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Table of Content

Chapter 1:- Conceptual Overview


Chapter 2:- Research Methodology
Objective of Study
Scope and Rationale of Study
Methodology
Limitation of Study
Chapter 3:- Theoretical Background
Chapter 4:- Case Study
Introduction of Company profile and Product
About the work in company done by students
Chapter 5:- Data Analysis
Chapter 6:- Findings
Bibliography
Annexure

CHAPTER - 1

Chapter 1:- Conceptual Overview


In few years Mutual Fund has emerged as a tool for ensuring ones financial well being.
Mutual Funds have not only contributed to the India growth story but have also helped
families tap into the success of Indian Industry. As information and awareness is rising more
and more people are enjoying the benefits of investing in mutual funds. The main reason the
number of retail mutual fund investors remains small is that nine in ten people with incomes
in India do not know that mutual funds exist. But once people are aware of mutual fund
investment opportunities, the number who decide to invest in mutual funds increases to as
many as one in five people. The trick for converting a person with no knowledge of mutual
funds to a new Mutual Fund customer is to understand which of the potential investors are
more likely to buy mutual funds and to use the right arguments in the sales process that
customers will accept as important and relevant to their decision.
This Project gave me a great learning experience and at the same time it gave me enough
scope to implement my analytical ability. The analysis and advice presented in this Project
Report is based on market research on the saving and investment practices of the investors
and preferences of the investors for investment in Mutual Funds. This Report will help to
know about the investors Preferences in Mutual Fund as an investment option means Are
they prefer any particular Asset Management Company (AMC), Which type of Product they
prefer, Which Option (Growth or Dividend) they prefer or Which Investment Strategy they
follow (Systematic Investment Plan or One time Plan). This Project as a whole can be divided
into two parts.
MEANING OF MUTUAL FUNDS
Mutual fund is a trust that pools the savings of a number of investors who share a common
financial goal. This pool of money is invested in accordance with a stated objective. The joint
ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus
collected is then invested in capital market instruments such as shares, debentures and other
securities. The income earned through these investments and the capital appreciations
realized are shared by its unit holders in proportion the number of units owned by them. Thus
a Mutual Fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed basket of securities at a
relatively low cost. A Mutual Fund is an investment tool that allows small investors access to
a well-diversified portfolio of equities, bonds and other securities. Each shareholder
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participates in the gain or loss of the fund. Units are issued and can be redeemed as needed.
The funds Net Asset value (NAV) is determined each day.
Investments in securities are spread across a wide cross-section of industries and sectors
and thus the risk is reduced. Diversification reduces the risk because all stocks may not move
in the same direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of mutual funds
are known as unit holders.

MUTUAL FUND AS AN INVESTMENT OPTION

When an investor subscribes for the units of a mutual fund, he becomes part owner of the
assets of the fund in the same proportion as his contribution amount put up with the corpus
(the total amount of the fund). Mutual Fund investor is also known as a mutual fund
shareholder or a unit holder.
Any change in the value of the investments made into capital market instruments (such as
shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is
defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a
scheme is calculated by dividing the market value of scheme's assets by the total number of
units issued to the investors.
An investor normally prioritizes his investment needs before undertaking an investment.
Different goals will be allocated to different proportions of the total disposable amount.
Investments for specific goals normally find their way into the debt market as risk reduction
is of prime importance, this is the area for the risk-averse investors and here, Mutual Funds
are generally the best option. One can avail of the benefits of better returns with added
benefits of anytime liquidity by investing in open-ended debt funds at lower risk, this risk
of default by any company that one has chosen to invest in, can be minimized by investing
in Mutual Funds as the fund managers analyze the companies financials more minutely than
an individual can do as they have the expertise to do so.
Moving up the risk spectrum, there are people who would like to take some risk and invest
in equity funds/capital market. However, since their appetite for risk is also limited, they
would rather have some exposure to debt as well. For these investors, balanced funds
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provide an easy route of investment, armed with expertise of investment techniques, they
can invest in equity as well as good quality debt thereby reducing risks and providing the
investor with better returns than he could otherwise manage. Since they can reshuffle their
portfolio as per market conditions, they are likely to generate moderate returns even in
pessimistic market conditions.
Next comes the risk takers, risk takers by their nature, would not be averse to investing in
high-risk avenues. Capital markets find their fancy more often than not, because they have
historically generated better returns than any other avenue, provided, the money was
judiciously invested. Though the risk associated is generally on the higher side of the
spectrum, the return-potential compensates for the risk attached.

CHAPTER - 2

Chapter 2:- Research Methodology

Objective of Study

1. To find out the Preferences of the investors for Asset Management Company.
2. To know the Preferences for the portfolios.
3. To know why one has invested or not invested in SBI Mutual fund
4. To find out the most preferred channel.
5. To find out what should do to boost Mutual Fund Industry.

Scope and Rationale of Study


Methodology

Research in common parlance refers to a search for knowledge. The advanced learners
dictionary of current English lays down the meaning of research as a careful investigation of
enquiry especially through search for new facts in any branch of knowledge.
The systematic approach concerning generalization and the formulation of a theory is also
research. The purpose of research is to discover answers to questions through the application
of scientific procedures.

A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in procedure.
- JOHN.W.BEST
Research may be defined as any organized inquiry designed and carried out to provide
information for solving a problem.
- EMORY
Research is essentially an investigation, a recording and an analysis of evidence for the
purpose of gaining knowledge.
- ROBERT ROSS

DESCRIPTIVE RESEARCH DESIGN


Descriptive research design studies are those studies, which are concerned with describing
the character of a group.
The researcher makes a plan of the study his research work. That will enable the researcher to
save and resources such a plan of study or blue print or study is called a research design.
Three main purposes of research are to describe, explain, and validate findings. Description
emerges following creative exploration, and serves to organize the findings in order to fit
them with explanations, and then test or validate those explanations
The reason to adopt the descriptive research is due to the type of research question, design,
and data analysis that will be applied to a given topic. Descriptive statistics tell what is, while
inferential statistics try to determine cause and effect. Descriptive research aims at fact
finding & more often is based on surveys .Its purpose to describe the present state of affairs
of the topic of study. It is more focused than an exploratory study. It provides basic
information for formulating more sophisticated study.
DATA COLLECTION
The study was based on questionnaire method.
There are two types of data collection:
1. Primary data
2. Secondary data

Primary data

The primary data are those, which are collected a fresh and for the first time happen to
be original in character. It has been collected through a Questionnaire and personal interview.
Only the primary data is not the sufficient to get information about the complete topic so both
primary and secondary data is collected.

Secondary data
Secondary data are those which have already been collected by someone else and
which have already been passed through the stratified process. It has collected through the
books, journals & Internet.
Data sources:
Research is totally based on primary data. Secondary data can be used only for the reference.
Research has been done by primary data collection, and primary data has been collected by
interacting with various people. The secondary data has been collected through various
journals and websites and some special publications of MUTUAL FUND COMPANY.

Sampling:

Sampling procedure:
The sample is selected in a random way, irrespective of them being investor or not or availing
the services or not. It was collected through mails and personal visits to the known persons,
by formal and informal talks and through filling up the questionnaire prepared. The data has
been analyzed by using the measures of central tendencies like mean, median, mode. The
group has been selected and the analysis has been done on the basis statistical tools available.

Sample size:
The sample size of my project is limited to 200 only. Out of which only 135 people attempted
all the questions. Other 65 not investing in MFs attempted only 2 questions.

Sample design:
Data has been presented with the help of bar graph, pie charts, line graphs etc.

RESEARCH INSTRUMENT
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Questionnaire
A questionnaire is simply a set of questions designed to generate the data necessary for
accomplishing a research projects objectives (Parasuraman, 1991, p.363).

SAMPLE DESIGN:
POPULATION

It covers the 120 unit of population.

SAMPLE PROCEDURES
In this study convenient sampling method was adopted. First each organization was divided
into different departments like Operations, Customer Services, Human Resources, Internet
Marketing and under writing departments. From this department, the respondents were
selected on the basis of convenience.
INTERVEIW SCHEDULE

The interview schedule has been used to collect the data. Information can be
gathered even when the respondents happen to be literate or illiterate.

TABULATION

It is the arrangement of classified data in an orderly manner. This involves


creating table for recording the filled in interview schedule. These tables are of immense help
to analysis by using the statistics tools help to analysis by using the statistical tools.

TOOLS USED FOR ANALYSIS

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Simple percentage analysis


It is simple analysis tool. In this method, based on the opinions of the

respondents, percentage and bar chart is calculated for the respective scales of each factor.

Formula:
Simple percentage =

No of Respondents

x 100

Total No of Sample Size

Limitation of Study

Time limitation.

Research has been done only at BHOPAL.

Some of the persons were not so responsive.

Possibility of error in data collection.

Possibility of error in analysis of data due to small sample size.

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SUGGESTIONS
The most vital problem spotted is of ignorance. Investors should be made aware of the benefits.
Nobody will invest until and unless he is fully convinced. Investors should be made to realize that
ignorance is no longer bliss and what they are losing by not investing.
Mutual funds offer a lot of benefit which no other single option could offer. But most of the people are
not even aware of what actually a mutual fund is? They only see it as just another investment option.
So the advisors should try to change their mindsets. The advisors should target for more and more
young investors. Young investors as well as persons at the height of their career would like to go for
advisors due to lack of expertise and time.

Mutual Fund Company needs to give the Study of the Individual Financial Advisors about the
Fund/Scheme and its objective, because they are the main source to influence the investors.

Before making any investment Financial Advisors should first enquire about the risk tolerance of the
investors/customers, their need and time (how long they want to invest). By considering these three
things they can take the customers into consideration.

Younger people aged under 35 will be a key new customer group into the future, so making greater
efforts with younger customers who show some interest in investing should pay off.

Customers with graduate level education are easier to sell to and there is a large untapped market
there. To succeed however, advisors must provide sound advice and high quality.

Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management
companies very recently in the industry. SIP is easy for monthly salaried person as it provides the
facility of do the investment in EMI. Though most of the prospects and potential investors are not
aware about the SIP. There is a large scope for the companies to tap the salaried persons.

12

CHAPTER - 3

13

Chapter 3:- Theoretical Background


IMPORTANCE OF MUTUAL FUNDS
1. A Mutual Fund actually belongs to the investors who have pooled their Funds. The
ownership of the mutual fund is in the hands of the Investors.
2. A Mutual Fund is managed by investment professional and other Service providers, who
earns a fee for their services, from the funds.
3. The pool of Funds is invested in a portfolio of marketable investments. The value of the
portfolio is updated every day.
4. The investors share in the fund is denominated by units. The value of the units changes
with change in the portfolio value, every day. The value of one unit of investment is called
net asset value (NAV).
5. The investment portfolio of the mutual fund is created according to The stated Investment
objectives of the Fund.

NEED OF MUTUAL FUNDS


Here are some of the Advantages offered by Mutual Funds-:

Number of available options


Mutual funds invest according to the underlying investment objective as specified at the time
of launching a scheme. So, we have equity funds, debt funds, gilt funds and many others that
cater to the different needs of the investor. The availability of these options makes them a
good option. While equity funds can be as risky as the stock markets themselves, debt funds
offer the kind of security that is aimed for at the time of making investments. Money market
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funds offer the liquidity that is desired by big investors who wish to park surplus funds for
very short-term periods. Balance Funds cater to the investors having an appetite for risk
greater than the debt funds but less than the equity funds.
Diversification
Investments are spread across a wide cross-section of industries and sectors and so the risk is
reduced. Diversification reduces the risk because all stocks dont move in the same direction
at the same time. One can achieve this diversification through a Mutual Fund with far less
money than one can on his own.
Professional Management
Mutual Funds employ the services of skilled professionals who have years of experience to
back them up. They use intensive research techniques to analyze each investment option for
the potential of returns along with their risk levels to come up with the figures for
performance that determine the suitability of any potential investment.
Liquidity
Mutual Funds offer the benefit of liquidity which provides the investor with the option of
easy conversion to money. As in the case of fixed deposits, where the investor can get his
money back only on the completion of a fixed period, an investor can get his money back as
and when he wants. Investors can redeem their money at the prevailing NAVs (Net Asset
Values). Mutual funds directly re-purchase at the current NAV.
Well Regulated
Unlike the company fixed deposits, where there is little control with the investment being
considered as unsecured debt from the legal point of view, the Mutual Fund industry is very
well regulated. All investments have to be accounted for, decisions judiciously taken. SEBI
acts as a true watchdog in this case and can impose penalties on the AMCs at fault. The
regulations, designed to protect the investors interests are also implemented effectively.
Transparency
Being under a regulatory framework, mutual funds have to disclose their holdings,
investment pattern and all the information that can be considered as material, before all
investors. This means that the investment strategy, outlooks of the market and scheme related
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details are disclosed with reasonable frequency to ensure that transparency exists in the
system. On the other hand, the investor is totally clueless in case of the other investment
alternatives as nothing is disclosed.
Savings
Tax saving schemes of Mutual Funds offer investor a tax rebate under section 88 of the
Income Tax Act. Under this section, an investor can invest up to Rs.10,000 per Financial year
in a tax saving scheme. The rate of rebate under this section depends on the investors total
income
Flexible and Affordable
Mutual Funds offer a relatively less expensive way to invest when compared to other avenues
such as capital market operations. The fee in terms of brokerages, custodial fees and other
management fees are substantially lower than other options and are directly linked to the
performance of the scheme. Investment in mutual funds also offers a lot of flexibility with
features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans enabling systematic investment or withdrawal of funds. Even the
investors, who could otherwise not enter stock markets with low investible funds, can benefit
from a portfolio comprising of high-priced stocks because they are purchased from pooled
funds.

TYPES OF MUTUAL FUNDS


1.

OPEN-ENDED MUTUAL FUNDS:The holders of the shares in the Fund can resell them to the issuing Mutual Fund company
at the time. They receive in turn the net assets value (NAV) of the shares at the time of resale. Such Mutual Fund Companies place their funds in the secondary securities market.
They do not participate in new issue market as do pension funds or life insurance
companies. Thus they influence market price of corporate securities. Open-end investment
companies can sell an unlimited number of Shares and thus keep going larger. The openend Mutual Fund Company Buys or sells their shares. These companies sell new shares
NAV plus a Loading or management fees and redeem shares at NAV. In other words, the
target amount and the period both are indefinite in such funds.
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2.

CLOSED-ENDED MUTUAL FUNDS:A closedend Fund is open for sale to investors for a specific period, after which further
sales are closed. Any further transaction for buying the units or repurchasing them, Happen
in the secondary markets, where closed end Funds are listed. Therefore new investors buy
from the existing investors, and existing investors can liquidate their units by selling them
to other willing buyers. In a closed end Funds, thus the pool of Funds can technically be
kept constant. The asset management company (AMC) however, can buy out the units from
the investors, in the secondary markets, thus reducing the amount of funds held by outside
investors. The price at which units can be sold or redeemed Depends on the market prices,
which are fundamentally linked to the NAV. Investors in closed end Funds receive either
certificates or Depository receipts, for their holdings in a closed end mutual Fund.
ADVANTAGES OF MUTUAL FUND
Professional Management
The idea behind a mutual fund is that individual investors generally lack the time, the
inclination or the skills to manage their own investment. Thus mutual funds hire professional
managers to manage the investments for the benefit of their investors in return for a
management fee.
The organization that manages the investment is the Asset Management Company (AMC).
Employees of the AMC who perform this role of managing investments are the fund
managers.
Diversification
The best mutual funds design their portfolios so individual investments will react differently
to the same economic conditions. For example, economic conditions like a rise in interest
rates may cause certain securities in a diversified portfolio to decrease in value. Other
securities in the portfolio will respond to the same economic conditions by increasing in
value. When a portfolio is balanced in this way, the value of the overall portfolio should
gradually increase over time, even if some securities lose value.
Convenient Administration

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Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as
bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds
save your time and make investing easy and convenient.
Low cost
Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for
Index Funds are less than that, because index funds are not actively managed. Instead, they
automatically buy stock in companies that are listed on a specific index.
Choice of Schemes
A mutual fund can, and typically does have several schemes to cater to different investors
preferences. The individual could choose to hire a professional manager to manage his money
as per his investment and risk preferences. Such personal treatment often referred to as
Portfolio Management Scheme (PMS).

Legal Framework
Since the investors are often not so well qualified to invest, the mutual fund business is
highly regulated. Broadly the existing regulations are:

Pre-requisitions to start a mutual fund;

Permissible schemes and investments;

Control over marketing process;

Checks and balances in the legal structure;

Valuation of securities;

Level of operational flexibility to the professional investors.

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Tax Benefits
Dividend income from mutual fund units will be exempt from income tax with effect from
July 1, 1999. Further, investors can get rebate from tax under section 88 of Income Tax Act,
1961 by investing in Equity Linked Saving Schemes of mutual funds. Further benefits are
also available under section 54EA and 54EB with regard to relief from long term capital
gains tax in certain specified schemes.
Return Potential
Mutual funds allow you to allocate investments assets across different fund categories to
achieve a variety of risk/reward objectives thereby reducing overall portfolio risk. In other
words, the right way to benefit from Mutual funds is to balance the risk as well as the
potential to earn.
Liquidity
Open-end schemes offer liquidity through on-going sale and re-purchase facility. Thus, the
investor does not have to worry about finding a buyer for his investment a risk normally
associated with direct investment in the securities market.
Transparency
You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and
the fund manager's investment strategy and outlook.

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Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs
and convenience.
Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund
because of its large corpus allows even a small investor to take the benefit of its investment
strategy.

DISADVANTAGES OF MUTUAL FUNDS


Mutual funds are good investment vehicles to navigate the complex and unpredictable world
of investments. However, even mutual funds have some inherent drawbacks. Understand
these before you commit your money to a mutual fund.
No assured returns and no protection of capital
If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not
offer assured returns and carry risk. For instance, unlike bank deposits, your investment in a
mutual fund can fall in value. In addition, mutual funds are not insured or guaranteed by any
government body (unlike a bank deposit, where up to Rs 1 lakh per bank is insured by the
Deposit and Credit Insurance Corporation, a subsidiary of the Reserve Bank of India). There
are strict norms for any fund that assures returns and it is now compulsory for funds to
establish that they have resources to back such assurances. This is because most closed-end
funds that assured returns in the early-nineties failed to stick to their assurances made at the
time of launch, resulting in losses to investors. A scheme cannot make any guarantee of
return, without stating the name of the guarantor, and disclosing the net worth of the
guarantor. The past performance of the assured return schemes should also be given.
Restrictive gains
Diversification helps, if risk minimization is your objective. However, the lack of investment
focus also means you gain less than if you had invested directly in a single security.

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Assume, Reliance appreciated 50 per cent. A direct investment in the stock would
appreciate by 50 per cent. But your investment in the mutual fund, which had invested
10 per cent of its corpus in Reliance, will see only a 5 per cent appreciation.
Taxes
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you will
pay taxes on the income you receive, even if you reinvest the money you made.
Management risk
When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as you had
hoped, you might not make as much money on your investment as you expected. Of course,
if you invest in Index Funds, you forego management risk, because these funds do not
employ managers.
LIMITATIONS OF MUTUAL FUNDS
No Guarantees
No investment is risk free. If the entire stock market declines in value, the value of mutual
fund shares will go down as well, no matter how balanced the portfolio. Investors encounter
fewer risks when they invest in mutual funds than when they buy and sell stocks on their
own. However, anyone who invests through a mutual fund runs the risk of losing money.

Fees and commissions


All funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge sales commissions or "loads" to compensate brokers, financial consultants, or
financial planners. Even if you don't use a broker or other financial adviser, you will pay a
sales commission if you buy shares in a Load Fund.
Taxes

21

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you will
pay taxes on the income you receive, even if you reinvest the money you made.

Management risk
When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as you had
hoped, you might not make as much money on your investment as you expected. Of course,
if you invest in Index Funds, you forego management risk, because these funds do not
employ managers.

Dilution
It's possible to have too much diversification. Because funds have small holdings in so many
different companies, high returns from a few investments often don't make much difference
on the overall return. Dilution is also the result of a successful fund getting too big. When
money pours into funds that have had strong success, the manager often has trouble finding a
good investment for all the new money.

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY


A little history

The mutual fund industry started in India in a small way with the UTI Act creating what was
effectively a small savings division within the RBI. Over period of 25 years this grew fairly
successfully and gave investors a good return, and therefore in 1989, as the next logical step,
public sector banks and financial institutions were allowed to float mutual funds and their
success emboldened the government to allow the private sector to foray into this area. The
initial years of the industry also saw the emerging years of the Indian equity market, when a
number of mistakes were made and hence the mutual fund schemes, which invested in lesser22

known stocks and at very high levels, became loss leaders for retail investors. From those
days to today the retail investor, for whom the mutual fund is actually intended, has not yet
returned to the industry in a big way. But to be fair, the industry too has focused on brining in
the large investor, so that it can create a significant base corpus, which can make the retail
investor feel more secure.
HISTORY OF MUTUAL FUND
The Evolution
The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry
in the year 1963. The primary objective at that time was to attract the small investors and it
was made possible through the collective efforts of the Government of India and the Reserve
Bank of India. The history of mutual fund industry in India can be better understood divided
into following phases:
Phase 1. Establishment and Growth of Unit Trust of India - 1964-87:
Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by
an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate
under the regulatory control of the RBI until the two were de-linked in 1978 and the entire
control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI
launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the
largest number of investors in any single scheme over the years.
UTI launched more innovative schemes in 1970s and 80s to suit the needs of different
investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift
Growth Fund and India Fund (India's first offshore fund) in 1986, Master share (Indias first
equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns)
during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700
crores.
Phase II. Entry of Public Sector Funds - 1987-1993
The Indian mutual fund industry witnessed a number of public sector players entering the
market in the year 1987. In November 1987, SBI Mutual Fund
From the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual
Fund was later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual
23

Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the
assets under management of the industry increased seven times to Rs. 47,004 crores.
However, UTI remained to be the leader with about 80% market share.

.
Phase III. Emergence of Private Sector Funds - 1993-96
The permission given to private sector funds including foreign fund management companies
(most of them entering through joint ventures with Indian promoters) to enter the mutual fund
industry in 1993, provided a wide range of choice to investors and more competition in the
industry. Private funds introduced innovative products, investment techniques and investorservicing technology. By 1994-95, about 11 private sector funds had launched their schemes.

Phase IV. Growth and SEBI Regulation - 1996-2004


The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after
the year 1996. The mobilization of funds and the number of players operating in the industry
reached new heights as investors started showing more interest in mutual funds.
Inventors' interests were safeguarded by SEBI and the Government offered tax benefits to the
investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was
introduced by SEBI that set uniform standards for all mutual funds in India. The Union
Budget in 1999 exempted all dividend incomes in the hands of investors from income tax.
Various Investor Awareness Programmes were launched during this phase, both by SEBI and
AMFI, with an objective to educate investors and make them informed about the mutual fund
industry.
In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal status
as a trust formed by an Act of Parliament. The primary objective behind this was to bring all
mutual fund players on the same level. UTI was re-organized into two parts: 1. The Specified
Undertaking, 2. The UTI Mutual Fund
Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past
schemes (like US-64, Assured Return Schemes) are being gradually wound up. However,
24

UTI Mutual Fund is still the largest player in the industry. In 1999, there was a significant
growth in mobilization of funds from investors and assets under management which is
supported by the following data:

25

GROSS FUND MOBILISATION (RS. CRORES)


ASSETS UNDER MANAGEMENT (RS.PUBLIC
CRORES)
FROM
AS ON

TO

UT

UTI

SECTO
PUBLIC
R
SECTOR

PRIVATE
SECTOR
PRIVATE

TOTAL
TO

SECTOR

TA
L

3101-April-98
March11,679
1,732
31-March-99
53,320
8,292
99
3101-April-99

March00
31-

01-April-00

March01

13,53

7,966
6,860

21,377

68,
472

4,039

42,173

59,748

6,192

74,352

92,957

4,643

13,613

1,46,267

1,64,523

5,505

22,923

2,20,551

2,48,979

7,259*

58,435

65,694

68,558

5,21,632

5,90,190

1,03,246

7,36,416

8,39,662

9,14,712

10,98,158

12,41
3

3101-April-01

March02

01-April-02

31Jan-03
31-

01-Feb.-03

March03
31-

01-April-03

March04
31-

01-April-04

March05

26

3101-April-05

March06

1,83,446

Phase V. Growth and Consolidation - 2004 Onwards


The industry has also witnessed several mergers and acquisitions recently, examples of which
are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual
Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international
mutual fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc.
There were 29 funds as at the end of March 2006. This is a continuing phase of growth of the
industry through consolidation and entry of new international and private sector players.

27

CATEGORIES OF MUTUAL FUND:

28

Mutual funds can be classified as follow :

Based on their structure:

Open-ended funds: Investors can buy and sell the units from the fund, at any point of
time.
Close-ended funds: These funds raise money from investors only once. Therefore,

after the offer period, fresh investments can not be made into the fund. If the fund is listed on
a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund).
Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a
periodic basis such as monthly or weekly. Redemption of units can be made during specified
intervals. Therefore, such funds have relatively low liquidity.

Based on their investment objective:


Equity funds: These funds invest in equities and equity related instruments. With fluctuating
share prices, such funds show volatile performance, even losses. However, short term
fluctuations in the market, generally smoothens out in the long term, thereby offering higher
returns at relatively lower volatility. At the same time, such funds can yield great capital
appreciation as, historically, equities have outperformed all asset classes in the long term.
Hence, investment in equity funds should be considered for a period of at least 3-5 years. It
can be further classified as:
i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked.
Their

portfolio mirrors the benchmark index both in terms of composition and individual

stock weightages.
ii) Equity diversified funds- 100% of the capital is invested in equities spreading across
different sectors and stocks.
iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest
in companies offering high dividend yields.
iv) Thematic funds- Invest 100% of the assets in sectors which are related through some
theme.
e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
29

v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund
will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the
risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal
mutual funds vehicle for investors who prefer spreading their risk across various instruments.
Following are balanced funds classes:
i) Debt-oriented funds -Investment below 65% in equities.
ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

Debt fund: They invest only in debt instruments, and are a good option for investors averse
to idea of taking risk associated with equities. Therefore, they invest exclusively in fixedincome instruments like bonds, debentures, Government of India securities; and money
market instruments such as certificates of deposit (CD), commercial paper (CP) and call
money. Put your money into any of these debt funds depending on your investment horizon
and needs.
i) Liquid funds- These funds invest 100% in money market instruments, a large portion
being invested in call money market.
ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.
iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments
which have variable coupon rate.
iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing
between cash market and derivatives market. Funds are allocated to equities, derivatives and
money markets. Higher proportion (around 75%) is put in money markets, in the absence of
arbitrage opportunities.
v) Gilt funds LT- They invest 100% of their portfolio in long-term government securities.
vi) Income funds LT- Typically, such funds invest a major
term debt papers.
30

portion of the portfolio in long-

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of
10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of
the fund.
INVESTMENT STRATEGIES
1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed
date of a month. Payment is made through post dated cheques or direct debit facilities. The
investor gets fewer units when the NAV is high and more units when the NAV is low. This is
called as the benefit of Rupee Cost Averaging (RCA)
2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give
instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same
mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he
can withdraw a fixed amount each month.

31

CHAPTER - 4

32

Chapter 4:- Case Study


Introduction of Company profile and Product
STATE BANK OF INDIA - MUTUAL FUND
---- A partner for life
SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country
with an investor base of over 4.6 million. With over 20 years of rich experience in fund
management, SBI MF brings forward its expertise in consistently delivering value to its
investors

Proven Skills in wealth generation:


SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable
track record in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI - Indias largest banking enterprise. The institution
has grown immensely since its inception and today it is India's largest bank, patronized
by over 80% of the top corporate houses of the country.
SBI Mutual Fund is a joint venture between the State Bank of India and Socit General Asset
Management, one of the worlds leading fund management companies that manages over US$
500 Billion worldwide.

Exploiting expertise, compounding growth:


In twenty years of operation, the fund has launched 38 schemes and successfully
redeemed fifteen of them. In the process it has rewarded its investors handsomely with
consistently high returns.
A total of over 5.4 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund.
Schemes of the Mutual fund have consistently outperformed benchmark indices and
have emerged as the preferred investment for millions of investors and HNIs.
33

Today, the fund manages over Rs. 51,461 crores of assets and has a diverse profile of
investors actively parking their investments across 36 active schemes.
The fund serves this vast family of investors by reaching out to them through network
of over 130 points of acceptance, 28 investor service centers, 46 investor service desks
and 56 district organizers.
SBI Mutual is the first bank-sponsored fund to launch an offshore fund Resurgent
India Opportunities Fund.
Growth through innovation and stable investment policies is the SBI MF credo.

Fund house expertise:


The investment environment is becoming increasingly complex. Innumerable
parameters need to be factored in to generate a clear understanding of market
movement

and

performance

in

the

near

and

long

term

future.

At SBIMF, we devote considerable resources to gain, maintain and sustain our


profitable insights into market movements. We consistently push the envelope to ensure
our investors get the maximum benefits year after year.

Research - the backbone of our Performance


Our expert team of experienced and market savvy researchers prepare comprehensive
analytical and informative reports on diverse sectors and identify stocks that promise
high performance in the future.
This team works in tandem with a compliance and risk-monitoring department, which
ensures minimization of operational risks while protecting the interests of the
investors.

34

Quite naturally many of our equity funds have delivered consistent returns to investors
and have repeatedly out performed benchmark indices by wide margins

AWARDS AND ACHIEVEMENTS


SBI- MUTUAL FUND has been performing excellently since its
inception. The fund has received lot of appreciation for its performance from the
mutual fund industry. It has been awarded by ICRA on line award 8 times, CNBC- TV
18 CRISIL 4 AWARDS, the Lipper award (year 05-06) and most recently the CNBC
TV 18 Crisil Mutual Fund Award of the year 2007 and 5 award for the schemes.

35

SBI- MUTUAL FUND PRODUCTS:


EQUITY SCHEMES:
The investments of these schemes will predominantly be in the stock markets and
endeavor will be to provide investors the opportunity to benefit from the higher returns
which stock markets can provide. However they are also exposed to the volatility and
attendant risks of stock markets and hence should be chosen only by such investors
who have high risk taking capacities and are willing to think long term. Equity Funds
include diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity
Funds invest in various stocks across different sectors while Sectoral funds which are
specialized Equity Funds restrict their investments only to shares of a particular sector
and hence, are riskier than Diversified Equity Funds. Index Funds invest passively only
in the stocks of a particular index and the performance of such funds move with the
movements of the index.
Magnum COMMA Fund
Magnum Equity Fund
Magnum Global Fund
Magnum Index Fund
Magnum MidCap Fund
Magnum Multicap Fund
Magnum Multiplier Plus 1993
SBI Arbitrage Opportunities Fund
SBI Blue chip Fund
SBI Infrastructure Fund - Series I
36

SBI Magnum Taxgain Scheme 1993


SBI ONE India Fund
SBI TAX ADVANTAGE FUND - SERIES I

DEBT SCHEMES:

Debt Funds invest only in debt instruments such as Corporate Bonds, Government
Securities and Money Market instruments either completely avoiding any investments
in the stock markets as in Income Funds or Gilt Funds or having a small exposure to
equities as in Monthly Income Plans or Children's Plan. Hence they are safer than
equity funds. At the same time the expected returns from debt funds would be lower.
Such investments are advisable for the risk-averse investor and as a part of the
investment portfolio for other investors.
Magnum Childrens Benefit Plan
Magnum Gilt Fund
Magnum Gilt Fund (Long Term)
Magnum Gilt Fund (Short Term)
Magnum Income Fund
Magnum Income Plus Fund
Magnum Income plus Fund (Saving Plan)
Magnum Income plus Fund (Investment Plan)
Magnum Insta Cash Fund
Magnum InstaCash Fund -Liquid Floater Plan
Magnum Institutional Income Fund
Magnum Monthly Income Plan
Magnum NRI Investment Fund
37

SBI Capital Protection Oriented Fund - Series I


SBI Debt Fund Series
SDFS 15 Months Fund
SDFS 90 Days Fund
SDFS 13 Months Fund
SDFS 18 Months Fund
SDFS 24 Months Fund
SDFS 30 DAYS
SDFS 30 DAYS
SDFS 60 Days Fund
SDFS 180 Days Fund
SDFS 30 DAYS
SBI Premier Liquid Fund
SBI Short Horizon Fund
SBI Short Horizon Fund - Liquid Plus Fund
SBI Short Horizon Fund - Short Term Fund

BALANCED SCHEMES:

Magnum Balanced Fund invests in a mix of equity and debt investments. Hence they are less risky
than equity funds, but at the same time provide commensurately lower returns. They provide a good
investment opportunity to investors who do not wish to be completely exposed to equity markets, but
is looking for higher returns than those provided by debt funds.

Magnum Balanced Fund


Magnum NRI Investment Fund - Flexi Asset Plan

38

39

KEY PERSONNEL OF SBI MUTUAL FUND


Mr. Syed shahbuddin

Managing Director

Mr. Didier Turpin

Dy. CEO

Mr. Achal K. Gupta

Chief Operating Officer

Mr. Sanjay Sinha

Chief Investment Officer

Mr. R. S. Srinivas Jain

Chief Marketing Officer

Mr. C A Santosh

Chief Manager - Customer Service

Ms. Aparna Nirgude

Chief Risk Officer

Mr. Ashutosh P Vaidya

Company Secretary & Compliance Officer

Mr. Parijat Agarwal

Head Fixed Income

40

Magnum Multiplier Plus 1993


Investment Objective:
Magnum Multiplier Plus is an open-ended diversified equity fund and the investment
objective of the scheme is to provide investors long term capital appreciation along
with the liquidity of an open-ended scheme. The scheme will invest in a diversified
portfolio of equities of high growth companies.
Asset Allocation
Instrument

% of Portfolio of Plan A Risk Profile


&B
related Not less than 70 %

Medium to High

instruments
Debt

instruments Not more than 30%

Low to Medium

(including

Securitized

Equity

and

debt) and Govt. Securities


Money
Market Balance

Low

instruments
Scheme Highlights:
1. An open-ended equity scheme aiming for aggressive growth from
investments

in

equities.

2. Scheme opens for Resident Indians, Trusts, and Indian Corporates and
on a fully repatriable basis for NRIs, FIIs & Overseas Corporate
Bodies.
3.

Facility

to

reinvest

dividend

proceeds

into

the

scheme

at

NAV.

4. Easy entry and exit on the basis of sales and repurchase prices
Determined

Launch Date

daily.

NAV

will

be

declared

on

Minimum Application
41

every

business

day.

February 28, 1993

Rs. 1000

Entry Load

Exit Load

Investments below Rs. 5 crore - 2.25% Investments below Rs 5 crores <= 6 months
Investments of Rs 5 crores and above- Nil - 1.00% and NIL thereafter. Investments of
Rs 5 crores and above - NIL
SIP
Rs

SWP
500/month

12

months,

Rs A minimum of Rs 500 can be withdrawn

1000/month - 6 months, Rs 1500/quarter - every month or quarter by issuing advance


12 months

instructions to the Registrars at any time.

Nav's
MSFU - Emerging Businesses Fund
42

Investment Objective
To provide the investors maximum growth opportunity through equity investments in stocks of
growth oriented sectors of the economy. There are five sub-funds dedicated to specific
investment themes viz. Information Technology, Pharmaceuticals, FMCG, Contrarian
(investment in stocks currently out of favour) and Emerging Businesses. The investment
objective of the Emerging Business Fund would be to participate in the growth potential
presented

by

various

companies

that

are

considered

emergent

and

have

export

orientation/outsourcing opportunities or are globally competitive by investing in the stocks


representing such companies. The fund may also evaluate emerging businesses with growth
potential and domestic focus.

Asset Allocation
% of Portfolio of Plan

Instrument

A&B

Equities or equity related instruments including


derivatives across diversified sectors *
Money market instruments

Risk Profile

At least 90%

Medium to High

0%-10%

Low

Scheme Highlights
1. An open-ended scheme in which there are five sub-funds, viz. Information
Technology (IT), Pharmaceuticals, Fast Moving Consumer Goods (FMCG) and a
Contra sub fund - investing in stocks currently out of favour and Emerging Businesses
Fund to participate in the growth potential presented by various companies that are
considered emergent and have export orientation / outsourcing opportunities or are
globally competitive by investing in the stocks representing such companies. The fund
may also evaluate emerging businesses with growth potential and domestic focus.
Accordingly, investors can chose to invest in one or more of the five sub funds. The
fund allows free switchover from one sector to another. The merits of each of the five
sectors are detailed in the following pages.
2. Growth and Dividend Option available under Contra, Pharmaceuticals and Emerging
43

Businesses Fund.
3. Switch-over facility at NAV related price to other open-ended schemes of SBI
Mutual Fund, is available. This facility is not available to NRIs.
Launch Date

Minimum Application

11/10/2004

Rs. 2000/- and multiples of Rs. 500/-

Entry Load

Exit Load

Investments below Rs 5 crores - 2.25% Investments below Rs 5 crores <= 6 months Investments of Rs 5 crores and above - NIL

1.00% and NIL thereafter. Investments of Rs 5


crores and above - NIL

SIP

SWP

Rs 500/month - 12 months, Rs 1000/month - A minimum of Rs 500 can be withdrawn every


6 months, Rs 1500/quarter - 12 months

month

or

quarter

by

issuing

advance

instructions to the Registrars at any time.

44

SBI Magnum Taxgain Scheme 1993


Investment Objective
The prime objective of scheme is to deliver the benefit of investment in a portfolio of equity
shares, while offering tax rebate on such investments made in the scheme under section 80 C
of the Income-tax Act, 1961. It also seeks to distribute income periodically depending on
distributable surplus.

Asset Allocation
% of Portfolio of Plan

Instrument

A&B

Risk Profile

Equity,PCDs and FCDs and bonds

80-100%

Medium to High

Money market instruments

0 20%

Low

Scheme Highlights
1. There is a statutory lock-in period of three years for investments in a Tax Saving
Scheme (irrespective of the fact whether the investors claim the rebate u/s 80C or any
other

section

or

not).

2. Dividends may be declared depending on distributable profits of the scheme. Facility


to

reinvest

dividend

proceeds

into

the

scheme

at

NAV.

3. Switchover facility to any other open-ended schemes of SBI Mutual Fund at NAV
related prices available after the statutory lock-in period.
Launch Date

Minimum Application

March 31, 1993

Rs. 500 and Multiples of Rs 500

Entry Load

Exit Load

Investments below Rs. 5 crores - 2.25% Nil


Investments of Rs.5 crores and above - NIL

SIP

SWP
45

Rs.500/month - 12 months Rs.1000/month - A minimum of Rs. 500 can be withdrawn every


6months Rs.1500/quarter - 12 months

month

or

quarter

by

issuing

advance

instructions to the Registrars at any time. This


facility is available only after the lock-in period
of three years.

46

RISK RETURN ANALYSIS OF THE SCHEMES


A rational investor before investing his or her money in any stock analyses the risk
associated with the particular stock. The actual return he receives from a stock may
vary from the expected one and thus a investor is always cautious about the rate of risk
associated with the particular stock. Hence it becomes very essential on the part of
investors to know the risk as the hard earned money is being invested with the view to
earn good return on the investment.
Risk mainly consists of two components
Systematic risk
Unsystematic risk
Systematic risk
The systematic risk affects the entire market. The economic
conditional, political situations, sociological changes affect the entire market in turn
affecting the company and even the stock market. These situations are uncontrollable
by the corporate and investor.
Unsystematic risk
The unsystematic risk is unique to industries. It differs from
industry to industry. Unsystematic risk stems from managerial inefficiency,
technological change in the production process, availability of raw materials, changes
in the consumer preference, and labour problems. The nature and magnitude of above
mentioned factors differ from industry to industry and company to company.
In a general view, the risk for any investor would be the probable loss for investing
money in any mutual fund. But when we look at the technical side of it , we cant just
say that these schemes/fund carry risk without any proof. They are certain set of
formulas to say the percentage of risk associated with it.

47

There are certain tools or formulas used to calculate the risk associated with the
schemes. These tools help us to understand the risk associated with the schemes. These
schemes are compared with the benchmark BSE 100.

48

CHAPTER - 5

49

Chapter 5:- Data Analysis

1. (a) Age distribution of the Investors of BHOPAL

Age Group
No.

<= 30
of 12

31-35

36-40

41-45

46-50

>50

18

30

24

20

16

Investors

Interpretation:
According to this chart out of 120 Mutual Fund investors of Bhopal the most are in the age group of
36-40 yrs. i.e. 25%, the second most investors are in the age group of 41-45yrs i.e. 20% and the least
investors are in the age group of below 30 yrs.

(b). Educational Qualification of investors of Bhopal


50

Educational Qualification

Number of Investors

Graduate/ Post Graduate

88

Under Graduate

25

Others

Interpretation:
Out of 120 Mutual Fund investors 71% of the investors in Bhopal are Graduate/Post Graduate, 23%
are Under Graduate and 6% are others (under HSC).

c). Occupation of the investors of Bhopal


Occupation of customer

No. of investors
51

Govt. service

35

Pvt. Service

45

Business

30

Agriculture

04

Others

06

Interpretation:
In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are Businessman, 29% are
Govt. Employees, 3% are in Agriculture and 5% are in others.

52

(d). Monthly Family Income of the Investors of Bhopal.


Income Group

No. of Investors

<=10,000

10,001-15,000

12

15,001-20,000

28

20,001-30,000

43

>30,000

32

Interpretation:
In the Income Group of the investors of Bhopal, out of 120 investors, 36% investors that is the
maximum investors are in the monthly income group Rs. 20,001 to Rs. 30,000, Second one i.e. 27%
investors are in the monthly income group of more than Rs. 30,000 and the minimum investors i.e.
4% are in the monthly income group of below Rs. 10,000

53

(2) Investors invested in different kind of investments.

Kind of Investments

No. of Respondents

Saving A/C

195

Fixed deposits

148

Insurance

152

Mutual Fund

120

Post office (NSC)

75

Shares/Debentures

50

Gold/Silver

30

Real Estate

65

Interpretation: From the above graph it can be inferred that out of 200 people, 97.5% people have
invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits, 60% in Mutual Fund, 37.5% in
Post Office, 25% in Shares or Debentures, 15% in Gold/Silver and 32.5% in Real Estate.
3. Preference of factors while investing

54

Factors

No.

(a) Liquidity

of 40

(b) Low Risk

(c) High Return

(d) Trust

60

64

36

Respondents

Interpretation:
Out of 200 People, 32% People prefer to invest where there is High Return, 30% prefer to invest
where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust

55

4. Awareness about Mutual Fund and its Operations

Response

Yes

No

No. of Respondents

135

65

Interpretation:
From the above chart it is inferred that 67% People are aware of Mutual Fund and its operations and
33% are not aware of Mutual Fund and its operations.

56

5. Source of information for customers about Mutual Fund


Source of information

No. of Respondents

Advertisement

18

Peer Group

25

Bank

30

Financial Advisors

62

Interpretation:
From the above chart it can be inferred that the Financial Advisor is the most important source of
information about Mutual Fund. Out of 135 Respondents, 46% know about Mutual fund Through
Financial Advisor, 22% through Bank, 19% through Peer Group and 13% through Advertisement.

57

6. Investors invested in Mutual Fund


Response

No. of Respondents

YES

120

NO

80

Interpretation:
Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested in Mutual Fund.

58

7. Reason for not invested in Mutual Fund


Reason

No. of Respondents

Not Aware

65

Higher Risk

Not any Specific Reason

10

Interpretation:
Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of Mutual Fund, 13%
said there is likely to be higher risk and 6% do not have any specific reason.

59

8. Investors invested in different Assets Management Co. (AMC)


Name of AMC

No. of Investors

SBIMF

55

UTI

75

HDFC

30

Reliance

75

ICICI Prudential

56

Kotak

45

Others

70

Interpretation:
In Bhopal most of the Investors preferred UTI and Reliance Mutual Fund. Out of 120 Investors 62.5%
have invested in each of them, only 46% have invested in SBIMF, 47% in ICICI Prudential, 37.5% in
Kotak and 25% in HDFC.
9. Reason for invested in Mutual Fund Company
Reason

No. of Respondents
60

Associated with SBI

35

Better Return

Agents Advice

15

Interpretation:
Out of 55 investors of Mutual Fund Company 64% have invested because of its association with
Brand, 27% invested on Agents Advice, 9% invested because of better return.

61

10. Reason for not invested in Mutual Fund Company


Reason

No. of Respondents

Not Aware

25

Less Return

18

Agents Advice

22

Interpretation:
Out of 65 people who have not invested in Mutual Fund Company, 38% were not aware with Mutual
Fund Company, 28% do not have invested due to less return and 34% due to Agents Advice.

62

11. Preference of Investors for future investment in Mutual Fund


Name of AMC

No. of Investors

SBIMF

76

UTI

45

HDFC

35

Reliance

82

ICICI Prudential

80

Kotak

60

Others

75

Interpretation:
Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63% in SBIMF,
62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual Fund.

63

12. Channel Preferred by the Investors for Mutual Fund Investment


Channel

Financial Advisor

Bank

AMC

No. of Respondents

72

18

30

Interpretation:
Out of 120 Investors 60% preferred to invest through Financial Advisors, 25% through AMC and 15%
through Bank.

64

13. Mode of Investment Preferred by the Investors


Mode of Investment

One time Investment

Systematic Investment Plan (SIP)

No. of Respondents

78

42

Interpretation:
Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through Systematic
Investment Plan.

65

14. Preferred Portfolios by the Investors


Portfolio

No. of Investors

Equity

56

Debt

20

Balanced

44

Interpretation:
From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and 17% preferred
Debt portfolio

66

15. Option for getting Return Preferred by the Investors


Option

Dividend Payout

Dividend

Growth

Reinvestment
No. of Respondents

25

10

85

Interpretation:
From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout and 8%
preferred Dividend Reinvestment Option.

67

16. Preference of Investors whether to invest in Sectoral Funds


Response

No. of Respondents

Yes

25

No

95

Interpretation:
Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because there is
maximum risk and 21% prefer to invest in Sectoral Fund.

68

CHAPTER - 6

69

Chapter 6:- Findings


In Bhopal in the Age Group of 36-40 years were more in numbers. The second most Investors were in
the age group of 41-45 years and the least were in the age group of below 30 years.
In Bhopal most of the Investors were Graduate or Post Graduate and below HSC there were very few
in numbers.
In Occupation group most of the Investors were Govt. employees, the second most Investors were
Private employees and the least were associated with Agriculture.
In family Income group, between Rs. 20,001- 30,000 were more in numbers, the second most were in
the Income group of more than Rs.30,000 and the least were in the group of below Rs. 10,000.
About all the Respondents had a Saving A/c in Bank, 76% Invested in Fixed Deposits, Only 60%
Respondents invested in Mutual fund.
Mostly Respondents preferred High Return while investment, the second most preferred Low Risk
then liquidity and the least preferred Trust.
Only 67% Respondents were aware about Mutual fund and its operations and 33% were not.
Among 200 Respondents only 60% had invested in Mutual Fund and 40% did not have invested in
Mutual fund.
Out of 80 Respondents 81% were not aware of Mutual Fund, 13% told there is not any specific reason
for not invested in Mutual Fund and 6% told there is likely to be higher risk in Mutual Fund.
Most of the Investors had invested in Reliance or UTI Mutual Fund, ICICI Prudential has also good
Brand Position among investors, MUTUAL FUND COMPANY places after ICICI Prudential
according to the Respondents.
Out of 55 investors of MUTUAL FUND COMPANY 64% have invested due to its association with
the Brand HDFC, 27% Invested because of Advisors Advice and 9% due to better return.
Most of the investors who did not invested in MUTUAL FUND COMPANY due to not Aware of
MUTUAL FUND COMPANY, the second most due to Agents advice and rest due to Less Return.

For Future investment the maximum Respondents preferred Reliance Mutual Fund, the second most
preferred ICICI Prudential, mutual fund company has been preferred after them.

60% Investors preferred to Invest through Financial Advisors, 25% through AMC (means Direct
Investment) and 15% through Bank.

65% preferred

One Time Investment and 35% preferred SIP out of both type of Mode of

Investment.
The most preferred Portfolio was Equity, the second most was Balance (mixture of both equity and
debt), and the least preferred Portfolio was Debt portfolio.
Maximum Number of Investors Preferred Growth Option for returns, the second most preferred
Dividend Payout and then Dividend Reinvestment.
70

Most of the Investors did not want to invest in Sectoral Fund, only 21% wanted to invest in Sectoral
Fund.

71

CONCLUSION AND SUGGESTIONS


Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian
Stock Market and also the psyche of the small investors. This study has made an attempt to
understand the financial behavior of Mutual Fund investors in connection with the preferences of
Brand (AMC), Products, Channel etc. I observed that many of people have fear of Mutual Fund.
They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund
and its related terms. Many of people do not have invested in mutual fund due to lack of awareness
although they have money to invest. As the awareness and income is growing the number of mutual
fund investors are also growing.
Brand plays important role for the investment. People invest in those Companies where they have
faith or they are well known with them. There are many AMCs in BHOPAL but only some are
performing well due to Brand awareness. Some AMCs are not performing well although some of the
schemes of them are giving good return because of not awareness about Brand. HDFC, Reliance, UTI,
SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and their Assets
Under Management is larger than others whose Brand name are not well known like Principle,
Sunderam, etc.
Distribution channels are also important for the investment in mutual fund. Financial Advisors are the
most preferred channel for the investment in mutual fund. They can change investors mind from one
investment option to others. Many of investors directly invest their money through AMC because they
do not have to pay entry load. Only those people invest directly who know well about mutual fund
and its operations and those have time.

72

SUGGESTIONS
The following suggestions are the outcome of the research and applications of these suggestions are
not necessary:

The company should come up with innovative ways of service at their door steps this may be
a costly affair but will surely give positive results in the long run.

The company should take the initiative of Study the advisors about the new funds from time
to time which also makes the advisors connected to the company. This also improves the
liaison between company customers and advisors.

The company should also emphasis on the monitoring of funds which directly relates to the
returns of a specific fund.

The company should use brand ambassadors for example the CEOs of major companies
where the company allocate the funds. This will probably ensure proper results.

The company should focus on the advertising strategy and also the marketing of the product.

The company should emphasis on creating an awareness about the SIP options which is
always preferable when the market is volatile.

The company doesnt have enough tax saving plans or appropriate plans for tax so which they
should come up with.

73

Bibliography
BOOKS

Bhalla V.K (2001), Investment Management, Tata McGraw hill, New Delhi

Pandian Punithavathy (2003), Security Analysis and Portfolio Management, Vikas

publication.

Kothari (2001), Research Methodology

Fisher E Donald(2003), Security Analysis and Portfolio Management, sixth edition

Sharma ansd Gupta, Financial management, sahitya Bhawan publication,2008

I. M. PANDEY, FINANCIAL MANAGEMENT,

Kothari C R, Research methodology,

Gupta S.P., mgt Accounting, Sanitya haw an peed, 2002.

Shashi. K. Gupta & R.K. Sharma, Financial Management- Theory and practice, Kalyani
Publishers,Third Edition 2000.

WEBSITES

www.moneycontrol.com

www.investopedia.com

www.nse-india.com

www.stockchart.com

www.wikipedia.com

JOURNALS

International Research Journal of Finance and Economics

Indian Journal of Finance

74

Annexure

1. Personal Details:
(a). Name:(b). Add: -

Phone:-

(c). Age:-

(d). Qualification:-

Graduation/PG

Under Graduate

Others

(e). Occupation. Pl tick ()


Go Pvt. Ser

Business

Agriculture

Others

vt. Ser

(g). What is your monthly family income approximately? Pl tick ().


Up
Rs.10,000

to Rs. 10,001 to Rs. 15,001 to Rs. 20,001 to Rs.


15000

20,000

30,000

30,001

and above

2. What kind of investments you have made so far? Pl tick (). All applicable.
a. Saving account

b. Fixed deposits

e. Post Office-NSC, f.
etc

c. Insurance

d. Mutual Fund

g. Gold/ Silver

h. Real Estate

Shares/Debentures

3. While investing your money, which factor will you prefer?


75

(a) Liquidity

(b) Low Risk

(c) High Return

(d) Trust

4. Are you aware about Mutual Funds and their operations? Pl tick ().

Yes

No

5. If yes, how did you know about Mutual Fund?

a. Advertisement

b. Peer Group

c. Banks

d. Financial Advisors

6. Have you ever invested in Mutual Fund? Pl tick ().

Yes

No

7. If not invested in Mutual Fund then why?


(a) Not aware of MF (b) Higher risk (c) Not any specific reason

8. If yes, in which Mutual Fund you have invested? Pl. tick (). All applicable.
a. SBIMF

b. UTI

c.

d. Reliance

e. Kotak

f. Other. specify

HDFC

9. If invested in MUTUAL FUND COMPANY, you do so because (Pl. tick (), all
applicable).
a. MUTUAL FUND COMPANY is associated with HDFC Bank.
b. They have a record of giving good returns year after year.
c. Agent Advice

10. If NOT invested in MUTUAL FUND COMPANY, you do so because (Pl. tick () all
applicable).
a. You are not aware of MUTUAL FUND COMPANY.
b. MUTUAL FUND COMPANY gives less return compared to the
76

others.
c. Agent Advice

11. When you plan to invest your money in asset management co. which AMC will you
prefer?

Assets Management Co.


a. SBIMF
b. UTI
c. Reliance
d. HDFC
e. Kotak
f. ICICI

77

12. Which Channel will you prefer while investing in Mutual Fund?

(a) Financial Advisor

(b) Bank

(c) AMC

13. When you invest in Mutual Funds which mode of investment will you prefer? Pl. tick
().

a. One Time Investment

b. Systematic Investment Plan (SIP)

14. When you want to invest which type of funds would you choose?

a. Having only debt b. Having debt & equity c. Only equity portfolio.
portfolio

portfolio.

15. How would you like to receive the returns every year? Pl. tick ().
a. Dividend payout

b.

Dividend

re- c. Growth in NAV

investment

16. Instead of general Mutual Funds, would you like to invest in sectorial funds?
Please tick ().

Yes

78

No