Report on Summer Training

A STUDY
ON
INDIVIDUAL PERCEPTION &
CUSTOMER BEHAVIOUR TOWARDS
MUTUAL FUNDS
At

In partial fulfillment of the requirements for the award of

Degree of Master of Business Administration

Submitted by:
Arun Kumar, Reg. No. 10804509

LOVELY PROFESSIONAL UNIVERSITY

PUNJAB

DECLARATION
I, Arun Kumar student of M.B.A program at Lovely School of Business (LPU). I
hereby declare that all the information ,facts and figures produce in this report are
based on my own experience and study during my study on Customer
perception towards mutual fund at Karvy Stock Broking Ltd. Dehradun.

The matter embodied in this project report has not been submitted to any other
University or Institution for the award of degree.

Date:

(ARUN KUMAR)

PREFACE
Give a man a fish, he will eat it.
Train a man to fish, he will feed his family.
The above saying highlights the importance of Practical knowledge. Practical
training is an important part of the theoretical studies. It is of an immense
importance in the field of management. It offers the student to explore the valuable
treasure of experience and an exposure to real work culture followed by the
industries and thereby helping the students to bridge gap between the theories
explained in the books and their practical implementations.
Research Project plays an important role in future building of an
individual so that he/she can better understand the real world in which he has to
work in future. The theory greatly enhances our knowledge and provides
opportunities to blend theoretical with the practical knowledge.
I have completed the Research Project on Customer perception
towards mutual fund. I have tried to cover each and every aspect related to the
topic with best of my capability.
I hope research would help many people in the future.

(Arun kumar)

ACKNOWLEDGEMENT

It is with deep sense of gratitude that I would like to thanks Karvy Stock Broking
(DEHRADUN) for providing me with an opportunity to take up a project in
KARVY on Customer perception towards mutual funds. I am very grateful to
Mr. TRIBHUVAN MALL (Branch Head) for being able to give me some of his
valuable time and able guidance. Without his guidance, support and
encouragement it would not have been possible to complete this project
successfully.
I would also like to express my sincere work of gratitude and heartiest thanks to
my faculty guide Mr. Lokesh Jasrai who helped me in some manner or other and
this have been a constant source of inspiration throughout the project.

(ARUN KUMAR)

CONTENTS
Topic

Company Profile.....6
Introduction........23
Background....27
Objectives of the study......29
Mutual fund for whom...34
Why mutual fund..35
Types of investors..37
Marketing strategies...40
Research Methodology..54
Findings.57
Data Analysis & interpretation...63
Conclusion.72
Recommendation...74
Bibliography..75
Questionnaire....76

Page No.

OVERVIEW
KARVY, is a premier integrated financial services provider, and ranked among the top
five in the country in all its business segments, services over 16 million individual investors in
various capacities, and provides investor services to over 300 corporate, comprising the who is
who of Corporate India. KARVY covers the entire spectrum of financial services such as Stock
broking, Depository Participants, Distribution of financial products - mutual funds, bonds, fixed
deposit, equities, Insurance Broking, Commodities Broking, Personal Finance Advisory Services,
Merchant Banking & Corporate Finance, placement of equity, IPOs, among others. Karvy has a
professional management team and ranks among the best in technology, operations and research
of various industrial segments.

KARVY-EARLY DAYS
The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise
of a small group of practicing Chartered Accountants who founded the flagship company
Karvy Consultants Limited. We started with consulting and financial accounting automation, and
carved inroads into the field of registry and share accounting by 1985. Thus over the last 20
years Karvy has traveled the success route, towards building a reputation as an integrated
financial services provider, offering a wide spectrum of services. And we have made this journey
by taking the route of quality service, path breaking innovations in service, versatility in service
and finallytotality in service.
With the experience of years of holistic financial servicing behind us and years of complete
expertise in the industry to look forward to, we have now emerged as a premier integrated
financial services provider.

SERVICES

Commodities trading (NCDEX & MCX)

Personal finance advisory services

Corporate finance & merchant banking

Depository participant services (NSDL & CDSL)

Financial products distribution (investments/loan products)

Mutual fund services

Stock broking (NSE & BSE, F&O)

E-Tds, tan/pan card/mapin

Insurance (life & general)

Registrar & transfer agents

MILESTONE OF KARVY CONSULTANTS LTD

As the flagship company of the Karvy Group, Karvy Consultants Limited has always remained
at the helm of organizational affairs, pioneering business policies, work ethic and channels of
progress.
We have now transferred this business into a joint venture with Computer share Limited
of Australia, the worlds largest registrar. With the advent of depositories in the Indian capital
market and the relationships that we have created in the registry business, we believe that we
were best positioned to venture into this activity as a Depository Participant today, we service
over 6 lakhs customer accounts in this business spread across over 250 cities/towns in India and
are ranked amongst the largest Depository Participants in the country. With a growing secondary
market presence, we have transferred this business to Karvy Stock Broking Limited (KSBL), our
associate and a member of NSE, BSE and HSE.

IT enabled services
Our Technology Services division forms the ideal platform to unleash our technology
initiatives and make our presence felt on the Internet. Our past achievements include many
quality websites designed, developed and deployed by us. We also possess our own web hosting
facilities with dedicated bandwidth and a state-of-the-art server farm (data center) with services
functioning on a variety of operating platforms such as Windows, Solaris, Linux and UNIX.
The corporate website of the company, www.karvy.com, gives access to in-depth information
on financial matters including Mutual Funds, IPOs, Fixed Income Schemes, Insurance, Stock
Market and much more.

Stock Broking Services | Distribution of Financial Products | Depository Participants |

Advisory Services | Research | Private Client Group
Member - National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), and The
Hyderabad Stock Exchange (HSE).
Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows freely
towards attaining diverse goals of the customer through varied services. Creating a plethora of
opportunities for the customer by opening up investment vistas backed by research-based
advisory services. Here, growth knows no limits and success recognizes no boundaries. Helping
the customer create waves in his portfolio and empowering the investor completely is the
ultimate goal.

Stock Broking Services

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high
success rate as a wealth management and wealth accumulation option. The difference between
unpredictability and a safety anchor in the market is provided by in-depth knowledge of market
functioning and changing trends, planning with foresight and choosing one & rescues options
with care. This is what we provide in our Stock Broking service.
KARVY offer services that are beyond just a medium for buying and selling stocks and
shares. Instead we provide services that are multi dimensional and multi-focused in their scope.

It offer trading on a vast platform; National Stock Exchange, Bombay Stock Exchange and
Hyderabad Stock Exchange. It make trading safe to the maximum possible extent, by accounting
for several risk factors and planning accordingly. It is assisted in this task by our in-depth
research, constant feedback and sound advisory facilities.
It have skilled research team, comprising of technical analysts as well as fundamental specialists,
secure result-oriented information on market trends, market analysis and reviewed.
KARVY publish a monthly magazine & ldquo; Karvy; The Finapolis”, which analyzes
the latest stock market trends and takes a close look at the various investment options, and
products available in the market, while a weekly report, called & ldquo.
It also offer special portfolio analysis packages that provide daily technical advice on scrips for
successful portfolio management and provide customized advisory services to help you make the
right financial moves that are specifically suited to your portfolio. Our Stock Broking services
are widely networked across India, with the number of our trading terminals providing retail
stock broking facilities. Our services have increasingly offered customer oriented convenience,
which we provide to a spectrum of investors, high-net worth or otherwise, with equal dedication
and competence.
To empower the investor further we have made serious efforts to ensure that our research
calls are disseminated systematically to all our stock broking clients through various delivery
channels like email, chat, SMS, phone calls etc.
In the future, our focus will be on the emerging businesses and to meet this objective, we
have enhanced our manpower and revitalized our knowledge base with enhances focus on
Futures and Options as well as the commodities business.

DEPOSITORY PARTICIPANTS
The onset of the technology revolution in financial services Industry saw the emergence of
Karvy as an electronic custodian registered with National Securities Depository Ltd (NSDL)

and Central Securities Depository Ltd (CSDL) in 1998. Karvy set standards enabling further
comfort to the investor by promoting paperless trading across the country and emerged as the top
3 Depository Participants in the country in terms of customer serviced. Offering a wide trading
platform with a dual membership at both NSDL and CDSL, we are a powerful medium for
trading and settlement of dematerialized shares.

DISTRIBUTION OF FINANCIAL PRODUCTS

The paradigm shift from pure selling to knowledge based selling drives the business
today. With our wide portfolio offerings, we occupy all segments in the retail financial services
industry.
A 1600 team of highly qualified and dedicated professionals drawn from the best of
academic and professional backgrounds are committed to maintaining high levels of client
service delivery. This has propelled us to a position among the top distributors for equity and
debt issues with an estimated market share of 15% in terms of applications mobilized, besides
being established as the leading procurer in all public issues.
To further tap the immense growth potential in the capital markets we enhanced the scope
of our retail brand, Karvy the Finapolis, thereby providing planning and advisory services to
the mass affluent. Here we understand the customer needs and lifestyle in the context of present
earnings and provide adequate advisory services that will necessarily help in creating wealth.
Judicious planning that is customized to meet the future needs of the customer deliver a service
that is exemplary. The market-savvy and the ignorant investors, both find this service very
satisfactory. The edge that we have over competition is our portfolio of offerings and our
professional expertise. The investment planning for each customer is done with an unbiased
attitude so that the service is truly customized.
Our monthly magazine, Finapolis, provides up-dated market information on market
trends, investment options, opinions etc. Thus empowering the investor to base every financial
move on rational thought and prudent analysis and embark on the path to wealth creation.

ADVISORY SERVICES
Under our retail brand Karvy the Finapolis', we deliver advisory services to a crosssection of customers. The service is backed by a team of dedicated and expert professionals with
varied experience and background in handling investment portfolios. They are continually
engaged in designing the right investment portfolio for each customer according to individual
needs and budget considerations with a comprehensive support system that focuses on trading
customers' portfolios and providing valuable inputs, monitoring and managing the portfolio
through varied technological initiatives. This is made possible by the expertise we have gained in
the business over the years. Another venture towards being investor-friendly is the circulation of
a monthly magazine called Karvy - the Finapolis'. Covering the latest of market news, trends,
investment schemes and research-based opinions from experts in various financial fields.

PRIVATE CLIENT GROUP

This specialized division was set up to cater to the high net worth individuals and
institutional clients keeping in mind that they require a different kind of financial planning and
management that will augment not just existing finances but their life-style as well. Here we
follow a hard-nosed business approach with the soft touch of dedicated customer care and
personalized attention.
For this purpose we offer a comprehensive and personalized service that encompasses
planning and protection of finances, planning of business needs and retirement needs and a host
of other services, all provided on a one-to-one basis.
Our research reports have been widely appreciated by this segment. The delivery and
support modules have been fine tuned by giving our clients access to online portfolio
information, constant updates on their portfolios as well as value-added advise on portfolio
churning, sector switches etc. The investment recommendations given by our research team in
the cash market have enjoyed a high success rate.

MERCHANT BANKING
Recognized as a leading merchant banker in the country, we are registered with SEBI as a
Category I merchant banker. This reputation was built by capitalizing on opportunities in
corporate consolidations, mergers and acquisitions and corporate restructuring, which have
earned us the reputation of a merchant banker. Raising resources for corporate or Government
Undertaking successfully over the past two decades have given us the confidence to renew our
focus in this sector.
Our quality professional team and our work-oriented dedication have propelled us to
offer value-added corporate financial services and act as a professional navigator for long term
growth of our clients, who include leading corporate, State Governments, foreign institutional
investors, public and private sector companies and banks, in Indian and global markets.
We have also emerged as a trailblazer in the arena of relationships, both at the customer
and trade levels because of our unshakable integrity, seamless service and innovative solutions
that are tuned to meet varied needs. Our team of committed industry specialists, having extensive
experience in capital markets, further nurtures this relationship.

Our financial advice and assistance in restructuring, divestitures, acquisitions, demergers, spin-offs, joint ventures, privatization and takeover defense mechanisms have elevated
our relationship with the client to one based on unshakable trust and confidence.

MUTUAL FUND SERVICES I ISSUE REGISTRY I CORPORATE SHAREHOLDERS

SERVICES

We have traversed wide spaces to tie up with the worlds largest transfer agent, the leading
Australian company, Computer share Limited. The company that services more than 75 million
shareholders across 7000 corporate clients and makes its presence felt in over 12 countries across 5
continents has entered into a 50-50 joint venture with us.

With our management team completely transferred to this new entity, we will aim to
enrich the financial services industry than before. The future holds new arenas of client servicing
and contemporary and relevant technologies as we are geared to deliver better value and foster
bigger investments in the business. The worldwide network of Computershare will hold us in
good stead as we expect to adopt international standards in addition to leveraging the best of
technologies from around the world.
Excellence has to be the order of the day when two companies with such similar
ideologies of growth, vision and competence, get together. www.karisma.karvy.com

MUTUAL FUND SERVICES

We have attained a position of immense strength as a provider of across-the-board
transfer agency services to AMCs, Distributors and Investors.
Nearly 40% of the top-notch AMCs including prestigious clients like Deutsche AMC and
UTI swear by the quality and range of services that we offer. Besides providing the entire back
office processing, we provide the link between various Mutual Funds and the investor, including
services to the distributor, the prime channel in this operation. We have been with the AMCs
every step of the way, helping them serve their investors better by offering them a diverse and
customized range of services. The first to market' approach that is our anthem has earned us the
reputation of an innovative service provider with a visionary bent of mind.
Our service enhancements such as Karvy Converz', a full-fledged call center, a top-line website
(www.karvymfs.com), the m-investor' and many more, creating a galaxy of customer
advantages.

ISSUE REGISTRY
In our voyage towards becoming the largest transaction-processing house in the Indian
Corporate segment, we have mobilized funds for numerous corporate, Karvy has emerged as the
largest transaction-processing house for the Indian Corporate sector. With an experience of
handling over 700 issues, Karvy today, has the ability to execute voluminous transactions and
hard-core expertise in technology applications have gained us the No.1 slot in the business.
Karvy is the first Registry Company to receive ISO 9002 certification in India that stands
testimony to its stature
Karvy has the benefit of a good synergy between depositories and registry that enables faster
resolution to related customer queries. Apart from its unique investor servicing presence in all
the phases of a public Issue, it is actively coordinating with both the main depositories to develop
special models to enable the customer to access depository (NSDL, CDSL) services during an
IPO. Our trust-worthy reputation, competent manpower and high-end technology and
infrastructure are the solid foundations on which our success is built.

CORPORATE SHAREHOLDER SERVICES

Karvy has been a customer centric company since its inception. Karvy offers a single
platform servicing multiple financial instruments in its bid to offer complete financial solutions
to the varying needs of both corporate and retail investors where an extensive range of services
are provided with great volume-management capability.

Today, Karvy is recognized as a company that can exceed customer expectations which is
the reason for the loyalty of customers towards Karvy for all his financial needs. An opinion poll
commissioned by The Merchant Banker Update and conducted by the reputed market research
agency, MARG revealed that Karvy was considered the Most Admired in the registrar category
among financial services companies.
We have grown from being a pure transaction processing business, to one of complete
shareholder solutions.

The specialist Business Process Outsourcing unit of the Karvy Group. The legacy of
expertise and experience in financial services of the Karvy Group serves us well as we enter the
global arena with the confidence of being able to deliver and deliver well.
Here we offer several delivery models on the understanding that business needs are
unique and therefore only a customized service could possibly fit the bill. Our service matrix has
permutations and combinations that create several options to choose from.
Be it in re-engineering and managing processes or delivering new efficiencies, our
service meets up to the most stringent of international standards. Our outsourcing models are
designed for the global customer and are backed by sound corporate and operations philosophies,
and domain expertise. Providing productivity improvements, operational cost control, cost
savings, improved accountability and a whole gamut of other advantages.
We operate in the core market segments that have emerging requirements for specialized
services. Our wide vertical market coverage includes Banking, Financial and Insurance Services
(BFIS), Retail and Merchandising, Leisure and Entertainment, Energy and Utility and
Healthcare.
Our horizontal offerings do justice to our stance as a comprehensive BPO unit and
include a variety of services in Finance and Accounting Outsourcing Operations, Human
Resource Outsourcing Operations, Research and Analytics Outsourcing Operations and
Insurance Back Office Outsourcing Operations.

At Karvy Commodities, we are focused on taking commodities trading to new

dimensions of reliability and profitability. We have made commodities trading, an essentially
age-old practice, into a sophisticated and scientific investment option.
Here we enable trade in all goods and products of agricultural and mineral origin that
include lucrative commodities like gold and silver and popular items like oil, pulses and cotton
through a well-systematized trading platform.
Our technological and infrastructural strengths and especially our street-smart skills
make us an ideal broker. Our service matrix is holistic with a gamut of advantages, the first and
foremost being our legacy of human resources, technology and infrastructure that comes from
being part of the Karvy Group.
Our wide national network, spanning the length and breadth of India, further supports
these advantages. Regular trading workshops and seminars are conducted to hone trading
strategies to perfection. Every move made is a calculated one, based on reliable research that is
converted into valuable information through daily, weekly and monthly newsletters, calls and
intraday alerts. Further, personalized service is provided here by a dedicated team committed to
giving hassle-free service while the brokerage rates offered are extremely.

At Karvy Broking Pvt. Ltd., we provide both life and non-life insurance products to retail
individuals, high net-worth clients and corporates. With the opening up of the insurance sector
and with a large number of private players in the business, we are in a position to provide tailor
made policies for different segments of customers.
In our journey to emerge as a personal finance advisor, we will be better positioned to
leverage our relationships with the product providers and place the requirements of our
customers appropriately with the product providers. With Indian markets seeing a sea change,
both in terms of investment pattern and attitude of investors, insurance is no more seen as only a
tax saving product but also as an investment product. By setting up a separate entity, we would
be positioned to provide the best of the products available in this business to our customers.
Our wide national network, spanning the length and breadth of India, further supports
these advantages. Further, personalized service is provided here by a dedicated team committed
in giving hassle-free service to the clients.

ACHIEV
EMENTS

 Among the top 5 stock brokers in India (4% of NSE volumes)

India's No. 1 Registrar & Securities Transfer Agents
Among the to top 3 Depository Participants
Largest Network of Branches & Business Associates
ISO 9002 certified operations by DNV
Among top 10 Investment bankers
Largest Distributor of Financial Products
Adjudged as one of the top 50 IT uses in India by MIS Asia
Full Fledged IT driven operations

QUALITY POLICY
To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial services.
In the process, Karvy will strive to exceed Customer's expectations.

QUALITY OBJECTIVES
As per the Quality Policy, Karvy will:
Build in-house processes that will ensure transparent and harmonious relationships with its clients
and investors to provide high quality of services.
Establish a partner relationship with its investor service agents and vendors that will help in
keeping up its commitments to the customers.
Provide high quality of work life for all its employees and equip them with adequate knowledge
& skills so as to respond to customer's needs.
Continue to uphold the values of honesty & integrity and strive to establish unparalleled
standards in business ethics.
Use state-of-the art information technology in developing new and innovative financial products
and services to meet the changing needs of investors and clients.
Strive to be a reliable source of value-added financial products and services and constantly guide
the individuals and institutions in making a judicious choice of same.
Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and
regulatory authorities) proud and satisfied.

INTRODUCTION
Mutual funds are financial intermediaries, which collect the savings of investors and invest them
in a large and well-diversified portfolio of securities such as money market instruments,
corporate and government bonds and equity shares of joint stock companies. A mutual fund is a
pool of common funds invested by different investors, who have no contact with each other.
Mutual funds are conceived as institutions for providing small investors with avenues of
investments in the capital market. Since small investors generally do not have adequate time,
knowledge, experience and resources for directly accessing the capital market, they have to rely
on an intermediary, which undertakes informed investment decisions and provides consequential
benefits of professional expertise. The raison dtre of mutual funds is their ability to bring down
the transaction costs. The advantages for the investors are reduction in risk, expert professional
management, diversified portfolios, and liquidity of investment and tax benefits. By pooling their
assets through mutual funds, investors achieve economies of scale. The interests of the investors
are protected by the SEBI, which acts as a watchdog. Mutual funds are governed by the SEBI
(Mutual Funds) Regulations, 1993.

MUTUAL FUND OPERATIONS FLOW CHART

The flow chart below describes broadly the working of a Mutual Fund:

THE GOAL OF MUTUAL FUND

The goal of a mutual fund is to provide an individual to make money. There are several thousand
mutual funds with different investments strategies and goals to chosen from. Choosing one can

be over whelming, even though it need not be different mutual funds have different risks, which
differ because of the funds goals fund manager, and investment style.
The fund itself will still increase in value, and in that way you may also make money therefore
the value of shares you hold in mutual fund will increase in value when the holdings increases in
value capital gains and income or dividend payments are best reinvested for younger investors
Retires often seek the income from dividend distribution to augment their income with
reinvestment of dividends and capital distribution your money increase at an even greater rate.
When you redeem your shares what you receive is the value of the share.

ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organizational set
up of a mutual fund:

BACKGROUND
HISTORY AND STRUCTURE OF INDIAN MUTUAL FUND INDUSTRY
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank. The history of mutual funds in India can
be broadly divided into four distinct phases:

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development
Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The
first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700
crores of assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and
Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004
crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993
SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual
Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)
Regulations 1996. The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs.
1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was
way ahead of other mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of
Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations. The
second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile
UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund industry
has entered its current phase of consolidation and growth. As at the end of September, 2004,
there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

Objectives of Study:
1.

Evaluate Perception towards risk involved in mutual funds in comparison to other

financial avenues.

2.

To enhance our knowledge about the subject.

3.

To have a vivid picture of major players in Mutual Fund Industry in India

4.

How effectively they are reaching their customers.

5.

To study the marketing of Mutual Fund products in India.

6.

To study the consumer awareness regarding Mutual Funds

7.

To study the preferences of the distributors for Mutual Funds.

8.

To study the pattern of consumer behavior within the available investment options and to
test awareness among the consumer about the various mutual fund houses.

CLASSIFICATION OF MUTUAL FUND SCHEMES:

Any mutual fund has an objective of earning income for the investors and/ or getting increased
value of their investments. To achieve these objectives mutual funds adopt different strategies
and accordingly offer different schemes of investments. On this basis the simplest way to
categorize schemes would be to group these into two broad classifications:
OPERATIONAL CLASSIFICATION AND PORTFOLIO CLASSIFICATION.

Operational classification highlights the two main types of schemes, i.e., open-ended and closeended which are offered by the mutual funds.
Portfolio classification projects the combination of investment instruments and investment
avenues available to mutual funds to manage their funds. Any portfolio scheme can be either
open ended or close ended.
Operational Classification:
(A) Open Ended Schemes: As the name implies the size of the scheme (Fund) is open i.e.,
not specified or pre-determined. Entry to the fund is always open to the investor who can
subscribe at any time. Such fund stands ready to buy or sell its securities at any time. It implies
that the capitalization of the fund is constantly changing as investors sell or buy their shares.
Further, the shares or units are normally not traded on the stock exchange but are repurchased by
the fund at announced rates. Open-ended schemes have comparatively better liquidity despite the
fact that these are not listed. The reason is that investors can any time approach mutual fund for
sale of such units. No intermediaries are required. Moreover, the realizable amount is certain
since repurchase is at a price based on declared net asset value (NAV). No minute to minute
fluctuations in rates haunt the investors. The portfolio mix of such schemes has to be
investments, which are actively traded in the market. Otherwise, it will not be possible to
calculate NAV. This is the reason that generally open-ended schemes are equity based. Moreover,
desiring frequently traded securities, open-ended schemes hardly have in their portfolio shares of
comparatively new and smaller companies since these are not generally traded. In such funds,
option to reinvest its dividend is also available. Since there is always a possibility of
withdrawals, the management of such funds becomes more tedious as managers have to work
from crisis to crisis. Crisis may be on two fronts, one is, that unexpected withdrawals require
funds to maintain a high level of cash available every time implying thereby idle cash. Fund
managers have to face questions like what to sell. He could very well have to sell his most
liquid assets. Second, by virtue of this situation such funds may fail to grab favourable
opportunities. Further, to match quick cash payments, funds cannot have matching realization
from their portfolio due to intricacies of the stock market. Thus, success of the open-ended
schemes to a great extent depends on the efficiency of the capital market and the selection and
quality of the portfolio.

(B) Close Ended Schemes: Such schemes have a definite period after which their shares/ units
are redeemed. Unlike open-ended funds, these funds have fixed capitalization, i.e., their corpus
normally does not change throughout its life period. Close ended fund units trade among the
investors in the secondary market since these are to be quoted on the stock exchanges. Their
price is determined on the basis of demand and supply in the market. Their liquidity depends on
the efficiency and understanding of the engaged broker. Their price is free to deviate from NAV,
i.e., there is every possibility that the market price may be above or below its NAV. If one takes
into account the issue expenses, conceptually close ended fund units cannot be traded at a
premium or over NAV because the price of a package of investments, i.e., cannot exceed the sum
of the prices of the investments constituting the package. Whatever premium exists that may
exist only on account of speculative activities. In India as per SEBI (MF) Regulations every
mutual fund is free to launch any or both types of schemes.
Portfolio Classification of Funds:
Following are the portfolio classification of funds, which may be offered. This classification may
be on the basis of (A) Return, (B) Investment Pattern, (C) Specialised sector of investment, (D)
Leverage and (E) Others.
(A) Return based classification:
To meet the diversified needs of the investors, the mutual fund schemes are made to enjoy a good
return. Returns expected are in form of regular dividends or capital appreciation or a
combination of these two.
1. Income Funds: For investors who are more curious for returns, Income funds are floated.
Their objective is to maximize current income. Such funds distribute periodically the income
earned by them. These funds can further be splitted up into categories: those that stress constant
income at relatively low risk and those that attempt to achieve maximum income possible, even
with the use of leverage. Obviously, the higher the expected returns, the higher the potential risk
of the investment.
2. Growth Funds: Such funds aim to achieve increase in the value of the underlying investments
through capital appreciation. Such funds invest in growth oriented securities which can

appreciate through the expansion production facilities in long run. An investor who selects such
funds should be able to assume a higher than normal degree of risk.
3. Conservative Funds: The fund with a philosophy of all things to all issue offer document
announcing objectives as: (i) To provide a reasonable rate of return, (ii) To protect the value of
investment and, (iii) To achieve capital appreciation consistent with the fulfillment of the first
two objectives. Such funds which offer a blend of immediate average return and reasonable
capital appreciation are known as middle of the road funds. Such funds divide their portfolio in
common stocks and bonds in a way to achieve the desired objectives. Such funds have been most
popular and appeal to the investors who want both growth and income.
(B) Investment Based Classification:
Mutual funds may also be classified on the basis of securities in which they invest. Basically, it is
renaming the subcategories of return based classification.
1. Equity Fund: Such funds, as the name implies, invest most of their investible shares in equity
shares of companies and undertake the risk associated with the investment in equity shares. Such
funds are clearly expected to outdo other funds in rising market, because these have almost all
their capital in equity. Equity funds again can be of different categories varying from those that
invest exclusively in high quality blue chip companies to those that invest solely in the new,
unestablished companies. The strength of these funds is the expected capital appreciation.
Naturally, they have a higher degree of risk.
2. Bond Funds: such funds have their portfolio consisted of bonds, debentures, etc. this type of
fund is expected to be very secure with a steady income and little or no chance of capital
appreciation. Obviously risk is low in such funds. In this category we may come across the funds
called Liquid Funds which specialize in investing short-term money market instruments. The
emphasis is on liquidity and is associated with lower risks and low returns.
3. Balanced Fund: The funds, which have in their portfolio a reasonable mix of equity and
bonds, are known as balanced funds. Such funds will put more emphasis on equity share
investments when the outlook is bright and will tend to switch to debentures when the future is
expected to be poor for shares.

(C) Sector Based Funds:

There are number of funds that invest in a specified sector of economy. While such funds do
have the disadvantage of low diversification by putting all their all eggs in one basket, the policy
of specializing has the advantage of developing in the fund managers an intensive knowledge of
the specific sector in which they are investing. Sector based funds are aggressive growth funds
which make investments on the basis of assessed bright future for a particular sector. These funds
are characterized by high viability, hence more risky.

MUTUAL FUNDS FOR WHOM?

These funds can survive and thrive only if they can live up to the hopes and trusts of their
individual members. These hopes and trusts echo the peculiarities which support the emergence
and growth of such insecurity of such investors who come to the rescue of such investors who
face following constraints while making direct investments:
(a)

Limited resources in the hands of investors quite often take them away from stock market

transactions.
(b)

Lack of funds forbids investors to have a balanced and diversified portfolio.

(c)

Lack of professional knowledge associated with investment business unable investors to

operate gainfully in the market. Small investors can hardly afford to have ex-pensive investment
consultations.
(d)

To buy shares, investors have to engage share brokers who are the members of stock

exchange and have to pay their brokerage.

(e)

They hardly have access to price sensitive information in time.

(f)

It is difficult for them to know the development taking place in share market and

corporate sector.
(g)

Firm allotments are not possible for small investors on when there is a trend of over

subscription to public issues.

WHY MUTUAL FUNDS?

Mutual Funds are becoming a very popular form of investment characterized by many
advantages that they share with other forms of investments and what they possess uniquely
themselves. The primary objectives of an investment proposal would fit into one or combination
of the two broad categories, i.e., Income and Capital gains. How mutual fund is expected to be
over and above an individual in achieving the two said objectives, is what attracts investors to
opt for mutual funds. Mutual fund route offers several important advantages.
Diversification: A proven principle of sound investment is that of diversification, which is the
idea of not putting all your eggs in one basket. By investing in many companies the mutual funds

can protect themselves from unexpected drop in values of some shares. The small investors can
achieve wide diversification on his own because of many reasons, mainly funds at his disposal.
Mutual funds on the other hand, pool funds of lakhs of investors and thus can participate in a
large basket of shares of many different companies. Majority of people consider diversification
as the major strength of mutual funds.
Expertise Supervision: Making investments is not a full time assignment of investors. So they
hardly have a professional attitude towards their investment. When investors buy mutual fund
scheme, an essential benefit one acquires is expert management of the money he puts in the fund.
The professional fund managers who supervise funds portfolio take desirable decisions viz.,
what scrips are to be bought, what investments are to be sold and more appropriate decision as
to timings of such buy and sell. They have extensive research facilities at their disposal, can
spend full time to investigate and can give the fund a constant supervision. The performance of
mutual fund schemes, of course, depends on the quality of fund managers employed.
A. Liquidity of Investment: A distinct advantage of a mutual fund over other investments is that
there is always a market for its unit/ shares. Moreover, Securities and Exchange Board of India
(SEBI) requires the mutual funds in India have to ensure liquidity. Mutual funds units can either
be sold in the share market as SEBI has made it obligatory for closed-ended schemes to list
themselves on stock exchanges. For open-ended schemes investors can always approach the fund
for repurchase at net asset value (NAV) of the scheme. Such repurchase price and NAV is
advertised in newspaper for the convenience of investors.
B. Reduced risks: Risk in investment is as to recovery of the principal amount and as to return on it.
Mutual fund investments on both fronts provide a comfortable situation for investors. The expert
supervision, diversification and liquidity of units ensured in mutual funds reduces the risks.
Investors are no longer expected to come to grief by falling prey to misleading and motivating
headline leads and tips, if they invest in mutual funds.
C. Safety of Investment: Besides depending on the expert supervision of fund managers, the
legislation in a country (like SEBI in India) also provides for the safety of investments. Mutual
funds have to broadly follow the laid down provisions for their regulations, SEBI acts as a
watchdog and attempts whole heatedly to safeguard investors interests.

D. Tax Shelter: Depending on the scheme of mutual funds, tax shelter is also available. As per the
Union Budget-2003, income earned through dividends from mutual funds is 100% tax-free at the
hands of the investors.
E. Minimize Operating Costs: Mutual funds having large invisible funds at their disposal avail
economies of scale. The brokerage fee or trading commission may be reduced substantially. The
reduced operating costs obviously increase the income available for investors.
Investing in securities through mutual funds has many advantages like option to reinvest
dividends, strong possibility of capital appreciation, regular returns, etc. Mutual funds are also
relevant in national interest. The test of their economic efficiency as financial intermediary lies in
the extent to which they are able to mobilize additional savings and channeling to more
productive sectors of the economy.

Types of Retail Investors

The ET survey on retail equity investors in the secondary market has identified different
categories of investors based on their characteristics. Many questions are raised about the
behaviour of the small investor under different circumstances. The answer to many of these
questions and similar others is not difficult to interpret once we identify the different types of
retail investors in the stock markets.
The survey shows that there are five different kinds of retail investors: intellectuals, cavaliers,
reactivists, opportunists, and gamblers. This classification is based on the attitudes of

investors towards secondary market investments. Lets explain each type of investor and
understand their investment psyche and behavioral patterns.
INTELLECTUALS:
This retail investor group forms around 17% of the total retail investment class. They are the
intelligent investors who follow an intelligent, individualist approach to investment planning and
a well-defined and deliberate strategy for stock investment. These investors are self reliant good
stock pickers and try to monetize market knowledge.
Giving proof of their intelligence, they consider low-risk; lowgain guaranteed return avenues as
pass. Also, they believe in and work towards a well-planned. Asset allocation and seek the right
mix of stability and reliability of returns.
The intellectuals are unaffected by shortterm fluctuations and prefer longterm investments.
Moreover, they are disciplined enough to observe profit targets which they have set for
themselves. And as they invest for the long term, they are not concerned with short term losses.
They manager their money themselves and understand the industry/sector before investing.
CAVALIERS:
As high as 49% of the small retail equity investors are cavaliers. They are those who have lost
money in fly-by night schemes. Therefore, much of their investments are driven by the desire
to recover past losses and make profits in the future. As such, they invest aggressively into
equities, mostly in volatile sectors in order to make big gains. However, they will also invest in
FDs and insurance as a precautionary measure. They get tempted to speculate in the secondary
market and once in a while, they actually speculate but with smaller amounts. The cavaliers try
to gather all available information and compare it with opinions from experts in the media, but
will trust their own judgment before making decisions.
REACTIVISTS:
About 5% of the retail equity investors fall under this category. These investors basically shortterm investors, are impulsive info addicts who are vulnerable to external influences and as such,
they have no specific investment patterns, They believe that dynamic and ad hoc investments

will result in better profits and are prompted to act on popular opinion rather than systematic
planning. As they lack in confidence, experience and expertise, they constantly rely on advice
from in the know people such as brokers and analysts. They are extremely anxious about price
fluctuations or short-term declines. They are very sceptical and believe that small declines can
lead to larger losses if not reacted upon immediately. Therefore, the reactivists constantly seek
new information about stocks in which they are currently invested in, to ensure a feeling of
security. Moreover, their investments apart from equities are solely for tax-saving purposes.

OPPORTUNISTS:
This class of investors account for 10% of the retail equity investor universe. This category is
defensively pessimistic and prefers to take only familiar risks. As they have a low risk tolerance,
they are wary of volatility in the equity market. They invest into equities by imitating larger
trends rather than with their individual analysis and consider equity investment as a gamble.
They want to be in the black all the time and as such, prefer popular stocks with immediate profit
potential. Opportunists need positive price movements to encourage their investments into
equities and they will not hunt for bargains of invest on price declines. But before investing into
equities. They prefer to build a critical mass of fixed income instruments as they find fixed
income options a reassuring way of safe bets. The opportunistschoice of investments as they
find fixed income options a reassuring way of safe bets. The opportunists choice of investment
is biased towards well known and previously owned securities, including equities. This investor
class is wary of investing into equities when the market has moved up too high too soon. So, if
you have not invested in the current market, you are probably an opportunist.
GAMBLERS:
19% the retail investor population is made up of not actual investors. But gamblers. They are the
typical thrill seeking traders who link profitability to personal achievement. They experiment a
lot, mostly driven by instinct and self confidence; as such their stock selection is more a random
exercise that lacks rationale. This class perceives all securities as tradable commodities to be
bought and sold in the short term. However, they know completely about the risk factors and
therefore, have a tendency to invest only as much as they are willing to lose. As a part, of the

game and this does not act as a hindrance for future investments. They do not trust brokers, but
will secretly verify their suggestions for fear of missing an opportunity. They ascertain fair value
of stocks on gut feeling rather than any financial analysis and use sudden downward fluctuations
as buying opportunities.

MARKETING STRATEGIES ADOPTED BY THE MUTUAL FUNDS

The present marketing strategies of mutual funds can be divided into two main headings:
Direct marketing
Selling through intermediaries.
Joint Calls
Direct Marketing:

This constitutes 20 percent of the total sales of mutual funds. Some of the important tools used in
this type of selling are:
Personal Selling: In this case the customer support officer or Relationship Manager of the fund
at a particular branch takes appointment from the potential prospect. Once the appointment is
fixed, the branch officer also called Business Development Associate (BDA) in some funds then
meets the prospect and gives him all details about the various schemes being offered by his fund.
The conversion rate in this mode of selling is in between 30% - 40%.
Telemarketing: In this case the emphasis is to inform the people about the fund. The names and
phone numbers of the people are picked at random from telephone directory. Some fund houses
have their database of investors and they cross sell their other products. Sometimes people
belonging to a particular profession are also contacted through phone and are then informed
about the fund. Generally the conversion rate in this form of marketing is 15% - 20%.
Direct mail: This one of the most common method followed by all mutual funds. Addresses of
people are picked at random from telephone directory, business directory, professional directory
etc. The customer support officer (CSO) then mails the literature of the schemes offered by the
fund. The follow up starts after 3 4 days of mailing the literature. The CSO calls on the people
to whom the literature was mailed. Answers their queries and is generally successful in taking
appointments with those people. It is then the job of BDA to try his best to convert that prospect
into a customer.
Advertisements in newspapers and magazines: The funds regularly advertise in business
newspapers and magazines besides in leading national dailies. The purpose to keep investors
aware about the schemes offered by the fund and their performance in recent past. Advertisement
in TV/FM Channel: The funds are aggressively giving their advertisements in TV and FM
Channels to promote their funds.
Hoardings and Banners: In this case the hoardings and banners of the fund are put at important
locations of the city where the movement of the people is very high. The hoarding and banner
generally contains information either about one particular scheme or brief information about all
schemes of fund.

Selling through intermediaries:

Intermediaries contribute towards 80% of the total sales of mutual funds. These are the people/
distributors who are in direct touch with the investors. They perform an important role in
attracting new customers. Most of these intermediaries are also involved in selling shares and
other investment instruments. They do a commendable job in convincing investors to invest in
mutual funds. A lot depends on the after sale services offered by the intermediary to the
customer. Customers prefer to work with those intermediaries who give them right information
about the fund and keep them abreast with the latest changes taking place in the market
especially if they have any bearing on the fund in which they have invested.
Regular Meetings with distributors: Most of the funds conduct monthly/bi-monthly meetings
with their distributors. The objective is to hear their complaints regarding service aspects from
funds side and other queries related to the market situation. Sometimes, special training
programmes are also conducted for the new agents/ distributors. Training involves giving details
about the products of the fund, their present performance in the market, what the competitors are
doing and what they can do to increase the sales of the fund.
Joint Calls:
This is generally done when the prospect seems to be a high net worth investor. The BDA and the
agent (who is located close to the HNIs residence or area of operation) together visit the
prospect and brief him about the fund. The conversion rate is very high in this situation,
generally, around 60%. Both the fund and the agent provide even after sale services in this
particular case.
Meetings with HNIs: This is a special feature of all the funds. Whenever a top official visits a
particular branch office, he devotes at least one to two hours in meeting with the HNIs of that
particular area. This generally develops a faith among the HNIs towards the fund.
MARKETING OF FUNDS: CHALLENGES AND OPPORTUNITIES
When we consider marketing, we have to see the issues in totality, because we cannot judge an
elephant by its trunk or by its tail but we have to see it in its totality. When we say marketing of
mutual funds, it means, includes and encompasses the following aspects:

 Assessing of investors needs and market research;

Responding to investors needs;
Product designing;
Studying the macro environment;
Timing of the launch of the product;
Choosing the distribution network;
Finalizing strategies for publicity and advertisement;
Preparing offer documents and other literature;
Getting feedback about sales;
Studying performance indicators about fund performance like NAV;
Sending certificates in time and other after sales activities;
Honoring the commitments made for redemptions and repurchase;
Paying dividends and other entitlements;
Creating positive image about the fund and changing the nature of the market itself.
The above are the aspects of marketing of mutual funds, in totality. Even if there is a single
weak-link among the factors which are mentioned above, no mutual fund can successfully
market its funds.
Widening, Broadening and Deepening the Markets
There are certain issues that are directly linked with the marketing of mutual funds, the first of
which is widening, broadening and deepening of the market for the mutual fund products.
Consider the geographical spread of the investors in the mutual fund industry. Almost 80% of the
funds are mobilized from less than 10 centers in the country. In fact there are only around 35

centers in the country, which account for almost 95% of the funds mobilized. Considering the
vast nature of this country, the first priority is that the geographic spread has to be widened and
the market has to be deepened. Secondly, the mutual funds must try to spread their wings not
only within the country, but also outside the country.
A. Markets in Rural and Semi-Urban Areas
There exists a large investor base in rural and semi-urban areas, having a population of about one
lakhs, which normally has access to only post office savings and bank deposits. This is the single
largest untapped market for mutual funds in India. Rural marketing, unlike the marketing of
mutual funds in the metros and urban areas, would require a completely different strategy, and
different means of communication to the target customer. Typically, investors in the rural and
semi-urban areas are not well educated and are inadequately exposed to the capital market
mechanisms. Therefore, more emphasis has to be given to the electronic media and other forms
of publicity such as wall paintings, hoardings, and educational films. It is also important to
utilize the services of local intermediaries like Gram Sevaks, Postmasters, School teachers,
Agricultural Co-operative Societies and Rural Banks. It would therefore be more expensive to
market mutual funds in such markets than marketing in the cities.
The mutual fund industry can collectively undertake this job of creating awareness among the
rural population about the mutual funds as a new form of savings; translate that awareness into
increased fund mobilization. Collective Advertisements can be released .AMFI can coordinate
this task on behalf of the various Mutual Fund houses. The retail distribution network,
comprising of the district representatives and the collection centers can be best utilized to create
such awareness and expand the market. Simplification of literature in regional languages, group
meetings in these semi-urban and rural areas, visits by mobile vans with some audio visual aids
and the like, should help develop these markets. In other words, the untapped markets in the
country should ideally be the first thing that the mutual funds in India should Endeavour to tap,
not entirely relying upon the investors in the 35 odd cities of the country. By concentrating on
these areas, the investor base will get more broad based. Once the semi urban population gets
acquainted with the concept of mutual funds, it will naturally give the much needed stability to
the market.

B. Overseas Markets
The second aspect with respect to the widening and deepening the market is expanding the
overseas investor base. A target group with large potential, which can be tapped is non-resident
Indians. If offered after sales services of international standard, reasonable return and easy access
to information, NRIs are willing to invest in Indian mutual funds. The expansion of the
distribution network and quick dissemination of information, coupled with prompt and timely
service, efficient collection and remittance mechanism, will play an important role in mobilizing
and retaining these funds. NRIs will also require a continuous presence in their market, because
that generates trust and confidence, which translates into sustained mobilization of funds.

PRODUCT INNOVATION AND VARIETY

A. Investor Preferences
The challenge for the mutual funds is in the tailoring the right products that will help mobilizing
savings by targeting investors needs. It is necessary that the common investor understands very
clearly and loudly the salient features of funds, and distinguishes one fund from another. The
funds that are being launched today are more or less look-alikes, or plain vanilla funds, and not
necessarily designed to take into account the investors varying needs. The Indian investor is
essentially risk averse and is more passive than active. He is not interested in frequently
changing his portfolio, but is satisfied with safety and reasonable returns. Importantly, he
understands more by emotions and sentiments rather than a quantitative comparison of funds
performance with respect to an index. Mere growth prospects, in an uncertain market, are not
attractive to him. He prefers one bird in the hand to two in bush, and is happy if assured a rate of
reasonable return that he will get on his investment. The expectations of a typical investor, in
order of preference are the safety of funds, reasonable return and liquidity.
The investor is ready to invest his money over a long period, provided there is a purpose attached
to it which is linked to his social needs and therefore appeals to his sentiments and emotions.
That purpose may be his childs education and career development, medical expenses, health
care after retirement, or the need for steady and sure income after retirement. In a country where
social security and social insurance are conspicuous more by their absence, mutual funds can

pool their resources together and try to mobilize funds to meet some of the social needs of the
society.
B. Product Innovations
With the debt market now getting developed, mutual funds are tapping the investors who require
steady income with safety, by floating funds that are designed to primarily have debt instruments
in their portfolio. The other area where mutual funds are concentrating is the money market
mutual funds, sectoral funds, index funds, gilt funds besides equity funds.
The industry can also design separate funds to attract semi-urban and rural investors, keeping
their seasonal requirements in mind for harvest seasons, festival seasons, sowing seasons, etc.
DISTRIBUTION NETWORK
Among the competitors to the mutual fund industry, Life Insurance Corporation with its
dedicated sales force is offering insurance products; banks with their friendly neighbourhood
presence offer the advantage of extensive network; finance companies with their hefty upfront
incentives offer higher returns; shares provided the market is moving favourably also attract
direct investments from retail investors. It is against this background that the merits and demerits
of the alternative methods of distribution have to be studied.
Retail through agents
The alternative distribution channels that are available are selling, or using lead managers and
brokers along with sub-brokers, for selling units. The experience of UTI has been that, if
necessary motivation and incentive is provided to the retailer agents, they are likely to be more
successful than the lead managers. This is because, there is a sense of loyalty amongst agents, in
anticipation of getting continuous business throughout the year, and the trust and credibility that
has been generated or will be generated by being loyal to one institution. Statistics reveal that the
wastage ratio of application forms in the lead manager concept, is much higher than in the retail
agency system. Savings in advertisement and publicity expenses is also affected, as the target of
communication is restricted to a few group of individuals, since the agent will function as a
facilitator, informer and educator. The reduced cost benefit will ultimately accrue to the investor
in the form of higher returns.

In such a system, one achieves brand loyalty through continuous interaction between agents and
investors. Building a team of agents and other distribution network such as distribution and
collecting agents and franchise offices, will provide the investor the opportunity of having
continuous interaction and contact with the mutual fund. Therefore, retail distribution through
the agents is a preferred alternative for distributing mutual fund products.
ADVERTISING AND SALES PROMOTION
By their very nature, mutual funds require higher advertisement and sales promotion expenses
than any consumer product offering measurable performance. Different kinds of advertising and
sales promotion exercises are required to serve the needs of different classes of investors. For
instance, an aggressive push marketing strategy is required for retail markets, where investors
are not adequately aware of the product and do not have specialized skill in financial market, in
contrast with pull marketing strategies for the wholesale market.
There are certain issues with reference to advertisement, publicity literature and offer documents,
which deserve attention. Most of the mutual fund advertisements look similar, focusing on
scheme features, returns and incentives. An investor exposed to the increasing number of mutual
fund products finds that all the available brands are rather identical, and cannot appreciate any
distinction.
The present form of application, brochures and other literature is generally lengthy, cumbersome
and at times complicated leading to higher emphasis on advertisement. One of the limiting
factors is the regulatory framework governing advertisements of mutual fund products. For
instance, in the offer documents, mutual funds are required to mention the fund objectives in
clear terms. Immediately thereafter, the first risk factor that has to be mentioned is that there is
no certainty whether the objectives of the fund will be achieved or not. Some more relaxations
in these may facilitate bringing more novelty in advertisements, within a broad framework,
without luring investors through false promises, and will certainly improve the situation. Another
hurdle is the statutory disclaimer required to be carried along with every advertisement. Mutual
funds have to provide risk factors. Under the present mutual fund regulations, a prior approval by
SEBI is a must before a mutual fund can launch its fund. In the regulation itself, a period of one
month has been provided. But in a months time, perhaps the situation may so change, that the

timing of launch gets affected. The requirement for getting approval, which normally takes about
2 months time, defeats the purpose for which the fund was designed also.
QUALITY OF SERVICE This industry primarily sells quality of services, given that the
performance cannot be promised. It is with this attribute along with procedural simplicity, that
the fund gradually builds its brand and its class of loyal investors. The quality of services is
broadly categorized as:
Timely services after the sale of the units; and
Continuous reporting of investment performance.
Mutual fund managers must give due attention and evaluate their performance on each front.
They may also consider an option of conducting a service audit for controlling and improving the
quality of service.
MARKET RESEARCH
Investment in mutual fund is not a one-time activity. It is a continuous activity. The same
investor, if satisfied, will come to the fund again and again. When the investor sends his
application, it is not only an application, but it also contains vital information. Most of this
information if tabulated and analyzed would provide important insights into investor needs,
preferences and behavior and enables us to target customers need more accurately, to achieve
better penetration, deeper loyalty and reduced costs. It is in this context that direct marketing will
assume increased importance. Knowing the customer thoroughly is of utmost importance. Unlike
the consumer goods industry, it is not possible for mutual fund industry to test market and have
pilot projects before launch. At the same time, focusing and concentrating on a particular
geographic area where the fund has a strong presence and proven marketing network, can help
reduce network, can help reduce issue expenses and ultimately translate into higher returns for
the investor. Very little research on investor preference is available, but the industry can
collectively have a data bank, and share the information for appropriate use.
Market Segmentation Different segments of the market have different risk-return criteria, on the
basis of which they take investment decisions. Not only that, in a particular segment also there
could be different sub-segments asking for yet different risk-return attributes, and differential

preference for various investments attributes of financial product. Different investment attributes
an investor expects in a financial product are:

Liquidity,
Capital appreciation,
Safety of principal,
Tax treatment,
Dividend or interest income,
Regulatory restrictions,
Time period for investment, etc.
On the basis of these attributes the mutual fund market may be broadly segmented into five main
segments as under.
1) Retail Segment
This segment characterizes large number of participants but low individual volumes. It consists
of individuals, Hindu Undivided Families, and firms. It may be further sub-divided into:
i. Salaried class people;
ii. Retired people;
iii. Businessmen and firms having occasional surpluses;
iv. HUFs for long term investment purpose.
These may be further classified on the basis of their income levels. It has been observed that
prospects in different classes of income levels have different patterns of preferences of
investment. Similarly, the investment preferences for urban and rural prospects would differ and
therefore the strategies for tapping this segment would differ on the basis of differential life style,

value and ethics, social environment, media habits, and nature of work. Broadly, this class
requires security of the principal, liquidity, and regular income more than capital appreciation. It
lacks specialized investment skills in financial markets and highly susceptible to mob behavior.
The marketing strategy involving indirect selling through agency network and creating
awareness through appropriate media would be more effective in this segment.
2) Institutional Segment
This segment characterizes less number of participants, and large individual volumes. It consists
of banks, public sector units, financial institutions, foreign institutional investors, insurance
corporations, provident and pension funds. This class normally looks for more specialized
professional investment skills of the fund managers and expects a structured product than a
ready-made product. The tax features and regulatory restrictions are the vital considerations in
their investment decisions. Each class of participants, such as banks, provides a niche to the fund
managers in this segment. It requires more of a personalized and direct marketing to sustain and
increase volumes.
3) Trusts
This is a highly regulated, high volumes segment. It consists of various types of trusts, namely,
charitable trusts, religious trust, educational trust, family trust, social trust, etc. each with
different objectives. Its basic investment need would be safety of the principal, regular income
and hedge against inflation rather than liquidity and capital appreciation. This class offers vast
potential to the fund managers, if the regulators relax guidelines and allow the trusts to invest
freely in mutual funds.
4) Non-Resident Indians
This segment consists of very risk sensitive participants, at times referred as fair weather
friends. They need the highest cover against political and exchange risk. They normally prefer
easy exit with repatriation of income and principal. They also hold a strategic importance as they
bring in crucial foreign exchange a crucial input for developing country like ours. Marketing to
this segment requires special kind of products for groups of foreign countries depending upon the
provisions of tax treaties. The range of suitable products is required to design to divert the funds

flowing into bank accounts. The latest flavour in the mutual fund industry is exclusive schemes
for non-resident Indians (NRIs).SBI MF has already launched an exclusive scheme for NRIs.
ICICI Prudential and JM Mutual are in process of finalizing details and some more funds have
also confirmed that they are planning such schemes. The MF industry is also looking to tap the
vast NRI funds of about $5 billion that were transferred to the local banks as FCNR and NRE
deposits on the redemption of the Resurgent India Bonds in October, 2003. HDFC was one of the
first to launch a fixed maturity plan to NRIs after the RIB redemption .The scheme had collected
Rs.16-17 crores. Sundaram and HDFC MF are currently in the process of strengthening
distribution net-works overseas, especially in the Middle East. Sanjay Santhanam, Vice President
Marketing &Sales of Sundaram MF says, We are intensifying our efforts at tapping NRI money.
To begin with, we are looking at a representative office and a distribution network in Dubai.
Then we will work out specialized products and asset allocation models.NRI are used to seeing
low interest rates so their return expectations are different from domestic investors. The large
South Indian population in the Middle East will surely connect with the Sundaram brand.
5) Corporates
Generally, the investment need of this segment is to park their occasional surplus funds that earn
returns more than what they have to pay on account of holding them. Alternatively, they also get
surplus fund due to the seasonality of the business, which typically become due for the payment
within a year or quarter or even a month. They need short term parking place for their fund,. This
segment offers a vast potential to specialized money market managers. Given the relaxation in
the regulatory guidelines, fund managers are expected design products to this segment. Thus,
each segment and sub-segment has their own risk return preferences forming niches in the
market. Mutual funds managers have to analyze in detail the intrinsic needs of the prospects and
design a variety of suitable products for them. Not only those, the products are also required to
be marketed through appropriately different marketing strategies.
ADS THE WAY Increasing sales have given mutual fund promoters the budget to spend more
on advertising, which has further boosted sales
The Atheists are turning believers. Mutual funds, private sector ones in particular, who had
written off advertising as the ultimate waste of money have nearly tripled their press media

spend .Whats interesting is that in this period the share of the private sector mutual funds in the
categorys total media spending has surged from 20 percent to 52 percent. This can be attributed
to private sector funds (given the data available with the Association of Mutual Funds of India)
seeing an increase share of net inflows relative to the bank-sponsored counterparts in the public
sector.
Clearly advertising types have something to cheer about. But whats caused this sudden
attitudinal shift towards advertising? According to experts, funds are being pushed into
advertising more by intermediaries like banks who are reluctant to sell a product whose name is
unfamiliar to investor. Besides, since more open-ended schemes are now available, some form of
ongoing support to keep sales booming has been deemed necessary by the funds. The industry
has discovered that advertising in the changed climate today, when investors are most receptive
to mutual funds, can perk up sales by anywhere between 20-40 percent. MFs has rationale for
stepping up marketing spends because the brand is an important part of the consumers decision
to invest in a category that is not yet clearly understood by people. According to the mutual fund
marketers, advertising helps bring recall when consumers are looking at investment
opportunities.
Advertising backed by an integrated marketing and communication campaign designed to attract
investors with long term prospective has helped the fund post a redemption-to-sales ratio of just
about five percent as compared to 20-30 percent for the industry on an average.
But what mode of advertising do these funds choose? To sell the category, answer is mass
media is more effective because one needs to target a large segment of the population. Mutual
Fund marketers feel that since the category is information centric, press is the best medium to
get across ones message. Within the print media, most marketers feel that a combination of
leading mainline and financial newspapers complemented by finance/ business magazines, with
relevant thematic appeal and editorial content are the perfect mix.
Direct mail is another medium, which some funds have successfully used. But rather than
sending out mailers to all and sundry, there is a need for appropriate targeting.

Educational seminars are the final leg in the marketing and communication process. In these,
investors conditioned by advertising and hooked by an interesting mailer can have lingering
doubts clarified.
Attractive point of purchase (POP) material can also help.
Another very successful media niche, which has been exploited to the hilt by funds, is
intermediary magazines and newsletters. Besides the low costs of advertising in these
newsletters, these publications circulate to those who are looking for investment opportunities
and thus represent an extremely lucrative target segment.
Advertising content by most of the funds too has undergone a marked change from conceptselling ads dispelling myths, to selling specific schemes that meet defined objectives/ goals.
But why is advertising suddenly working for mutual funds when it doesnt seem to have made a
difference earlier? A sustained marketing strategy instead of a few, scrappy ads is now seen to be
the key to investor demand. Advertising serves as a reminder complementing a sales push by the
distributor. Since the distributor wasnt ready in earlier years, advertising then, didnt work,.
Brand building, is a long-term exercise. Just like mutual funds advocate that investors take a
long-term approach to investing, similarly funds need to take a long-term approach to brand
building.
Fund marketers and industry observers however, caution against the danger of selling the product
for the wrong reasons. Funds need to focus on sustainable communication. They need to build
brands that strike a chord with investors by relating to their concerns rather than selling flavourof-the-month style. The winning formula as industry watchers put it is the troika of
performance, service and trust for meeting long term needs or goals.

Inspired Marketing will help Mutual Funds walk away with the bank Deposits
Bankers better watch out! The Indian mutual fund industry will soon start relieving the banking
system of its prized deposits.

Innovative distribution, marketing and aggressive concept selling will drive savings into the lap
of the Indian Mutual Fund industry in the next millennium. Fund chiefs predicted that ease of
transactions, thanks to technology and increased awareness, would lead to more investors putting
their money into mutual funds. The day was not far, they said, when small savings account s too
began moving into mutual funds.
Significantly, fund chiefs were unanimous that the credibility gap which the industry suffered for
the past few years did not exist anymore. All the fund chiefs were unanimous that performance,
service and support were all imperative for growth. Performance, transparency and after sales
service and genuine retail investor interest as opposed to hot corporate money, an important
contributor to many mutual fund schemes, will drive the industry growth. Performance,
transparency, after sales customer service and genuine retail investor interest are opposed to hot
corporate money, an important contributor to many mutual fund schemes, will drive the industry
growth, On the state of market in general, fund chiefs attempted to allay fears that an overvalued
market may pose hurdles to stock picking.
According to them, while investors may feel that information technology, pharmaceuticals and
consumer goods stocks - or the BSE Sensex for that matter might have peaked, new
opportunities are opening up in areas like retail, healthcare and even in internet business.
Fund chiefs also made a case for the code to prevent mutual funds from projecting short-term
gains in an attempt to attract investors into their schemes. They were of the view that, Mutual
Funds have to agree to present performances in an annualized fashion, over a longer period. The
industry as a whole should standardize its performance.

RESEARCH METHODOLOGY:
Research Design

Descriptive Research

Research Instrument

Structured, un-disguised

Sample Method

Non-Probability Sampling

Sample Size

50

Sampling Design

Convenience Sampling

Primary Data

Structured Non-Disguised Questionnaire

Secondary Data

Reference from distributors & banks.

Sources of Data

The whole study is based upon primary and secondary data. Therefore, information has been
collected from interacting with different investors and from various magazines, journals,
websites, and bulletins.

LIST OF INFORMATION REQUIRED

Primary Data: Primary data are generated when a particular problem and hand is investigated
by the researcher employing mail questionnaire, telephone survey, personal interviews,
observations, and experiments.
METHOD USED IN COLLECTION OF DATA
1.

Personal Interview: In personal interview, the investigator questions the respondents in

a face-to-face meeting. Personal interviews may be conducted on a door-to-door basis or
in public places such as shopping centers. The usual approach for the interviewer is to
identify himself to a potential respondent and attempt to secure the respondent's cooperation in answering a list of predetermined questions. These answers may be taperecorded or written down by the interviewer.

Advantages
a.

It requires relatively shorter period of time to complete.

b.

Researcher can procure many different types of information.

c.

The amount of information procured on each aspects is larger.

d.

The results can be projected to the relevant universe with a greater degree of accuracy.

Disadvantages
a.

The cost per completed interview is relatively higher as compared to other methods.

b.

The investigator may have to face relatively more difficulties in administering the
interview schedule.

c.

The investigators themselves may involve in cheating which is very difficult to detect.

2.

Telephone Survey: In telephone survey, prospective respondents are telephoned, usually

at homes, and asked to answer a series of questions over the telephone.

This form of the survey technique has become more popular in recent years in advanced
countries more people are having telephones at their houses.
Advantages
a.

It can be conducted at a lower cost as compared with personal interviews.

b.

The interviews can be completed very quickly. Thus, speed is the most significant
advantage.

Disadvantages
a.

The information on each aspect can be obtained to a limited extent.

b.

Visual aids cannot be used.

c.

It is difficult to keep respondents on the phone for any length of time if the survey is not
of keen interest to them.

TYPE OF SAMPLING USED

We used non-probability type of sampling.

In non-probability sampling, the chance of any particular unit in the population being selected is
unknown. Since randomness is not involved in the selection process, an estimate of the sampling
error cannot be made. But this does not mean that the findings obtained from non-probability
sampling are of questionable value. If properly conducted their findings can be as accurate as
those obtained from probability sampling.
Convenience Sampling
As the name implies, a convenience sample is one chosen purely for expedience (e.g., items are
selected because they are easy or cheap to find and measure.
While few analysts would find credibility in conclusions from such extreme cases, the
inappropriateness of using convenience sampling to estimate universe values is not widely
recognized. The major problem with this (and other non-probability method) is that one is
unable to draw objective inference about a rigorously defined universe. In practice, it is often
found that the response given by "convenient" items in a universe differ significantly from the
responses given by universe items that are less accessible. As a result, unless one is dealing with
a known highly homogeneous universe (virtually all items responding alike), convenience
sampling should not be used to estimate universe values.
Sample Size
The sample size taken in the project work is 50. The area selected is Dehradun and its
surrounding area.
Convenience sampling method was used in this study because of the constraints like cost and
time.

FINDINGS

OCCUPATION OF PERSONS

6%
Government employee

Private employee
Businessmen
24%
50%

Retired

20%

FINDINGS: - There are 76% people who are investing & in this 76% there are 50% people in
government service, 20% in private job & 24% people are businessmen & 6% are retired.

AGE GROUP
6%
20-40 year

48%

40-60 year

Above
60 years
46%

FINDINGS: - There are 48% people in age group 40-60 years and 46% of people in 20-40 years
and rest 6% are Above 60 years.

INTEREST IN INVESTMENT
24%
Interested

Not Interested

76%

FINDINGS: - When I have analyze the project then I found that in out of total people 24%
people are not investing & 76% people are investing.

AREA OF INVESTMENT

7%
Fixed deposit

Property
23%

32%
Mutual Funds

Insurance

Share

7%
31%

FINDINGS: - In area of investment 32% people interest in fixed deposit and 31% people
interested in property & 7% in share and same in Mutual funds & 23% investing in insurance in
this finding some people interested in two area of investment.

SATISFIED WITH INVESTMENT

8%
Satisfied with investment

Not satisfied with investment

92%

FINDINGS: - In survey 92% of people are satisfied with investment and 8% are not satisfied
with our investment.

MUTUAL FUND INVESTMENT

UTI

Reliance mutual fund

16%

SBI mutual fund

12%

7%

ICICI prudential mutual fund

46%
Other

19%

FINDINGS: - In this survey 46% people are interest to buy SBI mutual fund and 19% people to
invest in reliance, 16% in ICICI mutual fund and 7% in UTI and 12% interested in investing in
different mutual funds.

EXPECTED RETURN
10%
less than 10%

18%

Between 10% to 30%

Above 30%

72%

FINDINGS: - In investment 72% people expected return between 10% to 30% and 18% people
expect less than 10% return and remain 10% people expected above 30% return.

RISK FACTOR
8%
Minimum risk

16%

Moderate risk

High risk

76%

FINDINGS: - In risk factor 76% people take minimum risk in investment and 16% people take
moderate risk only 8% people take high risk for more return on investment.

MONEY INVESTED

5000

26%

10%
5000-25000

Above 25000

64%

FINDINGS: - In Survey 64% of people invested between Rs 5000 to 25000 and 26% people
invested above Rs 25000 only 10% people invested only Rs 5000.

HOW LONG INVESTED

8%

Less than 1 year

42%Between

1 to 3 year

More than 3 year

50%

FINDINGS: - In Survey 50% investors are interest in 1 to 3 years of investment and 42% are
interested in more than 3 years of investment only 8% investors are interested in short term
investment.

Is investment in mutual fund safe?

25%
75%

Yes
No

FINDINGS:- In Survey 75% investors think that investment is safe and 25% think that it is not
safe.

Mutual fund can give higher return?

11%

Yes
No

89%

FINDINGS:- In Survey 89% investors think that mutual fund can give higher return and 11%
think that mutual fund cannot give higher return it can give only normally 15- 20% return.

Future of mutual fund

19%
81%

Good
Not good

FINDINGS:- In Survey 81% investor think that future of mutual fund will be good and 19%
think that future of mutual fund will not be as such good as it is.

Analysis
&
Interpretation
PEOPLE CONSIDERS VARIOUS FACTORS WHILE INVESTING IN MUTUAL FUND

Options
Returns
Tax saving
Liquidity
Risk free

Responses
49
26
16
9

Percentages (%)
49
26
16
9

People consider various factor while investing in mutual fund

60
50
40
% of response

30
20
10
0
1

options

PEOPLE CONSIDER VARIOUS BASES FOR INVESTING IN ANY PARTICULAR FUND

OPTIONS

RESPONSES

RESPONSES IN %

Past performance of fund

64

64

Portfolio of fund

36

36

people consider various bases while investing in any particular fund

64

36
1

1
2

responses in %

options

PREFERENCE OF VARIOUS MUTUAL FUNDS OF DIFFERENT PEOPLES

Options

Responses

Responses in %

Franklin Templeton

17

17

HDFC

19

19

Reliance

11

11

ICICI

18

18

SBI

29

29

Any other

preference of various funds of different peoples

8%

228%

17%

19%

18%

11%

PEOPLE INVEST THE DIFFERENT % OF SAVING IN MUTUAL FUNDS

Sr.no

Options

Responses

Responses in %

10-20%

46

46

20-30%

33

33

50%

15

15

More than 50%

peoples invest the different % of savings in mutual funds

50

46

45
40
33

35
30
responses in %

25
20

15

15
10
5

0
1

3
options

PEOPLE EXPECTATIONS OF RETURN FROM DIFFERENT FUNDS

Sr.no

Options

Responses

Responses in %

10-20%

32

32

20-30%

45

45

50%

More than 50%

people expectations of returns from different funds

50

45

45
40
35

32

30
returns in %

25
20
15

10
5

0
1

3
options

PREFERED MODE OF INVESTMENT

Sr.no

Options

Responses (%)

Mutual Funds

48

Bank FDs

45

Direct Equity Market

38

Insurance

35

Others

72

Direct equity market

insurance

ot
h

D
ire

ct

eq

m
ut

ui
ty

ua

lf

m
ar

er

ke

Bank FD's

un
d

80%
70%
60%
50%
40%
30%
20%
10%
mutual
fund
0%

PREFERED SCHEMES OF MUTUAL FUNDS

Sr.no

Options

Responses

Debt Fund

12%

Balanced Fund

20%

Equity Fund

50%

ELSS Fund

18%

others

SOURCE OF INFORMATION ABOUT MUTUAL FUNDS

Sr.no

Options

Responses

Print Media

40%

Internet

22%

Television

38%

38%

40%

Print Media

Internet

T.V

22%

PREFERED OPTION WHILE MAKING INVESTMENT

Sr.no

Options

Responses

SIP

50%

STP

20%

Consolidated amount

30%

30%

50%
SIP

20%

STP

Consolidated amount

CONCLUSION
The end of millennium marks 44 years of existence of mutual funds in this country. The ride
through these 44 years is not been smooth .Investors opinion is still divided .while some are for
the mutual funds others are against it.
Mutual Funds (MF) have become one of the most attractive ways for the average person to invest
his money. It is said that Bank investment is the first priority of people to invest their savings and
the second place is for investment in Mutual Funds and other avenues. A Mutual Fund pools
resources from thousands of investors and then diversifies its investment into many different
holdings such as stocks, bonds, or Government securities in order to provide high relative safety

and returns. . Also generate leads of the prospective investors in Mutual Funds for the Asset
Management Company (AMC)
There are many improvements pending in the field and it has to happen as soon as possible so as
to call the MF industry as an Organized and well-developed sector.

RECOMMENDATIONS
1.

Tapping the upcoming market - Semi Urban Market as there is a lot of opportunity.
Most of the Mutual Funds are operating in the metros and big cities as per their present
branch office locations. If they have to increase their market size they have to open more
distribution centers at the various urban and semi-urban markets.

2.

To create the awareness about the different products of Mutual Fund and not about the
generic product. Various respondents were not aware of the mutual fund products and the
type of mutual fund schemes and the risk associated with mutual fund products.

3.

To provide some kind of curriculum at the school/college level to create awareness

regarding Mutual Fund.

BIBLIOGRAPHY
Books:
Research Methodology

Website:
www.karvydp.com
www.mfportfolio.karvy.com

C. R. Kothari

www.the-finapolis.com
www.karvymfs.com
www.karisma.karvy.com
www.karvycomtrade.com
www.economictimes.com
www.sebi.gov.in
www.mutualfundsindia.com

QUESTIONNAIRE
Name of customer

Address

City

Telephone no.

Mobile no.

E-mail address

1) Occupation

Government Employee
Private Employee
Businessmen
Retired

2) Age Group

20-40 years
40-60 years
Above 60 years

3) Annual house hold income

Less than 1.5 lakh

Between 1.5 to 3 lakh
Between 3 to 5 lakh
Above 5 lakh

4) You are interested in investment

Yes
No

5) Do you have any existing investment

Yes
No

If Yes in which area

6) Where do you make investment

Fixed Deposit
Property
Mutual Funds
Insurance
Shares

7) You are satisfied with our investment

Yes
No

If No, why? Reason

8) You want to invest for

Children Education
Retirement
House
Vacation Abroad
Any Other

9) For which companys mutual fund or Banks mutual fund you are interested
UTI
Reliance Mutual Fund
SBI Mutual Fund
ICICI Prudential
Mutual Fund
Other mention here
10) What is your expected return

Less than 10%

Between 10% to 30%
Above 30%

11) How much risk you can take

Minimum Risk
Moderate Risk
High Risk

12) How much money you can invest

5000
5000-25000
Above 25000

13) How long you can invest

Less than 1 year

Between 1 to 3 year
More than 3 year

14) Why investment in mutual fund is good? Give reason.

15) Are investment in mutual fund units safe?

Yes
No

16) What do you think mutual fund can give a higher return?

Yes
No

17) What is the future of mutual fund it will perform good or not?
Yes
No

18) Which is more profitable FD or mutual fund?

FD
Mutual fund