MF:

A. History of Mutual Fund The origin of mutual fund industry in

India is with the introduction of the concept of mutual fund by
UTI in the year 1963. Though the growth was slow, but it
accelerated from the year 1987 when non-UTI players entered
the industry . </li></ul><ul><li>The mutual fund industry can
be broadly put into four phases according to the development
of the sector. </li></ul>
7. <ul><li>First Phase - 1964-87 </li></ul><ul><li>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. </li></ul><ul><li>Second Phase - 1987-1993 (Entry of
Public Sector Funds) </li></ul><ul><li>Entry of non-UTI mutual
funds. SBI Mutual Fund was the first 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 in 1989 and GIC in 1990. The end of
1993 marked Rs.47,004 as assets under management </li></ul>
8. Third Phase - 1993-2003 (Entry of Private Sector Funds)
<ul><li>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. </li></ul><ul><li>The 1993 SEBI (Mutual Fund)
Regulations were substituted by a more comprehensive and
revised in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996. </li></ul>
9. Fourth Phase - since February 2003 <ul><li>This phase had
bitter experience for UTI. It was bifurcated into two separate
entities. One is the Specified Undertaking of the Unit Trust of India
with AUM of Rs.29,835 crores (as on January 2003)
</li></ul><ul><li>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.
</li></ul><ul><li>As at the end of September, 2004, there were
29 funds, which manage assets of Rs.153108 crores under 421
schemes. </li></ul>
10. Some Basic Concepts Mutual Funds
11. What are Mutual Funds? <ul><li>A Mutual Fund is a trust that
pools together the savings of a number of investors who share a
common financial goal. The fund manager invests this pool of
money in securities -- ranging from shares and debentures to
money market instruments or in a mixture of equity and debt,
depending upon the objectives of the scheme. </li></ul>
12. Mutual Fund Operation Flow Chart
13. What Types of Mutual Funds Are Available? <ul><li>There are
thousands of different mutual funds offered on the market. They
range from funds that include a broad variety of investments to
funds that invest exclusively in single securities or narrow sectors
of the market. With the many different investment styles and
objectives, theres bound to be a number of mutual funds that are
suited to your investing profile. Each of these funds has expense,
risk, and return characteristics. There are 15 principal types of
funds. They are listed according to their primary objectives:
growth, income, and specialized: </li></ul>
15. Balanced Funds <ul><li>Balanced funds seek to obtain the
highest return consistent with a low-risk strategy. They hold a mix
of common and preferred stocks, bonds and cash reserves. The
mix can vary according to current market conditions. Balanced
funds may offer higher yields than pure stock funds. Balanced
funds are generally the least risky of growth-oriented mutual
funds. </li></ul>
16. Growth and Income Funds <ul><li>Growth and income funds
attempt to achieve both long-term growth and current income.
They invest primarily in high-yield common stock, preferred stock,
and convertible debt (bonds) to generate both growth potential

and current income. Because they include a mix of investments,

these funds are typically less risky than growth funds.
</li></ul><ul><li>Growth Funds </li></ul><ul><li>Growth
funds seek long-term appreciation by investing in the stocks of
established companies that may be poised for growth. These
companies typically pay low dividends yet offer the potential for
long-term capital appreciation. Some growth funds limit their
investments to specific sectors of the economy. Growth funds are
generally less risky than aggressive growth funds. </li></ul>
17. International and Global Growth Funds <ul><li>International
and global mutual funds offer diversification into international
stock markets. International funds invest only in foreign
securities. Global funds, on the other hand, can invest in foreign
and U.S. securities. The risks associated with investing on a
worldwide basis include differences in regulation of financial data
and reporting, currency exchange differences, as well as
economic and political systems that may be different that those in
the United States. </li></ul>
18. Aggressive Growth Funds <ul><li>Aggressive growth funds,
sometimes known as &quot;small-cap&quot; funds, seek
maximum capital gains. They invest primarily in the stock of
smaller, less established companies. Since these companies
generally pay little or no dividends, aggressive growth funds rely
on capital growth for returns. These funds tend to be the riskiest
of growth-oriented mutual funds. </li></ul>
19. Money Market Funds <ul><li>Money market funds seek
current income while maintaining a stable $1.00 per share net
asset value by investing in short-term debt securities, including Tbills, certificates of deposit, commercial paper, and other highly
liquid and safe securities. They offer modest current income and
no potential for capital gains. They generally offer the lowest
returns but the most safety of all fund types. Some money market
funds also offer tax-free income. Money market funds are neither
insured nor guaranteed by the Federal Deposit Insurance

Corporation or any other government agency. Although the fund

seeks to preserve the value of your investment at $1.00 a share,
it is possible to lose money by investing in the fund. </li></ul>
20. Government Securities Funds <ul><li>Government securities
funds invest primarily in Treasury and government agency
securities. Because they are issued or guaranteed by the U.S.
government, they are considered the credit worthiness
alternatives available. Government securities offer moderate
current income and high safety. Treasury securities are backed by
the full faith and credit of the U.S. government as to the timely
payment of principal and interest. Government agency securities
are not considered government obligations and therefore are not
backed by the full faith and credit of the government. The
principal value of these funds will fluctuate due to changes in
interest rates. </li></ul>
21. Municipal Bond Funds <ul><li>Municipal bond funds seek
tax-free income by investing in the bonds of state and local
governments. In many cases, it may be wise to consider
municipal bond funds issued by your state because they may
offer double or even triple tax-free income. In some states you will
have to pay income tax if you buy shares of a municipal bond
fund that invests in bonds issued by other states. In addition,
while some municipal bonds in the fund may not be subject to
regular income taxes, they may be subject to federal, state, or
local alternative minimum tax. If you sell a tax-free bond fund at a
profit, there are capital gains taxes to consider. As with all types
of bond funds, the principal value will fluctuate with changes in
interest rates. </li></ul>
22. Corporate Bond Funds <ul><li>Corporate bond funds invest
in debt securities issued by corporations. The risk of corporate
bond funds may vary depending on the objectives of the fund.
Because credit risk is somewhat higher, these funds may offer
higher returns than funds specializing in government securities.
Principal will fluctuate with changes in interest rates

</li></ul><ul><li>High-Yield
Bond
Funds
</li></ul><ul><li>High-yield bond funds seek to maximize
current income by investing in lower-quality high-yielding
corporate bonds. The bonds held by these funds are generally
rated BB or lower by rating agencies. They offer the high current
yields to compensate for the greater risk of default. Since they are
more volatile than and pay higher yields than investment grade
bonds, they tend to be suited to investors with a high degree of
risk tolerance. </li></ul>
23. International Bond Funds <ul><li>International fixed-income
funds invest in debt securities of foreign governments and
corporations, and seek to provide current income. Global bond
funds may include U.S. government and corporate bonds. The
risks associated with investing on a worldwide basis include
differences in regulation of financial data and reporting, currency
exchange differences, as well as economic and political systems
that
may
be
different
than
those
in
the
U.S.
</li></ul><ul><li>Besides growth and income, there are a
variety of mutual funds that limit their investments to a particular
sector, index, or other specialized investments. Depending on
your investment objectives and preference for risk, these funds
might be considered additions to a portfolio containing more
traditional types of funds. </li></ul>
24. Index Funds <ul><li>Index funds are mutual funds that
attempt to match the performance of any of several market
indexes. For example, a stock index fund may hold stocks that
mirror the S&P 500 or the Dow Jones Industrial Average. Index
funds provide broad diversification within a single type of asset
class.
</li></ul><ul><li>Precious
Metals
Funds
</li></ul><ul><li>Precious metals funds invest directly in
precious metals or in the stocks of companies that mine precious
metals. Most of these funds limit their investments to gold and
gold bullion or to shares in gold-mining companies. The returns

from precious metals funds come primarily from long-term capital

appreciation. </li></ul>
25. Asset Allocation Funds <ul><li>Asset allocation funds are
those that give the manager great flexibility in deciding how to
invest fund assets. The fund manager can typically invest in all
the major investment classes, including stocks, bonds, and money
market securities. The weightings of each class may vary
dramatically and will reflect the market outlook and expectations
of the fund manager. </li></ul><ul><li>Sector Funds
</li></ul><ul><li>Sector funds invest in specific industries or
sectors of the economy, such as communications, aerospace and
defense, or health care. While they may be diversified within a
particular sector, they lack broad diversification. This increases
their investment risk. These funds typically seek long-term capital
appreciation. </li></ul>
26. Socially Conscious Funds <ul><li>Socially conscious funds
invest exclusively in the securities of socially conscious
companies. For example, this type of fund may not invest in
companies that cause environmental pollution or that have
interests
in
countries
with
repressive
governments.
</li></ul><ul><li>The value of mutual fund shares fluctuates
with market conditions and, when sold, shares may be worth
more or less than their original costs. Bond funds are subject to
the inflation, interest rate, and credit risks associated with the
underlying bonds in the fund. </li></ul>
27. Why choose Mutual Funds? <ul><li>Investing in Mutual
Funds offers several benefits: </li></ul><ul><li>Professional
expertise: </li></ul><ul><li>Fund managers are professionals
who track the market on an on-going basis. With their mix of
professional qualification and market knowledge, they are better
placed than the average investor to understand the markets.
</li></ul><ul><li>Diversification: </li></ul><ul><li>Since a
Mutual Fund scheme invests in number of stocks and/or
debentures, the associated risks are greatly reduced.

</li></ul><ul><li>Relatively
less
expensive:
</li></ul><ul><li>When compared to direct investments in the
capital market, Mutual Funds cost less. This is due to savings in
brokerage
costs,
demat
costs,
depository
costs
etc.
</li></ul><ul><li>. </li></ul>
28.
Continue
..
<ul><li>Liquidity:
</li></ul><ul><li>Investments in Mutual Funds are completely
liquid and can be redeemed at their Net Assets Value-related price
on
any
working
day.
</li></ul><ul><li>Transparency:
</li></ul><ul><li>You will always have access to up-to-date
information on the value of your investment in addition to the
complete portfolio of investments, the proportion allocated to
different assets and the fund managers investment strategy
</li></ul><ul><li>Flexibility:
</li></ul><ul><li>Through
features such as Systematic Investment Plans, Systematic
Withdrawal Plans and Dividend Investment Plans, you can
systematically invest or withdraw funds according to your needs
and convenience . </li></ul>
29.
Continue
..
<ul><li>SEBI
regulated
market:
</li></ul><ul><li>All Mutual Funds are registered with SEBI and
function within the provisions and regulations that protect the
interests of investors. AMFI is the supervisory body of the Mutual
Funds industry. </li></ul>
30. 3 years plus Aggressive investors with long term out look.
Stocks High Risk Long-term Capital Appreciation Equity Funds 12
months & more Salaried & conservative investors Government
securities Interest Rate Risk Security & Income Gilt Funds More
than 9 - 12 months Salaried & conservative investors
Predominantly Debentures, Government securities, Corporate
Bonds Credit Risk & Interest Rate Risk Regular Income Bond Funds
(Floating - Long-term) 3 weeks - 3 months Those with surplus
short-term funds Call Money, Commercial Papers, Treasury Bills,
CDs, Short-term Government securities. Little Interest Rate
Liquidity + Moderate Income Short-term Funds (Floating - short-

term) 2 days - 3 weeks Those who park their funds in current

accounts or short-term bank deposits Treasury Bills, Certificate of
Deposits, Commercial Papers, Call Money Negligible Liquidity +
Moderate Income + Reservation of Capital Money Market
Investment horizon Who should invest Investment Portfolio Risk
Objective Mutual Fund Type
31. Continue .. 2 years plus Moderate & Aggressive Balanced ratio
of equity and debt funds to ensure higher returns at lower risk
Capital Market Risk and Interest Risk Growth & Regular Income
Balanced Funds 3 years plus Aggressive investors. Portfolio
indices like BSE , NIFTY etc NAV varies with index performance To
generate returns that are commensurate with returns of
respective indices Index Funds
32. Systematic Investment Plan (S IP ) <ul><li>A Systematic
Investment Plan ( SIP ) is a simple method of investing, used
across the world as a means to accumulate wealth. It works the
same way as a recurring deposit account. SIP involves investing a
fixed sum of money in a specific investment scheme, on a regular
basis, for a pre-determined number of period. </li></ul>
33. SIP is a disciplined approach to investing, and :
<ul><li>Helps us to invest disposable funds each month.
</li></ul><ul><li>Gives us the benefits of rupee-cost averaging
</li></ul><ul><li>Relieves us of trying to time the market
</li></ul><ul><li>Helps us to reach your financial goals
</li></ul>
34. Growth Analysis Growth in Asset under management
36. OBJECTIVE OF THE STUDY <ul><li>The primary objective of
the research is to study the growth of Mutual Funds in India, their
types, and advantages & disadvantages from the point of view of
the investors. </li></ul><ul><li>The secondary objective of the
study is to analyze the Investor perception about the Equity
Linked Scheme. </li></ul><ul><li>To analyze the performance
of top players in the Mutual Fund Industry and find out the future
of Mutual Funds in India. </li></ul><ul><li>The study also try to

find the new segments of customers for Bajaj Capital Ltd.

</li></ul>
37. RESEARCH METHODOLOGY <ul><ul><li>The first stage
included gathering information about the Mutual Fund Industry in
India and getting acquainted with the working of the various
Mutual Fund Schemes. </li></ul></ul><ul><ul><li>The next
stage involved determining the objective of the study, knowing
the target audience and drafting a questionnaire. The
questionnaire was designed keeping in mind the target audience
and objectives of the study. It was non-disguised in nature and will
include a few open-ended questions. </li></ul></ul>
38. RESEARCH PLAN <ul><li>The research was exploratory in
nature and the goal was to gather preliminary data to shed light
on the real nature of problems and to suggest possible solutions
or new ideas. It involved getting a feel of the situation and lays
emphasis on the discovery of ideas and possible insights.
</li></ul>
39. DATA SOURCES <ul><li>Primary data was collected from the
specially targeted persons like salaried persons, business men
and house wife.The primary information was collected through
Questionnaire and interviews presented to the investors.
</li></ul><ul><li>Secondary
Data
was
collected
from:
</li></ul><ul><li>1.Print
articles
on
Mutual
Funds.
</li></ul><ul><li>2.Annual audit report of the Mutual Fund
Companies. </li></ul><ul><li>3.Product and Service Brochures
of the Mutual Funds. </li></ul>
40. SAMPLING PLAN <ul><ul><li>The sampling unit comprised
of the people present in the various offices of Mutual Fund
Companies. The sample size taken for the study was two hundred
fifty. The samples were chosen on the basis of random sampling
and these respondents belonged to middle and upper class
salaried and self-employed people, students, professionals and
housewives who have invested in Mutual Funds. The research was
carried
out
in
South
Delhi
only.

</li></ul></ul><ul><ul><li>DATA
ANALYSIS
TECHNIQUE
</li></ul></ul><ul><li>Simple
averages
</li></ul><ul><li>Tabulation </li></ul>
41. LIMITATIONS <ul><li>The survey was conducted in selective
areas because of constraints of time and resources. Therefore, the
findings cannot be generalized or claimed until further research
has been carried out. </li></ul><ul><li>The sample size taken
was 250, which may not reflect a true picture of the consumers
mind. Because of these constraints, the analysis may not be
accurate and may vary, when tested in different places and time.
</li></ul>
42. Findings: Out of total respondents a huge percentage is of
male respondents, which mainly reflects the dominance of male
decision makers.
43. Age : 5 42 150 53 Above 55 (Years) 40-55 (Years) 25-40
(Years) 18-25 (Years)
44. Educational Background: Finding: Large portion of investors
were highly educated with Post Graduates and Professionally
qualified respondents at equal percentage of 23% and 2%
respondents were Graduates and rest with other qualifications. 6
158 28 58 Others Professional Post-Graduate Graduate
45. Findings: 75% a very large number of respondents were from
the service/salaried class while 20% were from the business and
the rest were professionals.
46. Finding: 19% respondents have monthly income below 10000,
38% respondents had income between 10000-15000, 12%
respondents had income between 15000-25000 and 31%
respondents had income above 25000 .
47. <ul><ul><ul><ul><ul><li>What is percentage of your
income you save? </li></ul></ul></ul></ul></ul>Finding: 54%
respondents saved less than 15% of their saving, 44%
respondents saved 15-30% of their savings and 2% respondents
saved of 30-40% of their saving. - 5 110 135 ABOVE 40% 30-40%
15-30% 0-15%

48. Purpose of your investment? Finding: For 51% respondents the

purpose was saving and for 49% the purpose was wealth creation
and investment. 122 128 WEALTH CREATION/INVESTMENT
SAVINGS
49. If you prefer investment, then in which of the following type?
Finding: 24% respondents preferred Mutual funds and investors
equally preferred other investments. With increasing gold prices
and real estate prices they were getting less popular as
investment options. 38 32 34 58 65 75 REAL ESTATE GOLD
INSURANCE GOVT. BONDS/BANK FDS/POST OFFICE DEPOSITS
SHARES MUTUAL FUNDS
50. <ul><ul><ul><ul><ul><li>How would you like to do
trading
in
share
market?
</li></ul></ul></ul></ul></ul>Finding:
41%
respondents
preferred ONLINE TRADING in share market while 59% preferred
share trading through personal advice. 148 102 THROUGH
PERSONAL ADVICE ONLINE
51. Is fluctuation in share market effect your investment plan?
<ul><ul><li>Finding: According to the responses only 6% were
worried
about
fluctuation
in
share
</li></ul></ul><ul><ul><li>market and that affected their
investment plan. 36 % respondents were not at all worried
</li></ul></ul><ul><ul><li>about share market fluctuations
and 31% were little bit afraid and 27% were moderately
</li></ul></ul><ul><ul><li>worried . </li></ul></ul>15 67 78
90 VERY MUCH MODERATE LITTLE BIT NOT AT ALL
52. Finding: 30% respondents had proper knowledge about the
Mutual Funds and 14% did not have knowledge about the Mutual
Funds. 56% respondents wanted to know about the Mutual Funds
as they had partial knowledge about the Mutual Funds.
53. <ul><ul><ul><li>If you prefer mutual funds as your way of
investment
then
</li></ul></ul></ul><ul><ul><ul><li>in
which
kind
of
Mutual
fund
you
would
prefer?
</li></ul></ul></ul>Finding: 48% respondents prefer Equity

funds, 16% respondents prefer Debt Funds and 36% preferred

Balanced funds. 90 40 120 BALANCED DEBT EQUITY
54. <ul><ul><ul><ul><ul><li>How much of your total portfolio
is in Equity? </li></ul></ul></ul></ul></ul>Finding: 32%
respondents had invested less than 25% in equity funds, 56%
have invested in 25-50% equity, 10% had invested 50-75% in
equity funds and 2% respondents have invested 75-100% in
equity funds. 5 25 140 80 75-100% 50-75% 25-50% 0-25%
55. Rank these consultancy firms, as per your preference of (1-4
in descending order) Finding: Karvy Consultant was ranked as the
most preferred firm, followed by India bulls than Bajaj Capital. 4 1
2 3 OTHERS KARVY INDIABULLS BAJAJ CAPITAL
56. <ul><ul><ul><ul><ul><li>Do you have any knowledge
about
financial
planning?
</li></ul></ul></ul></ul></ul>Finding: 37% respondents have
knowledge about financial planning, 32% respondents had very
little knowledge about financial planning. While 31% respondents
had partial knowledge about financial planning and were eager to
know more about financial planning. Did your consultancy firm
provide you financial planning services / other value added
services? Finding: 26% respondents said that their consultancy
firm provided them financial planning services / other value added
services while 74% said that their consultancy firm did not
provide any such information. 78 80 92 Partial, I would like to
know more NO YES 186 64 NO YES
57. The Future plan: <ul><li>In a study conducted by the
Associated Chamber of Commerce and Industry of India
(ASSOCHAM) and the Association of Mutual Fund Industry of India
(AMFI), it has been revealed that by 2014, the size of the Indian
mutual fund industry is estimated to go up to over Rs 1,65,000
crore. </li></ul><ul><li>The focus of Industry players is shifting
from sector based fund to more diversified fund as they carry less
risk.Moreover the focus of industry is shifting from Debt based
funds to Equity based funds which performance better </li></ul>

58. Continue <ul><li>Some of the industry biggies are

exploring the opportunities in pension reform by positioning
themselves as the front-runners in the Pension Fund arena.
</li></ul><ul><li>Companies are now focusing on distribution
channels of Financial Planners and E-commerce, as they will stand
to benefit enormously if these trends gain significance.
</li></ul>