INTRODUCTION TO MUTUAL FUND

A Mutual Fund is a trust that pools the savings of a number of

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

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

and modern financial scenario. Markets for equity shares, bonds and other
fixed income instruments, real estate, derivatives and other assets have
become mature and information driven. Price changes in these assets are
driven by global events occurring in faraway places. A typical individual
is unlikely to have the knowledge, skills, inclination and time to keep
track of events, understand their implications and act speedily. An
individual also finds it difficult to keep track of ownership of his assets,
investments, brokerage dues and bank transactions etc.

A mutual fund is the answer to all these situations. It appoints

professionally qualified and experienced staff that manages each of these
functions on a full time basis.

The large pool of money collected in the fund allows it to hire such
staff at a very low cost to each investor. In effect, the mutual fund vehicle

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exploits economies of scale in all three areas - research, investments and
transaction processing.

While the concept of individuals coming together to invest money

collectively is not new, the mutual fund in its present form is a 20th
century phenomenon. In fact, mutual funds gained popularity only after
the Second World War. Globally, there are thousands of firms offering
tens of thousands of mutual funds with different investment objectives.
Today, mutual funds collectively manage almost as much as or more
money as compared to banks.

A sponsor then hires an asset management company to invest the

funds according to the investment objective. It also hires another entity to
be the custodian of the assets of the fund and perhaps a third one to
handle registry work for the unit holders (subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management

Company also, in which it holds a majority stake. In many cases a
sponsor can hold a 100% stake in the Asset Management Company
(AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life
Asset Management Company Ltd., which has floated different mutual
funds schemes and also acts as an asset manager for the funds collected
under the schemes.

MUTUAL FUND AS INVESTMENT OPTION

Concept:

A Mutual Fund is a trust that pools the savings of a number of

investors who share a common financial goal. The money thus collected

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is then invested in capital market instruments such as shares, debentures
and other securities. The income earned through these investments and
the capital appreciation realized is shared by its unit holders in proportion
to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to
invest in a diversified, professionally managed basket of securities at a
relatively low cost. The flow chart below describes broadly the working
of a mutual fund:

ADVANTAGES OF MUTUAL FUNDS:

The advantages of investing in a Mutual Fund are:

• Diversification: The best mutual funds design their portfolios so

individual investments will react differently to the same economic

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 conditions. For example, economic conditions like a rise in interest
rates may cause certain securities in a diversified portfolio to decrease
in value. Other securities in the portfolio will respond to the same
economic conditions by increasing in value. When a portfolio is
balanced in this way, the value of the overall portfolio should
gradually increase over time, even if some securities lose value.

• Professional Management: Most mutual funds pay topflight

professionals to manage their investments. These managers decide
what securities the fund will buy and sell.

• Regulatory oversight: Mutual funds are subject to many government

regulations that protect investors from fraud.

• Liquidity: It's easy to get your money out of a mutual fund. Write a
check, make a call, and you've got the cash.

• Convenience: You can usually buy mutual fund shares by mail,

phone, or over the Internet.

• Low cost: Mutual fund expenses are often no more than 1.5 percent of
your investment. Expenses for Index Funds are less than that, because
index funds are not actively managed. Instead, they automatically buy
stock in companies that are listed on a specific index

• Transparency

• Flexibility

• Choice of schemes

• Tax benefits

• Well regulated

Types of Mutual Fund Schemes:

• By Structure:

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 1. Open - Ended Schemes:

An open-ended fund or scheme is one that is available for

subscription and repurchase on a continuous basis. These schemes do not
have a fixed maturity period. Investors can conveniently buy and sell
units at Net Asset Value (NAV) related prices which are declared on a
daily basis. The key feature of open-end schemes is liquidity

2. Close - Ended Schemes:

A close-ended fund or scheme has a stipulated maturity period e.g.

5-7 years. The fund is open for subscription only during a specified
period at the time of launch of the scheme. Investors can invest in the
scheme at the time of the initial public issue and thereafter they can buy
or sell the units of the scheme on the stock exchanges where the units 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.

SEBI Regulations stipulate that at least one of the two exit routes is
provided to the investor i.e. either repurchase facility or through listing on
stock exchanges. These mutual funds schemes disclose NAV generally on
weekly basis.

Schemes according to Investment Objective:

A scheme can also be classified as growth scheme, income scheme,

or balanced scheme considering its investment objective.

• By Investment Objective:

1. Growth Schemes:

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The aim of growth funds is to provide capital appreciation over the
medium to long- term. Such schemes normally invest a major part
of their corpus in equities. Such mes funds have comparatively
high risks. These schemes provide different options to the investors
like dividend option, capital appreciation, etc. and the investors
may choose an option depending on their preferences. The
investors must indicate the option in the application form. The
mutual funds also allow the investors to change the options at a
later date. Growth schemes are good for investors having a long-
term outlook seeking appreciation over a period of time

2. Income Schemes:

The aim of income funds is to provide regular and steady

income to investors. Such schemes generally invest in fixed
income securities such as bonds, corporate debentures,
Government securities and money market instruments. Such funds
are less risky compared to equity schemes.

These funds are not affected because of fluctuations in

equity markets. However, opportunities of capital appreciation are
also limited in such funds. The NAVs of such funds are affected
because of change in interest rates in the country.

If the interest rates fall, NAVs of such funds are likely to

increase in the short run and vice versa. However, long term
investors may not bother about these fluctuations.

3. Balanced Schemes:

The aim of balanced funds is to provide both growth and

regular income as such schemes invest both in equities and fixed
income securities in the proportion indicated in their offer
documents. These are appropriate for investors looking for
moderate growth. They generally invest 40-60% in equity and debt
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 instruments. These funds are also affected because of fluctuations
in share prices in the stock markets. However, NAVs of such funds
are likely to be less volatile compared to pure equity funds.

4. Money Market Schemes:

These funds are also income funds and their aim is to provide
easy liquidity, preservation of capital and moderate income. These
schemes invest exclusively in safer short-term instruments such as
treasury bills, certificates of deposit, commercial paper and inter-
bank call money, government securities, etc. Returns on these
schemes fluctuate much less compared to other funds. These funds
are appropriate for corporate and individual investors as a means to
park their surplus funds for short periods.

• Other Schemes

1. 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 Savings 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 u/s 54EA and
54EB by investing in Mutual Funds, provided the capital asset
has been sold prior to April 1, 2000 and the amount is invested
before September 30, 2000.

2. Special Schemes:

 Index Schemes:

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 Index Funds replicate the portfolio of a particular index such
as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc
these schemes invest in the securities in the same weight age
comprising of an index. NAVs of such schemes would rise or
fall in accordance with the rise or fall in the index, though not
exactly by the same percentage due to some factors known as
"tracking error" in technical terms.Necessary disclosures in this
regard are made in the offer document of the mutual fund
scheme. There are also exchange traded index funds launched
by the mutual funds which are traded on the stock exchanges.

 Sector Specific Schemes:

Sectoral 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.

The graph indicates the growth of assets over the years.

Growth in Assets under Management:

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 Note:

Erstwhile UTI was bifurcated into UTI Mutual Fund and the
Specified Undertaking of the Unit Trust of India effective from
February 2003. The Assets under management of the Specified
Undertaking of the Unit Trust of India has therefore been excluded
from the total assets of the industry as a whole from February 2003
onward.

BENEFITS OF MUTUAL FUND INVESTMENT:

• Professional Management:

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 Mutual Funds provide the services of experienced and skilled
professionals, backed by a dedicated investment research team that
analyses the performance and prospects of companies and selects suitable
investments to achieve the objectives of the scheme.

• Diversification:
Mutual Funds invest in a number of companies across a broad
cross-section of industries and sectors. This diversification reduces the
risk because seldom do all stocks decline at the same time and in the
same proportion. You achieve this diversification through a Mutual Fund
with far less money than you can do on your own.
• Convenient Administration:
Investing in a Mutual Fund reduces paperwork and helps you avoid
many problems such as bad deliveries, delayed payments and follow up
with brokers and companies. Mutual Funds save your time and make
investing easy and convenient.
• Return Potential:

Over a medium to long-term, Mutual Funds have the potential to

provide a higher return as they invest in a diversified basket of selected
securities.

• Low Costs:

Mutual Funds are a relatively less expensive way to invest

compared to directly investing in the capital markets because the benefits
of scale in brokerage, custodial and other fees translate into lower costs
for investors.

• Liquidity:

In open-end schemes, the investor gets the money back promptly at

net asset value related prices from the Mutual Fund. In closed-end

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 schemes, the units can be sold on a stock exchange at the prevailing
market price or the investor can avail of the facility of direct repurchase
at NAV related prices by the Mutual Fund.

• Transparency:
You get regular information on the value of your investment in
addition to disclosure on the specific investments made by your scheme,
the proportion invested in each class of assets and the fund manager's
investment strategy and outlook.
• Flexibility:
Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, you can
systematically invest or withdraw funds according to your needs and
convenience.
• Affordability:
Investors individually may lack sufficient funds to invest in high-
grade stocks. A mutual fund because of its large corpus allows even a
small investor to take the benefit of its investment strategy. Choice of
Schemes Mutual Funds offers a family of schemes to suit your varying
needs over a lifetime.
• Well Regulated:

All Mutual Funds are registered with SEBI and they function
within the provisions of strict regulations designed to protect the interests
of investors. The operations of Mutual Funds are regularly monitored by
SEBI.

MUTUAL FUND COMPANIES IN INDIA

The concept of mutual funds in India dates back to the year 1963. The
era between 1963 and 1987 marked the existence of only one mutual fund
company in India with Rs. 67bn assets under management (AUM), by the

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end of its monopoly era, the Unit Trust of India (UTI). By the end of the
80s decade, few other mutual fund companies in India took their position
in mutual fund market.

The new entries of mutual fund companies in India were SBI Mutual
Fund, Canara bank Mutual Fund, Punjab National Bank Mutual Fund,
Indian Bank Mutual Fund, Bank of India Mutual Fund.

MAJOR MUTUAL FUND COMPANIES IN INDIA:

• ABN AMRO Mutual Fund

• Birla Sun Life Mutual Fund
• Bank of Baroda Mutual Fund (BOB Mutual Fund)
• HDFC Mutual Fund
• HSBC Mutual Fund
• ING Vysya Mutual Fund
• Prudential ICICI Mutual Fund
• Sahara Mutual Fund
• State Bank of India Mutual Fund
• Tata Mutual Fund
• Kotak Mahindra Mutual Fund
• Unit Trust of India Mutual Fund
• Reliance Mutual Fund
• Standard Chartered Mutual Fund
• Franklin Templeton India Mutual Fund
• Morgan Stanley Mutual Fund India
• Escorts Mutual Fund
• Alliance Capital Mutual Fund
• Benchmark Mutual Fund
• Canara bank Mutual Fund
• Chola Mutual Fund

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 • LIC Mutual Fund
• GIC Mutual Fund

 Future of Mutual Funds in India:

By December 2004, Indian mutual fund industry reached Rs 1,

50,537 crore. It is estimated that by 2010 March-end, the total assets of
all scheduled commercial banks should be Rs 40, 90,000 crore.

The annual composite rate of growth is expected 13.4% during the

rest of the decade. In the last 5 years we have seen annual growth rate of
9%. According to the current growth rate, by year 2010, mutual fund
assets will be double.

Some facts for the growth of mutual funds in India:

• 100% growth in the last 6 years.

• Number of foreign AMC's are in the que to enter the Indian

markets like Fidelity Investments, US based, with over
US$1trillion assets under management worldwide.

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 • 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.

• 'B' and 'C' class cities are growing rapidly. Today most of the
mutual funds are concentrating on the 'A' class cities. Soon they
will find scope in the growing cities.

• 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.

• Introduction of Financial Planners who can provide need based

advice.nds, which manages assets of Rs.153108crores under 421
schemes.

NEW FUND OFFER (NFO):

When a mutual fund asset management company announces Public

issue of units of a new fund/scheme it is called a New Fund Offer (NFO).

When a mutual fund company plans for a new fund offer it first
informs to the registrar or the back office functions provider like
INDIABULLS SECRITIES through email. This is called as “New Fund

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Offer Launching Information Mail” send by the fund manager of the asset
management company to the New Fund Offer coordinator of the
INDIABULLS SECRITIES. In this Mail the fund manager will ask the
NFO coordinator to get ready for the new fund with the required man
power and software.

Later they send the sample application form, the key information
memorandum (KIM) and offer document to INDIABULLS SECRITIES.
This offer document sets forth concisely, necessary information about the
scheme for a prospective investor to make an informed investment
decision on the scheme described. The offer document contains the
salient features of the scheme like New Fund Offer opening date, New
Fund Offer closing date, scheme name, Scheme class, reopening date,
plans available banks involved, number of bank branches involved,
minimum amount – fresh purchase, maximum amount – fresh purchase,
expected number of applications, entry load and exit load. The unit
manager or the New Fund Offer coordinator will arrange a meeting where
the AMC team, New Fund Offer expert’s team, Data entry team,
Reconciliation team and the dispatch team will discuss and fix the target
dates by which the work has to be completed accordingly.

New Fund Offer process:

When a mutual fund Assets Management Company (AMC)

announces a public issue of units of & new fund/scheme, it is called a
New Fund Offer (NFO).

The new fund is planned and sources from where it should be

collected and where the amount should be invested is planned by the
AMC.

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 According to the SEBI rules any new fund launched should be
approved by SEBI. Once the AMC get the approval of SEBI for the fund
it does the marketing of the fund by itself or through brokers. The
investors who are willing to invest in a particular fund deposit the amount
they plan to invest in the bank as directed by the AMC.

These banks collect the application and amount and direct it

towards the registrar specified by the AMC. From this point Indiabulls
came into the picture as the registrar.

The role, responsibilities, activities, forms and reports involved in

this process of New Fund Offer is general, are AMC, fund manager, SIP
I/c, Switches I/c., NFO Coordinator. Internal auditor, Systems(S/W) dept.
IPO Centre coordinator, IPO-RTI, IPO-EDP, Scanning and Printing &
Dispatching.

Teams involved in the New Fund Offer process-

➢ Mutual fund unit

➢ Technology team
➢ Data entry team
➢ Verification team
➢ External audit team
➢ Scanning team
➢ Franking and dispatching team

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17
 Description of New
Fund Offer process:

Bank wise
segregation:
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 The Indiabulls security branches collect the application forms of
the investors across India and abroad for all the branches of the bank that
is involved in this New Fund Offer. These applications are sent to
Indiabulls securities processing center, Hyderabad. After receiving, these
applications are segregated bank wise and branch wise.

IH Numbering:

IH numbering is also called as In house Numbering. Indiabulls

security gives this IH numbering to those application forms. This is done
for their convenience in doing back office functions easily. All the data
on the application is entered into systems through software developed by
Indiabulls security technology team called K-Bolt. Later on, we can get
any information of any particular application form or investor that we
require by entering this IH number.

Binding:

All the application forms that are received are given for binding.
Binding of application forms is done by segregating them according to
the bank and branch from which they are received. Indiabulls securities
do this Binding because to keep all these application forms safe, out of
any damage and miss-place.

First Entry:

After finishing binding of application forms they are sent to Data

Entry team. Here the first time entry is done. All the information or date
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of an investor that is available on the application forms like name of the
applicant, age, Address, PAN, Bank details, broker code, sub broker
code, email addresses, guardian name, amount invested, name of the
scheme or plan invested in, etc., are entered into the systems of
Indiabulls security ltd.

Second Entry:

After first entry the data is again sent for the second entry. Here in
second entry, the data that is entered in first entry is checked and the
information whatever is missing is entered.

Online Matching:

After entering the data like name of applicant, age, Address, PAN,
Bank details, broker code, sub broker code, email addresses, guardian
name, amount invested, name of the scheme or plan invested in, etc., in
the first entry and once again in the second entry, it is sent to the online
matching. Here in online matching the physical form of application are
kept side by checking of data that was entered in the first entry and
second entry is done

First time verification:

Data from online matching is sent to the verification team. This

team verifies mistakes that are left in online matching. Mistakes like
blank address, PAN blank for amount greater than or equal to RS. 50000
Name blank, bank details blank, invalid or blank broker code etc., are
rectified in the first time verification.

First time Check Clearing List:

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 First time check clearing list is in short is called as first time CCL.
First Time CCL is prepared based on the data that is provided after first
time verification.

External Audit:

First time check-clearing list is sent to an external audit team.

Indiabulls security Ltd, appoints this team before the New Fund Offer
processes. They are nowhere related to the organization. This external
audit team will mainly check name of the investor, amount invested, bank
details PAN number, name of the scheme/plan and mode of holding
(MOH). But in total they will check more than 30 characters

Second time verification:

If the external auditing is not satisfied and if they find any mistakes
or missing information they will send the first time Check Clearing List
for second time verification. Here they verify the check list once again
and mistakes like invalid mode of holding (MOH), invalid email address,
status minor without guardian name, invalid date of birth of minor,
invalid existing account number, blank/null application number, NRI with
blank account type, saving or current, investor signature missing are
rectified.

Second time Check clearing List:

Second check the verification team prepares clearing after

verifying the mistakes that are pointed out by the external audit team.
After preparing second time Check Clearing List it is again sent to
external audit team.

Integrity Check (New Fund Offer team):

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 Check clearing list will be given by the external audit team to the
New Fund Offer team in Indiabulls security. This New Fund Offer team
in India info line will once again check further mistakes like spelling
mistakes in the name of the applicant etc, and rectify them.

Integrity Check (by Audit):

After integrity check by the New Fund Offer team it is once

checked by the internal audit team of Indiabulls security Ltd.

Scanning Default Values, Verification of Mismatch cases:

Entire data is filtered at each and every step and finally it is given
to the scanning team for scanning here scanning team will detect and
rectify any further default values and mismatch cases.

Reconciliation, Rejections and Cheque returns:

Cheques of the investors are sent by the bank to Indiabulls security.

Reconciliation team. Here this team will verify bank details of the
investor like PAN number, bank a/c number, comparing the amount
invested with that of the minimum amount that has to be invested cheques
without hue signature of the investor bounced cheques etc., and they are
rejected. These rejected cheques are dispatched to the investors. A sample
statement of accounts (SOA) is prepared by this reconciliation team.

Handling over the data to Mutual Fund Services:

Entire data after getting filtered at each and every step will be
handing over to mutual fund services team. This mutual fund services
team will once again verify the data and the final data will come out any
mistakes and default values.

Porting in Task Mutual Fund:

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 Task Mutual Fund is the software developed by Indiabulls
securities Technology team. It is prepared according to the suggestion
given by AMC. This Task Mutual Fund will resemble the style or
Proforma or outlook of the statement of accounts. Final data that they got
after filtering the mistakes and default values is ported in the task Mutual
Fund

Allotment of units:

Allotment of units is done as per the amount that is invested by

investors. They will avail the units taking the Net Asset Value (NAV) of
that particular scheme as base.

Sample Statement of Accounts verification by audit:

Statement of accounts (SOA) is picked up randomly from a huge

lot and the audit team does verification. This verification will result in
preparing a statement of accounts which in cent percent correct and exact.

This Statement of accounts contains data like:

* Name of the investor

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 * Address

* Bank details

* Pan Number

* Guardian name

* Broker code & Sub broker code

* Nominee name and addresses

* 2nd and 3rd applicant name

* Amount invested

* No. Of units allotted

* Fund name, Scheme Name, Plan Name & A/c no

* Transaction type details

* Mode of redemption payment

* Mode of dividend payment

* Mode of dispatch, Status, occupation.

* Current balance, average price, current cost, current NAV etc.

Dispatch of Statement of Accounts: Statement of accounts (SOA) once

prepared is dispatched to the investor. SOA’s are neatly packed in an
envelope and dispatched to the investors by the dispatch team through
courier.
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 New Fund Report:

Indiabulls security will finally prepare New Fund Report. This new
fund report has to be submitted to the AMC. Then AMC will submit a
copy of the same to the SEBI, which is mandatory. The new fund report
details like

1) Scheme details:

* Scheme name and type, Date of opening

* Date of closing the scheme / initial subscription period

* Target amount and Minimum amount to be raised

2) Subscription / Allotment details:

* Number of applications received with in the country

* Number of NRI applications received

* Subscription amount received with in the country

* Subscription amount received form NRI

* Date of allotment of units

3) Initial issue expenses

4) Date of dispatch of refund of refund orders

5) Unit holding pattern

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 Need of the Study:

The project’s idea is to project Mutual Fund as a better

avenue for investment on a long-term or short-term basis. Mutual Fund is
a productive package for a lay-investor with limited finances, this project
creates an awareness that the Mutual Fund is a worthy investment
practice. Mutual Fund is a globally proven instrument. Mutual Funds are
”Unit Trust” as it is called in some parts of the world has a long and
successful history, of late Mutual Funds have become a hot favorite of
millions of people all over the world. The driving force of Mutual Funds
is the ‘safety of the principal’ guaranteed, plus the added advantage of
capital appreciation together with the income earned in the form of
interest or dividend. The various schemes of Mutual Funds provide the
investor with a wide range of investment options according to his risk
bearing capacities and interest besides; they also give handy return to the
investor. Mutual Funds offers an investor to invest even a small amount
of money, each Mutual Fund has a defined investment objective and
strategy. Mutual Funds schemes are managed by respective asset
managed companies sponsored by financial institutions, banks, private
companies or international firms. A Mutual Fund is the ideal investment
vehicle for today’s complex and modern financial scenario.

The study is basically made to analyses the various open-ended

equity schemes of different Asset Management Companies to highlight
the diversity of investment that Mutual Fund offer. Thus, through the
study one would understand how a common man could fruitfully convert
a pittance into great penny by wisely investing into the right scheme
according to his risk taking abilities.

Objectives of the study:

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• To study the technical, procedural, legal dimensions of the New Fund
Offer.
• To examine briefly the organizational structure, communication
network, resource requirements to launch a new fund
• To study a sample of application drawn from Indiabulls Mutual Fund.
• The returns profile of the Indiabulls mutual funds.
• The various occupational performances towards mutual funds.
• The performance of income groups.
• Analysis of customer’s preference towards various funds depending
on income.

The aim of growth funds is to provide capital appreciation

over the medium to long- term. Such schemes normally invest a major
part of their corpus in equities. Such funds have comparatively high risks.
These schemes provide different options to the investors like dividend
option, capital appreciation, etc. and the investors may choose an option
depending on their preferences. The investors must indicate the option in
the application form. The mutual funds also allow the investors to change
the options at a later date. Growth schemes are good for investors having
a long-term outlook seeking appreciation over a period of time.

Scope of the study:

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• The new fund is planned and sources from where it should be
collected and where the amount should be invested is planned by the
AMC.

• The investors who are willing to invest in a particular fund deposit the
amount they plan to invest in the bank as directed by the AMC.

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

like fidelity investments.

• Emphasis on better corporate governance.

Limitations of Study:

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• Analysis of the applications is carried out by taking the
applications from Indiabulls equity fund. The data available is
therefore restricted by the design of the application
• The inspection of applications is done on the basis of a sample of
120 applications. Though the sample is drawn randomly, the
possibility of sampling fluctuations affecting the findings cannot be
ruled out.
• Numerical data like number of applications received, total
subscription amount received, statement of accounts, investor
details, etc are not available and therefore a description of these
aspects is given.
• New Fund Offer process may not be same for all mutual funds that
are released. It may differ from one fund to other depending upon
the size like the no. of applications received, subscription amount
received, etc.

Introduction to Indiabulls:

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 Indiabulls is India’s leading Financial and Real Estate Company
with a wide presence throughout India. They ensure convenience and
reliability in all their products and services. Indiabulls has over 640
branches all over India. The customers of Indiabulls are more than
4,50,000 which covers from a wide range of financial services and
products from securities, derivatives trading, depositary services, research
& advisory services, consumer secured & unsecured credit, loan against
shares and mortgage & housing finance. The company employs around
4000 Relationship managers who help the clients to satisfy their
customized financial goals. Indiabulls entered the Real Estate business in
the year 2005 with its group of companies. Large scale projects worth
several hundred million dollars are evaluated by them.

Indiabulls Financial Services Ltd is listed on the National Stock

Exchange (NSE), Bombay Stock Exchange (BSE) and Luxembourg
Stock Exchange. The market capitalization of Indiabulls is around USD
2500 million (29thDecember, 2006). Consolidated net worth of the group
is around USD 700 million. Indiabulls and its group companies have
attracted USD 500 million of equity capital in Foreign Direct Investment
(FDI) since March 2000. Some of the large shareholders of Indiabulls are
the largest financial institutions of the world such as Fidelity Funds,
Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.

Indiabulls is India's leading Financial Services and Real Estate

Company with a pan India presence. We offer ease. Convenience and
reliability in our entire product from securities to consumer finance,
mortgage to real estate development.

Indiabulls Financial Services Ltd. offers securities, consumer

finance, mortgages, real estate, and internet trading and equity analysis.

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Its list of shareholders includes Fidelity Funds, Goldman Sachs, Merrill
Lynch, Morgan Stanley and Farallon Capital.

The company is a member of National Stock Exchange, Bombay

Stock Exchange and Luxembourg Stock Exchange. It has forged alliance
with Farallon Capital Management LLC, a US based investment firm, and
launched FDI in Indian real estate.

Indiabulls Financial Services Ltd. is a learning place. It enriches

the experience and awareness of its employees. It grooms its people on
various parameters such as quality, competence and efficacy. It supports
them to meet the company targets.

The Indiabulls Group is one of the top 15 business houses in the

country with businesses spanning Real Estate, Infrastructure, Financial
Services, Retail, Multiplex and Power Sector.

Indiabulls Securities Ltd. one of India's leading Capital Market

Companies, with a Pan Indian presence, is looking for cutting edge
personnel for our national operations.

The company became heavily dependent on its e-broking business

for survival. The odds were against them. There was no money available
from the private equity investors at any valuation.

The core promoters of the company had little experience of

broking. To add to it, the market was hit by a scam. They also had their
share of price to pay and lessons to learn.

It was difficult to retain people. Although devastating for morale,

but not surprising, most market observers had written them off. There
was a core group who never lost hope. They cut all possible costs and
worked on a bare bones structure. They survived against all odds and
started capturing market share. The company rose from strength to

31
strength to become the leading corporate agent in life insurance and
among the top retail players in mutual fund and broking space.

Indiabulls Financial Services Limited, together with its properties,

operates as a financial services company in India. Its offers brokerage and
consumer financing services.

The company provides securities brokerage services, including

equities, commodities, wholesale debt, futures, and options; depositary
services; research services; insurance, initial public offering (IPO), and
mutual fund distribution; consumer finance, including secured and
unsecured personal loans; commercial vehicle and tractor financing; loan
against property and housing loans; retail IPO financing; loans against
shares; and commercial credit to small and medium scale enterprises.

Indiabulls Financial Services offers services through its branch

offices, call centers, and the Internet. As of March 31, 2007, it operated
approximately 680 branches in 201 cities in India. The company was
founded in 2000 and is headquartered in New Delhi, India.

Growth of Indiabulls:

Year 2000-01:

One of India’s first trading platforms was set up by Indiabulls

Financial Services Ltd. with the development of an in-house team.

Year 2001-03:

32
 The service offered by Indiabulls was increased to include Equity,
F&O, Wholesale Debt, Mutual fund, IPO Financing/Distribution and
Equity Research.

Year 2003-04:

In this particular year Indiabulls ventured into Distribution and

Commodities Trading business.

Year 2004-05:

• This was one of the most important years in the history of Indiabulls.
In this year:
• Indiabulls came out with its initial public offer (IPO) in September
2004.
• Indiabulls started its Consumer Finance business.
• Indiabulls entered the Indian Real Estate market and became the first
company to bring FDI in Indian Real Estate.
• Indiabulls won bids for landmark properties in Mumbai.
Year 2005-06:
In this year the company acquired over 115 acres of land in
Sonepat for residential home site development. The world renowned
investment banks like Merrill Lynch and Goldman Sachs increased their
shareholding in Indiabulls.

It also became a market leader in securities brokerage industry,

with around 31% share in Online Trading. The world’s largest hedge
fund, Farallon Capital and its affiliates committed Rs. 2000 million for
Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls
Housing Finance Ltd. In the same year, the Steel Tycoon Mr. L N Mittal
promoted LNM India Internet venture Ltd. acquired 8.2% stake in
Indiabulls Credit Services Ltd.

33
Year 2006-07:

In this year, Indiabulls Financial Services Ltd. was included in the

prestigious Morgan Stanley Capital International Index (MSCI).
Indiabulls Financial Services Ltd. was benefited with the Farallon Capital
agreeing to invest Rs. 6,440 million in it. The company also received an
“in principle approval” from Government of India for development of
multi product SEZ in the state of Maharashtra. Indiabulls Financial
Services Ltd acquired 100% of the equity share capital of Noble Realtors
Pvt. Ltd. Noble Realtors is a Company engaged in the business of
construction and development of real estate projects. Indiabulls Real
Estate Business was demerged to become a separate entity called
Indiabulls Real Estate Ltd. The Board of Indiabulls Financial Services
Ltd., Resolved to Amalgamate Indiabulls Credit Services Ltd and
demerge Indiabulls Securities Limited. Indiabulls Financial Services Ltd

THE BOARD OF DIRECTORS:

• Sameer Gehlaut Chairman and CEO

• Gagan Banga Executive Director
• Rajiv Rattan CEO
• Shamsher Singh Director
• Aishwarya Katoch Director
• Karan Singh Director
• Prem Prakash Mirdha Director
• Saurabh K Mittal Director
• Amit Jain Company Secretary

34
 MANAGEMENT TEAM:

• Sangeeta mukherjee – HR-Manager,

• Mogis ahmed-Relationship manager,
• Udesh jha-Director,
• Ishwar Singh-Associate vice president(National Head
Administration),
• Wilson D’silva-Group Head-Recruitments,
• Rana Dutt-Vice President
• Sachin Bhatia-Manager

 Organization Structure- Board of Directors:

35
RM/SR
AR
Deale
Support
Sales
Senior
Regional
Back
Local
Branch Vice
Manager
M
Function
System
MrPresident
Manager
Compliance
Office
Senior Sales
Executive
Officer
Manager

36
• Trading Products of Indiabulls Securities:

Intraday
Margin
Cash bulls
India
Account
Trading
Securities
Trading Products

Indiabulls Securities provide three products for trading. They are

✔ Cash Account
✔ Intraday Account
✔ Margin Trading (Mantra)

37
Cash Account: It provides the client to buy 4 times of cash balance in his
trading account.

Intraday Product: It provides the client to buy 8 times of his cash

balance in the trading account.

Mantra Account: Also called as margin trading, is a special account to

buy on leverage for a longer duration.

Indian financial service:

India Bulls Financial Services is one of India’s leading and fastest

growing financial services firms. It is a major player in the capital
markets dealing with securities broking, margin lending, depository
services, equity research services, and commodities trading. It also
provides credit services like loan against shares, mortgage and consumer
finance. It is constantly tapping new business areas to drive growth.

India Bulls Financial Services Ltd. (IBFSL) established one of the

first in-house developed trading platforms in India. It expanded its service
offerings to include Equity, F&O, wholesale Debt, Mutual fund, IPO
distribution and Equity Research. It ventured into Insurance distribution
and commodities trading. It has always focused on brand building and the
franchise model for expanding its business. It came out fwith its Initial
Public Offer (IPO) in September 2004 and it gradually emerged as a
market leader in securities brokerage industry with 43% of online share
trading. In the financial year 2006-07 it was included in the prestigious
Morgan Stanley Capital International Index (MSCI).

India Bulls Financial Services Ltd has given us an opportunity to

do an internship project for the company. The goals of this project have
been clearly defined. The various goals are as follows

38
 Client acquisition
 Revenue generation
 Mapping the Risk Profile of Clients
 Coordination with the back office
 Client servicing and Retention
 Understanding the Media Sector
 Studying the patterns of the derivatives market.
Change is occurring at an accelerating rate; today is not like
yesterday, and tomorrow will be different from today. For Businesses,
change is the only constant. Firms that do not change and adjust
themselves to the market trends will go out of business in no time.
Continuing today’s strategy is risky; so is turning to a new strategy.
Therefore, tomorrow’s successful companies will have to heed three
certainties:

 Global forces will continue to affect everyone’s business and

personal life.
 Technology will continue to advance and amaze us.
 There will be a continuing push toward deregulation of the
economic sector.
These three developments globalization, technological advances,
and deregulation spell endless opportunities. Globalization is
characterized by the increases in the flow of goods and services, capital,
technology and information, as well as the mobility of individuals across
borders. In simple terms it is the integration of one country with the rest
of the world in all economic spheres. The process of globalization can be
seen in terms of trade in goods and services, trade in finance and Foreign
Direct Investment. Since 1990, India’s financial system has become more
exposed to the global bonding of the financial, IT and

39
telecommunications industries whose linkages keep widening, deepening
and growing.

India’s fitful ambivalent attempts at privatization and opening to

private participation in the provision of infrastructure services have also
contributed to reciprocal intrusions with the global financial system
impinging on India’s capital markets and vice-versa.

The dotcom and telecom bubbles have burst, but the financial
connections they created have remained intact. One outcome has been the
creeping but relentless internationalization of India’s financial system,
regardless of domestic popular or political preferences. The choice of a
sheltered domestically protected alternative to a globally connected
financial system no longer exists.

Indiabulls Financial Services Ltd. was incorporated in the year

2005.The Auditors of Indiabulls Financial Services Ltd. are Deloitte,
Haskins & Sells. The main activity of this company is in relation to
securities and stock brokerage. It was also responsible for setting up one
of India’s first trading platforms.

The subsidiaries of Indiabulls Financial Services Ltd. include:

• Indiabulls Capital Services Ltd.

• Indiabulls Commodities Pvt. Ltd.
• Indiabulls Credit Services Ltd.
• Indiabulls Finance Co. Pvt. Ltd
• Indiabulls Housing Finance Ltd.
• Indiabulls Insurance Advisors Pvt. Ltd.
• Indiabulls Resources Ltd.
• Indiabulls Securities Ltd.

40
The Bankers of Indiabulls Financial Services Ltd. are as follows:

✔ ABN-Amro Bank
✔ Andhra Bank
✔ Bank of Maharashtra
✔ Bank of Rajasthan Ltd.
✔ Canara Bank
✔ Centurion Bank of Punjab Ltd.
✔ Citibank
✔ Corporation Bank
✔ Dena Bank
✔ HDFC Bank Ltd
✔ HSBC Ltd.
✔ ICICI Bank Ltd.
✔ IDBI Ltd
✔ Industrial Bank Ltd.
✔ ING Vysya Bank Ltd
✔ Karnataka Bank
✔ LKB Ltd
✔ Punjab National Bank
✔ Standard Chartered Bank
✔ State Bank Of India
✔ Syndicate Bank
✔ Union Bank Of India
✔ UTI Bank Ltd.

41
✔ Yes Bank Ltd.

ABOUT INDIABULLS:

Indiabulls is India’s leading Financial Services and Real Estate

Company having over 640 branches all over India. Indiabulls serves the
financial needs of more than 4,50,000 customers with its wide range of
financial services and products from securities, derivatives trading,
depositary services, research & advisory services, consumer secured &
unsecured credit, loan against shares and mortgage & housing finance.
With around 4000 Relationship Managers, Indiabulls helps its clients to
satisfy their customized financial goals. Indiabulls through its group
companies has entered Indian Real Estate business in 2005. It is currently
evaluating several large-scale projects worth several hundred million
dollars.

Indiabulls Financial Services Ltd is listed on the National Stock

Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange.
The market capitalization of Indiabulls is around USD 3,330 million
(30th September 2007). Consolidated net worth of the group is around
USD 950 million (30th September 2007). Indiabulls and its group
companies have attracted more than USD 800 million of equity capital in
Foreign Direct Investment (FDI) since March 2000. Some of the large
shareholders of Indiabulls are the largest financial institutions of the
world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan
Stanley and Farallon Capital.

Business of the company has grown in leaps and bounds since its
inception. Revenue of the company grew at a CAGR of 159% from FY03

42
to FY07. During the same period, profits of the company grew at a
CAGR of 184%.

Indiabulls became the first company to bring FDI in Indian Real

Estate through a JV with Farallon Capital Management LLC, a respected
US based investment firm. Indiabulls has demonstrated deep
understanding and commitment to Indian Real Estate market by winning
competitive bids for landmark properties in Mumbai and Delhi.

Indiabulls became the first company to bring FDI in Indian Real

Estate through a JV with Farallon Capital Management LLC, a respected
US based investment firm.

Indiabulls has demonstrated deep understanding and commitment

to Indian Real Estate market by winning competitive bids for landmark
properties in Mumbai and Delhi With a market value of Rs 29,000 crore
and a net worth of Rs 8,000 crore, the eight-year-old Indiabulls group has
sky-high ambitions. Property development and consumer finance are the
current thrust areas. Retailing, insurance, banking, mutual funds, power
and telecom are on the cards. Chairman Sameer Gehlaut (34) and Co-
founder Rajiv Rattan (35) are in build-up mode, but are the foundations
strong enough?

February 2000: On a wintry morning in London, four gentlemen

get into a huddle at the headquarters of Mittal Steel (now Arcelor-Mittal),
the world’s largest steel manufacturer. It’s biting cold outside, but inside
an air of warm optimism prevails.

Sameer Gehlaut and Saurabh Mittal, two of the co-founders of

Indian stock broking upstart Indiabulls Financial Services Ltd (IBFSL),
are in the last lap of negotiations for angel funding from steel baron
Lakshmi N. Mittal (no relation to Saurabh Mittal).

43
 Present at the meeting are Mittal’s son, Aditya Mittal, then Vice
Chairman on the board of directors of LNM Holdings, and Rishi Khosla,
Mittal’s fund manager. The three promoters of Indiabulls (the third is
Rajiv Rattan), all alumni of IIT Delhi, had mandated a Mumbai-based
investment bank, Avendus Advisors, to scout around for an investor.

Gaurav Deepak, cofounder of Avendus, stumbles upon Khosla,

who is sniffing for potential growth stories across the globe. Aditya
Mittal and Gehlaut, from Mumbai, begin negotiations on the phone.
Mittal obviously liked what he heard. The numbers—an investment of $1
million at Rs 5 per share—are agreed upon telephonically. The deal is
signed in London.
It’s an investment Mittal won’t forget in a hurry. For one, it was his
first in India. More importantly, it’s yielded him returns of a phenomenal
100 times. ‘Of all our global investments, Indiabulls has given us the
highest return,” beams Khosla. Mittal was back seven years later to put
more money into the Indiabulls group.
The difference? He was now investing at not Rs 5 per share but at
Rs 531 per share (via an issue of global depository receipts, or GDR’s).
Mittal today has a net worth of Rs 1,200 crore in the group by virtue of
LNM India Internet Ventures’ 1.85 per cent in flagship IBFSL and 1.60
per cent in a recently de-merged property developer, IBREL. In addition,
the global metals magnate has committed Rs 120 crore to a multi-project
special economic zone (SEZ) that IBREL is putting up at Raigad in
Maharashtra.

Mittal is just one investor—albeit the one with the highest profile
for whom Indiabulls has created mind-boggling wealth. Others like hedge

44
fund giant Farallon, which invested $1.5 million at Rs 25 per share in
2004 (just before the company’s initial public offering, or IPO), and
Transatlantic Corporation, a fund that is promoted by Madrid-based
Harish Fabiani, which put in $2 million along with Mittal, are just two
other financial investors that made a killing in a relatively short span of
time. Most image} Prominent foreign institutional investors (FIIs) like
Deutsche Bank, Citigroup, Merrill Lynch, Goldman Sachs, Morgan
Stanley and Fidelity have also picked up stakes in the two listed
companies. And of course, along with these financial investors, the
promoters themselves have raked in the moolah. Consider: Since listing
on the stock exchanges in September 2004 at a price of Rs 25, Indiabulls
has appreciated some 60 times.
Two years ago, the group’s market cap was a little under Rs 3,000
crore. Today, the net worth of the three founders itself, by virtue of their
collective 27 per cent holding in Indiabulls Financial Services and 24 per
cent holding in Indiabulls Real Estate, is two times that figure. The
group’s market cap as of last fortnight? Rs 29,000 crore, which pitchforks
it into the top 20 business conglomerates in India, by market value
Beyond Brok Gehlaut is now set to create more value by taking the
securities business out of IBFSL and spinning it off into a separate
company, Indiabulls Securities Ltd (ISL). IBFSL will focus on businesses
like personal loans, loans against property, home loans, lending to small
& medium enterprises and used commercial vehicle loans. “The
consumer finance business is 10 times the size of broking.

If corporate growth is expected at 15 per cent, financial services

will grow at 30 per cent. And in the next 10 years we will grow 10 times
in the consumer finance business from $3 billion to $30 billion (in market
cap),” says Gehlaut, who after working with petroleum and energy giant

45
Halliburton in the US came to India to start a mining and earth moving
business. In October 1999, along with Rattan and Mittal, Gehlaut started
Indiabulls after acquiring a Delhi brokerage.Analysts tracking the group
expect these three companies to rack up total sales of roughly Rs 3,600
crore by the year ending March 2008, with profits of around Rs 1,500
crore and a net worth of a little over Rs 10,000 crore.

That would be a mind-boggling growth of 228 per cent in profits

(at the group level) over the previous year. Significantly, broking, the
business that Indiabulls started out with, will account for just 10 per cent
of revenues.

That’s not bad going at all for an eight-year-young upstart. “We

were extremely lucky to be at the forefront of the India growth story. We
did not have much clarity when we started with the broking business.
However, as we went about penetrating the retail market, we realized
there was huge untapped potential in the consumer finance and real estate
businesses,” says the 34-year-old Gehlaut. In real estate, IBREL has put
together a land bank of 4,000 acres, at an acquisition cost of over Rs
2,250 crore. That makes it the country’s third-largest property developer,
after DLF and Unitech—again, not bad for a company that came into
being only six months ago.

Gagan Banga:
To be sure, though, it isn’t just retail that’s on the drawing board of
Indiabulls’s corporate office in South Mumbai (the company will soon
move to the top three floors of the 25-storey commercial complex it is

46
developing in central Mumbai on the land where Jupiter Mills once stood;
Indiabulls had acquired the mill for Rs 400 crore).

Last fortnight, the top brass revealed to BT a clutch of proposed

ventures. These include plugging gaps in the financial services portfolio.
A foray into life insurance via a wholly owned subsidiary (although a
foreign partner is also being mulled), a mutual fund, and a credit cards
business are on the cards. Regulatory approvals are pending for all these
ventures. Indiabulls is also keen to merge with an existing bank by
swapping shares, rather than applying for a new licenses or throwing its
hat into the ring whenever a bank is put under moratorium by the Reserve
Bank—the company had earlier unsuccessfully bid for United Western
Bank.

Divyesh Shah:
Outside of financial services, Indiabulls will be one of the many
firms keen to redevelop the slum of Dharavi. It also has telecom in its
sights—it has applied for licenses for 22 circles, although operating these
circles will be a strategic partner. For its Nashik SEZ, Indiabulls has also
lined up a 500 MW power plant. For all these new ventures, the group
will invest a little over Rs 4,500 crore over the next couple of years.

Such aggression, such risk taking, such haste have not been heard
of in a long time—certainly not from an eight-year-young wannabe
mega-corp. Are Gehlaut and company for real, and are they here to stay?
These are questions that sections of the market have been pondering for
some time now. Competitors who’ve been around for decades privately
wonder how Indiabulls has been able to grow at such a heady pace; others
can’t hide their awe about the group’s marquee of investors. Blame it on

47
envy or competitive rivalry, but most of Indiabulls’ competitors in the
broking space have few kind words for them—all of them in anonymous
whispers, needless to say.
The charges range from an expertise in “managing the
environment” to trading with investor money, without their knowledge.
Says the promoter of a Mumbai brokerage: “At times they’ve got away
with murder (figuratively, of course) courtesy their financial muscle
power and close proximity to 10 Janpath (the residence of Sonia Gandhi,
President of the Congress party and Chairperson of the ruling UPA).”
Adds a fund manager: “Corporate governance levels are very low at the
group. I wouldn’t touch the stocks with a barge pole.”The company top
brass was apparently able to convince SEBI that the IPO shares heaped in
their accounts were those of clients.
Rashesh Shah:
As one market man points out: “The day after the order was passed
the doors of SEBI were opened as early as 6:30 in the morning for them.”
This proves that their connections with people in power are adequate to
override the regulators, say the let’s move on to the run-ins with SEBI.

Consider the first one, during the penny stock scandal of 2005,
when micro-cap stocks in the B2, S and Z categories were rigged up to
ridiculous levels. SEBI came down on Indiabulls, amongst other
brokerages, for contributing to the increase in turnover in a few penny
stocks. This in turn could be construed as price manipulation by these
brokerages. Indiabulls’ defense has been that it is not possible to keep a
tab on such rogue clients, and the contribution to turnover from such
stocks was a minuscule part of total turnover. However, since that scandal

48
Indiabulls decided not to trade ever in such stocks; today they restrict
themselves only to the large and mid caps in the A and B1 groups.

Road Ahead:

Clearly, Gehlaut believes in being proactive in protecting the firm,

with the benefit of hindsight. Consider, for instance, the charge of playing
around with the portfolio of retail investors without their knowledge. No
action was taken against Indiabulls but the dirt has stuck. Now, to counter
such negative perceptions, the company records every single call that
comes into its 400 broking branches nationwide.

“Some 6,000 lines are recorded and archived daily. It’s an

expensive solution, which costs Rs 10 lakh per day,” says Gagan Banga,
CEO, Indiabulls Credit Services. Shrugs Gehlaut. “Broking is a thankless
business.” With new ventures likes consumer finance and real estate,
broking has been relegated to the backburner. But he says he won’t let go
of it, and the leadership status that he claims, with a 6 per cent market
share. “It’s close to our hearts, it would be bad for the morale of the army
if we lose on our home turf,” adds the Chairman.

In the IPO scam, Indiabulls officials explain that they arranged

meetings in Kolkata between Sebi officials and 230 of the 559 clients
from which it had received credits in its accounts. They also claim to
have taken them to the residences of 30-40 of the clients.

As for Mittal and the Farallon connection, Rattan and Gehlaut

rubbish the link, although agreeing that Mittal’s presence in the US
financial markets provides a huge leg-up when it comes to raising funds
from international investors.

The clamour in some nooks of Dalal Street notwithstanding, there

are those who admire Indiabulls for the fire in their belly, their
entrepreneurial skills and their execution capabilities. Says Rashesh Shah,
CEO & Managing Director, Edelweiss Securities, a Mumbai based
49
investment bank: “They entered the market when competition in retail
broking was low. Retail broking is a high-risk, high-reward segment and
they were aggressive in tapping that sector. Remember this was at a time
when small players were shutting shop as they couldn’t come to terms
with the sea change in the broking environment following the closure of
regional stock exchanges, the abolition of badla (an indigenous form of
carry-forward trading) and the introduction of screen-based trading. They
saw the opportunity and capitalized by investing heavily in setting up
broking facilities and that has paid off.” Adds Ambareesh Baliga, Vice
President, and Karvy Stock Broking: “Since the beginning they had
strong system and processes in place. Their impressive back office
operations provide them with an edge over other brokerages.”

Research Methodology:

Research methodology is a way to systematically solve the

research problem. it may be understood as a science of study how
research is done scientifically. We can say that research methodology has
many dimensions and research methods constitute a part of the research
methodology. Research methodology consists of two kinds of data viz.
primary and secondary data.

To fulfill the objective of the study both primary and secondary

data has been collected. Primary data is the data collected specifically for
the study. Data is collected directly from people and organizations via
questionnaires or surveys before being analyzed to reach conclusions
concerning the issues covered in the questionnaire or survey.

Data Collection:

50
Primary data: Primary data consists of the data which is collected by
the researcher first hand. We collect primary data during the course of
doing experiments in an experimental research but in case we do research
of the descriptive type and perform surveys, whether sample surveys or
census surveys, then we can obtain primary data either through
observation or through direct communication with respondents in one
form or another or through personal interviews.

In this study primary data was collected through interaction with

staff of Indiabulls Securities Ltd. and the application forms of Indiabulls
equity fund received by Indiabulls.

In direct contact with the people and taking their response through
questionnaires.

Observation method: The information is collected by the investigator

from own direct observations without asking from the responded as called
as observation method.

Interview method: The interview method of collected data involves

presentation of oral-verbal stimuli and reply in terms of oral-verbal
responses. This method can be used through personal interviews and, if
possible, through telephone interviews.

Questionnaire method: The questionnaire method a set of questions will

be prepare by the researcher and those questions will be printed on a
paper and that printed questionnaire will be send to the respondent to fill
it and send back to the researcher, in this method the respondent has to
fill the questions with his or her own hand writing.

Secondary data: Secondary data means data that are already available
that is they refer to the data which have already been collected and
analyzed by someone else. When the researcher utilizes secondary data
then he has to look into various sources form where he can obtain them.
Secondary data consists of the published information of the organization.
51
This study is mainly based on the secondary data, as all the information
required for the purpose of analysis is available in the form of printed
material. Sometimes the first had information was also used in order to
get the clarification about exactness of the techniques used by the
company for evaluating the inventory position.

Secondary data is the data collected previously by someone else for

some other purpose which can be analyzed and interpreted according to
requirements. For example, sources of secondary data are government
publications, newspapers, worldwide web etc.

In this study the Secondary data is mainly taken from

• The company’s training material.

• Reconciliation statements.
• Other documents generated within the organization

Information collected through bank journals, Fact Sheets, Internet, Asset

Management Company.

TECHNIQUES APPLIED:

Net asset value:

As you must have noticed, we always talk about ’units’ in a mutual

fund and not money itself. A unit is basic measure of investment n a
mutual fund.

Each scheme / plan will have a different market value is called the
Net asset value or simply NAV. Since market value of the underlying
securities changes every day, NAV of a scheme also varies on a day to
day basis.

NAV = (Total assets – Total liabilities) / Number of units

52
1. Are you interested in Mutual Funds:

Particulars Yes No Total

No. of applicants 84 36 120
% of applicants 70 30 100

Interpretation:

From the sampling of 100 people 70 percentage of people are

really interested in mutual funds.

2. What is Your Occupation:

53
Particulars Private Government Business Retired Total
Employee Employee Person
No. of 36 30 12 42 120
applicants
% of 30 25 10 35 100
applicants

Interpretation:

Here Number of Retired employees are investing more as they are

Concerns about their future.

3. In Which Type of Mutual Fund Do You Like to Invest

Particulars Open ended Close ended Total

No. of applicants 90 30 120
% of applicants 75 25 100

54
 Interpretation:
Here open ended schemes are more flexible compare to close
so Many people are interested into open ended schemes.

4. Had You Invested In Any Other Mutual Funds

Particulars Reliance JM Fidelity HSBC Total

Mutual Financial Mutual
Funds fund
No. of 12 12 12 84 120
applicants
% of 10 10 10 70 100
applicants

Interpretation:
As people are specialized in market more the investors they
all are Investing in HSBC if not in UTI because HSBC is the
world’s local bank and international old more than 200 year old
company.

55
5. Which Type of Fund Allocation Do You Like

Particulars 100% 80%Equity 70%Equity 20% 100% Total

Equity &20%Debt Debt & 10% Money Debt
Market
No. of 7 55 40 18 120
applicants
% of 5.67 46 33.33 15 100
applicants

Interpretation:
Here many investors are love to invest in 80% equity and 20%
fund Allocation scheme.

6. In Which of the UTI Scheme You Have Invested

56
Particulars UTI UTI UTI long term None Total
wealth infrastructure advantage
builder advantage fund fund
fund
No. of 34 65 12 9 120
applicants
% of 28.5 54 10 7.5 100
applicants

Interpretation:
Here the investors are likely to invest in infrastructure advantage
Fund as this sector is in a booming stage.

7. What Percent of Return Do You Expect

Particulars 10-20 21-30 31-40 Doubling Total

your
amount
No. of 18 24 12 66 120
applicants
% of applicants 15 20 10 55 100

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 Interpretation:
Here Number of people likes to double their amount.

8. Are You Satisfied With the Returns of Which UTI is Giving

Particulars Yes No Con not say Total

No. of applicants 54 42 24 120
% of applicants 45 35 20 100

Interpretation:
The above chart is clearly saying that today according to
market Situation many people are quite satisfied with the return
they are getting.

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9. Do You Advice People To Invest In Mutual Funds

Particulars Yes No Con not say Total

No. of applicants 36 42 42 120
% of applicants 30 35 35 100

Interpretation:
As mutual funds is the subject to market so people generally
does not Like to give advice to others as it is a risky business.

10. Occupation Profile of Applicants:

Particulars No.of % of applicants

applicants
Business 34 28.33
Service 46 38.33

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Student 2 1.66
Professional 4 3.33
Retired 7 5.83
Housewife 23 19.16
Others 5 4.16
Total 120 100

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 Interpretation:

Majority of the applicants are from services personnel at 38.33%,

next comes business People are 28.33%. The housewife occupy 3rd
highest at 19.16%. It is found that professionals and retired are at the
lowest.

11. Status:

a) Residential status of individual applicants:

Particulars Resident NRI Total

No. of applicants 116 4 120

% of applicants 96.66 3.34 100

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 Interpretation:

It can be observed from the table and the chart that the majority of
applicants are resident individuals constituting 96.66% the applicants and
remaining 3.34% are the Non-resident Indians.

b) Status of non-individuals:
Particulars Partnership AOP/BOI Trust HUF Fall’ Banks
s
No. of applicants 12 24 0 48 12 0
% of applicants 10 20 0 40 10 0

Particulars Company Society Fl SME Others Total

No. of applicants 0 6 0 18 0 120
% of applicants 0 5 0 15 0 100

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 Interpretation:

In the non-individuals category HUF occupied the highest at 40%

and next 20% is for AOP/BOI and also SME is 15%. In others category
10% is found and all other non-individual entities have recorded zero
applications.

12. Age profile of the applicants:

Particulars Below 18 18-30 31-60 Above 60 Total

No. of applicants 0 30 72 18 120
% of applicants 0 25 60 15 100

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 Interpretation:

The age profile of the applicants shows that the majority of the
applicants fall into the age Group 31-60 years and the percentage of them
being 60. This is followed by the age Group 18-30 years and 15% of the
applicants are above 60 years.

13. Investment profile of the applicants:

Particulars 5000- 25001- 50001- Above Total

25000 50000 100000 100000

No. of 78 32 4 6 120
applicants
% of 65 26.67 3.33 5 100
applicants

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 Interpretation:

Amount of investment is high at 65% in the range 5000-25000 and it

is very low at 3.33% in 50001-100000.

14. Scheme profile of applicants:

Particulars Growth Bonus Dividend Dividend Total

option option reinvestment payout
No. of 59 4 37 20 120
applicants
% of 49.16 3.33 30.85 16.66 100
applicants

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Interpretation:

Majority of the applicants opted the growth option is 49.16% and

the option of dividend reinvestment is 30.85%. This means that 80% of
the applicants are not investing for income sake rather they look at the
accumulation of profits.

15.Analysis of mode of payment:

Particulars Cheque DD Total

No. of applicants 119 1 120
% of applicants 99 1 100

Interpretation:
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 The mode of payment reflects upon the quality of applicants. On an
average 99% have paid through cheques and therefore the NFO is able to
attract good quality retail investors.

16. Analysis of type of account:

Particulars SB Current Total

No. of 119 1 120
applicants
% of applicants 99 1 100

Interpretation:

Majority of the payments have been made from Savings Bank

account (SB) with 99%.

17. Gender profile of the applicants:

Particulars Male Female Total

No. of applicants 90 30 120

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% of applicants 75 25 100

Interpretation:

The female participation in the NFO is low at 25%. The male

applicants are very high at 75% as is not normally found in found in
institutional investments.

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 18. Geographical distribution of applicants:

Particulars Andhra Bihar Chandigarh Delhi Gujarat Karnataka

Prades
h
No. of 12 3 3 15 12 3
applicants
% of 10 2.5 2.5 12.5 10 2.5
applicants

Particular Keral Madhy Maharashtr Rajastha Punja Uttar

s a a a n b Prades
h
Prades
h
No. of 3 3 48 3 3 3
applicants

% of 2.5 2.5 40 2.5 2.5 2.5

applicants

Particulars Tamilnadu West Bengal Others Total

No. of applicants 3 3 3 120
% of applicants 2.5 2.5 2.5 100

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Interpretation:

A predominant feature is that 40% of the applications are from

Maharashtra and next highest 12.5% is registered for Delhi and next
highest 12% is registered for Andhra Pradesh.

FINDINGS :

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• The New Fund Offer is found to be a complex activity calling for
creating an organization pooling the knowledge and expertise of
people in different areas.
• The SEBI regulations governing New Fund Offer are
comprehensive and protect investor's interest at each level.
• Different funds have been designing different forms of applications
for New Fund Offer.

An analysis of sample of applications revealed the following

➢ Majority applicants prefer to hold the units individually.

➢ Majority of the applicants are in service.
➢ NRI s share is about 4% of the total.
➢ More than 2/3 rd of the applicants are HUF s.
➢ The model age group is 31-60.
➢ The most common investment amount is 5000-25000.
➢ About half of the applicants prefer Growth option.
➢ Almost all applicants make the payments by cheques.
➢ No. of retired employees are investing more as they are concerns
about their future.
➢ Majority the applicants are male, and.
➢ Majority applications are from state of Maharashtra.
➢ No. of applicants interested the open ended schemes because the
open ended schemes do not have a fixed maturity period.
➢ No. of people likes to double their amounts.
➢ Majority of the payments have been made from savings bank
account (SB) with 99%.

SUGGESTIONS:

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• Different funds have been using different forms of applications. A
standardized form of application maybe designed by the competent
authority and should be made mandatory for all funds to use the
standard application form.

• The NFO process is very complex and there is a need to simplify

the process by eliminating certain unnecessary steps in the process
i.e. instead of carrying out audit for three times and appropriate
internal check system maybe devised to keep the errors within the
tolerance limits.

• The application from institutional investors and foreign

institutional investors are to be encouraged through a package of
incentives.

• The participation of senior citizens in the NFO s may be

encouraged as they are likely to hold more surpluses compared to
others.

• The holding of units in joint names shall be encouraged.

• There is a need to investigate the reasons for HUF s occupying

more than 2/3rd share in the non-individual applications as it’s not

a body corporate.
• A savings from all channels of India / World are to be tapped by
the NFO rather than one or two states applying for a loin share of
the option.

QUESTIONAIRE:

1. Are You Interested in Mutual Funds

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 (A) Yes (B) No

(From the sampling of 100 people 70 percentage of people are really

interested in mutual funds.)

2. What is Your Age Group

(A) 25-35 (B) 35-45 (C) 45-55 (D) 55-65

(From the above chart we can understand the age group 55-65 people are
more investing in to the mutual funds).

3. What is Your Occupation

(A) Private Employee (B) Government Employee

(C) Business Person (D) Retired

(Here Number of Retired employees are investing more as they are

Concerns about their future).

4. In Which Type of Mutual Fund Do You Like to Invest

(A) Close Ended (B) Open Ended

(Here open ended schemes are more flexible compare to close so

Many people are interested into open ended schemes).

5. What Percent of Return Do You Expect

(A) 10-15 B) 20-25 (C) 30-40 (D) Doubling Your Amount

(Here Number of people likes to double their amount).

6. Which Type of Fund Allocation Do You Like

(A) 100 Percent Equity

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(B) 80 Percent Equity & 20 Percent Debt

(C) 70 Percent Equity 20 Percent Debt & 10 Percent Money Market

(D) 100 Percent Debt

(Here many investors are love to invest in 80% equity and 20%
fund Allocation scheme).

7. In Which of the UTI Scheme You Have Invested

(A) UTI wealth builder fund (B) UTI infrastructure advantage fund

(C) UTI long term advantage fund (D) None

(Here the investors are likely to invest in infrastructure advantage Fund as

this sector is in a booming stage.)

8. Are You Satisfied With the Returns of Which UTI is Giving

(A) Yes (B) No (C) Cannot Say

(The above chart is clearly saying that today according to market

Situation many people are quite satisfied with the return they are getting.)

9. Had You Invested In Any Other Mutual Funds

(A) Reliance Mutual Funds (B) J m Financial

(C) Fidelity Mutual Funds (D) HSBC

(As people are specialized in market more the investors they all are
Investing in HSBC if not in UTI because HSBC is the world’s local bank
and international old more than 200 year old company)

10.Do You Advice People To Invest In Mutual Funds

(A) Yes (B) No (C) Cannot Say

NOTE:
74
 As mutual funds is the subject to market so people generally does
not Like to give advice to others as it is a risky business.

11. Occupation Profile of Applicants

(A) Business (B) Service (C) Student (D) Professional

(E) Retired (F) Housewife (G) Others

12. Age profile of the applicants

(A) Below 18 (B) 18-30 (C) 31-60 (D) Above 60

13. Investment profile of the applicants

(A) 5000-25000 (B) 25001-50000 (C) 50001-100000 (D) Above 100000

14. Scheme profile of applicants

(A) Growth option (B) Bonus option

(C) Dividend reinvestment (D) Dividend

15. Analysis of type of account

(A) Cheque (B) DD

16. Analysis of type of account:

(A) SB (B) Current

17. Gender profile of the applicants

(A) Male (B) Female

BIBILOGRAPHY:

Web Sites:

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• www.Indiabulls.com

• www.sebi.com

• www.amfiindia.com

Books Referred:

1. Mutual Funds in India

Marketing Strategies and Investment Practices
2nd Edition By H.Sadhak

2. How Mutual Fund Work

By Albert J. Fredman, Russ Wiles 97th Edition.

3. Investment Manageent By V.AAvadhani

4. Indian Mutual Funds A Guide for Industry Professionals &

Intelligent Investors By Sundar Sankaran

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