A PROJECT REPORT
On
STUDY OF MUTUAL FUND SCHEMES
AT
NJ INDIA INVEST PVT. LTD. (PUNE)
Submitted
In partial fulfillment of
MASTER DEGREE IN BUSINESS
ADMINISTRATION
University of Pune
(2007-2009)
By
SANGEETA ROHRA
MASTER OF BUSINESS ADMINISTRATION
Allana Institute of Management Science, Pune.
CERTIFICATE
This to certify that SANGEETA ROHRA an M.B.A student of Allana
Institute of Management Sciences has undergone a summer internship
in NJ INDIA INVEST PVT.LTD. Under the title “Study of mutual
fund Schemes”. She has successfully completed her project work in partial
fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION.
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This report is the record of the student‟s own effort your able supervision
and guidance.
Prof. RASHMI
SUNDRIYAL DR.K.K. SINGH
(Internal Guide) [Director]
Date :--------- Date--------
Place:--------- Place:------
--
DECLARATION
This is to declare that the project “STUDY OF MUTUAL FUND
SCHEMES” is entirely genuine work done by me without copying any
material from any available source. It is authentic effort put in by me.
SANGEETA ROHRA
MASTER OF BUSINESS ADMINISTRATION
(ALLANA INSTITUTE OF MANAGEMENT SCIENCES)
www.final-yearproject.com | www.finalyearthesis.com
ACKNOWLEDGEMENT
The last two months with NJ INDIA INVEST PVT.LTD. has been full of
learning and sense of contribution toward the organization. I would like to
thank NJ INDIA INVEST for giving me an opportunity of learning and
contributing through this project. I would like to thanks all the people who
knowingly and unknowingly supported me in my endeavor.
As a student of ALLANA INSITUTE OF MANAGEMENT SCIENCES, I
would first of all like to express my gratitude o Mr. K. K. SINGH for
assigning me such a topic STUDY OF MUTUAL FUND SCHEMES to
work upon in NJ INDIA INVEST PVT.LTD.
During the actual project work, Prof. RASHMI SUNDRIYAL {Project
Guide} has been a source of inspiration through her constant guidance;
personal interest; encouragement and help. I convey my sincere thanks to
her in project. I am also grateful to her for responding Confidence in my
abilities end giving me the freedom to work on my project.
The project couldn‟t have been completed without timely and vital help of
other office staff. Special thanks to Mr. SWAPNIL ADMANE for their
invaluable guidance, keen interest, co-operation, inspiration and of course
moral support through my project session.
[SANGEETA ROHRA]
www.final-yearproject.com | www.finalyearthesis.com
About NJ
NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financial products and services in India. Established in year 1994, NJ has over a decade of rich exposure in financial investments space and portfolio advisory services. From a humble beginning, NJ over the years has evolved out to be a professionally managed, quality conscious and customer focussed financial / investment advisory & distribution firm.
NJ prides in being a professionally managed, quality focused and customer centric organisation. The strength of NJ lies in the strong domain knowledge in investment consultancy and the delivery of sustainable value to clients with support from cutting-edge technology platform, developed in-house by NJ.
At NJ we believe in …
having single window, multiple solutions that are integrated for
simplicity and sapience
making innovations, accessions, value-additions, a constant
process
providing customers with solutions for tomorrow which will keep them above the curve, today
NJ Fundz Network was established in year 2003 as a dedicated platform offering comprehensive services and support to the independent financial advisors. The services offered by NJ Fundz Network are increasingly recognized as the best and most comprehensive in nature. The scope, depth, and quality of the services and support is unmatched in the industry. NJ Fundz Network is proud to be the pioneers in India in providing the 360° Advisory platform to independent advisors. With this NJ has managed to successfully transform the business of many independent financial advisors, bringing them on equal footing or even better than the strongest competitors in the industry. NJ has over 8,600* NJ Fundz Network Partners and over 4,500*
www.final-yearproject.com | www.finalyearthesis.com
normal advisors associated with us. NJ presently has over Rs. 5,050* Crores of assets under advice. NJ has over 130* PSCs (Partner Service Centers) in 22* states spread across India. The numbers are reflections of the trust, commitment and value that NJ shares with its clients.
Vision & Mission
To be the leader in our field of business through,
Total Customer Satisfaction
Commitment to Excellence
Determination to Succeed with strict adherence to compliance
Successful Wealth Creation of our Customers
Mission :
Ensure creation of the desired value for our customers, employees
and associates, through constant improvement, innovation and
commitment to service & quality. To provide solutions which meet
expectations and maintain high professional & ethical standards
along with the adherence to the service commitments.
www.final-yearproject.com | www.finalyearthesis.com
Philosophy
At NJ our service and investing philosophy inspire and shape the
thoughts, attitude, actions and decisions of our employees. If NJ
would beliefs, At NJ our Service and Investing philosophy inspire
and shape the resemble a body, our philosophy would be our spirit
which drives our body.
Service Philosophy:
Our primary measure of success is customer satisfaction …
We are committed to provide our customers with continuous, long-
term improvements and value-additions to meet the needs in an
exceptional way. In our efforts to consistently deliver the best
service possible to our customers, all employees of NJ will make
every effort to:
think of the customer first, take responsibility, and make prompt
service to the customer a priority
deliver upon the commitments & promises made on time
anticipate, visualize, understand, meet, exceed our customer‟s
needs
bring energy, passion & excellence in everything we do
be honest and ethical, in action & attitude, and keep the customer‟s
interest supreme
www.final-yearproject.com | www.finalyearthesis.com
strengthen customer relationships by providing service in a
thoughtful & proactive manner and meet the expectations,
effectively
Investing Philosophy:
We aim to provide Need-based solutions for long-term wealth
creation
We aim to provide all customers of NJ, directly or indirectly, with
true, unbiased, need-based solutions and advice that best meets
their stated & un-stated needs. In our efforts to provide quality
financial & investment advice, we believe that …
Clients want need-based solutions, which fits them
Long-term wealth creation is simple and straight
Asset-Allocation is the ideal & the best way for long-term wealth
creation
Educating and disclosing all the important facets which the
customer needs to be aware of, is important
The solutions must be unbiased, feasible, practical, executable,
measurable and flexible
Constant monitoring and proper after-sales service is critical to
complete the on-going process
At NJ our aim is to earn the trust and respect of the
employees, customers, partners, regulators, industry
members and the community at large by following our
service and investing philosophy with commitment and
without exceptions
www.final-yearproject.com | www.finalyearthesis.com
Management
The management at NJ brings together a team of people with wide experience and knowledge in the financial services domain. The management provides direction and guidance to the whole organisation. The management has strong visions for NJ as a globally respected company providing comprehensive services in financial sector.
The ‘Customer First’ philosophy in deeply ingrained in the management at NJ. The aim of the management is to bring the best to the customers in terms of
Range of products and services offered
Quality Customer Service
All the key members of the organisation put in great focus on the processes & systems under the diverse functions of business. The management also focuses on utilizing technology as the key enabler for all the activities and to leverage the technology for enhancing overall customer experience.
www.final-yearproject.com | www.finalyearthesis.com
The key members of the management are:
Mr. Neeraj Choksi Jt. Managing Director Mr. Jignesh Desai Jt. Managing Director
Sales Team: Mr. Misbah Baxamusa National Head Mr. Kulbhushan Nandwani A.V.P. Mr. Prashant Kakkad A.V.P. Executive Team: Mr. Shirish Patel Information Technology Mr. Vinayak Rajput Finance & Operations Mr. Abhishek Dubey Marketing & Development Mr. Viral Shah Research Mr. Dhaval Desai Human Resources
People & Culture
People
Enthusiasm, Enterprise, Education and Ethics form the four pillars
at NJ. At NJ one can witness the vibrant energy, enthusiasm and
the enterprising drive to excel flowing freely throughout the
organisation. At NJ can also experience the creativity, one-to-one
responsiveness, collaborative approach and passion for delivering
value.
www.final-yearproject.com | www.finalyearthesis.com
At NJ people evolve to be more effective, efficient, and result
oriented. Knowledge is inherent due to the education-centric
approach and the experience in handling different clients groups
across diverse product profiles.
NJ understands that the people are the most important assets of
the company and it is not the company that grows but the people.
NJ hence undertakes rigorous training and educational activities
for enhancing the entire team at NJ. NJ also believes in the
‘Learning through Responsibility’ concept for its employees.
For people at NJ success is not a new word, but is a regular
stepping-stone to realising the one vision that everyone shares.
Culture:
At NJ we believe in transforming the lives of our customers. We
exist to create a difference – a change towards a better life. The
culture at NJ reflects this responsibility, this dream of transforming
lives. And we at NJ are always excited and enthused in doing so.
We believe in keeping „You First‟, providing you with products
and services that meet your stated and unstated needs. Client
satisfaction and client service is the Mantra we constantly recite.
This service oriented philosophy runs throughout the organization,
from top to bottom.
Employees are given ample freedom in their work. The objective is
to keep an open, healthy environment with ample scope for
enterprise, improvement, innovations and out-of-the box solutions
www.final-yearproject.com | www.finalyearthesis.com
Our efforts are constantly engaged in improving our existing
services, offering new and innovative solutions that go beyond
your expectations. This focus has made us one of the most
respected and preferred service providers, especially in the mutual
fund industry.
Service Standards
Service in words, service in action
www.final-yearproject.com | www.finalyearthesis.com
Service is the key to unlocking customer satisfaction, which again
is key for sustainability of any business. At NJ we understand this
very well. NJ has set strict processes in place to deliver quality
services to customers. At NJ strict quality service standards are set
and a well-defined process is established and followed religiously
by our quality customer service teams. Performance is evaluated
on a frequent basis and glitches are ironed out.
But quality service also involves quality people in addition to
processes. NJ gives significant focus to the proper training and
development of the people involved in the service delivery chain.
Further we,
Have well-defined "Privacy Policy" to keep clients‟ information
confidential & internal audits done on the same at regular intervals
Receive various statistics which are analysed on an ongoing basis
to improve the service standards
We are committed to improve and enhance our services and
undertake new service initiatives. Such and other services
differentiate us with other service providers in the industry.
Our Service Commitments …
The service commitments are to guide the actions of the people at
NJ. Clearly stated, advisors can freely communicate any such
actions/events wherein they feel that any of the following
commitments have been breached / compromised. At NJ we desire
to honour our commitments at all points of time and to all our
advisors without any bias.
www.final-yearproject.com | www.finalyearthesis.com
To provide advisor-focussed need-based valued services
To provide reliable, accurate and timely information
To maintain all records in privacy
To optimise services/benefits at least justifiable cost
To develop and grow the advisors‟ business
To provide constructive after sales service
To honour our service commitments
Past Recognitions
Some of the awards & recognitions that we have received in
past …
Year 2000:
For Outstanding Performance presented by Chairman, Prudential
Plc. at London
www.final-yearproject.com | www.finalyearthesis.com
Year 2002:
For Outstanding Performance presented by Group Chief Executive,
Prudential Plc. at London
Year 2003:
For Outstanding Performance presented by Group Chief Executive,
Prudential Plc. at London
Year 2004:
Among Most Valued Business Associates presented by HDFC
Standard Life at Edinburgh, Scotland
Year 2004:
For Outstanding Performance by Deputy CEO, Prudential
Singapore at Malaysia
Year 2006:
Award for mobilising the Highest Number of SIPs at National Level
by Fidelity Mutual Fund Plc at Mumbai
Year 2006:
Award – Vietnam
Comments from Industry Stalwarts:
The essence of investment consultancy lies in optimal asset
allocation as against security selection or timing the markets for
clients. NJ understands this very well and has added significant
www.final-yearproject.com | www.finalyearthesis.com
value to the clients through this approach. I am sure with this new
initiative; a much larger number of clients will be able to benefit
from this approach. I wish them all the best in this initiative
CHAPTER: 1
INTRODUCTION
INTRODUCTION OF THE STUDY
Mutual funds now represent perhaps the most appropriate investment
opportunity for most small investors. As financial markets become more
sophisticated and complex, investors need a financial intermediary who
provides the required knowledge and professional expertise on successful
investing. It is no wonder then that in the birthplace of mutual fund-the
U.S.A.-the fund industry has already overtaken the banking industry, with
more money under mutual fund management than deposited with banks.
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The Indian mutual fund industry has already opened up many exciting
investment opportunity to Indian investors. We have started witnessing
the phenomenon of more savings now being entrusted to the funds.
Despite the expected continuing growth in the industry, mutual fund is
still a new financial intermediary in India. Hence, it is important that the
investors, the mutual fund agents / distributors, financial planners,
investment advisors and even the fund employees acquire better
knowledge of what mutual funds are, what they can do for investors and
what they cannot, and how they function differently from other financial
intermediaries such as the banks. The Association of Mutual Funds in
India has commissioned this Workbook will also serve as a guide to the
AMFI Mutual Fund Testing Programmed for distributors and employees
of mutual funds.
Mutual Funds normally invest in a well-diversified portfolio of securities.
Each investor in a fund is a part owner of all of the fund‟s assets. This
enables him to hold a diversified investment portfolio even with a small
amount of investment, which would otherwise require big capital.
Even if an investor has a big amount of capital available to him, he
benefits from the professional management skills brought in by the fund
in the management of the investor‟s portfolio. The investment
management skills, along with the needed research into available
investment options, ensure a much better return than what an investor can
manage on his own. Few investors have the skills and resources of their
own to succeed in today‟s fast-moving, global and sophisticated markets.
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EXECUTIVE SUMMARY
The project titled “Comparison of Mutual Fund Scheme” being
carried out for NJ INDIA INVESTS PVT. LTD. Today an investor is
interested in tracking the value of his investments, whether he invests
directly in the market or indirectly through Mutual Funds. This dynamic
change has taken place because of a number of reasons. With
globalization and the growing competition in the investments opportunity
available he would have to make guided and rational decisions on
whether he gets an acceptable return on his investments in the funds
selected by him, or if he needs to switch to another fund.
In order to achieve such an end the investor has to understand the
basis of appropriate preference measurement for the fund, and acquire the
basic knowledge of the different measures of evaluating the performance
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of the fund. Only then would he be in a position to judge correctly
whether his fund is performing well or not, and make the right decision.
This project is undertaken to help the investors in tracking the
performance of their investments in Mutual Funds and has been carried
out with the objective of giving performance analysis of Mutual Fund.
The methodology for carrying out the project was very simple that
is through secondary data obtained through various mediums like fact
sheet of the funds, the Internet, Business magazines, Newspaper, etc. the
analysis of Mutual Funds has been done with respect to its various
parameters. I hope NJ INDIA INVEST PVT. LTD., Pune will recognize
this as well as take more references from this project report.
INTRODUCTION OF THE PROJECT
In a Mutual Fund, many investors contribute to form a common pool of
money. This pool of money is invested in accordance with an objective.
The ownership of the fund is thus joint of “mutual”; the fund belongs to
all investors. A single investor‟s ownership of the fund is in the same
proportion as the amount of the contribution made by him bears to the
total amount of the fund.
A mutual fund uses the money collected from investors to buy those
assets which are specifically permitted by its stated investment objective.
Thus, a growth fund would buy mainly equity assets – ordinary shares,
preference, warrants, etc. An income fund would mainly buy debt
instruments such as debentures and bonds. The fund‟s assets are owned
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by the investors in the same proportion as their contribution bears to the
total contributions of all investors put together.
An investor can buy the shares from a company only when the company
makes a share issue. At other times, a share can be purchased from
another investor through the stock exchange if the share is listed. A
shareholder can sell the share to the company only when the company
announces „share buy back‟. At other times, he can sell share to another
investor through a stock exchange. The price observed in a stock
exchange is a reasonable estimate of the fair value of the share.
An open-end mutual fund is quite different in this respect. In an open-end
mutual fund, investors can buy units from the fund and sell units to the
fund continuously. The stock exchange is not in the picture. To ensure
that there is fairness, sale and purchase has to take place at fair value of
the unit. In other words, each share or unit that an investor holds needs to
be assigned a value. Since the units held by an investor evidence the
ownership of the fund‟s assets, the value of the total assets of the fund
when divided by the total number of units issued by the mutual fund
gives us the value of one unit. This is generally called the Net Asset
Value (NAV) of one unit or one share. The total value of an investor‟s
part ownership is thus determined by multiplying the NAV with the
number of units held.
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OBJECTIVES OF THE STUDY:
The project was conducted for the following objective:-
1) To gain an understanding and knowledge of Mutual Funds as an
Investment Tool.
2) To study the product profile of the company.
3) To evaluate the performance of selected schemes of Mutual Fund
of different companies.
4) To compare the Mutual fund schemes on different parameters.
5) To analyze the performance factor of the Fund based on different
drivers associated with the specific fund.
6) To study the diversification of mutual fund.
7) To know the different Asset management companies involve in
MUTUAL FUND.
Scope of the study:
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The Indian securities market is the scope of this project and funds floated
therein. The whole project was based with the agenda to analyze existing
mutual funds and determine their performance factors .In depth analysis
of individual fund is not scope but on the other hand performance of
funds and finding their reasons as in general is the primary motive behind
this project.
The area of the project work is pune city and its location where the
survey has been undertaken those are Hinjewadi IT Park, Magarpatta IT
Park, WNS, Baner symphony Soft Ware, Zensar IT Park, and Senapati
Bapat Road.
LIMITATIONS OF THE STUDY:
Every work has its own limitation. Limitations are extent to which the
process should not exceed. Limitations of this project are:-
1. Duration of project was not enough to make a conclusion on such a
vast subject time. Constraint has become a big limitation.
2. The analysis is based on historical data and thus indicates the past
performance, which may not always be indicative of the future
performance.
3. Different schemes consider different market indices as their
benchmarks, but for purpose of uniformity in the study all schemes have
to be compared against same benchmark index.
4.Weekly NAV‟S have been considered for the study. Daily NAV‟s
would have given more precise result for the study.
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5. It is difficult to get full insight of how fund managers have deployed
their funds.
6. There are more than 30 companies and offering various ranges of
products and analyzing all of them is again a difficult task.
7. Mutual Fund industry performance is dependent on daily churning of
portfolio and Net Asset Value of each fund changes every day, thus the
fund which in comparison is doing better today may not perform well
tomorrow and thus it affects the analysis process.
All the above mentioned statements are the limitations of the project.
Time, Sample Size & Mentality of investor are the main limitations of the
project.
The study is being done by taking and keeping all limitation in mind. The
project is completed in prescribed time.
To find the Awareness of Mutual Fund the Sample Size is not at all
enough because the population size is much bigger than the sample size
and the last limitation was to change the mentality of the investor to
invest in a particular type of the Investment Product. As the Indian
Market have a large number of potential customer to draw a conclusion in
such a small size may not be reliable.
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CHAPTER:2
COMPANY PROFILE
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About NJ
NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financial products and services in India. Established in year 1994, NJ has over a decade of rich exposure in financial investments space and portfolio advisory services. From a humble beginning, NJ over the years has evolved out to be a professionally managed, quality conscious and customer focussed financial / investment advisory & distribution firm.
NJ prides in being a professionally managed, quality focused and customer centric organisation. The strength of NJ lies in the strong domain knowledge in investment consultancy and the delivery of sustainable value to clients with support from cutting-edge technology platform, developed in-house by NJ.
At NJ we believe in …
having single window, multiple solutions that are integrated for
simplicity and sapience
making innovations, accessions, value-additions, a constant
process
providing customers with solutions for tomorrow which will keep them above the curve, today
NJ Fundz Network was established in year 2003 as a dedicated platform offering comprehensive services and support to the independent financial advisors. The services offered by NJ Fundz Network are increasingly recognized as the best and most comprehensive in nature. The scope, depth, and quality of the
www.final-yearproject.com | www.finalyearthesis.com
services and support is unmatched in the industry. NJ Fundz Network is proud to be the pioneers in India in providing the 360° Advisory platform to independent advisors. With this NJ has managed to successfully transform the business of many independent financial advisors, bringing them on equal footing or even better than the strongest competitors in the industry. NJ has over 8,600* NJ Fundz Network Partners and over 4,500* normal advisors associated with us. NJ presently has over Rs. 5,050* Crores of assets under advice. NJ has over 130* PSCs (Partner Service Centers) in 22* states spread across India. The numbers are reflections of the trust, commitment and value that NJ shares with its clients.
Vision & Mission
To be the leader in our field of business through,
Total Customer Satisfaction
Commitment to Excellence
Determination to Succeed with strict adherence to compliance
Successful Wealth Creation of our Customers
Mission:
Ensure creation of the desired value for our customers, employees
and associates, through constant improvement, innovation and
www.final-yearproject.com | www.finalyearthesis.com
commitment to service & quality. To provide solutions which meet
expectations and maintain high professional & ethical standards
along with the adherence to the service commitments.
Philosophy
At NJ our service and investing philosophy inspire and shape the
thoughts, attitude, actions and decisions of our employees. If NJ
would beliefs, At NJ our Service and Investing philosophy inspire
and shape the resemble a body, our philosophy would be our spirit
which drives our body.
Service Philosophy:
Our primary measure of success is customer satisfaction …
We are committed to provide our customers with continuous, long-
term improvements and value-additions to meet the needs in an
exceptional way. In our efforts to consistently deliver the best
service possible to our customers, all employees of NJ will make
every effort to:
think of the customer first, take responsibility, and make prompt
service to the customer a priority
www.final-yearproject.com | www.finalyearthesis.com
deliver upon the commitments & promises made on time
anticipate, visualize, understand, meet, exceed our customer‟s
needs
bring energy, passion & excellence in everything we do
be honest and ethical, in action & attitude, and keep the customer‟s
interest supreme
strengthen customer relationships by providing service in a
thoughtful & proactive manner and meet the expectations,
effectively
Investing Philosophy:
We aim to provide Need-based solutions for long-term wealth
creation
We aim to provide all customers of NJ, directly or indirectly, with
true, unbiased, need-based solutions and advice that best meets
their stated & un-stated needs. In our efforts to provide quality
financial & investment advice, we believe that …
Clients want need-based solutions, which fits them
Long-term wealth creation is simple and straight
Asset-Allocation is the ideal & the best way for long-term wealth
creation
Educating and disclosing all the important facets which the
customer needs to be aware of, is important
The solutions must be unbiased, feasible, practical, executable,
measurable and flexible
www.final-yearproject.com | www.finalyearthesis.com
Constant monitoring and proper after-sales service is critical to
complete the on-going process
At NJ our aim is to earn the trust and respect of the
employees, customers, partners, regulators, industry
members and the community at large by following our
service and investing philosophy with commitment and
without exceptions
Management
The management at NJ brings together a team of people with wide experience and knowledge in the financial services domain. The management provides direction and guidance to the whole organisation. The management has strong visions for NJ as a globally respected company providing comprehensive services in financial sector.
The ‘Customer First’ philosophy in deeply ingrained in the management at NJ. The aim of the management is to bring the best to the customers in terms of
Range of products and services offered
Quality Customer Service
www.final-yearproject.com | www.finalyearthesis.com
All the key members of the organisation put in great focus on the processes & systems under the diverse functions of business. The management also focuses on utilizing technology as the key enabler for all the activities and to leverage the technology for enhancing overall customer experience.
The key members of the management are:
Mr. Neeraj Choksi Jt. Managing Director
Mr. Jignesh Desai Jt. Managing Director
Sales Team:
Mr. Misbah Baxamusa National Head
Mr. Kulbhushan Nandwani A.V.P.
Mr. Prashant Kakkad A.V.P.
People & Culture
People
Enthusiasm, Enterprise, Education and Ethics form the four pillars
at NJ. At NJ one can witness the vibrant energy, enthusiasm and
the enterprising drive to excel flowing freely throughout the
organisation. At NJ can also experience the creativity, one-to-one
responsiveness, collaborative approach and passion for delivering
value.
www.final-yearproject.com | www.finalyearthesis.com
At NJ people evolve to be more effective, efficient, and result
oriented. Knowledge is inherent due to the education-centric
approach and the experience in handling different clients groups
across diverse product profiles.
NJ understands that the people are the most important assets of
the company and it is not the company that grows but the people.
NJ hence undertakes rigorous training and educational activities
for enhancing the entire team at NJ. NJ also believes in the
‘Learning through Responsibility’ concept for its employees.
For people at NJ success is not a new word, but is a regular
stepping-stone to realising the one vision that everyone shares.
Culture:
At NJ we believe in transforming the lives of our customers. We
exist to create a difference – a change towards a better life. The
culture at NJ reflects this responsibility, this dream of transforming
lives. And we at NJ are always excited and enthused in doing so.
We believe in keeping „You First‟, providing you with products
and services that meet your stated and unstated needs. Client
satisfaction and client service is the Mantra we constantly recite.
This service oriented philosophy runs throughout the organization,
from top to bottom.
Employees are given ample freedom in their work. The objective is
to keep an open, healthy environment with ample scope for
enterprise, improvement, innovations and out-of-the box solutions
www.final-yearproject.com | www.finalyearthesis.com
Our efforts are constantly engaged in improving our existing
services, offering new and innovative solutions that go beyond
your expectations. This focus has made us one of the most
respected and preferred service providers, especially in the mutual
fund industry.
Service Standards
Service in words, service in action
Service is the key to unlocking customer satisfaction, which again
is key for sustainability of any business. At NJ we understand this
very well. NJ has set strict processes in place to deliver quality
services to customers. At NJ strict quality service standards are set
www.final-yearproject.com | www.finalyearthesis.com
and a well-defined process is established and followed religiously
by our quality customer service teams. Performance is evaluated
on a frequent basis and glitches are ironed out.
But quality service also involves quality people in addition to
processes. NJ gives significant focus to the proper training and
development of the people involved in the service delivery chain.
Further we,
Have well-defined "Privacy Policy" to keep clients‟ information
confidential & internal audits done on the same at regular intervals
Receive various statistics which are analysed on an ongoing basis
to improve the service standards
We are committed to improve and enhance our services and
undertake new service initiatives. Such and other services
differentiate us with other service providers in the industry.
Our Service Commitments …
The service commitments are to guide the actions of the people at
NJ. Clearly stated, advisors can freely communicate any such
actions/events wherein they feel that any of the following
commitments have been breached / compromised. At NJ we desire
to honour our commitments at all points of time and to all our
advisors without any bias.
www.final-yearproject.com | www.finalyearthesis.com
To provide advisor-focussed need-based valued services
To provide reliable, accurate and timely information
To maintain all records in privacy
To optimise services/benefits at least justifiable cost
To develop and grow the advisors‟ business
To provide constructive after sales service
To honour our service commitments
Past Recognitions
Some of the awards & recognitions that we have received in
past …
Year 2000:
For Outstanding Performance presented by Chairman, Prudential
Plc. at London
www.final-yearproject.com | www.finalyearthesis.com
Year 2002:
For Outstanding Performance presented by Group Chief Executive,
Prudential Plc. at London
Year 2003:
For Outstanding Performance presented by Group Chief Executive,
Prudential Plc. at London
Year 2004:
Among Most Valued Business Associates presented by HDFC
Standard Life at Edinburgh, Scotland
Year 2004:
For Outstanding Performance by Deputy CEO, Prudential
Singapore at Malaysia
Year 2006:
Award for mobilising the Highest Number of SIPs at National Level
by Fidelity Mutual Fund Plc at Mumbai
Year 2006:
Award – Vietnam
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Comments from Industry Stalwarts:
The essence of investment consultancy lies in optimal asset
allocation as against security selection or timing the markets for
clients. NJ understands this very well and has added significant
value to the clients through this approach. I am sure with this new
initiative; a much larger number of clients will be able to benefit
from this approach. I wish them all the best in this initiative
CHAPTER NO 3:
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THEORETICAL FRAMEWORK
Mutual Funds: An overview
Introduction
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 invested
by the fund manager in different types of securities depending upon the
objective of the scheme. These could range from shares to debentures to
money market instruments. The income earned through these investments
and the capital appreciations realized by the scheme are shared by its unit
holders in proportion to the number of units owned by them (pro rata).
Thus a Mutual Fund is the most suitable investment for the common
strategy.
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A mutual fund is the ideal investment vehicle for today‟s complex and
modern financial scenario. Markets for equity shares, bonds and complex
and modern financial scenario. Markets for equity shares, bonds and other
fixed income instruments, real estate, derivatives and other assets have
become mature and information driven. Price changes in these assets are
driven by global events occurring in faraway places. A typical individual
is unlikely to have the knowledge, skills, inclination and time to keep
track of events, understand their implications and act speedily. An
individual also finds it difficult to keep track of ownership of his assets,
investments, brokerage dues and bank transactions etc.
A mutual fund is the answer to all there situations. It appoints
professionally qualified and experienced staff that manages each of these
functions on a full time basis. The large pool of money collected in the
fund allows it to hire such staff at a very low cost to each investor. In
effect, the mutual fund vehicle exploits economies of scale in all three
areas – research, investments and transaction processing. While the
concept of individuals coming together to invest money collectively is not
new, the mutual fund in its present form is a 20th
century phenomenon. In
fact, mutual funds gained popularity only after the Second World War.
Globally, there are thousands of firms offering tens of thousands of
mutual funds with different investment objectives. Today, mutual funds
collectively manage almost as much as or more money as compared to
banks.
A draft offer document is to be prepared at the time of launching the fund.
Typically, it pre specifies the investment objectives of the fund, the risk
associated, the costs involved in the process and the broad rules for entry
into and exit from the fund and other areas of operation. In India, as in
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most countries, these sponsors need approval from a regulator, SEBI
(Securities exchange Board of India) in our case. SEBI looks at track
records of the sponsor and its financial strength in granting approval to
the fund for commencing operations.
A sponsor then hires an asset management company to invest the funds
according to the investment objective. It also hires another entity to be the
custodian of the assets of the fund and perhaps a third one to handle
registry work for the unit holders (subscribers) of the fund.
In the Indian context, the sponsors promote the Asset Management
Company also, in which it holds a majority stake. In many cases a
sponsor can hold a 100% stake in the Asset Management Company
(AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life
Asset Management Company Ltd., which has floated different mutual
funds schemes and also acts as an asset manager for the funds collected
under the schemes.
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HISTORY OF MUTUAL FUND IN INDIA:
The mutual fund industry in India started in 1963 with the formation of
Unit Trust of India, at the initiative of the Government of India and
Reserve Bank the. The history of mutual funds in India can be broadly
divided into four distinct phases.
FIRST PHASE – 1964-87
An act of Parliament established Unit Trust of India (UTI) on 1963. It
was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In
1978 UTI was de-linked from the RBI and the Industrial Development
Bank of India (IDBI) took over the regulatory and administrative control
in place of RBI. The first scheme launched by UTI was Unit Scheme
1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under
management.
SECOND PHASE – 1987-1993 (ENTRY OF PUBLIC SECTOR
FUNDS)
1987 marked the entry of non-UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non-UTI Mutual Fund established in June 1987 followed by
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Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),
Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in
June 1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry has assets under
management of Rs. 47,004 crores.
THIRD PHASE – 1993-2003 (ENTRY OF PRIVATE SECTOR
FUNDS)
With the entry private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, expect UTI
were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The
industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many
foreign mutual funds setting up funds in India and also the industry has
witnessed several mergers and acquisitions. As at the end of January 2003,
there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The
Unit Trust of India with Rs. 44,541 crores of assets under management
was way ahead of other mutual funds.
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FOURTH PHASE – SINCE FEBRUARY 2003
In February 2003, following the repeal of the Unit Trust of India Act
1963 UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of
Rs. 29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The
Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and
does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB
and LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in
March 2000 more than Rs. 76,000 crores of assets under management and
with the setting up of a UTI Mutual Fund, conforming to the SEBI
Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth. As at the end of September,
2004, there were 29 funds, which manage assets of Rs. 153108 crores
under 421 schemes.
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FUTURE SCENARIO
The asset base will continue to grow at an annual rate of about 30 to
35% over the next few years as investor‟s shift their assets from banks
and other traditional avenues. Some of the older public and private
sector players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge
with stronger players in three to four years. In the private sector this
trend has already started with two mergers and one takeover. Here too
some of them will down their shutters in the near future to come.
But this does not mean there is no room for other players. The market
will witness a flurry of new players entering the arena. There will be a
large number of offers from various asset management companies in
the time to come. Some big names like Fidelity, Principal, Old Mutual
etc. are looking at Indian market seriously. One important reason for it
is that most major players already have presence here and hence these
big names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in
India as this would enable it to hedge its risk and this in turn would be
reflected in it‟s Net Asset Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund
schemes to trade in derivatives. Importantly, many market players have
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called on the Regulator to initiate the process immediately, so that the
mutual funds can implement the changes that are required to trade in
Derivatives.
RECENT TRENDS IN MUTUAL FUND INDUSTRY
The most important trend in mutual fund industry is the aggressive
expansion of the foreign owned mutual fund companies and the decline
of the companies floated by nationalized banks and smaller private sector
players.
Many nationalized banks got into the mutual fund business in the early
nineties and got off to a good start due to the stock market boom
prevailing then. These banks did not really understand the mutual fund
business and they just viewed it as another kind of banking activity. Few
hired specialized staff and generally chose to transfer staff from the
parent organizations. The performance of most of the schemes floated by
these funds was not good. Some schemes had offered guaranteed returns
and their parent organizations had to bail out these AMCs by paying
large amounts of money as the diffrence between the guaranteed and
actual returns. The service levels were also very bad.
Most of these AMCs have not been able to retain staff, float new schemes
etc. And it is doubtful whether, barring a few exceptions, they have
serious plans of continuing the activity in a major way. The experience of
some of the AMCs floated by private sector Indian companies was also
very similar. They quickly realized that the AMC business, which makes
money in the long term and requires deep-pocketed support in the
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intermediate years. Some have sold out to foreign owned companies,
some have merged with others and there is general restructuring going on.
The foreign owned companies have deep pockets and have come in here
with the expectation of a long haul. They can be credited with introducing
many new practices such as new product innovation, sharp improvement
in service standards and disclosure, usage of technology, broker
education and support etc. In fact, they have forced the industry to
upgrade itself and service levels of organizations like UTI have improved
dramatically in the last few years in response to the competition provided
by these.
LIST OF MEMBERS:
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A) Bank Sponsored
1) Joint Ventures – Predominantly Indian
a. SBI Funds Management Private Ltd.
2) Others
a. BOB Asset Management Co. Ltd.
b. Canbank Investment Management Services Ltd.
c. UTI Asset Management Co. Pvt. Ltd.
B) Institutions
a. Jeevan Bima Sahayog Asset Management Co. Ltd.
C) Private Sector
1. Indian
a. Benchmark Asset Management Co. Private Ltd.
b. Cholamandalam Asset Management Co. Ltd.
c. Credit Capital Asset Management Co. Ltd.
d. Escorts Asset Management Ltd.
e. J.M. Financial Asset Management Private Ltd.
f. Kotak Mahindra Asset Management Co. Ltd.
g. Quantum Asset Management Co. Private Ltd.
h. Relience Capital Asset Management Ltd.
i. Sahara Asset Management Co. Private Ltd.
j. Sundaram Asset Management Co. Ltd.
k. Tata Asset Management Ltd.
2. JOINT VENTURES – PREDOMINANTLY INDIAN
a. Birla Sun Life Asset Management Co. Ltd.
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b. DSP Merrill Lynch Fund Managers Ltd.
c. HDFC Asset Management Co. Ltd.
d. Prudential ICICI Asset Management Co. Ltd.
3. JOINT VENTURES – PREDOMINANTLY FOREIGN
a. ABN AMRO Asset Management (India) Ltd.
b. Deutsche Asset Management (India) Private Ltd.
c. Fidelity Fund Management Private Ltd.
d. Franklin Templeton Asset Management (India) Private Ltd.
e. HSBC Asset Management (India) Private Ltd.
f. ING Investment Management (India) Private Ltd.
g. Morgan Stanley Investment Management Private Ltd.
h. Principal PNB Asset Management Co. Private Ltd.
i. Standard Charted Asset Management Co. Private.
TYPES OF MUTUAL FUNDS
Mutual fund schemes may be classified on the basis of its structure and
its investment objective.
By Structure:
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OPEN – ENDED FUNDS
An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy
and sell units at Net Asset Value (“NAV”) related prices. The key feature
of open-end schemes is liquidity.
CLOSED-ENDED FUNDS
A closed-end fund has a stipulated maturity period which generally
ranging from 3 to 15 years. The fund is open for subscription only during
a specified period. Investors can invest in the scheme at the time of the
initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide
an exit route to the investors, some close-ended funds give an option of
selling back the units to the Mutual Fund through periodic repurchase at
NAV related prices. SEBI Regulations stipulate that at least one of the
two exit routes is provided to the investor.
INTERVAL FUNDS
Interval funds combine the features of open-ended and close-ended
schemes. They are open for sale or redemption during pre-determined
intervals at NAV related prices.
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By Investment Objective:
GROWTH FUNDS
The aim of growth funds is to provide capital appreciation over the
medium to long-term. Such schemes normally invest a majority of their
corpus in equities. It has been proven that returns from stocks, have
outperformed most other kind of investments held over the long term.
Growth schemes are ideal for investors having a long-term outlook
seeking growth over a period of time.
INCOME FUNDS
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The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such
as bonds, corporate debentures and Government securities. Income Funds
are ideal for capital stability and regular income.
BALANCED FUNDS
The aim of balanced funds is to provide both growth and regular income.
Such schemes periodically distribute a part of their earning and invest
both in equities and fixed income securities in the proportion indicated in
their offer documents. In a rising stock market, the NAV of these
schemes may not normally keep pace, or fall equally when the market
falls. These are ideal for investors looking for a combination of income
and moderate growth.
MONEY MARKET FUNDS
The aim of money market funds is to provide easy liquidity, preservation
of capital and moderate income. These schemes generally invest in safer
short-term instruments such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money. Returns on these schemes
may fluctuate depending upon the interest rates prevailing in the market.
These are ideal for Corporate and individual investors as a means to park
their surplus funds for short periods.
Loads Funds A Load Fund is one that charges a commission for entry or
exit. That is, each time you buy or sell units in the fund, a commission
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will be payable. Typically entry and exit loads range from 1% to 2%. It
could be worth paying the load, if the fund has a good performance
history.
NO-LOAD FUNDS
A No-Load Fund is one that does not charge a commission for entry or
exit. That is, no commission is payable on purchase or sale of units in the
fund. The advantage of a no load fund is that the entire corpus is put to
work.
OTHER SCHEMES:
TAX SAVING SCHEMES
These schemes offer tax rebates to the investors under specific provisions
of the Indian Income Tax laws as the Government offers tax incentives
for investment in specified avenues. Investments made in Equity Linked
Savings Schemes (ELSS) and Pension Schemes are allowed as deduction
u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities
to investors to save capital gains u/s 54EB by investing in Mutual Funds,
provided the capital asset has been sold prior to April 1, 2000 and the
amount is invested before September 30,20.
SPECIAL SCHEMES
INDUSTRY SPECIFIC SCHEMES
Industry Specific Schemes invest only in the industries specified in the
offer document. The investment of these funds is limited to specific
industries like InfoTech, FMCG, and Pharmaceutical etc.
INDEX SCHEMES
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Index Funds attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50.
SECTORAL SCHEMES
Sectoral Funds are those, which invest exclusively in a specified industry
or a group of industries or various segments such as „A‟ Group shares or
initial public offerings.
BENEFITS OF MUTUAL FUND INVESTMENT:
Professional Management: Mutual Funds provide the services of
experienced and skilled professionals, backed by a dedicated investment
research team that analyses the performance and prospects of companies
and selects suitable investments to achieve the objectives of the scheme.
Diversification: Mutual Funds invest in a number of companies across a
broad cross-section of industries and sectors. This diversification reduces
the risk because seldom do all stocks decline at the same time and in the
same proportion. You achieve this diversification through a Mutual Fund
with far less money than you can do on your own.
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Convenient Administration: Investing in a Mutual Fund reduces
paperwork and helps you avoid many problems such as bad deliveries,
delayed payments and follow up with brokers and companies. Mutual
Funds save your time and make investing easy and convenient.
Return Potential: Over a medium to long-term, Mutual Funds have the
potential to provide a higher return as they invest in a diversified basket
of selected securities.
Low Costs: Mutual Funds are a relatively less expensive way to invest
compared to directly investing in the capital markets because the benefits
of scale in brokerage, custodial and other fees translate into lower costs
for investors.
Liquidity: In open-end schemes, the investor gets the money back
promptly at net asset value related prices from the Mutual Fund. In
closed-end schemes, the units can be sold on a stock exchange at the
prevailing market price or the investor can avail of the facility of direct
repurchase at NAV related prices by the Mutual Fund.
Transparency: You get regular information on the value of your
investment in addition to disclosure on the specific investments made by
your scheme, the proportion invested in each class of assets and the fund
manager‟s investment strategy and outlook.
Flexibility: Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, you can
systematically invest or withdraw funds according to your needs and
convenience.
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Affordability: Investors individually may lack sufficient funds to invest
in high-grade stocks. A mutual fund because of its large of its large
corpus allows even a small investor to take the benefit of its investment
strategy.
Choice of Scheme: Mutual Fund offers a family of schemes to suit your
varying needs over a lifetime.
Well Regulated: All Mutual Funds are registered with SEBI and they
function within the provisions of strict regulations designed to protect the
interests of investors. The operations of Mutual Funds are regularly
monitored by SEBI.
DRAWBACKS OF MUTUAL FUND:
No Guarantees: No investment is risk free. If the entire stock market
declines in value, the value of mutual fund shares will go down as well,
no matter how balanced the portfolio. Investors encounter fewer risks
when they invest in mutual funds than when they buy and sell stocks on
their own. However, anyone who invests through a mutual fund runs the
risk of losing money.
Fees and Commissions: All funds charge administrative fees to cover
their day-to-day expenses. Some funds also charge sales commissions or
“loads” to compensate brokers, financial consultants, or financial
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planners. Even if you don‟t use a broker or other financial advisor, you
will pay a sales commission if you buy shares in a Load Fund.
Taxes: During a typical year, most actively managed mutual funds sell
anywhere from 20 to 70 percent of the securities in their portfolios. If
your fund makes a profit on its sales, you will pay taxes on the income
you receive, even if you reinvest the money you made.
Management Risk: When you invest in a mutual fund, you depend on the
fund‟s manager to make the right decisions regarding the fund‟s portfolio.
If the manager does not perform as well as you had hoped, you might not
make as much money on your investment as you expected. Of course, if
you invest in Index Funds, you forego management risk, because these
funds do not employ managers.
CHAPTER NO 4:
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RESEARCH METHODOLOGY
MEANING OF RESEARCH
“A research is a careful investigation or enquiry, especially through
search for new facts in any branch of knowledge. It is a systemized effort
to gain more knowledge.”
“Research Methodology is a way to systematically solve the research
problem. It includes not only the research methods, but also the logic
behind using the methods.”
The methods of research used in this project were as follows:-
Analytical Research
Applied Research
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ANALYTICAL RESEARCH
In analytical research the researcher has to use the facts already available,
and analyze these to make the critical evaluation of the material.
In this project I have used many raw data from the various sources and
analyzed it for underlying trends.
APPLIED RESEARCH
Applied Research aims at finding a solution for an immediate problem.
Research aimed at certain conclusions (say a solution) facing a concrete
social or business problem is an example of applied research. Thus the
central aim of applied research is to find a solution for some pressing
practical problem.
In this project, in the last section, by means of assumptions I have found
the feasibility of a project that the organization means to undertake.
The analysis of the trends followed by the mutual funds was Analytical
Research.
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OBJECTIVE OF RESEARCH METHODOLOGY
It intends, verifies or correct knowledge.
It enables us to have a better understanding of our world.
It aids in purposive planning.
Research initiates, formulates, deflects and clarifies theories.
METHODS OF DATA COLLECTION
Data is primarily of two kinds.
1. Primary data.
INTERVIEWING
It is the most commonly used method of data collection. It is two ways
purposive communication between interviewer and the respondent aimed
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at obtaining and recording information pertinent to the subject matter of
the study.
2. Secondary data.
Secondary data may be defined as a data that has been collected earlier
for some purpose other than the purpose of the present study. Any data
that is available to the prior commencement of the research project is
secondary data and it is called historic data.
USES OF SECONDARY DATA
It acts as a reference for the present study.
The secondary data can be the useful benchmark on which the
finding of the study can be tested.
At times it may be the only source of data.
SOURCES OF SECONDARY DATA
1. Published sources
2. Unpublished sources
DATA COLLECTION METHODS CAN BE CLASSIFIED AS
FOLLOWS
Observations
Interviewing
Experimentation
Simulations
Projective techniques
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IN THIS PROJECTS THE TWO METHODS OF COLLECTION
WERE USED
1. Interviewing
2. Published source of data in the form of fact sheets
RESEARCH DESIGN
Type of Research – Descriptive
Nature of Research – Quantitative
Type of Question – Close Ended
Types of Questionnaire – Structured
Types of Analysis – Statistical Analysis
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CHAPTER NO 5:
DATA ANALYSIS & INTERPRETATION
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Fundz Network
www.njfundz.com
Only Real Provider of a Complete Business Platform
NJ FUNDZ NETWORK
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Fundz Network
www.njfundz.com
Mutual Fund Equity schemes have delivered very attractive returns in
last 5 years, giving over 51% returns annually
Opportunity for you to offer your clients with such equity-related
products for long-term wealth creation * Returns as on 23rd August,2008
EXCELLENT PAST PERFORMANCE
Scheme Name 3 Years 5 Years 7 Years10
Years
Average of Diversified Mutual fund
Schemes20.98 35.10 31.92 27.79
BSE 30 (Sensex) 23.7 29.19 23.4 12.69
NSE 50 23.08 27.78 22.11 12.9
No. of Diversified Schemes considered 46 30 20 6
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Fundz Network
www.njfundz.com
Investor Base Across Various Financial Products
240
1640 17
110
15 1.50
50
100
150
200
250
Bankin
g
Credit
Cards
Debit
Cards
Mutu
al
Funds
Life
Insura
nce
General
Insura
nce
Online
Trad
ing
Penetration of Mutual Funds is very low …
Going forward, the opportunity is big …Source: www.rbi.org.in
www.irdaindia.org
www.sebi.gov.in
Customers in millions
PENETRATION OF FINANCIAL PRODUCTS
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Fundz Network
www.njfundz.com
Investors Looking for Products with following Features :-
• Excellent Returns that can beat Inflation
• Liquidity of the money
• Tax Efficient Returns
• Tax Deduction benefits under Section 80 C
• Professionally Managed
• Transparent
• Easily Understood
• Looking for products which help in Wealth Creation in long term
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Fundz Network
www.njfundz.com
Few people have been exposed to the idea & advantages of mutual
funds and even fewer actually invest in mutual funds, because of lack
of adequate no. of advisors
*Figures are approx.*for House Holds savings
Measure US India
Rupees invested in Mutual Funds out of 100 > 30 < 2
MF Industry size as % size of economy (GDP) 83% 6%
Total size / value of MF industry (Rs. Lac Crores) > 469 > 5
Opportunity to offer such products to clients …
Every person can be a customer !!
LOW PENETRATION OF MUTUAL FUNDS IN INDIA
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Fundz Network
www.njfundz.com
Lack of competition represents a very big opportunity to grow your
business anywhere in India.
>35 Insurance Advisors V/s 1 Mutual Fund Advisor
> 20 Lacs Insurance Advisors
V/s
< 55,000 Mutual Fund Advisors
Very Few Financial Advisors
LOW COMPETITION OF MUTUAL FUND ADVISORS
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Fundz Network
www.njfundz.com
1st in India to offer Complete Business Platform to financial
advisors / firms to manage, monitor and grow their advisory
practice
Integrated, comprehensive, convergent & practical business
solutions
Understands what is needed to grow & manage a financial
advisory practice
NJ FUNDZ NETWORK
Developing Mutual Fund Advisory Business
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Fundz Network
www.njfundz.com
Dedication: NJ is dedicated to your growth hence has a limit of
only 80 advisors for all Employees.
• Employee's complete focus is on expanding your business &
growth as their own growth is linked to your growth
• Single focus / expertise on mutual funds unlike other distributors
• Experienced and qualified sales force show you the right direction
• Interact with apprehensive clients to help in client acquisition
through Ongoing Client Meets, Joint Calls etc.
NJ MANAGERS
Personal Attention
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Fundz Network
www.njfundz.com
NJ RESEARCH
Regular publications:
– Monthly magazine 'FUNDZ WATCH‘
– Weekly reports
– Daily market update
– Daily MF track and much more...
Research reports : Recommendations, market insight, analyses etc
NJ KNOWLEDGE EDGE
•Ongoing interaction through product training, Fund Manager Meets
etc.
•Launch Presentations of all prominent products of various Mutual
Funds
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Fundz Network
www.njfundz.com
Effective integration of different products and services for simplicity
that deliver effective, dynamic solutions that work for you.
Dedicated Relationship Manager for every Fundz Network Partner.
Single Service Point – Get/ Deposit Applications of All AMCs/ All
schemes at NJ PSC.
NJ Customer care - Single contact point for all queries across all
AMCs/ All problems.
SINGLE WINDOW - MULTIPLE SOLUTIONS
NJ ADVANTAGE
Single Interaction Point
,
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CHAPTER: 6
FINDINGS,SUGGESTIONS AND CONCLUSION
FINDINGS
From the above data analysis and interpretations, following observations
can be made:
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The DSP ML Equity (Growth) scheme was started way back in
April 1997 and since then it has been a consistent performer. The
scheme is benchmarked against Nifty.
The average equity exposure of the portfolio in last one year has
been around 94.26% and 5.74% in cash and equivalents. In the
current month however it had 89.58% of assets in equity and
10.42% in cash and equivalent segments. The scheme has a corpus
of Rs. 469.8094 crores (Aug 2007), which is not among the best in
the industry but its growth from Rs. 68.63 crores as on November
2004 definitely points towards the rising investor confidence in this
scheme. In last six months the corpus has grown over.
The HSBC Equity (growth) scheme is mandated to invest upto 95-
100% in the equity related instruments and 0-5% in debt and
money market instruments. As of Aug 2007, it has allocated
89.44% of its assets in equity and rest in cash and equivalent. Over
a period of one year the asset allocation in equities has not
fluctuated much with average allocation at 88.6%. The scheme had
a corpus of Rs. 973.5673 crores as on Aug 2007 and has gone
down by 25% over a period of last one year.
The UTI Equity (Growth) scheme is managing assets worth Rs.
1635.4454 crores as on Aug 2007 but has witnessed significant
reduction from Rs. 4472 crores when it was launched. However
over a period of one year assets under management of the scheme
has increased by 45%. As per stated guidelines it could invest at
least 80% of its net assets in equity and equity related instruments
and upto 20% in Debt and Money market instruments. As on Aug
2007, the scheme has allocated 97.94% of its assets in equities and
rest in cash and equivalent with average equity allocation of its
assets in last one year.
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The LIC equity (Growth) scheme has a corpus of Rs. 91.1291
crores as on Aug 2007 and has gone up by 41% in last one year. As
per stated guidelines it could invest 80%-100% of its net assets in
equity and equity related instruments and upto 20% in Debt and
Money market instruments. As on Aug 2007, the scheme has
allocated 101.92% of its assets in equities. Average equity
allocation in last one year has been at 95.9% of assets under
management of the scheme.
SUGGESTIONS
Following suggestions and recommendations can be made the above
analysis and findings.
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1. The AMC (Asset Management Company) should create awareness
among the individuals about the benefits of Mutual Funds & the
returns from the Mutual Fund market.
2. This can be done by arranging at the household level or by
conducing external program at a public place to educate people
about the nature, benefits & importance of Mutual Funds.
3. As on many people are not aware about mutual fund & other
financial products, industry should conduct surveys to gauge the
preferences of the investors as many people do not invest there
savings due to lack of knowledge & because of high risk.
4. They should have customer care department.
5. Make your future secure by investing in Mutual Funds, as
investments in mutual funds may assure based on various available
schemes and funds, higher rate of return that conventional
investments like Banks and Post Office may not provide.
6. The prospective investors should diversify their monthly income
by preparing the Monthly Budget and they cab generate savings
out of their regular income to invest in the monthly plan of Mutual
Funds.
7. It is found that minimum investment in case of HSBC Equity Fund
is Rs. 10,000 which is double than HDFC‟s, hence it is suggested
to reduce it so that more number of invertors can invest.
8. Investors who want to gain consistent profit but in a long time
duration can invest in these companies. The net asset value of the
funds under consideration had proved to be bullish and bearish in a
very short period. But if we see the trend these schemes shows
bullish nature on an average.
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9. Dividend acts as a good promotion tool to investors. In all AMC
taken above only UTI equity fund has given dividend, so other
AMC can go for dividend.
10. In case of LIC Equity Fund, since the AMC has made short term
borrowings from money market and hence it might have affect its
performance. Hence it is recommended that AMC should attract
more investors rather than borrowings from market.
CONCLUSION
1. In case of UTI Equity Fund, though the scheme‟s performance has
taken a beating in the recent past but frontline stocks in the
portfolio and better performance in bearish phase do provide some
comfort. At the same time its sector calls are likely to show the
good performance once rerated. Going forward investors should
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closely watch its performance before trimming down the
exposures.
2. Seeing the past market rally the LIC Equity (Growth) scheme
shows a lackluster performance and has been ranked at the bottom
of the charts most of the time since its inception. Its one year and
three returns are far below the returns posted by benchmark and
peers despite the average equity exposure of 95% past one year.
The scheme had trailed its peers and benchmark all the time during
the selected time frame shows high risk profile compared to its
peers.
3. Birla Equity Fund, has been very consistent in the performance.
The scheme has given 41.02% annualized return since inception. In
almost all the time periods considered it has consistently beaten the
benchmark and the peer group average. In last one year the scheme
has delivered 48.77% return while the peer group and the
benchmark deliver 39.91% & 37.45% respectively. The scheme
has over the last three years remained in the top quartile.
4. Over the years since the Mutual Fund industry started witnessing
positive contribution in the capital market both, Public sector and
Private sector Mutual Fund institutions has made enough efforts to
meet the investors demands and likely will continue in future too.
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CHAPTER: 7
BIBLIOGRAPHY
BOOKS REFERRED WEBSITES
Product And Services Taxman www.njindiainvest.com
Amfi Course Book www.amfiindia.com
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www.moneycontrol.com
www.karvy.com
www.Valueresearchonline.com
CHAPTER: 1
INTRODUCTION
INTRODUCTION OF THE STUDY
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Mutual funds now represent perhaps the most appropriate investment
opportunity for most small investors. As financial markets become more
sophisticated and complex, investors need a financial intermediary who
provides the required knowledge and professional expertise on successful
investing. It is no wonder then that in the birthplace of mutual fund-the
U.S.A.-the fund industry has already overtaken the banking industry, with
more money under mutual fund management than deposited with banks.
The Indian mutual fund industry has already opened up many exciting
investment opportunity to Indian investors. We have started witnessing
the phenomenon of more savings now being entrusted to the funds.
Despite the expected continuing growth in the industry, mutual fund is
still a new financial intermediary in India. Hence, it is important that the
investors, the mutual fund agents / distributors, financial planners,
investment advisors and even the fund employees acquire better
knowledge of what mutual funds are, what they can do for investors and
what they cannot, and how they function differently from other financial
intermediaries such as the banks. The Association of Mutual Funds in
India has commissioned this Workbook will also serve as a guide to the
AMFI M usual Fund Testing Programmed for distributors and employees
of mutual funds.
Mutual Funds normally invest in a well-diversified portfolio of securities.
Each investor in a fund is a part owner of all of the fund‟s assets. This
enables him to hold a diversified investment portfolio even with a small
amount of investment, which would otherwise require big capital.
Even if an investor has a big amount of capital available to him, he
benefits from the professional management skills brought in by the fund
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in the management of the investor‟s portfolio. The investment
management skills, along with the needed research into available
investment options, ensure a much better return than what an investor can
manage on his own. Few investors have the skills and resources of their
own to succeed in today‟s fast-moving, global and sophisticated markets.
EXECUTIVE SUMMARY
The project titled “Comparison of Mutual Fund Scheme” being
carried out for NJ INDIA INVESTS PVT. LTD. Today an investor is
interested in tracking the value of his investments, whether he invests
directly in the market or indirectly through Mutual Funds. This dynamic
change has taken place because of a number of reasons. With
globalization and the growing competition in the investments opportunity
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available he would have to make guided and rational decisions on
whether he gets an acceptable return on his investments in the funds
selected by him, or if he needs to switch to another fund.
In order to achieve such an end the investor has to understand the
basis of appropriate preference measurement for the fund, and acquire the
basic knowledge of the different measures of evaluating the performance
of the fund. Only then would he be in a position to judge correctly
whether his fund is performing well or not, and make the right decision.
This project is undertaken to help the investors in tracking the
performance of their investments in Mutual Funds and has been carried
out with the objective of giving performance analysis of Mutual Fund.
The methodology for carrying out the project was very simple that
is through secondary data obtained through various mediums like fact
sheet of the funds, the Internet, Business magazines, Newspaper, etc. the
analysis of Mutual Funds has been done with respect to its various
parameters. I hope NJ INDIA INVEST PVT. LTD., Pune will recognize
this as well as take more references from this project report.
INTRODUCTION OF THE PROJECT
In a Mutual Fund, many investors contribute to form a common pool of
money. This pool of money is invested in accordance with an objective.
The ownership of the fund is thus joint of “mutual”; the fund belongs to
all investors. A single investor‟s ownership of the fund is in the same
proportion as the amount of the contribution made by him bears to the
total amount of the fund.
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A mutual fund uses the money collected from investors to buy those
assets which are specifically permitted by its stated investment objective.
Thus, a growth fund would buy mainly equity assets – ordinary shares,
preference, warrants, etc. An income fund would mainly buy debt
instruments such as debentures and bonds. The fund‟s assets are owned
by the investors in the same proportion as their contribution bears to the
total contributions of all investors put together.
An investor can buy the shares from a company only when the company
makes a share issue. At other times, a share can be purchased from
another investor through the stock exchange if the share is listed. A
shareholder can sell the share to the company only when the company
announces „share buy back‟. At other times, he can sell share to another
investor through a stock exchange. The price observed in a stock
exchange is a reasonable estimate of the fair value of the share.
An open-end mutual fund is quite different in this respect. In an open-end
mutual fund, investors can buy units from the fund and sell units to the
fund continuously. The stock exchange is not in the picture. To ensure
that there is fairness, sale and purchase has to take place at fair value of
the unit. In other words, each share or unit that an investor holds needs to
be assigned a value. Since the units held by an investor evidence the
ownership of the fund‟s assets, the value of the total assets of the fund
when divided by the total number of units issued by the mutual fund
gives us the value of one unit. This is generally called the Net Asset
Value (NAV) of one unit or one share. The total value of an investor‟s
part ownership is thus determined by multiplying the NAV with the
number of units held.
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OBJECTIVE OF THE STUDY:
The project was conducted for the following objective:-
8) To gain an understanding and knowledge of Mutual Funds as an
Investment Tool.
9) To study the product profile of the company.
10) To evaluate the performance of selected schemes of Mutual
Fund of different companies.
11) To compare the Mutual fund schemes on different
parameters.
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12) To analyze the performance factor of the Fund based on
different drivers associated with the specific fund.
13) To study the diversification of mutual fund.
14) To know the different Asset management companies involve
in MUTUAL FUND.
Scope of the study:
The Indian securities market is the scope of this project and funds floated
therein. The whole project was based with the agenda to analyze existing
mutual funds and determine their performance factors .In depth analysis
of individual fund is not scope but on the other hand performance of
funds and finding their reasons as in general is the primary motive behind
this project.
The area of the project work is pune city and its location where the
survey has been undertaken those are Hinjewadi IT Park, Magarpatta IT
Park, WNS, Baner symphony Soft Ware, Zensar IT Park, and Senapati
Bapat Road.
LIMITATION OF THE STUDY:
Every work has its own limitation. Limitations are extent to which the
process should not exceed. Limitations of this project are:-
1. Duration of project was not enough to make a conclusion on such a
vast subject time. Constraint has become a big limitation.
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2. The analysis is based on historical data and thus indicates the past
performance, which may not always be indicative of the future
performance.
3. Different schemes consider different market indices as their
benchmarks, but for purpose of uniformity in the study all schemes have
to be compared against same benchmark index.
4.Weekly NAV‟S have been considered for the study. Daily NAV‟s
would have given more precise result for the study.
5. It is difficult to get full insight of how fund managers have deployed
their funds.
6. There are more than 30 companies and offering various ranges of
products and analyzing all of them is again a difficult task.
7. Mutual Fund industry performance is dependent on daily churning of
portfolio and Net Asset Value of each fund changes every day, thus the
fund which in comparison is doing better today may not perform well
tomorrow and thus it affects the analysis process.
All the above mentioned statements are the limitations of the project.
Time, Sample Size & Mentality of investor are the main limitations of the
project.
The study is being done by taking and keeping all limitation in mind. The
project is completed in prescribed time.
To find the Awareness of Mutual Fund the Sample Size is not at all
enough because the population size is much bigger than the sample size
and the last limitation was to change the mentality of the investor to
invest in a particular type of the Investment Product. As the Indian
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Market have a large number of potential customer to draw a conclusion in
such a small size may not be reliable.
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CHAPTER NO 3:
THOERITCAL FRAMEWORK
Mutual Funds: An overview
Introduction
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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 invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned
through these investments and the capital appreciations realized by the scheme are
shared by its unit holders in proportion to the number of units owned by them (pro
rata). 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 portfolio at a
relatively low cost. Anybody with an investible surplus of as little as a few thousand
rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined
investment objective and strategy.
A mutual fund is the ideal investment vehicle for today‟s complex and modern
financial scenario. Markets for equity shares, bonds and complex and modern
financial scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events
occurring in faraway places. A typical individual is unlikely to have the knowledge,
skills, inclination and time to keep track of events, understand their implications and
act speedily. An individual also finds it difficult to keep track of ownership of his
assets, investments, brokerage dues and bank transactions etc.
A mutual fund is the answer to all there situations. It appoints
professionally qualified and experienced staff that manages each of these
functions on a full time basis. The large pool of money collected in the
fund allows it to hire such staff at a very low cost to each investor. In
effect, the mutual fund vehicle exploits economies of scale in all three
areas – research, investments and transaction processing. While the
concept of individuals coming together to invest money collectively is not
new, the mutual fund in its present form is a 20th
century phenomenon. In
fact, mutual funds gained popularity only after the Second World War.
Globally, there are thousands of firms offering tens of thousands of
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mutual funds with different investment objectives. Today, mutual funds
collectively manage almost as much as or more money as compared to
banks.
A draft offer document is to be prepared at the time of launching the fund.
Typically, it pre specifies the investment objectives of the fund, the risk
associated, the costs involved in the process and the broad rules for entry
into and exit from the fund and other areas of operation. In India, as in
most countries, these sponsors need approval from a regulator, SEBI
(Securities exchange Board of India) in our case. SEBI looks at track
records of the sponsor and its financial strength in granting approval to
the fund for commencing operations.
A sponsor then hires an asset management company to invest the funds according to
the investment objective. It also hires another entity to be the custodian of the assets
of the fund and perhaps a third one to handle registry work for the unit holders
(subscribers) of the fund.
In the Indian context, the sponsors promote the Asset Management
Company also, in which it holds a majority stake. In many cases a
sponsor can hold a 100% stake in the Asset Management Company
(AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life
Asset Management Company Ltd., which has floated different mutual
funds schemes and also acts as an asset manager for the funds collected
under the schemes.
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HISTORY OF MUTUAL FUND IN INDIA:
The mutual fund industry in India started in 1963 with the formation of
Unit Trust of India, at the initiative of the Government of India and
Reserve Bank the. The history of mutual funds in India can be broadly
divided into four distinct phases.
FIRST PHASE – 1964-87
An act of Parliament established Unit Trust of India (UTI) on 1963. It
was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In
1978 UTI was de-linked from the RBI and the Industrial Development
Bank of India (IDBI) took over the regulatory and administrative control
in place of RBI. The first scheme launched by UTI was Unit Scheme
1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under
management.
SECOND PHASE – 1987-1993 (ENTRY OF PUBLIC SECTOR
FUNDS)
1987 marked the entry of non-UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
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first non-UTI Mutual Fund established in June 1987 followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),
Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in
June 1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry has assets under
management of Rs. 47,004 crores.
THIRD PHASE – 1993-2003 (ENTRY OF PRIVATE SECTOR
FUNDS)
With the entry private sector funds in 1993, a new era started in the Indian mutual
fund industry, giving the Indian investors a wider choice of fund families. Also, 1993
was the year in which the first Mutual Fund Regulations came into being, under
which all mutual funds, expect UTI were to be registered and governed. The erstwhile
Kothari Pioneer (now merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The
industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many
foreign mutual funds setting up funds in India and also the industry has
witnessed several mergers and acquisitions. As at the end of January 2003,
there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The
Unit Trust of India with Rs. 44,541 crores of assets under management
was way ahead of other mutual funds.
FOURTH PHASE – SINCE FEBRUARY 2003
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In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit
Trust of India with assets under management of Rs. 29,835 crores as at the end of
January 2003, representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000
crores of assets under management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking
place among different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth. As at the end of September, 2004, there
were 29 funds, which manage assets of Rs. 153108 crores under 421 schemes.
FUTURE SCENARIO
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The asset base will continue to grow at an annual rate of about 30 to
35% over the next few years as investor‟s shift their assets from banks
and other traditional avenues. Some of the older public and private
sector players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge
with stronger players in three to four years. In the private sector this
trend has already started with two mergers and one takeover. Here too
some of them will down their shutters in the near future to come.
But this does not mean there is no room for other players. The market
will witness a flurry of new players entering the arena. There will be a
large number of offers from various asset management companies in
the time to come. Some big names like Fidelity, Principal, Old Mutual
etc. are looking at Indian market seriously. One important reason for it
is that most major players already have presence here and hence these
big names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in India as this
would enable it to hedge its risk and this in turn would be reflected in it‟s Net
Asset Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund
schemes to trade in derivatives. Importantly, many market players have
called on the Regulator to initiate the process immediately, so that the
mutual funds can implement the changes that are required to trade in
Derivatives.
RECENT TRENDS IN MUTUAL FUND INDUSTRY
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The most important trend in mutual fund industry is the aggressive
expansion of the foreign owned mutual fund companies and the decline
of the companies floated by nationalized banks and smaller private sector
players.
Many nationalized banks got into the mutual fund business in the early nineties and
got off to a good start due to the stock market boom prevailing then. These banks did
not really understand the mutual fund business and they just viewed it as another kind
of banking activity. Few hired specialized staff and generally chose to transfer staff
from the parent organizations. The performance of most of the schemes floated by
these funds was not good. Some schemes had offered guaranteed returns and their
parent organizations had to bail out these AMCs by paying large amounts of money
as the diffrence between the guaranteed and actual returns. The service levels were
also very bad.
Most of these AMCs have not been able to retain staff, float new schemes
etc. And it is doubtful whether, barring a few exceptions, they have
serious plans of continuing the activity in a major way. The experience of
some of the AMCs floated by private sector Indian companies was also
very similar. They quickly realized that the AMC business, which makes
money in the long term and requires deep-pocketed support in the
intermediate years. Some have sold out to foreign owned companies,
some have merged with others and there is general restructuring going on.
The foreign owned companies have deep pockets and have come in here with the
expectation of a long haul. They can be credited with introducing many new practices
such as new product innovation, sharp improvement in service standards and
disclosure, usage of technology, broker education and support etc. In fact, they have
forced the industry to upgrade itself and service levels of organizations like UTI have
improved dramatically in the last few years in response to the competition provided
by these.
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LIST OF MEMBERS:
D) Bank Sponsored
3) Joint Ventures – Predominantly Indian
b. SBI Funds Management Private Ltd.
4) Others
d. BOB Asset Management Co. Ltd.
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e. Canbank Investment Management Services Ltd.
f. UTI Asset Management Co. Pvt. Ltd.
E) Institutions
b. Jeevan Bima Sahayog Asset Management Co. Ltd.
F) Private Sector
4. Indian
l. Benchmark Asset Management Co. Private Ltd.
m. Cholamandalam Asset Management Co. Ltd.
n. Credit Capital Asset Management Co. Ltd.
o. Escorts Asset Management Ltd.
p. J.M. Financial Asset Management Private Ltd.
q. Kotak Mahindra Asset Management Co. Ltd.
r. Quantum Asset Management Co. Private Ltd.
s. Relience Capital Asset Management Ltd.
t. Sahara Asset Management Co. Private Ltd.
u. Sundaram Asset Management Co. Ltd.
v. Tata Asset Management Ltd.
5. JOINT VENTURES – PREDOMINANTLY INDIAN
e. Birla Sun Life Asset Management Co. Ltd.
f. DSP Merrill Lynch Fund Managers Ltd.
g. HDFC Asset Management Co. Ltd.
h. Prudential ICICI Asset Management Co. Ltd.
6. JOINT VENTURES – PREDOMINANTLY FOREIGN
j. ABN AMRO Asset Management (India) Ltd.
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k. Deutsche Asset Management (India) Private Ltd.
l. Fidelity Fund Management Private Ltd.
m. Franklin Templeton Asset Management (India) Private Ltd.
n. HSBC Asset Management (India) Private Ltd.
o. ING Investment Management (India) Private Ltd.
p. Morgan Stanley Investment Management Private Ltd.
q. Principal PNB Asset Management Co. Private Ltd.
r. Standard Charted Asset Management Co. Private.
TYPES OF MUTUAL FUNDS
Mutual fund schemes may be classified on the basis of its structure and
its investment objective.
By Structure:
OPEN – ENDED FUNDS
An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy
and sell units at Net Asset Value (“NAV”) related prices. The key feature
of open-end schemes is liquidity.
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CLOSED-ENDED FUNDS
A closed-end fund has a stipulated maturity period which generally
ranging from 3 to 15 years. The fund is open for subscription only during
a specified period. Investors can invest in the scheme at the time of the
initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide
an exit route to the investors, some close-ended funds give an option of
selling back the units to the Mutual Fund through periodic repurchase at
NAV related prices. SEBI Regulations stipulate that at least one of the
two exit routes is provided to the investor.
INTERVAL FUNDS
Interval funds combine the features of open-ended and close-ended
schemes. They are open for sale or redemption during pre-determined
intervals at NAV related prices.
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By Investment Objective:
GROWTH FUNDS
The aim of growth funds is to provide capital appreciation over the
medium to long-term. Such schemes normally invest a majority of their
corpus in equities. It has been proven that returns from stocks, have
outperformed most other kind of investments held over the long term.
Growth schemes are ideal for investors having a long-term outlook
seeking growth over a period of time.
INCOME FUNDS
The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such
as bonds, corporate debentures and Government securities. Income Funds
are ideal for capital stability and regular income.
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BALANCED FUNDS
The aim of balanced funds is to provide both growth and regular income.
Such schemes periodically distribute a part of their earning and invest
both in equities and fixed income securities in the proportion indicated in
their offer documents. In a rising stock market, the NAV of these
schemes may not normally keep pace, or fall equally when the market
falls. These are ideal for investors looking for a combination of income
and moderate growth.
MONEY MARKET FUNDS
The aim of money market funds is to provide easy liquidity, preservation
of capital and moderate income. These schemes generally invest in safer
short-term instruments such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money. Returns on these schemes
may fluctuate depending upon the interest rates prevailing in the market.
These are ideal for Corporate and individual investors as a means to park
their surplus funds for short periods.
Loads Funds A Load Fund is one that charges a commission for entry or
exit. That is, each time you buy or sell units in the fund, a commission
will be payable. Typically entry and exit loads range from 1% to 2%. It
could be worth paying the load, if the fund has a good performance
history.
NO-LOAD FUNDS
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A No-Load Fund is one that does not charge a commission for entry or
exit. That is, no commission is payable on purchase or sale of units in the
fund. The advantage of a no load fund is that the entire corpus is put to
work.
OTHER SCHEMES:
TAX SAVING SCHEMES
These schemes offer tax rebates to the investors under specific provisions
of the Indian Income Tax laws as the Government offers tax incentives
for investment in specified avenues. Investments made in Equity Linked
Savings Schemes (ELSS) and Pension Schemes are allowed as deduction
u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities
to investors to save capital gains u/s 54EB by investing in Mutual Funds,
provided the capital asset has been sold prior to April 1, 2000 and the
amount is invested before September 30,20.
SPECIAL SCHEMES
INDUSTRY SPECIFIC SCHEMES
Industry Specific Schemes invest only in the industries specified in the
offer document. The investment of these funds is limited to specific
industries like InfoTech, FMCG, and Pharmaceutical etc.
INDEX SCHEMES
Index Funds attempt to replicate the performance of a particular index such as the
BSE Sensex or the NSE 50.
SECTORAL SCHEMES
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Sectoral Funds are those, which invest exclusively in a specified industry or a group
of industries or various segments such as „A‟ Group shares or initial public offerings.
BENEFITS OF MUTUAL FUND INVESTMENT:
Professional Management: Mutual Funds provide the services of
experienced and skilled professionals, backed by a dedicated investment
research team that analyses the performance and prospects of companies
and selects suitable investments to achieve the objectives of the scheme.
Diversification: Mutual Funds invest in a number of companies across a
broad cross-section of industries and sectors. This diversification reduces
the risk because seldom do all stocks decline at the same time and in the
same proportion. You achieve this diversification through a Mutual Fund
with far less money than you can do on your own.
Convenient Administration: Investing in a Mutual Fund reduces
paperwork and helps you avoid many problems such as bad deliveries,
delayed payments and follow up with brokers and companies. Mutual
Funds save your time and make investing easy and convenient.
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Return Potential: Over a medium to long-term, Mutual Funds have the
potential to provide a higher return as they invest in a diversified basket
of selected securities.
Low Costs: Mutual Funds are a relatively less expensive way to invest
compared to directly investing in the capital markets because the benefits
of scale in brokerage, custodial and other fees translate into lower costs
for investors.
Liquidity: In open-end schemes, the investor gets the money back
promptly at net asset value related prices from the Mutual Fund. In
closed-end schemes, the units can be sold on a stock exchange at the
prevailing market price or the investor can avail of the facility of direct
repurchase at NAV related prices by the Mutual Fund.
Transparency: You get regular information on the value of your
investment in addition to disclosure on the specific investments made by
your scheme, the proportion invested in each class of assets and the fund
manager‟s investment strategy and outlook.
Flexibility: Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, you can
systematically invest or withdraw funds according to your needs and
convenience.
Affordability: Investors individually may lack sufficient funds to invest
in high-grade stocks. A mutual fund because of its large of its large
corpus allows even a small investor to take the benefit of its investment
strategy.
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Choice of Scheme: Mutual Fund offers a family of schemes to suit your
varying needs over a lifetime.
Well Regulated: All Mutual Funds are registered with SEBI and they
function within the provisions of strict regulations designed to protect the
interests of investors. The operations of Mutual Funds are regularly
monitored by SEBI.
DRAWBACKS OF MUTUAL FUND:
No Guarantees: No investment is risk free. If the entire stock market
declines in value, the value of mutual fund shares will go down as well,
no matter how balanced the portfolio. Investors encounter fewer risks
when they invest in mutual funds than when they buy and sell stocks on
their own. However, anyone who invests through a mutual fund runs the
risk of losing money.
Fees and Commissions: All funds charge administrative fees to cover
their day-to-day expenses. Some funds also charge sales commissions or
“loads” to compensate brokers, financial consultants, or financial
planners. Even if you don‟t use a broker or other financial advisor, you
will pay a sales commission if you buy shares in a Load Fund.
Taxes: During a typical year, most actively managed mutual funds sell
anywhere from 20 to 70 percent of the securities in their portfolios. If
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your fund makes a profit on its sales, you will pay taxes on the income
you receive, even if you reinvest the money you made.
Management Risk: When you invest in a mutual fund, you depend on the
fund‟s manager to make the right decisions regarding the fund‟s portfolio.
If the manager does not perform as well as you had hoped, you might not
make as much money on your investment as you expected. Of course, if
you invest in Index Funds, you forego management risk, because these
funds do not employ managers.
CHAPTER NO 4:
RESEARCH METHODOLOGY
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MEANING OF RESEARCH
“A research is a careful investigation or enquiry, especially through
search foe new facts in any branch of knowledge. It is a systemized effort
to gain more knowledge.”
“Research Methodology is a way to systematically solve the research
problem. It includes not only the research methods, but also the logic
behind using the methods.”
The methods of research used in this project were as follows:-
Analytical Research
Applied Research
ANALYTICAL RESEARCH
In analytical research the researcher has to use the facts already available,
and analyze these to make the critical evaluation of the material.
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In this project I have used many raw data from the various sources and
analyzed it for underlying trends.
APPLIED RESEARCH
Applied Research aims at finding a solution for an immediate problem. Research
aimed at certain conclusions (say a solution) facing a concrete social or business
problem is an example of applied research. Thus the central aim of applied research is
to find a solution for some pressing practical problem.
In this project, in the last section, by means of assumptions I have found
the feasibility of a project that the organization means to undertake.
The analysis of the trends followed by the mutual funds was Analytical
Research.
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OBJECTIVE OF RESEARCH METHODOLOGY
It intends, verifies or correct knowledge.
It enables us to have a better understanding of our world.
It aids in purposive planning.
Research initiates, formulates, deflects and clarifies theories.
METHODS OF DATA COLLECTION
Data is primarily of two kinds.
3. Primary data.
INTERVIEWING
It is the most commonly used method of data collection. It is two ways
purposive communication between interviewer and the respondent aimed
at obtaining and recording information pertinent to the subject matter of
the study.
4. Secondary data.
Secondary data may be defined as a data that has been collected earlier for some
purpose other than the purpose of the present study. Any data that is available to the
prior commencement of the research project is secondary data and it is called historic
data.
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USES OF SECONDARY DATA
It acts as a reference for the present study.
The secondary data can be the useful benchmark on which the
finding of the study can be tested.
At times it may be the only source of data.
SOURCES OF SECONDARY DATA
3. Published sources
4. Unpublished sources
DATA COLLECTION METHODS CAN BE CLASSIFIED AS FOLLOWS
Observations
Interviewing
Experimentation
Simulations
Projective techniques
IN THIS PROJECTS THE TWO METHODS OF COLLECTION WERE USED
3. Interviewing
4. Published source of data in the form of fact sheets
RESEARCH DESIGN
Type of Research – Descriptive
Nature of Research – Quantitative
Type of Question – Close Ended
Types of Questionnaire – Structured
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Types of Analysis – Statistical Analysis
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CHAPTER NO 5:
DATA ANALYSIS & INTERPRETATION
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CHAPTER: 6
FINDING, SUGGESSIONS AND
CONCLUSION
FINDINGS
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From the above data analysis and interpretations, following observations
can be made:
The DSP ML Equity (Growth) scheme was started way back in
April 1997 and since then it has been a consistent performer. The
scheme is benchmarked against Nifty.
The average equity exposure of the portfolio in last one year has
been around 94.26% and 5.74% in cash and equivalents. In the
current month however it had 89.58% of assets in equity and
10.42% in cash and equivalent segments. The scheme has a corpus
of Rs. 469.8094 crores (Aug 2007), which is not among the best in
the industry but its growth from Rs. 68.63 crores as on November
2004 definitely points towards the rising investor confidence in this
scheme. In last six months the corpus has grown over.
The HSBC Equity (growth) scheme is mandated to invest upto 95-
100% in the equity related instruments and 0-5% in debt and
money market instruments. As of Aug 2007, it has allocated
89.44% of its assets in equity and rest in cash and equivalent. Over
a period of one year the asset allocation in equities has not
fluctuated much with average allocation at 88.6%. The scheme had
a corpus of Rs. 973.5673 crores as on Aug 2007 and has gone
down by 25% over a period of last one year.
The UTI Equity (Growth) scheme is managing assets worth Rs.
1635.4454 crores as on Aug 2007 but has witnessed significant
reduction from Rs. 4472 crores when it was launched. However
over a period of one year assets under management of the scheme
has increased by 45%. As per stated guidelines it could invest at
least 80% of its net assets in equity and equity related instruments
and upto 20% in Debt and Money market instruments. As on Aug
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2007, the scheme has allocated 97.94% of its assets in equities and
rest in cash and equivalent with average equity allocation of its
assets in last one year.
The LIC equity (Growth) scheme has a corpus of Rs. 91.1291
crores as on Aug 2007 and has gone up by 41% in last one year. As
per stated guidelines it could invest 80%-100% of its net assets in
equity and equity related instruments and upto 20% in Debt and
Money market instruments. As on Aug 2007, the scheme has
allocated 101.92% of its assets in equities. Average equity
allocation in last one year has been at 95.9% of assets under
management of the scheme.
SUGGESSIONS
Following suggestions and recommendations can be made the above
analysis and findings.
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11. The AMC (Asset Management Company) should create awareness
among the individuals about the benefits of Mutual Funds & the
returns from the Mutual Fund market.
12. This can be done by arranging at the household level or by
conducing external program at a public place to educate people
about the nature, benefits & importance of Mutual Funds.
13. As on many people are not aware about mutual fund & other
financial products, industry should conduct surveys to gauge the
preferences of the investors as many people do not invest there
savings due to lack of knowledge & because of high risk.
14. They should have customer care department.
15. Make your future secure by investing in Mutual Funds, as
investments in mutual funds may assure based on various available
schemes and funds, higher rate of return that conventional
investments like Banks and Post Office may not provide.
16. The prospective investors should diversify their monthly income
by preparing the Monthly Budget and they cab generate savings
out of their regular income to invest in the monthly plan of Mutual
Funds.
17. It is found that minimum investment in case of HSBC Equity Fund
is Rs. 10,000 which is double than HDFC‟s, hence it is suggested
to reduce it so that more number of invertors can invest.
18. Investors who want to gain consistent profit but in a long time
duration can invest in these companies. The net asset value of the
funds under consideration had proved to be bullish and bearish in a
very short period. But if we see the trend these schemes shows
bullish nature on an average.
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19. Dividend acts as a good promotion tool to investors. In all AMC
taken above only UTI equity fund has given dividend, so other
AMC can go for dividend.
20. In case of LIC Equity Fund, since the AMC has made short term
borrowings from money market and hence it might have affect its
performance. Hence it is recommended that AMC should attract
more investors rather than borrowings from market.
CONCLUSION
5. In case of HSBC Equity (Growth) fund, though it has yet to
witness bear phase but its performance so far has been
encouraging. And if it manages this kind of performance and sticks
to its investment objective it won‟t be a limiting factor for long.
6. In case of UTI Equity Fund, though the scheme‟s performance has
taken a beating in the recent past but frontline stocks in the
portfolio and better performance in bearish phase do provide some
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comfort. At the same time its sector calls are likely to show the
good performance once rerated. Going forward investors should
closely watch its performance before trimming down the
exposures.
7. Seeing the past market rally the LIC Equity (Growth) scheme
shows a lackluster performance and has been ranked at the bottom
of the charts most of the time since its inception. Its one year and
three returns are far below the returns posted by benchmark and
peers despite the average equity exposure of 95% past one year.
The scheme had trailed its peers and benchmark all the time during
the selected time frame shows high risk profile compared to its
peers.
8. Birla Equity Fund, has been very consistent in the performance.
The scheme has given 41.02% annualized return since inception. In
almost all the time periods considered it has consistently beaten the
benchmark and the peer group average. In last one year the scheme
has delivered 48.77% return while the peer group and the
benchmark deliver 39.91% & 37.45% respectively. The scheme
has over the last three years remained in the top quartile.
9. Over the years since the Mutual Fund industry started witnessing
positive contribution in the capital market both, Public sector and
Private sector Mutual Fund institutions has made enough efforts to
meet the investors demands and likely will continue in future too.
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CHAPTER: 7
ANNEXURE
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QUESTIONARE AND BIBLIOGRAPHY
QUESTIONNAIRE
NAME:
AGE: SEX:
ADDRESS:
E-MAIL:
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1) Are you aware of NJ INDIA INVEST PVT. LTD.
Consultancy?
o YES
o NO
If NO, are you aware of any of following consultancy?
India Bulls ENAM Sherekhan HDFC
2) Which are the Financial Services you are aware of?
INSURANCE
MUTUAL FUND
TAX PLANNING
BONDS/FD
PERSONAL PORTFOLIO MANAGEMENT
STOCK
3) From which media you come to know about Financial Services
Magazine
Newspaper
TV
Radio
Interest
Agents
Franchisee
Hoardings
Friends
Others
4) Would you like to invest in Financial Sector?
Yes Go to (5)
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No Go to (6)
5) Which Financial Service you will prefer to invest and why?
INSURANCE
MUTUAL FUNDS
TAX PLANNIG
BOND/FD
PERSONAL PORTFOLIO MANAGEMENT
STOCK:
6) Reason Being:
High Risk
Lack of Knowledge
Previous Loss
Lack of Financial Planning
7) How much percentage you will like to invest from your annual
income?
INSURANCE
5 to 10%, 10 to 15%, 15 to 20% 20% and above
MUTUAL FUNDS
5 to 10%, 10 to 15%, 15 to 20% 20% and above
PPM
5 to 10%, 10 to 15%, 15 to 20% 20% and above
TAX
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5 to 10%, 10 to 15%, 15 to 20% 20% and above
STOCK
5 to 10%, 10 to 15%, 15 to 20% 20% and above
BONDS/FD
5 to 10%, 10 to 15%, 15 to 20% 20% and above
8) What is your Preferable Period for investment?
January – March
April – June
July – September
October – December
9) To invest through consultancy?
Yes
No
If No, then why?
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10) If yes, what all services you expect from consultancy?
BOOKS REFERRED WEBSITES
Product And Services Taxman www.njindiainvest.com
Amfi Course Book www.amfiindia.com
www.moneycontrol.com
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www.karvy.com
www.Valueresearchonline.com
A PROJECT REPORT
On
STUDY OF MUTUAL FUND SCHEMES
AT
NJ INDIA INVEST PVT. LTD. (PUNE)
Submitted
In partial fulfillment of
MASTER DEGREE IN BUSINESS ADMINISTRATION
University of Pune
(2007-2009)
By
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SANGEETA ROHRA
MASTER OF BUSINESS ADMINITRATION
Allana Institute of Management Science, Pune.
CERTIFICATE
This to certify that SANGEETA ROHRA an M.B.A student of Allana
Institute of Management Sciences has undergone a summer
internship in NJ INDIA INVEST PVT.LTD. Under the title “Study
of mutual fund Schemes”. She has successfully completed his
project work in partial fulfillment for the award of MASTER OF
BUSINESS ADMINISTRATION.
This report is the record of the student’s own effort your able
supervision and guidance.
Prof. RASHMI SUNDRIYAL Dr. K.K. SINGH
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(Internal Guide) [Director]
Date :--------- Date--------
Place:--------- Place:--------
DECLARATION
This is to declare that the project “STUDY OF MUTUAL FUND
SCHEMES” is entirely genuine work done by me without copying
any material from any available source. It is authentic effort put in
by me.
SANGEETA ROHRA
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MASTER OF BUSINESS ADMINISTRATION
(ALLANA INSTITUTE OF MANAGEMENT SCIENCES)
ACKNOWLEDGEMENT
The last two months with NJ INDIA INVEST PVT.LTD. has been full of
learning and sense of contribution toward the organization. I would like
to thank NJ INDIA INVEST for giving me an opportunity of learning and
contributing through this project. I would like to thanks all the people
who knowingly and unknowingly supported me in my endeavor.
As a student of ALLANA INSITUTE OF MANAGEMENT SCIENCES,
I would first of all like to express my gratitude o Mr. K. K. SINGH for
assigning me such a topic STUDY OF MUTUAL FUND SCHEMES to
work upon in NJ INDIA INVEST PVT.LTD.
During the actual project work, Prof. RASHMI SUNDRIYAL {Project
Guide} has been a source of inspiration through her constant guidance;
personal interest; encouragement and help. I convey my sincere thanks to
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her in project. I am also grateful to her for responding Confidence in my
abilities end giving me the freedom to work on my project.
The project couldn‟t have been completed without timely and vital help
of other office staff. Special thanks to Mr. SWAPNIL ADMANE for
their invaluable guidance, keen interest, co-operation, inspiration and of
course moral support through my project session.
[SANGEETA ROHRA]
CHAPTER: 1
INTRODUCTION
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INTRODUCTION OF THE STUDY
Mutual funds now represent perhaps the most appropriate investment
opportunity for most small investors. As financial markets become more
sophisticated and complex, investors need a financial intermediary who
provides the required knowledge and professional expertise on successful
investing. It is no wonder then that in the birthplace of mutual fund-the
U.S.A.-the fund industry has already overtaken the banking industry, with
more money under mutual fund management than deposited with banks.
The Indian mutual fund industry has already opened up many exciting
investment opportunity to Indian investors. We have started witnessing
the phenomenon of more savings now being entrusted to the funds.
Despite the expected continuing growth in the industry, mutual fund is
still a new financial intermediary in India. Hence, it is important that the
investors, the mutual fund agents / distributors, financial planners,
investment advisors and even the fund employees acquire better
knowledge of what mutual funds are, what they can do for investors and
what they cannot, and how they function differently from other financial
intermediaries such as the banks. The Association of Mutual Funds in
India has commissioned this Workbook will also serve as a guide to the
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AMFI Mutual Fund Testing Programmed for distributors and employees
of mutual funds.
Mutual Funds normally invest in a well-diversified portfolio of securities.
Each investor in a fund is a part owner of all of the fund‟s assets. This
enables him to hold a diversified investment portfolio even with a small
amount of investment, which would otherwise require big capital.
Even if an investor has a big amount of capital available to him, he
benefits from the professional management skills brought in by the fund
in the management of the investor‟s portfolio. The investment
management skills, along with the needed research into available
investment options, ensure a much better return than what an investor can
manage on his own. Few investors have the skills and resources of their
own to succeed in today‟s fast-moving, global and sophisticated markets.
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EXECUTIVE SUMMARY
The project titled “Comparison of Mutual Fund Scheme” being
carried out for NJ INDIA INVESTS PVT. LTD. Today an investor is
interested in tracking the value of his investments, whether he invests
directly in the market or indirectly through Mutual Funds. This dynamic
change has taken place because of a number of reasons. With
globalization and the growing competition in the investments opportunity
available he would have to make guided and rational decisions on
whether he gets an acceptable return on his investments in the funds
selected by him, or if he needs to switch to another fund.
In order to achieve such an end the investor has to understand the
basis of appropriate preference measurement for the fund, and acquire the
basic knowledge of the different measures of evaluating the performance
of the fund. Only then would he be in a position to judge correctly
whether his fund is performing well or not, and make the right decision.
This project is undertaken to help the investors in tracking the
performance of their investments in Mutual Funds and has been carried
out with the objective of giving performance analysis of Mutual Fund.
The methodology for carrying out the project was very simple that
is through secondary data obtained through various mediums like fact
sheet of the funds, the Internet, Business magazines, Newspaper, etc. the
analysis of Mutual Funds has been done with respect to its various
parameters. I hope NJ INDIA INVEST PVT. LTD., Pune will recognize
this as well as take more references from this project report.
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INTRODUCTION OF THE PROJECT
In a Mutual Fund, many investors contribute to form a common pool of
money. This pool of money is invested in accordance with an objective.
The ownership of the fund is thus joint of “mutual”; the fund belongs to
all investors. A single investor‟s ownership of the fund is in the same
proportion as the amount of the contribution made by him bears to the
total amount of the fund.
A mutual fund uses the money collected from investors to buy those
assets which are specifically permitted by its stated investment objective.
Thus, a growth fund would buy mainly equity assets – ordinary shares,
preference, warrants, etc. An income fund would mainly buy debt
instruments such as debentures and bonds. The fund‟s assets are owned
by the investors in the same proportion as their contribution bears to the
total contributions of all investors put together.
An investor can buy the shares from a company only when the company
makes a share issue. At other times, a share can be purchased from
another investor through the stock exchange if the share is listed. A
shareholder can sell the share to the company only when the company
announces „share buy back‟. At other times, he can sell share to another
investor through a stock exchange. The price observed in a stock
exchange is a reasonable estimate of the fair value of the share.
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An open-end mutual fund is quite different in this respect. In an open-end
mutual fund, investors can buy units from the fund and sell units to the
fund continuously. The stock exchange is not in the picture. To ensure
that there is fairness, sale and purchase has to take place at fair value of
the unit. In other words, each share or unit that an investor holds needs to
be assigned a value. Since the units held by an investor evidence the
ownership of the fund‟s assets, the value of the total assets of the fund
when divided by the total number of units issued by the mutual fund
gives us the value of one unit. This is generally called the Net Asset
Value (NAV) of one unit or one share. The total value of an investor‟s
part ownership is thus determined by multiplying the NAV with the
number of units held.
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OBJECTIVES OF THE STUDY:
The project was conducted for the following objective:-
15) To gain an understanding and knowledge of Mutual Funds
as an Investment Tool.
16) To study the product profile of the company.
17) To evaluate the performance of selected schemes of Mutual
Fund of different companies.
18) To compare the Mutual fund schemes on different
parameters.
19) To analyze the performance factor of the Fund based on
different drivers associated with the specific fund.
20) To study the diversification of mutual fund.
21) To know the different Asset management companies involve
in MUTUAL FUND.
Scope of the study:
The Indian securities market is the scope of this project and funds floated
therein. The whole project was based with the agenda to analyze existing
mutual funds and determine their performance factors .In depth analysis
of individual fund is not scope but on the other hand performance of
funds and finding their reasons as in general is the primary motive behind
this project.
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The area of the project work is pune city and its location where the
survey has been undertaken those are Hinjewadi IT Park, Magarpatta IT
Park, WNS, Baner symphony Soft Ware, Zensar IT Park, and Senapati
Bapat Road.
LIMITATIONSOF THE STUDY:
Every work has its own limitation. Limitations are extent to which the
process should not exceed. Limitations of this project are:-
1. Duration of project was not enough to make a conclusion on such a
vast subject time. Constraint has become a big limitation.
2. The analysis is based on historical data and thus indicates the past
performance, which may not always be indicative of the future
performance.
3. Different schemes consider different market indices as their
benchmarks, but for purpose of uniformity in the study all schemes have
to be compared against same benchmark index.
4.Weekly NAV‟S have been considered for the study. Daily NAV‟s
would have given more precise result for the study.
5. It is difficult to get full insight of how fund managers have deployed
their funds.
6. There are more than 30 companies and offering various ranges of
products and analyzing all of them is again a difficult task.
7. Mutual Fund industry performance is dependent on daily churning of
portfolio and Net Asset Value of each fund changes every day, thus the
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fund which in comparison is doing better today may not perform well
tomorrow and thus it affects the analysis process.
All the above mentioned statements are the limitations of the project.
Time, Sample Size & Mentality of investor are the main limitations of the
project.
The study is being done by taking and keeping all limitation in mind. The
project is completed in prescribed time.
To find the Awareness of Mutual Fund the Sample Size is not at all
enough because the population size is much bigger than the sample size
and the last limitation was to change the mentality of the investor to
invest in a particular type of the Investment Product. As the Indian
Market have a large number of potential customer to draw a conclusion in
such a small size may not be reliable.
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CHAPTER:2
COMPANY PROFILE
About NJ
NJ IndiaInvest Pvt. Ltd. is one of the leading advisors and distributors of financial products and services in India. Established
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in year 1994, NJ has over a decade of rich exposure in financial investments space and portfolio advisory services. From a humble beginning, NJ over the years has evolved out to be a professionally managed, quality conscious and customer focussed financial / investment advisory & distribution firm.
NJ prides in being a professionally managed, quality focused and customer centric organisation. The strength of NJ lies in the strong domain knowledge in investment consultancy and the delivery of sustainable value to clients with support from cutting-edge technology platform, developed in-house by NJ.
At NJ we believe in …
having single window, multiple solutions that are integrated for
simplicity and sapience
making innovations, accessions, value-additions, a constant
process
providing customers with solutions for tomorrow which will keep
them above the curve, today
NJ Fundz Network was established in year 2003 as a dedicated platform offering comprehensive services and support to the independent financial advisors. The services offered by NJ Fundz Network are increasingly recognized as the best and most comprehensive in nature. The scope, depth, and quality of the services and support is unmatched in the industry. NJ Fundz Network is proud to be the pioneers in India in providing the 360° Advisory platform to independent advisors. With this NJ has managed to successfully transform the business of many independent financial advisors, bringing them on equal footing or even better than the strongest competitors in the industry. NJ has over 8,600* NJ Fundz Network Partners and over 4,500* normal advisors associated with us. NJ presently has over Rs. 5,050* Crores of assets under advice. NJ has over 130* PSCs (Partner Service Centers) in 22* states spread across India. The numbers are reflections of the trust, commitment and value that NJ shares with its clients.
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Vision & Mission
To be the leader in our field of business through,
Total Customer Satisfaction
Commitment to Excellence
Determination to Succeed with strict adherence to compliance
Successful Wealth Creation of our Customers
Mission:
Ensure creation of the desired value for our customers, employees
and associates, through constant improvement, innovation and
commitment to service & quality. To provide solutions which meet
expectations and maintain high professional & ethical standards
along with the adherence to the service commitments.
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Philosophy
At NJ our service and investing philosophy inspire and shape the
thoughts, attitude, actions and decisions of our employees. If NJ
would beliefs, At NJ our Service and Investing philosophy inspire
and shape the resemble a body, our philosophy would be our spirit
which drives our body.
Service Philosophy:
Our primary measure of success is customer satisfaction …
We are committed to provide our customers with continuous, long-
term improvements and value-additions to meet the needs in an
exceptional way. In our efforts to consistently deliver the best
service possible to our customers, all employees of NJ will make
every effort to:
think of the customer first, take responsibility, and make prompt
service to the customer a priority
deliver upon the commitments & promises made on time
anticipate, visualize, understand, meet, exceed our customer‟s
needs
bring energy, passion & excellence in everything we do
be honest and ethical, in action & attitude, and keep the customer‟s
interest supreme
strengthen customer relationships by providing service in a
thoughtful & proactive manner and meet the expectations,
effectively
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Investing Philosophy:
We aim to provide Need-based solutions for long-term wealth
creation
We aim to provide all customers of NJ, directly or indirectly, with
true, unbiased, need-based solutions and advice that best meets
their stated & un-stated needs. In our efforts to provide quality
financial & investment advice, we believe that …
Clients want need-based solutions, which fits them
Long-term wealth creation is simple and straight
Asset-Allocation is the ideal & the best way for long-term wealth
creation
Educating and disclosing all the important facets which the
customer needs to be aware of, is important
The solutions must be unbiased, feasible, practical, executable,
measurable and flexible
Constant monitoring and proper after-sales service is critical to
complete the on-going process
At NJ our aim is to earn the trust and respect of the
employees, customers, partners, regulators, industry
members and the community at large by following our
service and investing philosophy with commitment and
without exceptions
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Management
The management at NJ brings together a team of people with wide experience and knowledge in the financial services domain. The management provides direction and guidance to the whole organisation. The management has strong visions for NJ as a globally respected company providing comprehensive services in financial sector.
The ‘Customer First’ philosophy in deeply ingrained in the management at NJ. The aim of the management is to bring the best to the customers in terms of
Range of products and services offered
Quality Customer Service
All the key members of the organisation put in great focus on the processes & systems under the diverse functions of business. The management also focuses on utilizing technology as the key enabler for all the activities and to leverage the technology for enhancing overall customer experience.
The key members of the management are:
Mr. Neeraj Choksi Jt. Managing Director
Mr. Jignesh Desai Jt. Managing Director
Sales Team:
Mr. Misbah Baxamusa National Head
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Mr. Kulbhushan Nandwani A.V.P.
Mr. Prashant Kakkad A.V.P.
People & Culture
People
Enthusiasm, Enterprise, Education and Ethics form the four pillars
at NJ. At NJ one can witness the vibrant energy, enthusiasm and
the enterprising drive to excel flowing freely throughout the
organisation. At NJ can also experience the creativity, one-to-one
responsiveness, collaborative approach and passion for delivering
value.
At NJ people evolve to be more effective, efficient, and result
oriented. Knowledge is inherent due to the education-centric
approach and the experience in handling different clients groups
across diverse product profiles.
NJ understands that the people are the most important assets of
the company and it is not the company that grows but the people.
NJ hence undertakes rigorous training and educational activities
for enhancing the entire team at NJ. NJ also believes in the
‘Learning through Responsibility’ concept for its employees.
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For people at NJ success is not a new word, but is a regular
stepping-stone to realising the one vision that everyone shares.
Culture:
At NJ we believe in transforming the lives of our customers. We
exist to create a difference – a change towards a better life. The
culture at NJ reflects this responsibility, this dream of transforming
lives. And we at NJ are always excited and enthused in doing so.
We believe in keeping „You First‟, providing you with products
and services that meet your stated and unstated needs. Client
satisfaction and client service is the Mantra we constantly recite.
This service oriented philosophy runs throughout the organization,
from top to bottom.
Employees are given ample freedom in their work. The objective is
to keep an open, healthy environment with ample scope for
enterprise, improvement, innovations and out-of-the box solutions
Our efforts are constantly engaged in improving our existing
services, offering new and innovative solutions that go beyond
your expectations. This focus has made us one of the most
respected and preferred service providers, especially in the mutual
fund industry.
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Service Standards
Service in words, service in action
Service is the key to unlocking customer satisfaction, which again
is key for sustainability of any business. At NJ we understand this
very well. NJ has set strict processes in place to deliver quality
services to customers. At NJ strict quality service standards are set
and a well-defined process is established and followed religiously
by our quality customer service teams. Performance is evaluated
on a frequent basis and glitches are ironed out.
But quality service also involves quality people in addition to
processes. NJ gives significant focus to the proper training and
development of the people involved in the service delivery chain.
Further we,
Have well-defined "Privacy Policy" to keep clients‟ information
confidential & internal audits done on the same at regular intervals
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Receive various statistics which are analysed on an ongoing basis
to improve the service standards
We are committed to improve and enhance our services and
undertake new service initiatives. Such and other services
differentiate us with other service providers in the industry.
Our Service Commitments …
The service commitments are to guide the actions of the people at
NJ. Clearly stated, advisors can freely communicate any such
actions/events wherein they feel that any of the following
commitments have been breached / compromised. At NJ we desire
to honour our commitments at all points of time and to all our
advisors without any bias.
To provide advisor-focussed need-based valued services
To provide reliable, accurate and timely information
To maintain all records in privacy
To optimise services/benefits at least justifiable cost
To develop and grow the advisors‟ business
To provide constructive after sales service
To honour our service commitments
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Past Recognitions
Some of the awards & recognitions that we have received in
past …
Year 2000:
For Outstanding Performance presented by Chairman, Prudential
Plc. at London
Year 2002:
For Outstanding Performance presented by Group Chief Executive,
Prudential Plc. at London
Year 2003:
For Outstanding Performance presented by Group Chief Executive,
Prudential Plc. at London
Year 2004:
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Among Most Valued Business Associates presented by HDFC
Standard Life at Edinburgh, Scotland
Year 2004:
For Outstanding Performance by Deputy CEO, Prudential
Singapore at Malaysia
Year 2006:
Award for mobilising the Highest Number of SIPs at National Level
by Fidelity Mutual Fund Plc at Mumbai
Year 2006:
Award – Vietnam
Comments from Industry Stalwarts:
The essence of investment consultancy lies in optimal asset
allocation as against security selection or timing the markets for
clients. NJ understands this very well and has added significant
value to the clients through this approach. I am sure with this new
initiative; a much larger number of clients will be able to benefit
from this approach. I wish them all the best in this initiative
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CHAPTER NO 3:
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THEORETICAL FRAMEWORK
Mutual Funds: An overview
Introduction
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 invested
by the fund manager in different types of securities depending upon the
objective of the scheme. These could range from shares to debentures to
money market instruments. The income earned through these investments
and the capital appreciations realized by the scheme are shared by its unit
holders in proportion to the number of units owned by them (pro rata).
Thus a Mutual Fund is the most suitable investment for the common
strategy.
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A mutual fund is the ideal investment vehicle for today‟s complex and
modern financial scenario. Markets for equity shares, bonds and complex
and modern financial scenario. Markets for equity shares, bonds and other
fixed income instruments, real estate, derivatives and other assets have
become mature and information driven. Price changes in these assets are
driven by global events occurring in faraway places. A typical individual
is unlikely to have the knowledge, skills, inclination and time to keep
track of events, understand their implications and act speedily. An
individual also finds it difficult to keep track of ownership of his assets,
investments, brokerage dues and bank transactions etc.
A mutual fund is the answer to all there situations. It appoints
professionally qualified and experienced staff that manages each of these
functions on a full time basis. The large pool of money collected in the
fund allows it to hire such staff at a very low cost to each investor. In
effect, the mutual fund vehicle exploits economies of scale in all three
areas – research, investments and transaction processing. While the
concept of individuals coming together to invest money collectively is not
new, the mutual fund in its present form is a 20th
century phenomenon. In
fact, mutual funds gained popularity only after the Second World War.
Globally, there are thousands of firms offering tens of thousands of
mutual funds with different investment objectives. Today, mutual funds
collectively manage almost as much as or more money as compared to
banks.
A draft offer document is to be prepared at the time of launching the fund.
Typically, it pre specifies the investment objectives of the fund, the risk
associated, the costs involved in the process and the broad rules for entry
into and exit from the fund and other areas of operation. In India, as in
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most countries, these sponsors need approval from a regulator, SEBI
(Securities exchange Board of India) in our case. SEBI looks at track
records of the sponsor and its financial strength in granting approval to
the fund for commencing operations.
A sponsor then hires an asset management company to invest the funds
according to the investment objective. It also hires another entity to be the
custodian of the assets of the fund and perhaps a third one to handle
registry work for the unit holders (subscribers) of the fund.
In the Indian context, the sponsors promote the Asset Management
Company also, in which it holds a majority stake. In many cases a
sponsor can hold a 100% stake in the Asset Management Company
(AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life
Asset Management Company Ltd., which has floated different mutual
funds schemes and also acts as an asset manager for the funds collected
under the schemes.
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HISTORY OF MUTUAL FUND IN INDIA:
The mutual fund industry in India started in 1963 with the formation of
Unit Trust of India, at the initiative of the Government of India and
Reserve Bank the. The history of mutual funds in India can be broadly
divided into four distinct phases.
FIRST PHASE – 1964-87
An act of Parliament established Unit Trust of India (UTI) on 1963. It
was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In
1978 UTI was de-linked from the RBI and the Industrial Development
Bank of India (IDBI) took over the regulatory and administrative control
in place of RBI. The first scheme launched by UTI was Unit Scheme
1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under
management.
SECOND PHASE – 1987-1993 (ENTRY OF PUBLIC SECTOR
FUNDS)
1987 marked the entry of non-UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non-UTI Mutual Fund established in June 1987 followed by
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Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),
Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in
June 1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry has assets under
management of Rs. 47,004 crores.
THIRD PHASE – 1993-2003 (ENTRY OF PRIVATE SECTOR
FUNDS)
With the entry private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, expect UTI
were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The
industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many
foreign mutual funds setting up funds in India and also the industry has
witnessed several mergers and acquisitions. As at the end of January 2003,
there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The
Unit Trust of India with Rs. 44,541 crores of assets under management
was way ahead of other mutual funds.
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FOURTH PHASE – SINCE FEBRUARY 2003
In February 2003, following the repeal of the Unit Trust of India Act
1963 UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of
Rs. 29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The
Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and
does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB
and LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in
March 2000 more than Rs. 76,000 crores of assets under management and
with the setting up of a UTI Mutual Fund, conforming to the SEBI
Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth. As at the end of September,
2004, there were 29 funds, which manage assets of Rs. 153108 crores
under 421 schemes.
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FUTURE SCENARIO
The asset base will continue to grow at an annual rate of about 30 to
35% over the next few years as investor‟s shift their assets from banks
and other traditional avenues. Some of the older public and private
sector players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge
with stronger players in three to four years. In the private sector this
trend has already started with two mergers and one takeover. Here too
some of them will down their shutters in the near future to come.
But this does not mean there is no room for other players. The market
will witness a flurry of new players entering the arena. There will be a
large number of offers from various asset management companies in
the time to come. Some big names like Fidelity, Principal, Old Mutual
etc. are looking at Indian market seriously. One important reason for it
is that most major players already have presence here and hence these
big names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in
India as this would enable it to hedge its risk and this in turn would be
reflected in it‟s Net Asset Value (NAV).
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SEBI is working out the norms for enabling the existing mutual fund
schemes to trade in derivatives. Importantly, many market players have
called on the Regulator to initiate the process immediately, so that the
mutual funds can implement the changes that are required to trade in
Derivatives.
RECENT TRENDS IN MUTUAL FUND INDUSTRY
The most important trend in mutual fund industry is the aggressive
expansion of the foreign owned mutual fund companies and the decline
of the companies floated by nationalized banks and smaller private sector
players.
Many nationalized banks got into the mutual fund business in the early
nineties and got off to a good start due to the stock market boom
prevailing then. These banks did not really understand the mutual fund
business and they just viewed it as another kind of banking activity. Few
hired specialized staff and generally chose to transfer staff from the
parent organizations. The performance of most of the schemes floated by
these funds was not good. Some schemes had offered guaranteed returns
and their parent organizations had to bail out these AMCs by paying
large amounts of money as the diffrence between the guaranteed and
actual returns. The service levels were also very bad.
Most of these AMCs have not been able to retain staff, float new schemes
etc. And it is doubtful whether, barring a few exceptions, they have
serious plans of continuing the activity in a major way. The experience of
some of the AMCs floated by private sector Indian companies was also
very similar. They quickly realized that the AMC business, which makes
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money in the long term and requires deep-pocketed support in the
intermediate years. Some have sold out to foreign owned companies,
some have merged with others and there is general restructuring going on.
The foreign owned companies have deep pockets and have come in here
with the expectation of a long haul. They can be credited with introducing
many new practices such as new product innovation, sharp improvement
in service standards and disclosure, usage of technology, broker
education and support etc. In fact, they have forced the industry to
upgrade itself and service levels of organizations like UTI have improved
dramatically in the last few years in response to the competition provided
by these.
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LIST OF MEMBERS:
G) Bank Sponsored
5) Joint Ventures – Predominantly Indian
c. SBI Funds Management Private Ltd.
6) Others
g. BOB Asset Management Co. Ltd.
h. Canbank Investment Management Services Ltd.
i. UTI Asset Management Co. Pvt. Ltd.
H) Institutions
c. Jeevan Bima Sahayog Asset Management Co. Ltd.
I) Private Sector
7. Indian
w. Benchmark Asset Management Co. Private Ltd.
x. Cholamandalam Asset Management Co. Ltd.
y. Credit Capital Asset Management Co. Ltd.
z. Escorts Asset Management Ltd.
aa. J.M. Financial Asset Management Private Ltd.
bb. Kotak Mahindra Asset Management Co. Ltd.
cc. Quantum Asset Management Co. Private Ltd.
dd. Relience Capital Asset Management Ltd.
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ee. Sahara Asset Management Co. Private Ltd.
ff. Sundaram Asset Management Co. Ltd.
gg. Tata Asset Management Ltd.
8. JOINT VENTURES – PREDOMINANTLY INDIAN
i. Birla Sun Life Asset Management Co. Ltd.
j. DSP Merrill Lynch Fund Managers Ltd.
k. HDFC Asset Management Co. Ltd.
l. Prudential ICICI Asset Management Co. Ltd.
9. JOINT VENTURES – PREDOMINANTLY FOREIGN
s. ABN AMRO Asset Management (India) Ltd.
t. Deutsche Asset Management (India) Private Ltd.
u. Fidelity Fund Management Private Ltd.
v. Franklin Templeton Asset Management (India) Private Ltd.
w. HSBC Asset Management (India) Private Ltd.
x. ING Investment Management (India) Private Ltd.
y. Morgan Stanley Investment Management Private Ltd.
z. Principal PNB Asset Management Co. Private Ltd.
aa. Standard Charted Asset Management Co. Private.
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TYPES OF MUTUAL FUNDS
Mutual fund schemes may be classified on the basis of its structure and
its investment objective.
By Structure:
OPEN – ENDED FUNDS
An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy
and sell units at Net Asset Value (“NAV”) related prices. The key feature
of open-end schemes is liquidity.
CLOSED-ENDED FUNDS
A closed-end fund has a stipulated maturity period which generally
ranging from 3 to 15 years. The fund is open for subscription only during
a specified period. Investors can invest in the scheme at the time of the
initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide
an exit route to the investors, some close-ended funds give an option of
selling back the units to the Mutual Fund through periodic repurchase at
NAV related prices. SEBI Regulations stipulate that at least one of the
two exit routes is provided to the investor.
INTERVAL FUNDS
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Interval funds combine the features of open-ended and close-ended
schemes. They are open for sale or redemption during pre-determined
intervals at NAV related prices.
By Investment Objective:
GROWTH FUNDS
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The aim of growth funds is to provide capital appreciation over the
medium to long-term. Such schemes normally invest a majority of their
corpus in equities. It has been proven that returns from stocks, have
outperformed most other kind of investments held over the long term.
Growth schemes are ideal for investors having a long-term outlook
seeking growth over a period of time.
INCOME FUNDS
The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such
as bonds, corporate debentures and Government securities. Income Funds
are ideal for capital stability and regular income.
BALANCED FUNDS
The aim of balanced funds is to provide both growth and regular income.
Such schemes periodically distribute a part of their earning and invest
both in equities and fixed income securities in the proportion indicated in
their offer documents. In a rising stock market, the NAV of these
schemes may not normally keep pace, or fall equally when the market
falls. These are ideal for investors looking for a combination of income
and moderate growth.
MONEY MARKET FUNDS
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The aim of money market funds is to provide easy liquidity, preservation
of capital and moderate income. These schemes generally invest in safer
short-term instruments such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money. Returns on these schemes
may fluctuate depending upon the interest rates prevailing in the market.
These are ideal for Corporate and individual investors as a means to park
their surplus funds for short periods.
Loads Funds A Load Fund is one that charges a commission for entry or
exit. That is, each time you buy or sell units in the fund, a commission
will be payable. Typically entry and exit loads range from 1% to 2%. It
could be worth paying the load, if the fund has a good performance
history.
NO-LOAD FUNDS
A No-Load Fund is one that does not charge a commission for entry or
exit. That is, no commission is payable on purchase or sale of units in the
fund. The advantage of a no load fund is that the entire corpus is put to
work.
OTHER SCHEMES:
TAX SAVING SCHEMES
These schemes offer tax rebates to the investors under specific provisions
of the Indian Income Tax laws as the Government offers tax incentives
for investment in specified avenues. Investments made in Equity Linked
Savings Schemes (ELSS) and Pension Schemes are allowed as deduction
u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities
to investors to save capital gains u/s 54EB by investing in Mutual Funds,
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provided the capital asset has been sold prior to April 1, 2000 and the
amount is invested before September 30,20.
SPECIAL SCHEMES
INDUSTRY SPECIFIC SCHEMES
Industry Specific Schemes invest only in the industries specified in the
offer document. The investment of these funds is limited to specific
industries like InfoTech, FMCG, and Pharmaceutical etc.
INDEX SCHEMES
Index Funds attempt to replicate the performance of a particular index
such as the BSE Sensex or the NSE 50.
SECTORAL SCHEMES
Sectoral Funds are those, which invest exclusively in a specified industry
or a group of industries or various segments such as „A‟ Group shares or
initial public offerings.
BENEFITS OF MUTUAL FUND INVESTMENT:
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Professional Management: Mutual Funds provide the services of
experienced and skilled professionals, backed by a dedicated investment
research team that analyses the performance and prospects of companies
and selects suitable investments to achieve the objectives of the scheme.
Diversification: Mutual Funds invest in a number of companies across a
broad cross-section of industries and sectors. This diversification reduces
the risk because seldom do all stocks decline at the same time and in the
same proportion. You achieve this diversification through a Mutual Fund
with far less money than you can do on your own.
Convenient Administration: Investing in a Mutual Fund reduces
paperwork and helps you avoid many problems such as bad deliveries,
delayed payments and follow up with brokers and companies. Mutual
Funds save your time and make investing easy and convenient.
Return Potential: Over a medium to long-term, Mutual Funds have the
potential to provide a higher return as they invest in a diversified basket
of selected securities.
Low Costs: Mutual Funds are a relatively less expensive way to invest
compared to directly investing in the capital markets because the benefits
of scale in brokerage, custodial and other fees translate into lower costs
for investors.
Liquidity: In open-end schemes, the investor gets the money back
promptly at net asset value related prices from the Mutual Fund. In
closed-end schemes, the units can be sold on a stock exchange at the
prevailing market price or the investor can avail of the facility of direct
repurchase at NAV related prices by the Mutual Fund.
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Transparency: You get regular information on the value of your
investment in addition to disclosure on the specific investments made by
your scheme, the proportion invested in each class of assets and the fund
manager‟s investment strategy and outlook.
Flexibility: Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, you can
systematically invest or withdraw funds according to your needs and
convenience.
Affordability: Investors individually may lack sufficient funds to invest
in high-grade stocks. A mutual fund because of its large of its large
corpus allows even a small investor to take the benefit of its investment
strategy.
Choice of Scheme: Mutual Fund offers a family of schemes to suit your
varying needs over a lifetime.
Well Regulated: All Mutual Funds are registered with SEBI and they
function within the provisions of strict regulations designed to protect the
interests of investors. The operations of Mutual Funds are regularly
monitored by SEBI.
DRAWBACKS OF MUTUAL FUND:
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No Guarantees: No investment is risk free. If the entire stock market
declines in value, the value of mutual fund shares will go down as well,
no matter how balanced the portfolio. Investors encounter fewer risks
when they invest in mutual funds than when they buy and sell stocks on
their own. However, anyone who invests through a mutual fund runs the
risk of losing money.
Fees and Commissions: All funds charge administrative fees to cover
their day-to-day expenses. Some funds also charge sales commissions or
“loads” to compensate brokers, financial consultants, or financial
planners. Even if you don‟t use a broker or other financial advisor, you
will pay a sales commission if you buy shares in a Load Fund.
Taxes: During a typical year, most actively managed mutual funds sell
anywhere from 20 to 70 percent of the securities in their portfolios. If
your fund makes a profit on its sales, you will pay taxes on the income
you receive, even if you reinvest the money you made.
Management Risk: When you invest in a mutual fund, you depend on the
fund‟s manager to make the right decisions regarding the fund‟s portfolio.
If the manager does not perform as well as you had hoped, you might not
make as much money on your investment as you expected. Of course, if
you invest in Index Funds, you forego management risk, because these
funds do not employ managers.
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CHAPTER NO 4:
RESEARCH METHODOLOGY
MEANING OF RESEARCH
“A research is a careful investigation or enquiry, especially through
search for new facts in any branch of knowledge. It is a systemized effort
to gain more knowledge.”
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“Research Methodology is a way to systematically solve the research
problem. It includes not only the research methods, but also the logic
behind using the methods.”
The methods of research used in this project were as follows:-
Analytical Research
Applied Research
ANALYTICAL RESEARCH
In analytical research the researcher has to use the facts already available,
and analyze these to make the critical evaluation of the material.
In this project I have used many raw data from the various sources and
analyzed it for underlying trends.
APPLIED RESEARCH
Applied Research aims at finding a solution for an immediate problem.
Research aimed at certain conclusions (say a solution) facing a concrete
social or business problem is an example of applied research. Thus the
central aim of applied research is to find a solution for some pressing
practical problem.
In this project, in the last section, by means of assumptions I have found
the feasibility of a project that the organization means to undertake.
The analysis of the trends followed by the mutual funds was Analytical
Research.
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OBJECTIVE OF RESEARCH METHODOLOGY
It intends, verifies or correct knowledge.
It enables us to have a better understanding of our world.
It aids in purposive planning.
Research initiates, formulates, deflects and clarifies theories.
METHODS OF DATA COLLECTION
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Data is primarily of two kinds.
5. Primary data.
INTERVIEWING
It is the most commonly used method of data collection. It is two ways
purposive communication between interviewer and the respondent aimed
at obtaining and recording information pertinent to the subject matter of
the study.
6. Secondary data.
Secondary data may be defined as a data that has been collected earlier
for some purpose other than the purpose of the present study. Any data
that is available to the prior commencement of the research project is
secondary data and it is called historic data.
USES OF SECONDARY DATA
It acts as a reference for the present study.
The secondary data can be the useful benchmark on which the
finding of the study can be tested.
At times it may be the only source of data.
SOURCES OF SECONDARY DATA
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5. Published sources
6. Unpublished sources
DATA COLLECTION METHODS CAN BE CLASSIFIED AS
FOLLOWS
Observations
Interviewing
Experimentation
Simulations
Projective techniques
IN THIS PROJECTS THE TWO METHODS OF COLLECTION
WERE USED
5. Interviewing
6. Published source of data in the form of fact sheets
RESEARCH DESIGN
Type of Research – Descriptive
Nature of Research – Quantitative
Type of Question – Close Ended
Types of Questionnaire – Structured
Types of Analysis – Statistical Analysis
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CHAPTER NO 5:
DATA ANALYSIS & INTERPRETATION
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EXCELLENT PAST PERFORMANCE
Scheme Name 3 Years 5 Years 7 Years10
Years
Average of Diversified Mutual fund
Schemes20.98 35.10 31.92 27.79
BSE 30 (Sensex) 23.7 29.19 23.4 12.69
NSE 50 23.08 27.78 22.11 12.9
No. of Diversified Schemes considered 46 30 20 6
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Fundz Network
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Investor Base Across Various Financial Products
240
1640 17
110
15 1.50
50
100
150
200
250
Bankin
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Credit
Cards
Debit
Cards
Mutu
al
Funds
Life
Insura
nce
General
Insura
nce
Online
Trad
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Penetration of Mutual Funds is very low …
Going forward, the opportunity is big …Source: www.rbi.org.in
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Customers in millions
PENETRATION OF FINANCIAL PRODUCTS
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Few people have been exposed to the idea & advantages of mutual
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*Figures are approx.*for House Holds savings
Measure US India
Rupees invested in Mutual Funds out of 100 > 30 < 2
MF Industry size as % size of economy (GDP) 83% 6%
Total size / value of MF industry (Rs. Lac Crores) > 469 > 5
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LOW PENETRATION OF MUTUAL FUNDS IN INDIA
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>35 Insurance Advisors V/s 1 Mutual Fund Advisor
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LOW COMPETITION OF MUTUAL FUND ADVISORS
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CHAPTER: 6
FINDINGS,SUGGESTIONS AND CONCLUSION
FINDINGS
From the above data analysis and interpretations, following observations
can be made:
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The DSP ML Equity (Growth) scheme was started way back in
April 1997 and since then it has been a consistent performer. The
scheme is benchmarked against Nifty.
The average equity exposure of the portfolio in last one year has
been around 94.26% and 5.74% in cash and equivalents. In the
current month however it had 89.58% of assets in equity and
10.42% in cash and equivalent segments. The scheme has a corpus
of Rs. 469.8094 crores (Aug 2007), which is not among the best in
the industry but its growth from Rs. 68.63 crores as on November
2004 definitely points towards the rising investor confidence in this
scheme. In last six months the corpus has grown over.
The HSBC Equity (growth) scheme is mandated to invest upto 95-
100% in the equity related instruments and 0-5% in debt and
money market instruments. As of Aug 2007, it has allocated
89.44% of its assets in equity and rest in cash and equivalent. Over
a period of one year the asset allocation in equities has not
fluctuated much with average allocation at 88.6%. The scheme had
a corpus of Rs. 973.5673 crores as on Aug 2007 and has gone
down by 25% over a period of last one year.
The UTI Equity (Growth) scheme is managing assets worth Rs.
1635.4454 crores as on Aug 2007 but has witnessed significant
reduction from Rs. 4472 crores when it was launched. However
over a period of one year assets under management of the scheme
has increased by 45%. As per stated guidelines it could invest at
least 80% of its net assets in equity and equity related instruments
and upto 20% in Debt and Money market instruments. As on Aug
2007, the scheme has allocated 97.94% of its assets in equities and
rest in cash and equivalent with average equity allocation of its
assets in last one year.
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The LIC equity (Growth) scheme has a corpus of Rs. 91.1291
crores as on Aug 2007 and has gone up by 41% in last one year. As
per stated guidelines it could invest 80%-100% of its net assets in
equity and equity related instruments and upto 20% in Debt and
Money market instruments. As on Aug 2007, the scheme has
allocated 101.92% of its assets in equities. Average equity
allocation in last one year has been at 95.9% of assets under
management of the scheme.
SUGGESTIONS
Following suggestions and recommendations can be made the above
analysis and findings.
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21. The AMC (Asset Management Company) should create awareness
among the individuals about the benefits of Mutual Funds & the
returns from the Mutual Fund market.
22. This can be done by arranging at the household level or by
conducing external program at a public place to educate people
about the nature, benefits & importance of Mutual Funds.
23. As on many people are not aware about mutual fund & other
financial products, industry should conduct surveys to gauge the
preferences of the investors as many people do not invest there
savings due to lack of knowledge & because of high risk.
24. They should have customer care department.
25. Make your future secure by investing in Mutual Funds, as
investments in mutual funds may assure based on various available
schemes and funds, higher rate of return that conventional
investments like Banks and Post Office may not provide.
26. The prospective investors should diversify their monthly income
by preparing the Monthly Budget and they cab generate savings
out of their regular income to invest in the monthly plan of Mutual
Funds.
27. It is found that minimum investment in case of HSBC Equity Fund
is Rs. 10,000 which is double than HDFC‟s, hence it is suggested
to reduce it so that more number of invertors can invest.
28. Investors who want to gain consistent profit but in a long time
duration can invest in these companies. The net asset value of the
funds under consideration had proved to be bullish and bearish in a
very short period. But if we see the trend these schemes shows
bullish nature on an average.
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29. Dividend acts as a good promotion tool to investors. In all AMC
taken above only UTI equity fund has given dividend, so other
AMC can go for dividend.
30. In case of LIC Equity Fund, since the AMC has made short term
borrowings from money market and hence it might have affect its
performance. Hence it is recommended that AMC should attract
more investors rather than borrowings from market.
CONCLUSION
10. In case of HSBC Equity (Growth) fund, though it has yet to
witness bear phase but its performance so far has been
encouraging. And if it manages this kind of performance and sticks
to its investment objective it won‟t be a limiting factor for long.
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11. In case of UTI Equity Fund, though the scheme‟s performance has
taken a beating in the recent past but frontline stocks in the
portfolio and better performance in bearish phase do provide some
comfort. At the same time its sector calls are likely to show the
good performance once rerated. Going forward investors should
closely watch its performance before trimming down the
exposures.
12. Seeing the past market rally the LIC Equity (Growth) scheme
shows a lackluster performance and has been ranked at the bottom
of the charts most of the time since its inception. Its one year and
three returns are far below the returns posted by benchmark and
peers despite the average equity exposure of 95% past one year.
The scheme had trailed its peers and benchmark all the time during
the selected time frame shows high risk profile compared to its
peers.
13. Birla Equity Fund, has been very consistent in the performance.
The scheme has given 41.02% annualized return since inception. In
almost all the time periods considered it has consistently beaten the
benchmark and the peer group average. In last one year the scheme
has delivered 48.77% return while the peer group and the
benchmark deliver 39.91% & 37.45% respectively. The scheme
has over the last three years remained in the top quartile.
14. Over the years since the Mutual Fund industry started witnessing
positive contribution in the capital market both, Public sector and
Private sector Mutual Fund institutions has made enough efforts to
meet the investors demands and likely will continue in future too.
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CHAPTER: 7
BIBLIOGRAPHY
BOOKS REFERRED WEBSITES
Product And Services Taxman www.njindiainvest.com
Amfi Course Book www.amfiindia.com
www.moneycontrol.com
www.karvy.com
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