PROJECT REPORT

ON
COMPARATIVE ANALYSIS OF MUTUAL FUNDS
AND ULIPS

Submitted in partial fulfillment of requirement of Bachelor

of Business Administration (B.B.A) General

BBA VITH SEMESTER (E)

BATCH 2015-2018

Submitted to: Submitted by:

Ms. Jasleen Rana Shivam Gusain
Assistant professor 03924501715

JAGANNATH INTERNATIONAL MANAGEMENT

SCHOOL KALKAJI

1
 DECLARATION

I,Shivam Gusain, a student of BBA Sixth semester of Jagannath International

Management School hereby declare that the project report under the title “ A
STUDY ON COMPARATIVE ANALYSIS OF MUTUAL FUNDS AND ULIPS
" is my own work .All care has been taken to keep this report error free and I
sincerely regret for any unintended discrepancies that might have crept into this
report. I shall be highly obliged if errors (if any) be brought to my attention.

Thank you

Shivam Gusain

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 CERTIFICATE

This is to certify that the project titled “ COMPARATIVE ANALYSIS

OF MUTUAL FUNDS AND ULIPS” is a record of personal work done by SHIVAM

GUSAIN, a full time student of bachelor of business administration, Jagannath

International Management School(JIMS), New Delhi, during the period of the study in the

academic year 2015-2018.This project report represents entirely an independent work of

the candidate under my supervision and guidance.

Ms. JASLEEN RANA,

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 ACKNOWLEDGEMENT

A lot of effort has gone into this final report. My thanks are due to many

people with whom I have been closely associated. I would like to thank all those

who have contributed in completing this project. First of all, I would like

to send my sincere thanks to Ms. Jasleen Rana for her helpful hand in the

completion of my project.

I would like to thank my entire beloved family & friends for providing me

monetary as well as non – monetary support, as and when required, without

which this project would not have completed on time. Their trust and patience

is now coming out in form of this thesis

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 TABLE OF CONTENTS
Description Page No.
Contents with page no.

DECLARATION 2
Certificate of completion 3
Acknowledgement 4
List of tables 5
Introduction to topic 6
Objectives 50
Research Methodology 51
Analysis & Interpretation 54
Findings 60
Conclusion 61
Recommendations 62
Questionnaire 63
Bibliography 67

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 INTRODUCTION

The mutual fund industry is a lot like the film star of the finance business.
Though it is perhaps the smallest segment of the industry, it is also the most
glamorous – in that it is a young industry where there are changes in the rules
of the game everyday, and there are constant shifts and upheavals. The
mutual fund is structured around a fairly simple concept, the mitigation of risk
through the spreading of investments across multiple entities, which is
achieved by the pooling of a number of small investments into a large bucket.
Yet it has been the subject of perhaps the most elaborate and prolonged
regulatory effort in the history of the country.
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 a
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 lesser-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.

The Indian MF industry has Rs 5.67 lakh crore of assets under management.
As per data released by Association of Mutual Funds in India, the asset base

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of all mutual fund combined has risen by 7.32% in April, the first month of the
current fiscal. As of now, there are 33 fund houses in the country including 16
joint ventures and 3 whollyowned foreign asset managers.
According to a recent McKinsey report, the total AUM of the Indian mutual fund
industry could grow to $350-440 billion by 2012, expanding 33% annually.
While the revenue and profit (PAT) pools of Indian AMCs are pegged at $542
million and $220 million respectively, it is at par with fund houses in developed
economies. Operating profits for AMCs in India, as a percentage of average
assets under management, were at 32 basis points in 2006-07, while the
number was 12 bps in UK, 17 bps in Germany and 18 bps in the US, in the
same time frame.

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 Major players in Indian mutual fund industry and their AUM

Mutual Fund Name

As on Corpus
No. of Schemes*
ABN AMRO M F 337 July 31, 2008 7803

AIG GlobalM F 54 July 31, 2008 3513

SBI Mutual Fund 177 July 31, 2008 29151.00

Birla Mutual Fund 343 July 31, 2008 37497.00

BOB Mutual Fund 22 July 31, 2008 56.00

Canara Robeco Mutual Fund 54 July 31, 2008 4576.00

DBS Chola Mutual Fund 80 July 31, 2008 1853.00

Deutsche Mutual Fund 187 July 31, 2008 10792.00

DSP Merrill Lynch Mutual Fund 211 Feb 29, 2008 19483.00

Escorts Mutual Fund 26 Feb 29, 2008 177.00

Fidelity Mutual Fund 39 Mar 31, 2008 7464.00

Franklin Templeton Investments 230 July 31, 2008 24441.00

HDFC Mutual Fund 371 July 31, 2008 50,752.00

HSBC Mutual Fund 221 July 31, 2008 16,385.00

ICICI Prudential Mutual Fund 431 July 31, 2008 55,161.00

ING Mutual Fund 262 July 31, 2008 7091.00

JPMorgan Mutual Fund 9 July 31, 2008 3054.00

Kotak Mahindra Mutual Fund 185 July 31, 2008 18,782.00

LIC Mutual Fund 112 July 31, 2008 17,499.00

Lotus India Mutual Fund 216 July 31, 2008 7831.00

Morgan Stanley Mutual Fund 3 July 31, 2008 2,814.00

PRINCIPAL Mutual Fund 151 July 31, 2008 11,359.00

Quantum Mutual Fund 6 July 31, 2008 66.00

Reliance Mutual Fund 345 July 31, 2008 84,564.00

Sahara Mutual Fund 45 July 31, 2008 175.00

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 Mirae asset mutual fund 255 July 31, 2008 2546.00

Sundaram Mutual Fund 219 July 31, 2008 11,898.00

Tata Mutual Fund 389 July 31, 2008 20,443.00

Taurus Mutual Fund 14 July 31, 2008 289.00

UTI Mutual Fund 315 July 31, 2008 46,120.00

HISTORY OF MUTUAL FUND

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

-
First Phase – 1964-87

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

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec
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87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund
(Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund
in December 1990.
At the end of 1993, the mutual fund industry had assets under management of
Rs.47,004 crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families.

Also, 1993 was the year in which the first Mutual Fund Regulations came into
being, under which all mutual funds, except UTI were to be registered and
governed. The erstwhile Kothari Pioneer (now merged with Franklin
Templeton) was the first private sector mutual fund registered in July 1993.

Fourth Phase – since February 2003

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

GROWTH IN ASSETS UNDER MANAGEMENT

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ECONOMIC ENVIRONMENT

GROWTH OF MUTUAL FUND INDUSTRY IN INDIA

While the Indian mutual fund industry has grown in size by about 320% from
March, 1993 (Rs. 470 billion) to December, 2004 (Rs. 1505 billion) in terms of
AUM, the AUM of the sector excluding UTI has grown over 8 times from Rs.
152 billion in March 1999 to $ 148 billion as at March 2008.

Though India is a minor player in the global mutual fund industry, its AUM as
a proportion of the global AUM has steadily increased and has doubled over
its levels in 1999.
The growth rate of Indian mutual fund industry has been increasing for the last
few years. It was approximately 0.12% in the year of 1999 and it is noticed

0.25% in 2004 in terms of AUM as percentage of global AUM.

Some facts for the growth of mutual funds in India

• 100% growth in the last 6 years.

• Number of foreign AMC’s is in the queue to enter the Indian markets.

• Our saving rate is over 23%, highest in the world. Only channelizing
these savings in mutual funds sector is required.
• We have approximately 29 mutual funds which is much less than US
having more than 800. There is a big scope for expansion.
• Mutual fund can penetrate rurals like the Indian insurance industry with
simple and limited products.
• SEBI allowing the MF's to launch commodity mutual funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.

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 • Introduction of Financial Planners who can provide need based advice.

Recent trends in mutual fund industry

The most important trend in the mutual fund industry is the aggressive
expansion of the foreign owned mutual fund companies and the decline
of the companies floated by the nationalized banks and smaller private
sector players.

Many nationalized banks got into the mutual fund business in the early
nineties and got off to a start due to the stock market boom was
prevailing. These banks did not really understand the mutual fund
business and they just viewed it as another kind of banking activity. Few
hired specialized staff and generally chose to transfer staff from the
parent organizations. The performance of most of the schemes floated
by these funds was not good. Some schemes had offered guaranteed
returns and their parent organizations had to bail out these AMCs by
paying large amounts of money as a difference between the guaranteed
and actual returns. The service levels were also very bad. Most of these
AMCs have not been able to retain staff, float new schemes etc.

TECHNOLOGICAL ENVIRONMENT

IMPACT OF TECHNOLOGY

Mutual fund, during the last one decade brought out several innovations in their
products and is offering value added services to their investors. Some of the
value added services that are being offered are:
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 • Electronic fund transfer facility.
• Investment and re-purchase facility through internet.
• Added features like accident insurance cover, mediclaim etc.
• Holding the investment in electronic form, doing away with the traditional
form of unit certificates.
• Cheque writing facilities.
• Systematic withdrawal and deposit facility.

ONLINE MUTUAL FUND TRADING

The innovation the industry saw was in the field of distribution to make it more
easily accessible to an ever increasing number of investors across the country.
For the first time in India the mutual fund start using the automated trading,
clearing and settlement system of stock exchanges for sale and repurchase of
open-ended de-materialized mutual fund units.

Systematic Investment Plan (SIP) and Systematic Withdrawal Plan (SWP) were
options introduced which have come in very handy for the investor to maximize
their returns from their investments. SIP ensures that there is a regular
investment that the investor makes on specified dates making his purchases to
spread out reducing the effect of the short term volatility of markets. SWP was
designed to ensure that investors who wanted a regular income or cash flow
from their investments were able to do so with a predefined automated form.
Today the SW facility has come in handy for the investors to reduce their taxes.

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LEGAL AND POLITICAL ENVIRONMENT

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

With the increase in mutual fund players in India, a need for mutual fund
association in India was generated to function as a non-profit organization.
Association of Mutual Funds in India (AMFI) was incorporated on 22 nd August
1995.

AMFI is an apex body of all Asset Management Companies (AMC), which has
been registered with SEBI. Till date all the AMCs are that have launched
mutual fund schemes are its members. It functions under the supervision and
guidelines of board of directors. AMFI has brought down the Indian Mutual
Fund Industry to a professional and healthy market with ethical lines
enhancing and maintaining standards. It follows the principle of both
protecting and promoting the interest of mutual funds as well as their unit
holders.

It has been a forum where mutual funds have been able to present their
views, debate and participate in creating their own regulatory framework. The
association was created originally as a body that would lobby with the
regulator to ensure that the fund viewpoint was heard. Today, it is usually the
body that is consulted on matters long before regulations are framed, and it
often initiates many regulatory changes that prevent malpractices that
emerge from time to time.

AMFI works through a number of committees, some of which are standing

committees to address areas where there is a need for constant vigil and
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improvements and other which are adhoc committees constituted to address
specific issues. These committees consist of industry professionals from
among the member mutual funds. There is now some thought that AMFI
should become a self-regulatory organization since it has worked so
effectively as an industry body.

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REGULATORY MEASURES BY SEBI
Like Banking & Insurance up to the nineties of the last century, Mutual Fund
industry in India was set up and functioned exclusively in the state monopoly
represented by the Unit Trust of India. This monopoly was diluted in the eighties
by allowing nationalized banks and insurance companies (LIC & GIC) to set up
their institutions under the Indian Trusts Act to transact mutual fund business,
allowing the Indian investor the option to choose between different service
providers. Unit Trust was a statutory corporation governed by its own
incorporating act. There was no separate regulatory authority up to the time
SEBI was made a statutory authority in 1992. but it was only in the year 1993,
when a government took a policy decision to deregulate Indian Economy from
government control and to transform it market oriented, that the industry was
opened to competition from private and foreign players. By the year 2000 there
came to be established in the market 34 mutual funds offerings a variety of
about 550 schemes.

SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)

REGULATIONS, 1996

The fast growing industry is regulated by Securities and Exchange Board of

India (SEBI) since inception of SEBI as a statutory body. SEBI initially
formulated “SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL
FUNDS) REGULATIONS, 1993” providing detailed procedure for
establishment, registration, constitution, management of trustees, asset
management company, about schemes/products to be designed, about
investment of funds collected, general obligation of MFs, about inspection, audit
etc. based on experience gained and feedback received from the market
SEBI revised the guidelines of 1993 and issued fresh guidelines in 1996 titled
“SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS)
REGULATIONS, 1996”. The said regulations as amended from time to time are
in force even today.
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The SEBI mutual fund regulations contain ten chapters and twelve schedules.
Chapters containing material subjects relating to regulation and conduct of
business by Mutual Funds.

REGISTRATION OF MUTUAL FUND:

Application for registration

1. An application for registration of a mutual fund shall be made to the Board in
Form A by the sponsor.

Application fee to accompany the application

2. Every application for registration under regulation 3 shall be accompanied by
nonrefundable application fee as specified in the Second Schedule.

Application to conform to the requirements

3. An application which is not complete in all respects shall be liable to be
rejected:
Provided that, before rejecting any such application, the applicant shall be
given an opportunity to complete such formalities within such time as may be
specified by the Board.

Furnishing information
4. The Board may require the sponsor to furnish such further information or
clarification as may be required by it.

Eligibility criteria
5. For the purpose of grant of a certificate of registration, the applicant has to
fulfill the following, namely :—
(a) the sponsor should have a sound track record and general reputation of
fairness and integrity in all his business transactions.

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Explanation : For the purposes of this clause “sound track record” shall mean
the sponsor should,—
(i) be carrying on business in financial services for a period of not less than
five years; and
(ii) the networth is positive in all the immediately preceding five years; and
(iii) the networth in the immediately preceding year is more than the capital
contribution of the sponsor in the asset management company; and (iv) the
sponsor has profits after providing for depreciation, interest and tax in three
out of the immediately preceding five years, including the fifth year;

(b) in the case of an existing mutual fund, such fund is in the form of a trust
and the trust deed has been approved by the Board;

(c) the sponsor has contributed or contributes at least 40% to the net worth of
the asset management company:
Provided that any person who holds 40% or more of the net worth of an
asset management company shall be deemed to be a sponsor and will be
required to fulfill the eligibility criteria specified in these regulations; (d) the
sponsor or any of its directors or the principal officer to be employed by the
mutual fund should not have been guilty of fraud or has not been convicted
of an offence involving moral turpitude or has not been found guilty of any
economic offence;

(e) appointment of trustees to act as trustees for the mutual fund in

accordance with the provisions of the regulations;

(f) appointment of asset management company to manage the mutual fund

and operate the scheme of such funds in accordance with the provisions of
these regulations;

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(g) appointment of a custodian in order to keep custody of the securities
10[or gold and gold related instruments and carry out the custodian activities
as may be authorized by the trustees.

Consideration of application
8. The Board, may on receipt of all information decide the application.

Grant of Certificate of Registration

9. The Board may register the mutual fund and grant a certificate in Form B on
the applicant paying the registration fee as specified in Second Schedule.

Terms and conditions of registration

10. The registration granted to a mutual fund under regulation 9, shall be
subject to the following terms and conditions:
(a) the trustees, the sponsor, the asset management company and the
custodian shall comply with the provisions of these regulations; (b) the
mutual fund shall forthwith inform the Board, if any information or particulars
previously submitted to the Board was misleading or false in any material
respect;
(c) the mutual fund shall forthwith inform the Board, of any material change in
the information or particulars previously furnished, which have a bearing
on the registration granted by it;
(d) payment of fees as specified in the regulations and the Second Schedule.

Rejection of application
11. Where the sponsor does not satisfy the eligibility criteria mentioned in
regulation 7, the Board may reject the application and inform the applicant of
the same.

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Payment of annual service fee:
12. A mutual fund shall pay before the 15th April each year a service fee as
specified in the Second Schedule for every financial year from the year
following the year of registration:
Provided that the Board may, on being satisfied with the reasons for the
delay permit the mutual fund to pay the service fee at any time before the
expiry of two months from the commencement of the financial year to which
such fee relates.

Failure to pay annual service fee

13. The Board may not permit a mutual fund who has not paid service fee to
launch any scheme.

CONSTITUTION AND MANAGEMENT OF ASSET MANAGEMENT

COMPANY AND CUSTODIAN

Application by an asset management company

14. (1) The application for the approval of the asset management company shall
be made in Form D.
(2) The provisions of regulations 5, 6 and 8 shall, so far as may be, apply to
the application made under sub-regulation (1) as they apply to the application
for registration of a mutual fund.

Appointment of an asset management company

15. (1) The sponsor or, if so authorised by the trust deed, the trustee, shall
appoint an asset management company, which has been approved by the
Board under sub-regulation(2) of regulation 21.

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(2) The appointment of an asset management company can be terminated
by majority of the trustees or by seventy-five per cent of the unitholders of the
scheme.

(3) Any change in the appointment of the asset management company shall
be subject to prior approval of the Board and the unitholders.

Eligibility criteria for appointment of asset management company

16. (1) For grant of approval of the asset management company the applicant
has to fulfill the following :—
(a) in case the asset management company is an existing asset management
company it has a sound track record, general reputation and fairness in
transactions.
Explanation: For the purpose of this clause sound track record shall mean
the networth and the profitability of the asset management company; (aa)
the asset management company is a fit and proper person; (b) the
directors of the asset management company are persons having adequate
professional experience in finance and financial services related field and
not found guilty of moral turpitude or convicted of any economic offence or
violation of any securities laws;
(c) the key personnel of the asset management company 27[have not been
found guilty of moral turpitude or convicted of economic offence or violation of
securities laws or worked for any asset management company or mutual fund
or any intermediary 29[during the period when its] registration has been
suspended or cancelled at any time by the Board;
(d) the board of directors of such asset management company has at least
fifty per cent directors, who are not associate of, or associated in any manner
with, the sponsor or any of its subsidiaries or the trustees;
(e) the Chairman of the asset management company is not a trustee of any
mutual fund;

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(f) the asset management company has a networth of not less than rupees
ten crores :
Provided that an asset management company already granted approval
under the provisions of Securities and Exchange Board of India (Mutual
Funds) Regulations, 1993 shall within a period of twelve months from the date
of notification of these regulations increase its networth to rupees ten crores :
Provided [further] that the period specified in the first proviso may be
extended in appropriate cases by the Board up to three years for reasons to
be recorded in writing :
Provided further that no new schemes shall be allowed to be launched or
managed by such asset management company till the networth has been
raised to rupees ten crores.

Explanation : For the purposes of this clause, “networth” means the

aggregate of the paid up capital and free reserves of the asset management
company after deducting therefrom miscellaneous expenditure to the extent
not written off or adjusted or deferred revenue expenditure, intangible assets
and accumulated losses.
(2) The Board may, after considering an application with reference to the
matters specified in sub-regulation (1), grant approval to the asset
management company.

Terms and conditions to be complied with

17. The approval granted under sub-regulation (2) of regulation 21 shall be

subject to the following conditions, namely:—
(a) any director of the asset management company shall not hold the office of
the director in another asset management company unless such person is an
independent director referred to in clause (d) of sub-regulation (1) of regulation
23
21 and approval of the Board of asset management company of which such
person is a director, has been obtained;
(b) the asset management company shall forthwith inform the Board of any
material change in the information or particulars previously furnished, which
have a bearing on the approval granted by it;
(c) no appointment of a director of an asset management company shall be
made without prior approval of the trustees;
(d) the asset management company undertakes to comply with these
regulations;
(e) no change in the controlling interest of the asset management company
shall be made unless,—
(i) prior approval of the trustees and the Board is obtained;
(ii) a written communication about the proposed change is sent to each
unitholder and an advertisement is given in one English daily newspaper
having nationwide circulation and in a newspaper published in the
language of the region where the Head Office of the mutual fund is
situated; and (iii) the unitholders are given an option to exit on the
prevailing Net Asset Value without any exit load;]
(f) the asset management company shall furnish such information and
documents to the trustees as and when required by the trustees.

Procedure where approval is not granted

18. Where an application made under regulation 19 for grant of approval does
not satisfy the eligibility criteria laid down in regulation 21, the Board may
reject the application.

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CHARACTERISTICS OF MUTUAL FUNDS

• The ownership is in the hands of the investors who have pooled in their
funds.

• It is managed by a team of investment professionals and other service

providers.

• The pool of funds is invested in a portfolio of marketable investments.

• The investors share is denominated by ‘units’ whose value is called as

Net Asset Value (NAV) which changes everyday.

• The investment portfolio is created according to the stated investment

objectives of the fund.

ADVANTAGES OF MUTUAL FUNDS

The advantages of mutual funds are given below: -

Portfolio Diversification

Mutual funds invest in a number of companies. This diversification reduces

the risk because it happens very rarely that all the stocks decline at the same
time and in the same proportion. So this is the main advantage of mutual funds .

Professional Management

Mutual funds provide the services of experienced and skilled professionals,

assisted by investment research team that analysis the performance and
prospects of companies and select the suitable investments to achieve the
objectives of the scheme.
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Low Costs

Mutual funds are a relatively less expensive way to invest as compare to

directly investing in a capital markets because of less amount of brokerage
and other fees.

Liquidity

This is the main advantage of mutual fund, that is whenever an investor

needs money he can easily get redemption, which is not possible in most of
other options of investment. In open-ended schemes of mutual fund, the
investor gets the money back at net asset value and on the other hand in
closeended schemes the units can be sold in a stock exchange at a prevailing
market price.

Transparency

In mutual fund, investors get full information of the value of their investment,
the proportion of money invested in each class of assets and the fund
manager’s investment strategy

Flexibility

Flexibility is also the main advantage of mutual fund. Through this

investors can systematically invest or withdraw funds according to their needs
and convenience like regular investment plans, regular withdrawal plans,
dividend reinvestment plans etc.

Convenient Administration

Investing in a mutual fund reduces paperwork and helps investors to avoid

many problems like bad deliveries, delayed payments and follow up with
brokers and companies. Mutual funds save time and make investing easy.
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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.

Well Regulated

All mutual funds are registered with SEBI and they function with in the
provisions of strict regulations designed to protect the interest of investors.
The operations of mutual funds are regularly monitored by SEBI.

DISADVANTAGES OF MUTUAL FUNDS

Mutual funds have their following drawbacks:

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 mutual fund runs the risk of losing the 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 advisor, you will pay a sales commission if you buy shares in a Load
Fund.

27
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 you
reinvest the money you made.

Management Risk

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

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STRUCTURE OF MUTUAL FUND
There are many entities involved and the diagram below illustrates the structure
of mutual funds: -

Structure of Mutual Funds

SEBI

The regulation of mutual funds operating in India falls under the preview of
authority of the “Securities and Exchange Board of India” (SEBI). Any
person proposing to set up a mutual fund in India is required under the SEBI
(Mutual Funds) Regulations, 1996 to be registered with the SEBI.

29
Sponsor

The sponsor should contribute at least 40% to the net worth of the AMC.
However, if any person holds 40% or more of the net worth of an AMC shall be
deemed to be a sponsor and will be required to fulfill the eligibility criteria in the
Mutual Fund Regulations. The sponsor or any of its directors or the principal
officer employed by the mutual fund should not be guilty of fraud or guilty of any
economic offence.
Trustees

The mutual fund is required to have an independent Board of Trustees, i.e.

two third of the trustees should be independent persons who are not associated
with the sponsors in any manner. An AMC or any of its officers or employees
are not eligible to act as a trustee of any mutual fund. The trustees are
responsible for - inter alia – ensuring that the AMC has all its systems in place,
all key personnel, auditors, registrar etc. have been appointed prior to the
launch of any scheme.

Asset Management Company

The sponsors or the trustees are required to appoint an AMC to manage

the assets of the mutual fund. Under the mutual fund regulations, the applicant
must satisfy certain eligibility criteria in order to qualify to register with SEBI as
an AMC.

1. The sponsor must have at least 40% stake in the AMC.

2. The chairman of the AMC is not a trustee of any mutual fund.
3. The AMC should have and must at all times maintain a minimum net
worth of Cr. 100 million.
4. The director of the AMC should be a person having adequate
professional experience.

30
 5. The board of directors of such AMC has at least 50% directors who are
not associate of or associated in any manner with the sponsor or any of
its subsidiaries or the trustees.

The Transfer Agents

The transfer agent is contracted by the AMC and is responsible for

maintaining the register of investors / unit holders and every day settlements of
purchases and redemption of units. The role of a transfer agent is to collect
data from distributors relating to daily purchases and redemption of units.

Custodian

The mutual fund is required, under the Mutual Fund Regulations, to appoint
a custodian to carry out the custodial services for the schemes of the fund. Only
institutions with substantial organizational strength, service capability in terms
of computerization and other infrastructure facilities are approved to act as
custodians. The custodian must be totally delinked from the AMC and must be
registered with SEBI.

Unit Holders

They are the parties to whom the mutual fund is sold. They are ultimate
beneficiary of the income earned by the mutual funds.

31
TYPES OF MUTUAL FUND SCHEMES

In India, there are many companies, both public and private that are engaged
in the trading of mutual funds. Wide varieties of Mutual Fund Schemes exist to
cater to the needs such as financial position, risk tolerance and return
expectations etc. Investment can be made either in the debt Securities or equity
.The table below gives an overview into the existing types of schemes in the
Industry.

TYPES OF MUTUAL FUND SCHEME

32
 Generally two options are available for every scheme regarding dividend
payout and growth option. By opting for growth option an investor can have the
benefit of long-term growth in the stock market on the other side by opting for
the dividend option an investor can maintain his liquidity by receiving dividend
time to time. Some time people refer dividend option as dividend fund and
growth fund. Generally decisions regarding declaration of the dividend depend
upon the performance of stock market and performance of the fund.

OPTION REGARDING DIVIDEND

Dividend Growth

Payout Reinvested

Systematic Investment Plan (SIP)

Systematic investment plan is like Recurring Deposit in which investor

invests in the particular scheme on regular intervals. In the case it is convenient
for salaried class and middle-income group. In this case on regular interval units
of specified amount is created. An investor can make payment by regular
payments by issuing cheques, post dated cheques, ECS, standing Mandate etc.
SIP can be started in the any open-ended fund if there is provision of it. There
are some entry and exit load barriers for discontinuation and redemption of the
fund before the said period.

33
According to Structure

Open – Ended Funds

An open – ended fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy and
sell units at Net Asset Value (NAV) related prices. The key feature of open –
ended schemes is liquidity.
Close – Ended Funds

A close – ended fund has a stipulated maturity period which generally

ranging from 3 to 15 years. The fund is open for subscription only during a
specified period. Investors can invest in the scheme at the same time of the
initial public issue and thereafter they can buy and sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an
exit route to the investors, some close – ended funds give an option of selling
back the units to the mutual fund through periodic repurchase at NAV related
prices.

Interval Funds

Interval funds combine the features of open – ended and close – ended
schemes. They are open for sales or redemption during pre-determined
intervals at their NAV.

According to Investment Objective:

34
Growth Funds

The aim of growth funds is to provide capital appreciation over the

medium to long term. Such schemes normally invest a majority of their
corpus in equities. It has been proven that returns from stocks are much
better than the other investments had over the long term. Growth
schemes are ideal for investors having a long term outlook seeking
growth over a period of time.

Income Funds

The aim of the income funds is to provide regular and steady income
to investors. Such schemes generally invest in fixed income securities
such as bonds, corporate debentures and government securities.

Income funds are ideal for capital stability and regular income .

Balanced Funds

The aim of balanced funds is to provide both growth and regular

income. Such schemes periodically distribute a part of their earning and
invest both in equities and fixed income securities in the proportion
indicated in their offer documents. In a rising stock market, the NAV of
these schemes may not normally keep pace or fall equally when the
market falls. These are ideal for investors looking for a combination of
income and moderate growth.

Money Market Funds

The main aim of money market funds is to provide easy liquidity,

preservation of capital and moderate income. These schemes generally
35
invest in safe short term instruments such as treasury bills, certificates
of deposit, commercial paper and inter – bank call money. Returns on
these schemes may fluctuate depending upon the interest rates
prevailing in the market. These are ideal for corporate and individual
investors as a means to park their surplus funds for short periods.

Other Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific

provisions of the Indian Income Tax laws as the government offers tax
incentives for investment in specified avenues. Investments made in
Equity Linked Saving Schemes (ELSS) and Pension Schemes are
allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also
provides opportunities to investors to save capital gains.

Special Schemes:

Index Schemes

Index funds attempt to replicate the performance of a particular index

such as the BSE Sensex or the NSE 50.

Sector Specific Schemes

Sector funds are those which invest exclusively in a specified

industry or a group of industries or various segments such as ‘A’ group
shares or initial public offerings.
36
 Bond Schemes

It seeks investment in bonds, debentures and debt related

instrument to generate regular income flow.

FREQUENTLY USED TERMS

Advisor - Is employed by a mutual fund organization to give professional

advice on the fund’s investments and to supervise the management of its asset.

Diversification – The policy of spreading investments among a range of

different securities to reduce the risk.

Net Asset Value (NAV) - Net Asset Value is the market value of the
assets of the scheme minus its liabilities. The per unit NAV is the net asset
value of the scheme divided by the number of units outstanding on the
Valuation Date.

Sales Price - Is the price you pay when you invest in a scheme. Also called
Offer Price. It may include a sales load.

Repurchase Price - Is the price at which a close-ended scheme

repurchases its units and it may include a back-end load. This is also called Bid
Price.

Redemption Price - Is the price at which open-ended schemes repurchase

their units and close-ended schemes redeem their units on maturity. Such
prices are NAV related.

37
Sales Load - Is a charge collected by a scheme when it sells the units. Also
called ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’
schemes.

ULIPS

PLATFORMS OF LIFE INSURANCE- UNIT LINKED INSURANCE

PLANS

World over , insurance come in different forms and shapes . although the
generic names may find similar , the difference in product features makes one
wonder about the basis on which these products are designed .With insurance
market opened up , Indian customer has suddenly found himself in a market
place where he is bombarded with a lot of jargon as well as marketing gimmicks
with a very little knowledge of what is happening . This module is aimed at
clarifying these underlying concepts and simplifying the different products
available in the market.

We have many products like Endowment , Whole life , Money back etc. All
these products are based on following basic platforms or structures viz.
 Traditional Life
 Universal Life or Unit Linked Policies

3.1 TRADITIONAL LIFE – AN OVERVIEW

The basic and widely used form of design is known as Traditional Life Platform.
It is based on the concept of sharing . Each of the policy holder contributes his
contribution (premium) into the common large fund is managed by the company
on behalf of the policy holders.

38
Administration of that common fund in the interest of everybody was entrusted
to the insurance company .It was the responsibility of the company to
administer schemes for benefit of the policyholders. Policyholders played a very
passive roll . In the course of time , the same concept of sharing and a common
fund was extended to different areas like saving , investment etc.

3.1.1 FEATURES OF TL :

 This is the simplest way of designing product as far as concerned. He

has no other responsibility but to pay the premium regularly.
 Company is responsible for the protection as well as maximization of the
policyholder’s funds.
 There is a common fund where in all the premiums paid are
accumulated. Expenses incurred as well as claims paid are then taken
out of this fund.
 Companies carry out the valuation of the fund periodically to ascertain
the position. It is also a practice to increase the minimum possible
guarantee under a policy every year in the form of declaring and
attaching bonuses to the sum assured on the basis of this valuation.
Declaration of bonuses is not mandatory .
 Based on the end objective , companies may offer different plans like
saving plans, investment plans etc.(e.g. Endowment , SPWLIP) It helps
to maintain a smooth growth and protects against the vagaries of the
market. In other words it minimizes the risk of investments for an average
individual. He shares his risk with a group of like-minded individuals.

ULIP is the Product Innovation of the conventional Insurance product.

With the decline in the popularity of traditional Insurance products &
changing Investor needs in terms of life protection, periodicity, returns &

39
liquidity, it was need of the hour to have an Instrument that offers all these
features bundled into one.

A Unit Link Insurance Policy (ULIP) is one in which the customer is provided
with a life insurance cover and the premium paid is invested in either debt or
equity products or a combination of the two. In other words, it enables the buyer
to secure some protection for his family in the event of his untimely death and
at the same time provides him an opportunity to earn a return on his premium
paid. In the event of the insured person's untimely death, his nominees would
normally receive an amount that is the higher of the sum assured or the value
of the units (investments).

To put it simply, ULIP attempts to fulfill investment needs of an investor with

protection/insurance needs of an insurance seeker. It saves the
investor/insurance-seeker the hassles of managing and tracking a portfolio or
products. More importantly Ulips offer investors the opportunity to select a
product which matches their risk profile.

Unit Linked Insurance Plans came into play in the 1960s and became very
popular in Western Europe and Americas. In India The first unit linked
Insurance Plan , popularly known as ULIP – Unit Linked Insurance Plan in India
was brought out by Unit Trust Of India in the year 1971 by entering into a group
insurance arrangement with LIC o provide for life cover to the investors , while
UTI , as a mutual was taking care of investing the unit holders money in the
capital market and giving them a fair return .

Subsequently in the year 1989 , another Unit Linked Product was launched
by the LIC Mutual Fund called by the name of “DHANARAKSHA” which was
more or less on the line of ULIP of UTI . Thereafter LIC itself came out with a
Unit

40
Linked Insurance Product known by name “BIMA PLUS “ in the year 2001-02 .

Presently a number of private life insurance companies have launched Unit

Linked Insurance Products with a variety of new features.

TYPES OF ULIP

There are various unit linked insurance plans available in the market.
However, the key ones are pension, children, group and capital guarantee
plans.

The pension plans come with two variations — with and without life cover —
and are meant for people who want to generate returns for their sunset years.

The children plans, on the other hand, are aimed at taking care of their
educational and other needs..
Apart from unit-linked plans for individuals, group unit linked plans are also
available in the market. The Group linked plans are basically designed for
employers who want to offer certain benefits for their employees such as
gratuity, superannuation and leave encashment.

The other important category of Ulips is capital guarantee plans. The plan
promises the policyholder that at least the premium paid will be returned at
maturity. But the guaranteed amount is payable only when the policy's
maturity value is below the total premium paid by the individual till maturity.
However, the guarantee is not provided on the actual premium paid but only
on that portion of the premium that is net of expenses (mortality, sales and
marketing, administration).

How Ulips work

41
Ulips work on the lines of mutual funds. The premium paid by the client (less
any charge) is used to buy units in various funds (aggressive, balanced or
conservative) floated by the insurance companies. Units are bought according
to the plan chosen by the policyholder. On every additional premium, more
units are allotted to his fund. The policyholder can also switch among the
funds as and when he desires. While some companies allow any number of
free switches to the policyholder, some restrict the number to just three or
four. If the number is exceeded, a certain charge is levied.
Individuals can also make additional investments (besides premium) from
time to time to increase the savings component in their plan. This facility is
termed "top-up". The money parked in a ULIP plan is returned either on the
insured's death or in the event of maturity of the policy. In case of the insured
person's untimely death, the amount that the beneficiary is paid is the higher
of the sum assured (insurance cover) or the value of the units (investments).
However, some schemes pay the sum assured plus the prevailing value of
the investments.

ULIP - KEY FEATURES

• Premiums paid can be single, regular or variable. The payment period

too can be regular or variable. The risk cover can be increased or
decreased.

• As in all insurance policies, the risk charge (mortality rate) varies with
age.

• The maturity benefit is not typically a fixed amount and the maturity
period can be advanced or extended.

• Investments can be made in gilt funds, balanced funds, money market

funds, growth funds or bonds.
42
 • The policyholder can switch between schemes, for instance, balanced
to debt or gilt to equity, etc.

• The maturity benefit is the net asset value of the units.

• The costs in ULIP are higher because there is a life insurance

component in it as well, in addition to the investment component.

• Insurance companies have the discretion to decide on their investment

portfolios.

• Being transparent the policyholder gets the entire episode on the

performance of his fund.

• ULIP products are exempted from tax and they provide life insurance.

• Provides capital appreciation.

• Investor gets an option to choose among debt, balanced and equity

funds.

USP of ULIPS

Insurance cover plus savings

Ulips serve the purpose of providing life insurance combined with savings at
market-linked returns. To that extent, ULIPS can be termed as a two-in-one

43
plan in terms of giving an individual the twin benefits of life insurance plus
savings.

Multiple investment options

ULIPS offer a lot more variety than traditional life insurance plans. So there
are multiple options at the individual’s disposal. ULIPS generally come in
three broad variants:
 Aggressive ULIPS (which can typically invest 80%-100% in equities,
balance in debt)
 Balanced ULIPS (can typically invest around 40%-60% in equities)
 Conservative ULIPS (can typically invest upto 20% in equities)

Although this is how the ULIP options are generally designed, the exact
debt/equity allocations may vary across insurance companies. Individuals can
opt for a variant based on their risk profile.

Flexibility

The flexibility with which individuals can switch between the ULIP variants to
capitalise on investment opportunities across the equity and debt markets is
what distinguishes it from other instruments. Some insurance companies allow
a certain number of ‘free’ switches. Switching also helps individuals on another
front. They can shift from an Aggressive to a Balanced or a Conservative ULIP
as they approach retirement. This is a reflection of the change in their risk
appetite as they grow older.

Works like an SIP

Rupee cost-averaging is another important benefit associated with ULIPS. With
an SIP, individuals invest their monies regularly over time intervals of a
month/quarter and don’t have to worry about ‘timing’ the stock markets.

44
COMPARISON BETWEEN ULIPS AND MUTUAL
FUNDS:

Unit Linked Insurance Policies (Ulips) as an investment avenue are closest to

mutual funds in terms of their structure and functioning. As is the case with
mutual funds, investors in Ulips are allotted units by the insurance company
and a net asset value (NAV) is declared for the same on a daily basis.

Similarly ULIP investors have the option of investing across various schemes
similar to the ones found in the mutual funds domain, i.e. diversified equity
funds, balanced funds and debt funds to name a few. Generally speaking,
Ulips can be termed as mutual fund schemes with an insurance component.

However it should not be construed that barring the insurance element there is
nothing differentiating mutual funds from Ulips.

Points of difference between the two:

1. Mode of investment/ investment amounts

Mutual fund investors have the option of either making lump sum investments
or investing using the systematic investment plan (SIP) route which entails
commitments over longer time horizons. The minimum investment amounts are
laid out by the fund house.

ULIP investors also have the choice of investing in a lump sum (single premium)
or using the conventional route, i.e. making premium payments on an annual,
half-yearly, quarterly or monthly basis. In Ulips, determining the premium paid
is often the starting point for the investment activity.

45
This is in stark contrast to conventional insurance plans where the sum assured
is the starting point and premiums to be paid are determined thereafter.

ULIP investors also have the flexibility to alter the premium amounts during the
policy's tenure. For example an individual with access to surplus funds can
enhance the contribution thereby ensuring that his surplus funds are gainfully
invested; conversely an individual faced with a liquidity crunch has the option
of paying a lower amount (the difference being adjusted in the accumulated
value of his ULIP). The freedom to modify premium payments at one's
convenience clearly gives ULIP investors an edge over their mutual fund
counterparts.

2. Expenses

In mutual fund investments, expenses charged for various activities like fund
management, sales and marketing, administration among others are subject to
pre-determined upper limits as prescribed by the Securities and Exchange
Board of India.

For example equity-oriented funds can charge their investors a maximum of

2.5% per annum on a recurring basis for all their expenses; any expense above
the prescribed limit is borne by the fund house and not the investors.

Similarly funds also charge their investors entry and exit loads (in most cases,
either is applicable). Entry loads are charged at the timing of making an
investment while the exit load is charged at the time of sale.

Insurance companies have a free hand in levying expenses on their ULIP

products with no upper limits being prescribed by the regulator, i.e. the
Insurance Regulatory and Development Authority. This explains the complex
and at times 'unwieldy' expense structures on ULIP offerings. The only restraint
46
placed is that insurers are required to notify the regulator of all the expenses
that will be charged on their ULIP offerings.

Expenses can have far-reaching consequences on investors since higher

expenses translate into lower amounts being invested and a smaller corpus
being accumulated. ULIP-related expenses have been dealt with in detail in the
article "Understanding ULIP expenses".

3. Portfolio disclosure

Mutual fund houses are required to statutorily declare their portfolios on a

quarterly basis, albeit most fund houses do so on a monthly basis. Investors
get the opportunity to see where their monies are being invested and how they
have been managed by studying the portfolio.

There is lack of consensus on whether Ulips are required to disclose their

portfolios. During our interactions with leading insurers we came across
divergent views on this issue.

While one school of thought believes that disclosing portfolios on a quarterly

basis is mandatory, the other believes that there is no legal obligation to do so
and that insurers are required to disclose their portfolios only on demand.

Some insurance companies do declare their portfolios on a monthly/quarterly

basis. However the lack of transparency in ULIP investments could be a cause
for concern considering that the amount invested in insurance policies is
essentially meant to provide for contingencies and for long-term needs like
retirement; regular portfolio disclosures on the other hand can enable investors
to make timely investment decisions.

47
4. Flexibility in altering the asset allocation

As was stated earlier, offerings in both the mutual funds segment and Ulips
segment are largely comparable. For example plans that invest their entire
corpus in equities (diversified equity funds), a 60:40 allotment in equity and debt
instruments (balanced funds) and those investing only in debt instruments (debt
funds) can be found in both Ulips and mutual funds.

If a mutual fund investor in a diversified equity fund wishes to shift his corpus
into a debt from the same fund house, he could have to bear an exit load and/or
entry load.

On the other hand most insurance companies permit their ULIP inventors to
shift investments across various plans/asset classes either at a nominal or no
cost (usually, a couple of switches are allowed free of charge every year and a
cost has to be borne for additional switches).

Effectively the ULIP investor is given the option to invest across asset classes
as per his convenience in a cost-effective manner.

This can prove to be very useful for investors, for example in a bull market when
the ULIP investor's equity component has appreciated, he can book profits by
simply transferring the requisite amount to a debt-oriented plan.

5. Tax benefits

ULIP investments qualify for deductions under Section 80C of the Income Tax
Act. This holds good, irrespective of the nature of the plan chosen by the
investor. On the other hand in the mutual funds domain, only investments in
tax-saving funds (also referred to as equity-linked savings schemes) are eligible
for Section 80C benefits.
48
Maturity proceeds from Ulips are tax free. In case of equity-oriented funds (for
example diversified equity funds, balanced funds), if the investments are held
for a period over 12 months, the gains are tax free; conversely investments sold
within a 12-month period attract short-term capital gains tax @ 10%.

Similarly, debt-oriented funds attract a long-term capital gains tax @ 10%, while
a short-term capital gain is taxed at the investor's marginal tax rate.

Despite the seemingly similar structures evidently both mutual funds and Ulips
have their unique set of advantages to offer. As always, it is vital for investors
to be aware of the nuances in both offerings and make informed decisions.

49
 OBJECTIVES:

• To study about the mutual funds industry.

• To study the approach of investors towards Mutual Funds and ULIPS

• To study the behavior of the investors whether they prefer mutual funds
or Ulips.

50
RESEARCH METHODOLOGY

SCOPE OF THE STUDY:

• Subject matter is related to the investor’s approach towards mutual

funds and Ulips.
• People of age between 20 to 60. Area limited to Delhi.
• Demographics include names, age, qualification, occupation, marital
status and annual income.

• STEPS OF RESEARCH DESIGN:

• Define the information needed:- This first step states that what is
the information that is actually required. Information in this case we
require is that what is the approach of investors while investing their
money in mutual funds and Ulips e.g. what do they consider while
deciding as to invest in which of the two i.e mutual funds or Ulips. Also,
it studies the extent to which the investors are aware of the various costs
that one bears while making any investment. So, the information sought
and information generated is only possible after defining the information
needed.

• Design the research:- A research design is a framework or blueprint

for conducting the research project. It details the procedures necessary
for obtaining the information needed to solve research problems. In this
project, the research design is explorative in nature.
• Specify the scaling procedures:- Scaling involves creating a
continuum on which measured objects are located. Both nominal and
interval scales have been used for this purpose.

51
• Construct and pretest a questionnaire:- A questionnaire is a
formalized set of questions for obtaining information from respondents.
Where as pretesting refers to the testing of the questionnaire on a small
sample of respondents in order to identify and eliminate potential
problems.

• Population
• All the clients of State bank of India and who are investing money in
mutual funds and Ulips, both.
• Sample Unit
• Investors and non-investors.
• Sample Size

• This study involves 100 respondents.

• Sampling Technique:
• The sample size has been taken by non-random convenience sampling
technique Data Collection:
• Data has been collected both from primary as well as secondary sources
as described below:
• Primary sources
• Primary data was obtained through questionnaires filled by people and
through direct communication with respondents in the form of Interview.

• Secondary sources

• The secondary sources of data were taken from the various websites ,
books, journals reports, articles etc. This mainly provided information
about the mutual fund and Ulips industry in India.

52
• Plan for data analysis : Analysis of data is planned with the help of
mean, chi-square technique and analysis of variance. No
study is free from limitations. The limitations of this study can be:
• Sample size taken is small and may not be sufficient to predict the results
with 100% accuracy.
• The result is based on primary and secondary data that has it’s own
limitations.
• The study only covers the area of Delhi that may not be applicable to
other areas.

53
 Analysis & findings

COMPARATIVE ANALYSIS
Do you invest in Mutual Funds ?

Response Percentage
Yes 62%
No 38%
total 100

38%
yes
no
62%

INTERPRETATION:

62% of the people invest in mutual funds.

54
What is the mode of information that you use for insurance
companies?
1. Advertisement
2. Agents
3. Seminar
4. Work shop

Options percentage
Advertisements 44%
Agents 24%
Seminar 14%
Workshop 18%

18%
advertisement
44%
agents
14% seminar
workshops
24%

Interpretation: It means that all the modes of information are not the
same. Advertisement is more popular

55
In which sector do you prefer to invest your money?

Options Percentages
Government sector 54
Private sector 46
Total 100

frequency

government sector
46%
private sector

54%

Interpretation: People prefer both the sectors equally.

56
 At which rate do you want your investment to grow?

options percentages
Steadily 34
At an average rate 26
Fast 40
Total 100

frequency

34%
steadily at an
40% average rate
fast

26%

interpretation: 40% of the respondents want their investments to grow fastly

57
 Imagine that stock market drops immediately after you invest
in it then what will you do?

A. Do you have any other investment/insurance policy?

Options Percentages
Yes 68
No 32
Total 100

frequency

32 %

Yes
No

68%

Interpretation: 68 % of the people had bought other investment

policies.

Interpretation: 26% of the respondents will wait and watch even if the
share market drops.
58
 How often do you monitor your investment?

Options Percentage

Daily 15

Monthly 25

Occasionally 10

frequency

30%
20% daily
monthly
occasionally

50%

Options Percentages
Daily 30
Monthly 50
Occasionally 20

total 100
Interpretation: It shows that most of the people .i.e. 50% prefer
monitoring their investment on monthly basis.

59
 FINDINGS

• Highest number of investors comes from the salaried class.

• Highest number of investors comes from the age group of 25-
35.
• Most of the people have been investing their money n the share
market belong to Rs.400000 and above income group.
• Mostly investors prefer monitoring their investment on monthly
basis.
• Most of the people invest upto 6% of their annual income in
mutual funds.
• Most of the people between the age group of 25– 35 invest their
money in share market.

60
 CONCLUSIONS

 A mutual fund is the ideal investment vehicle for today’s complex

and modern financial scenario. Markets for equity shares, bonds
and other fixes income instruments, real estate, derivatives and
other assets have become mature and information driven.
 Today each and every person is fully aware of every kind of
investment proposal. Everybody wants to invest money, which
entitled of low risk, high returns and easy redemption. In my
opinion before investing in mutual funds, one should be fully
aware of each and everything.
 At the same time Ulips as an investment avenue is good for
people who has interest in staying for a longer period of time,
that is around 10 years and above. Also in the coming times,
Ulips will grow faster. Ulips are actually being publicized more
and also the other traditional endowment policies are becoming
unattractive because of lower interest rate.
 It is good for people who were investing in ULIP policies of
insurance companies as their investments earn them a better
return than the other policies.

61
 RECOMMENDATIONS

The performance of the mutual fund depends on the previous years Net Asset
Value of the fund. All schemes are doing well. But the future is uncertain. So,
the AMC (Asset under Management Companies) should take the following
steps: -

1. The people do not want to take risk. The AMC should launch more
diversified funds so that the risk becomes minimum. This will lure
more and more people to invest in mutual funds.
2. The expectation of the people from the mutual funds is high. So,
the portfolio of the fund should be prepared taking into
consideration the expectations of the people.
3. Try tp reduce fund charges, administration charges and other
charges which helps to invest more funds in the security market
and earn good returns.
4. Diffferent campaigns should be launched to educate people
regarding mutual funds.
5. companies should give regular dividends as it depicts profitability.
6. Mutual funds should concentrate on differentiating the portfolio of
their MF than their competitors MF
7. Companies should give handsome brokerage to brokers so that
they get attracted towards distribution of the funds.

62
QUESTIONNAIRE

Do you invest in Mutual Funds or Ulips?

• Yes
• No

If not, then what other option(s) do you prefer to invest?

• Fixed deposits
• Post office schemes Recurring deposits.

How do you get the information of the various Insurance Companies?

a) Advertisement

b) Agents

c) Seminar

d) Work shops

In which sector do you prefer to invest your money

a) Private Sector ( )

b) Government Sector ( )

At which rate do you want your investment to grow?

o Steadily
o Averag
o Fast
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 Which factor do you consider before investing in mutual fund or
Ulips? (tick)

• Safety of principal
• Low risk
• High returns
• Maturity period

Terms and conditions

Do you invest your money in share market?

Yes ( ) no( )

Imagine that stock market drops immediately after you invest in it then
what will you do?

o Withdraw your money

o Wait and watch

Do you have any other investment/insurance policy?

Yes ( ) No ( )

How often do you monitor your investment?

 Daily
 Monthly
 occasionally

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 What percentage of your income do you invest?

0-5% ( ) 5-10% ( ) 10-15% ( )

How long have you been investing in mutual funds?

 For the last 1-5 years

 For the last 5-10 years

In the past, you have invested mostly in (choose one):

 Savings A/cs & PO schemes ( ) Mutual funds investing in bonds

( )
 Mutual funds investing in stocks ( ) Balanced mutual funds ( )
 Individual stocks & bonds ( ) Ulips ( )
 Other instruments like real estate, gold ( )

You would describe your financial situation as being:

• Very unstable. ( )
• Somewhat unstable ( ).
• Moderately stable. ( )
• Stable. ( )
• Very stable ( )

Your comfort level in making investment decisions can best be described as

• Low ( )
• Moderate ( )
• High ( )
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If in the near future if you ever plan to invest in your money in any of
the mutual fund company, which would be your choice?

• Sbi mutual fund ( )

• HDFC mutual fund ( )
• Reliance mutual fund ( )
• ABN AMRO mutual fund ( )
• Others ( )

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 BIBLIOGRAPHY

• www.amfiindia.com

• www.principalindia.com
• www.investorsguide.com
• www.moneycontrol.com
• www.mutualfundsindia.com
• www.sbimf.com
• www.sebi.co.in

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