Mutual Fund Analysis

Investment Objective & Portfolio Mgmt.
A
2008
ICFAI
BUSINES
SCHOOL PROJECT c oREPORT
nd
2 fl o o r, 20, C o m m uni t y C ent re, new fri e nds
SUBMITTED TO l o ny ,
Mr. Nitish Dipankar Ne w D el hi - 110065
STANDARD S CHARTERED SUBMITTED BANK
ON
Area Sales Manager
(Standard Chartered Bank)
BY
Ranjeet Kumar
INVESTMENT OBJECTIVES 07BS3315
&
PORTFOLIO MANAGEMENT AT
STANDARD CHARTERED
BANK
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ACKNOWLEDGEMENT
“Life is a journey; it's not the years in your life that count. It's the
life in your years.”
But Life can’t be completed without the support of many people.
Any accomplishment requires the effort of many people and this work is not
different. I would like to take this opportunity to thanks STANDARD
CHARTERED BANK for giving me an opportunity to be a part of their
esteem organization and enhance my knowledge by granting permission to
do summer training project.
I would also like to extend my sincere regards to Mr.NITISH DIPANKAR

(Area Sales Manager, Standard Chartered Bank), my project guide for his
guidance and support throughout my training .My learning has been
immeasurable and working under him was great experience. I would always
be grateful to him for the providing such an opportunity; and exposure to
ground realities of business operations and functionalities.
I would also thank Prof.P.C. VERMA my faculty guide ICFAI Business

School, Gurgaon, for his immense guidance and suggestions in carrying out
this project.
Last but not the least I also wish to thanks to everybody who helped me
through the successful completion of the project. The learning from this
experience has been immense and would be cherished throughout my life.
“It is good to have an end to journey toward; but it is the journey

that matters, in the end.”
CONTENTS
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1. Introduction…………………………………………………………………………..4
2. Investments……………………………………………………………………………6
3. Planning Your Investment………………………………………………………8
4. Investment Options Available in India………………………………….14
5. Current Banking Scenario of Indian Banking System………….26
6. Indian Banking: Strength & Weaknesses………………………………31
7. Standard Chartered Bank……………………………………………………….33
8. Standard Chartered Bank in India………………………………………….36
9. Products Offered……………………………………………………………………..42
10. Saving Accounts………………………………………………………………………43
11. ULIPs………………………………………………………………………………………..48
12. Mutual Funds…………………………………………………………………………….59
13. ULIPs Vs Mutual Funds……………………………………………………………108

14. Impact of Union Budget 2008-09…………………………………………..114
15.Survey………………………………………………………………………………………123
16. Profile of Respondents…………………………………………………………….125
17. Analysis…………………………………………………………………………………….130
18. Recommendations…………………………………………………………………..161
19. Conclusion………………………………………………………………………………..163
20. Annexure………………………………………………………………………………….167
21. References……………………………………………………………………………….171
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INTRODUCTION
Rationale of the Project
In the current banking scenario, all the banks are engaged in an in-depth
introspection for analyzing their strengths and weakness and identifying core
competencies to set a mission in which they are likely to find themselves as
leaders.
In all private and foreign banks stress is being laid on knowing their
customers. This involves not just finding the profile details about the
customer but also catering to their different needs. The needs and
investment pattern of all individual change according to their life stages and
are strongly influenced by their demographics. This project helps to analyze
customer investment habits and suggest portfolio.
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Methodology
The study was exploratory in nature and aimed at exploring the factors,
which formed the basis for selection of different types of investments by
individuals. The study also aimed at finding out what type of investment
pattern is followed by individuals of different profiles and what is their
frequency of investments so as to know where a person should invest.
Individuals already availing or planning to avail the services of different
banking firms both in public and private functioning at Delhi and Gurgaon,
formed the population from where the sample was drawn. a sample of
approx 100 respondents was studied for the purpose of this study.
The research was carried out by collecting primary data for the study
through a self-developed, non-disguised questionnaire for the customers of
various banks. For developing the profile of the customers, the
respondents were classified into various groups on the basis of their
age, occupation and income. For age wise classification the respondents
were categorized into four groups - group of 18-30 yrs, group of 30-40, 40-
50 and groups above 50.
For income group there were four categories low income group of less than
250000, middle income 250000-500000, 500000-100000, high level income
group of greater than 1000000. We tried to find keeping income as constant
what are the various instruments they invest, for how long they invest etc..
For occupation wise classification four categories were selected namely

service, business, self-employed and others for people like housewives.
Limitation of the Study
The study which is being conducted is limited by following reasons:-
1) Disclosure of information from the banks is a constraint-when I

approached the various banks for information there was lack of
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cooperation on the part of the employees in giving the right

information.
2) Unwillingness of the respondents to provide information-when I

approached the customers for filling the questionnaire, I encountered
2 kinds of problems. First they did not have time to fill the
questionnaire, second they did not want to answer any question
regarding income.
3) Incapacity to survey large number of people. I could survey approx
100 people. So whatever analysis has been done is done accordingly.
4) The people surveyed belonged to NCR region only-investment habits of

people in different regions differ.
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INVESTMENTS
In finance, the purchase of a financial product or other item of value with an

expectation of favorable future returns. In general terms, investment means
the use money in the hope of making more money. Done wisely, it can help
meet individual financial goals like buying a new house, paying for college
education of children, enjoying a comfortable retirement, or whatever is
important to an individual.
Savings form an imperative part of the economy of any nation. With the
savings invested in various options available to the people, the money acts
as the driver for growth of the country. Indian financial scene too presents
an excess of avenues to the investors.
You do not have to be wealthy to be an investor. Investing even a small

amount can produce considerable rewards over the long-term, especially if
one does it regularly. But one need to decide about how much you want to
invest and where. To choose wisely, one need to know the investment
options thoroughly and their relative risk exposures.
An investment can be described as perfect if it satisfies all the needs of all

investors. So, the starting point in searching for the perfect investment
would be to examine investor needs. If all those needs are met by the
investment, then that investment can be termed the perfect investment.
Understanding the needs of the investor and ensuring that the most
appropriate investments are selected is the most essential.
The investment needs of an investor are simply his lifestyle needs converted
into financial terms. These include the normal living expenses, food,
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accommodation, as well as education, health, recreation, transport, special

occasions like marriages, festivals etc.
Investment Strategies
You can make your own investment picking approach or adopt one after
consulting financial experts or investment advisors. Whatever method you
use, keep in mind the importance of diversification, or variety in your
investment portfolio and the need for a strategy, or a plan, to guide your
choices.
Investment approaches
The options you choose to put your money in reflect the investment strategy
you are using - whether you realize it or not. Most people adopt the
following approaches:-
Conservative
These investors take only limited risk by concentrating on secure, fixed-

income investments etc.
Moderate
Such Investors take moderate risk by investing in mutual funds, bonds,
select blue chip equity shares etc.
Aggressive
These are investors who take major risk on investments in order to have
high (above-average) returns like speculative or unpredictable equity
shares, etc.
As a matter of fact, the investment approach of an investor is directly linked

to his or her ability to shoulder risk. The ability to take risks depends largely
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on personal circumstances and factors like age, past experiences with

investment, level of responsibility, etc.
Planning Your Investment:
Investment Planning is the process of identifying and implementing effective

investment strategies to create and accumulate the financial resources for
achieving financial planning goals. This section includes in-depth information
related to investment planning.
One of the parts of developing a comprehensive financial plan is the

development of an investment plan. There are six steps that one should
follow while developing an investment plan.
• The Means to Invest.
In order to even begin this portion of your financial plan, one must
determine that he/she is ready to save. In this step one need to determine if
one is going to use the money on some good or service (spend it), or if one
will invest or save the money.
• Investment Time Horizon
In this step, you will be determining how long you plan to invest and when
you will need the funds to meet your financial objective(s). You must decide,
based on the time horizon of your objectives, among short-term
investments, long-term investments or some combination. In this step you
are going to be determining what you will be saving for, which should give
some indication of your time horizon.
• Risk vs Return
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Risk and returns go hand in hand. Higher the risk, higher is the possibility of
earning a good return. Thus, it follows that all types of investment have
some form of risk attached to it. Theoretically, even 'safe' investments (such
as bank deposits) are not without some element of risk. Broadly, here are
the various types of risks that you might have to face as an investor.
➢ Credit Risk
The risk is that the issuer of the security will default, or not repay the
principal amount. This is valid for corporate bonds etc.
➢ Liquidity Risk
If you invest in securities, stocks, bonds, you are risking their sell ability. In
other words, your money gets stuck unnecessarily, creating an asset-liability
mismatch.
➢ Market Risk
Financial markets are volatile in nature. Volatility means sudden swings in

value from high to low, or the reverse. The more volatile an investment is,
the more profit or loss you can make, since there can be a big spread
between what you paid and what you sell it for. But you also have to be
prepared for the price to drop by the same amount. Those who invest in
stocks and mutual funds typically run this risk.
➢ Interest Rate Risk
Depending on the interest rate movement in the economy, the rates of

interest investment instruments may go up or come down, resulting in a
subsequent reverse movement of their prices. Such a scenario of economic
instability might affect mutual funds etc.
The whole idea behind investment planning is to evaluate the risk associated
with various types of investments and take steps so as to balance it with the
desired return.
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You will need to determine what your level of risk tolerance is. As the level
of risk tolerance increases so does the potential for higher returns as well as
larger losses.
• Investment Selection
Based on above three considerations, investments should be selected to

meet your goals. These investments must satisfy your time horizon and your
risk tolerance.
• Evaluate Performance
Once investments are chosen and expectations are established, the

performance of your investments should be determined by comparing the
actual realized returns against the expected returns. The returns should also
be compared to a benchmark, such as the S&P 500 index. In addition, the
investments should be reevaluated to determine if they continue to meet
your investment criteria.
• Adjust the Portfolio
Your portfolio should be adjusted to maintain your goals and your

investment criteria. If your goals change, your investments should be
reviewed to determine if they continue to meet your objectives.
To summarize, once you have determined that you are financially able to
begin investing (or saving), you should evaluate your investment goals and
set out a plan to accomplish these goals. Once you have begun your
investment plan, you must periodically review the performance of your
investments and re-evaluate your objectives and investments to make
certain there is a good fit.

Inflation Devil
Inflation, the rate at which the general level of prices for goods and services
rises, can steadily erode the purchasing power of your income. That is why
you should invest a portion of your savings at a rate higher than the inflation
rate to recover the loss of purchasing power.
This means that over time a rupee will be able to buy a lesser amount of
goods and services. If the inflation rate is 5%, then Rs. 100 worth of goods
will cost Rs. 105 after a year. The following table indicates how the value of
Rs 1,00,000 will change over time at different levels of inflation.
Inflation % p.a.
Years 2 3 4 4.5 5 6
5 90,573 86,261 82,193 80,245 78,353 74,726
10 82,035 74,409 67,556 64,393 61,391 55,839
15 74,301 64,186 55,526 51,672 48,102 41,727
20 67,297 55,368 45,639 41,464 37,689 31,180
25 60,953 47,761 37,512 33,273 29,530 23,300
30 55,207 41,199 30,832 26,700 23,138 17,411

The Power of Compounding
Regardless of where you choose to put your money - cash, stocks, bonds, or
a combination of these - the key to saving for the future is to make your
money work for you. This is done through the power of compounding.
Compounding investment earnings is what can make even small investments

become larger, given enough time. You are probably already familiar with
the principle of compounding. The money you put into a bank account earns
an interest. Then, you earn interest on the money you originally put in, plus
on the interest you have accumulated. As the size of your account grows,
you earn interest on a bigger and bigger pool of money.
The following table shows how much your money would grow when you
invest a fixed amount per month over a period of 10, 15, 20, 25, and 30
years, assuming an interest rate of 10% p.a.
Amount (Rs)
Years 1000 2000 3000 4000 5000
5 78,082 156,165 234,247 312,330 390,412
10 206,552 413,104 619,656 826,208 1,032,760
15 417,924 835,849 1,253,773 1,671,697 2,089,621
20 765,697 1,531,394 2,297,091 3,062,788 3,828,485
25 1,337,890 2,675,781 4,013,671 5,351,561 6,689,452
30 2,279,325 4,558,651 6,837,976 9,117,301 11,396,627

How power of compounding makes your money grow, when you invest a
fixed amount every month
Here's how much your money would grow if you make an lump sum (one-
time) investment and leave it untouched. The interest rate has been
assumed to be 10%.
Amount (Rs)
Years 100000 200000 300000 400000 500000
5 161,051 322,102 483,153 644,204 805,255
10 259,374 518,748 778,123 1,037,497 1,296,871
15 417,725 835,450 1,253,174 1,670,899 2,088,624
20 672,750 1,345,500 2,018,250 2,691,000 3,363,750
25 1,083,471 2,166,941 3,250,412 4,333,882 5,417,353
30 1,744,940 3,489,880 5,234,821 6,979,761 8,724,701
The real power of compounding comes with time. The earlier you start
saving, the more your money can work for you. To attain certain amount of
corpus within a set period of time, a pro-active investment style is
preferable. Thus, no matter how young you are, the sooner you begin saving
for the future, the better it is.

Investment options available in India
Today choosing a best investment plan is difficult because there are so many
investment options available in India. These days we are getting more
money compared to last decades.
1) Bank Fixed Deposits (FD)
Fixed Deposit or FD is the most preferred investment option today. Minimum

period is 15 days and maximum is 5 years and above. Senior citizens get
special interest rates for Fixed Deposits. This is considered to be a safe
investment because all banks operated under the guidelines of Reserve Bank
of India. Other features are;
• Very low risk and low liquidity.
• Low returns, but assured. Depending on the tenure and bank, could be
around 6-9%
• Since returns are fully taxable, the post-tax returns will be still lower.
• Good for very low risk investors and those in the nil or low tax
brackets. As interest rate scenario seems to be peaking, one could
consider investing in 3-5 year FDs.
1) Fixed maturity plans (FMPs)
FMPs, as they are popularly known, are the equivalent of a fixed deposit in a
bank, with a caveat. The maturity amount of a fixed deposit in a bank is
'guaranteed', but only 'indicated' in the FMP. Its other features are;
• Low risk and low Liquidity.
• No assured returns but depending on tenure and the MF, could be

around 6-9%. (Ability to deliver the indicative returns).
• MFs attract much lower taxation and hence give better post-tax
returns vis-à-vis Bank FDs.

• Good for low risk investors, but in high tax brackets. Good for
investing the debt portion of one’s portfolio.
1) National Saving Certificate (NSC)
NSC is backed by Govt. of India so it is a safe investment method. Minimum

amount is Rs 100 and no upper limit. From FY 2005-'06 onwards interest
accrued on NSC is taxable.
• Low risk with low liquidity (6 years lock-in).
• 8% assured returns.
• Interest fully taxable. But eligible for Sec 80C benefit.
Not very attractive vis-à-vis other options like 5-year Bank FDs.
1) Public Provident Fund (PPF)
PPF is another form of investment backed by Govt. of India. Minimum

amount is Rs500 and maximum is Rs70,000 in a financial year. A PPF
account can be opened in a head post office, GPO and selected branches of
nationalized banks. Both PPF and NSC considered to be best investment
option as it is backed by Government of India
• Low risk with very low liquidity (15-year lock-in period. Partial
withdrawal allowed after 6 years).
• 8% assured returns. Interest is tax-free. Also Sec 80C benefit. Hence

a good scheme.
• Good tax saving investment option. Good for investing the debt
portion of one’s portfolio
1) Equity
This need high risk appetite. Ideal for those investors who have a good
corpus, good knowledge and time to track the stock markets regularly. Care

should be taken to invest in good profit making companies. Penny stocks

should be avoided
• High risk and high liquidity.
• Market linked returns. Good potential.
• Attractive tax treatment. No Long Term (investment of more than 1

year) Capital Gain Tax and 10% Short Term Capital Gains Tax.
1) Mutual Funds
Mutual Fund companies collect money from investors and invest in share
market. Investing in mutual funds is also subject to market risks but return
is good. The various fund options are;
Equity Funds
• High risk and high liquidity in open-ended funds.
• Attractive tax treatment. No Long Term Capital Gain Tax and 10%
Short Term Capital Gains Tax.
• Ideal for small and common investors, but with high risk appetite. SIP
and a long term investment horizon can cut down risk and increase the
probability of making good returns. Ideally, one should build a well-
diversified portfolio with say 40-50% money in 5-7 diversified funds
(large cap oriented), 20-30% money in 3-4 mid/small-cap funds, 10-
15% in 3-4 sector funds and 10-20% in balanced funds.
ELSS Funds
• High risk with low liquidity (3 years lock-in period).

Short Term Capital Gains Tax. Also Sec 80C benefit.
• Good tax saving investment option. Amounts beyond Rs.1 lakh limit
could be invested in open-ended funds. SIP in ELSS would reduce the
volatility risk.
Balanced Funds
• Medium to High risk. High Liquidity.
• Medium to high returns. Market linked.
Short Term Capital Gains Tax.
• Though convenient as both debt and equity investment is covered

under one fund, it may be better to invest separately in equity and
debt funds for better control.
Debt Funds
• Low to Medium risk. High Liquidity.
• Returns are market-linked. Today could be around 5-7%, but

susceptible to interest rate risk.
• Lower taxation of MFs makes such funds attractive.
• Can be avoided in a rising interest rate scenario but is good in a falling

interest rate scenario.
1) Unit Linked Insurance Plans
ULIPs are remarkably alike to mutual funds in terms of their structure

and functioning; premium payments made are converted into units and a
net asset value (NAV) is declared for the same. In traditional insurance
products, the sum assured is the corner stone; in ULIPs premium
payments is the key component.

• Low to High Risk depending on the investment option i.e. Pure Debt or
Mixed or Pure Equity. Low Liquidity (3-5 years lock-in period).
• Low to high depending on the investment option. Market linked

returns.
• Tax free returns also Sec 80 C benefit available.
• Not an attractive option due to high charges, low flexibility and low
diversification. There are other better similar investment products like
MFs with low charges, high flexibility and high diversification. As
regards life cover, the same could be done through a term policy.
1) Endowment/Money back Plan
These policies are term policies. Investors have to pay the premiums for
a particular term, and at maturity the accrued bonus and other benefits
are returned to the policyholder if he survives at maturity
• Low risk and very low liquidity
• Low returns. Generally around 6-6.5%.
• Tax free returns. Also Sec 80 C benefit available.
Not an attractive option due to low returns. There are other better similar
investment products like PPF. As regards life cover, the same could be done
through a term policy
There are many investment options available like investing in Gold, Real
Estate , commodities etc. the features of this options are;
1) Real Estate
• Variable risk and variable liquidity depending on the type and location
of property.

• No tax advantages, except attractive tax benefits on the home loans.
• High initial investment required which could make one’s portfolio

lopsided; high transactions costs like title-search, registration
brokerage etc.; and cannot be partly liquidated. Therefore, real-estate
MFs (expected in the near future) may be a better alternative than
direct property investment. If investing directly, it is important to
assess the potential and clear title.
1) Commodities
• High risk with high liquidity.
• Market linked returns.
• No tax advantages.
• Highly cyclical.
1) Gold
• Low long-term risk. But volatile in short term. High Liquidity.
• Has traditionally been a hedge against inflation. So returns could be

around inflation levels.
• No tax advantages.
• Not an attractive investment option. Can be used for portfolio

diversification to partly hedge against inflation. Gold MFs are better
than buying physical gold.
Because of these unique properties, gold has traditionally been the currency
of choice for much of the world's population. The value of gold has
transcended all national, political, and cultural borders, making it the ideal
currency.
1) Post Office Schemes
• Low risk and low Liquidity.

• MIS scheme give 8% interest. Time deposit 6.25-7.5%.
• Since returns are taxable, the post-tax returns will be still lower.
• Good for very low risk investors and those in the nil or low tax
brackets.
BANKING
The banking section will navigate through all the aspects of the banking
system in India. It will discuss upon the matters with the birth of the
banking concept in the country to new players adding their names in the
industry in coming few years.
The banker of all banks, Reserve Bank of India (RBI), the Indian Banks
Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO etc,

has been well defined. However, in the introduction part of the entire
banking cosmos, the past has been well explained under four different heads
namely:
➢ History of Banking in India
➢ Nationalization of Banks in India
➢ Scheduled Commercial Banks in India.
➢ Current Scenario of Banking in India.
History of Banking in India
Without a sound and effective banking system in India it cannot have a

healthy economy. The banking system of India should not only be hassle
free but it should be able to meet new challenges posed by the technology
and any other external and internal factors.
For the past three decades India’s banking system has several outstanding
achievements to its credit. The most striking is its extensive reach. It is no
longer confined to only metropolitans or cosmopolitans in India. In fact,
Indian banking system has reached even to the remote corners of the
country. This is one of the main reasons of India’s growth process.
The government’s regular policy for Indian bank since 1969 has paid rich
dividends with the nationalization of 14 major private banks of India.
Not long ago. An account holder had to wait for hours at the bank counters
for getting a draft of for withdrawing his own money. Today, he has a
choice. Gone are days when the most efficient bank transferred money from
one branch to other in two days. Now it is simple as instant messaging or
dials a pizza. Money has become the older of the day.
Nationalization of Banks in India

The nationalization of banks in India took place in 1969 by Mrs. Indira

Gandhi the then Prime Minister. It nationalized 14 banks then. These banks
were mostly owned by businessmen and even managed by them.
➢ Central Bank of India
➢ Bank of Maharashtra
➢ Dena Bank
➢ Punjab National Bank
➢ Syndicate Bank
➢ Canara Bank
➢ Indian Bank
➢ Indian Overseas Bank
➢ Bank of Baroda
➢ Union Bank
➢ Allahabad Bank
➢ United Bank of India
➢ UCO Bank
➢ Bank of India
Before the steps of nationalization of Indian banks, only State Bank of India
(SBI) was nationalized. It took place in July 1955 under the SBI Act of 1955.
Nationalization of seven State banks of India (formed subsidiary) took place
on 19th July, 1960.
The State Bank of India is India’s largest commercial bank and is ranked one
of the top five banks worldwide. It serves 90 million customers through a
network of 9000 branches and it offers – either directly or through
subsidiaries a wide range of banking services.
The second phase of nationalization of Indian banks took place in the year
1980. Seven more banks were nationalized with deposits over 200 crores.
Till this year, approximately 80% of the banking segment in India was under
government ownership.
After the nationalization of banks in India, the branches of the public sector
banks rose to approximately 800% in deposits and advances took a huge
jump by 11,000%.
➢ 1955: Nationalization of State Bank of India.
➢ 1959: Nationalization of SBI subsidiaries.
➢ 1969: Nationalization of 14 major banks.
➢ 1980: Nationalization of seven banks with deposits over 200 crores.
Scheduled Commercial Banks in India
The commercial banking structure in India consists of:

➢ Scheduled Commercial Banks in India
➢ Unscheduled Banks in India
Scheduled banks in India constitute those banks which have been included in
the second schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn
includes only those banks in this schedule which satisfy the criteria laid down
vide section 42(6) (a) of the act.
As on 30th June, 1999, there were 300 scheduled banks in India having a
total network of 64,918 branches. The scheduled commercial banks in India
comprise of State Bank of India and its associates (8), nationalized banks
(19), foreign banks (45), private sector banks (32), co-operative banks and
regional rural banks.

“Scheduled banks in India” means the State Banks of India constituted

under the State Banks of India Act, 1955 (23 of 1955), a subsidiary bank as
defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of
1959), a corresponding new bank constituted under section 3 of the banking
companies (Acquisition and Transfer of Undertaking) Act, 1970 (5 of 1970).
Or under section 3 of the banking companies ( Acquisition and Transfer of
Undertakings) Act, 1980 ( 40 of 1980), or any other bank being a bank
included in the second schedule to the Reserve Bank of India Act, 1934 ( 2
of 1934), but does not include a co-operative”.
“Non-scheduled bank in India” means a banking company as defined in
clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949),
which is not a scheduled bank”.
The following are scheduled Banks in India (Public Sector):
➢ State Bank of India
➢ State Bank of Bikaner and Jaipur
➢ State Bank of Hyderabad
➢ State Bank of Indore
➢ State Bank of Mysore
➢ State Bank of Patiala
➢ State Bank of Saurashtra
➢ State Bank of Travancore
➢ Andhra Bank
➢ Allahabad Bank
➢ Bank of Baroda
➢ Bank of India

➢ Bank of Maharashtra
➢ Canara Bank
➢ Central Bank of India
➢ Corporation Bank
➢ Dena Bank
➢ Indian Overseas Bank
➢ Indian Bank
➢ Oriental Bank of Commerce
➢ Punjab National Bank
➢ Punjab and Sind Bank
➢ Syndicate Bank
➢ Union Bank of India
➢ United Bank of India
➢ UCO Bank
➢ Vijaya Bank
The following are the Scheduled Banks in India (Private Sector)
• Vysya Bank Ltd
• Axis Bank Ltd
• Indusind Bank Ltd
• ICICI Banking Corporation Bank Ltd
• Global Trust Bank Ltd
• HDFC Bank Ltd
• Centurion Bank Ltd
• Bank of Punjab Ltd

• IDBI Bank Ltd
The following are the Scheduled Foreign Banks in India
• American Express Bank Ltd.
• ANZ Grid lays Bank Plc.
• Bank of America NT & SA
• Barclays Bank Plc
• Citi Bank N.C.
• Deutsche Bank A.G.
• Hongkong and Shanghai Banking Corporation
• Standard Chartered Bank.
Current Scenario of Indian Banking System
Indian economy is one of the fastest growing economies in the world. The
country’s GDP is growing at an average rate of almost 7% during the last
decade with the GDP growth rate touching 9.4% in the last year. The Indian
banking industry also had its share in the growth of the Indian economy.
With the Indian economy moving on to a high growth trajectory,

consumption levels soaring and investment riding high, the Indian banking
sector is at a watershed. The industry has been growing faster than the real
economy, resulting in the ratio of assets of commercial banks to GDP
increasing to 92.5% at end-March 2007. The Indian banks have also been
doing exceptionally well in the financial sector with the price-to-book value
being second only to China.
Consequently, the degree of leverage enjoyed by the banking system, as

reflected in the equity multiplier (measured as total assets divided by total

equity), has increased from 15.2% at end March 2006 to 15.8 % at the end
of March 2007.
Growth of the sector
A burgeoning economy, financial sector reforms, rising foreign investment,

favorable regulatory climate and demographic profile has led to India
becoming one of the fastest growing banking markets in the world. The
overall banking industry's business grew at a CAGR of about 20 per cent
from US$ 469.4 billion as of March 2002, to US$ 1171.29 billion by March
2007.
In the current fiscal, aggregate bank deposits increased by 23.8 per cent,
year-on-year, as of January 4, 2008 as against 21.5 per cent a year ago.
While aggregate demand deposits increased by 15.6 per cent, aggregate
time deposits increased by 25.3 per cent in the same period, indicating
migration from small savings schemes of the Government.
Similarly, aggregate deposits of the scheduled commercial banks (SCB),

after growing by 17.8 per cent and 24.6 per cent in 2005-06 and 2006-07,
rose by 25.2 per cent, year-on-year, as on January 4, 2008. In fact, the
absolute increase of US$ 96.34 billion (14.6 per cent) in the current fiscal
year up to January 4 2008 was higher than the US$ 70.59 billion (13.2 per
cent) increase in the same period last year.
Simultaneously, loans and advances of SCBs rose by over 30 per cent (i.e.
33.2 per cent in 2004-05, 31.8 per cent in 2005-06 and 30.6% cent in 2006-
07) in the last three financial years, underpinned by the robust
macroeconomic performance. The growth has continued in the current fiscal

with non-food credit by SCBs increasing by 22.2 per cent, year-on-year, as

on January 4, 2008.
Private Sector
Ever since the banking operations had been opened to the private sector in
1990s, the new private banks have been increasing its role in the Indian
banking industry. Against the industry average growth of about 20 per cent
in the past five years, the new private sector banks registered a growth of
about 35 per cent per annum, growing from US$ 41.63 billion as of March
2002 to US$ 186.71 billion by March 2007.
Consequently, new private banks market share has increased from about 9
per cent in 2001-02 to 16 per cent as of March 2006-07. Foreign banks,
which totaled 29 in June 2007, have also been expanding at a rapid pace.
For example, India was the fastest growing market for Global banking major
HSBC in 2006-07, with a growth rate of 64 per cent.
The balance sheet of private banks and foreign banks in India expanded by
38.7 per cent and 39.5 per cent during 2006-07, taking their combined
share (along with private banks) in total assets of the banking sector to
grow from 22.3 per cent at the end of March 2006 to 24.9 per cent by March
2007.
Investment Banking
The flurry of mergers and acquisition deals by Indian corporate has boosted
the investment banking revenues to a record high. Investment banking

revenues from India crossed the US$ 1 billion mark for the first time in 2007
to US$ US$ 1.069 billion.
This is significantly higher than the US$ 400 million investment banking
revenues recorded in 2006. Also, this surge in revenues has propelled India
to become the third largest market for investment banking in Asia-Pacific in
2007.
Potential
While this growth has been very impressive, the potential banking market
waiting to be tapped in India is still fairly huge. Out of the 203 million Indian
households, three-fourths, or 147 million, are in rural areas and 89 million
are farmer households. In this segment, 51.4 per cent have no access to
formal or informal sources of credit, while 73 per cent have no access to
formal sources of credit.
In fact, according to a report by Boston Consultancy Group, India has the

second largest financially excluded households of about 135 million, which is
next only to china. Also, about 60 million new households are expected to be
added to India's bankable pool between 2005 and 2009. With such a large
untapped market, the Indian banking industry is estimated to grow rapidly,
faster than even china in the long run.
Some of the high growth potential areas to be looked at are: the market for
consumer finance stands at about 2%-3% of GDP, compared with 25% in
some European markets, the real estate market in India is growing at 30%
annually and is projected to touch $ 50 billion by 2008, the retail credit is

expected to cross Rs 5, 70,000 crore by 2010 and huge SME sector which
contributes significantly to India’s GDP.
Road Ahead
Banks aspiring to become global must have a presence in India and other
emerging markets, as they are set to become a major source of financial
sector revenue and profit growth.
As the Indian banking industry continues its rapid growth along with rise in
financial services penetration in the Indian economy, the industry's profit is
likely to simultaneously surge ahead. According to a report by Boston
Consultancy Group, the profit pool of the Indian banking industry is
estimated to increase to US$ 20 billion in 2010 and further to US$ 40 billion
by 2015.
Simultaneously, driven by the expansion of the middle class population. With

such a favorable scenario, India is likely to emerge as the third largest
banking hub in the world by 2040, says a Price Waterhouse Coopers report.
Indian Banking: Strength & Weaknesses

Major Strength Areas * Area to be geared up for future

Growth.
Regulatory Systems Diversification of markets beyond
Economic Growth Rate big cities
Technological Advancement Size of banks
Risk Assessment Systems HR Systems
Credit Quality Banking Infrastructure
Labour Inflexibilities
High Transaction Costs
Indian Banking Sector
Turnaround success strategies
Strategies To Be Adopted For Creating World Class Banking System

Consolidation
Strict Corporate Governance Norms
Regional Expansion (Both within India as well as Outside)
Higher FDI limits
FTA with countries where India has comparative advantage in banking sector

New Business Opportunities
With the interest income coming under pressure, banks are urgently looking
for expanding fee-based income activities. Banks are increasingly getting
attracted towards activities such as mutual funds and insurance policies
offering credit cards to suit different categories of customers and services
such as wealth management and equity trading. These are indeed proving to
be more profitable for banks than plain vanilla lending and borrowing.
The current policy environment enables a fair level of foreign participation

even in the non-banking financial sector of the country.

STANDARD CHARTERED BANK: BACKGROUND
Standard chartered: leading the way in Asia, Africa and Middle East
Standard Chartered Bank is a British bank headquartered in London with

operations in more than seventy countries. It operates a network of over
1,700 branches and outlets (including subsidiaries, associates and joint
ventures) and employs 73,000 people.
The name Standard Chartered comes from the two original banks from
which it was founded – The Chartered Bank of India, Australia and China,
and The Standard Bank of British South Africa.
It is listed on the London Stock Exchange and the Hong Kong Stock
Exchange and is among the top 25 constituent members of the FTSE 100
Index.
In its unique position as an international bank with strong franchise,

Standard Chartered combines an in-depth knowledge of local markets with
global product expertise to offer effective financial solutions. The bank
capitalizes on its onshore presence across Asia, Africa and the Middle East to
offer customers convenient and reliable access to the widest range of
currency markets, to date local market information, country-specific global
risk management strategies, and customized capital raising and liquidity
management solutions.
Group chief executive peter sand

The present CEO is PETER SAND he was nominated as the CEO in

November 2006 Sands has been with the bank since 2002, and was most
recently serving as Group Finance Director. Prior to his appointment to the
Board of Standard Chartered PLC, Peter was a Director with worldwide
consultants McKinsey & Co. Peter had been with McKinsey since 1988 where
he worked extensively in the banking and technology sectors in a wide range
of international markets. He was elected a partner of McKinsey in 1996 and
became Director in 2000.
Standard Chartered Today
Today Standard Chartered is the world's leading emerging markets bank

employing 30,000 people in over 500 offices in more than 50 countries
primarily in countries in the Asia Pacific Region, South Asia, the Middle East,
Africa and the Americas.

The new millennium has brought with it two of the largest acquisitions in the
history of the bank with the purchase of Grind lays Bank from the ANZ
Group and the acquisition of the Chase Consumer Banking operations in
Hong Kong in 2000.
These acquisitions demonstrate Standard Chartered firm committed to the

emerging markets, where it has a strong and established presence and
where it sees their future growth.
Awards
Standard Chartered Bank has ended 2007 on a high note by bagging best
bond house titles from three well-respected finance titles, fortifying its
strengths and capabilities as a bond powerhouse in the key markets of Asia,
Africa and the Middle East.
Some of the awards which standard chartered received last year are
Best Trade Finance Bank in Singapore, Best Transaction Bank in Korea - SC

First Bank, Best Domestic Custodian in Korea - SC First Bank. best
structured trade finance bank, best sub-custodian in Indonesia, Korea and
Thailand, best trade finance bank in Singapore, best bank for liquidity
management Africa. there are many more awards which the bank received
for its good and efficient performance throughout the world.
Recent Acquisitions
In the year 2000 standard chartered plc was in news because of its
acquisition of Grid lays bank.
Standard Chartered Completes Acquisition Of American Express Bank For

$823 Million.

AEB is a wholly-owned subsidiary of AXP. Founded in 1919 and

headquartered in New York, this acquisition will Significantly enhance
Standard Chartered’s Financial Institutions transaction banking business by
bringing both new client relationships and new capabilities to this key
customer segment.
Standard Chartered Bank in India
The name is derived from Standard & Chartered. Standard Bank of British
South Africa merged with Chartered Bank of India, Australia and China in
1969. Chartered Bank opened its first overseas branch in India, at Kolkata,
on 12th April 1858. During that time Kolkata was the most important
commercial city and was the hub of jute and indigo trades. The merger with
the Standard Bank of British South Africa in 1969 and the acquisition of
“Grind lays” Bank in 2000 were two key events that were have played an
important role in making the Bank the largest international Bank in India.
Mr. NEERAJ SWARUP is the present CEO of standard Chartered bank India.
Mr. Swarup had been heading HDFC Bank's consumer banking business for
the last four years. He was also associated with the Bank of America.
Standard Chartered Bank is the largest international banking group in India

with 83 branches in 33 cities. It also has 231 ATMs. The Bank is having a
combined customer base of 2.5 million in retail banking and over 1200
corporate customers. Stan Chart’s Indian operations now accounts for 17%
of its global revenues in 2007, making it the second largest contributor (with
operating profit of $690 million) to the global revenues after Hong Kong.
The key business of Standard Chartered Bank in India include consumer

banking—mortgages, personal loans and wealth management- and –

wholesale banking, where the bank specializes in the provision of cash

management, trade, finance, treasury and custody services.
Standard Chartered was the first to issue global credit card in India, the first
to issue photo card, the first picture card and was the first credit card issuer
to be awarded the ISO 9002 certification.
Some other product innovations of Standard Chartered Bank in India include

the “Sap nay” credit card, the international debit card that provides free
access to over 1500 visa ATMs, a first in the banking industry, Mileage, an
overdraft facility against the security of a car and smart credit, a personal
line of credit for salaried customers.

PRESENCE OF STANDARD CHARTERED BANK IN INDIA: 33 CITIES

WITH MORE THAN 83 BRANCHES.
MORE THAN BANKING

Corporate Social Responsibility (CSR) is at the core of the values of Standard

Chartered Bank. The Bank is committed to the communities and
environments in which it operates. The Bank strongly supports the trend
towards delivering shareholder value in a socially, ethically and
environmentally responsible manner. ‘Living with HIV’ is a global community
initiative of Standard Chartered that is aimed at raising awareness of
HIV/AIDS amongst employees through workshops and amongst stakeholders
by providing thought leadership. Under ‘Seeing is believing’, a programme
that aims to restore sight to one million people globally by 2007, the Bank
has raised funds to help 8000 people to see.
In partnership with Sight Savers International and VISION2020 the Bank is

now involved in two flagship projects at Vishakhapatnam and Muzaffarpur,
both aimed at the elimination avoidable blindness. Furthermore, in support
of the communities ravaged by the Asian Tsunami
Crisis in 2004 the Standard Chartered Group committed US$ 1 million to

India. The Bank is utilizing these funds for the rehabilitation of two villages
adopted near Chennai.
In 2004, Standard Chartered initiated the phenomenally successful

Standard Chartered Mumbai Marathon - an event dedicated to charity fund
raising. The two marathons held so far have forged partnerships with
customers and charities and deepened the Bank’s ties with the community,
with over US$ 1 million being raised in 2005.

Products offered by standard chartered
OPERATION
SME BANKING PERSONAL BANKING

COMMERCIAL BANKING
INSURANCE INVESTMEN LOANS ACCOUNTS

T SERVICES
ULIP SAVINGS ACCOUNT

ACCOUNTS
TERM DEMAT 2-IN-1 SAVINGS CURRENT
aaSaan Parivaar No Frills Account aXcessPlus Super Value
PRODUCTS OFFERED

Standard Chartered bank provides different products and services in order to

cater the needs of the customers which can be broadly classified into the
following categories:
1. PERSONAL BANKING: To cater the diverse financial needs, Standard

Chartered offers a wide range of premium banking products and
services through its network of 83 branches in 33 cities across the
country. As a privileged customer of this bank, the customers can
always be assured of a banking service that is flexible enough to tailor-
make a product suite to take care of his specific banking needs.
2. SME BANKING: SME Banking provides integrated financial solutions
to small and medium businesses, through a relationship management

approach. Its customer focused product offerings include working
capital finance, trade services, foreign exchange, and cash
management.
3. COMMERCIAL BANKING: Standard Chartered has maintained a long

local presence, since 1858, with particular emphasis on relationship
banking. Significant networks have been established with vendors and
financial-related organizations to enable it to offer the customers a
comprehensive range of flexible financial services, with special focus
on transactional banking products. Supported by state-of-the-art
operations, Standard Chartered is pro-active in improving every part
of services. Electronic Delivery system has been put in place to ensure
that transactions are handled speedily. It has its Cash Product
Specialists and dedicated Customer Service Centers to provide its
customers with effective solutions.

To fully understand the workings and functions of Standard Chartered Bank,

the scope of this project has been limited to the detailed study of only three
products offered by this bank under the above mentioned categories:
1. Savings Account : Personal banking

2. Unit Linked Insurance Plan (ULIP): Personal banking
3. Mutual Funds: Commercial banking
SAVINGS ACCOUNT
An account primarily opened for and operated by individuals, wherein the

numbers of transactions are few and which give the customer liquidity, with
the facility to earn some interest on the residual balances. For details of
different saving accounts offered by StanC & comparison with different
bank’s a/s see annexure.
Standard Chartered bank offers four types of Savings account catering to

the needs of different customers namely:
1) Axcess Plus -Standard Chartered bank's aXcess Plus is an innovatory

savings account that provides you with unparalleled aXcess to your money.
The customer can get instant cash at over 1 Million ATMs across the world
through the Visa network. And a globally valid Debit Card that lets you shop
at over 326,000 outlets in India and at over 21 Million outlets across the
world. Minimum average quarterly balance to be maintained is Rs.10,000.
Unique Features:
• Free aXcess to cash anytime, anywhere, across India

• Free Unlimited Visa ATM transactions* (Cash withdrawal and balance

enquiry)
• Free Standard Chartered Bank branch access across the country
• Free Doorstep Banking
• Free Demand Drafts/Pay Orders* (drawn at SCB locations)
• Free Payable at Par Chequebook
Other features are:
• International debit card

• Phone banking
• Internet banking
• Extended banking hours
• 365 days branches open
The aXcess plus customers get FREE aXcess to cash withdrawals at over
6500 Visa ATMs in up to four free transactions per month. This is over and
above unlimited free aXcess to all Standard Chartered Bank ATMs.
2) Super Value – An account with lots of facilities and can be termed as an

account much more than an ordinary saving account. You name it and they
offer it. The unique SuperValue savings account is proof that the best things
in life come free. With an average quarterly balance of just Rs. 50,000, you
get a host of services from Standard Chartered absolutely free.
• Free globally valid Debit cum ATM card.

• Free doorstep banking.

• Free payable at par cheque books/ account statements/ demand
drafts.
• Free Bill Pay, Inter banks funds transfer.
• Free foreign inward remittance certificate.
• Free access to 6500 ATMs across India.
Other benefits of the Super Value account
• Globally valid debit card - make purchases at over 12 million merchant

outlets and withdraw cash at over 810,000 ATMs worldwide using
funds from your account.
• Multicity Banking - access your account even when you are out of
town.
• Enjoy extended banking hours at all our branches, and Speed Cheque
Clearing and Metro Clearing facilities.
• 24-hour branches, 365 day branches available at select locations.
• Phone banking - available to you 365 days a year on a 24-hour basis
in the metros and everyday of the week at other centers.
• Internet banking - access and transact on your accounts through the
Internet from any part of the world.
• Free Investment Advisory Services to assist you in investing in a range
of mutual funds.
• Full suite of complimentary banking services including credit cards,
loan products and capital market services.
3) No Frills Saving Accounts - No Frills Savings Account, a New account

to meet your basic banking requirements

You can now open an account with Standard Chartered Bank, with an
average quarterly balance of as low as Rs. 250. What’s more – you can avail
of Anywhere Banking, by which you can access your account from any
branch of Standard Chartered Bank in India.
Unique features are;
• Quarterly Average Balance, as low as Rs. 250

• ATM card & Debit Card available
• 4 free transactions per month at any Standard Chartered Bank channel
(Internet banking, Phone Banking, ATM & Branch)
• Anywhere banking – Access your account from any branch of Standard
Chartered Bank.
• Access to Phone Banking and Internet Banking
• Free Cheque deposit at any SCB Branch or ATM.
Eligibility criteria
This account is available to individual Resident Indian customers.

Account may be opened after being properly introduced in a manner
approved by the Bank
4) aaSaan - Here's introducing Standard Chartered Bank's aaSaan savings

account - the easy solution to all your banking needs.
Its unique features are:-
• No Minimum Balance requirement

• Free unlimited access to any SCB branch across the country for
Customer in-person

• Unlimited Free access to Standard Chartered Bank ATM's

• Up to 4 free cash withdrawal transactions per month at other domestic
VISA ATMs.
• Nominal quarterly fee of Rs. 100 (reversed if the Average Balance in
the quarter is Rs 10,000 or more
Other Facilities
• International Debit Card

• Phone banking
• Net Banking
• Extended banking hours*
• Locker facility*
• Doorstep banking
To open an aaSaan account, you have to initially fund the account with Rs.
10,000 (Rs. Ten Thousand)
5) Parivaar- Parivaar is a unique Wealth Management Solution from

Standard Chartered Bank that offers your family flexibility, convenience and
essential tools for wealth accumulation and preservation.
• Your family can maintain individual savings accounts with the

benefit of clubbing balances in grouped accounts.
• Anytime, anywhere access to accounts through ATMs, Phone

Banking and Inter Net banking.
• Option of Systematic Investment Plan (SIP), a well known long

term wealth building tool that allows you to invest a fixed amount
of money every month in specific mutual funds. This comes with a
direct debit facility and avoids the need to remember dates and
write cheques every month.
• Globally valid ATM-cum-debit card can be used at 55,000 merchant
outlets in India and 12 million outlets worldwide.
ULIP (Unit Linked Insurance Plan)
ULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a life

insurance policy which provides a combination of risk cover and investment.
The dynamics of the capital market have a direct bearing on the
performance of the ULIPs. ULIP is life insurance solution that provides for
the benefits of protection and flexibility in investment. The investment is
denoted as units and is represented by the value that it has attained called
as Net Asset Value (NAV).
ULIP came into play in the 1960s and became very popular in Western
Europe and Americas. The reason that is attributed to the wide spread
popularity of ULIP is because of the transparency and the flexibility which it
offers.
As times progressed the plans were also successfully mapped along with life
insurance need to retirement planning. In today’s times, ULIP provides
solutions for insurance planning, financial needs, financial planning for
children’s future and retirement planning.

A ULIP, as the name suggests, is a market-linked insurance plan. A ULIP is

a unit linked insurance plan. This is the type of investment where the
characteristics of insurance and mutual fund are combined. Some part of
the money invested goes into the insurance cover and the remaining goes
into an asset class.
The main difference between a ULIP and other insurance plans is the way in
which the premium money is invested. Premium from, say, an endowment
plan, is invested primarily in risk-free instruments like government
securities (gsecs) and AAA rated corporate paper, while ULIP premiums can
be invested in stock markets in addition to corporate bonds and govt.
securities.
Type of Funds
Most insurers offer a wide range of funds to suit one’s investment

objectives, risk profile and time horizons. Different funds have different risk
profiles. The potential for returns also varies from fund to fund.
The following are some of the common types of funds available along with
an indication of their risk characteristics.

General Description Nature Risk Category
of
Investments
Equity Funds Primarily Medium to High

invested in
company
stocks with
the general
aim of capital
appreciation
Income, Fixed Interest Invested in Medium

and Bond Funds corporate
bonds,
government
securities and
other fixed
income
instruments
Cash Funds Sometimes Low

known as
Money Market
Funds —
invested in
cash, bank
deposits and
money

market
instruments
Balanced Funds Combining Medium

equity
investment
with fixed
interest
instruments
ULIPs offer a variety of options to the individual depending on his risk

profile. For instance, an individual with an above-average risk appetite can
choose a ULIP option that invests up to 60% of premium in equities.
Likewise, an individual with a lower risk appetite can select a ULIP that
invests up to 20% of premium in equities.
SUM ASSURED
Perhaps the most fundamental difference between ULIPs and traditional

endowment plans is in the concept of premium and sum assured.
When you want to take a traditional endowment plan, the question your
agent will ask you are -- how much insurance cover do you need? Or in
other words, what is the sum assured you are looking for? The premium is
calculated based on the number you give your agent.
With a ULIP it works in reverse. When you opt for a ULIP, you will have to
answer the question -- how much premium can you pay?

Reasons why ULIPs score over endowment plans
Such has been the popularity of ULIPs in the recent past that they have
outpaced the growth of regular endowment plans. We take a look at the
most important reasons why ULIPs score over endowment plans.
1. The power of equity
Simply put, ULIPs are life insurance plans, which have a mandate to invest
upto 100% of their corpus in equities. While individuals have the choice to
shift between equity and debt (explained later in this article), several
studies have shown that equities are best equipped to deliver better returns
compared to their fixed-return counterparts like bonds and gsecs. And given
the fact that life insurance is a long-term contract, equity-oriented ULIPs
augur well for the policyholder.
2. Flexibility
While ULIPs offer the opportunity to invest up to 100% in equity, it is also

true that ULIPs provide individuals the flexibility to shift to up to 100% debt.
It is entirely upon the individual how he wishes to allocate his premiums
between equity and debt. This is not the case with endowment type plans-
individuals can't choose their investment avenues and have to be content
with the insurance company's investment decisions which revolve largely
around debt.
ULIPs are available in 3 broad variants: 'Aggressive' ULIPs, which invest

upto 100% of their corpus in equities, 'Balanced' ULIPs which invest upto
60% of their corpus in equities and 'Conservative' ULIPs which invest up to
100% of their corpus in debt instruments and the money market
instruments*. Individuals are free to decide where they want to invest their

money. For example, individuals with an appetite for risk can invest their
entire money in equities while conservative individuals have the option to
park their money in balanced or conservative ULIPs.
* The percentages given in the paragraph above may differ across life
insurance companies.
That apart, ULIPs also provide individuals with the flexibility of

terminating/resuming premiums, increasing/decreasing premiums and
paying top-ups (i.e. a one-time sum over and above the regular premium)
whenever possible. These options are not available in regular endowment
plans.
3. Transparency
For the first time, ULIPs introduced transparency into the manner in which
life insurance products were being managed. This is something that was
missing in conventional savings-based insurance products (like endowment/
money-back/ pension plans). To understand why we are saying this, one
has to first understand the structure of traditional endowment plans.
Traditional endowment plans have been opaque in more ways than one.
To begin with, traditional endowment plans have invested a sizable portion

of their corpus in debt instruments like gsecs and bonds. The quantum of
money invested is not known. Individuals do not have access to portfolios of
endowment plans so they never find out how much money is in
debt/equities. Add to this the fact that the expenses, which form a sizable
percentage of the premium in the first few years, are also not clear and you
have a situation where the individual is 'investing' in life insurance purely on
the basis of faith and little else!
Unit linked plans brought transparency into the scheme of things. Today, if
an individual wants to invest in a ULIP, he knows upfront what percentage

of the premium is being invested, what are the charges being levied and
where his monies are being invested. This is a welcome change for the
policyholder. Another advantage ULIPs offer is that they enable insurance
seekers to compare plans across companies and help him buy a plan that
fits well into his portfolio. Also ULIPs disclose their portfolios at regular
intervals, so you know exactly where your money is being invested.
1. TAX BENEFITS
Taxation is one area where there is common ground between ULIPs and
traditional endowment. Premiums in ULIPs as well as traditional endowment
plans are eligible for tax benefits under Section 80C subject to a maximum
limit of Rs 100,000. On the same lines, monies received on maturity on
ULIPs and traditional endowment are tax-free under Section 10.
5. Liquidity
ULIPs offer liquidity to the individual. He can withdraw money anytime he

wishes to once the initial years' premiums are paid. He will not be levied
with any surrender charges i.e. he stands to get the full market value of his
investments, net of charges, till date. This is unlike conventional endowment
plans where individuals tend to lose out on surrender charges on
surrendering their policies. Besides, part surrender is also allowed in ULIPs.
Simply put, part surrender allows individuals to withdraw a part of their
corpus and thus keep the policy alive, albeit with some adjustments. This
helps individuals tide over a situation where they need cash but have few
'liquid' investments at their disposal.
So does this mean that it is the end of the road for endowment plans? Not

quite! Individuals need to understand the de-merits of investing in market-

linked products like ULIPs. The latter are susceptible to the vagaries of
markets and can burn a hole in your portfolio over the short term. So if you
can't withstand that kind of volatility, equity-oriented ULIPs are not the right
investment option for you. Insurance seekers would do well to take into
consideration their risk appetite as well as their overall financial portfolio
before taking a final call on ULIP investments. The ideal option is to have a
prudent mix of endowment and ULIPs depending on your preference for
either long-term growth or stability.
CHARGES
Premium Allocation Charge
This is a percentage of the premium appropriated towards charges before

allocating the units under the policy. This charge normally includes initial
and renewal expenses apart from commission expenses.
Mortality Charges
These are charges to provide for the cost of insurance coverage under
the plan. Mortality charges depend on number of factors such as age,
amount of coverage, state of health etc
Fund Management Fees
These are fees levied for management of the fund(s) and are deducted
before arriving at the Net Asset Value (NAV).
Policy/ Administration Charges
These are the fees for administration of the plan and levied by cancellation
of units. This could be flat throughout the policy term or vary at a pre-

determined rate.
Surrender Charges
A surrender charge may be deducted for premature partial or full

encashment of units wherever applicable, as mentioned in the policy
conditions.
Fund Switching Charge
Generally a limited number of fund switches may be allowed each year

without charge, with subsequent switches, subject to a charge.
Service Tax Deductions
Before allotment of the units the applicable service tax is deducted from the
risk portion of the premium.
Investors may note, that the portion of the premium after deducting for all
charges and premium for risk cover is utilized for purchasing units.
ULIP – STANDARD CHARTERED
The flexible Unit linked life insurance plans at Standard Chartered bank
provides the opportunity to participate in market-linked returns while
enjoying the valuable benefits of life insurance. Insurance Plans for
Standard Chartered Bank customers is issued by Bajaj Allianz Life Insurance
Company Limited.
BAJAJ ALLIANZ:
Bajaj Allianz General Insurance Company Limited is a joint venture between

Bajaj Auto Limited and Allianz SE. Both enjoy a reputation of expertise,
stability and strength.

The Allianz Group is one of the leading global services providers in

insurance, banking and asset management.
With approximately 181,000 employees worldwide (as of December 31,

2007), the Allianz Group serves more than 80 million customers in about 70
countries. On the insurance side, Allianz is the market leader in the German
market and has a strong international presence.
In fiscal 2007 the Allianz Group achieved total revenues of over 102 billion
euros. Allianz is also one of the world’s largest asset managers, with third-
party assets of 765 billion euros under management at year end 2007.
Bajaj Auto Ltd, the flagship company of the Rs80bn Bajaj Group is the
largest manufacturer of two-wheelers and three-wheelers in India and one
of the largest in the world. Bajaj Auto has a strong brand image & brand
loyalty synonymous with quality & customer focus in India
In the Indian market, together are committed to offer Insurance solutions

that provide all the security needed for a family.
BAJAJ ALLIANZ NEW SECURE FIRST PLAN
Bajaj Allianz New Secure First offers the unique option of combining the
protection of life insurance with the attractive prospect of investing in
securities. It provides you with an opportunity to have a direct stake in the
performance of financial market. . By choosing an appropriate premium
level and term, individual can match the maturity date of the plan to a
specific savings need such as child’s education, wedding, retirement etc.
This is the one-stop solution to investment, tax-saving and protection
needs.

The key features of New Secure First Plan are:
• It is a unit linked plan with a minimum of 5 years and maximum

maturity age 70
• Guaranteed death benefit: Value of units plus Sum Assured.
• Choice of 5 investment funds today with flexible investment

management: you can change funds at any time and also invest in the
newer funds that would be introduced from time to time.
• Attractive investment alternative to fixed –interest securities
• Provision for full/partial Withdrawl any time after three years from
commencement if three full years’ premium are paid.
• Unmatched flexibility to match changing needs of customer to manage

investments, pay top-ups, and cash withdrawal option.
Other benefits are;
• Maturity benefit- On maturity, the value of units in the fund will be

paid out and policy will terminate.
• Option of choosing from a host of additional rider benefits:
UL Accidental Death Benefit, UL Accidental Permanent Total/Partial Disability

Benefit, UL Critical Illness; Benefit and UL Hospital Cash Benefit
• Increase savings by paying top up premiums

• Flexibility to increase / decrease the regular premiums
MUTUAL FUNDS
A mutual fund is a pool of money, collected from investors, and is invested

according to certain investment objectives. A mutual fund uses the money
collected from the investors to buy those assets which are specifically
permitted by its stated investment objective. The fund’s assets are owned by
the investors in the same proportion as their contribution bears to the total
contributions of all investors put together.

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. The history of mutual funds in India can be broadly divided into four
distinct phases
First Phase – 1964-87 GROWTH OF UNIT TRUST OF INDIA
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It

was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In 1978
UTI was de-linked from the RBI and the Industrial Development Bank of
India (IDBI) took over the regulatory and administrative control in place of

RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of
1988 UTI had Rs.6, 700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the first
non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual
Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund
(Oct 92). LIC established its mutual fund in June 1989 while GIC had set up
its mutual fund in December 1990. At the end of 1993, the mutual fund
industry had assets under management of Rs.47,004 crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
fund families. Also, 1993
was the year in which the first Mutual Fund Regulations came into being,
under which all mutual funds, except UTI were to be registered and
governed. The erstwhile Kothari Pioneer (now merged with Franklin
Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry
now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were
33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of
India with Rs.44, 541 crores of assets under management was way ahead of
other mutual funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of
Rs.29, 835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The
Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March
2000 more than Rs.76, 000 crores of assets under management and with
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different private
sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004, there were 29
funds, which manage assets of Rs.153108 crores under 421 schemes.
The graph indicates the growth of assets over the years.

CHARGES
The Asset Management Companies (AMCs) managing the Mutual Funds levy
a load as a percentage of NAV at the time of entry into the Schemes or at
the time of exiting from the Schemes.
Entry Load - It is the load charged by the fund when an investor invests
into the fund. It increases the price of the units to more than the NAV and is
expressed as a percentage of NAV.
Exit Load - It is the load charged by the fund when an investor redeems the
units from the fund. It reduces the price of the units to less than the NAV
and is expressed as a percentage of NAV.
Cost of Churning/Turnover cost - It refers to the costs associated with

the churning (or changes made to the holdings) of the portfolio. Portfolio
changes have associated costs of brokerage, custody fees, transaction fees
and registration fees, which lower the returns. The quantum depends on the
management style of the fund manager.

Expense Ratio - The Expenses of a mutual fund include management fees

and all the fees associated with the fund's daily operations. Expense Ratio
refers to the annual percentage of fund's assets that is paid out in expenses.
Tax
Capital Gains Tax- The profit realizations on sale of securities and certain
other capital assets (including units of mutual funds) are called capital gains.
The gains can be classified into long-term or short-term depending on the
period of holding of the asset and are charged to tax at different rates. Gains
on mutual fund units held for a period of 12 months or more are long-term
gains. These gains are taxable.
Dividend Distribution Tax – The Mutual Fund schemes distributing dividends

on their units to the investors attract a distribution tax as per tax laws.
Securities Transaction Tax – AMCs managing the portfolio have to pay STT
on transaction (buying/selling) of different securities in the stock market.
Presently the tax rate is 0.025%.
Pointers to Mutual Fund Performance
Mutual Fund industry today, with about 34 players and more than five
hundred schemes, is one of the most preferred investment avenues in India.
However, with a plethora of schemes to choose from, the retail investor
faces problems in selecting funds. Factors such as investment strategy and
management style are qualitative, but the funds record is an important
indicator too. Though past performance alone can not be indicative of future
performance, it is the only quantitative way to judge how good a fund is at
present. Therefore, there is a need to correctly assess the past performance
of different mutual funds. Quite simply then a fund generating more returns

than the other is considered better than the other. But this is just half the
story.
Return alone should not be considered as the basis of measurement of the

performance of a mutual fund scheme, it should also include the risk taken
by the fund manager because different funds will have different levels of risk
attached to them.
Risk associated with a fund can be defined as fluctuations in the returns

generated by it. The higher the fluctuations in the returns of a fund during a
given period, higher will be the risk associated with it. These fluctuations in
the returns generated by a fund are resultant of two guiding forces. First,
general market fluctuations affecting all the securities present in the market
are called market risk or systematic risk and second, fluctuations due to
specific securities present in the portfolio of the fund, called unsystematic
risk. The Total Risk of a given fund is sum of these two and is measured in
terms of standard deviation of returns of the fund.
Systematic risk is measured in terms of Beta, which represents fluctuations

in the NAV of the fund vis-à-vis market. The more responsive the NAV of a
mutual fund is to the changes in the market; higher will be its beta. Beta is
calculated by relating the returns on a mutual fund with the returns in the
market. While unsystematic risk can be diversified through investments in a
number of instruments, systematic risk cannot. By using the risk return
relationship, we try to assess the competitive strength of the mutual funds
vis-à-vis one another in a better way. It should be appreciated that there is
a level of risk that a fund has taken to generate this return. So what is really

relevant is not just performance or returns. What matters therefore are Risk
Adjusted Returns (RAR).
The only caveat whilst using any risk-adjusted performance is the fact that
their clairvoyance is decided by the past. Each of these measures uses past
performance data and to that extent are not accurate indicators of the
future.
There are different statistical parameters available on which a fund

may be analyzed. These are:
1. Standard Deviation
The most basic of all measures- Standard Deviation allows evaluating the
volatility of the fund. Alternatively, it allows measuring the consistency of
the returns.
Volatility is often a direct indicator of the risks taken by the fund. The
standard deviation of a fund measures this risk by measuring the degree to
which the fund fluctuates in relation to its mean return, the average return
of a fund over a period of time.
A security that is volatile is also considered higher risk because its

performance may change quickly in either direction at any moment.
A fund that has a consistent four-year return of 3%, for example, would

have a mean, or average, of 3%. The standard deviation for this fund would
then be zero because the fund's return in any given year does not differ
from its four-year mean of 3%. On the other hand, a fund that in each of the
last four years returned -5%, 17%, 2% and 30% will have a mean return of
11%. The fund will also exhibit a high standard deviation because each year
the return of the fund differs from the mean return. This fund is therefore
more risky because it fluctuates widely between negative and positive
returns within a short period.
2. Beta (ß)
Beta is a fairly commonly used measure of risk. It basically indicates the
level of volatility associated with the fund as compared to the benchmark.
So quite naturally the success of Beta is heavily dependent on the

correlation between a fund and its benchmark. Thus if the fund's portfolio
doesn't have a relevant benchmark index then a beta would be grossly
inadequate.
A beta that is greater than one (ß >1) means that the fund is more volatile
than the benchmark, while a beta of less than one (ß <1) means that the
fund is less volatile than the index. A fund with a beta very close to 1 (ß ~1)
means the fund's performance closely matches the index or benchmark.
If, for example, a fund has a beta of 1.03 in relation to the BSE Sensex, the
fund has been moving 3% more than the index. Therefore, if the BSE
Sensex increased 10%, the fund would be expected to increase 10.30%.
Investors expecting the market to be bullish may choose funds exhibiting

high betas, which increase investors' chances of beating the market. If an
investor expects the market to be bearish in the near future, the funds that

have betas less than 1 are a good choice because they would be expected to
decline less in value than the index.
3. R-Square
The success of Beta is dependent on the correlation of a fund to its

benchmark or its index. Thus whilst considering the beta of any security,
investors should also consider another statistic- R squared that measures
the Correlation.
The R-squared of a fund advises investors if the beta of a mutual fund is

measured against an appropriate benchmark. Measuring the correlation of a
fund's movements to that of an index, R-squared describes the level of
association between the fund's volatility and market risk, or more
specifically, the degree to which a fund's volatility is a result of the day-to-
day fluctuations experienced by the overall market.
R-squared values range between 0 and 1, where 0 represents no correlation

and 1 represents full correlation. If a fund's beta has an R-squared value
that is close to 1, the beta of the fund should be trusted. On the other hand,
an R-squared value that is less than 0.5 indicates that the beta is not
particularly useful because the fund is being compared against an
inappropriate benchmark.
4. Alpha
Alpha = (Fund return-Risk free return) - Funds beta *(Benchmark return-

risk free return)

Alpha is the difference between the returns one would expect from a fund,
given its beta, and the return it actually produces. An alpha of -1.0 means
the fund produced a return 1% higher than its beta would predict. An alpha
of 1.0 means the fund produced a return 1% lower. If a fund returns more
than its beta then it has a positive alpha and if it returns less then it has a
negative alpha. Once the beta of a fund is known, alpha compares the fund's
performance to that of the benchmark's risk-adjusted returns. It allows you
to ascertain if the fund's returns outperformed the market's, given the same
amount of risk. The higher a funds risk level, the greater the returns it must
generate in order to produce a high alpha.
Normally one would like to see a positive alpha for all of the funds owned.
But a high alpha does not mean a fund is doing a bad job nor is the vice
versa true as alpha measures the out performance relative to beta. So the
limitations that apply to beta would also apply to alpha.
Alpha can be used to directly measure the value added or subtracted by a

fund's manager.
The accuracy of an alpha rating depends on two factors:
1) The assumption that market risk, as measured by beta, is the only risk
measure necessary.
2) The strength of fund's correlation to a chosen benchmark such as the

BSE Sensex or the NIFTY.
5. Sharpe Ratio
Sharpe Ratio= Fund return in excess of risk free return/ Standard deviation
of Fund

In case funds have low correlation with indices or benchmarks, they should
be evaluated using the Sharpe ratio. Since it uses only the Standard
Deviation, which measures the volatility of the returns there is no problem of
benchmark correlation.
The higher the Sharpe ratio, the better a funds returns relative to the
amount of risk taken.
Performance of Diversified Funds
Sharpe ratios are ideal for comparing funds that have a mixed asset classes.
That is balanced funds that have a component of fixed income offerings.

ADVANTAGES OF INVESTING IN MUTUAL FUNDS
• Flexibility: The investments pertaining to the Mutual Fund offers the

public a lot of flexibility by means of dividend reinvestment, systematic
investment plans and systematic withdrawal plans.
• Affordability: The Mutual funds are available in units. Hence they are
highly affordable and due to the very large principal sum, even the
small investors are benefited by the investment scheme.
• Liquidity: In case of Open Ended Mutual Fund schemes, the investors

have the option of redeeming or withdrawing money at any point of
time at the current rate of net value asset.
• Diversification: The risk pertaining to the Mutual Funds is quite low

as the total investment is distributed in several industries and different
stocks.
• Professional Management: The Mutual Funds are professionally

managed. The experienced Fund Managers pertaining to the Mutual
Funds examine all options based on research and experience.
• Potential of return: The Fund Managers of the Mutual Funds gather

data from leading economists and financial analysts. So they are in a
better position to analyze the scopes of lucrative return from the
investments.
• Low Costs: The fees pertaining to the custodial, brokerage, and

others is very low.
• Regulated for investor protection: The Mutual Funds sector is

regulated by the Securities Exchange Board of India (SEBI) to
safeguard the rights of the investor.

DISADVANTAGES OF INVESTING IN MUTUAL FUNDS:
The Drawbacks of Mutual Funds are the major obstacles for the growth of
the same. Management risks, trading limitations and absence of taxes are
some of the major drawbacks of mutual funds.
 Fees and commissions: The Mutual funds charge administrative fees

to meet the daily expenses. Many funds charge brokerage or 'loads' to pay
financial planners or financial consultants, brokers. In case a shareholder
does not use the services of financial adviser, he still has to pay a sales
commission.
• No Guarantees: All investments bear risk factors. The Mutual

Funds are no different. It depends on the stock market. A fall in the
stock market would trigger a fall in the value of the mutual fund
shares. Although the risk factor pertaining to Mutual funds are much
lower compared to Mutual Funds.
• Inefficiency of Cash Reserves: The Mutual Funds maintain big cash

reserves, for situations such as a number of large withdrawals. The
investors are provided with liquidity, and a major portion of the
financial resources is maintained as cash, and it is not invested in
some assets.
• Management risk: The investment pertaining to the Mutual Funds

depends on the fund manager and his selection of the mutual fund
portfolio, which is based on speculation. If things do not go as
expected, the investments may not earn enough money.

• Taxes: The proceeds from the sale of mutual funds are taxable, even
if the same is reinvested in mutual funds.
• No Insurance: The Mutual funds are regulated by the central

government. However mutual funds are still not insured against
losses.
• Trading Limitations: The Mutual Funds usually have high liquidity,

but most of the mutual funds, such as open-ended funds, are bought
or sold at the end of the day
• Loss of Control: In case, if the mutual funds are managed by the

investor himself, the portfolio management may go bad and have an
adverse effect on the earnings from the investment.
TYPES OF MUTUAL FUNDS
• By Structure
○ Open - Ended Schemes
○ Close - Ended Schemes
○ Interval Schemes
• By Investment Objective
○ Growth Schemes
○ Income Schemes
○ Balanced Schemes
○ Debt Schemes
○ Money Market Schemes
• Other Schemes

○ Tax Saving Schemes
○ Load & No Load Schemes
○ Special Schemes
 Index Schemes
 Sector Specific Scheme
 Gilt Funds
Open-ended Funds
Open-ended or open mutual funds are much more common than closed-
ended funds and meet the true definition of a mutual fund – a financial
intermediary that allows a group of investors to pool their money
together to meet an investment objective– to make money! An individual
or team of professional money managers manage the pooled assets and
choose investments, which create the fund’s portfolio They are
established by a fund sponsor, usually a mutual fund company, and
valued by the fund company or an outside agent. This means that the
fund’s portfolio is valued at "fair market" value, which is the closing
market value for listed public securities. An open-ended fund can be
freely sold and repurchased by investors.
• Buying and Selling: Open funds sell and redeem shares at any time
directly to shareholders. To make an investment, you purchase a
number of shares through a representative, or if you have an
account with the investment firm, you can buy online, or send a
check. The price you pay per share will be based on the fund’s net
asset value as determined by the mutual fund company. Open
funds have no time duration, and can be purchased or redeemed at
any time, but not on the stock market.
An open fund issues and redeems shares on demand, whenever

investors put money into the fund or take it out. Since this happens
routinely every day, total assets of the fund grow and shrink as
money flows in and out daily. The more investors buy a fund, the
more shares there will be. There's no limit to the number of shares
the fund can issue. Nor is the value of each individual share
affected by the number outstanding, because net asset value is
determined solely by the change in prices of the stocks or bonds
the fund owns, not the size of the fund itself. Some open-ended
funds charge an entry load (i.e., a sales charge), usually a
percentage of the net asset value, which is deducted from the
amount invested.
• Advantages:
Open funds are much more flexible and provide instant liquidity as
funds sell shares daily. You will generally get a redemption (sell)
request processed promptly, and receive your proceeds by check in
3-4 days. A majority of open mutual funds also allow transferring
among various funds of the same “family” without charging any
fees.
Open funds range in risk depending on their investment strategies

and objectives, but still provide flexibility and the benefit of
diversified investments, allowing your assets to be allocated among
many different types of holdings. Diversifying your investment is
key because your assets are not impacted by the fluctuation price
of only one stock. If a stock in the fund drops in value, it may not
impact your total investment as another holding in the fund may be
up. But, if you have all of your assets in that one stock, and it
takes a dive, you’re likely to feel a more considerable loss.

• Risks: Risk depends on the quality and the kind of portfolio you
invest in. One unique risk to open funds is that they may be
subject to inflows at one time or sudden redemptions, which leads
to a spurt or a fall in the portfolio value, thus affecting your
returns. Also, some funds invest in certain sectors or industries in
which the value of the in the portfolio can fluctuate due to various
market forces, thus affecting the returns of the fund.
Closed-ended Funds
Close-ended or closed mutual funds are really financial securities that are
traded on the stock market. Similar to a company, a closed-ended fund
issues a fixed number of shares in an initial public offering, which trade
on an exchange. Share prices are determined not by the total net asset
value (NAV), but by investor demand. A sponsor, either a mutual fund
company or investment dealer, will raise funds through a process
commonly known as underwriting to create a fund with specific
investment objectives. The fund retains an investment manager to
manage the fund assets in the manner specified.
• Buying and Selling: Unlike standard mutual funds, you cannot

simply mail a check and buy closed fund shares at the calculated
net asset value price. Shares are purchased in the open market
similar to stocks. Information regarding prices and net asset values
are listed on stock exchanges, however, liquidity is very poor. The
time to buy closed funds is immediately after they are issued.
Often the share price drops below the net asset value, thus selling
at a discount. A minimum investment of as much as $5000 may
apply, and unlike the more common open funds discussed below,

there is typically a five-year commitment.
• Advantages:
The prospect of buying closed funds at a discount makes them
appealing to experienced investors. The discount is the difference
between the market price of the closed-end fund and its total net
asset value. As the stocks in the fund increase in value, the
discount usually decreases and becomes a premium instead. Savvy
investors search for closed-end funds with solid returns that are
trading at large discounts and then bet that the gap between the
discount and the underlying asset value will close. So one
advantage to closed-end funds is that you can still enjoy the
benefits of professional investment management and a diversified
portfolio of high quality stocks, with the ability to buy at a discount.
• Risks:
Investing in closed-end funds is more appropriate for seasoned
investors. Depending on their investment objective and underlying
portfolio, closed-ended funds can be fairly volatile, and their value
can fluctuate drastically. Shares can trade at a hefty discount and
deprive you from realizing the true value of your shares. Since
there is no liquidity, investors must buy a fund with a strong
portfolio, when units are trading at a good discount, and the stock
market is in position to rise.
Equity
An equity fund can invest in a large-cap, mid-cap or a small-cap stock.

You might have heard these words being thrown around rather liberally by
all the new funds on offer. 'Cap' refers to market capitalization (M-cap) of
a stock. M-cap is defined as the total market value of the equity of a

company.
For example, if a company has 1,000 shares outstanding and the price of
each share is Rs 20, the market value of the total equity of the company
is Rs 20,000 (1,000*20). To exemplify, the market capitalization of
Reliance is approx Rs 200,000 crore (Rs 2,000 billion), while that of Hero
Honda is around Rs 15,000 crore (Rs 150 billion).
Large cap, hence, refers to companies which have a large market
capitalisation (usually above Rs 5,000 crore). Mid-cap refers to companies
whose market value lies between Rs 1,000 crore to Rs 5,000 crore.
Any company with market capitalization of less than Rs 1,000 crore is
called a small cap company. Now different fund houses have different
definitions of where a 'cap' ends and where the other begins but these are
rough bench-marks. One of the biggest selling points currently of the new
fund offers is that the small cap companies of today will increase in value
so much that they will become the next mid-cap or large-cap companies.
Looking at managing equities differently, we say that the fund manager
may pick a growth or a value stock. Growth companies are typically ones
which are witnessing high amount of growth in their profits (due to growth
in underlying demand, increase in prices, new technology, etc).
These firms command a valuation which is superior to firms with a lower
growth potential. Value companies, on the other hand, are in mature
industries where they offer more stable cash flows and a reasonable
valuation to buy them. Note that in a market downturn, a growth stock
can become a value stock if it is available cheap!
A fund manager may decide to invest exclusively in growth or value stocks
or in a combination of both.
Debt

Debt funds can similarly be classified in to long, medium and short tenor
funds. While the definitions are flexible again, long funds typically invest
in instruments with maturity greater than 5 years, while short-term funds
invest in instruments with less than one year of maturity; medium-term
funds invest in the 1-year to 5-year range.
Note that the longer the duration (roughly average maturity) of the
investments, the more sensitive it is to interest rate movements. Also
remember that the price of bonds varies inversely with interest rates.
On the other axis, a debt fund can invest in high quality instruments like
government of India bonds, bonds issued by healthy PSUs, top-notch
corporate, etc. It can progressively lower its investment quality by
investing in not-so-stable corporate or in fixed deposits of co-operative
banks. The advantage of lowering credit quality is higher expected
returns.
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
proportion indicated 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.
Gilt Fund
These funds invest exclusively in government securities. Government

Securities have no default risk. NAVs of these schemes also fluctuate due to
change in 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 weightage 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.
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.
Other Special Schemes:

NAV
Scheme AMC OBJ. Dt. NAV Wk Mth Qtr 1 Yr 3 Yrs Inceptn
1. ABN
21-
AMRO Tax
ABN Equity- Apr- -
Advantag
AMRO ELSS 08 14.36 5.86 13.87 12.4 12.65 -NA- 12.55
e Plan
21-
Equity- Apr- -
2. BOBELSS
BOB ELSS 08 24.1 4.37 9.55 5.97 23.95 26.15 17.3
96
21-
3. Birla
Equity- Apr- -
Equity
Birla ELSS 08 12.51 3.99 10.71 5.37 14.89 31.56 30.26
Plan
4. Canara
Robeco
21-
Equity
Equity- Apr- -
Tax Saver
Canbank ELSS 08 16.67 5.64 -7.7 17.7 3.78 25.95 11.56
- 93
5. DBS
21-
Chola Tax
Equity- Apr- -
Saver
Chola ELSS 08 14.32 7.19 14.74 0.07 7.38 -NA- 15.29
Fund
6. DSP
Merrill
21-
Lynch Tax
DSP Equity- Apr- -
Saver
Merrill ELSS 08 13.74 6.24 14.11 4.62 35 -NA- 28.77
Fund
17-
7. DWS Tax
Equity- Apr- -
Saving
Deutsche ELSS 08 13.78 5.45 11.7 19.8 32.5 -NA- 11.49
Fund
21-
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.
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.
The graph below shows the risk and return from various kinds of funds.
there are certain funds where the return is more but at the same time the
risk associated is more.

Equity Linked Savings Scheme
A special product offered by mutual funds. These schemes invest in equity

i.e. shares and generally have a lock-in period of three years.
Balanced Funds – These funds invest part of their corpus into Debt
Instruments which give a fixed rate of return and the remaining part of the
corpus into Equity giving a high rate of return. Thus, overall the balanced

funds give a moderate rate of return with lower risk as compared to the pure
equity funds.
NA
V
Dat Mt 3 Incept
Scheme AMC OBJ. e NAV Wk h Qtr 1 Yr Yrs n
ABN
RO
Dual
Advant
age
Fund -
Plan B
-
Series
ABN 21- - -
1-
AMR Balanc Apr 3.2 3.3 2.9 1.2
Regula
O ed -08 9.79 9 6 7 9 -NA- -2.23
r
21- -
1. BOB
Balanc Apr 27.2 3.8 2.4 11. 21. 19.8
Balanc
BOB ed -08 7 9 8 1 4 6 24.48
e Fund
2. Bench Benc Balanc 16- 142. 1.6 0.1 - 13. -NA- 14.32
mark hmar ed Apr 49 9 8 11. 58
Split k -08 1
Capital
Fund -
Preferr
ed

Units
(Class
A)
21-
3. Birla
Balanc Apr 31.4 3.4 7.5 2.2 12. 21.7
Balanc
Birla ed -08 6 5 9 1 37 6 14.52
e Fund
26.27
4. Birla Top of
21- -
Sun Form
Balanc Apr 211. 5.7 6.1 8.2 17. 26.8
Life 95
Birla ed -08 39 1 2 2 33 8
Fund
5. Canara
Robec
21- -
o
Canb Balanc Apr 44.4 8.1 0.2 20. 31.9
Balanc
ank ed -08 6 2 8 2 63 9 10.4
e - II
6. DSP
Merrill
Lynch
DSP 17- -
Balanc
Merri Balanc Apr 48.6 3.1 7.4 0.8 74. 30.4
ed
ll ed -08 7 9 5 2 8 3 3.33
Fund
7. Escort
s
21- -
Balanc
Escor Balanc Apr 57.1 1.9 4.1 6.3 21. 29.6
ed
ts ed -08 3 7 9 4 4 3 28.02
Fund

8. Escort
s
21- -
Opport
Escor Balanc Apr 28.5 - 1.5 7.4 13. 14.4
unities
ts ed -08 8 0.2 2 1 55 2 16.99
Fund
9. FT
India
Tem 21- -
Balanc
pleto Balanc Apr 39.3 3.8 7.4 3.2 18.
ed
n ed -08 9 1 4 7 39 27.8 18.03
Fund
10. HDFC
21-
Balanc
HDF Balanc Apr 36.0 4.5 9.8 0.8 16. 21.9
ed
C ed -08 4 7 2 7 78 1 18.34
Fund
11. HDFC
21- -
Pruden
HDF Balanc Apr 132. 2.8 8.1 6.0 15. 29.2
ce
C ed -08 07 1 8 9 51 6 19.88
Fund
12. ICICI
Pruden
tial
21- -
Balanc
Prud Balanc Apr 38.5 3.5 6.1 3.1 10. 25.2
ed
ential ed -08 1 8 2 2 03 7 16.36
Fund
13. ICICI
Pruden
tial
21- -
Blende
Prud Balanc Apr 12.6 0.0 0.5 1.0 8.8
d Plan
ential ed -08 1 3 2 9 5 -NA- 8.35
A

14. ICICI
Pruden
tial
21-
Blende
Prud Balanc Apr 12.3 0.1 0.4 1.0 9.6
d Plan
ential ed -08 9 5 6 9 8 -NA- 7.68
B
15. ING
Vysya
21- -
Balanc
Balanc Apr 7.2 3.1 18.
ed
ING ed -08 22.1 4.1 8 1 26 24 10.49
Fund
16. J M
21- -
Balanc
Balanc Apr 25.4 4.7 11. 7.2 8.4
ed
JM ed -08 5 9 1 2 9 25.1 16.79
Fund
21- - - -
17. Kotak
Kota Balanc Apr 22.6 3.8 9.3 19. 4.2 18.5
Balanc
k ed -08 2 7 6 8 9 2 17.75
e
18. LICMF
21- -
Balanc
Balanc Apr 53.7 5.5 10. 6.6 24. 25.7
ed
LIC ed -08 9 9 71 3 4 9 3.11
Fund
19. Princip
al
21- -
Balanc
Princi Balanc Apr 26.4 7.1 2.7 21. 22.8
ed
pal ed -08 8 3.6 6 5 39 8 12.49
Fund
20. SBI SBI Balanc 21- 42.0 3.0 6.9 - 18. 31.4 20.57
Magnu ed Apr 7 4 7 2.8 5 7
m -08 9
Balanc

ed
Fund
21. Sundar
am
BNP
Pariba
s
21- -
Balanc
Sund Balanc Apr 38.8 3.8 6.6 2.3 17. 24.3
ed
aram ed -08 1 3 2 8 61 6 18.9
Fund
22. Tata
Tata 21- -
Balanc
Mutu Balanc Apr 61.0 8.4 5.2 18. 27.0
ed
al ed -08 5 4 8 6 91 1 18.78
Fund
23. Tata
Tata 21- -
Young
Mutu Balanc Apr 15.9 1.7 3.2 3.3 5.7 16.6
Citizen
al ed -08 2 1 8 2 9 7 15.67
s Fund
24. Templ
eton
India
Childre
n`s
Tem 21- -
Asset
pleto Balanc Apr 3.6 1.7 11. 18.8
Plan -
n ed -08 34.9 5 8.1 6 51 3 13.89
Gift
25. UTI
21- -
Balanc
Balanc Apr 63.4 3.8 8.6 2.3 15. 21.4
ed
UTI ed -08 1 8 3 4 91 2 15.19
Fund

26. UTI
Unit
Linked
Insura
nce
21-
Plan
Balanc Apr 16.5 2.8 - 17. 11.3
(US)
UTI ed -08 8 1.2 7 1.3 04 8 10.09
1971
12.07
21- Botto
27. UTI
Balanc Apr 17.1 3.9 0.0 3.8 15.1 m of
VIS -
UTI ed -08 5 9 7.7 2 4 3 Form
ILP
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IBS, GURGAON Page

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IBS, GURGAON Page

101
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IBS, GURGAON Page

102
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IBS, GURGAON Page

103
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IBS, GURGAON Page

104
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Best Mutual Funds
Best Mutual Funds are selected on the basis of specific

characteristics of a mutual fund. Performance, management and
administrative fees are the major considerations in selecting best mutual
funds.
The Best Mutual Funds are sorted out with the help of the characteristics
the mutual funds. Choosing the Best Mutual Funds needs vivid knowledge
IBS, GURGAON Page
105
about the features and concepts of the Mutual Funds.
Best Mutual Funds - Selection
• The selection of Mutual Funds is highly critical for various reasons
• The Mutual Fund are investments in multiple securities
• Every single share of a mutual fund is like a small investment in

thousands of stocks and bonds
• The advantages of the mutual funds are that they allow small
investors to put their money in a large variety of securities
• The Mutual Funds charges administrative fees to all the

shareholders, which becomes a discouraging factor for small
investors
Best Mutual Funds - Characteristics
• Low administrative fees: The administrative fees, front-end

loads, and management fees are some of the fees charged on the
investments. These fees considerably lower the return from
investments. In case the performance varies, the fees remain
constant. It is wise to invest in a mutual fund with low
administrative fees rather than a mutual fund which is performing
superbly for the past three to four years.
• Experienced management: The Fund Manager pertaining to the

Mutual Funds, also referred as the portfolio manager trades, realizes
the capital losses and gains, and collects the income in form of
interest. A lot depends on the manager, as one who is inexperienced
without any previous record of performance may deliver well, but
there is guarantee, whereas a manager with a performance record
IBS, GURGAON Page

106
has proved his worth.
• Above average performance: Investors look for mutual funds,

which have performed well for the past three to four years, but the
problem is that there is no guarantee that it would perform in the
same manner at present. It is wiser to invest in those funds which
have performed better than those having higher returns.
Tax Saving Mutual Funds
Tax Saving Mutual Funds are highly preferred by the investors

as they can enjoy the benefits of Section 88 (of the Income Tax Act).
There are a range of parameters which should be followed by the
investors who wish to invest in the tax saving mutual fund to ensure
returns over a long period.
A Short Note on Tax Saving Mutual Funds in India-
Tax Saving Mutual Funds are one of the most preferred areas for
investments. This is mainly because the investors treat the tax saving
funds at par with the regular diversified equity funds.
They would just follow the same process while choosing a tax saving
fund just as they would have done in case of equity fund. A proper
study on the performance of the tax saving mutual fund for at least a
period of three years or five years is essential for every investor to
avoid unnecessary hassles that might pop up later on. The lock-in
IBS, GURGAON Page
107
period for the fund is determined by the fund manager so that the
investors cannot sell the stocks anytime they want as selling of stocks
at wrong time, especially when the value of stocks lower down is quite
inexpedient for the company.
Ways To Select a Tax Saving Mutual Fund
Performance of a Tax Saving Mutual Fund:
The investors are advised to assess the tax saving mutual fund on the
returns of its Net Asset Value before going for a purchase. A tax saving
mutual fund is determined on the basis of its performance on the Nifty,
Sensex and BSE 200. To evaluate the performance of a tax saving
mutual fund, it is essential to invest in it for three or five consecutive
years.
Investment Approach:
It is also very important for the investors to have a profound knowledge

about the investment approach of the fund manager of the tax saving
mutual fund. The investment patterns are either managed through
strong systems or individually of which the first one is more relevant
though the fund managers enjoy the full privilege to make decisions on
the fund. In the first process, the investors get a clear picture
beforehand about the investment patterns.
Volatility and risk-return:
The investors should choose a fund that has a lower 'standard

deviation' as this is used to determine the volatility in the performance
of the fund's NAV.
Expenses:
There are a lot of expenditures entailed in a tax saving mutual fund.

These expenses include the fund manager's salary, costs for marketing
IBS, GURGAON Page

108
or advertising of the fund, and other administration costs. The investors

should consider the expense ratio of the fund before investing in it. The
expense ratio precisely implies the percentage of the fund's assets that
corresponds with the cost set for running that particular fund. A lower
expense ratio is advantageous for the returns of the fund as the Net
Asset Value is calculated after subtracting the expenses.
Other Parameters that should be considered by the Investors:
The investors must also consider the entry load and track record of the
asset management company of the tax saving mutual fund. Some AMCs
do not charge the entry load on investments which are made through
systematic investment plans.
Some of the Top Performing Tax Saving Mutual Funds During

2007-08
SBI Magnum Tax gain

HDFC Mutual Fund (Long Term Advantage Fund)
HDFC Mutual Fund (Tax Saver)
Birla Sun life Mutual Fund
Franklin India Tax shield
Association of Mutual Funds of India
Association of Mutual Funds in India (AMFI) was set up on 22nd

August, 1995. It was established with the aim to function as a non-profit
IBS, GURGAON Page

109
organization. This association is the chief governing body of all Asset

Management Companies (AMC) and is registered with Securities and
Exchange Board of India (SEBI).
Association of Mutual Funds of India at a Glance-
Association of Mutual Funds in India (AMFI) was set up on 22nd August,

1995.
The members of Asset Management Companies (AMC) have always

carried out the responsibility of introducing new mutual fund schemes
under the governance and guidelines of its Board of Directors. Association
of Mutual Funds in India has played a significant role in creating a healthy
and professional market for mutual funds. It has elevated the standard of
the mutual fund investment patterns by introducing more beneficiary
schemes to attract more investors. The Association of Mutual Funds is also
the main governing body of all Asset Management Companies (AMC). The
Association of Mutual Funds in India (AMFI) has been registered with the
Securities and Exchange Board of India (SEBI). The main principle
religiously followed by AMFI is to protect and promote the mutual funds
along with the investors or shareholders.
Important Aspects of Association of Mutual Funds of India-
• AMFI provides professionalism and a proper balance in the mutual

fund industry.
• It promotes the highly-efficient business practices as well as the

code of conduct in the mutual fund industry among its members and
those who are involved in mutual fund investments.
• AMFI is registered with SEBI and follows its suggestions while

executing its activities.
IBS, GURGAON Page

110
• AMFI also represents the Government of India, the Reserve Bank of

India and other related higher authority bodies in the mutual fund
operations.
• It also provides training programs to hone the skills of those who

are involved in mutual fund investments and also develops a team
of efficient and skilled agents.
• AMFI also carries out various campaigns and awareness programs to

inform the individuals about the basic concept of mutual fund
investments.
Contact Details of AMFI-
Association of Mutual Funds in India

106, Free Press House, Nariman Point,
Mumbai - 400 021, India.
Top of Form
Top of Form
Criticism of managed mutual funds
Historically, only a small percentage of actively managed mutual funds, over

long periods of time, have returned as much, or more than comparable
index mutual funds. This, of course, is a criticism of one type of mutual fund
over another.
Another criticism concerns sales commissions on load funds, an upfront or

deferred fee as high as 8.5 percent of the amount invested in a fund. Critics
point out that high sales commission can sometimes represent a conflict of
interest, as high commissions benefit the sales people but hurt the investors.
Although in reality, "A shares", which appear to have the highest up front
load, (around 5%) are the "cheapest" for the investor, if the investor is
IBS, GURGAON Page

111
planning on 1) keeping the fund for more than 5 years, 2) investing more
than 100,000 in one fund family, which likely will qualify them for
"breakpoints”, which is a form of discount, or 3) staying with that "fund
family" for more than 5 years, but switching "funds" within the same fund
company. High commissions can sometimes cause sales people to
recommend funds that maximize their income.
Mutual fund managers, and companies need to disclose by law, if they have
a conflict of interest due to the way they are paid. In particular fund
managers may be encouraged to take more risks with investors money than
they ought to: Fund flows (and therefore compensation) towards successful,
market beating funds are much larger than outflows from funds that lose to
the market. Fund managers may therefore have an incentive to purchase
high risk investments in the hopes of increasing their odds of beating the
market and receiving the high inflows, with relatively less fear of the
consequences of losing to the market.
Many analysts, however, believe that the larger the pool of money one
works with, the harder it is to manage actively, and the harder it is to
squeeze good performance out of it. This is true, due to the fact that there
are only so many companies that one can identify to put the money into
( buy shares of) that fit with the "style" of the mutual fund, due to what is
disclosed in the prospectus. Thus some fund companies can be focused on
attracting new customers, and forget to "close" their mutual funds to new
customers, when they get too big, to invest the assets properly, thereby
hurting its existing investors' performance.
A great deal of a fund's costs are flat and fixed costs, such as the salary for
the manager. Thus it can be more profitable for the fund to try to allow it to
grow as large as possible, instead of limiting its assets. Most fund companies
have closed some funds to new investors to maintain the integrity of the
funds for existing investors. If the funds reach more than 1 billion dollars,
IBS, GURGAON Page
112
many times, these funds, have gotten too large, before they are closed, and
when this happens, the funds tend to not have a place to put the money and
can and tend to lose value.
Other criticisms of mutual funds are that some funds illegally are guilty of
market timing and that some fund managers, also illegal, accept
extravagant gifts in exchange for trading stocks through certain investment
banks, which presumably charge the fund more for transactions than would
non-gifting investment bank. This practice, although done, is completely
illegal. As a result, all fund companies strictly limit -- or completely bar --
such gifts.
ULIPs vs Mutual Funds:
Unit Linked Insurance Policies (ULIPs) as an investment avenue are closest

to mutual funds in terms of their structure and functioning. As is the cases
with mutual funds, investors in ULIPs are allotted units by the insurance
company and a net asset value (NAV) is declared for the same on a daily
basis.
Similarly ULIP investors have the option of investing across various schemes
similar to the ones found in the mutual funds domain, i.e. diversified equity
funds, balanced funds and debt funds to name a few. Generally speaking,
ULIPs can be termed as mutual fund schemes with an insurance component.
However it should not be construed that barring the insurance element there
is nothing differentiating mutual funds from ULIPs.
How ULIPs can make you RICH!
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Despite the seemingly comparable structures there are various factors

wherein the two differ.
In this article we evaluate the two avenues on certain common parameters

and find out how they measure up.
ULIP Vs Mutual Fund
ULIPs Mutual Funds
Minimum investment amounts

Investment Determined by the investor are determined by the fund
amounts and can be modified as well house
No upper limits, expenses Upper limits for expenses

determined by the chargeable to investors have
Expenses insurance company been set by the regulator
Portfolio Quarterly disclosures are

disclosure Not mandatory* mandatory
Modifying Generally permitted for free Entry/exit loads have to be
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asset
allocation or at a nominal cost borne by the investor
Section 80C benefits are Section 80C benefits are

available on all ULIP available only on investments
Tax benefits investments in tax-saving funds
1. Mode of investment/ investment amounts
Mutual fund investors have the option of either making lump sum
investments or investing using the systematic investment plan (SIP) route
which entails commitments over longer time horizons. The minimum
investment amounts are laid out by the fund house.
ULIP investors also have the choice of investing in a lump sum (single
premium) or using the conventional route, i.e. making premium payments
on an annual, half-yearly, quarterly or monthly basis. In ULIPs, determining
the premium paid is often the starting point for the investment activity.
This is in stark contrast to conventional insurance plans where the sum

assured is the starting point and premiums to be paid are determined
thereafter.
ULIP investors also have the flexibility to alter the premium amounts during
the policy's tenure. For example an individual with access to surplus funds
can enhance the contribution thereby ensuring that his surplus funds are
gainfully invested; conversely an individual faced with a liquidity crunch has
the option of paying a lower amount (the difference being adjusted in the
accumulated value of his ULIP). The freedom to modify premium payments
at one's convenience clearly gives ULIP investors an edge over their mutual
fund counterparts.
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2. Expenses
In mutual fund investments, expenses charged for various activities like fund
management, sales and marketing, administration among others are subject
to pre-determined upper limits as prescribed by the Securities and Exchange
Board of India.
For example equity-oriented funds can charge their investors a maximum of

2.5% per annum on a recurring basis for all their expenses; any expense
above the prescribed limit is borne by the fund house and not the investors.
Similarly funds also charge their investors entry and exit loads (in most
cases, either is applicable). Entry loads are charged at the timing of making
an investment while the exit load is charged at the time of sale.
Insurance companies have a free hand in levying expenses on their ULIP

products with no upper limits being prescribed by the regulator, i.e. the
Insurance Regulatory and Development Authority. This explains the complex
and at times 'unwieldy' expense structures on ULIP offerings. The only
restraint placed is that insurers are required to notify the regulator of all the
expenses that will be charged on their ULIP offerings.
Expenses can have far-reaching consequences on investors since higher

expenses translate into lower amounts being invested and a smaller corpus
being accumulated. ULIP-related expenses have been dealt with in detail in
the article "Understanding ULIP expenses".
3. Portfolio disclosure
Mutual fund houses are required to statutorily declare their portfolios on a

quarterly basis, albeit most fund houses do so on a monthly basis. Investors
get the opportunity to see where their monies are being invested and how
they have been managed by studying the portfolio.
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There is lack of consensus on whether ULIPs are required to disclose their

portfolios. During our interactions with leading insurers we came across
divergent views on this issue.
There is lack of consensus on whether ULIPs are required to disclose their

portfolios. While some insurers claim that disclosing portfolios on a quarterly
basis is mandatory, others state that there is no legal obligation to do so.
4. Flexibility in altering the asset allocation
As was stated earlier, offerings in both the mutual funds segment and ULIPs
segment are largely comparable. For example plans that invest their entire
corpus in equities (diversified equity funds), a 60:40 allotment in equity and
debt instruments (balanced funds) and those investing only in debt
instruments (debt funds) can be found in both ULIPs and mutual funds.
If a mutual fund investor in a diversified equity fund wishes to shift his

corpus into a debt from the same fund house, he could have to bear an exit
load and/or entry load.
On the other hand most insurance companies permit their ULIP inventors to
shift investments across various plans/asset classes either at a nominal or
no cost (usually, a couple of switches are allowed free of charge every year
and a cost has to be borne for additional switches).
Effectively the ULIP investor is given the option to invest across asset
classes as per his convenience in a cost-effective manner.
This can prove to be very useful for investors, for example in a bull market
when the ULIP investor's equity component has appreciated, he can book
profits by simply transferring the requisite amount to a debt-oriented plan.
5. Tax benefits
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ULIP investments qualify for deductions under Section 80C of the Income
Tax Act. This holds good, irrespective of the nature of the plan chosen by the
investor. On the other hand in the mutual funds domain, only investments in
tax-saving funds (also referred to as equity-linked savings schemes) are
eligible for Section 80C benefits.
Maturity proceeds from ULIPs are tax free. In case of equity-oriented funds
(for example diversified equity funds, balanced funds), if the investments
are held for a period over 12 months, the gains are tax free; conversely
investments sold within a 12-month period attract short-term capital gains
tax @ 10%.
Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%,

while a short-term capital gain is taxed at the investor's marginal tax rate.
Despite the seemingly similar structures evidently both mutual funds and
ULIPs have their unique set of advantages to offer. As always, it is vital for
investors to be aware of the nuances in both offerings and make informed
decisions.
Impact Analysis on the Mutual Fund Industry

Of the Union Budget 2008-09
Fixed Income Markets to Benefit
Measures
• Revenue deficit target reduced to 1% in FY09 from 1.4% in FY08; fiscal
deficit target reduced to 2.5% in FY09 from 3.1% in FY08
• Gross borrowings lower at Rs.1.45 trillion in FY09 from Rs.1.56 trillion in
FY08; net borrowing also lower at Rs.1.01 trillion from Rs.1.11 trillion in
FY08
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• Measures announced to develop bond, currency and derivatives markets

that will include launching exchange-traded currency and interest rate
futures and developing a transparent credit derivatives market with
appropriate safeguards.
• Measures announced to enhance tradability of domestic convertible bonds
by putting in place a mechanism that will enable investors to separate
embedded equity options from convertible bonds and trade them
separately.
• Measures announced to encourage development of a market-based
system for classifying financial instruments based on their complexity and
implicit risks.
• Proposal announced to exempt from TDS, corporate debt instruments
issued in demat form and listed on recognized stock exchanges.
Impact
• Decision of expanding the corporate debt market will help in increased

focus towards bond funds and in a scenario where interest rates are not
expected to be adverse in the medium term, this would further assist in
increasing the popularity of bond funds which have not been doing well in
the last few years.
• Development of the derivatives markets can in turn enhance the
development of the structured products market.
• Better than targeted fiscal position of the government can impart some
bullishness to G-Secs and hence to Gilt funds.
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Service Taxes Realigned for ULIPs
Measures
• Asset management services provided under Unit Linked Insurance Plans

(ULIPs) would be brought on par with asset management services
provided under mutual funds as regards chargeability to service tax.
• Services provided by stock/commodity exchanges and clearing houses
would also be brought under the service tax net.
Impact
• The competitiveness of mutual funds vis-à-vis ULIPs in the investment

basket of investors is expected to increase somewhat.
• Transactional expense levels of mutual funds are expected to go up
marginally on account of their exposure to stock and commodity
exchanges which are expected to pass on the service tax. But clarity on
what would define services here and on what amount the service tax
would be levied is awaited
Tax Calculation in India
The Tax Calculation in India is the method for calculating the amount of
tax for different individuals. Any individual income i.e., income of a public
sector employee and income of private sector employee is taxable under the
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Income Tax Act of India. The tax calculation in India is done on the basis of
the income of an individual under various defined heads of income, as
mentioned in the 4th chapter of the Income Tax Act, 1961 (Section 14)
The different heads of income for tax calculation in India
 Salary
 House property
 Profit in business or profession
 Capital gains
Other sources
There are different slabs given for taxation under the new budget given by
the finance minister which are different for man, woman and senior citizens
which are as follows:
FOR MAN
Income Tax Rate

Up to Rs. 1,50,000 Nil
Rs. 1,50,001 to Rs.
3,00,000 10%
Rs. 3,00,001 to Rs.
5,00,000 20%
More than Rs.
5,00,000 30%
FOR WOMAN
Income Tax Rate

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Rs. 1,80,001 to Rs.

3,00,000 10%
Rs. 3,00,001 to Rs. 20%
5,00,000
More than Rs. 30%
5,00,000
FOR SENIOR
CITIZENS
Income Tax Rate

Rs. 2,25,001 to Rs. 10%
3,00,000
Rs. 3,00,001 to Rs. 20%
5,00,000
More than Rs. 30%
5,00,000
Now for the calculation of income tax, section 88 is no more valid, only
section 80C is applicable. Section 88 offered a rebate. A rebate is when the
government gives you a concession on your income if you invest in certain
instruments. Section 80C does not offer a rebate but a deduction from
taxable income. The upper limit under both, Section 88 and Section 80C is
Rs 1, 00,000.
Under Section 88
Since the maximum amount that could be invested under Section 88 was Rs
1, 00,000, the maximum tax that could be saved was up to Rs 20,000.
Let us explain it with the help of an example as:
You had to pay tax = Rs 28,000
your rebate = 20%
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you invested Rs 1, 00,000 in the instruments eligible for a rebate.

Your savings = Rs 20,000 of your tax (20% of Rs 1, 00,000).
So instead of paying tax of Rs 28,000, you pay a tax of Rs 8,000 (Rs 28,000
- Rs 20,000).
Under Section 80C
Let's say your taxable income is Rs 100,000.
You invest Rs 70,000 in the Public Provident Fund. Your taxable income
drops to Rs 30,000 (Rs 1, 00,000 - Rs 70,000).
So if you up to Rs 1, 00,000 invest in the relevant instruments, you save tax

up to that amount.
Section 80C gives more investment flexibility
No more sub-caps exist.
The maximum amount under Section 88 (Rs 1, 00,000) has several sub-
caps.
For instance, a maximum of Rs 10,000 in Equity Linked Savings Schemes.

These are diversified mutual funds with a tax benefit. They invest in the
shares of various companies of various sectors.
Then there was a minimum of Rs 30,000 that had to be invested in

infrastructure bonds. These were the bonds that were issued by financial
institutions like ICICI and IDBI.
These restrictions do not exist anymore. There is much more freedom to

select where to invest under Section 80C. You can decide how much
percentage of your income can go in which investment. So, if you want to
invest the entire Rs 1, 00,000 in ELSS, no one is there to stop you.
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Eligible avenues for Section 80C:
1. Payment of life insurance premium.
2. Contribution to Provident Fund.
3. Repayment of principal amounts on housing loans.
4. Payment of tuition fees.
5. Investments in PPF.
6. Investments in NSC.
7. Investments in Equity-Linked Savings Schemes.
8. Investments in Infrastructure Bonds.
Why Section 80C scores over Section 88
Investing in line with one's risk appetite is a tenet of financial planning and
Section 80C promotes the same. Removal of sectoral caps on investments
for tax-planning purposes means that investors can invest in line with their
risk appetites and needs.
A risk-taking investor can invest his entire corpus of Rs 100,000 in a high-

risk instrument like ELSS; conversely a risk-averse investor can select small
savings schemes like PPF and NSC. As a result, every investor's tax-saving
portfolio can now reflect his individual preferences.
Another advantage that Section 80C offers is for investors whose gross total
income is greater that Rs 500,000. Under the earlier tax regime, these
investors were not eligible for Section 88 tax rebates. However, Section 80C
has done away with this disparity and investors across tax brackets can
claim the Rs 100,000 deduction.
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Impact
• This is expected to increase the disposable income in the hands of the

individuals to some extent which could translate into increased retail
investments in mutual funds.
Increase in Short term Capital Gains
Measures
• Short Term Capital Gains Tax raised from 10% to 15%
Impact
• Since long term capital gains tax has been left unchanged, this hike in
short-term capital gains tax could encourage long-term investments
which augur well to the development of the concept of “long term” in the
Indian Mutual Fund industry, which is conspicuous by its absence but
which is coveted by the fund industry given the greater flexibility that this
provides in fund management.
• At the same time since the short term capital gains tax is still lower than
the income tax slabs of typical capital market investors, it is not expected
to cause too many investors to turn away from mutual funds.
• The fact that the dividend distribution tax structure has not changed
would mean that dividend reinvestment plans in liquid schemes will
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continue to be popular and also the liquid plus category will continue to
attract inflows as the tax rates there would continue to be lower than the
liquid category.
Thrust on Infrastructure Sector
Measures
• Call for more reforms in coal and electricity sectors
• Coal sector regulator to be appointed.
• Fourth Ultra Mega Power Project (UMPP) at Tilaiya to be awarded shortly;
five more UMPPs in Chhattisgarh, Karnataka, Maharashtra, Orissa and
Tamil Nadu likely
• Allocation for National Highway Development Programme (NHDP) raised
from Rs.109 billion in FY08 to Rs.130 billion in FY09
• Rural Infrastructure Development Fund (RIDF) corpus in FY09 raised to
Rs.140 billion
• Oil and Gas - New Exploration Licensing Policy (NELP) to attract
investment of the order of $3.5 - 8 bn for exploration and discovery.
• Government of India is expected to list more PSUs to unlock their values.
Impact
• With so much focus on the infrastructure sector, it is expected that
infrastructure funds which have been the key out-performers in the
industry of late both in terms of returns performance as well as attracting
fund flows, will continue to occupy a prominent place.
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SURVEY
As a part of our project, a survey of customers was being conducted in Delhi

NCR region to know the perceptions of the investors about the investment
schemes basically ULIP and MUTUAL FUNDS
OBJECTIVE OF THE SURVEY:
The major objective of the study
• To know the current pattern of investment among different age groups

and different occupations.
• To know the investors’ perceptions about different investment options

and their investment concerns, their expected returns, and their future
expectations from different investment schemes.
• To know the reputation and acceptability of the two products i.e. ULIP
and MUTUAL FUNDS (of Standard Chartered bank specially) among the
above mentioned categories.
• To know the potential customers for the investment schemes: ULIP

and Mutual Funds of Standard Chartered bank.
RESEARCH METHODOLOGY
The survey process involved two phases: First phase included identification
and selection of the target audience to be studied and to determine the
parameters on which respondents will justify their preferences. The audience
were targeted and analyzed basically on the basis of three important
parameters: Age, Occupations and Income. Demographical information
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was also taken in order to know the investment patterns according to the
location, age, gender etc. A questionnaire (shown in the end of the report)
was designed to collect the needed information from the respondents.
In the second phase data was collected through questionnaire from more
than 100 respondents within Gurgaon region. First component of the survey
was age brackets. Age brackets taken were:
• 18-30
• 30-40
• 40-50
• Above 50
The aim of taking small age brackets was to find out which age group of
people, company need to tape, to increase the sales of the company’s
products, since generally people make their investment decision on the basis
of their age. So, age was the vital component of my survey and I tried to
make sure that, to do the survey among the people of different age groups.
Next component of the questionnaire was the purpose of investment, to find

out the need of the people that why they make investment planning like, for
future security purpose or for tax saving purpose or for any other reason.
Next component was the type of investment to find out whether people are
interested or not to invest in the kind of product which the company is
offering.
Next component of the questionnaire was the nature of job; this component
was taken to find out the relationship between risk appetite and the nature
of job and also the relationship between type of investment and nature of
job.
Another component of the questionnaire was to find out the risk appetite of
people. This was also very important component to conduct the survey.
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One more very important component of questionnaire was the duration of

investment to find out the current trend of the market; that is, to find out
whether people are interested in long-term investment plan or short-term
investment plan.
Results were viewed cautiously as sample was from a specific population.

The responses that were generated during this exercise were converted in
the form of percentages to have a comparative outlook, as the numbers
itself cannot explain the true picture. These percentages were then
represented through the simple tools like bar graphs, pie charts.
Sample size
A sample is a part of the target population carefully selected to represent

that population. As this study is based on finding the investment behavior
towards different investment options in the market. The sample size is 200.
Limitations of the study
Every research is incomplete without its own limitations. In this research too
there were some limitations. They are:
• Results are just an indication of the present scenario and may not be
applicable in the future.
• As the study was conducted only in Delhi & NCR so it can be said that
the study was regionally biased.
• Since sampling was done under the simple random sampling method,
where easily approachable respondents were picked up. So this may
not represent the whole universe.
• The size of the sample is small i.e. 200.
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Profile of Respondents
Analysis
A major chunk of people surveyed fall in the age-group of 18-30

years, followed by the age-group of 30-40 years. Only 9% of the
respondents consisted of above 50 years.
Analysis
76% of the respondents are male while female consisted of a

small group of 24%.
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Analysis
Most of the respondents belongs to Business which covers 40% of

the distribution and it is closely followed by service which
comprised of 38% and further followed by self-employed and
others (e.g. house-wives) which are smaller in proportion.
Analysis
More than half of the respondents belong to the income group of

2.5 – 5 Lacs. 19% of the respondents belong to 5-10 Lacs
whereas same proportion of respondents fall under the category
of less than 2.5 Lacs.
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ANALYSIS
1) FINDINGS BASED ON AGE:
Risk appetite of people belonging to different age groups
Age plays a very crucial role in taking risk. From the graph, it is very much
clear that people in all the age groups falls mainly in the moderate risk
category. As the age factor increases, people divert more towards low risk
category.
It is further explained individually in the form of pie-charts as:
Analysis:
Pie- chart indicates that

people with age group 20-
Analysis:
30 years are neither too
much People of this
risk lover age
nor group
they
prefer risk
are highly to spend their
averse, butmoney
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132 in highly
all have risky instruments,
a medium risk
and .mutual funds form the
appetite
major part of their
investments.
Analysis:
This age group is risk

Analysis:
averse and wants to have
Peopleinvestments
of this age with
group are
safer
highly conservative
moderate returns. in
nature and want to invest
their money in very low
risky investments like fixed
deposits.
Relation between Age & Withdrawl of Money
ANALYSIS
From the above graph it can be concluded that respondents across all age
groups withdraw their money within 1-3 years, followed by the horizon of 3-
10 years with the only exception being the people above 50 years who didn’t
find it safe to invest for 3-10 years.
AGE AND AVENUES USED FOR INVESTMENT
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ANALYSIS
The most favorite and sort out investment option favored by each and every
age group is Mutual Funds which is getting a close competition with stock
investment.
ANALYSIS
PEOPLE IN THE AGE GROUP OF 18-30 YEARS ARE RISK-AVERSE & THIS
CLEARLY SHOWS THEIR INTEREST IN MUTUAL FUNDS.ONLY 13% OF THE
RESPONDENTS FINDS IT SAFE TO INVEST IN ULIP. AS THE AGE-GROUP IS
QUIET YOUNG THESE PEOPLE DON’T WANT TO INVEST IN FIXED DEPOSIT.
THE YOUNG BLOOD TAKES INTEREST IN STOCK INVESTMENT AS 19% OF

THIS AGE-GROUP OPTED FOR STOCKS. BUT ONLY 8% OF THE PEOPLE TAKE
UP INSURANCE AT THIS POINT OF LIFE, WHERE AS OTHERS (REAL
ESTATE.GOLD ETC.) COMPRISES OF ONLY 10%.
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ANALYSIS
PEOPLE IN THE AGE GROUP OF 30-40 YEARS ARE IN THE MIDDLE OF THEIR CAREERS
AT THIS POINT OF TIME THEY CAN TAKE RISK AS IT IS CLEAR FROM THE GRAPH
ITSELF THAT 29% ARE OPTING MUTUAL FUND WHEREAS STOCK OPTION WHICH
COMPRISES OF 21% HAS EMERGED AS THE SECOND MOST PREFERRED INSTRUMENT
FOLLOWED BY INSURANCE HAVING 18% SHARES. ULIP IS NOT KNOWN TO
EVERYBODY AT THIS POINT OF TIME. FDS AND OTHERS ARE HAVING SHARE OF 12%
AND 8% RESPECTIVELY.
ANALYSIS
MUTUAL FUND REMAINS A FAVORITE INVESTMENT OPTION OF THIS MID AGE GROUP
AS 26% OF THE RESPONDENTS FAVOURS THIS INSTRUMENT FOLLOWED BY
INSURANCE WHICH OCCUPIES QUITE A HEALTHY STAKE OF 20% IN THE CHART.
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STOCKS STILL REMAINS A CANDY IN THE HANDS OF INVESTORS AS 17% OF THE

PEOPLE BELONGING TO THIS AGE GROUP HAVE FAITH IN STOCKS WHERE AS FDS,
ULIP HAVE 13% & 12% RESPECTIVELY.
ANALYSIS
PEOPLE ABOVE 50 YEARS OF AGE PREFER PUTTING MONEY IN MUTUAL FUNDS ONLY
BECAUSE OF ITS HEAVY RETURN AS 31% OF THESE INVESTORS IN THE CHART
FAVORS MUTUAL FUNDS. NOW AT THIS POINT OF TIME PEOPLE CHANGE THEIR
PREFERENCE FROM FD & STOCKS TO OTHERS (GOLD, REAL ESTATE ETC.)BECAUSE
AT THIS STAGE I.E BEFORE RETIREMENT PEOPLE NEED HOUSE FOR THEMSELVES &
THERE ARE MANY OTHER RESPONSIBILITIES. THE MOST PREFEERED INSTRUMENT
FOR THE PEOPLE ABOVE 50 YEARS OF AGE IS INVESTING IN FIXED DEPOSIT,
FOLLOWED BY A NEAR EQUAL DISTRIBUTION FOR STOCKS.
Age and Purpose behind Investment
ANALYSIS
PEOPLE OF ALL THE AGE GROUPS HAVE HIGH INCLINATION TOWARDS SAVING
TAXES.NEARLY PEOPLE OF EACH AGE-GROUP SAVES MONEY TO SAVE THEIR TAX
RETURNS. THOUGH THERE ARE PEOPLE WHO INVEST BECAUSE OF CAPITAL GAINS.
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ANALYSIS
INVESTORS IN THE AGE-GROUP OF 18-30 YEARS ARE HIGHLY INCLINED TOWARDS

TAX SAVING AS 56% OF THE INVESTORS PREFER TAX SAVING WHEN THEY GO FOR
AN INVESTMENT. AT THIS AGE PEOPLE DON’T SAVE FOR RETIREMENT BUT 24% OF
INVESTORS GO FOR CAPITAL GAINS AS THEIR MOTIVE FOR INVESTMENT & ONLY 15%
INVEST FOR FUTURE NEEDS.
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ANALYSIS
A PERSON IN THE AGE GROUP OF 30-40 YEARS INVESTS TO SAVE THEIR TAXES.
MORE THAN 50% OF THE INVESTORS FIND TAX SAVING AS THE BEST OPTION AS
THEY ARE SAVING FOR FUTURE AS WELL AS DOESN’T HAVE TO GIVE THEIR HARD
EARNED MONEY TO THE GOVERNMENT. THIS GROUP OF PEOPLE ALSO FAVORS
CAPITAL GAINS TO INCREASE THEIR MONEY AS 28% OF THE INVESTORS INVEST
BECAUSE OF CAPITAL GAINS. ONLY 14% OF THE PEOPLE GIVE PREFERENCE TO
FUTURE NEEDS 6% THINK OF THEIR RETIREMENT & THEN INVEST.
ANALYSIS
PEOPLE IN THE AGE GROUP OF 40-50 YEARS HAVE A HIGH INCLINATION TOWARDS
TAX SAVINGS & CAPITAL GAINS WHEN THEY GO FOR AN INVESTMENT. THOUGH THE
TAX SAVING CHUNK ACCOUNTS TO 48% AND THE OTHER 52% ARE OCCUPIED BY
CAPITAL GAINS, FUTURE NEEDS & RETIREMENT WHICH CONSTITUTE OF 21%, 17% &
14% RESPECTIVELY.
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ANALYSIS
INTERESTINGLY PEOPLE ABOVE 50 YEARS OF AGE ARE MORE INTERESTED IN

SAVING THEIR TAX LIABILITY AS THESE PEOPLE OCCUPY HALF OF THE CHART. 25%
OF THE PEOPLE ARE INTERESTED TO INVEST IN THE RETIREMENT PLANS TO MAKE
THEIR FUTURE SAFE. THIS FIGURE CAN BE EASILY DRAWN OUT AS THIS GROUP OF
PEOPLE IS NEARING THE RETIREMENT AGE & THEY HAVE TO MAKE THEIR FUTURE
SAFE. CAPITAL GAINS & FUTURE NEEDS GETS AN EQUAL WEIGHTAGE OF 14%.
2) FINDING BASED ON OCCUPATION
ANALYSIS
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THE BAR GRAPH ABOVE SHOWS HOW PEOPLE OF DIFFERENT OCCUPATION

INVEST. INVESTING IN STOCK MARKET IS NOT EVERYONE’S CUP OF TEA.
PEOPLE WHO CAN TAKE RISK CAN INVEST IN STOCK MARKET & INVESTING
IN STOCKS IS VERY MUCH PREVALANT AMONG BUSINESSMEN. MUTUAL
FUND INVESTMENT IS SAFE AMONG SELF-EMPLOYED.
ANALYSIS
BUSINESSMEN ARE PEOPLE WHO ARE CONSIDERED TO TAKE RISK IN

STOCK INVESTMENT.49% OF BUSINESSMEN INVESTS IN STOCKS TO GET
HIGH RETURN & OTHER 50% CONTITUTE OF ULIP, FIXED DEPOSIT,
INSURANCE, MUTUAL FUNDS, & OHTERS (REAL ESTATE, GOLD ETC.) THIS
CATEGORY OF PEOPLE CANNOT SUSTAIN WITH A FIXED RETURN SO THEY
INVEST IN SHARE MARKET & THEY ARE ALSO RISK TAKERS.
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ANALYSIS
SELF-EMPLOYED (CA, DOCTORS ETC.) HAVE A STRONGER PREFERENCE FOR

INVESTING IN MUTUAL FUNDS & INSURANCE WHICH CONSTITUTE OF 34%
& 23% RESPECTIVELY. THIS CATEGORY OF INVESTORS WANT THEIR HARD
EARNED MONEY TO BE SAFE SO THEY PLAY SAFELY WITH MUTUAL FUNDS &
ONLY 13% TAKES RISK & INVESTS IN STOCKS. THIS TYPE OF PEOPLE NEED
A CONTINUOUS GROWTH & MUTUAL FUNDS ONLY PROVIDE THEM WITH
THIS GROWTH ENGINE. 17% OF SELF-EMPLOYED GROUP INVESTS IN ULIP
& ONLY 9% TAKES INTEREST IN FD.
ANALYSIS
SERVICEMEN PREFER TO PLAY WITH THEIR MONEY SAFELY. SO 37% OF

THESE PEOPLE KEEP THEIR MONEY IN BANK ACCOUNTS I.E HAVING THEIR
FIXED DEPOSITS. AFTER THIS THEY PREFER INSURANCE & MUTUAL FUNDS
WHICH COMPRISES OF 16% & 17% OF THEIR INVESTMENT RESPECTIVELY.
THESE PEOPLE DON’T WANT TO TAKE RISK WITH THEIR HARD EARNED
MONEY SO ONLY 13% INVESTS IN STOCKS & 11% INVESTS IN ULIP. ONLY
6% OF PEOPLE INVESTS IN OTHERS(GOLD, REAL ESTATE.)
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141
OCCUPATION & INVESTMENT PURPOSE
ANALYSIS
IT IS CLEAR FROM THE BAR GRAPH THAT PEOPLE HAVE THE STRONGEST
PREFERENCES FOR ACHIEVING CAPITAL GAINS WHETHER THEY BELONG TO
BUSINESS, SELF-EMPLOYED, OR SERVICE CLASS. MORE OR LESS EQUAL
PREFERENCE IS SEEN IN FUTUTE NEEDS, TAX-SAVING & RETIREMENT.
ANALYSIS
BUSINESS CLASS IS RISK TAKERS & THEIR MAIN INTEREST IS WEALTH

MAXIMIZATION. THIS CLASS OF PEOPLE HAVE THE STRONGEST
PREFERENCE FOR ACHIEVING CAPITAL GAINS WITH 51% OF SHARE,
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142
FOLLOWED BY FUTURE NEEDS WHICH COMPRISES 22%.IT SEEMS THEY

ARE LESS WORRIED ABOUT THEIR TAX SAVING & RETIREMENT.
ANALYSIS
LIKE BUSINESS CLASS, THE MAIN INTEREST OF THE SELF-EMPLOYED IS TO

ACHIEVE CAPITAL GAINS. IT COMPRISES OF ALMOST HALF OF THE TOTAL
SELF-EMPLOYED.OTHER HALF COMPRISES OF FUTURE NEEDS, TAX SAVING
& RETIREMENT, IN WHICH FUTURE NEEDS HAD THE MAXIMUM SHARE
WHICH IS CLOSELY FOLLOWED BY TAX SAVING & RETIREMENT.
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143
ANALYSIS
LOOKING AT THE ABOVE CHART IT IS CLEAR THAT SERVICE CLASS HAS

ALSO CLOSE AFFINITY WITH CAPITAL GAINS LIKE THE OTHER TWO
CLASSES I.E BUSINESS & SELF-EMPLOYED. BUT PEOPLE IN THE SERVICE
CLASS ARE WILLING TO SAVE MORE FOR TAX SAVING & RETIREMENT.AND
22% PEOPLE ALSO SAVE FOR FUTURE NEEDS.
3) FINDING BASED ON INCOME
INCOME & PERCENTAGE OF INVESTMENT
ANALYSIS
IBS, GURGAON Page
144
PEOPLE IN EACH GROUP OF INCOME LEVEL APPROXIMATELY SAVE TO 10-

25% OF THEIR INCOMES. THIS BAR GRAPH GIVES A CLEAR CUT PICTURE
OF PEOPLE’S INCOME & THEIR SAVING PATTERN.
ANALYSIS
IN THE LOWER INCOME GROUP I.E PEOPLE HAVING INCOME OF LESS THAN
2.5 LACS, ONLY TWO CATEGORIES EXISTS. ONE IS PEOPLE WHO INVEST 0-
10% OF THEIR EARNING WHICH CONSTITUTE OF 65% AND THE OTHER
CATEGORY WHICH INVESTS 10-25% OF ITS EARNING COMPRISES OF 35%.
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145
ANALYSIS
IN THE MIDDLE INCOME GROUP I.E 2.5-5 LACS THERE IS ALMOST AN

EQUAL DISTRIBUTION OF PEOPLE INVESTING THEIR TOTAL EARNINGS.
46% OF THIS GROUP INVESTS THEIR 10-25% OF THEIR INCOME WHERE AS
48% INVESTS ONLY 0-10% OF THEIR MONEY. ONLY 6% OF PEOPLE
INVESTS ABOVE 25% OF THEIR HARD EARNED MONEY.
ANALYSIS
65% OF THE PEOPLE WHO EARN MORE THAN 5 LACS INVEST 10-25% OF
THEIR EARNINGS WHERE AS 21% PEOPLE INVESTS 0-10%. IN THE INCOME
GROUP OF 5-10 LACS 14% OF THE POPULATION INVESTS ABOVE 25%.
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146
ANALYSIS
AS PEOPLE INCOME INCREASES THEIR INVESTMENT PATTERN ALSO

CHANGES. PEOPLE OF HIGH INCOME GROUP I.E HAVING EARNING OF MORE
THAN 10 LACS SAVES OR INVESTS A GOOD AMOUNT OF MONEY. 24% OF
THIS CATEGORY OF PEOPLE INVESTS ABOVE 25% OF THEIR EARNINGS.
THOUGH 60% OF PEOPLE INVEST 10-25% OF THEIR TOTAL EARNINGS. AND
ONLY 16% OF THIS GROUP INVESTS IN THE RANGE OF 0-10% OF THEIR
EARNINGS.
INCOME & PURPOSE OF INVESTMENT

IBS, GURGAON Page
147
ANALYSIS
PEOPLE HAVE DIFFERENT INCOMES & ACCORDING TO THEIR INCOME THEIR

PURPOSE OF INVESTMENT ALSO VARY. IT IS CLEARLY VISIBLE IN THIS
GRAPH THAT EACH LEVEL OF INCOME GROUP HAVE DIFFERENT
REQUIREMENT & ACCORDING TO THAT INVESTMENT PATTERN DIFFERS.
ANALYSIS
PEOPLE IN THE LOW INCOME GROUP I.E LESS THAN 2.5 LACS HAVE A
TENDANCY TO SAVE FOR FUTURE NEEDS & 45% PEOPLE FALLS IN THIS
CLASS. AND THESE PEOPLE HAVE A TENDANCY TO INVEST FOR FUTURE
NEEDS & TO EARN CAPITAL GAINS IN THAT ORDER.THEY DO NOT HAVE
MUCH TAX LIABILITY SO THEY DO NOT HAVE TO BOTHER ABOUT THAT.BUT
17% PLAN THEIR FUTURE.
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148
ANALYSIS
AS PEOPLE ‘S INCOME INCREASES SO THE TENDANCY TO SAVE FOR TAX

DEDUCTIONS ALSO INCREASES.PEOPLE WHO’S INCOME RANGES FROM 2.5-
5 LACS FALLING IN THE MIDDLE INCOME GROUPS INVEST FOR THE
PURPOSE OF TAX SAVING, FUTURE NEEDS & CAPITAL GAINS WHICH
STANDS OUT TO BE 51%, 22%, & 19% RESPECTIVELY.
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ANALYSIS
PEOPLE WHO FALLS UNDER THE CATEGORY OF 5-10 LACS INCOME SLAB
INVESTS FOR THE PURPOSE OF TAX SAVING. 54% OF PEOPLE INVEST TO
SAVE TAX. OTHER INVESTMENTS COMPRISES NEARLY OF 50% & CAPITAL
GAINS, RETIREMENT, & FUTURE NEEDS ACCOUNT TO THIS 50%.
ANALYSIS
PEOPLE BELONGING TO THE HIGH LEVEL OF INCOME GROUP’S MAIN

MOTTO IS TO SAVE TAX THESE PEOPLE INVESTS FOR THE PURPOSE OF TAX
REDUCTIONS & CAPITAL GAINS. A LARGE NUMBER OF PEOPLE I.E 58%
INVESTS ONLY TO SAVE TAX.21% SAVES FOR CAPITAL GAINS, 13% PLAN
FOR THEIR RETIREMENT & ONLY 8% ACCOUNTS FOR FUTURE NEEDS.
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150
Recommendations
Age
• The segment (18-30) can be a potential customer segment for the

bank as most of the people are falling in the income group of less than
Rs.15000 per month. The company can target this segment by offering
its ULIP product both as an insurance and investment product, which
can provide high returns as the investments and provide the insurance
cover too, as a large segment doesn’t have an insurance cover. The
return in new Capital Unit Gain Plan is around 20% which is quite good
enough. Mutual Fund Schemes can also be offered to those
respondents in this age group who are risk takers as in mutual funds
small amounts can invested. The need is to make this segment aware
of the products like ULIP (which is promising return of 20-25% p.a.)
and tap as many customers as possible. Also Positioning of the Mutual
Funds should be such that attracts customers.
• In order to tap the 30-40 years segment ULIP can be promoted as an
investment option rather than an insurance product. Mutual funds
need to be promoted as only a small segment is investing in mutual
funds. Mutual funds and ULIP both can be the best investment option
for this segment.
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151
• As the segment 40-50 years is an investing and risk taking segment,

Mutual funds promising higher returns can be promoted in this
segment. The product ULIP is also highly acceptable by this segment,
so both of these products can be promoted as a best investment
options promising high returns and low risks. People in this age group
can also invest in real estate as by this age people are in the position
to invest large lump sum money for this investment.
• In the segment of above 50 age group people be targeting for the
Mutual funds as can be seen that very few people are investing M.Fs.
this is because this segment consists of risk averters as this segment
have invested in Fixed Deposits and government securities and
insurance than any other investment product as safety is the most
important factor which is being considered while investing by this
segment. But these people are neutral for these investments. These
thus theses products can be promoted as safe investments and better
than F.D’s only then this segment can be tapped.
Income
• The income bracket less than Rs.15000 per month are basically
safe investors and have not and do not prefer investing in mutual
funds and ULIP. Thus positioning of these products should be such
that people are attracted towards this scheme. Emphasis on
marketing of the products should be given.
• Respondents under income bracket Rs.15000-Rs.30000 have
mainly invested in insurance and real estate. But when survey was
done and their preference was asked these respondents strongly
preferred investing in these strategies.
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152
• Income Bracket of Rs.30000-Rs.50000 is the strong contenders for

investing their money and these people have invested in real
estate, insurance and fixed deposits. Moreover there is mixed
preferences for their investments thus proper segmentation of the
sample should be done accordingly marketing strategies should be
adopted.
• Though there is a small percentage of respondents in income
bracket above Rs.50000 who least prefer investing in mutual fund.
But this is the segment which can be well targeted and their
portfolio should be such that gives them more returns. The case of
ULIP is different as people strongly prefer investing in this
investment strategy. Thus emphasis for selling ULIP in this income
bracket.
Occupation
The survey conducted has resulted in the observation that the

business class should be targeted for ULIP and Mutual funds as they
strongly prefer investing in these two products. These products should
be positioned as safe investment and then been sold it to service class
and retirees as these investors are the safe investor.
Conclusion
As the main objective of the project is to analyze the investment strategies

of various retail investors, the whole analysis of project is divided into three
phases—
Phase 1
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153
Investment is integral part of savings i.e. people invests from the amount
which they saved after their daily expenditures. But still anyone rarely
invests the whole amount he saved, and thus the question arise ‘where to
keep the savings?’ and the most common answer to this question is saving
a/cs of the banks.
Thus while analyzing the investment strategies our first target segment was
saving bank a/c of our organization. Standard Chartered bank offers 5 types
of Savings account matching different needs of customers namely:
· Axcess plus
· Super Value
· Parivaar account
· Saral Account
· Aasan Account
The product which we analyze for our bank was axcess plus saving a/c of it
in context with the same type of saving a/cs of the other organizations. For
this we did an organization survey and collect the information about the
different banks a/cs. This collected data was then posted in the excel sheet
and thus a comparative analyses was done focusing the different competitive
strategies followed by the banks in marketing their product. E.g. ICICI bank
& HDFC bank follows the aggressive marketing policy whereas banks as
STANDARD CHARTERED & ABN AMRO follow the targeted marketing policy.
The former cater to the needs of every customer and target the mass
customer segment present in market while the latter focuses only on the
selected segment and provides a very good service with charges
comparatively high than other banks.
As our main objective behind this research was to analyze the competitive
strategies we also did selling of this product so that we can analyze the need
IBS, GURGAON Page
154
of the different customers while choosing a saving bank a/c. Thus we sell the
axcess plus and did a comparative analyses of the various needs of the
customer e.g. very good service, always filled ATMs, low charges etc.
PHASE 2
People used to invest from the savings and some of the major investment
instruments are ULIPs, MUTUAL FUNDS, LIC, etc. which caters to different
investment needs of the investors as mentioned earlier. Every investor has
lot of expectations from his investment but there is always priority given to
the one expectation on the other. E.g. a customer might expect very high
returns from his investment but when it comes to the risk he prefer to
invest in bonds as he didn’t want to bear risk at all. Thus his priority is safe
investment rather than very high returns. To analyze this we did a market
survey considering the following facts in mind-
✔ It consist sample from all the age groups of investors.

✔ It caters to all class of society i.e. businessmen, servicemen and self
employed.
✔ People from different income groups were included in sample size.
✔ Sample size also consist sample of respondents with different
disposable incomes. Etc
Thus a questionnaire was formed including all these factors and a market
survey was done in Delhi NCR region. The main aim of survey was to
analyze the risk appetite of different respondents in different age groups,
with different annual income, disposable income etc. so that while designing
the portfolio of the customer we can actually identify the need of the
customer and suggest him the investments according to his need.
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155
After collecting the required information an excel sheet was prepared in

which the data was posted. Then we plan to did the graphical analyses of
whole the data collected. These graphs will analyze the relations between
different factors which were kept in mind while doing the analyses.
To go into more depth of the investors thinking we did selling of this product
too. The main aim behind this selling was to know the factors which an
investor kept in mind before investing in any instrument. One of the most
common factors we came to know was BRAND NAME.
Apart from the ULIPs we also laid emphasis on deep theoretical study of
mutual funds which are one of the most common investment instruments.
This study includes comparative analyses of returns in different ULIP plans
with different types of MUTUAL FUNDS. In this study comparison is done not
only for returns but also keeping risk factor in mind.
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156
ANNEXURE-I
COMPARISON OF SERVICE CHARGES AMONG DIFFERENT
PRIVATE BANKS
STAN ABN KOTAK
Service Charges C AMRO ICICI HDFC M
Average Balance 10000 10000 5000 5000 10000
Non maintenance
of AB
500/mont 750/quarte
<5000 1500 h 750/quarter* r** 750
>=5000 to < 400/mont
7500 1250 h
300/mont
>=7500 to 10000 750 h
* Rs. 250/quarter for sr.citizens & young star

customers (minors)
** if customer is semi urban than AQB will be
2500/quarter
Debit card fees
Free for 1st

year Rs.100
normal debit card 200/yr 180/yr 99/yr 100/yr for
subsequent
years
smart fill card 399/yr na 99/yr* na na
gold card 799/yr 400/yr na 500/yr na
Additional
cards
supplementary
cards na 180/yr na na 100/card
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157
add on cards na 180/yr** na 500/yr*** 250/card

replacement card
fee 200/card 200/card 100/card 100/card
damaged card fee 200/card 200/card free free
woman’s card na na na 150/card na
* smart fill card is HPCL DEBIT CARD in

ICICI
** minimum limit for add on card in ABN AMRO is RS.15000 & service charge will
be as
500/mont
<7500 h
>=7500 to 400/mont
<10000 h
>=10000 to < 300/mont
15000 h
***for easy shop woman’s card fee will be RS 150/yr in

HDFC
ATM's
transaction
UTI HDFC &
free ATMS* ICICI SBI** KOTAK M
cash
withdrawal(fr rs 25 from
Others( Visa
om partners any other
Charged domestic
Rs 20 & from bank
ATMs
non partners except SBI
Rs 60)
Cheque Book
At par cheque
book
0 to 500 50**** free
50*** free
Rs 1/
1000(min
501 & above Rs 50)
cheque return
Inward 300 350 200 400 300
OUTWARD 100 100 100***** 100 300

*subsequent to the month where transaction criteria not fulfilled &
bal<10,000
IBS, GURGAON Page
158
** only in gold card , 2 transactions per

month
*** only if AQB is not maintained
otherwise free
**** free 1st cheque book of 25 leaves
***** 50/Cheque for local cheque deposited by
customer
statements
monthly
statement 200/yr 200/yr free* free
Adhoc statement 50/yr na 100/stat 100/yr
Facilities
Dmat a/c na free
Dmat maintain
charges na 360 per yr
Internet Banking free free free free free

Phone Banking free free free free free
DD/POS
DD COMMISON
2/1000(min shown
On same bank 50 50) below 2.5/1000*
2.5/1000* 4/1000 (100
on other bank * min)
* min 50 max
5000
** min 50 max
8000
HDFC commission schedule
on branch
location
up to 10000 50,40*
10000-50000 75,60*
50000-100000 2.5/1000**
above 100000 2/1000***
* for sr.citizens /rural areas
** min 150/-
***min 250/- & max 5000
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159
On non branches location-----rs 50/- plus charges as

below
rs 500/- 10
500/- to 1000/- 15
1000/- to 5000/- 25
5000/- to 10000/- 30
10000/ to
100000/- 3/1000
100000 and
above 6/1000*
* max rs 5000
PO commission schedule 50 1/1000* dd charges dd charges

* 75 for PO Upto 50000
max 5000
< 14 & >6 Rs.600 if

500 months no closed
within 12 250 within 1
Account closing less charge, 15 within 6
months yr, nil after
charge than 6 days to 6 months.
500/- 1 yr
months months Else no
100/- charges
courier
Rs. 25 &
Door step DD Rs. 50 Rs. 10 par
na
banking par transaction
transactio
n
ANNEXUR
E-II
QUESTIONNAIRE
Name- Age- 18-30 31-40 41-

50 >50
Telephone No-
Occupation
a) Service b)Business
c)Self employed d) Others
IBS, GURGAON Page
160
Current annual income-

a) <2,50,000 b) Rs 2,50,000-5,00,000
c) Rs 5,00,000-10,00,000 d) >Rs 10,00,000
1) Have you invested in any of the following?

a) Fixed deposits. b) Mutual Fund
c) Stocks d) ULIP e) Others
2) You begin to withdraw money from your investment

a) 0-1 yr b) 1-3 yrs
c) 3-10 yrs d) 10 yrs or more
3) What is your primary investment focus?

a) Retirement b) Wealth creation
c) Future uncertainty d) Tax rebate
4) Brand name is considered while making a decision to invest

a) Disagree b) Uncertain
c) Agree e) don’t know
5) What is the most important criterion for you selecting a particular investment plan?
a) Past performance b) Service
c) Promoter’s background d) any other________________
6) Your approx. fixed monthly expenses?

a) < Rs.10,000 b) Rs 10,000-25,000
c) Rs. 25,000-50,000 d) Rs >50,000
7) How would you describe yourself as a risk taker?

a) Willing to take risk for higher return b) Can take calculated risk.
c) Low risk taking capabilities. e) Extremely averse to risk
References
www.standardchartered.co.in
www.bajajallianz.com
www.nseindia.com
www.mutualfundsindia.com
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161
www.valueresearchonline.com
ICFAI Journals
The Economic Times
IBS, GURGAON Page

162

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Investment Objective & Portfolio Mgmt.

IBS, GURGAON Page 1

But Life can’t be completed without the support of many people.

I would also like to extend my sincere regards to Mr.NITISH DIPANKAR

I would also thank Prof.P.C. VERMA my faculty guide ICFAI Business

“It is good to have an end to journey toward; but it is the journey

IBS, GURGAON Page 2

13. ULIPs Vs Mutual Funds……………………………………………………………108

IBS, GURGAON Page 3

Rationale of the Project

IBS, GURGAON Page 4

For occupation wise classification four categories were selected namely

Limitation of the Study

The study which is being conducted is limited by following reasons:-

1) Disclosure of information from the banks is a constraint-when I

IBS, GURGAON Page 5

cooperation on the part of the employees in giving the right

2) Unwillingness of the respondents to provide information-when I

3) Incapacity to survey large number of people. I could survey approx

100 people. So whatever analysis has been done is done accordingly.

4) The people surveyed belonged to NCR region only-investment habits of

IBS, GURGAON Page 6

In finance, the purchase of a financial product or other item of value with an

You do not have to be wealthy to be an investor. Investing even a small

An investment can be described as perfect if it satisfies all the needs of all

IBS, GURGAON Page 7

accommodation, as well as education, health, recreation, transport, special

These investors take only limited risk by concentrating on secure, fixed-

As a matter of fact, the investment approach of an investor is directly linked

IBS, GURGAON Page 8

on personal circumstances and factors like age, past experiences with

Planning Your Investment:

Investment Planning is the process of identifying and implementing effective

One of the parts of developing a comprehensive financial plan is the

• The Means to Invest.

• Investment Time Horizon

IBS, GURGAON Page 9

Financial markets are volatile in nature. Volatility means sudden swings in

➢ Interest Rate Risk

Depending on the interest rate movement in the economy, the rates of

IBS, GURGAON Page 10

Based on above three considerations, investments should be selected to

Once investments are chosen and expectations are established, the

• Adjust the Portfolio

Your portfolio should be adjusted to maintain your goals and your

IBS, GURGAON Page 11

5 90,573 86,261 82,193 80,245 78,353 74,726

10 82,035 74,409 67,556 64,393 61,391 55,839

15 74,301 64,186 55,526 51,672 48,102 41,727

20 67,297 55,368 45,639 41,464 37,689 31,180

25 60,953 47,761 37,512 33,273 29,530 23,300

30 55,207 41,199 30,832 26,700 23,138 17,411

IBS, GURGAON Page 12

The Power of Compounding

Compounding investment earnings is what can make even small investments

Years 1000 2000 3000 4000 5000

5 78,082 156,165 234,247 312,330 390,412

10 206,552 413,104 619,656 826,208 1,032,760

15 417,924 835,849 1,253,773 1,671,697 2,089,621

20 765,697 1,531,394 2,297,091 3,062,788 3,828,485

25 1,337,890 2,675,781 4,013,671 5,351,561 6,689,452

30 2,279,325 4,558,651 6,837,976 9,117,301 11,396,627