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THE JAMMU AND KASHMIR BANK LIMITED

1.1 PROFILE

Industry Founded Headquarters Number of locations Area served Revenue Employees Website

Financial ,Commercial banks 1938 Srinagar, India > 577 branches/offices Mostly J & K 20,595,000,000 (2007) 7267 http://www.jkbank.net

The Jammu & Kashmir Bank was founded on October 1 1938 under letters patent issued by the Maharaja of Kashmir, Hari Singh. The Maharaja invited eminent Kashmiri investors to become founding directors and shareholders of the bank, the most notable of which were Abdul Aziz Mantoo, Pesten Gee and the Bhaghat Family, all of whom acquired major shareholdings. Jammu and Kashmir Bank Limited was incorporated on 1st October, 1938 and commenced its business from 4th July, 1939 at in Kashimir (India). The Bank was the first in the country as a State owned bank.

According to the extended Central laws of the state, Jammu & Kashmir Bank was defined as a govt. Company as per the provision of Indian companies act 1956. In the year 1971, the Bank received the status of scheduled bank. It was declared as A Class Bank by RBI in 1976. Today the bank has more than 500 branches across the country and has recently became a 10 billion Dollar Company. The Jammu and Kashmir Bank is overseen by the Reserve Bank of India and SEBI. Apart from this, the bank is also a member of the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). In fact, the government of the J&K owns 53% of the bank which includes a same percentage of equity.

FEATURES OF J&K BANK

The J&K Bank provides fast payments and quick and convenient collections by means of Real Time Gross Settlement (RTGS). This procedure is in alignment with the payment method of the Reserve Bank of India. This process enables and ensures an easy way to transfer money to the respective customer accounts. One of the other benefits of this method include saving time and cost so that monetary transactions are made easy and viable to the account.

1.2 PRODUCTS
i. Insurance:

The Jammu and Kashmir Bank has made tie ups with MetLife India Insurance Company entering into a joint venture with the same along with M. Pallonji and Co. Pvt. Ltd. and other private investors. Apart from this, the bank also has entered into an agreement with Bajaj Allianz General Insurance Co. Ltd. In this regard, the bank has decided to distribute all their non-life products and services in collaboration with the same. It is important to note that all these products can be obtained from all the branches that are located at different parts of the country.

ii.

Tax Products and Planning:

One of the major purposes of the bank is to help its customers invest in long term deposits so that they can accrue tax benefits. This is mentioned in the section 80C of the Income Tax Act of 1961. Under this section, the bank offers higher rate of interest to its customers and account holders along with certain incentives. These include offering 0.25% increased rate of interest for any new term deposit. It is to be noted that TDS is excluded under this facility. Apart from this, the bank also provides 1% interest discount under the schemes of loans that comprise housing, educational and consumer loans. Finally, with a deposit of Rs. 50,000 and above, the bank can charge any installation amount for POS machine. 2

1.3 SERVICES:
The Jammu and Kashmir Bank strives to offer the best quality of services to its customers with uncompromising levels of dedication and commitment. The bank operates in a 24x7 environment offering multi-channel banking and cost effective services. Some of these services are listed below:

Anywhere banking Internet Banking SMS Banking ATM Services Debit & Credit Cards Merchant Acquiring Saving Bank Deposit Term Bank Deposit Value Added Schemes Gift Cheque Scheme Current Account Support Services Third Party Services Depository Services

1.4 J&K BANK DEPOSITORY SERVICES

A depository is like a bank where securities are held in electronic (dematerialized) form. In order to broaden its areas of diversification, j&K Bank became a depository participant and started depository services in year 2000.

FEATURES OF J&K BANK DEPOSITORY

Dematerialization It is the process of converting the securities held in physical form (certificates) to an equivalent number of securities in electronic form and crediting the same to the investor's demat account. Dematted securities do not have any certificate numbers or distinctive numbers and are dealt only in quantity i.e. the securities are replaceable Stock Broking through INVESTMART an initiative of ILFS.

You can avail the facility of buying and selling of shares under single roof. It integrates your Broker, DP and Bank on a single platform.You may open a trading account by opening a Demat account with J&K BANK, SAVING ACCOUNT with J&K BANK and Stock Broking Account by filling Investor Registration form of INVESTMART an initiative of ILFS and our business patner for providing broking services.For further queries you may contact the DP branches of J&K Bank

Market transaction When securities are transferred from a beneficiary account of an investor to a clearing member account of a broker for ensuring delivery of securities on a stock exchange, then it is a market transaction. Off-market transactions When securities are transferred from the beneficiary account of one investor to that of another, and the transaction does not get routed to the stock exchange, it is an off-market transaction. Rematerialisation (Remat) It is the process of conversion of securities from electronic to physical form

Trading with J&K Bank depository is a fast, easy, and transparent and hassle free way to trade in shares. It offers a wide choice of products for investing in the stock market. Unique features that differentiate J&K Bank depository from other broking firms are as follows:3-in-1 Account which integrates J&K Bank demat account J&K Bank savings account Online investment account(Trading Account)

TRADING ACCOUNT

DEMAT ACCOUNT

BANK ACCOUNT

Convenience
The 3-in-1 account integrates banking, broking and demat accounts. When customers place buy or sell order with J&K Bank depository, the system checks the funds and shares available in their bank and demat account respectively and executes the trade on the exchange online. The bank account and the demat account is automatically debited or credited. This enables customers to trade in shares without going through the hassles of tracking settlement cycles, writing cheques and Transfer Instructions, chasing his/her broker for cheques or Transfer Instructions etc.

Speed
Customers can get the latest quotes of scrips and this enables them to place an order immediately.

Control
Customer gets an order confirmation instantly. This ensures that one has indeed placed an order at the price one wanted to. Thus, one has complete control over his order.

VISION OF J&K BANK

To make JK Bank a good player built on trust by world-class people and service. Understanding the needs of customers and offering them superior products and service Leveraging technology to service customers quickly, efficiently and conveniently Providing an enabling environment to foster growth and learning for our employees. And above all, building transparency in all our dealings. The success of the company will be founded in its unflinching commitment to 5 core values Integrity, Customer First, Boundary less, Ownership and Passion.

Each of the values describes what the company stands for, the qualities of their people and the way they work.

2. OBJECTIVES OF THE RESEARCH

To understand investors perception about capital market To know the most sought after investment avenue and preference in equity market. To identify the factors influencing investment decisions. To know the fund types and schemes most opted for. To evaluate the extent of tolerable loss To comprehend Current vs Future investment goals of investors. To explore investors risk perception. To check the satisfaction level of customers with respect to services provided by JKBANK Depository , in Jammu. To find customers attitude towards various investment vehicles. To give suggestions to improve the competitive position of the company.

3. FINANCIAL MARKET
3.1 SECURITIES MARKET IN INDIA AN OVERVIEW 3.1.1 Introduction
The securities market has essentially three categories of participants, viz., the issuer of securities, the investors in the securities and the intermediaries. The issuers are the borrowers or deficit savers, who issue securities to raise funds. The investors, who are surplus savers, deploy their savings by subscribing to these securities. The intermediaries are the agents who match the needs of users and suppliers of funds for a commission. These intermediaries function to help both the issuers and investors to achieve their respective goals. There is large variety and number of intermediaries providing various services in the Indian securities market. This process of mobilization of resources is carried out under the supervision and overview of the regulators. The regulators develop fair market practices and regulate the conduct of issuers of securities and the intermediaries. They are also in charge of protecting the interests of the investors. The regulator ensures a high service standard from the intermediaries and supply of quality securities and nonmanipulated demand for them in the market.

Market Segments
The securities market has two interdependent and inseparable segments, the new issues (primary) market and the stock (secondary) market. The primary market provides the channel for creation and sale of new securities, while the secondary market deals in securities previously issued. The securities issued in the primary market are issued by public limited companies or by government agencies. The resources in this kind of market are mobilized either through the public issue or through private placement route. It is a public issue if anybody and everybody can subscribe for it, whereas if the issue is made available to a selected group of persons it is termed as private placement. There are two major types of issuers of securities, the corporate entities who issue mainly debt and equity instruments and the government (central as well as state) who issue debt securities (dated securities and treasury bills).

3.1.2 Primary Market Corporate Securities

The average annual capital mobilisation from the primary market has grown manifold since the last two-three decades. There is a high preference for raising resources in the primary market through private placement route. Private placements accounted for 81.80 % of total resources mobilized through domestic issues by corporate sector during 2008-09. It appears that more and more people prefer mutual funds (MFs) as their investment vehicle. This change in investor behaviour is induced by the evolution of a regulatory framework for MFs, tax concessions offered by government and preference of investors for passive investing. Starting with an asset base of Rs. 250 million in 1964, the total assets under management at the end of March 2008 has risen to Rs. 3,263,880 million. The resources mobilized by the MFs have increased from Rs.112,440 million in 1993-94 to Rs. 939,850 million in 2008-09.

Government Securities
The primary issues of the Central Government have increased manifold during the decade of 1990s from Rs. 89,890 million in 1990-91 to Rs. 1,793,730 million in 2008-09. The issues by state governments have also increased from Rs. 25,690 million in 1990-91 to Rs. 505,210 million in 2003-04. Thereafter, the issues by the State Government have been witnessing a decrease, mobilizing Rs.208,250 million in 2008-09 against Rs.217,290 million in 2007-08.

3.13 Secondary Market Corporate Securities

Exchanges in the country, offer screen based trading system. There were 9,443 trading members registered with SEBI as at end March 2008.

The market capitalization has grown over the period indicating more companies using the trading platform of the stock exchange. The All-India market capitalization was around Rs. 35,488,081 million at the end of March 2008. The market capitalization ratio is defined as market capitalisation of stocks divided by GDP. It is used as a measure to denote the importance of equity markets relative to the GDP. It is of economic significance since market is positively correlated with the ability to mobilize capital and diversify risk. The All- India market capitalisation ratio increased to 86.02 % in 2007-08 from 85.6 % in 2006-07. NSE Market Capitalisation ratio was 81.62 % during 2007-08 while BSE Market Capitalisation ratio was 85.93 %.

Government Securities
The trading in non-repo government securities has been declining considerably since 2004-05. The aggregate trading volumes in central and state government securities declined from Rs. 7,080,147 million in 2005-06 to Rs.3,982,988 million in 2006-07. The trading volumes on stock exchanges have been witnessing phenomenal growth over the past years.The relative importance of various stock exchanges in the market has undergone dramatic changes over a decade. The increase in turnover took place mostly at the big stock exchanges.

3.1.4 Derivatives Market

The number of instruments available in derivatives has been expanded. To begin with, SEBI only approved trading in index futures contracts based on Nifty 50 Index and BSE30 (Sensex) Index. On NSE, there are futures and options based on benchmark index Nifty 50, CNX IT Index, Bank Nifty Index, CNX Nifty Junior, CNX 100 and Nifty Midcap 50 as well as futures and options on 221 single stocks as of December 2007. On BSE, Futures and Options are based on BSE 30 Sensex, BSE Teck, BSE Bankex, BSE Oil & Gas, BSE PSU, BSE Metal and BSE FMCG, as well as futures and options on 91 single stocks.

3.2 REGULATORY FRAMEWORK

The four main legislations governing the securities market are (a) the SEBI Act, 1992 (b) the Companies Act, 1956 (c) the Securities Contracts (Regulation) Act, 1956, and (d) the Depositories Act, 1996. A brief about these legislations is given below:

SEBI Act, 1992

The SEBI Act, 1992 was enacted to empower SEBI with statutory powers for (a) protecting the interests of investors in securities, (b) promoting the development of the securities market and (c) regulating the securities market by measures it thinks fit. The measure provide for : a) Regulating the business in stock exchanges and other securities markets.

b) Registering and regulating the working of stock brokers, sub-brokers, share transfer agents, and such other intermediaries who may be associated with securities markets in any manner. c) Registering and regulating the working of the depositories, participants, custodian of securities, foreign institutional investors, credit rating agencies and such other intermediaries as SEBI, notification may specify. d) Registering and regulating the working of venture capital funds and collective investment schemes, including mutual funds. e) Promoting and regulating self-regulatory organizations. f) Prohibiting fraudulent and unfair trade practices relating to securities markets. g) Promoting investors education and training of intermediaries of securities markets. h) Prohibiting insider trading in securities i) Regulating substantial acquisition in shares and takeover of companies. j) Calling of information from, undertaking inspection, conducting inquires and audits of the stock exchanges, mutual funds etc. k) Calling for information and record from any bank or any other authority or board or corporation in respect of any transactions in securities which is under investigation or inquiry by SEBI. l) Performing such other functions as may be prescribed. 10

Securities Contracts (Regulation) Act, 1956

It provides for direct and indirect control of virtually all aspects of the securities trading including the running of stock exchanges. The objective of the act is to prevent undesirable transactions in securities by regulating the business of dealing. It gives the Central Government regulatory jurisdiction over (a) stock exchanges through a process of recognition and continued supervision, (b) contracts in securities, and (c) listing of securities on stock exchanges. As a condition of recognition, a stock exchange complies with the requirements prescribed by the Central Government. The stock exchanges frame their own listing regulations in consonance with the minimum listing criteria set out in the Rules.

Depositories Act, 1996

The Depositories Act, 1996 provides for the establishment of depositories for securities to ensure transferability of securities with speed, accuracy and security. The act provides the rights and obligations of depositories, participants, issuers and beneficial owners.

Companies Act, 1956

It deals with issue, allotment and transfer of securities and various aspects relating to company management. It provides for standards of disclosure in the public issues, particularly in the fields of company management and projects, information about other listed companies under the same management, and management perception of risk factors. It also regulates underwriting, the use of premium and discounts on issues, rights and bonus issues, payment of interest and dividends, supply of annual report and other information.

3.3 REFORMS IN INDIAN SECURITIES MARKETS

Corporate Securities Market
During the last decade, there have been substantial regulatory, structural, institutional and operational changes in the securities industry. These have been brought in with the objective of improving market efficiency, enhancing transparency, preventing unfair trade practices and bringing the Indian market up to the international standards. The following paragraphs list the principal reform measures undertaken since 1992.

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SEBI Act, 1992

It created the securities market regulator, the SEBI, with the main objective and responsibility for (a) protecting the interests of investors in securities, (b) promoting the development of the securities market, and (c) regulating the securities market.

DIP Guidelines
In the interest of investors, SEBI issued the Disclosure and Investor Protection (DIP) guidelines. These guidelines contain a substantial body of requirements for issuers/intermediaries, with a broad intention to ensure that all the concerned entities observe high standards of integrity and fair dealing. The guidelines cast a responsibility on the lead managers to issue a due diligence certificate stating that they have examined the prospectus and that it brings out all the facts and does not contain anything wrong or misleading. Issuers are now required to comply with the guidelines and then access the market. The companies can access the market only if they fulfill minimum eligibility norms in terms of their track record of distributable profits and net worth.

Screen Based Trading

Prior to setting up of NSE, the trading on stock exchanges in India used to take place through an open outcry system. This system did not allow immediate matching or recording of trades. This was time consuming and imposed limits on trading. In order to provide efficiency, liquidity and transparency, NSE introduced a nation-wide on-line fully-automated screen based trading system (SBTS). In this system a member can punch into the computer, quantities of securities and the prices at which he desires to transact and the transaction is executed as soon as it finds a matching sale or buy order from a counter party. It allows a large number of participants, irrespective of their geographical locations, to trade with one another simultaneously, improving the depth and liquidity of the market. Given the efficiency and cost effectiveness delivered by the NSE's trading system, it became the leading stock exchange in the country in its very first year of operation. This forced the other stock exchanges to adopt SBTS. As a result, open out-cry system has disappeared from India. Today, India can boast that almost 100% trading takes place through electronic order matching. Technology has been harnessed to carry the trading platform to the premises of brokers. NSE carried the trading platform further to the PCs in the residence of investors through the internet. This has made a huge difference in terms of equal access to investors in a geographically vast country like India.

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Trading Cycle
Initially, the trading cycle varied from 14 days for specified securities to 30 days for others and settlement took another fortnight. The exchanges, however, continued to have different weekly trading cycles, which enabled shifting of positions from one exchange to another. Rolling settlement on T+5 basis was introduced in respect of specified scrips reducing the trading cycle to one day. It was made mandatory for all exchanges to follow a uniform weekly trading cycle in respect of scrips not under rolling settlement. All scrips moved to rolling settlement from December 2001. The settlement period has been reduced progressively from T+5 to T+3 days. Currently T+2 day settlement cycle is being followed.

Derivatives Trading
To assist market participants to manage risks better through hedging, speculation and arbitrage, SCRA was amended in 1995 to lift the ban on options in securities. However, trading in derivatives took off much later after the suitable legal and regulatory framework was out in place. The market presently offers index futures and index options on Nifty 50, CNX IT, Bank Nifty, Nifty Junior ,CNX 100, Nifty Midcap 50, BSE 30 Sensex, BSE Teck, BSE Bankex, BSE Oil & Gas, BSE PSU, BSE Metal and BSE FMCG, and single stock futures and options and futures in interest rate products like notional 91-day T-Bills and notional 10-year bonds. BSE also has weekly options on 4 stocks and BSE Sensex. The mini derivative (futures and options) contracts on Nifty 50 and Sensex were introduced for trading on January 1, 2008.

Demutualisation
Historically, brokers owned, controlled and managed the stock exchanges. In case of disputes, integrity of the exchange suffered. Therefore, regulators focused on reducing the dominance of trading members in the management of stock exchanges. The Securities and Exchange Board of India (SEBI), has approved and notified the Corporatisation and Demutualisation Scheme of 19 Stock Exchanges. This is a major step for modernisation of securities markets. India is the only country, which achieved this corporatisation and demutualisation in the shortest possible time. NSE and OTECI, was the first exchanges in India to adopt a pure demutualised governance structure where ownership, management and trading are with three different sets of people. This completely eliminates any conflict of interest and helped NSE to aggressively pursue policies.

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Depositories Act
The earlier settlement system gave rise to settlement risk. This was due to the time taken for settlement and due to the physical movement of paper. Further, the transfer of shares in favour of the purchaser by the company also consumed considerable amount of time. To obviate these problems, the Depositories Act, 1996 was passed to provide for the establishment of depositories in securities with the objective of ensuring free transferability of securities with speed and accuracy. This act brought in changes by (a) making securities of public limited companies freely transferable subject to certain exceptions; (b) dematerialising of securities in the depository mode. In order to promote dematerialisation, the regulator has been promoting settlement in demat form in a phased manner in an ever-increasing number of securities.

Risk Management
With a view to avoid any kind of market failures, the regulator/ exchanges have developed a comprehensive risk management system. This system is constantly monitored and upgraded. It encompasses capital adequacy of members, adequate margin requirements, limits on exposure and turnover, indemnity insurance, on-line position monitoring and automatic disablement, etc. They also administer an efficient market surveillance system to detect and prevent price manipulations. The clearing corporation has also put in place a system which tracks online real time client level portfolio based upfront margining. Exchanges have set up trade/settlement guarantee funds for meeting shortages arising out of non-fulfillment/partial fulfillment of funds obligations by the members in a settlement. As a part of the risk management system, index based market wide circuit breakers have also been put in place.

Investor Protection
The SEBI Act established SEBI with the primary objective of protecting the interests of investors in securities and empowers it to achieve this objective. SEBI specifies that critical data should be disclosed in the specified formats regarding all the concerned market participants. The Central Government has established a fund called Investor Education and Protection Fund (IEPF) in October 2001 for the promotion of awareness amongst investors and protection of the interest of investors.

Globalisation
Indian securities market is getting increasingly integrated with the rest of the world. Indian companies have been permitted to raise resources from abroad through issue of ADRs, GDRs etc. Further, foreign companies are allowed to tap the domestic stock markets. 14

Indian companies are permitted to list their securities on foreign stock exchanges by sponsoring ADR/GDR issues against block shareholding. NRIs and OCBs are allowed to invest in Indian companies. FIIs have been permitted to invest in all types of securities, including government securities. They can invest in a company under portfolio investment route upto 24% of the paid up capital of the company. This can be increased up to the sectoral cap/statutory ceiling, as applicable. The Indian Stock Exchanges have been permitted to set up trading terminals abroad. The trading platform of Indian exchanges is now accessed through the Internet from anywhere in the world.

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4. PRIMARY MARKET
4.1 Introduction
The issuers issue fresh securities through public issues as well as private placements. The resources, raised by them from domestic as well as international markets, are presented in (Table 2-1). During 2006-07, a total of Rs. 3,951,560 mn were mobilized (increase of 24.89% over the previous year) by both the government and corporate sector from the primary market through public issues and private placement.

Market Design
The primary market is governed by the provisions of the Companies Act, 1956, which deals with issues, listing and allotment of securities. Additionally the SEBI (Disclosure and Investor Protection) guidelines issued under the securities law prescribes a series of eligibility and disclosure norms to be complied by the issuer, promoter for accessing the market.

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4.2 DIP Guidelines, 2000

Disclosure and Investor Protection (DIP) Guidelines of SEBI, was issued in June 1992. SEBI has since then been issuing clarifications/amendments to these guidelines from time to time, in order to streamline the public issue process. The guidelines apply to all public issues, offer for sale, and rights issues by listed and unlisted companies. This section attempts to highlight some of the important clauses in the guideline in a precise manner.

Pricing of Issues
The companies, including the eligible infrastructure companies, have the freedom to price their equity shares or any security convertible into equity in public or rights issues as the case may be. The banks however, can price their shares subject to the approval by the RBI. A company (listed or unlisted) should issue shares to applicants in the firm allotment category at a different price from the one at which the net offer to the public is made. That is, at a higher price than at which the securities are offered to the public.

4.3 Demat Issues

SEBI has mandated that all new IPOs compulsorily should be traded in dematerialised form only. Further, the section 68B of the Companies Act, 1956, requires that every listed public company making IPO of any security for Rs. 10 crore or more should issue the same only in dematerialised form. The investors, however, would have the option of either subscribing to securities in physical or dematerialised form.

Investors :
.

As on January 31, 2008, there were 77,58,786 Investor accounts from within the country and abroad. 2,148 clearing member accounts have been opened to facilitate trading and settlement of demat shares in the stock exchanges connected to NSDL. Table below shows the growth in investor accounts over a period of three years

Month Year

Client Accounts No. of Accounts (lakh)

Jan-06 Jan-07 Jan-08

60.85 74.23 77.59

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Dematerialisation :
As on January 31, 2008, 19,598 cr. securities having a value of Rs. 32,23,741 cr. were dematerialised. Table below shows the dematerialisation figures over the last three years.

Month Year Jan-06 Jan-07 Jan-08

Demat Quantity (Cr.) 10,565 16,745 19,598

Demat Value (Rs. Cr.) 1,395,290 2,172,927 3,223,741

Private Placement
The private placement involves issue of securities, debt or equity, to selected subscribers, such as banks, FIs, MFs and high net worth individuals. It is arranged through a merchant/ investment banker, who acts as an agent of the issuer and brings together the issuer and the investor(s). Since these securities are allotted to a few sophisticated and experienced investors, the stringent public disclosure regulations and registration requirements are relaxed.

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5 COLLECTIVE INVESTMENT VEHICLES

A collective investment vehicle is any entity that allows investors to pool their money and invest the pooled funds, rather than buying securities directly as individuals. The most common types of collective investment vehicles are mutual funds, exchange traded funds, collective investment schemes and venture capital funds. The Collective Investment Scheme is well established in many jurisdictions and now serves as an investment vehicle for a wide range of investment opportunities around the world.

5.1 Mutual Funds

5.1.1 Concept
A mutual fund is a company that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, other securities or assets, or some combination of these investments. Mutual Funds are essentially investment vehicles where people with similar investment objective come together to pool their money and then invest accordingly. A Mutual Fund is a body corporate that pools the savings of a number of investors and invests the same in a variety of different financial instruments, or securities. Securities and Exchange Board of India (mutual fund) Regulation,1996 defines mutual funds as 'A fund established in the form of a trust to raise money through the sale of units to the public or a section of the public under one or more schemes for investing in securities, including money market instruments or gold or gold related instruments.' The income earned through these investments and the capital appreciation realised by the scheme are shared by its unit holders in proportion to the number of units owned by them. Mutual funds can thus be considered as financial intermediaries in the investment business who collect funds from the public and invest on behalf of the investors. The losses and gains accrue to the investors only. The Investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment objectives specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper and government securities. Since each owner is a part owner of a mutual fund, it is necessary to establish the value of his part. In other words, each share or unit that investors hold needs to be assigned a value. This is generally called the Net Asset Value (NAV) of one unit or share. The value of an investors part ownership is thus determined by NAV of the number of units held. NAV, is calculated daily, based on the total value of the fund divided by the number of shares currently issued and outstanding. In India, the Unit Trust of India (UTI), created in 1964 was the first MF. It enjoyed complete monopoly of MF business up to 1986. The entry of non- UTI, public sector mutual funds was set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) in 1987. SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987.

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5.1.2 BENEFITS OF INVESTING THROUGH MUTUAL FUNDS Portfolio Diversification Professional Management Reduction / Diversification of Risk Liquidity Convenience And Flexibility Return Potential Choice of Schemes Well Regulated

DISADVANTAGES OF MUTUAL FUNDS

No Control Over Costs No Tailor-Made Portfolios Managing Portfolio of Funds Risk Factors
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Market Design
The MF industry is governed by SEBI (MF) Regulations, 1996, which lays the norms for the MF and its AMC. All MFs in India are constituted as trusts and are allowed to issue open-ended and close-ended schemes under a common legal structure. This section throws light on the market design of the MFs in India.

5.1.3 Structure of MFs Fund Sponsor

A 'sponsor' is a person who, acting alone or in combination with another corporate body, establishes a MF. In order to register with SEBI as a MF, the sponsor should have a sound financial track record of over five years, and integrity in all his business transactions. Following its registration, in accordance with SEBI Regulations, the sponsor forms a trust, appoints a Board of Trustees and an AMC as a fund manager.Further, a custodian is appointed to carry out the custodial services for the schemes of the fund. The sponsor should contribute at least 40% of the net worth of the AMC (provided that any person who holds 40 % or more of the net worth of an asset management company should be deemed to be a sponsor and would be required to fulfil the elilgibility criteria specified in the SEBI regulations)

Trustees
The MF can either be managed by the Board of Trustees, which is a body of individuals, or by a Trust Company, which is a corporate body. Most of the funds in India are managed by a Board of Trustees. The trustees are appointed with the approval of SEBI. Two thirds of trustees are independent persons and are not associated with sponsors or be associated with them in any manner whatsoever. The trustees, being the primary guardians of the unit holders' funds and assets, have to be persons of high repute and integrity. The Trustees, however, do not directly manage the portfolio of MF. It is managed by the AMC as per the defined objectives, in accordance with trust deed and SEBI (MF) Regulations.

Asset Management Company

The AMC, appointed by the sponsor or the Trustees and approved by SEBI, acts like the investment manager of the Trust. The AMC should have at least a net worth of Rs. 10 crore. It functions under the supervision of its Board of Directors, Trustees and the SEBI. In the name of the Trust, AMC floats and manages different investment 'schemes' as per the SEBI Regulations and the Investment Management agreement signed with the Trustees. The regulations require non interfering relationship between the fund sponsors, trustees, custodians and AMC.

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Custodians
A custodian is appointed for safe keeping the securities and participating in the clearing system through approved depository. Custodian also records information on stock splits and other corporate actions. No custodian in which the sponsor or its associate holds 50 % or more of the voting rights of the share capital of the custodian or where 50 % or more of the directors of the custodian represent the interest of the sponsor or its

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associates should act as custodian for a mutual fund constituted by the same sponsor or any of its associate or subsidiary company.

Registrar and Transfer agent

Registrar and transfer agent maintains record of the unitholders account. A fund may choose to hire an independent party registered with SEBI to provide such services or carryout these activities in-house. If the work relating to the transfer of units is processed in-house, the charges at competitive market rates may be debited to the scheme. The registrar and transfer agent forms the most vital interface between the unitholder and mutual fund. Most of the communication between these two parties takes place through registrar and transfer agent.

Distributors/Agents
To send their products across the length and breadth of the country, mutual funds take the services of distributors/agents. Distributors comprise of banks, non-banking financial companies and other distribution companies.

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5.2 TYPES OF FUNDS

The mutual fund may float several schemes which may be classified on the basis of its structure, its investment objectives and other objectives.

By Structure/ Flexibility
Open ended schemes
Open ended scheme is open for subscription and redemption throughout the year.These do not have a fixed maturity. The key feature is liquidity. An investor can conveniently buy and sell his units at Net Asset Value(NAV) based prices, at any point of time generally calculated on every business day. These schemes have unlimited capitalization. These funds are not generally listed on any exchange. Open-ended funds are bringing in a revival of the mutual fund industry owing to increased liquidity, transparency and performance in the new open-ended funds promoted by the private sector and foreign players. Open-ended funds score over close-ended ones on several counts. Some of these are listed below: 24

a) Any time exit option : The issuing company directly takes the responsibility of providing an entry and an exit. This provides ready liquidity to the investors and avoids reliance on transfer deeds, signature verifications and bad deliveries. b) Tax advantage : The funds continue to remain attractive investment vehicles. In equity plans there is no distribution tax. c) Any time entry option : An open-ended fund allows one to enter the fund at any time and even to invest at regular intervals (a systematic investment plan).

Close-Ended funds
Schemes that have a stipulated maturity period, limited capitalization and the units are listed on the stock exchange are called close-ended schemes. These funds are open initially for entry during the Initial Public Offering (IPO) and thereafter closed for entry as well as exit. They are open for subscription only once and can be redeemed only on the fixed date of redemption. These funds have a fixed date of redemption. One of the characteristics of the close-ended schemes is that they are generally traded at a discount to NAV; but the discount narrows as maturity nears. The units of these funds are listed (with certain exceptions), are tradable and the subscribers to the fund would be able to exit from the fund at any time through the secondary market. SEBI Regulations ensure that at least one of the two exit routes are provided to the investor under the close ended schemes. These schemes have historically seen a lot of subscription. This popularity is estimated to be on account of firstly, public sector MFs having floated a lot of close-ended income schemes with guaranteed returns and secondly easy liquidity on account of listing on the stock exchanges.

Interval fund
These funds combine the features of both openended and close-ended funds wherein the fund is close-ended for the first couple of years and open-ended thereafter. Some funds allow fresh subscriptions and redemption at fixed times every year (say every six months) in order to reduce the administrative aspects of daily entry or exit, yet providing reasonable liquidity.

25

OPEN ENDED OPEN FOR ALL THE YEAR MIN SUBS AMT 50CR NO DURATION REFUNDED IF MIN SUBS NOT ACHIEVED REPURCHASED ANY TIME REDEEMED AT NAV & LOAD FACTOR RANGES (4% TO 6%) AS REPURCHSED SO NOT LISTED AT STOCK EX TRADED AS PERMITTED LOT SWITCHOVER ALLOWED

CLOSE ENDED OPEN FOR FIXED PERIOD MIN SUBS AMT 20CR DURATION (5TO7 YEARS) REFUNDED IF MIN AMT NOT ACHIEVED MAY BE REPURCHASED (AFTER 2 TO 3 YRS) REDEMPTION SPECIFIED & DONE AT NAV - SERVICE CHARGE LISTED AT STOCK EX SWITCHOVER ALLOWED

By Investment Objectives
Equity Funds/ Growth Funds
The objective of growth fund scheme is to provide capital appreciation over the medium to long term. This type of scheme is an ideal scheme for the investors seeking capital appreciation for long period. These schemes are not for investors seeking regular income or needing their money back in the short term. . Because they invest in well-established companies where the company itself and the industry in which it operates are thought to have good long-term growth potential, growth funds provide low current income. Growth funds generally incur higher risks than income funds in an effort to secure more pronounced growth. These schemes normally invest a majority of their funds in equities and are willing to bear short term decline in value for possible future appreciation. Growth funds are suitable for investors who can afford to assume the risk of potential loss in value of their investment in the hope of achieving substantial and rapid gains. They are not suitable for investors who must conserve their principal or who must maximize current income. Ideal for: Investors in their prime earning years. Investors seeking growth over the long term.

Debt / Income Funds

These Funds invest predominantly in high-rated fixed-income-bearing instruments like bonds, corporate debentures, government securities, commercial paper and other money market instruments that have a fixed rate of return. They are best suited for the medium to long-term investors who are averse to risk and seek capital preservation. They provide 26

regular and steady income and safety to the investor.Capital appreciation in such schemes may be limited. Some fixed-income funds seek to minimize risk by investing exclusively in securities whose timely payment of interest and principal is backed by the full faith and credit of the Indian Government. Ideal for: Retired people and others with a need for capital stability and regular income. Investors who need some income to supplement their earnings.

Balanced Funds
These funds invest both in equity shares and fixed-income-bearing instruments (debt) in some proportion. The objective of balanced fund schemes is to provide both growth and regular income by periodically distributing a part of the income and capital gains they earn. These funds have low to moderate stability of principal and moderate potential for current income and growth. They are ideal for medium- to long-term investors willing to take moderate risks. In a rising stock market, the NAV of these schemes may not normally keep pace or fall equally when the market falls. Ideal for: Investors looking for a combination of income and moderate growth.

Gilt Fund
These funds invest in Central and State Government securities. With a view to creating a wider investor base for government securities, the Reserve Bank of India encouraged setting up of gilt. Since they are Government backed bonds they give a secured return and also ensure safety of the principal amount They are best suited for the medium to longterm investors who are averse to risk

Money Market / Liquid funds

These funds invest in highly liquid money market instruments. The period of investment could be as short as a day. The aim of money market funds is to provide easy liquidity, preservation of capital or principal while seeking a moderate to high current income .These schemes generally invest in safer, highly liquid, virtually risk-free short term instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money. Because of their short-term investments, money market mutual funds are able to keep a virtually constant unit price; only the yield or returns on these schemes may fluctuate, depending upon the interest rates prevailing in the market. Therefore, they are an attractive alternative to bank accounts. With yields that are generally competitive with - and usually higher than - yields on bank savings account, they offer several advantages. Money can be withdrawn any time without penalty. Although not insured, money market funds invest only in highly liquid, short-term, top-rated money market instruments. Ideal for: Corporates and individual investors as a means to park their surplus funds for short periods or awaiting a more favourable investment alternative. 27

Investors who want high stability of principal and current income with immediate liquidity. The table below gives the summary of the various funds and their investment objectives

Scheme type Objective Open Close

Time Horizon

Risk Profile

Typical Investment Pattern Equity (%) Debt (%) Money Market Inst./Others (%) 80-100 0-20 0-20 0-20 0-20

Money Market Income Growth Balanced Tax Saving

Yes Yes Yes Yes Yes

No Yes Yes Yes Yes

Short term Medium Long term Long term Long term Long term

Low Low to Medium High Medium to high High

0 0 80-100 0-60 80-100

0-20 80-100 0-20 0-40 80-100

Specialty/Sector Funds
These funds invest in securities of a specific industry or sector of the economy such as infrastructure, banking, technology, pharma, leisure, utilities or precious metals. The funds enable investors to diversify holdings among many companies within an industry, a more conservative approach than investing directly in one particular company. These funds are targeted at investors who are extremely bullish about a particular sector. Sector funds offer the opportunity for sharp capital gains in cases where the fund's industry is "in favor" but also entail the risk of capital losses when the industry is out of favor. While sector funds restrict holdings to a particular industry, other specialty funds such as index funds give investors a broadly diversified portfolio and attempt to mirror the performance of various market averages. Index funds generally buy shares in all the companies composing the BSE Sensex or NSE Nifty or other broad stock market indices. They are not suitable for investors who must conserve their principal or maximize current income.

Index funds
Index schemes attempt to replicate the performance of a particular market index such as the BSE Sensex, S&P 500 ,the NSE 50 (NIFTY) .They invest in the same pattern as popular market indices. The value of the index fund varies in proportion to the

28

benchmark index. Index fund schemes are ideal for investors who are satisfied with a return approximately equal to that of an index.

Diversified funds
These funds invest in companies spread across sectors. These funds are generally meant for risk-taking investors who are not bullish about any particular sector

Hedge Funds
These funds adopt highly speculative trading strategies. They hedge risks in order to increase the value of the portfolio

Tax Saving Schemes (Equity Linked Saving Scheme - ELSS)

These funds offer tax benefits to investors under the Income Tax Act. Opportunities provided under this scheme are in the form of tax rebates U/s 88 as well saving in Capital Gains U/s 54EA and 54EB. They are best suited for investors seeking tax concessions. They promote long term investments in equities through Mutual Funds.Also these schemes carry a lock in period before the end of which funds cannot be withdrawn Ideal for: Investors seeking tax incentives.

By Geographical Location
Domestic Funds
Funds which mobilize resources from a particular geographical locality like a country or a region are domestic funds. They mobilize the savings of nationals within the country The market is limited and confined to the boundaries of a nation in which the fund operates. They can invest only in the securities, which are issued and traded in the domestic financial market.

Offshore Funds
Offshore funds attract foreign capital for investment in the country of the issuing company by investing in securities of foreign companies. They facilitate cross-border fund flow which leads to an increase in foreign currency and foreign exchange reserves. They open domestic capital market to international investors. Many mutual funds in India have launched a number of offshore funds, either independently or jointly with foreign investment management companies. The first offshore fund, the India fund, was launched by unit trust of India in July 1986 in collaboration with the US fund manager, Merril Lynch. 29

Other Funds
Load 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.

INVESTORS PERSPECTIVES: MFS V/S. OTHER PRODUCTS

Product Equity FI Bonds Debentures Comp. FD Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds INVESTMENT OBJECTIVE Capital Appr. Income Income Income Income Income Risk Cover Inflation Hedge Inflation Hedge Cap. Gwt, Inc. RISK TOLERANCE. High Low Income Income Low Low Low Low Low H-M-Low TIME HORIZON Long Term Med-Long Med-Long Medium Flex-All Terms Long Long Long Long Flex-All Terms

30

5.3 Selection Parameters For Mutual Funds Objective

The first point to note before investing in a fund is to find out whether ones objective matches with the scheme. It is necessary, as any conflict would directly affects the prospective returns. For example, a scheme that invests heavily in mid-cap stocks is not suited for a conservative equity investor. He should be better off in a scheme, which invests mainly in blue chips. Similarly, investor should pick schemes that meet his specific needs. Example: pension plans, childrens plans, sector-specific schemes, etc.

Risk capacity and capability

This dictates the choice of schemes. Investors with no risk tolerance should go for debt schemes, as they are relatively safer. Aggressive investors can go for equity investments. Investors that are even more aggressive can try schemes that invest in specific industry or sectors.

Fund Managers and scheme track record

It is imperative that the hard earned money which the investor invests should be managed well. It is also essential that the fund house he chooses has excellent track record. It also should be professional and maintain high transparency in operations. One should look at the performance of the scheme against relevant market benchmarks and its competitors and for a longer period, as it gives an idea how the scheme fared in different market conditions.

Cost factor
Though the AMC fee is regulated, an investor should look at the expense ratio of the fund before investing. This is because the money is deducted from his investments. A higher entry load or exit load also eats the returns. A higher expense ratio can be justified only by superlative returns. It is very crucial in a debt fund, as it devours a few percentages from the modest returns.

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6. ABOUT ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

AMFI is an apex body of all Asset Management Companies (AMC), which has been registered with SEBI. It is a trade body of all the mutual funds in India. It was incorporated on 22nd August 1995 as a non-profit organisation to promote and protect the interests of mutual funds and their unitholders, define and maintain high ethical and professional standards and enhance public awareness of mutual funds. Till date all the AMCs are that have launched mutual fund schemes are its members. It functions under the supervision and guidelines of its Board of Directors and works through committees and working groups. Over the years, AMFI has worked closely with SEBI in establishing standards that match the best in the world. It has played a significant role in introducing best practices to reinforce the growth of the Indian Mutual Fund industry on healthy, professional and ethical lines and protect the interests of the investors.

Objectives
It works with 30 registered AMCs of the country. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The objectives are as follows: It maintains high professional and ethical standards in all areas of operation of the industry. It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association. It represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. It develops a team of well-qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. It undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds. It also disseminates information on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.

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7. RESOURCE MOBILISATION
The MF vehicle is quite popular with investors who are wary of directly investing in the securities market. The popularity of the MFs as an investment avenue is clearly visible from the data presented in Table. The schemes of MFs of the commercial banks and the insurance companies, which entered the market in 1987, were well received. The boom continued into the 90's with liberalisation evoking positive response from the investors.

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8 SECONDARY MARKET TRADING

8.1 Introduction
After the securities are issued in the primary market, they are traded in the secondary market by the investors. The stock exchanges along with a host of other intermediaries provide the necessary platform for trading in secondary market and also for clearing and settlement. The securities are traded, cleared and settled within the regulatory framework prescribed by the Exchanges and the SEBI. With the increased application of information technology, the trading platforms of stock exchanges are accessible from anywhere in the country through their trading terminals. The trading platforms are also accessible through internet. In a geographically widespread country like India, this has significantly expanded the reach of the exchanges.

Market Design
At the end of March 2007, there were 22 stock exchanges registered with SEBI having a total of 9,444 registered brokers and 27,541 registered sub-broker trading on them The stock exchanges need to be recognized under the Securities Contracts (Regulation) Act, 1956. SEBI has approved and notified the Corporatisation and Demutualisation Scheme of 19 Stock Exchanges.

Membership
The trading platform of a stock exchange is accessible only to trading members. They play a significant role in the secondary market by bringing together the buyers and the sellers. The brokers give buy/sell orders either on their own account or on behalf of clients. As these buy and sell order matches, the trades are executed. The exchange can admit a broker as its member only on the basis of the terms specified in the Securities Contracts (Regulation) Act, 1956, the SEBI Act 1992, the rules, circulars, notifications, guidelines, and the byelaws, rules and regulations of the concerned exchange. No stock broker or sub-broker is allowed to buy, sell or deal in securities, unless he or she holds a certificate of registration from the SEBI.

34

8.2 Trading Mechanism

NSE was the first stock exchange in the country set up as a national exchange having nationwide access with fully automated screen based trading system. Today, NSE has become the largest exchange in India with approximately 67% of the trading volumes on it. It is one of the very few exchanges in the world to also have adopted anonymous order matching system. The member punches in the NEAT system, the details of his order such as the quantities and prices of securities at which he desires to transact. The transaction is executed as soon as it finds a matching sale or buy order from a counter party. All the orders are electronically matched on a price/time priority basis. This has resulted in a considerable reduction in time spent, cost and risk of error, as well as frauds, resulting in improved operational efficiency. It allows for faster incorporation of price sensitive information into prevailing prices, as the market participants can see the full market on real time basis. This increases informational efficiency and makes the market more transparent. Further, the system allows a large number of participants, irrespective of their geographical locations, to trade with one another simultaneously, improving the depth and liquidity of the market. A single consolidated order book for each stock displays, on a real time basis, buy and sell orders originating from all over the country.

8.3 Trading Regulations Insider Trading

Insider Trading is considered as an offence and is hence prohibited as per the SEBI (Prohibition of Insider Trading) Regulations, 1992. The same was amended in the year 2003. The act prohibits an insider from dealing (on his behalf or on behalf of any other person) in securities of a company listed on any stock exchange, when in possession of any unpublished price sensitive information. Further, it has also prohibited any insider from communicating, counseling or procuring directly or indirectly any unpublished price sensitive information to any person who while in possession of such unpublished price sensitive information should not deal in securities. Price sensitive information means any information which is related directly or indirectly to a company and which if published is likely to materially affect the price of securities of a company. It includes information like periodical financial results of the company, intended declaration of dividends (both interim and final), issue of securities or buy-back of securities, any major expansion plans or execution of new projects, amalgamation, merger or takeovers, disposal of the whole or substantial part of the undertaking and significant changes in policies, plans or operations of the company.

35

Unfair Trade Practices

The SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to the Securities Market) Regulations 2003 enable SEBI to investigate into cases of market manipulation and fraudulent and unfair trade practices. The regulations specifically prohibit fraudulent dealings, market manipulations, misleading statements to induce sale or purchase of securities, unfair trade practices relating to securities. When SEBI has reasonable ground to believe that the transaction in securities are being dealt within a manner detrimental to the investor or the securities market in violation of these regulations and when any intermediary has violated the rules and regulations under the act then it can order to investigate the affairs of such intermediary or persons associated with the securities market. Based on the report of the investigating officer, SEBI can initiate action for suspension or cancellation of registration of an intermediary.

Buy Back
Buy Back is done by the company with the purpose to improve liquidity in its shares and enhance the shareholders' wealth. Under the SEBI (Buy Back of Securities) Regulations, 1998, a company is permitted to buy back its shares or other specified securities by any of the following methods:a) From the existing security holders on a proportionate basis through the tender offer b) From the open market through (i) book building process (ii) stock exchange c) From oddlot holders.

Circuit Breakers
Volatility in stock prices is a cause of concern for both the policy makers and the investors. To curb excessive volatility, SEBI has prescribed a system of circuit breakers. The breakers are triggered by movement of either Nifty 50 or Sensex, whichever is breached earlier.

9 Market Capitalisation - Growth and Distribution

The market capitalisation for securities available for trading on the equity segment of NSE and BSE witnessed enormous growth over the previous years. The market capitalisation of NSE and BSE as at end March 2007 amounted to Rs. 33,673,500 million and Rs. 35,450,410 million respectively.

36

10 Settlement Cycle
NSCCL clears and settles trades as per the well-defined settlement cycles. All the securities are being traded and settled under T+2 rolling settlement. The NSCCL notifies the relevant trade details to clearing members/custodians on the trade day (T), which are affirmed on T+1 to NSCCL. Members' pay-in/pay-out obligations are determined latest by T+1 and are forwarded to them on the same day, so that they can settle their obligations on T+2. The securities/funds are paid-in/paid-out on T+2 day to the members' clients' and the settlement is complete in 2 days from the end of the trading day.

11 DEBT MARKET 11.1 Participants & Products in the Debt Market

37

Security-wise Distribution of Turnover, 2007-08

Source: NSE.

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12 RESEARCH METHODOLOGY
Method is a way of doing something and methodology is a set of methods used in a particular area of activity. The purpose of this research is to evaluate the Customers Perception towards investment in equity market or mutual funds. This is an informative survey as it evaluates each dealer on the basis of certain criteria and finally frames their perception about the market and the company. The methodology employed in the research is as given by Philip Kotler 1. Developing the problems and research objective 2. Developing the information sources. 3. Collecting and analyzing the information 4. Presenting the information

Research problem
To find the Customers Perception toward various investment vehicles.

Source of information:
Since this research is related to the customers perception, so the important sources of information are customers themselves.

Sample Design
The sample size that was studied in this project is 60.A market research was conducted in Jammu region.

Method of sampling - Random sampling:

In random sampling, samples are taken randomly without any priority.

Method of Data Collection

Primary information or information from first-hand sources can be collected through observation method, personal interviews and questionnaire. The information collected in the survey is by using questionnaire method. A questionnaire is a written list of questions, the answers to which are recorded by the respondents. Systematic collection of information was undertaken directly from the customers. Secondary data was gathered through business magazines (Business Today, Business Standard) News papers (Times of India, Economic times) and Internet (web site of IDirect)

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ANALYTICAL APPROACH:
Data analysis involves converting a series of recorded observation (Data) into descriptive statements (information) The Analysis is shown with the help of a. b. c. Chart pie Graphs

13 LIMITATIONS OF THE STUDY

The survey had been conducted as a part of the academic study in partial fulfillment of the requirement for the degree of MBA so the time duration was less. The sample size for the survey was 60. Historically low response rate (although inducements may help). Problems with incomplete questionnaires. The analysis is based on the respondents reply so there is an element of error. The Direct personal investigation is restricted in scope. Results are bound to be bias due to personal biasness. Investors sample was very less, so it may not represent the actual results. The data has been collected on the basis of the sampling method so this is the main limitation of the survey. The respondent might not respond actual feelings or facts either to demonstrate a superior status or by being frivolous while filling up the questionnaire. Coverage of survey area is not sufficient to reach a satisfactory conclusion.

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Q1. What is your annual income?

11

Annual Income Below 2.5 Lakhs 2.5 5 Lakhs 57.5 Lakhs Above 7.5 Lakhs

Frequency 28 19 9 4

ANNUAL INCOME 30

25

NUMBER OF INVESTORS

20

15

10

0 Below 2.5 lakhs 2.5 -- 5 lakhs 5 --7.5 lakhs Above 7.5 lakhs INCOME LEVEL (in Rupees)

46% investors who are mostly professionals or service men have annual income below Rs. 2.5 lakhs and only 7 % investors who are businessmen have an annual income above Rs.7.5 lakhs

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Q2. Of your total income, you invest upto ?

12

Investment 5% 5% to 10% More than 10%

Frequency 15 20 25

PERCENTAGE OF TOTAL INCOME INVESTED

25% 42% 5% 5-10% More than 10%

33%

Predominantly investors invest approximately 30- 40% of their total income in various investment vehicles.

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Q3. How much experience do you have in the stock market ?

13 Number of Years Less than a Year 1-4 >4

Frequency 19 34 7

EXPERIENCE IN STOCK MARKET

40 35 30 25 20 15 10 5 0 34

NO. OF PERSONS

19 7

Less than a year

1 to 4 YEARS

More than 4

56% investors have an experience of 1 to 4 years which has made them conversant with the market .They have headed towards gaining more knowledge in the ever dynamic stock market.

Q4. What is your preferred way of Investment?

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14 Investment Options Mutual Funds Stocks/Bonds Insurance Real Estate Bank Deposits Govt. Securities

Frequency 53 39 27 25 24 8

INVESTMENT VEHICLES

5% 14% 30% Mutual Funds Stocks/Bonds 14% Insurance Real Estate Bank Deposits 15% Govt. Securities 22%

Maximum number of investors prefer to invest in Mutual Funds , as they deem to be a better option in terms of Portfolio Diversification, Professional Management, Diversification of Risk etc.

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Q 5 What is your preference in equity market?

15 Frontline Midcap Smallcap

Preference

Frequency 32 40 14

INVESTMENT OPTION

Smallcap 16%

Frontline 37%

Midcap 47%

47% investors prefer mid-caps as they have the potential to deliver very high returns.

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Q6 How much returns do you expect from your investments?

16 Returns Upto 15% 15 25% 25 35% More than 35%

Frequency 9 30 15 6

APPRECIATION
30 25 20 NO.OF 15 PERSONS 10 5 0 30

15 9 6

Upto 15% 15 25% 25 35% More than 35% GROWTH

Maximum investors expect higher returns than bank deposits.

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Q7 Factors influencing your investment decisions

Option Advice from brokers Reviews in financial magazines Self Evaluation Current News Advice from friends Others 7 5 28 26 8 3

Frequency

INVESTMENT DECISIONS
30 25 20 15 10 5 0
NO. OF PERSONS

Advice from brokers

Advice from friends

Reviews in financial magazines

Self Evaluation

Current News

Generally the investment decisions of the investors are influenced by self knowledge of the share market or by gaining a comprehensive understanding from news.

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Others

Q8 Which type of schemes do you prefer to invest in?

Schemes Open Ended Close Ended Interval Fund

Frequency 48 11 1

SCHEMES BY STRUCTURE

2% 18% Open Ended Close Ended Interval Fund 80%

80% investors prefer to invest in open ended schemes as they are open for subscription and redemption throughout the year and do not have a fixed maturity period.
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Q9 Which type of fund are you most interested in ?

Fund Type Equity Fund Debt Fund Liquid Fund Gilt Fund

Frequency 48 7 5 0

FUND TYPE

8% 0% 12% Equity Fund Debt Fund Liquid Fund Gilt Fund 80%

Irrespective of the high risks 80% of investors are inclined towards investing in Equity funds as they provide capital appreciation over medium to long term and there is no preference for investment in Government securities.

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Q10 Consider the following two investments -- ABC Limited and XYZ Limited. ABC Ltd. provides an average annual return of 10% with minimal risk of loss of principal. XYZ Ltd provides an average annual return of 20% but carries a potential loss of principal of 30% or more in any year. If you could choose to invest between these two companies to meet your goals, you would invest your money in: Allocation Strategy 100% in ABC Ltd. 0% in XYZ Ltd 50% in ABC Ltd. 50% in XYZ Ltd. 20% in ABC Ltd. 80% in XYZ Ltd. 80% in ABC Ltd. 20% in XYZ Ltd. 0% in ABC Ltd. 100% in XYZ Ltd and Conservative and Moderate and Risk takers and Cautiously Moderate and Aggressive Frequency 8 20 10 18 4

ALLOCATION STRATEGY

7%

13% Conservative

30% 33%

Moderate Risk takers Cautiously Moderate Aggressive 17%

7% investors want high returns in less time period irrespective of the risk attached and 33% divide the risk in such a manner that loss from one investment still provides them a cushion against absolute losses.
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Q11 Which of the following statements best reflects the manner you wish to invest to achieve your goals? My investments should be absolutely safe & I cannot run the risk of losing even a single rupee of principal My investments should generate regular income that I can spend. My investments should generate some current income & also grow in value over time I want to create wealth and not current income

Current VS. Future Absolute Safety Capital Production Regular Income Dividend Current Income & Dividend Reinvestment Growth Wealth Growth

Frequency 8 12 23 17

INVESTMENT GOALS

13% 28%

Absolute Safety Regular Income 20% Current Income & Growth Wealth

39%

39% investors prefer their investments to generate some current income and also grow in value. Therefore they go for dividend reinvestment option of
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mutual funds. 13% investors want absolute safety of their investments without any risk hence they prefer Debt or Gilt finds.

Q12 The maximum loss in any one-year period that you would be prepared to accept is approximately :
Loss Percentage NIL 5% 10% 20% 30% Frequency 9 16 14 10 11

LOSS BEARING CAPACITY

_30 18%

0 15%

_20 17% _10 23%

_5 27%

Investors do have a risk bearing appetite and the general consensus was that to earn profits risk bearing capacity is a must.

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Q13 Rate the following factors importance wise while deciding about buying mutual funds

Brand name/ Goodwill of Co. Strongly Agree Agree Neutral Disagree Strongly Disagree

Frequency 4 14 3 2 0

BRAND NAME
16 14 12 10 8 6 4 2 0 Strongly Agree Agree Neutral IMPORTANCE Disagree Strongly Disagree

78% of investors feel that goodwill of the company influences investment decision as a company with a recognizable and trusted brand name can count on important benefits .

NO.OF INVESTORS

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Q14
Rating of the Fund Strongly Agree Agree Neutral Disagree Strongly Disagree Frequency 19 25 10 4 2

RATING OF FUND

7% 17%

3% 32%

Strongly Agree Agree Neutral Disagree Strongly Disagree

41%

73% investors feel that rating of the fund bears importance while investing as it provides insight into the performance of the funds by examining the basis on which it is rated and an evaluation of the people, processes and team.

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Q15
Portfolio of the Fund Strongly Agree Agree Neutral Disagree Strongly Disagree Frequency 26 25 7 0 2

PORTFOLIO OF FUND
NO. OF INVESTORS

30 25 20 15 10 5 0 Strongly Agree Agree Neutral Disagree IMPORTANCE Strongly Disagree Series1

85% investors feel that portfolio of funds holds significance while deciding about mutual funds as it is the philosophy and mandate of investing and has a bearing on the returns.

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Q16
Past Experience of the Fund Strongly Agree Agree Neutral Disagree Strongly Disagree Frequency 28 14 16 1 1

PAST EXPERIENCE OF FUND

2% 2% 27% 46% Strongly Agree Agree Neutral Disagree 23% Strongly Disagree

About 70% investors feel that the best strategy is to examine a mutual fund's annual performance consistency by looking at the past experience of the fund.

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Q17
Experience of the Manager Strongly Agree Agree Neutral Disagree Strongly Disagree Fund Frequency 19 18 17 3 3

EXPERIENCE OF FUND MANAGER

5% 5% 32% 28% Strongly Agree Agree Neutral Disagree Strongly Disagree 30%

More than 60% investors feel that the experience of the fund manager is a critical factor while buying funds as it is his presence i.e. his skill sets that steers the performance of the fund.

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Q18
Recommendation of Broker Strongly Agree Agree Neutral Disagree Strongly Disagree Frequency 9 16 22 4 9

RECOMMENDATION OF BROKER
25 20 NO. OF 15 INVESTORS 10 5 0 Strongly Agree Neutral IMPORTANCE Strongly Disagree Series1

42% investors feel that the recommendation of broker holds due importance and 22% feel that the brokers advice does not play a substantial role as one can gain market knowledge and thereby invest by experience and gut feel .

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Q19
Importance of NAV Strongly Agree Agree Neutral Disagree Strongly Disagree Frequency 20 21 6 7 6

IMPORTANCE OF NAV

10% 12% 33% Strongly Agree Agree 10% Neutral Disagree Strongly Disagree 35%

68% investors feel that NAV of a fund holds importance while investing in mutual funds.

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Q20
Entry & Exit Load Strongly Agree Agree Neutral Disagree Strongly Disagree Frequency 19 15 15 8 3

ENTRY AND EXIT LOAD

13%

5% 32%

Strongly Agree Agree Neutral Disagree

25% 25%

Strongly Disagree

57% investors feel that load which is a charge which an asset management company (AMC) of a mutual fund collects on entry or exit from a fund, is consequential while taking investment decisions.

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Q21 The services provided by JKBANK Depository are:

Services Excellent Good Satisfactory Bad Frequency 9 32 17 2

SERVICES OF I-DIRECT

Bad 3% Satisfactory 28%

Excellent 15%

Good 54%

69% of the investors are fully pleased with the services provided by JKBANK Depository, 28% are satisfied and 3% are dissatisfied.

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14 FINDINGS
As per the survey 69% of the respondents are fully pleased with the services provided by JKBANK Depository, 28% are satisfied and 3% are dissatisfied. 42% investors invest approximately 30- 40% of their total income in various investment vehicles. Majority investors are quite experienced about the stock market. The middle path - Mid Caps are the most preferred way of investments, as they deliver superior returns. Investment decisions are influenced more by investors own experience, premonition and current news rather than advice from brokers or reviews from financial magazines. Open ended schemes are the most preferred ones as they provide liquidity option. 80% investors are ready to take high risk for better returns. Dividend reinvestment is the most sought after alternative. Portfolio of the Fund holds strong significance and Recommendation of broker does not hold much worth while deciding to invest in mutual funds. More than 70% investors feel that Brand name of company and Rating of the fund have a bearing on investment decisions. 65% investors want their returns to appreciate upto 25% of the total investments. In case of the public sector, JKBANK Depository is the most preferred one, capturing the major proportion of the market.

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Portfolio Age relationship.

Ones age helps to determine what a good mix / portfolio is

Age

Portfolio 80% in stocks or mutual below 30 10% in 10% in fixed income 70% in stocks or mutual 30 t0 40 10% in 20% in fixed income 60% in stocks or mutual 40 to 50 10% in 30% in fixed income 50% in stocks or mutual 50 to 60 10% in 40% in fixed income 40% in stocks or mutual above 60 10% in 50% in fixed income

funds cash funds cash funds cash funds cash funds cash

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15 SUGGESTIONS
Documentation should be less. Formalities should be less. More branches should be opened and a help desk should be created in Jammu for solving the issues of aggrieved investors. JKBANK Depository should try to aim at providing better services to the customers. Advertise more to reach people. JKBANK Depository needs more marketing and sales people. Incentives should be provided to the employees who are working in Depository services..

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ANNEXURE
QUESTIONNAIRE Name Age ................................ ................................ Occupation .... Education Level ......................

What is your income? o Below 2.5 lakhs o 2.5-5 lakhs o Above 7.5 lakhs Of your total income , you invest upto? o 5% o 5-10% 10% How much experience do you have in the stock market? o Less than a year o 1-4 yrs. than 4 yrs. Which is your preferred way of investment? o Mutual Funds o Stocks/Bonds o Real Estate o Bank Deposits Securities What is your preference in equity market? o Frontline o Midcap How much returns do you expect from your investments? o Upto15% o 15-25% o More than 35% Factors influencing your investment decisions o Advice from broker o Current news from Fin.Magazines o Advice from friends o Self Evaluation Which type of schemes do you prefer to invest in? o Open ended o Close ended fund Which type of fund are you most interested in? o Equity fund o Debt fund o Gilt fund

o 5-7.5 lakhs

o More than

o More

o Insurance o Govt.

o Smallcap o 25-35%

o Reviews o Others

o Interval

o Liquid fund

Consider the following two investments -- ABC Ltd. provides an average annual return of 10% with minimal risk of loss of principal. XYZ Ltd provides an average annual return of 20% but carries a 65

potential loss of principal of 30% or more in any year. If you could choose to invest between these two companies to meet your goals, you would invest your money in: o 100% in ABC Ltd. and 20% in XYZ Ltd o 50% in ABC Ltd. and 50% in XYZ Ltd. o 20% in ABC Ltd. and 80% in XYZ Ltd. o 80% in ABC Ltd. and 20% in XYZ Ltd o 0% in ABC Ltd. and 100% in XYZ Ltd. Which of the following statements best reflects the manner you wish to invest to achieve your goals? o My investments should be absolutely safe & I cant run the risk of losing even a single rupee of principal o My investments should generate regular income that I can spend. o My investments should generate some current income & also grow in value over time o I want to create wealth and not current income. The maximum loss in any one-year period that you would be prepared to accept is approximately: o 0% o -5% o -10% o -20% o -30%
Rate the following factors importance wise while deciding about buying mutual funds Strongly Agree Agree Neutral Disagree Strongly Disagree . . . . . . . .

Brand name/ Goodwill of co. Rating of the fund Portfolio of the fund Past experience of the fund Experience of the fund manager Recommendation of the broker NAV is important Entry and Exit load

. . . . . . . .

. . . . . . . .

. . . . . . . .

. . . . . . . .

The services provided by JKBANK Depository are: o Bad o Excellent o Good o Satisfactory

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BIBLIOGRAPHY

BOOKS REFERRED
Philip Kotler, Marketing Management ISMR 2008

VARIOUS WEBSITES REFERRED

www.jkbank.com www.amfiindia.com www.nseindia.com www.bseindia.com www.sebi.com

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