mohd. tabish

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CHAPTER -1

MOTIVE OF SUMMER TRAINING


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OBJECTIVES

The overall objectives of this project are as under:

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To know the investment in various mutual funds.

To know the best equity fund available in the market.


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SCOPE

All the fingers of a hand are not same people differ from each other upon

their income , expenditure, saving habits, environment, etc. Their requirement also

differ from each other as per the above factor. Due to this the financial

requirement and ability to get the investment requirement differ from person to

person so the financial market especially the mutual fund market caters to a vast

area from each of these aspect stated above.

This project is based on the 35()(5(1&( 2) A'9,6256

TOWARDS FINANCIAL SERVICES-) , which is a brief analysis on the

Equity or Growth mutual fund as the project report is fully based on secondary

data and it can be used to have the exact figure of investment in market. ,

especially in Equity funds.It also based on the commodities Also report can be used

for decision making by knowing the opinion of customer.


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LIMITATION

.

1. Some comparisons cannot be done due to the nature of the funds.

2. New funds are entering the market and booming, so their past records cannot be

given for their non-existence in the market.

3. As mutual funds performance is calculated by comparing the current records with

its past performances of a long period (1 yr.,3 yr.,5 yr,) one cannot do research by

giving only current data.


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CHAPTER-2

ORGANIZATION OVERVIEW


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Organization Overview

Introduction:

6XFFHVV LV D MRXUQH\, QRW D GHVWLQDWLRQ. If we look for examples to prove

this quote then we can find many but there is none like that of karvy. Back in the

year 1981, five people created history by establishing karvy and company which is

today known as karvy, the largest financial service provider of India.

Vision of karvy:

To achieve & sustain market leadership, Karvy shall aim for complete

customer satisfaction, by combining its human and technological resources, to

provide world class quality services. In the process Karvy shall strive to meet and

exceed customer's satisfaction and set industry standards.

Mission statement:

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customers, and we aim to achieve this leadership position by building an

innovative, enterprising , and technology driven organization which will set

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Company overview:

Karvy was established as karvy and company by five chartered accountants

during the year 1979-80, and then its work was confined to audit and taxation only.

Later on it diversified into financial and accounting services during the year 1981-

82 with a capital of rs.150000. it achieved its first milestone after its first


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investment in technology. Karvy became a known name during the year 1985-86

when it forayed into capital market as registrar.

Evolutionof KARVY:

It is well said that success is a journey not a destination and we can see it

being proved by karvy. Under this sectLRQ ZH ZLOO VHH WKDW KRZ WKLV NDUvy and

company of 1980 became NDUvy of 2008. Karvy blossomed with the setting up

of its first branch at Mumbai during the year 1987-88. The turning point came in the

year 1989 when it decided to enter into one of the not only emerging rather

potential field too i.e; stock broking. It added the feather of stock broking into its

cap. At the same time it became the member of Hyderabad Stock Exchange through

associate firm karvy securities ltd and then karvy QHYHU ORRNHG EDFN__LW ZHQW RQ

adding services one after another, it entered into retail stock broking in the year

1990. Karvy investor service centers were set up in the year 1992. Karvy which

already enjoyed a wide network through its investor service centers, entered into

financial product distribution services in the year1993. One year more and karvy

was now dealing into mutual fund services too in the year 1994 but it didnt stopped

there, it stepped into corporate finance and investment banking in the year 1995.

Karvys strategy has always been being the first entrant in the market. Karvy

again hit the limelight by becoming the first registrar in the country to be awarded

ISO 9002 in the year 1997. Then it stepped into the other most happening sector i.e;

IT enabled services by establishing its own BPO units and at a gap of just 1 year it

took the path of e-Business through its website www.karvy.com . Then it entered

into insurance services in the year 2001 with the launch of its retail arm NDUvy- the

finapolis: your personal finance DGYLVRU_ Then in the year 2002 it launched its

PCG(Private Client Group) which looks after its High Networth Individuals .and

maintain their portfolio and provides them with other financial services. In the year

2003, it commenced secondary debt and WDM trading. It was a decade which saw

many Indian companLHV JRLQJ JOREDO__VR Z hy the largest financial service


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provider of India should lag behind? Hence, karvy launched karvy global services

limitHG DIWHU HQWHULQJ LQWR D MRLQW YHQWXre with Computershare, Australia in the year

2004.the year 2004 also saw karvy entering into commodities marketing through

karvy comtrade.

Year 2005 saw karvy establishing a separate branch for its insurance services

under thH KHDG NDUvy LQVXUDQFH EURNLQJ OWG DQG LQ WKH VDme year, after being

impressed with the rapid growth of karvy stock broking limited, PCG group of

Hong Kong acquired 25% stake at KSBL. In the year 2006, karvy entered into one

of the hottest sector of present time i.e real estate through Karvy realty& services(India) ltd. hence , we can see now karvy being established as the lagest financial

service provider of the country.


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Now karvy group consists of 8 highly renowned entities which are as follow:

1. : The first securities registry to receive ISO 9002

certification in India. Registered with SEBI as Category I Registrar, is Number 1

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among many of the acknowledgements we received for our customer friendly and

competent services.

2. : karvy stock broking ltd. Consists of five units

namely stock broking servics, depository participant, advisory services, distribution

of financial products, advisory services and private client goups.

3. : it is registered with SEBI as a category 1

merchant banker. Its clientele includesinclude leading corporates, State

Governments, foreign institutional investors, public and private sector companies

and banks, in Indian and global markets.

4. : karvy insurance broking ltd is also a part of karvy

stock broking ltd. At Karvy Insurance Broking Limited both life and non-life

insurance products are provided to retail individuals, high net-worth clients and

corporates.

5. : The company provides investment, advisory and

brokerage services in Indian Commodities Markets. And most importantly, it offer

a wide reach through our branch network of over 225 branches located across 180cities.


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6. : Karvy Global is a leading business and

knowledge process outsourcing Services Company offering creative business

solutionsto clients globally. It operates in banking and financial services, inurance,

healthcare and pharmaceuticals, media , telecom and technology. It has its sales and

business development office in New York, USA and the offshore global delivery

center in Hyderabad, India

7. : Karvy Realty (India) Limited is engaged in the business of

real estate and property services offering:

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Facilitating financial support for real estate and investments in properties

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8. : it is a joint venture between Computershare,

Australia and Karvy Consultants Limited, India in the registry management

services industry.


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Organization structure of karvy:

Talking about the organization structure of karvy, we have the board of

directors as the supreme governing body , the chairman being Mr. C parthasarthy,

Mr. M yugandhar as the managing director, Mr. M s ramakrishna andmr. Prasad v.

potluri as directors.

The board of diretors head the karvy group, karvy computershares limited,

karvy investors services ltd., karvy comtrade, karvy stock broking ltd., and karvy

global services ltd. Karvy group being the flagship company looks after the

functional departments such as corporate affairs, group human resources, finance &

accounting, training & development, technology services and corporate quality.

Karvy computer share private limited facilitates mutual fund services, share

registry and issue registry whereas merchant banking is looked after by karvy

investor services ltd.

Karvy stock broking ltd heads its another branch too ie. Karvy insurance

broking ltd. The services offered by KSBL are: stock broking, depository, research,

distribution, personal client group and institutional desk. And finally the BPO

services are managed by karvy global services ltd. Summarizing it in a diagram, it

can be presented as:


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ORGANIZATION STRUCTURE OF KARVY


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13

Structure according to the Products offered by Karvy

RegionalHeads

Products

Realty Debtdivison

Mutual insurance commo stocking Depository MarchentFund banking dities brocking perticipent banking PFM


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Why should investors choose for karvy?

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EHVW to offer excellent services to its clientele through its offerings maintaining the karvy

culture which includes:

1. Controlled and low cost service culture: karvy is there to serve its client at the

minimum possible cost. it controls cost by its various cost- cutting techniques and

minimization of avoidable costs.

2. Large volume processing capability: being the largest financial service provider

in the country, it has the unique distinction of operating its activities on a large

scale which benefits all the parties cordially.

3. Adherence to strict time schedule: karvy knows that time is money and tries it

best to finish the task within the stipulated time schedule.

4. Expertise in coordinating multi-location responses: karvy has got a wide network

and hence one can find its branches at most of the places in India. Thus it enjoys its

presence everywhere and coordinates among itself in solving the queries and in

responding to any situation.

5.Expertise in managing independent entities such as banks, post-office etc.: the

work culture of karvy and the ethics followed inside karvy makes its workforce

compatible with everybody, so the karvy people establishes good coordination with

independent entities too.

6. Pooling of group resources: karvy group consists of eight subsidiaries, so it can

easily pool up its resources for accomplishment of its goals, whenever needed. The

groups can help each other whenever there are peaks and lows, and even in the case


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when they have huge targets just as we saw few years back, Tata group pooling its

resources to acquire Corus.

How karvy achieved it?

The core competency of karvy lies in the following points due to which it

enjoys a competitive edge over its competitors. The following culture adopted by

karvy makes it all time favorite among its clientele:

1. Professionally managed by qualified and trained manpower.

2. Uniquely structured in-house software and hardware department

3. Query handling within 48 hrs.

4. Strong secretarial, accounting and audit systems.

5. Unique work culture of working 7 days a week in 3 shifts.

6. Unmatched network spreading all over India.


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KARVY Mutual Fund Services:

Mutual funds have servings for everybody. Whichever type of investor you

are, you will surely get a mutual fund meeting your requirements. But investing in

mutual funds is no FKLOGV SOD\ WKHUHIRUH NDUY\ PXWXDO IXQG DGYLVRU\ VHUYices is

there to guide in each and every step of investment in mutual funds so that the

GUHDP RI ZHDOWK FUHDWLRQ GRHVQW turns into nightmares. Its offerings includes:

products of all the 42 major AMCs, research report about all the existing funds as

well as NFOs, customized mutual fund portfolios designed for individual as well as

institutional customers, it not only design the portfolios rather it offers continuous

portfolio revision too depending on changing market outlook and evolving trends, it

further gives access to its online consolidated portfolio statement. Thus karvy with

its various offerings makes the investor feel safe in this dynamic environment of

the Indian financial market.

Karvy Computershare mutual fund services offers investors services,

distributor services and client services. It can be said that karvy is dedicated

towards providing quality service to all these three facets of the investment process.

Karvy being an intermediary is well registered with the Association of

Mutual Funds of India (AMFI). KARVY has got the registration no [ARN 0018]

for mutual funds, which is mentioned on every form. After the procurement of

forms from various AMCs, the forms are passed on to its various zonal and branch

offices (as per their requirements) and then further processing is done eitherdirectly or through sub-brokers.

Karvy operates through its sub- brokers, associates and its excellent pool of

own direct employees. The employees are offered salary by karvy whereas the sub-

brokers and associates get certain commission. Karvy has 926 branches and

franchisees in the all over india. All the work of mutual funds is regulated from

aligarh branch, an extension of the ramghat road branch.


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The main source of earning for KARVY is the brokerage offered by the various

AMCs known as pay-in. The amount offered may vary from AMC to AMC. Also,

the franchisees have to pay a certain amount every month. Now karvy also pay a

certain amount to the sub brokers and associates known as pay-out. The payout is

decided according to the procurement done by them.

Recruitment:

Karvy has an enviable pool of dynamic employees. Its people power has a

great contribution in making it the No. 1 financial intermediary. All the employees

of karvy dealing in mutual funds have to go through AMFI test. The recruitment

process is at par with the industry standards, it is mostly done through campus

recruitment from reputed B- schools. Other than that, it also recruits through direct

interviews and GDs as per their requirement.

Karvy QHYHU FRPSURPLVHV ZLWK TXDOLW\ WKDWV WKH UHDVRQ LW LV H[FHOOLQJ E\

providing quality services to all the investors, clients, AMCs etc. associated with it.


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COMPETITOROFKARVY:

There are some competitor of karvy. Name of karvy competitor are as follows:

Religare share brocking ltd.

Motilal oswal security ltd.

Share khan share brocking ltd.

Other service provider :

SBI Bank

HDFC

ICICI BANK

IDBI


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CHAPTER- 3

MUTUAL FUND


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Mutual Funds

INTRODUCTION:

Mutual funds: A mutual fund is a professionally-managed firm of

collective investments that pools money from many investors and invests it in

stocks, bonds, short-term money market instruments, and/or other securities.in

other words we can say that A Mutual Fund is a trust registered with the Securities

and Exchange Board of India (SEBI), which pools up the money from individual /

corporate investors and invests the same on behalf of the investors /unit holders, in

equity shares, Government securities, Bonds, Call money markets etc., anddistributes the profits.

The value of each unit of the mutual fund, known as the net asset value

(NAV), is mostly calculated daily based on the total value of the fund divided by

the number of shares currently issued and outstanding. The value of all the

securities in the portfolio in calculated daily. From this, all expenses are deducted

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NAV.

NAV = Total value of the fund / No. of shares currently issued and

outstanding


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Advantages & Disadvantages of Mutual Funds

The Advantages of investing in a Mutual Fund are:

Professional Management

The primary advantage of funds (at least theoretically) is the professional

management of your money. Investors purchase funds because they do not have the

time or the expertise to manage their own portfolio. A mutual fund is a relatively

inexpensive way for a small investor to get a full-time manager to make and

monitor investments.

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By owning shares in a mutual fund instead of owning individual stocks or

bonds, your risk is spread out. The idea behind diversification is to invest in a large

number of assets so that a loss in any particular investment is minimized by gains

in others. In other words, the more stocks and bonds you own, the less any one of

them can hurt you (think about Enron). Large mutual funds typically own hundreds

of different stocks in many different industries. It wouldn't be possible for an

investor to build this kind of a portfolio with a small amount of money.

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Because a mutual fund buys and sells large amounts of securities at a time, its

transaction costs are lower than you as an individual would pay

.

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.


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LowCosts

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, demat costs, depository costs etc 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

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 corpus allows even a small investor to take the

benefit of its investment strategy.


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Choice of Schemes:

Mutual Funds offer a family of schemes to suit your varying needs over a

lifetime.

The Disadvantages of investing in a Mutual Fund are:

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Did you notice how we qualified the advantage of professional management

with the word "theoretically"? Many investors debate over whether or not the so-

called professionals are any better than you or I at picking stocks. Management is

by no means infallible, and, even if the fund loses money, the manager still takes

his/her cut. We'll talk about this in detail in a later section.

Costs

Mutual funds don't exist solely to make your life easier--all funds are in it for a

profit. The mutual fund industry is masterful at burying costs under layers of

jargon. These costs are so complicated that in this tutorial we have devoted an

entire section to the subject.

Dilution

It's possible to have too much diversification (this is explained in our article

entitled "Are You Over-Diversified?"). Because funds have small holdings in so

many different companies, high returns from a few investments often don't make

much difference on the overall return. Dilution is also the result of a successful

fund getting too big. When money pours into funds that have had strong success,the manager often has trouble finding a good investment for all the new money.


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Taxes

When making decisions about your money, fund managers don't consider yourpersonal tax situation. For example, when a fund manager sells a security, a capital-

gain tax is triggered, which affects how profitable the individual is from the sale. It

might have been more advantageous for the individual to defer the capital gains

liability.


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BASICALLY USED TERM

Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme minus its

liabilities. The per unit NAV is the net asset value of the scheme divided by the

number of units outstanding on the Valuation Date.

The net asset value (NAV) is the market value of the fund's underlying securities. It

is calculated at the end of the trading day. Any open-end funds buy or sell order

received on that day is traded based on the net asset value calculated at the end of

the day. The NAV per units is such Net Asset Value divided by the number of

outstanding units

NAV = Market Value of Assets - Liabilities

- - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Units Outstanding

For eg., if the market value of the securities of a mutual fund scheme is Rs. 200

lakhs & the mutual fund has issued 10 lakhs units at Rs. 10 to the investors, then

the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the

mutual funds on a regular basis- daily or weekly- depending

Sale Price

Is the price you pay when you invest in a scheme or NAV a unit holder is

charged while investing in an open-ended scheme is sale price. Also called Offer

Price. It may include a sales load if applicable.


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Mohd. Tabish 26

Repurchase Price

Is the price at which a close-ended scheme repurchases its units and it may

include a back-end load. This is also called Bid Price.

Redemption Price

Is the price at which open-ended schemes repurchase their units and close-ended

schemes redeem their units on maturity. Such prices are NAV related.

Sales Load (After one year)

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each time one buys or sells units in the fund, a charge will be payable. This charge

is used by the mutual fund for marketing & distribution expenses. Suppose the

NAV per unit is Rs.10. if the entry as well as exit load charged were 1%, then the

investors who buy would be required to pay Rs.10.10 & those who offer their units

for repurchase to the mutual fund will get only Rs.9.9 per unit. The investors

should take the loads into consideration while making investment as these affect

their yields/returns.


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History of the Indian mutual fund industry:

The mutual fund industry in India started in 1963 with the formation of Unit

Trust of India, at the initiative of the Government of India and Reserve Bank. The

history of mutual funds in India can be broadly divided into four distinct phases.

Phase 1 July 1964 to November 1987

Phase 2 November 1987- October 1993

Phase 3--- October 1993- February 2003

Phase 4-- since February 2003

Phase 1--- MONOPOLY OF UTI

This period was marked by the operations of a single institution, UTI,

which prepared ground for the future mutual fund industry.

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and still more popular product launched by UTI was US-64. Due to immensepopularity of unit 64, UTI launched a reinvestment plan in 1966-67. Another

popular scheme, Unit Linked Insurance Plan (ULIP), was launched in 1971. By the

end of June 1974 there were six lakhs unit holders with UTI .the unit capital totaled

Rs.152 crore and investible funds Rs.172 crore.

The second phase of operations (1974-84) was one of the consolidation and

expansion. In this period UTI was delinked from RBI .The period was marked by

the introduction of open ended growth funds. Six new schemes were introduced

during 1981-84. by the end of June 84 the investible funds crossed Rs. 1000 crore

and unit holders numbered to 17 lakhs.

During 1984-87, innovative aQG ZLGHO\ DFFHSWHG VFKHPHV VXFK DV &KLOGUHQV

Gift Growth Fund, Master share were launched. The first Indian off shore fund,

India Fund was launched in august 1986.


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Mohd. Tabish 28

Towards the end of 1980s, winds of change had started blowing in the

Indian economy. UTI was one of the few organizations to prepare fully to face the

emerging challenges. In the following years it launched all round diversification

programmes through backward and forward integration in order to retain its

position as the undisputed market leader.

Phase 2PUBLIC SECTOR COMPETITION

This period was marked by the entry of non-UTI public sector mutual

funds in the market, bringing in competition. With the opening up of the economy

many public sector financial institution established mutual funds in India. However,

the mutual fund industry remained the exclusive domain of the public sector in this

period.

The first non-UTI mutual fund ---- SBI mutual fund was launched by the

State Bank of India in 1987.this was followed by Canbank mutual fund scheme

(launched in December 1987),LIC mutual fund scheme (launched in June 1989)

and Indian bank mutual fund scheme (launched in January 1990).

The entry of the public sector mutual funds created waves in the market and

attracted small investors. The cumulative mobilization of resources went up from

Rs.4500 crores in 1987 (mobilized by UTI alone.) to Rs.19000 crore in 1990

(mobilized collectively by UTI, SBI mutual fund, CANBANK mutual fund, LIC

mutual fund, and Ind Bank mutual fund). With the entry of three more mutual funds

in the market namely, Bank of India mutual fund, GIC mutual fund , PNB mutual

fund ,collection increased to Rs.37,480 crore (1991-92) indicating a 96% increase

in between 1989-90 and 91-92. However UTI continued to be the dominantly

player in the market, though its share declined marginally from 87.9 % in 1988-89

to 84% in 1991-92.


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The years 1992-93 and 93-94 saw a decline in collections by the public

sector mutual funds. The total collection declined from the 2500 crore to 1960 crore

in 92-93. There were two reasons for the fall in the collection. First, SEBI had

prohibited mutual funds from any scheme with an assured return. Second according

to mutual fund regulations, 1993, Indian mutual funds were to form Asset

Management Company (AMC) pending which they could not launch any scheme.

Before 1989 there were no regulatory guidelines for the mutual fund

industry in India. The first such guidelines for setting up and regulating mutual

funds were issued by Reserve Bank Of India but they were applicable to mutual

funds floated by banks. Then the guidelines were issued by the government of India

in 1990 covering all mutual funds and making them mandatory for all the mutual

funds to be registered with SEBI. These guidelines also set the norms for

registration, management, investment objectives, disclosure, pricing and valuation

of securities, and so on.

These guidelines were revised and Security and Exchange Board of India (SEBI)

regulations 1993 came in to effect on the 20th

Jan 1993, rules for formulation,

administration, and management of mutual funds in India were clearly laid down.

The regulation made the formulation of AMC and listing of the closed ended

hemes compulsoU\_ :LWK YLHZ WR SURWHFW WKH LQYHVWRUV ULJKW GLVFORVXUH_RUP

was also tightened.

Another significant development during this period was the opening up of

the mutual funds market to the private sector.

PHASE 3-EMEREGENCE OF COMPETITATIVE MARKET.

A new era in mutual fund industry began with the entry of private sector

funds in 1993, posing a serious competition to the existing public sector funds. The

new private sector funds have distinctive operational advantages. They are Most of

them are jointly floated by Indian organization along with experienced foreign asset


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Mohd. Tabish 30

management companies, facilitating access the latest technology and foreign fund

management strategies. Private sector funds are able to attract the best managerial

talents from the public sector. Starting of the mutual funds has been easier for them

because infrastructural inputs created by the public sector mutual funds were

already available.

The first private sector mutual fund to launch a scheme was the Madras

based Kothari Pioneer Mutual fund. It launched the open ended prima fund in

November 1993.

During the year 93-94, five private sector mutual funds namely

Kothari Pioneer Mutual Fund

ICICI Mutual fund

20th

century mutual fund

Morgan Stanley Mutual Fund

Taurus Mutual fund

During 1994-95 six more private sector funds were launched they are

Apple mutual fund

JM mutual fund

Shriram mutual fund

CRB mutual fund

Alliance mutual fund

Birla mutual fund

Between 1993 and 1995, further regulatory measures were introduced

The government of India has allowed NRIs and Overseas Corporate Bodies

(OCB) to invest in UTI and other mutual funds (in both primary and secondary


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Mohd. Tabish 31

market). The practice of obtaining prior approval for advertising by mutual funds

has been dispensed with.. Mutual funds are allowed to invest in money market

instruments up to 25% of resources mobilized. The practice of reissuing of units of

closed ended schemes has been dispensed with. Mutual funds are allowed to buy

back their own units from the secondary marketing case they are traded at a

substantial discount to NAV.

With effect from 1 December 1993 new issuers have been allowed to reserve 20%

of the public issue for mutual funds. Mutual funds have been allowed to launch

income schemes with assured returns one at a time.

PHASE-4 - (SINCE 2003 FEBRUARY)

On Feb 2003, UTI was bifurcated in to 2 separate entities. One is

specified undertaking of the UTI with asset under management of Rs.29, 835 crores

as at the end of Jan 2003. The second is the UTI mutual funds Limited, sponsored

by the State Bank of India, Bank of Baroda and Life Insurance Corporation of

India. UTI is functioning under an administrator and rules framed by the

government of India do not come under the purview of the Mutual fund

Regulations. The Mutual Funds Limited is registered with SEBI and functions

under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI, with

the setting up of a UTI mutual fund, confirming to the SEBI Mutual Fund

Regulations and recent mergers taking place among different private sector funds,

the mutual fund industry has entered its current phases of consolidation and growth.

At the end of September 2004, there are 29 funds, which manage assets

of Rs. 153108 crores under 421 different schemes


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Mohd. Tabish 32

Categories of mutual funds:


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Mohd. Tabish 33

TYPES OF MUTUAL FUND SCHEMES:

By Structure

o Open-ended schemes

o Close-ended schemes

o Interval schemes

By Investment Objective

o Growth schemes

o Income schemes

o Balance schemes

o Money Market schemes

Other types of schemes

o

Tax Saving schemeso Special schemes

o Index schemes

o Sector specific schemes


34/82

Mohd. Tabish 34

Schemes according to maturity period:

A mutual fund scheme can be classified into open-ended scheme or close-

ended scheme depending on its maturity period.

Open-ended Fund / Scheme

An open-ended fund or scheme is one that is available for subscription and

repurchase on a continuous basis. These schemes do not have a fixed maturity

period. Investors can conveniently buy and sell units at Net Asset Value (NAV)

related prices which are declared on a daily basis. The key feature of open-endschemes is liquidity.

Close-ended Fund / Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7

years. The fund is open for subscription only during a specified period at the time

of launch of the scheme. 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 the units 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 i.e. either

repurchase facility or through listing on stock exchanges. These mutual funds

schemes disclose NAV generally on weekly basis.

Interval scheme

Interval funds combine the features of open-ended & closed ended schemes.

They are open for sale or redemption during pre-determined intervals at NAV

related prices.


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Mohd. Tabish 35

Schemes according to Investment Objective:

A scheme can also be classified as growth scheme, income scheme, or

balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified

mainly as follows:

Growth / Equity Oriented Schemes

The aim of growth funds is to provide capital appreciation over the medium

to long- term. Such schemes normally invest a major part of their corpus in

equities. Such funds have comparatively high risks.

These schemes provide different options to the investors like dividend

option, capital appreciation, etc. and the investors may choose an option depending

on their preferences. The investors must indicate the option in the application form.

The mutual funds also allow the investors to change the options at a later date.

Growth schemes are good for investors having a long-term outlook seeking

appreciation over a period of time.

Income / Debt Oriented Scheme

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, Government securities and money market instruments. Such

funds are less risky compared to equity schemes. These funds are not affected

because of fluctuations in equity markets. However, opportunities of capital

appreciation are also limited in such funds. The NAVs of such funds are affected

because of change in interest rates in the country. If the interest rates fall, NAVs of

such funds are likely to increase in the short run and vice versa. However, long

term investors may not bother about these fluctuations.


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Mohd. Tabish 36

Balanced Fund

The aim of balanced funds is to provide both growth and regular income as

such schemes invest both in equities and fixed income securities in the proportionindicated in their offer documents. These are appropriate for investors looking for

moderate growth. They generally invest 40-60% in equity and debt instruments.

These funds are also affected because of fluctuations in share prices in the stock

markets. However, NAVs of such funds are likely to be less volatile compared to

pure equity funds.

Money Market or Liquid Fund

These funds are also income funds and their aim is to provide easy liquidity,

preservation of capital and moderate income.

These schemes invest exclusively in safer short-term instruments such as

treasury bills, certificates of deposit, commercial paper and inter-bank call money,

government securities, etc. Returns on these schemes fluctuate much less compared

to other funds. These funds are appropriate for corporate and individual investors as

a means to park their surplus funds for short periods.

Other Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of

the Income Tax Act, 1961 as the Government offers tax incentives for investment

in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension

schemes launched by the mutual funds also offer tax benefits. These schemes are

growth oriented and invest pre-dominantly in equities. Their growth opportunities

and risks associated are like any equity-oriented scheme.


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Mohd. Tabish 37

Gilt Fund

These funds invest exclusively in government securities. Government

securities have no default risk. NAVs of these schemes also fluctuate due to changein interest rates and other economic factors as is the case with income or debt

oriented schemes.

Index Funds

Index Funds replicate the portfolio of a particular index such as the BSE

Sensitive index, S&P NSE 50 index (Nifty), etc these schemes invest in the

securities in the same weight age comprising of an index. NAVs of such schemes

would rise or fall in accordance with the rise or fall in the index, though not exactly

by the same percentage due to some factors known as "tracking error" in technical

terms. Necessary disclosures in this regard are made in the offer document of the

mutual fund scheme.

There are also exchange traded index funds launched by the mutual funds

which are traded on the stock exchanges.

Sector specific funds / schemes

These are the funds/schemes which invest in the securities of only those sectors or

industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast

Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these

funds are dependent on the performance of the respective sectors/industries. While

these funds may give higher returns, they are more risky compared to diversified

funds. Investors need to keep a watch on the performance of those

sectors/industries and must exit at an appropriate time. They may also seek advice

of an expert.


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Mohd. Tabish 38

Investment strategies:

1. Systematic Investment Plan:

under this a fixed sum is invested each month on a fixed date of a month.

Payment is made through post dated cheques or direct debit facilities. The investor

gets fewer units when the NAV is high and more units when the NAV is low. This

is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan :

under this an investor invest in debt oriented fund and give instructions to

transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutualfund.

3. Systematic Withdrawal Plan:

if someone wishes to withdraw from a mutual fund then he can withdraw a

fixed amount each month.


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Mohd. Tabish 39

Risk v/s. return:


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Mohd. Tabish 40

Working of a Mutual fund:


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Mohd. Tabish 41

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


42/82

Mohd. Tabish 42

by the schemes are shared by its unit holders in proportion to the number of units

owned by them.

Thus a mutual fund is the most suitable investment for the common person

as it offers an opportunity to invest in a diversified, professionally managed basket

of securities at a relatively low cost.

Since small investors generally do not have adequate time, knowledge,

experience & resources for directly accessing the capital market, they have to rely

on an intermediary, which undertakes informed investment decisions & provides

consequential benefits of professional expertise.

The advantage of Mutual Funds to the investors is professional managed,

low transaction cost, liquidity, transparency, well regulated, diversified portfolios

& tax benefits. By pooling their assets through mutual funds, investors achieve

economies of scale.

A collected corpus can be used to procure a diversified portfolio indicating

greater returns has also create economies of scale through cost reduction. This

principle has been effective worldwide as more & more investors are going the

mutual fund way. This portfolio diversification ensures risk minimization. The

criticality such a measure comes in when you factor in the fluctuations that

characterize stock markets. The interest of the investors is protected by the SEBI,

which acts as a watchdog. Mutual funds are governed by SEBI (Mutual Funds)

regulations, 1996.


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Mohd. Tabish 43

ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates

the organizational set up of a mutual fund:

Mutual funds have a unique structure not shared with other entities such as

companies of firms. It is important for employees & agents to be aware of the

special nature of this structure, because it determines the rights & responsibilities of

WKH IXQGV FRQVWLWXHQWV YL]__ VSRQVRUV_ WUXVWHHV_ FXVWRGLDQV_WUDQVIHU DJHQWV & RI

course, the fund & the Asset Management Company(AMC) the legal structure also

drives the inter-relationships between these constituents.

The structure of the mutual fund India is governed by the SEBI (Mutual Funds)

regulations, 1996. These regulations make it mandatory for mutual funds to have a

structure of sponsor, trustee, AMC, custodian. The sponsor is the promoter of the

mutual fund,& appoints the trustees. The trustees are responsible to the investors in

the mutual fund, & appoint the AMC for managing the investment portfolio. The

AMC is the business face of the mutual fund, as it manages all affairs of the mutual

fund. The mutual fund & the AMC have to be registered with SEBI. Custodian,


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Mohd. Tabish 44

who is also registered with SEBI, holds the securities of various schemes of the

fund in its custody.

Sponsor:

The sponsor is the promoter of the mutual fund. The sponsor establishes

the Mutual fund & registers the same with SEBI. He appoints the trustees,

Custodians & the AMC with prior approval of SEBI, & in accordance with SEBI

regulations. He must have at least five year track record of business interest in the

financial markets. Sponsor must have been profit making in at least three of the

above five years. He must contribute at least 40% of the capital of the AMC.

Trustees:

The Mutual Fund may be managed by a Board of trustees a of individuals,

or a trust company a corporate body. Most of the funds in India are managed by

board of trustees. While the board of trustees is governed by the provisions of the

Indian trust act, where the trustee is the corporate body, it would also be required to

comply with the provisions of the companies act, 1956. the board of trustee

company, as an independent body, act as protector of the unit-holders interest. The

WUXVWHHV GRQW GLUHFWO\ PDQDJH WKH SRUWIROLR RI VHFXULWLHV_ )RU WKLVVSHFLDOLVW

function, they appoint an AMC. They ensure that the fund is managed by AMC as

per the defined objectives & in accordance with the trust deed & SEBI regulations.

The trust is created through a document called the trust deed i.e., executed by

the fund sponsor in favor of the trustees. The trust deed is required to be stamped as

registered under the provision of the Indian registration act & registered with SEBI.

The trustees begin the primary guardians of the unit-holders funds & assets, a

trustee has to be a person of high repute & integrity.

Asset Management Company(AMC):

The role of an Asset management companies is to act as the investment

manager of the trust. They are the ones who manage money of investors. An AMC

takes decisions, compensates investors through dividends, maintains proper

accounting & information for pricing of units, calculates the NAV, & provides


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Mohd. Tabish 45

information on listed schemes. It also exercises due diligence on investments &

submits quarterly reports to the trustees. AMCs have been set up in various

countries internationally as an answer to the global problem of bad loans.

Bad loans are essentially of two types: bad loans generated out of the usual

banking operations or bad lending, and bad loans which emanate out of a

systematic banking crisis.

It is in the latter case that banking regulators or governments try to bail out the

banking system of a systematic accumulation of bad loans which acts as a drag on

their liquidity, balance sheets and generally the health of banking. So, the idea of

AMCs or ARCs is not to bail out banks, but to bail out the banking system itself.

Types of AMCs in Indian Context:

The following are the various types of AMCs we have in India:

1.AMCs owned by banks.

2.AMCs owned by financial institutions.

3.AMCs owned by Indian private sector companies.

4.AMCs owned by foreign institutional investors.

5.AMCs owned by Indian & foreign sponsors.


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Mohd. Tabish 46

List of Top 10Asset Management Companies inIndia

UTI Asset Management Company Ltd.

Name

UTI Asset Management Company Ltd.

Income / Debt Oriented Schemes 1,935,985

Growth / Equity Oriented Schemes 6,817,477

Balanced Schemes 1,028,613

Exchange Traded Funds 29,046

Fund of Funds Investing Overseas -

Grand Total

9,811,121

Reliance Capital Asset Management Ltd.

Name

Reliance Capital Asset Management Ltd.

Income / Debt Oriented Schemes 172,612

Growth / Equity Oriented Schemes6,389,925

Balanced Schemes

1,074,839

Exchange Traded Funds

41,343

Fund of Funds Investing Overseas

-

Grand Total

7,678,719

SBI Funds Management Private Ltd.

Name

SBI Funds Management Private Ltd.

Income / Debt Oriented Schemes

87,184


5,730,085

Balanced Schemes

72,437


2


-

Grand Total

5,889,708


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Mohd. Tabish 47

HDFC Asset Management Co. Ltd.

Name

HDFC Asset Management Co. Ltd.



Balanced Schemes 308,655

Exchange Traded Funds -

Fund of Funds Investing Overseas 55

Grand Total 2,448,913

ICICI Prudential Asset Management Co. Ltd.

Name

ICICI Prudential Asset Management Co.

Ltd.


Growth / Equity OrientedSchemes

2,660,02


Exchange Traded Funds899Fund of Funds Investing Overseas -

Grand Total

2,955,591

Franklin Templeton Asset Management (India) Pvt. Ltd.

Name

Franklin Templeton Asset Management (India)

Pvt. Ltd.

Income / Debt Oriented

Schemes

193,977


2,231,995

Balanced Schemes

22,886


-

Fund of Funds InvestingOverseas

55

Grand Total

2,448,913


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Mohd. Tabish 48

Birla Sun Life Asset Management Co. Ltd.

Name

Birla Sun Life Asset Management Co. Ltd.





Fund of Funds Investing Overseas -


Sundaram BNP Paribas Asset Management Co. Ltd.

Name

Sundaram BNP Paribas Asset Management

Co. Ltd.

Income / Debt OrientedSchemes

26,749


2,155,301

Balanced Schemes8,890


-


42,319

Grand Total

2,233,259

Tata Asset Management Ltd.

Name

Tata Asset Management Ltd.

Income / Debt Oriented Schemes

39,745


1,617,471

Balanced Schemes

94,576


-


-

Grand Total

1,751,792


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Mohd. Tabish 49

DSP Black Rock Investment Managers Pvt. Ltd.

Name

DSP Black Rock Investment Managers Pvt.

Ltd.



1,370,767




136,300



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Mohd. Tabish 50


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Mohd. Tabish 51

SEBI Securities and Exchange Board of India:

Securities and Exchange Board ofIndia (SEBI) is a board (autonomous

body) created by the Government of India in 1988 and given statutory form in 1992

with the SEBI Act 1992 with its head office at Mumbai.

The Securities and Exchange Board of India is perhaps the most important

regulatory body. Similar to the Securities Exchange Commission in the US, it is the

authority that has to always be on its toes. More so, when the markets are doing

ZHOO DQG WKHUH DUH D VSDWH RI ,32V _LQLWLDO SXEOLF RIIHULQJV_ RU )32V_IROORZ-on

public offerings) like now.

Its main mandate is to protect the interest of investors in the securities

markets and to promote the development of and to regulate the securities markets

so as to establish a dynamic and efficient securities market.

When investors have complaints against listed companies or registered

intermediaries, SEBI acts as the nodal agency for addressing these complaints, if

they are not solved directly between the parties concerned, or if the investor is not

happy with the response.

SEBI has listed certain categories of grievances for which investors can file

complaints with it. These include:

Non-receipt of refund order or allotment advice in case of investment in

IPO's, FPO's and rights issuesNon-receipt of dividend from listed companies

Non-receipt of share certificates after transfer from listed companies

Non-receipt of debentures after transfer or non-receipt of interest or

principal on redemption and non-receipt of interest on delayed repayment

Non-receipt of rights offer letter


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Mohd. Tabish 52

Collective investment schemes like plantation companies. Investors can send

complaints to SEBI regarding non-receipt of invested principal and returns there

from.

Mutual funds/venture capital funds/foreign venture capital investors/foreign

institutional investors/portfolio managers/custodians - Complaints mutual funds

like non-receipt or delay in receipt of dividends/redemptions, non-availability of

portfolio disclosures, non-receipt of transaction statement, etc.

Brokers This is the most common area of complaints for the average investor.

Complaints against brokers stem from disputes over brokerage rates, non-receipt ofpurchased shares or payments for sold shares, auction of shares sold and delivered

timely, but delay at broker's end, etc.

Complaints against securities lending intermediaries may arise due to non-

receipt of shares lent by the investor or interest thereupon, or non-receipt of funds

upon return of borrowed shares or excessive interest charged upon borrowing.

Complaints against merchant bankers, registrar and transfer agents, bankers

to issues and underwriters generally stem from problems in primary market issues,

like non-disclosures, service issues etc.

Complaints against securities exchanges, clearing or settlement houses or

depositories - these concern irregularities or failure to act diligently, like the

Calcutta Stock Exchange in the last securities scam or the NSDL in the recent IPO

scam.

Derivative trading Many investors sign legal papers empowering the broker

to trade on their behalf, without proper knowledge and wake up on seeing their

margin money eroded due to sustained losses.

In other instances, major complaints are against brokers squaring off

outstanding derivatives positions due to lack of margins or not giving the client


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Mohd. Tabish 53

adequate time or notice, leading to huge losses for investors/traders. These happen

especially when markets turn volatile of see sustained and large one- way

movements.

There are other areas such as corporate governance, corporate restructuring,

acquisitions, buybacks, delisting and other compliance related issues for which one

could approach SEBI. For all this one can

File complaints electronically on the SEBI website

Get a complaint registration number

Track the status of the complaint online

SEBI looks into the merit of the complaint and takes up the matter with the

concerned company or intermediary

It can also direct intermediaries to redress the investor complaints satisfactorily

if the case merits such an order one can also send grievances by post or fax.

Measurement Risk, Safety, Volatility, Liquidity,

Convenience in mutual fund investment:

FUND/FACTOR RETURN SAFETY VOLATILITY LIQUIDITY CONVENIENCE

EQUITY High Low High High Moderate

BONDS Moderate High Moderate Moderate High

CO.

DEBENTURE

Moderate Moderate Moderate Low Low

)' 6 Moderate Low Low Low

Low


54/82

Mohd. Tabish 54

CHAPTER- 4

REGULATORY AUTHORITY


55/82

Mohd. Tabish 55

RegulatoryAuthorities:

To protect the interest of the investors, SEBI formulates policies and

regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996)

and issues guidelines from time to time.

SEBI approved Asset Management Company (AMC) manages the funds by

making investments in various types of securities. Custodian, registered with SEBI,

holds the securities of various schemes of the fund in its custody.

According to SEBI Regulations, two thirds of the directors of Trustee

Company or board of trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in

units of mutual funds that the mutual funds function within the strict regulatory

framework. Its objective is to increase public awareness of the mutual fund

industry. AMFI also is engaged in upgrading professional standards and in

promoting best industry practices in diverse areas such as valuation, disclosure,

transparency etc.

Documents required (PAN mandatory):

Proof of identity :

1.photo PAN card

2. In case of non-photo PAN card in addition to copy of PAN card

any one of the following: driving license/passport copy/ voter id/ bank

photo pass book.

Proof of address (any of the following):

latest telephone bill, latest electricity bill, Passport, latest bank passbook/bank

account statement, latest Demat account statement, voter id, driving license, ration

card, rent agreement.


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Mohd. Tabish 56

Offer document:

An offer document is issued when the AMCs make New Fund

Offer(NFO). Its advisable to every investor to ask for the offer document and

read it before investing. An offer document consists of the following:

Standard Offer Document for Mutual Funds (SEBI Format) Summary

Information

Glossary of Defined Terms

Risk Disclosures

Legal and Regulatory Compliance

Expenses

Condensed Financial Information of Schemes

Constitution of the Mutual Fund Investment Objectives and Policies

Management of the Fund.

Key Information Memorandum:

A key information memorandum, popularly known as KIM, is attachedalong with the mutual fund form. And thus every investor get to read it. Its contentsare:

1.Name of the fund.

2.Investment objective

3.Asset allocation pattern of the scheme.

4.Risk profile of the scheme

5.Plans & options

6.Minimum application amount/ no. of units

7.Benchmark index

8.Dividend policy

9.Name of the fund manager(s)


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Mohd. Tabish 57

10.Expenses of the scheme: load structure, recurring expenses

11.Performance of the scheme (scheme return v/s. benchmark return)

12.Year- wise return for the last 5 financial year.

Distribution channels:

Mutual funds posses a very strong distribution channel so that the ultimate

customers doesnt face any difficulty in the final procurement. The various parties

involved in distribution of mutual funds are:

1. Direct marketing by the AMCs: the forms could be obtained from the AMCs

directly. The investors can approach to the AMCs for the forms. some of the top

AMCs of India are; Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra,

HDFC, Sundaram, ICICI, Mirae Assets, Canara Robeco, Lotus India, LIC, UTI etc.

whereas foreign AMCs include: Standard Chartered, Franklin Templeton, Fidelity,

JP Morgan, HSBC, DSP Merill Lynch, etc.

2. Broker/ sub broker arrangements: the AMCs can simultaneously go for

broker/sub-broker to popularize their funds. AMCs can enjoy the advantage of large

network of these brokers and sub brokers.eg: KARVY being the top financial

intermediary of India has the greatest network. So the AMCs dealing through

KARVY has access to most of the investors.

3. Individual agents, Banks, NBFC: investors can procure the funds through

individual agents, independent brokers, banks and several non- banking financial

corporations too, whichever he finds convenient for him.


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Mohd. Tabish 58

Cost associated:

Expenses: AMCs charge an annual fee, or expense ratio that covers

administrative expenses, salaries, advertising expenses, brokerage fee, etc. A 1.5%

expense ratio means the AMC charges Rs1.50 for every Rs100 in assets under

management. A fund's expense ratio is typically to the size of the funds under

management and not to the returns earned. Normally, the costs of running a fund

grow slower than the growth in the fund size - so, the more assets in the fund, the

lower should be its expense ratio.

Loads: Entry Load/Front-End Load (NIL)- its the commission charged at thetime of buying the fund to cover the cost of selling, processing etc. It has been

ended in 2009 by SEBI.

Exit Load/Back- End Load (0% -1%)- it is the commission or charged paid

when an investor exits from a mutual fund, it is imposed to discourage withdrawals.

It may reduce to zero with increase in holding period. It is charged when investor

withdrawals before one year.

Measuring and evaluating mutual funds performance:

Every investor investing in the mutual funds is driven by the motto of either

wealth creation or wealth increment or both. Therefore its very necessary to

continuously HYDOXDWH WKH IXQGV SHUIRUmance with the help of fact sheets and

newsletters, websites, newspapers and professional advisors like karvy mutual fund

services. If the investors ignore the evaluation of fundV performance then he can

loose hold of it any time. In this ever-changing industry, he can face any of the

following problems:


59/82

Mohd. Tabish 59

1. Variation in WKH IXQGV performance due to change in its management/ objective.

2. The IXQGV performance can slip in comparison to similar funds.

3. There may be an increase in the various costs associated with the fund.

4. Beta, a technical measure of the risk associated may also surge.

5. The IXQGV ratings may go down in the various lists published by independent

rating agencies.

6. It can merge into another fund or could be acquired by another fund house.

Performance measures:

Equity funds: the performance of equity funds can be measured on the basis of:

NAV Growth, Total Return; Total Return with Reinvestment at NAV, Annualized

Returns and Distributions, Computing Total Return (Per Share Income and

Expenses, Per Share Capital Changes, Ratios, Shares Outstanding), the Expense

Ratio, Portfolio Turnover Rate, Fund Size, Transaction Costs, Cash Flow,

Leverage.

Debt fund: likewise the performance of debt funds can be measured on the basis

of: Peer Group Comparisons, The Income Ratio, Industry Exposures and

Concentrations, NPAs, besides NAV Growth, Total Return and Expense Ratio.

Concept of benchmarking for performance evaluation:

Every fund sets its benchmark according to its investment objective. The

funds performance is measured in comparison with the benchmark. If the fund

generates a greater return than the benchmark then it is said that the fund has

outperformed benchmark , if it is equal to benchmark then the correlation between

them is exactly 1. And if in case the return is lower than the benchmark then the

fund is said to be underperformed.


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Mohd. Tabish 60

Some of the benchmarks are:

1.Equity funds: market indices such as S&P CNX nifty, BSE100, BSE200, BSE-

PSU, BSE 500 index, BSE bankex, and other sectoral indices.

2.Debt funds: Interest Rates on Alternative Investments as Benchmarks, I-Bex

Total Return Index, JPM T-Bill Index Post-Tax Returns on Bank Deposits versus

Debt Funds.

3. Liquid funds: Short Term Government InstrumHQWV Interest Rates as

Benchmarks, JPM T- Bill Index.

To measure the funds performance, the comparisons are usually

done with:

i) With a market index.

ii) Funds from the same peer group.

iii) Other similar products in which investors invest their funds.


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Mohd. Tabish 61

Financial planning for investors (ref. to mutual funds):

Investors are required to go for financial planning before making

investments in any mutual fund. The objective of financial planning is to ensure

that the right amount of money is available at the right time to the investor to be

able to meet his financial goals. It is more than mere tax planning. Steps in

financial planning are:

(a) Asset allocation.

(b) Selection of fund.

(c) Studying the features of a scheme.

In case of mutual funds, financial planning is concerned only with broad

asset allocation, leaving the actual allocation of securities and their management to

fund managers. A fund manager has to closely follow the objectives stated in the

offer document, because financial plans of users are chosen using these objectives.


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Mohd. Tabish 62

Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then

we can find the market flooded with a variety of investment options which includes

mutual funds, equities, fixed income bonds, corporate debentures, company fixed

deposits, bank deposits, PPF, life insurance, gold, real estate etc. all these

investment options could be judged on the basis of various parameters such as-

return, safety convenience, volatility and liquidity measuring these investment

options on the basis of the mentioned parameters, we get this in a tabular form

FUND/FACTOR RETURN SAFETY VOLATILITY LIQUIDITY CONVENIENCE

EQUITY High Low High High Moderate

BONDS Moderate High Moderate Moderate High

CO.

DEBENTURE

Moderate Moderate Moderate Low Low

)' 6 Moderate Low Low Low

Low


63/82

Mohd. Tabish 63

CHAPTER - 5

SURVEY REPORT

& RESEARCH METHODOLOGY


64/82

Mohd. Tabish 64

SURVEY REPORT

To know the awareness and interest of people in mutual funds I have

conduct a survey in the Aligarh region. I surveyed 300 people in the region which

are selected randomly.

I come to know that very few people know about mutual fund. People are

still investing in BANK, POST OFFICE SCHEMES, REAL ESTATE, GOLD and

other traditional investment option .

Out of the total 300 people only 85 people know mutual fund properly and

80 people know slightly about mutual fund.

That say A NEED OF ADVISOR is very necessary for Aligarh region,

which gave knowledge about financial product of company to people.


65/82

Mohd. Tabish 65

RESEARCHMETHODOLOGY

Definition of Research:

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-Redman and mory

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suggested solution,collecting,organizing and evaluating data,making deduction and

reaching conclusions and at last carefully testing the FRQFOXVLRQV K\SRWKHVLV_

-Clifford

OBJECTIVE OFRESEARCH

The purpose of research is to discover answer to questions through the

application of scientific procedure. The main aim is to find out truth which is

hidden and which has not been discovered yet.

Various objective of this research are as follows:

1-To gain familiarity with the mutual fund.

2-To portray accurately the characteristics of customers of mutual funds.

3-To determine the need of mutual fund in financial market.

DATACOLLECTION

The task of data collection begins after a research problem has been definedand research design checked out.

The data to be collected for the purpose of the research are of two types:

Primary data

Secondary data


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Mohd. Tabish 66

Primarydata:

Primary data are those data which are collected afresh and for the first time

and thus are original in character.

Collection of primary data:

I collected primary data through Questionnare. I performed surveys and

obtained primary data through direct communication with respondents through

filling up questionnaire.

Secondary data:

Secondary data are those wh ich have already been collected by some oneelse and which have already been passed through statistical process.

Collection of secondary data:

I collected secondary data needed for research from the following sources-

1-Internet

2-Magazines

3-Books

Methodology of survey

Primary data are used for survey the mode of survey is based on questioner.

Questioner is filled by people on the basis of his knowledge about investment.


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Mohd. Tabish 67

ANALYSIS PART

300 people selected on the basis of age group.

a) 100 people are 18 to 22

b) 100 people are 22 to 55

c) 100 people are 55 above.

Group a) In the100 people only 45 people know about mutual fund in which 20

people know properly about mutual fund and 25 people know slightly about

mutual fund.

45YES

55NO

Only 20 % know properly about mutual fund.

20 FULLYAWRE

25 LITTLE AWARE


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Mohd. Tabish 68

Group b) in the 100 people only 55 people know about mutual fund in which 30

people know properly about mutual fund and 25 people know slightly about mutual

fund.

55yes

45no

Only 30 % know properly about mutual fund.

30fully

25little


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Group c) in the 100 people only 65 people know about mutual fund in which

30 people know properly about mutual fund and 35 people know slightly about

mutual fund.

65yes

35no

Only 35% know properly about mutual fund.

35fully aware

30little aware

In 300 people only 165 people know about mutual fund it means 55% only

in which only 85 people properly know about mutual funds, it mean 28.33% and 80

people slightly know about mutual funds, it mean 26.67%.. and 135 people are not

know about mutual fund its mean 45% people.


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28.33% fully aware

26.67% little aware45% no aware

. Which feature of the mutual funds allure you most?


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. Where from you purchase mutual funds?

.have you invested /are you interested to invest in mutual

funds?


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. According to you which are the most suitable

stage to invest in mutual funds?

Are you availing the services of personal financial advisors?


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Which expertise of the personal financial advisor is demanded most?


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.what is the major reason for using financial advisors?


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FINDINGS AND CONCLUSIONS

At the survey conducted upon 300 people, 165 are already mutual fund

investors or are into invest in future and the remaining 135 are not interested in it.

So there is enough scope for the advisors to convert those 135 participants into

investors through their convincing power and great communication skills.

Now, when those 135 people were asked about the reason of not investing in

mutual funds, then most of the people held their ignorance responsible for that.

They lacked knowledge and information about the mutual funds. Whereas just 55

people enjoyed investing in other option. For 45people, the benefits arousing from

these investments were not enough to drive them for investment in MFs and 35

people expressed no trust over the fund managerV decision. Again the financial

advisors can tap upon these people by educating them about mutual funds.

55 participants buy forms directly from the AMCs, 45 from brokers only, 34

from brokers and sub-brokers even then 31 people buy from other sources. The

brokers and sub brokers have the maximum reach so they should try to make those

investors aware f the happenings, even the AMCs should follow it.

When asked about the most alluring feature of MFs, most of them opted for

diversification, followed by reduction in risk, helps in achieving long term goals

and helps in achieving long term goals respectively.

Most of the investor preferred to invest at a young unmarried stage. Even 41%

persons were ready to invest at a stage of young married with children but person

with older children avoid investing due to increased expenses. But again the

number rose to 20% at pre-retirement stage.

Out of them 87 were already availing the services of financial advisors whereas


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48 didnt. When asked about the expertise of financial advisors which they liked

most? 43 of them favored portfolio review and investment recommendation,

followed by planning to achieve long term goals, managing assets in retirement and

access to specialists in area such as tax planning.

42 participants regarded asset allocation as the major reason for going for

financial advisors. 37 of them needed them to explain them the various investment

options available.33 of them wanted to make sure that they were saving enough to

meet their financial goals. While just 23 gave the reason- lack of time.

When asked about one reason for not availing the services of financial advisors,

about 53 of them pointed the advisors as expensive. 43 of them wished to be in

control of their own assets.21 of them said that they find it difficult to get

trustworthy advisors. Whereas 18 of them said they have access to all the necessary

resources required.

After the survey in the market with 300 hundred respondent. Only 55%

people know about the mutual funds investment and only help percentage of

aware people perfect fully about the mutual funds.

With the help of it, I observe need of financial advisor for mutual fund

investor is most important for provide the information to investor.

In 300 people only 165 people know about mutual fund it means 55% only in

which only 85 people properly know about mutual funds, it mean 28.33% and

80 people slightly know about mutual funds, it mean 26.67%.. and 135 people

are not know about mutual fund its mean 45% people.

With the help of this I observe financial advisor are most important for

investors.


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Conclusion

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

aware of the realize that ignorance is no longer bliss and what they are losing by not

investing. Mutual funds offer a lot of benefit which no other single option could

offer. But most of the people are not even aware of what actually a mutual fund is?

They only see it as just another investment option. So the advisors should try to

change their mindsets. The advisors should target for more and more young

investors. Young investors as well as persons at the height of their career would liketo go for advisors due to lack of expertise and time.

The advisors may try to highlight some of the value added benefits of MFs

such as tax benefit, rupee cost averaging, and systematic transfer plan, rebalancing

etc. these benefits are not offered by other options singlehandedly. So these are

enough to drive the investors towards mutual funds. Investors could also try to

increase the spectrum of services offered.

Now the most important reason for not availing the services of advisors was

spotted was being expensive. The advisors should try to charge a nominal fee at the

beginning. But if not possible then they could go for offering more services and

benefits at the existing rate. They should also maintain their decency and follow the

code of ethics so that the investors could trust upon them. Thus the advisors should

try to attract more and more persons and turn them into investors and finally their

clients.


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SUMMER TRAINING REPORT

35()(5(1&( 2) A'9,6256TOWARDS FINANCIAL SERVICES-)

(With special reference to KARVY)

SUBMITTED BY:

LALIT KUMAR

Roll No. 19

(Post Graduate Diploma in Business Management)

Under the guidance of:

Mr. Arvind Sharma Mr. Rakesh Gupta

Marketing manager Branch manager

(Project guide) karvy, Aligarh

karvy, Aligarh


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SUMMER TRAINING REPORT

35()(5(NCE OF ADVISORSTOWARDS FINANCIAL SERVICES-)

(With special reference to KARVY)

SUBMITTED BY:

LALIT KUMAR

Roll No. 19

(Post Graduate Diploma in Business Management)

Under the guidance of:

Dr. Grish Varshney Mr.Rakesh Gupta

(Lecturer) Branch manager

Shri Varshney College Karvy, Aligarh

Aligarh


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CONTENTS

1. MOTIVE OF SUMMER TRAINING 1-4

OBJECTIVE

SCOP

LIMITATION

2. ORGANIZATION OVERVIEW 5-18

INTRODUCTION

SUCCESS STORY OF KARVY

VISION OF KARVY

MISION STATEMENT

COMPANY OVERVIEW

EVALUTION OF KARVY

GROUP OF KARVY

ORGANIZATION STRUCTURE

KARVY MUTUAL FUND SERVICES

RECRUITMENT

COMPETITOR OF KARVY

3. MUTUAL FUND 19-53

INTRODUCTION

ADVANTAGE OF MUTUAL FUND

DISADVANTAGE OF MUTUAL FUND

BASICALLY USED TERMS

HISTORY OF MUTUAL FUND INDUSTRIES INDIA

CATEGORIES OF MUTUAL

TYPES OF MUTUAL FUND SCHEMES FUND


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INVESTMENT STRATEGIES

RISK

WORKING OF MUTUAL FUND

ORGANIZATION OF MUTUAL FUND

3. REGULATORY AUTHORITIES 54-62

INTRODUCTION

DOCUMENT REQUIRED

KEY INFORMATION MEMORANDOM

DISTRIBUTION CHANNELS

COSTASSOCIATED EXPENSES

EVALUATINIG THE MUTUAL FUND PERFORMNCE

5. SURVEY REPORT & RESEARCH METHODOLOGY 63-77

SURVEY REPORT 63

RESEARCH METHODLOGY 65

ANALYSIS PART 67

RESEARCH FINDINGS AND CONCLUSIONS 74

RECOMMENDATION 76


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DECLARATION

I, LALIT KUMARroll No. 19, a student ofPGDBM declare that the project report titled

35()(5(1&( 2) A'9,6256 TOWARDS FINANCIAL SERVICES-) is a

genuine research work undertaken by me and it has not been published anywhere earlier.

LALIT KUMAR

SHRI VARSHNEY COLLAGE

ALIGARH