ACKNOWLEDGEMENT

It is difficult to acknowledge precious a debt as that of learning as it is the only debt that is difficult to repay except through gratitude. First and foremost I wish to express my profound gratitude to the almighty, the merciful & compassionate with those grace & blessings. I have been able to complete this work. I convey my heart full thanks to the Assistant Sales manager Mr.Sanjeev Kanwar and the staff members of HSBC INVESTDIRECT SECURITIES (INDIA) LTD, with their help and corporation. It is my profound privilege to express my sincere thanks to Dr. J.S.BEDI, Chairman, GJIMT for giving me an opportunity to work on the summer training project and giving me full support in completing this project. I am very thankful to my guide Ms. Anupam Gupta (Lecturer in GJIMT) and my coordinator Ms. Babita Dosanjh for his full support in completing this project work. Last but not least, I would like to thank my parents & my friends for their full cooperation & continuous support during the course of this assignment.

DECLARATION
Hereby declare by the summer training project report entitled CURRENT SCENARIO OF MUTUAL FUNDS WITH REFERENCE TO HSBC AND INVESTORS AWARENESS ABOUT IT submitted for the degree of Masters of Business Administration is our original work & the project report has not formed the basis for the award of any diploma, degree, associate ship, fellowship or similar other titles. It has not been submitted to any other university or institution for the award of any degree or diploma.

Gurpreet Singh Rollno : 94512236918

CERTIFICATE

EXECUTIVE SUMMARY

The project talks about The current scenario of Mutual funds as an investment tool, and investors perception about it, with special reference to HSBC mutual funds. The first few pages talk about the introduction to mutual funds. This is followed by literature review with details about mutual funds. Next comes the survey, the purpose of which is to study the working of mutual funds, the characteristics of mutual funds that attract the investor and what an investor should consider for safe investment and better returns. The last part consists of findings, recommendations, limitations, conclusion and bibliography. The questionnaire has been annexed to the report.

TABLE OF CONTENTS
SR.NO
1 2 3 4 5 6 7 8 9 10 11 12 13 14

TOPIC
Introduction to the Project Review of Literature Company Profile Need for the study Objective of the study Research methodology Data Representation Data Analysis and Interpretation Findings Recommendations and Suggestions Conclusion Limitations Bibliography Annexure: Questionnaire

PAGE NO.
6 9 45 61 63 64 67 76 89 92 94 95 96 97

INTRODUCTION
S avings form an important 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 a plethora of avenues to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings. Let us examine several of them:

Banks Considered as the safest of all options, banks have been the roots of the financial systems in India. Promoted as the means to social development, banks in India have indeed played an important role in the rural upliftment. For an ordinary person though, they have acted as the safest investment avenue wherein a person deposits money and earns interest on it. The two main modes of investment in banks, savings accounts and Fixed deposits have been effectively used by one and all. However, today the interest rate structure in the country is headed southwards, keeping in line with global trends. With the banks offering little above 9 percent in their fixed deposits for one year, the yields have come down substantially in recent times. Add to this, the inflationary pressures in economy and you have a position where the savings are not earning. The inflation is creeping up, to almost 8 percent at times, and this means that the value of money saved goes down instead of going up. This effectively mars any chance of gaining from the investments in banks.

Post Office schemes Just like banks, post offices in India have a wide network. Spread across the nation, they offer financial assistance as well as serving the basic requirements of communication. Among all saving options, Post office schemes have been offering the highest rates. Added to it is the fact that the investments are safe with the department being a Government of India entity. So the two
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basic and most sought for features, those of return safety and quantum of returns were being handsomely taken care of. Though certainly not the most efficient systems in terms of service standards and liquidity, these have still managed to attract the attention of small, retail investors. However, with the government announcing its intention of reducing the interest rates in small savings options, this avenue is expected to lose some of the investors. Public Provident Funds act as options to save for the post retirement period for most people and have been considered good option largely due to the fact that returns were higher than most other options and also helped people gain from tax benefits under various sections. This option too is likely to lose some of its sheen on account of reduction in the rates offered.

Company Fixed Deposits Another oft-used route to invest has been the fixed deposit schemes floated by companies. Companies have used fixed deposit schemes as a means of mobilizing funds for their operations and have paid interest on them. The safer a company is rated, the lesser the return offered has been the thumb rule. However, there are several potential roadblocks in these. First of all, the danger of financial position of the company not being understood by the investor lurks. The investors rely on intermediaries who more often than not, dont reveal the entire truth. Secondly, liquidity is a major problem with the amount being received months after the due dates. Premature redemption is generally not entertained without cuts in the returns offered and though they present a reasonable option to counter interest rate risk (especially when the economy is headed for a low interest regime), the safety of principal amount has been found lacking. Many cases like the Kuber Group and DCM Group fiascoes have resulted in low confidence in this option.

The options discussed above are essentially for the risk-averse, people who think of safety and then quantum of return, in that order. For the brave, it is dabbling in the stock market. Stock markets provide an option to invest in a high risk, high return game. While the potential return is much more than 10-11 percent any of the options discussed above can generally generate, the risk is undoubtedly of the highest order. But then, the general principle of
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encountering greater risks and uncertainty when one seeks higher returns holds true. However, as enticing as it might appear, people generally are clueless as to how the stock market functions and in the process can endanger the hard-earned money. For those who are not adept at understanding the stock market, the task of generating superior returns at similar levels of risk is arduous to say the least. This is where Mutual Funds come into picture.

REVIEW OF LITERATURE

What are Mutual Funds?

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money collected & invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and its unit holders in proportion to the number of units owned by them (pro rata) shares the capital appreciation realized by the scheme. Thus, a Mutual Fund is the most suitable investment for the common person as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy

A Mutual fund is the answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. In effect, the mutual fund vehicle exploits economies of scale in all three areas - research, investments and transaction processing. While the concept of individuals coming together to invest money collectively is not new, the mutual fund in its present form is a 20 th century phenomenon. In fact, mutual funds gained popularity only after the Second World War. Globally, there are thousands of firms offering tens of thousands of mutual funds with different investment objectives. Today, mutual funds collectively manage almost as much as or more money as compared to banks.

CONCEPT
The flow chart below describes broadly the working of a mutual fund:

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Flow from SEBI to Investor

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THE SECURITY AND EXCHANGE BOARD OF INDIA (Mutual Funds) REGULATIONS,1996 defines a mutual fund as a " a fund establishment in the form of a trust to raise money through the sale of units to the public or a section of the public under one or more schemes for investing in securities, including money market instruments." Mutual Funds have been a significant source of investment in both government and corporate securities. It has been for the decades the monopoly of the state with UTI being the key player with invested funds exceeding Rs. 300 bn. (US $ 10 bn.). The state owned insurance companies also hold a portfolio of stocks. Presently, numerous mutual funds exist, including private and foreign companies. Banks mainly state owned too have established Mutual Funds (MFs). Foreign participation in mutual funds and asset management companies permitted on a case-by-case basis.

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MUTUAL FUNDS ADVANTAGES:

The benefits on offer are many with good post-tax returns and reasonable safety being the hallmark that we normally associate with them. Some of the other major benefits of investing in them are: Number of available options Mutual funds invest according to the underlying investment objective as specified at the time of launching a scheme. So, we have equity funds, debt funds, gilt funds and many others that cater to the different needs of the investor. The availability of these options makes them a good option. While equity funds can be as risky as the stock markets themselves, debt funds offer the kind of security that aimed at the time of making investments. Money market funds offer the liquidity that desired by big investors who wish to park surplus funds for very short-term periods. The only pertinent factor here is that the fund has to selected keeping the risk profile of the investor in mind because the products listed above have different risks associated with them. So, while equity funds are a good bet for a long term, they may not find favor with corporate or High Net worth Individuals (HNIs) who have short-term needs. Diversification Investments spread across a wide cross-section of industries and sectors and so the risk is reduced. Diversification reduces the risk because not all stocks move in the same direction at the same time. One can achieve this diversification through a Mutual Fund with far less money than one can on his own. Professional Management Mutual Funds employ the services of skilled professionals who have years of experience to back them up. They use intensive research techniques to analyze each investment option for the potential of returns along with their risk levels to come up with the figures for performance that determine the suitability of any potential investment. Potential of Returns
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Returns in the mutual funds are generally better than any other option in any other avenue over a reasonable period. People can pick their investment horizon and stay put in the chosen fund for the duration. Equity funds can outperform most other investments over long periods by placing long-term calls on fundamentally good stocks. The debt funds too will outperform other options such as banks. Though they are affected by the interest rate risk in general, the returns generated are more as they pick securities with different duration that have different yields and so are able to increase the overall returns from the Get Focused Investing in individual stocks can be fun because each company has a unique story. However, it is important for people to focus on making money. Investing is not a game. Your financial future depends on where you put you hardearned dollars and it should not take lightly. Efficiency By pooling investors' monies together, mutual fund companies can take advantage of economies of scale. With large sums of money to invest, they often trade commission-free and have personal contacts at the brokerage firms. Ease of Use Can you imagine keeping track of a portfolio consisting of hundreds of stocks? The bookkeeping duties involved with stocks are much more complicated than owning a mutual fund. If you are doing your own taxes, or are short on time, this can be a big deal. Wealthy stock investors get special treatment from brokers and wealthy bank account holders get special treatment from the banks, but mutual funds are non-discriminatory. It doesn't matter whether you have $50 or $500,000, you are getting the exact same manager, the same account access and the same investment. Risk In general, mutual funds carry much lower risk than stocks. This is primarily due to diversification (as mentioned above). Certain mutual funds can be riskier than individual stocks, but you have to go out of your way to find them.
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With stocks, one worry is that the company you are investing in goes bankrupt. With mutual funds, that chance is next to nil. Since mutual funds, typically hold anywhere from 25-5000 companies, all of the companies that it holds would have to go bankrupt. I will not argue that you should not ever invest in individual stocks, but I do hope you see the advantages of using mutual funds and make the right choice for the money that you really care about.

DRAWBACKS OF MUTUAL FUNDS

Mutual funds have their drawbacks and may not be for everyone: No Guarantees No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money. Fees and commissions All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund. Taxes During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a
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profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made. Management risk When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers

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BROAD MUTUAL FUND TYPES

Various Mutual Fund schemes and their implications

Mutual fund schemes are classified on the basis of its structure and investment objective.

By Structure
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Open ended funds: Investors can buy and sell units of open-ended funds at NAVrelated price every day. Open-end funds do not have a fixed maturity and it is available for subscription every day of the year. Open-end funds also offer liquidity to investments, as one can sell units whenever there is a need for money. Close-ended funds: These funds have a stipulated maturity period, which may vary from three to 15 years. They are open for subscription only during a specified period. Investors have the option of investing in the scheme during initial public offer period or buy or sell units of the scheme on the stock exchanges. Some closeended funds repurchase the units at NAV-related prices periodically to provide an exit route to the investors. Interval Funds: These funds combine the features of both open and close-ended funds. They are open for sale and repurchase at a predetermined period.

By Investment objective
Growth funds: They normally invest most of their corpus in equities, as their objective is to provide capital appreciation over the medium-to-long term. Growth schemes are ideal for investors with risk appetite. Income funds: As the name suggests, the aim of these funds is to provide regular and steady income to investors. They generally invest their corpus in fixed income securities like bonds, corporate debentures, and government securities. Income funds are ideal for those looking for capital stability and regular income. Balanced funds: The objective of balanced funds is to provide growth along with regular income. They invest their corpus in both equities and fixed income securities as indicated in the offer documents. Balanced funds are ideal for those looking for income and moderate growth. Money market funds: These funds strive to provide easy liquidity, preservation of capital and modest income. MMFs generally invest the corpus in safer short-term instruments like treasury bills, certificates of deposit, commercial paper and interbank call money. Returns on these schemes hinges on the interest rates prevailing in the market. MMFs are ideal for corporate and individual investors looking to park funds for short periods.
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Other schemes
Tax saving schemes: Tax saving schemes or equity-linked savings schemes offer tax rebates to investors under section 88 of the Income Tax Act. They generally have a lock-in period of three years. They are ideal for investors looking to exploit tax rebates as well as growth in investments. Special schemes: These schemes invest only in the industries specified in the offer document. Examples are Infotech funds, FMCG funds, pharma funds, etc. These schemes are meant for aggressive and well-informed investors. Index funds: Index Funds invest their corpus on the specified index such as BSE Sensex, NSE index, etc. as mentioned in the offer document. They try to mimic the composition of the index in their portfolio. Not only the shares, even their weightage is replicated. Index funds are a passive investment strategy and the fund manager has a limited role to play here. The NAVs of these funds move along with the index they are trying to mimic save for a few points here and there. This difference is called tracking error. Sector specific schemes: These funds invest only specified sectors like an industry or a group of industries or various segments like A Group shares or initial public offerings.

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Mutual funds - FAQ

What is the procedure to Invest in Mutual Funds?

Prospective investors who wish to invest in mutual funds have to contact a distributor/agent of mutual funds. Any good agent/distributor would be able to suggest you the appropriate funds from the plethora of funds available. The normal procedure is to fill-up the required application form and submit it along with a cheque for the amount of investment. Cheques and Demand Drafts are accepted. Payment by cash is not allowed. The agent/distributor would submit the application form with the cheque to the mutual fund company. The mutual fund company would issue you an Account Statement with 4 working days from the date of investment.

How is a mutual fund set up?

A Mutual Fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like the promoter of a company. The trustees of the Mutual Fund hold its property for the benefit of the unit holders. An Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. A Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of directing the actions of the AMC and also monitor the performance and compliance of SEBI Regulations by the Mutual Fund. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All Mutual Funds are required to be registered with SEBI before they launch any scheme

What is Net Asset Value (NAV) of a scheme?

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Net Asset Value (NAV) denotes the performance of a particular scheme of a Mutual Fund. Just like in the case of Equities, where Current Market Price denotes the value of a share, in Mutual Funds, its is the NAV of the scheme which is considered. Since market value of securities changes every day, NAV of a scheme also varies on a day-to-day basis. NAV of a particular scheme can be calculated using the formula mentioned below: NAV = The market value of a scheme Total Number of units of the scheme on any particular date For example, if the market value of securities of a Mutual Fund scheme is Rs. 200 lakhs and the Mutual Fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the Mutual Funds on a regular basis - daily or weekly depending on the type of scheme

What are 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.

What is a sales or repurchase/redemption price?

The price or NAV a unit holder is charged while investing in an open-ended scheme is called sales price. It may include sales load, if applicable. Repurchase or redemption price is the price or NAV at which an open-ended scheme purchases or redeems its units from the unit holders. It may include exit load, if applicable.

What is an assured return scheme?

Assured return schemes are those schemes that assure a specific return to the unit holders irrespective of performance of the scheme.
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A scheme cannot promise returns unless such returns are fully guaranteed by the sponsor or AMC and this is required to be disclosed in the Offer document. Investors should carefully read the offer document whether return is assured for the entire period of the scheme or only for a certain period. Some schemes assure returns one year at a time and they review and change it at the beginning of the next year.

Can a Mutual Fund change the asset allocation while deploying funds of investors?
Considering the market trends, any prudent fund managers can change the asset allocation i.e. he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the Offer document. It can be done on a short term basis on defensive considerations i.e. to protect the NAV. Hence the Fund Managers are allowed certain flexibility in altering the asset allocation considering the interest of the investors. In case the Mutual Fund wants to change the asset allocation on a permanent basis, they are required to inform the unit holders and give them the option to exit the scheme at the prevailing NAV without any load

What can an investor find in an offer document?

An abridged offer document, which contains very useful information, is required to be given to the prospective investor by the Mutual Fund. The application form for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. An investor, before investing in a scheme, should carefully read the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsors track record, educational qualification and work experience of key personnel including fund managers, performance of other schemes launched by the Mutual Fund in the past, pending litigations and penalties imposed, etc.

How do I track the performance of a Mutual Fund scheme?

The performance of a scheme is reflected in its net asset value (NAV), which is disclosed on daily basis in case of open-ended schemes and on weekly basis in
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case of close-ended schemes. You can track the performance of your portfolio using the Portfolio tracker section of the site. You can also analyze the sector wise/stock wise break up of the Mutual Fund.

If Mutual Fund scheme is wound up, what happens to money invested?

In case of winding up of a scheme, the Mutual Funds pay a sum based on prevailing NAV after adjustment of expenses. Unit holders are entitled to receive a report on winding up from the Mutual Funds which gives all necessary details.

What are the expenses involved in a mutual fund?

A mutual fund is managed by an investment management company (popularly called an Asset Management Company). The investment management company charges fee for managing the assets (which is otherwise called as Asset Management Fee). The fee is charged as a percentage on the total assets managed by the company. This fee is adjusted to the NAV (Net Asset Value) declared on every trading day. Apart from the asset management fee, there are other charges like custodian charges, printing and stationary charges, brokerage charges and others. These charges are also adjusted to the daily NAV. Usually; the total charges are about 2.5% of the assets managed.

Who can invest?

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Resident Indians Non-resident Indians (NRI) Persons of Indian Origin (POI) Indian Public Sector Undertakings Indian Private Sector Undertakings Parents/Guardians on behalf of minors Wakf Boards Hindu Undivided Family Sole Proprietorship Firms Partnership Firms Cooperative Societies Charitable or Religious Trusts Trustee, AMC or Sponsor of their associates Endowment or Registered Societies Army/Air Force/Navy/Para-Military funds and other eligible institutions Scientific and/or industrial research organizations And other associations, institutions, bodies, etc., authorized to invest in mutual funds

What is the minimum amount of Investment?

The minimum amount of investment differs from scheme to scheme and from company to company. However, the lowest amount of minimum initial investment is Rs.1, 000 and the minimum additional investment is Rs.500.

Important terms related to Mutual Funds

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NAV: NAV is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units.

Sale price: The price you pay when you invest in a scheme. It is also called offer price. Repurchase price: The price at which a close-ended scheme repurchases its units. It is also called bid price. Redemption price: The price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. This price is NAV related. Entry load: The extra amount you pay when you invest in a scheme. It is also called front-end load or sales load. Exit load: Amount collected when you are selling or redeeming units.

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HISTORY OF MUTUAL FUND

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases: -

First Phase 1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank 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.
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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,
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conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

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Structure of the Indian mutual fund industry

The Indian mutual fund industry is dominated by the Unit Trust of India, which has a total corpus of Rs700bn collected from more than 20 million investors. The UTI has many funds/schemes in all categories i.e. equity, balanced, income etc with some being open-ended and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of about Rs200bn. Most of its investors believe that the UTI is government owned and controlled, which, while legally incorrect, is true for all practical purposes. The second largest category of mutual funds is the ones floated by nationalized banks. Can bank Asset Management floated by Canara Bank and SBI Funds Management floated by the State Bank of India are the largest of these. GIC AMC floated by General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones.

Recent trends in mutual fund industry

The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by nationalized banks and smaller private sector players. Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have serious plans of continuing the activity in a major way.

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The experience of some of the AMCs floated by private sector Indian companies was also very similar. They quickly realized that the AMC business is a business, which makes money in the long term and requires deep-pocketed support in the intermediate years. Some have sold out to foreign owned companies, some have merged with others and there is general restructuring going on. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. In fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.

Performance of Mutual Funds in India

Let us start the discussion of the performance of mutual funds in India from the day the concept of mutual fund took birth in India. The year was 1963. Unit Trust of India invited investors or rather to those who believed in savings, to park their money in UTI Mutual Fund. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. People rarely understood, and of course investing was out of question. But yes, some 24 million shareholders were accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of investors touched the sky in profitability factor. However, people were miles away from the preparedness of risks factor after the liberalization. The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn. The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative investments. There was rather no choice apart from holding the cash or to further continue investing in shares. One more thing to be noted, since only closed-end funds were floated in the market, the investors disinvested by selling at a loss in the secondary market.
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The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal, the losses by disinvestments and of course the lack of transparent rules in the whereabouts rocked confidence among the investors. Partly owing to a relatively weak stock market performance, mutual funds have not yet recovered, with funds trading at an average discount of 1020 percent of their net asset value. The measure was taken to make mutual funds the key instrument for long-term saving. The more the variety offered, the quantitative will be investors. At last to mention, as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time, more and more people will be inclined to invest until and unless they are fully educated with the dos and don'ts of mutual funds.

Market Trends COMPARISION OF MUTUAL FUNDS WITH OTHER INSTRUMENT A lone UTI with just one scheme in 1964 now competes with as many as 400 odd products and 34 players in the market. In spite of the stiff competition and losing market share, Last six years have been the most turbulent as well as exiting ones for the industry. New players have come in, while others have decided to close shop by either selling off or merging with others. Product innovation is now pass with the game shifting to performance delivery in fund management as well as service. Those directly associated with the fund management industry like distributors, registrars and transfer agents, and even the regulators have become more mature and responsible. The industry is also having a profound impact on financial markets. While UTI has always been a dominant player on the bourses as well as the debt markets, the new generations of private funds, which have gained substantial mass, are now flexing their muscles. Fund managers, by their selection criteria for stocks have forced corporate governance on the industry. Rewarding honest and transparent management with higher valuations has created a system of risk-reward created where the corporate sector is more transparent then before. Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and technology sector. Funds performances are improving. Funds collection, which averaged at less than Rs100bn per annum over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. In the current year mobilization
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till now have exceeded Rs300bn. Total collection for the current financial year ending March 2000 is expected to reach Rs450bn. What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than public sector mutual funds. Indeed private MFs saw a net inflow of Rs. 7819.34 Crore during the first nine months of the year as against a net inflow of Rs.604.40 Crore in the case of public sector funds.

Current Scenario
Mutual funds are an under tapped market in India

Despite being available in the market for over two decades now with assets under management equaling Rs 7,81,71,152 Lakhs (as of 28 February,2010) (Source: Association of Mutual Funds, India) , less than 10% of Indian households have invested in mutual funds. A recent report on Mutual Funds Investments in India published by research and analytics firm, Boston Analytics, suggests investors are holding back from putting their money in mutual funds due to their perceived high risk and a lack of information on how mutual funds work. This report is based on a survey of approximately 10,000 respondents in 15 Indian cities and towns as of March 2010. The primary reason for not investing appears to be correlated with city size. For example, as depicted in the exhibit below, among respondents with a high savings rate, close to 40% of those who live in metros and Tier I cities cited such investments were very risky, whereas 33% of those in Tier II cities said they did not how and where to invest in such assets.

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On the other hand, among those who invested, close to nine out of ten respondents did so because they felt these assets to be more professionally managed than other asset classes. Exhibit 2 lists some of the influencing factors for investing in mutual funds.Interestingly, while non-investors cite risk as one of the primary reasons they do not invest in mutual funds, those who do invest cite the fact that they are professionally managed and more diverse most often as the reasons they invest in mutual funds versus other investments.

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Mutualfunds - Global Scenario

Some basic facts : The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S. against a corpus of $ 100 million in India. Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital are non-bank mutual funds in this group. In the U.S. the total number of schemes is higher than that of the listed companies while in India we have just 277 schemes. Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway. In the U.S. about 9.7 million households will manage their assets on-line by the year 2003, such a facility is not yet of avail in India. On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets. 72% of the core customer base of mutual funds in the top 50-broking firms in the U.S. are expected to trade on-line by 2003. Internationally, on-line investing continues its meteoric rise. Many have debated about the success of e- commerce and its breakthroughs, but it is true that this aspect of technology could and will change the way financial sectors function. However, mutual funds cannot be left far behind. They have realized the potential of the Internet and are equipping themselves to perform better. In fact in advanced countries like the U.S.A, mutual funds buy- sell transactions have already begun on the Net, while in India the Net is used as a source of Information. Such changes could facilitate easy access, lower intermediation costs and better services for all. A research agency that specializes in internet technology estimates that
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over the next four years Mutual Fund Assets traded on- line will grow ten folds from $ 128 billion to $ 1,227 billion ; whereas equity assets traded on-line will increase during the period from $ 246 billion to $ 1,561 billion. This will increase the share of mutual funds from 34% to 40% during the period. (Source: The Financial Express September ,99) Such increases in volumes are expected to bring about large changes in the way Mutual Funds conduct their business. Here are some of the basic changes that have taken place since the advent of the Net. Lower Costs: Distribution of funds will fall in the online trading regime by 2003 . Mutual funds could bring down their administrative costs to 0.75% if trading is done online. As per SEBI regulations , bond funds can charge a maximum of 2.25% and equity funds can charge 2.5% as administrative fees. Therefore if the administrative costs are low , the benefits are passed down and hence Mutual Funds are able to attract mire investors and increase their asset base. Better advice: Mutual funds could provide better advice to their investors through the Net rather than through the traditional investment routes where there is an additional channel to deal with the Brokers. Direct dealing with the fund could help the investor with their financial planning. In India , brokers could get more Net savvy than investors and could help the investors with the knowledge through get from the Net. New investors would prefer online : Mutual funds can target investors who are young individuals and who are Net savvy, since servicing them would be easier on the Net. India has around 1.6 million net users who are prime target for these funds and this could just be the beginning. The Internet users are going to increase dramatically and mutual funds are going to be the best beneficiary. With smaller administrative costs more funds would be mobilized .A fund manager must be ready to tackle the volatility and will

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have to maintain sufficient amount of investments which are high liquidity and low yielding investments to honor redemption. Net based advertisements: There will be more sites involved in ads and promotion of mutual funds. In the U.S. sites like AOL offer detailed research and financial details about the functioning of different funds and their performance statistics. a is witnessing a genesis in this area.

FUTURE SCENARIO
The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few years as investors shift their assets from banks and other traditional avenues. Some of the older public and private sector players will either close shop or be taken over. Out of ten public sector players five will sell out, close down or merge with stronger players in three to four years. In the private sector this trend has already started with two mergers and one takeover. Here too some of them will down their shutters in the near future to come. But this does not mean there is no room for other players. The market will witness a flurry of new players entering the arena. There will be a large number of offers from various asset management companies in the time to come. Some big names like Fidelity, Principal, Old Mutual etc. are looking at Indian market seriously. One important reason for it is that most major players already have presence here and hence these big names would hardly like to get left behind. In the U.S. most mutual funds concentrate only on financial funds like equity and debt. Some like real estate funds and commodity funds also take an exposure to physical assets. The latter type of funds are preferred by corporates who want to hedge their exposure to the commodities they deal with. For instance, a cable manufacturer who needs 100 tons of Copper in the month of January could buy an equivalent amount of copper by investing in a copper fund. For
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Example, Permanent Portfolio Fund, a conservative U.S. based fund invests a fixed percentage of its corpus in Gold, Silver, Swiss francs, specific stocks on various bourses around the world, short term and long-term U.S. treasuries etc. In U.S.A. apart from bullion funds there are copper funds, precious metal funds and real estate funds (investing in real estate and other related assets as well.).In India, the Canada based Dundee mutual fund is planning to launch a gold and a real estate fund before the year-end. In developed countries like the U.S.A there are funds to satisfy everybodys requirement, but in India only the tip of the iceberg has been explored. In the near future India too will concentrate on financial as well as physical funds. The mutual fund industry is awaiting the introduction of DERIVATIVES in the country as this would enable it to hedge its risk and this in turn would be reflected in its Net Asset Value (NAV). SEBI is working out the norms for enabling the existing mutual fund schemes to trade in Derivatives. Importantly, many market players have called on the Regulator to initiate the process immediately, so that the mutual funds can implement the changes that are required to trade in Derivatives.

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Major Mutual Fund Companies in India

ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.

Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsorer. The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. with the corporate office in Mumbai.

Bank of Baroda Mutual Fund (BOB Mutual Fund)

Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a golbal organisation evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda
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apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs. 10,000 crores

Canbank Mutual Fund

Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the sponsor. Canbank Investment Management Services Ltd. incorporated on March 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.

Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.

Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited.

Franklin Templeton India Mutual Fund

The group, Frnaklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing Development Finance Corporation Limited and Standard Life Investments Limited.
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 HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.

ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having more than 1,99,818 investors in its various schemes. KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities.

LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investmenty management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset management services and products to governments, corporations, pension funds and non-profit organisations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley
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Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the needs of Indian retail investors focussing on a long-term capital appreciation.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsorers, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993.

Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.

Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.

Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Co.Pvt.Ltd.

State Bank of India Mutual Fund

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State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshor fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8 Lakhs spread over 18 schemes.

Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsor for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country with more than Rs. 7,703 crores (as on April 30, 2005) of AUM.

Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Privete Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds.

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Top mutual fund schemes in India

Here is the list of best performing Mutual Fund in India that are giving highest return.
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Scheme Name Reliance Diversified Power Sector Fund Growth Taurus Libra Taxshield JM Basic Fund Growth Taurus Discovery Stock Standard Chartered Premier Equity Fund Growth JM Financial Services Sector Fund Growth JM Emerging Leaders Fund Growth Reliance Media & Entertainment Fund Growth ICICI Prudential Infrastructure Fund Growth Sundaram BNP Paribas CAPEX Opportunities Fund Growth Canara Robeco Infrastructure Fund Growth Taurus Starshare Kotak Opportunities Fund Growth DWS Investment Opportunity Fund Growth Reliance Regular Savings Fund Equity Growth NAV (Rs.)On Dec 20 , 2007 76.9114 33.23 36.7221 29.23 25.3355 17.8261 19.1945 38.8662 33.14 30.7904 25.01 73.65 50.137 41.29 27.1398 % Return in Last 12 Months 116.7736 102.7076 102.5008 101.0225 97.9425 88.0136 86.3021 85.0635 84.9721 84.4347 84.1912 83.6647 83.1904 82.5341 81.9458

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HSBC Holdings Plc

HSBC Holdings plc is a public limited company incorporated in England and Wales, headquartered in London. One of the largest Banking and Financial Services organization in the world. As of 2008, it is both the world's largest banking group and the world's largest company according to a composite measure by Forbes magazine. The group was founded from The Hongkong and Shanghai Banking Corporation, the acronym of which led to the current name. Today, whilst Hong Kong still continues to be a significant source of income for the group, no single geographical area dominates earnings. Recent acquisitions and expansion in China are returning HSBC to part of its roots. HSBC is Europe's biggest bank and has an enormous operational base in Asia and significant lending, investment, and insurance activities around the world. Advertising tagline: The Worlds Local Bank. Founder: Thomas Sutherland Group Chairman: Stephen Green Group CEO: Micheal Geoghegan Has 9,500 offices across 85 countries. Has 2,00,000 shareholders across 100 countries, 3,02,000 employees and 12,80,00,000 customers. Listed on Stock exchanges: London, Hong Kong, New York, Paris, Bermuda.

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 Huge Product Range: Financial Services Commercial Banking Corporate Banking Investment Banking Private Banking 5 Core Business Principles: Outstanding Customer Service Effective and Efficient operations Strong Capital and Liquidity Conservative Lending Policy Strict Expense Discipline Awards and Recognitions: 2008: The Bankers magazine named Worlds most valuable Banking Brand. Most Profitable Bank. Best Global Bank. Safest Bank, more known for its conservative and risk-averse approach. Named no.1 in service quality and branch facilities. Largest market value. Its stock maintained relatively high price even during the credit crunch phase.
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HISTORY
HSBC is one of the oldest banking groups in the modern world. After the establishment of Hong Kong as a British colony in the aftermath of the Opium War, a bank was needed to finance the growing trade between China and Europe. Its main and foundation-laying subsidiary The Hongkong and Shanghai Banking Corporation was established in Hong Kong and Shanghai in 1865. Before 1998 it was also known colloquially as "Hongkong Bank" (by tradition "Hong Kong" always spelled as one word). In 1990 HSBC wanted to change its domicile to UK and hence purchased Midland Bank. Shares in HSBC Holdings were first listed on the London Stock Exchange and Hong Kong Stock Exchange in 1991. The acquisition of Midland Bank giving HSBC a substantial presence in the UK was completed in 1992. Major acquisitions in South America started with the purchase of Banco Bamerindus of Brazil for $1bn in March 1997 and the acquisition of Roberts SA de Inversiones of Argentina for $600m in May 1997. In May 1999 HSBC embarked on a major acquisition in the United States with the purchase of Republic National Bank of New York for $10.3bn. Expansion into Continental Europe took place in April 2000 with the acquisition of Crdit Commercial de France, a large French bank for 6.6bn. In July 2001 HSBC bought Demirbank, an insolvent Turkish bank. Then in August 2002 HSBC acquired Grupo Financiero Bital, SA de CV, Mexico's largest retail bank for $1.1bn. The new headquarters of HSBC Holdings at 8 Canada Square, London officially opened in April 2003. In November 2002 HSBC expanded in the United States acquiring Household International, a US credit card issuer for 9bn. Then in September 2003 HSBC bought Polski Kredyt Bank SA of Poland for $7.8bn.

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 A terrorist attack took place in November 2003: a bomb blast in Istanbul damaged the banks head office in Turkey, causing several deaths and hundreds of injuries. In October 2003 HSBC bought the Bank of Bermuda for $1.3bn. In June 2004 HSBC expanded into China buying 19.9% of the Bank of Communications of Shanghai. Most recently in China, HSBC declined to repurchase its former corporate headquarters on the Shanghai Bund from the Shanghai Pudong Development Bank, which now occupies the magnificent, restored building. In the United Kingdom HSBC acquired Marks & Spencer Retail Financial Services Holdings Ltd for 763m in December 2004. Acquisitions in 2005 included Metris Inc, a US credit card issuer for $1.6bn in August and 70.1% of Dar Es Salaam Investment Bank of Iraq in October. In April 2006 HSBC bought the 90 branches in Argentina of Banca Nazionale del Lavoro for $155m. Later that year, in July HSBC bought Grupo Banistmo, the largest financial services company in Central America, based in Panama for $1.8bn. In December 2007 HSBC acquired The Chinese Bank in Taiwan. In May 2008 HSBC acquired IL&FS Investment, an Indian retail broking firm.

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SWOT Analysis
Strengths

The bank is well capitalised and this has enabled it to perform relatively well against other banks in recent economic events. The level of capitalisation means that, going forward, the bank is unlikely to need to borrow from the UK government: this will enable it to retain more autonomy. The bank has a strong presence in emerging markets, putting it in a good position to take advantage of future growth in those economies. The banks global presence in Europe, Asia and South America helps to spread risk and offers significant economies of scale. Despite rebranding relatively recently (1999), the HSBC brand has become well-established and is considered particularly valuable within the industry.

Weaknesses

HSBC associates itself strongly with investment in the small business sector, but the current economic situation has led to increased risks, potentially compromising the activity levels in this area of the operation. The bank was involved with sub-prime markets in the US and has had to write off large figures lent to high-risk borrowers. Despite falls in the UK interest rate, HSBC has increased its mortgage rates. This may be perceived negatively by borrowers and potential borrowers, adds pressure to an already depressed housing market and could ultimately lead to more defaulting as borrowers struggle with higher repayments. A redundancy programme announced recently may affect morale among staff, leading to decreased production and loyalty. HSBCs branding emphasises its global presence, and this may be seen negatively by some customers in its implication of homogenisation and lack of personalisation.
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Opportunities

HSBCs high level of capitalisation places it in a strong position to acquire assets Banks finding trading conditions particularly difficult at present may be available at low cost HSBC also has adequate capital to purchase stronger banks such as Bank Ekonomi in Indonesia, in which it has purchased a stake to continue its Asian expansion despite challenging economic times. HSBCs generally strong position presents the opportunity to outperform competitors during the economic downturn and to build a reputation for being one of the safer banks for depositors, helping to increase resources for lending. Negative press coverage of competitors such as HBOS may encourage customers to choose HSBC instead.

Threats

Trust in banks has decreased due to financial losses suffered by investors, who may be more inclined to invest elsewhere. Financial losses affecting banks and investors on a global scale have resulted in less credit being available to customers. In the UK this is coupled with increases in living costs resulting in less money being saved. The falling property market has created a rise in numbers of homeowners with negative equity. If a property is worth less than was borrowed to finance its purchase, there is little likelihood that the bank will recoup all its losses if owners default. Claims have been made that HSBC has understated losses resulting from US sub-prime markets, and this could undermine confidence in the bank.

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HSBC in India
The Hongkong and Shanghai Banking Corporation Limited IN 1959 HSBC acquired The Mercantile Bank of India, London and China, established in October 1853 in Bombay (now Mumbai). 1990. HSBC is now one of the fastest growing foreign banks in India, both in domestic banking and support operations for worldwide operations. Group general manager and Country Head: Naina Lal Kidwani It is one of the largest Foreign Banks in India. Launched First ATM in India in 1987. HSBC has Group service centers in India to handle Back-office operations and software Development to reduce cost of providing services to developed countries. Established a reputation in India of being a provider of International quality Investment products and services.

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HSBC INVESTDIRECT SECURITIES (INDIA) LTD

In year 2008, in order to tap the market for brokerage services Worlds fastest growing economy after china, HSBC Holdings bought a 93.9% stake in IL&FS Investsmart Ltd (Infrastructure Leasing and Financial Services) for Rs.13.1 billion. HSBC InvestSmart is listed on BSE and NSE. The Business Activities of HSBC InvestDirect are: Securities Broking Investment Advisory. Distribution of Financial products. Portfolio management services. Services related Financing (NBFC).

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History of IL&FS Investsmart Ltd.

The Comp. was set up as Investsmart India Limited, a wholly owned subsidiary of Infrastructure Leasing and Financial Services Limited for carrying on capital market activities such as share & stock broking, underwriting, placement of securities etc. The Comp. was incorporated on September 01, 1997 & received the Certificate of Commencement of Business on October 07, 1997.

MAJOR EVENTS IN THE HISTORY OF THE COMPANY Year Event 1997-1998 * February 1998: Commenced equity broking on NSE 1998-99 * Commenced branch operations for retail businesses at Bangalore, Chennai & Kolkata. 1999-2000 * August 1999: Commenced equity broking on BSE * March 30, 2000: ORIX subscribed to 80,00,000 Equity Shares * March 30, 2000: K. Raheja group subscribed to 30,00,000 Equity Shares * Launched a fully functional website : www.investsmartindia.com 2000-2001 * April 14, 2000: Change in the registered office of the Company * June 2000: Commenced derivative broking on NSE * January 2001: Launched investment advisory products. * Set up a dedicated mutual fund desk & fixed income retail desk at branch locations. * Received SEBI registration as a Portfolio Manager 2001-2002 * January 01, 2002 : Merger of IL&FS Merchant Banking Services Limited [IMBSLs] & DebtonNet India Limited [DILs] with the Company * Foray into insurance distribution through setting up of wholly owned subsidiaries i.e. Investsmart Insurance Agency Pvt. limited & Investsmart Insurance Distribution Private Limited as Corporate Agents of HDFC Standard Life Insurance Comp. Limited & Life Insurance Corporation of India respectively 2002-2003 * March 25, 2003 : Change in name of Comp. from Investsmart India Limited to IL&FS Investsmart Limited
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 2003-2004 * Registered as an Underwriter with SEBI * Acquired 4 branches of Tata TD Waterhouse Securities Pvt. Limited along with assets. * Incorporated a wholly owned subsidiary, IL&FS Investsmart Commodity Brokers Limited * Acquired IL&FS Academy for Insurance & Finance Limited [Formerly known as SAIFA Training Academy Limiteds] 2004-2005 * Induction of ETM & SAIF as strategic investors * Commenced derivative broking on BSE * IL&FS Investsmart Insurance & Risk Management Services Limited [formerly Investsmart Insurance Distribution Private Limiteds] applied for insurance broking license which is currently pending with IRDA * Name of SAIFA Training Academy Limited was changed to IL&FS Academy for Insurance & Finance Limited * Commenced commodities broking business through wholly owned subsidiary, IL&FS Investsmart Commodity Brokers Limited 2007 - IL&FS Investsmart Ltd has informed that Mr. Mitchell Caplan, Chief Executive Officer & Director of E*TRADE FINANCIAL Corporation, USA has been appointed as an Additional Director on the Board of Company. 2008 -IL&FS Investsmart Ltd has informed that Mr. Gregory Framke has been appointed on the Board of Comp. in the meeting of Board held on February 28, 2008 subject to completion of regulatory procedures including obtaining Director Identification Number [DINs].

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HSBC Mutual Fund

HSBC Mutual Fund is managed by HSBC Asset Management (India) Private Limited which was set up in India by the HSBC Group. HSBC Mutual Fund has over 25 years experience in management of investments.

HSBC Mutual Fund at a Glance-

HSBC Investments in India works as an operating unit of the main global investment management business of the HSBC Group. HSBC Mutual Fund is managed and regulated by HSBC Asset Management (India) Private Limited which was established in India by the HSBC group. HSBC mutual Fund has got investment professionals all across the globe which includes Europe, Africa, Asia Pacific and the Americas. HSBC Mutual Fund has a high potential for global investments and it executes its investment activities among its clients in India. HSBC Mutual Fund offers a wide spectrum of investment management solutions to various institutions, corporates and financial intermediaries across the globe. HSBC Investments in India also offers custom-made portfolio management services to the high net worth customers in collaboration with their managers. HSBC Mutual Fund has acquired more than 25 years of experience in managing global investments to its clients. HSBC group brought all its units under one roof, that is, under the 'HSBC' banner to generate one efficient investment manager to deliver quality investment solutions. A report of 31st May 2007 states that HSBC Investments has funds of USD 339 billion under management.

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Overview
World-class investment solutions backed by the strength of the HSBC Group HSBC Global Asset Management in India is part of the core global investment management business of the HSBC Group. With dedicated investment professionals across Europe, Africa, Asia-Pacific and the Americas, HSBC Global Asset Management has strong global investment capabilities that are delivered to clients locally. For institutions, corporates and financial intermediaries, a comprehensive range of investment management solutions are offered. For high net worth individuals, HSBC Global Asset Management works with relationship managers to provide bespoke portfolio management services.

We have been dedicated to managing global assets on behalf of clients for more than 25 years. As far back as 1994, it was recognised that in an increasingly global economy, the internationalisation of assets would need a credible global organisation to ensure that the best possible solutions could be delivered to clients. The Group responded by uniting its separate regional businesses under the HSBC banner to create a single powerful investment manager aimed at delivering global investment capability combined with significant local expertise. HSBC Global Asset Management has funds under management of USD416.3 billion as on 30 September 2009.

HSBC Global Asset Management in India

HSBC Asset Management (India) Private Limited is the Investment Manager to HSBC Mutual Fund, set up locally by the HSBC Group. HSBC Mutual Fund is the brand name adopted by HSBC Asset Management (India) Private Limited. The business is working on ambitious plans to position itself as one of the leading Private Sector Fund Managers in the Indian financial market - one of the most promising markets in Asia. It also aims to expand its customer base by extending
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its product range to include a wide variety of investment products and enhance its reputation in India of being a provider of international quality investment products and services.

Company history - A global pedigree HSBC Global Asset Management draws upon a long history of serving clients by the HSBC Group, tracing its roots back to the foundation of the Hongkong and Shanghai Banking Corporation in 1865. The HSBC Group has identified asset management as a key constituent of the HSBC Groups wealth management strategy and at HSBC Global Asset Management, we have been dedicated to managing assets on behalf of our clients for more than 30 years.

1973 - HSBC forms Hong Kong-based Wardley as a wholly owned merchant banking subsidiary 1986 - The European arm of HSBC Asset Management is conceived with the purchase of James Capel, a leading and well established international securities company The addition of New York-based Marinvest establishes the US arm of HSBC Asset Management 1992 - Consolidation in Europe with the acquisition of the Midland Bank Group 1994 - Regional companies are brought together under the name HSBC Asset Management, a single investment manager offering global investment capability combined with significant local expertise 2000 - HSBC Group purchases CCF Bank, France - CCF Capital Management in Paris joins HSBC Asset Management 2001 - The market for asset management solutions has grown rapidly and investors requirements have become more sophisticated. In response to this, the asset management business of HSBC was reorganised at the end of 2001 to provide a full range of sophisticated services under the name Asset Management Services, comprising the core business, HSBC Asset Management and several specialist companies offering complementary
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investment management services

In August, HSBC Asset Management completed its acquisition of China Securities Investment Trust Corporation, Taiwan's premier asset management company HSBC Asset Management (India) Private Limited is incorporated in December 2001 2002 - New investment and marketing office established in India. Cooperation with HSBC Trinkaus Capital Management and its parent HSBC Trinkaus & Burkhardt HSBC Asset Management (India) Private Limited , the Investment Manager to HSBC Mutual Fund launches its first four schemes in December 2002 2003 - Integration of Bital's fund management business in Mexico following its purchase by HSBC 2004 - Integration and development of investment management activity in Bermuda following the acquisition of Bank of Bermuda 2004 - On 1 December HSBC announces a reorganisation of its investment management businesses as part of a new strategy designed to drive further growth 2005 - HSBC Asset Management is replaced by HSBC Investments and HSBC Halbis Partners during 2005 (subject to local legal and regulatory approvals in all jurisdictions) 2006 - HSBC receives approval for joint venture fund management company in China. HSBC Halbis Partners is renamed Halbis Capital Management 2008 - HSBC Investments is renamed to HSBC Global Asset Management (subject to local legal and regulatory approvals in all jurisdictions)

Types of HSBC Mutual Funds

HSBC Equity Fund HSBC India Opportunities Fund

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HSBC Midcap Equity Fund HSBC Advantage India Fund HSBC Tax Saver Equity Fund HSBC Unique Opportunities Fund HSBC Dynamic Fund HSBC MIP HSBC Income Fund HSBC Gift Fund HSBC Floating Rate Fund HSBC Cash Fund HSBC Fixed Terms Series HSBC Liquid Plus Fund

HSBC Mutual Fund also offers Portfolio Management Services. The Portfolio Management Services offered by HSBC Mutual Fund are as follows: Capital Guard Portfolio Signature Portfolio

Strategic Portfolio 85 percent Capital Oriented Portfolio Large Cap Oriented Portfolio

HSBC

Mutual Fund product details

Investment needs of an individual vary over time and depend on his/her investment objectives and financial goals. Defining your investment objectives and identifying financial goals is the key to financial security and wealth. Once investment objectives have been identified, you now need to plan meticulously to achieve them. Investment experts around the world advise
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instruments like equity funds and stocks for long-term (more than 5 years), income funds for medium-term and liquid funds for short-term needs.

The investment matrix above depicts a broad variety of available investment options in mutual funds. These are categorized by risk/return levels. Those at the top provide for a greater opportunity for long-term capital growth with a higher risk level while those at the bottom take care of current income and conservation of capital with a lower risk level. HSBC Mutual Fund offers products at both ends to cater to your individual needs.

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NEED FOR THE STUDY

The main purpose of doing this project was to know about mutual fund and its functioning. This helps to know in details about mutual fund industry right from its inception stage, growth, current scenario and future prospects. It also helps in understanding different schemes of mutual funds. Another purpose of the study was to identify the investors perception of mutual funds as an investment tool. The need was to analyze the awareness and knowledge of mutual funds as per demographics details. It also included study of investors awareness about HSBC mutual funds, so that corrective measures can be taken by them.

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SCOPE OF THE STUDY

The scope of this project is limited to investors perception regarding mutual funds as an investment tool in Chandigarh and adjoining region. Although brief details about mutual fund market and key players were also mentioned, with focus on the future aspects of growth in mutual funds. My study is mainly concentrated on HSBC mutual funds, and analyze the investors perception about its products, and features of their product range.

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OBJECTIVE OF THE STUDY

To study the investors perception about mutual funds as an investment tool. To know the investors perception towards HSBC mutual funds. To identify the various factors considered by investors while opting for mutual funds. To get insight knowledge about mutual funds as an investment tool.

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RESEARCH METHODOLOGY
My research project has a specified framework for collecting the data in an effective manner. Such framework is called RESEARCH DESIGN. The research process which was followed by me consisted following steps. A. PROBLEM: The problem at hand was to study and measure the awareness level of people regarding mutual funds and to know the awareness level of investors. Also to identify the investment attributes affecting the investors most. B. DEVELOPING THE RESEARCH PLAN : The development of Research Plan has the following Steps: 1. DATA SOURCES: Two types of data were taken into consideration i.e. Secondary data & primary data. My major emphasis was on gathering the primary data. The secondary data has been used to make things more clear at earlier stage, and was a part of literature overview. (i) (ii) Primary Data: Direct collection of data from the source of information, mainly through online survey. Secondary Data: Indirect collection of data from sources containing past or recent past information like internet, company websites, news and previous survey results. 2. RESEARCH INSTRUMENT
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The Research was done with the help of an online survey, where a link to survey form was provided to the email address of respondents, through which they have to answer. 3. SAMPLING PLAN The sampling plan calls for three decisions. a) Sampling Unit: I have completed my survey in Chandigarh and adjoining areas. b) Sample Size: The sample consisted of about 202 respondents. The sample was drawn on the basis of convenient sampling where respondents were mainly references and further references chain. c) Contact Methods I have contacted the respondents through email links, telephone calls and initial personal meetings. 4. FILTER QUESTIONS: To select only relevant respondents for study. C. COLLECTING THE INFORMATION The information, i.e., the respondents answers were automatically stored in a online database accessible only to me. D. ANALYZE THE INFORMATION The next step is to extract the pertinent findings from the collected data. I have tabulated the collected data & developed frequency distributions. This was followed by analysis and interpretation by SPSS (statistical tool). E. PRESENTATIONS OF FINDINGS This was the last step of the survey.
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ONLINE SURVEYS

can use web or e-mail web is preferred over e-mail because interactive HTML forms can be used often inexpensive to administer very fast results easy to modify response rates can be improved by using Online panels - members of the panel have agreed to participate data creation, manipulation and reporting can be automated and/or easily exported into a format that can be read bySPSS, DAP or other statistical analysis software

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DATA PRESENTATION

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DATA ANALYSIS AND INTERPRETATION

What you think of average rate of return given by mutual funds?

What you think about Risk factor in mutual funds?

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What you think about Tax saving by investing in mutual funds?

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What you think of your awareness level about mutual funds?

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Do you think that HSBC mutual fund is offering more affordable schemes than others?

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What you have heard/know about Quality of services given by HSBC mutual funds?

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What you think of highest rate of returns achieved by best performing mutual funds?

Effect of age on investment options.

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Age

Bank Equity saving/p trading ost office saving 14 27 0 0 14 14

Fixed deposit

Gold

Mutual funds

Real estate

20-24 24-29

7 14 0 21

14 14 14 42

13 42 21 76

8 8 0 16

Above 30 7 Total 48

Effect of number of dependents in family on investment options.

Effect of % savings on investment options.

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Effect of gender on investment options

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Effect of income on investment in mutual funds.

Effect of Savings percentage on investment in mutual funds

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Effect of Investment purpose on investment in mutual funds

Effect of age on dominating factor to invest in mutual funds

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Age

Monthly income/retur ns 7 0 0 7

Quick returns 15 7 0 22

Safe investment 20 21 0 41

Steady growth 14 62 28 104

20-24 24-29 Above 30 Total

Effect of Age on investment in HSBC mutual fund

Age I have already invested 0 0 7 7 Will invest after 3 years 14 13 0 27 Will invest within 1 year 7 14 27 48 Will invest Will never in next 1-3 invest in year HSBC m.f. 21 28 5 46 13 34 12 59

20-24 24-29 Above 30 Total

Effect of annual income on investment in HSBC mutual fund

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Effect of percentage of income saved on investment in HSBC mutual fund

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FINDINGS

Most of the People are not aware of even average rate of return given by mutual funds, underestimating the mutual funds performance. Hence it is quite understood that their awareness level is quite low. Again majority of investors were not aware of the capability of mutual funds to perform, with most of them estimating best rate of returns at mere 2550%. Still many investors believe that risk factor in mutual funds is high, as compared to other investment tools. A good number of investors think that mutual funds are helpful for tax saving, while others of the view that its as good as in other investment options. The knowledge about mutual funds is only in patches, where many investors only know the basic knowledge only. Apart from traditional saving, like banks and gold, people are slowly trying their hands in mutual funds also, where many investors have shown a will to invest in mutual funds in future. People prefer on steady growth of their funds invested in mutual funds, rather than mere safety. People, who know about HSBC mutual funds is through advertisements and news mainly, hence word of mouth is lacking. Some even have not heard about it. A very little number of people have invested in HSBC mutual funds, and remaining majority prefers to avoid it, whether some were of the view of investing here in future.
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 Whether its affordability, or quality of services, majority of investors believe HSBC is as good as others, with nothing special in it. Some have even underrated it. Those who invested, or wanted to invest in mutual funds, prefer open ended. And among the types, equity funds were most preferred, followed by balance funds. Majority of investors believe to consider the companys brand name and area of investment the most while opting for mutual funds, whereas fund managers past record matters least. The main prohibitive factors to invest in mutual funds were lack of knowledge about them and their complexity. Many also doubted advice of investment advisors. Investors who like to, or invest in mutual funds mainly belonged to agegroup 25-29 years, and above also, maybe by that time they gain confidence and knowledge to go for it. Banks and gold still liked by diverse age groups. Investors on whom number of dependents were none were noticed to be more interested in mutual funds, due to their freedom to spent and risk taking capability, whereas on whom dependents were there seems to go for traditional methods like banks and gold investments. Interestingly, investors that save/invest 5-20% of their monthly income were seem to be more interested in mutual funds, whereas others preferred more for gold and bank savings, but some shown interest to go for mutual funds in future also. The effect of gender on investment were such that females mostly preferred to invest in less risk investment tools like in banks, post office schemes, and gold, whereas male diversely go for all available options among which a significant number of them were also interested in real estate, and equity trading.

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 Investors with income less than 3 lacs were seem to be more resistant to invest in mutual funds, whereas others having income more than 3 lacs do invest in mutual funds, or have plans to do so in future. Investors investing for the purpose of buying property in future were more seems to opt for mutual funds. Some investing to meet family responsibilities however disagreed to invest in mutual funds. Steady growth and safe investment seems to be most dominating factor among all age groups of youth while investing in mutual funds, but some of youngsters seems more interested in quick returns. Investors of age group of more than 30 were seem to be more interested in HSBC mutual funds, and some of those of age less than 30 years, were planning to invest in future. Many of younger ones even denied to go for HSBC mutual funds. Investors with higher annual income were seem to be more interested in HSBC mutual funds, whereas many less income investors say they will never invest in mutual funds. Investors that save good proportion of their income were seem to be more interested to go for HSBC mutual funds, while others were not.

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RECOMMENDATIONS AND SUGGESTIONS

For mutual fund industry There should be more advertising and promotional campaigns by asset management companies to make people aware of mutual funds, their capability to perform, and tax saving options available. Let people know how some good mutual funds have performed in the past, so that they are aware of their capability to perform. Let people know that there are many mutual fund investment options with less risk involved, and also its complexity should be reduced. Focus more on less risk products with steady growth. More competent investment advisors should be there, that are able to satisfy investors needs. More focus is needed for younger age group of 20-24 years of age to make them invest in mutual funds. Also such schemes should be there that can suit the pockets of less earning investors also. Companies should equally promote debt funds also as the provide security to customers. Female investors should be encouraged to invest in mutual funds, over traditional saving options.

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For HSBC mutual funds:

Focus more on advertising campaigns, as there are still many who dont even heard of HSBC mutual funds. Past performance oriented campaigns may help to get good word of mouth. Such schemes should be made that can be afforded by less income earning investors also. There is a need to further strengthen your quality of services to meet international standards. Focus on age group of 20-29 by making affordable schemes for them. Make strong strategic plans to compete with competitors like HDFC, Reliance, Kotak, ICICI, Tata, etc.

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CONCLUSION
These were the objectives of my project To study the investors perception about mutual funds as an investment tool. To know the investors perception towards HSBC mutual funds. To identify the various factors considered by investors while opting for mutual funds. To get insight knowledge about mutual funds as an investment tool.

I satisfied my objectives of the project in the following manner Complete insight knowledge about the mutual funds was mentioned in the project. To know the consumer awareness, I have done the online survey using different customers so as to analyze the views about the mutual funds and perception of the customer in the present scenario. Various factors playing important role in considering mutual fund as investment tool were also analyzed. I evaluate the ways and means to improve HSBC mutual fund, I have mentioned various suggestions that are listed above

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LIMITATIONS

The time constraint was one of the major problems.

The study is limited to youth of Chandigarh and adjoining areas only.

Length of the questionnaire may be a problem.

The report is strictly based on the opinion of the respondents. Sometime people are not aware of the real objective, so error may be there.

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BIBLIOGRAPHY
Websites:

www.assetmanagement.hsbc.com www.hsbcinvestdirect.co.in www.google.com www.wikipedia.com www.amfiindia.com www.moneycontrol.com www.5paisa.com www.sharemarketbasics.com

Reference books:
Financial institutions and markets - l.m.bhole Investment management - v.k.bhalla Research methodology - kothari

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