
salaries, bonuses or commission.
Objective of compensation:
The objective of the compensation function is to crate a system of
rewards that is equitable to the employee and employer alike. The desired
outcome is an employee who is attracted to the work and motivated to do a
good job for the employer. Compensation should be
1. Adequate
2. Equitable
3. Balanced
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4. Cost-effective
5. Secure
6. Incentive – providing
7. Acceptable to the employee
CHAPTER 4
ANALYSIS AND INTERPRETATION OF DATA
SEGMENTATION, TARGETING, POSITIONING;
company discovers different needs and groups in the market place, targets
those needs and group that it can satisfy in a superior way, and than positions
its offering in a way so that target market recognizes the company’s distinctive
offering and image. Positioning is the act of designing the company’s offering
and image to occupy a distinctive place in the mind of target market. The end
result of positioning is the successful creation of customer - focused value
proposition, a cogent reason why the target market will buy the product.
REASON BEHIND S.T.P---
A total Market can be defined as people or organization with needs, want,
demand however within the total market there is always some diversity among
buyers, not all consumers who drink hot drink wants tea. Similarly not all
consumers who wear pants wants to wear jeans. So within the same general
market there are group of customer with different needs and buying
preference. Hence a market should never commit the mistake to taking up the
whole market uniformly at a time. The best way is to segment or break the
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market into groups of buyers with similar needs and preference and than
select the more attractive groups/segments as part of their marketing strategy.
POSITIONING-----
Here in the case of Mahindra finance they did the very good segmentation,
targeting, positioning in the market. They have positioned itself very well in the
consumers mind by the way of attractive advertisement and excellent past
record. Now Mahindra finance a brand in the market and its on the consumers
mind as a CASH COW
TARGETING-----
Here in the case of Mahindra finance,Its targeting strategy is simply superb.
Mahindra finance has basically targeting the all type of customer in every
level. They have the vide variety of product range that suit for every customer.
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TABLE OF S.T.P.
SEGMENT TARGET POSITIONING
BACHELOR YOUTH CREDIT CARD, TWO
WHEELER- LOAN
NEWLY MARRIED YOUTH CREDIT CARD,
MUTUAL FUND, ULIP-
PLAN
FULLNEST ONE YOUTH ULIP- PLAN, HOME-
LOAN, INSURANCE,
CAR LOAN
FULLNEST TWO MIDDLE AGE EDUCATION LOAN,
SAFE INVESTMENT,
HEALTH INSURANCE,
RETIREMENT PLAN
EMPTYNESS ONE MIDDLE AGE EASY GROWTH FUND
EMPTYNESS TWO OLD AGE FIXED DEPOSIT
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Comparision of ULIPS vs MFS (India ) :
Below is a brief comparision of ULIP (Unit Linked Insurance Product) vs MF
(Mutual Funds) specific to the Indian market.
Primary Objective:
MFs: Investments
ULIPs: Protection + Investments
Investment Duration:
MFs: Works out for Medium term, Long Term Investors. Risky for Short Term
investors.
ULIPs: Works out for Long Term Investors only.
Flexibility:
MFs: Very flexible. Plenty of scope to correct your mistakes if you made any
wrong investment decisions. You can easily shuffle your portfolio in MFs.
ULIPs: Flexibility is limited to moving across the different funds offered with
your policy. Correcting mistakes can turn out to be expensive. Moving funds
from one ULIP to an other ULIP of a different fund house can be expensive.
Liquidity:
MFs: Very liquid. You can sell your MF units any time(except ELSS). Some
MF's like those from Reliance have introduced redemptions at ATMs.
ULIPs: Limited liquidity. Need to stay invested for the minimum number of
years specified before you can redeem.
Investment Objective:
MFs: MF's can be used as your vechile for investments to achive different
objectives.(Eg: Buying a car three years from now. Downpayment for a home
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five years from now. Childrens education 10 years from now. Childrens
marriage 15 years from now. Retirement planning 25 years from now. Medical
expenses after retirement 25 years from now)
ULIPs: ULIPs can be used for achieving only long term objectives (Childrens
education, Childrens marriage, Retirement planning)
Tax Implications:
MFs: All investments in MF's don't qualify for section 80C. Only investments in
ELSS qualify for 80C.
ULIPs: Provide Tax Benefits under section 80C.
MFs: Returns on equity MF's are exempt from long term capital gains tax.
(Unless tax laws change in the future).
ULIPs: We are moving from EEE to EET. No clarity if ULIPs will be taxed
under EET.
MFs: Tax liabilities when moving across from debt to equity funds.(Returns
from debt MF's are taxed.)
ULIPs: Very flexible in moving between equity and debt funds(not tax
implications until maturity of the policy).
Strings Attached (fine print):
MFs: None so ever. At most you pay a small exit load if any.
ULIPs: Some strings attached for your policy to be in effect. Minimum number
of premiums needs to be paid. Minimum fund balance needs to be always
maintained. (I personally don’t like policies which say pay three years
premium and get insurance cover for the next 25 years since there are a lot of
ifs and butts involved. A lot of assumptions made and nothing is in your hand,
it could turn out your fund balance might be exhausted after just 12 years of
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insurance cover).
ADVANTAGES ULIPS:
Can easily rebalance your risk between equity and debt without any tax
implications.
Best suited for medium risk taking individuals who wish to invest in
equity and debt funds(atleast 40% or higher exposure to debt). No
additional tax burden for those investing mainly in debt unlike in MFs.
ADVANTAGE MFS:
Better returns than ULIPs.
Lower charges than ULIPs.
Very flexible and enables you to switch your investments from non
performing MF's to better performing MFs
Very Liquid can be redeemed at anytime.
Best suited for medium to high risk taking individuals who wish to
invest a significant portion in equity funds(atleast 65% exposure in
equities).
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CHAPTER 5
CONCLUSION AND RECOMMENDATION
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”MUTUAL FUND INVESTMENT IS SUBJECT TO
MARKET RISKS. PLEASE READ THE OFFER
DOCUMENT CAREFULLY BEFORE INVESTING”
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