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Investors preferences towards Mutual Funds of Kotak

1.1 GENERAL INTRODUCTION

Mutual fund is a pool of funds which is divided into units of equal value and sold to investing public and the funds so collected are utilized for collective investments in various capitals and money market instrument. In todays market people invest money to gain more. So when they take into account, they mostly look out for Investment Company where they can get more income.

Investment companies can be classified into closed-end and open-end investment companies. Closed-end is when it is readily transferable in the market. Open-end funds sell their own shares to investors and ready to buy back their old shares. If we talk about the investment options today, in India we have so many investment companies like UTI, LIC etc, all have their own special ways of servicing the customers. The investors also feel that they are worth to be the part of that company. These days people mainly look for avoiding tax so normally they look out for some investments which can help them in doing so. When it comes to this point of view, people mainly look out for mutual fund.

Mutual fund is a trust at law; it is a special type of managed, pooled portfolio financial company or financial service organization that sells shares/units/stocks in itself, to the public to obtain its resources and it invests the savings so mobilized or pooled in a large, diversified, & sound portfolio of equity shares, bonds, money market instruments etc., Redeemable trust certificates are sold to investors at net asset value (NAV) plus a small commission. All interest/dividend and principal repayments are distributed to the holders of the certificates.

Investors preferences towards Mutual Funds of Kotak

1.2 THEORETICAL BACKGROUND

Meaning of Mutual Funds

Mutual fund is a pool of funds which is divided into units of equal value and sold to investing public and the funds so collected are utilized for collective investment in various capital and money market instrument. Investment is a commitment of a persons funds to derive future income in the form of interest, dividends, rent, premiums, pension benefits or the appreciation of the value of their principal capital. Investments have a return but there can be no return without risk.

Definitions Different persons in different words have defined mutual fund. The SEBI (MF) Regulations, 1993 defines mutual fund as A fund established in the form of a trust by a sponsor to raise money by the trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations. Investment is the allocation of monetary resources to assets that are expected to yield some gain or positive return over a given period of time. These assets range from safe investments to risky investments. Investments in this form are also called Financial Investments.

Investors preferences towards Mutual Funds of Kotak

Characteristics of MF

A mutual fund actually belongs to the investors who have pooled their funds. The ownership of the MF is in the hands of the investors. A MF is managed by investment professionals and other service providers, who earn a fee for their services from the fund. The pool of funds is invested in a portfolio of marketable investment. The value of the portfolio is updated every day. The investors share in the fund is denominated by units. The value of the units changes with change in the portfolios value, every day. The value of one unit of investment is called as the net assets value or NAV. The investment portfolio of the Mutual fund is vested according to the stated Investment objectives of the fund.

Investment Company A company or trust that uses its capital to invest in other companies. There are two principal types closed-ended and the open-ended. Shares in closed-ended investment companies, some of which are listed on the New York Stock Exchange are readily transferable in the open market and are bought and sold like other shares. Open-ended funds sell their own shares to investors, stand ready to buy back their old shares and are not listed. These funds are so called because their capitalization is not fixed; they issue more shares as people want them.

Investors preferences towards Mutual Funds of Kotak

Fig.1.1 Concept of Mutual Fund Industry

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.

Investors preferences towards Mutual Funds of Kotak

CONSTITUENTS OF MUTUAL FUND There are many entities involved and the diagram below illustrates the constitut ion of a mutual fund: Fig.1.2 Constituents of Mutual Fund Industry

Formation process starts from sponsor {the investment advisor or manager}. Sponsor selects & appoints the Board of Trustees. Trustees again hire or contract a separate AMC that is run by professional managers. The AMC conducts the necessary research & based on it, manages the fund or portfolio. It is responsible for floating, managing, redeeming the schemes; it also handles the administrative chares. It receives the fees for the services rendered by it. The custodian is responsible for co-ordination with brokers, the actual transfer & storage of stocks, & handling the property of the trust.

Investors preferences towards Mutual Funds of Kotak


Finally the unit holders are investors from who a pool of money is collected & invested according to the stated investment objectives. Mutual fund investors are like share holders & they own the fund. They are neither lenders nor the deposit holders in the fund. Unlike a holder of stock of company, unit holders have no voting rights.

Organization of a Mutual Fund All mutual funds comprise four constituents Sponsors, Trustees, Asset Management Company (AMC) and Custodians. 1. Sponsors: The sponsors initiate the idea to set up a mutual fund. It could be a registered company, scheduled bank or financial institution. A sponsor has to satisfy certain conditions, such as capital, record (at least five years operation in financial services), de-fault free dealings and general reputation of fairness. The sponsors appoint the Trustee, AMC and Custodian. Once the AMC is formed, the sponsor is just a stakeholder.

2. Trust/ Board of Trustees: Trustees hold a fiduciary responsibility towards unit holders by protecting their interests. Trustees float and market schemes, and secure necessary approvals. They check if the AMCs investments are within well-defined limits, whether the funds assets are protected, and also ensure that unit holders get their due returns. They also review any due diligence by the AMC. For major decisions concerning the fund, they have to take the unit holders consent. They submit reports every six months to SEBI; investors get an annual report. Trustees are paid annually out of the funds assets 0.5 percent of the weekly net asset value.

Investors preferences towards Mutual Funds of Kotak

3. Fund Managers/ AMC: They are the ones who manage money of the investors. An AMC takes decisions, compensates investors through dividends, maintains proper accounting and information for pricing of units, calculates the NAV, and provides information on listed schemes. It also exercises due diligence on investments, and submits quarterly reports to the trustees. A funds AMC can neither act for any other fund nor undertake any business other than asset management. Its net worth should not fall below Rs. 10 crore. And, its fee should not exceed 1.25 percent if collections are below Rs. 100 crore and 1 percent if collections are above Rs. 100 crore. SEBI can pull up an AMC if it deviates from its prescribed role.

4. Custodian: Often an independent organization, it takes custody of securities and other assets of mutual fund. Its responsibilities include receipt and delivery of securities, collecting income-distributing dividends, safekeeping of the units and segregating assets and settlements between schemes. Their charges range between 0.15-0.20 percent of the net value of the holding. Custodians can service more than one fund.

Investors preferences towards Mutual Funds of Kotak

Investment Alternatives I. Direct Investment Alternatives A. Fixed Principal Investments i. ii. iii. iv. v. Cash Savings account Savings Certificate Government Bonds Corporate Bonds and Debentures

B. Variable Principle Securities i. ii. Equity Shares Convertible Debentures or Preference Securities

C. Non-Security Investments i. ii. iii. iv. v. Real Estate Mortgages Commodities Business Ventures Art, Antiques and Other Valuables

II. Indirect Investment Alternatives A. Pension Fund B. Provident Fund C. Insurance D. Investment Companies E. Unit Trust of India and Other Trust Funds F. Mutual Funds

Investors preferences towards Mutual Funds of Kotak

1.3 A comparison of different investment options with respect to their Performance is as shown in the following table.

Options Equity FI Bond Debentures Company FD PPF LIC Gold Real Estate Mutual Fund Bank Deposit

Returns High Moderate Moderate Moderate Moderate Low Moderate High High Low

Safety Low High Moderate Low High High High Moderate High High

Volatility High Moderate Moderate Low Low Low Moderate High Moderate Low

Liquidity High/Low Moderate Low Low Moderate Low Moderate Low High High

Convenience Moderate High Low Moderate High Moderate Low Low High High

Financial Institutions:

Investors preferences towards Mutual Funds of Kotak

Financial institutions are business organizations that act as mobilizes & depositors of savings & purveyors of credit or finance. Financial Institutions are engaged in these activities

Financing by way of loans, advances, and so on any activity except its own. Acquisition of shares/ stocks/ bonds/ debentures/ securities Hire- purchase Any class of insurance, stock- broking, etc. Chit funds and Collection of money by way of subscription/ sale of units or other instruments/ any other manner and their disbursement.

Fig 1.4. Typical Financial System

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Investors preferences towards Mutual Funds of Kotak Financial System

Financial Institutions

Financial Services

Financial Markets

Financial Instruments (Claims, assets,

Regulator y

Intermediaries

Nonintermediaries

Others

Primary

Secondary

Banking

Nonbanking

Short term

Medium term

Long term

Organized

Unorganized

Primary

Secondary

Capital Market LEGAL & REGULATORY FRAME WORK:

Money Market

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Investors preferences towards Mutual Funds of Kotak


Mutual funds are regulated by the SEBI (Mutual Fund) Regulations 1996. SEBI is the regulator of all funds except off share funds. Where as Bank-sponsored mutual funds are jointly regulated jointly by SEBI & RBI.

RBI also regulates money market & Government. Securities Markets, in which mutual funds invest. Since the AMC & Trustee Company is Companies, they are regulated by the department of Company affairs. They have to send periodic reports to the Registrar of the Company (ROC) & the Company Law Board (CLB).

Regulatory institutions: These institutions regulate Indian financial system. The major regulatory arms of the Government of India are Reserve Bank of India (RBI) Securities Exchange Board of India (SEBI) and Association of Mutual Fund Industry (AMFI)

Fig.1.5. The Structure of Mutual Fund Industry

Regulatory Bodies
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Investors preferences towards Mutual Funds of Kotak


RBI AMFI

SEBI

Mutual Funds

Sponsor

Trustee

AMC

Custodian

Investor

Public Sector Funds

Private Sector Funds

UTI

Bank Sponsored

Financial Institutions Sponsored Schemes

Domestic

Offshore

Open ended

Closed ended

Growth Funds

Income Funds

Balanced Funds

Sect oral Funds

Special purpose Funds

Tax saving Funds

THE RESERVE BANK OF INDIA (RBI):

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Investors preferences towards Mutual Funds of Kotak


The RBI as the central bank of the country is the center of the Indian financial and monetary system. As the apex institution it has been guiding monitoring, regulating controlling and promoting the destiny of the Indian Financial System since its inception. It started functioning from April 1, 1935 on the terms of the reserve Bank of India Act 1934. It was a shareholders institution till January 1949, after which it become a state-owned institution under the reserve Bank (transfer to public ownership) of India Act, 1948.

FUNCTIONS OF RBI

F U N C T I O N S

Central banking functions

Supervisory functions Promotional functions Monetary planning and control system

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

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Investors preferences towards Mutual Funds of Kotak

The SEBI was established on April.12.1982 through an administrative order, but it became a statutory and really powerful organization only since 1992. SEBI was set up on 21st February.1992 through an ordinance issued on 30th January.1992. The SEBI Act on 4th April.1992 replaced the ordinance. The SEBI is under the overall control of the ministry of Finance, and it has head office at Mumbai. It has now become a very important constituent of the financial regulatory framework in India.

OBJECTIVES:

To regulate stock exchanges & securities industry to promote their orderly functioning. To protect the interest of investors so that there is a steady flow of savings in to the capital market and educating individual investors. To prevent trading malpractices and aims at achieving a balance between selfregulation by securities industry and its statutory regulation.

ASSOCIATION OF MUTUAL FUND INDUSTRY (AMFI)

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Investors preferences towards Mutual Funds of Kotak


AMFI is an Industry Association. AMFI is not yet the Self Regulatory Organization (SRO), though SEBI consults AMFI on a number of issues. AMFI can only issue guidelines. The objectives of AMFI are To define and maintain high professional and ethical standards in all areas of operation of mutual fund industry To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all matters concerning the mutual fund industry. To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry. To undertake nation wide investor awareness programme so as to promote proper understanding of the concept and working of mutual funds. To disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies.

INDIAN MUTUAL FUND INDUSTRY Structure Of The Indian Mutual Fund Industry
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Investors preferences towards Mutual Funds of Kotak


Structure wise Mutual fund Industry can be classified in to three categories: Unit Trust of India The Indian Mutual Fund industry is dominated by the Unit Trust of India, which has a total corpus of Rs.51,100 crore collected from over 20 million investors. The UTI has many funds/ schemes in all categories i.e. Equity, Balanced, Debt, Money Market etc. With some being open ended and some being closed ended. The Unit scheme 1964 commonly referred to as US 64, which is a balanced fund, it is the biggest scheme with a corpus of about 10,000 crore. Public Sector Mutual Funds The second largest categories of mutual funds are the ones floated by nationalized banks. Canbank asset management floated by Canara Bank and SBI Funds Management floated by State Bank of India are the largest of these. GIC AMC floated by General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones. The aggregate corpus of the funds managed by this category of AMCs is around Rs. 8,300 crore. Private Sector Mutual fund The third largest categories of mutual funds are the ones floated by the Private Sector Domestic Mutual funds and the Private Sector Foreign Mutual Funds. The largest of these in Private Sector Domestic Mutual funds are Cholamandalam Asset Management Co.Ltd., J.M Capital Management Co. Ltd., Escort Asset Management Ltd., Birla Sun Life Asset Management Pvt.Ltd., and in Private Sector Foreign Mutual Funds these are Alliance Capital Asset Management Pvt.Ltd., Prudential ICICI Management Co. Ltd. The aggregate corpus of the assets managed by this category of AMCs is about Rs. 42,200 crore .

History of the Indian Mutual Fund Industry

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Investors preferences towards Mutual Funds of Kotak


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. 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 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.

Amount Mobilised

199293

Assets Under

Mobilis ation as

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Investors preferences towards Mutual Funds of Kotak


% gross Management Domesti c Savings 11,057 1,964 13,021 UTI Public Sector Total 38,247 8,757 47,004 5.2% 0.9% 6.1% of

Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds.

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Investors preferences towards Mutual Funds of Kotak


Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386 schemes.

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Investors preferences towards Mutual Funds of Kotak


The graph indicates the growth of assets over the years. GROWTH IN ASSETS UNDER MANAGEMENT

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Investors preferences towards Mutual Funds of Kotak


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.

Let us discuss with the following table: Table 1.6 Aggregate deposits of Scheduled Banks in India (Rs.Crore) Month/Year Deposits Change in % over last yr Source RBI Mutual Fund AUMs Growth Month/Year MF AUM's Change in % over last yr Source - AMFI Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sep-04 4-Dec 68984 93717 26 83131 13 94017 12 75306 25 13762 6 45 15114 1 9 149300 1 Mar-98 Mar-00 Mar-01 Mar-02 605410 851593 989141 1131188 15 14 13 Mar-03 1280853 12 Mar04 Sep-04 1567251 18 4-Dec 1622579 3

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Investors preferences towards Mutual Funds of Kotak


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. Our saving rate is over 23%, highest in the world. Only We have approximately 29 mutual funds which is much less than 'B' and 'C' class cities are growing rapidly. Today most of the channelizing these savings in mutual funds sector is required. US having more than 800. There is a big scope for expansion. mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. advice. Mutual fund can penetrate rurals like the Indian insurance industry 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 with simple and limited products.

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Investors preferences towards Mutual Funds of Kotak


Global Scenario Of Mutual Fund Industry

The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S. Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital are non-bank mutual funds in this group. In the U.S. the total number of schemes is higher than that of the listed companies. Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway. In the U.S. about 9.7 million households will manage their assets online by the year 2003, such a facility is not yet of avail in India. On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets. 72% of the core customer base of mutual funds in the top 50-broking firms in the U.S. is expected to trade on-line by 2003.

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Investors preferences towards Mutual Funds of Kotak


ADVANTAGES OF MUTUAL FUNDS: If mutual funds are emerging as the favorite investment vehicle, it is because of the many advantages they have over other forms and avenues of investing, particularly for the investor who has limited resources available in terms of capital and ability to carry out detailed research and market monitoring. The following are the major advantages offered by mutual funds to all investors:

Portfolio diversification: Mutual Funds normally invest in a well-diversified portfolio or securities. Each investor in a fund is a part owner of all of the funds assets. This enables him to hold a diversified investment portfolio even with a small amount of investment that would otherwise require big capital.

Professional Management: Even if and investor has a big amount of capital available to him, he benefits from the professional management skills brought in the management of the investors portfolio. The investment management skills, along with the needed research into available investment options, ensure a much better return than what an investor can manage on his own. Few investors have the skills and resources of their own to succeed in todays fast moving, global and sophisticated markets.

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Investors preferences towards Mutual Funds of Kotak


Reduction/Diversification of Risk: An investor in a mutual fund acquires a diversified portfolio, no matter how small his investment. Diversification reduces the risk of loss, as compared to investing directly in one or two shares or debentures or other instruments. When and investor invests directly, all in the pool of funds with other investors, any loss on one or two securities is also shared with other investors. This risk reduction is one of the most important benefits of a collective investment vehicle like the mutual fund.

Reduction of transaction cost: What is true of risk is also true of the transaction costs. A direct investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund. He has the benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit passed on to its investors.

Liquidity: Often, investors hold shares or bonds they cannot directly, easily and quickly sell. Investment in a mutual fund, on the other hand, is more liquid. An investor can liquidate the investment, by selling the units to the fund if openend or selling them in the market if the fund is closed-end, and collect funds at the end of a period specified by the mutual fund or the stock market.

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Investors preferences towards Mutual Funds of Kotak


Convenience and Flexibility: Mutual Fund management companies offer many investor services that a direct market investor cannot get. Investors can easily transfer their holdings from one scheme to the other; get updated market information, and so on.

RISK FACTORS ASSOCIATED WITH MUTUAL FUNDS

Mutual funds & securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved. Past performance of the Sponsor or that of existing Schemes of the Fund does not indicate the future performance of the Schemes. As with any securities investment, the NAV of the Units issued under the scheme can go up or down depending on the factors and forces affecting the capital and money market. Tax laws may change, affecting the return on investment in Units.

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Investors preferences towards Mutual Funds of Kotak


TYPES OF MUTUAL FUND SCHEMES

I. Schemes according to Maturity Period: A mutual fund scheme can be classified into open-ended scheme or ended scheme depending on its maturity period. close-

i.

Open-ended Fund/ Scheme

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.

ii.

Close-ended Fund/ Scheme

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 funds 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.

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Investors preferences towards Mutual Funds of Kotak


II. Schemes according to Investment Objective: A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:

i.

Growth / Equity Oriented Scheme 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.

ii.

Income / Debt Oriented Scheme The aim of the income funds is to provide regular and steady investors. Such scheme generally invests 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. The NAVs of such funds are affected because of change in interest rates in the country.

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Investors preferences towards Mutual Funds of Kotak


iii. Balance Fund The aim of balance 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 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.

iv.

Gilt Fund These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as are the case with income or debt oriented schemes.

v.

Index Funds 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.

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Investors preferences towards Mutual Funds of Kotak


vi. Money-Market Mutual Funds These funds invest in highly liquid and safe securities like commercial paper, bankers acceptances, and certificates of deposits. Treasury bills etc., which are called money market instruments.

vii.

Tax Saving Schemes This 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. Investment made in Equity Linked Saving Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act 1961.

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Investors preferences towards Mutual Funds of Kotak 2.1 OBJECTIVES OF THE STUDY

1.

To track investors attitude, performance and behavior with respect to financial institutions and financial products.

2.

To find new and more effective ways of ensuring investor satisfaction and to find efficient ways of communicating it.

3.

To conduct the study with references to Kotak Mahindra products and the competitive scenario in which Kotak Mahindra operates.

4.

To study the structure of investment opportunities.

2.2 SCOPE OF THE STUDY

The study includes investors, financial institutions, investors who are interested in Kotak Mahindra Asset Management Companys mutual fund and also the individuals who are interested in the investment on the mutual fund. The individuals without investment are also included in the scope of the study.

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Investors preferences towards Mutual Funds of Kotak 2.3 STATEMENT OF THE PROBLEM

The investment objective of Kotak Mahindra Asset Management Co is to generate capital appreciation from a diversified portfolio of predominantly equity and equity related securities or securities issued by central and state government. Despite this objective, the reasons like mutual fund investments are subject to market risk, there is no assurance or guarantee that the objective of the scheme can be achieved and also the Net Asset Value (NAV) of the units can go up or down depending on factors affecting the capital and money market, many of the investors tend not to invest in the mutual fund investment.

2.4 OPERATIONAL DEFINITIONS OF CONCEPTS

NET ASSET VALUE (NAV): -

Net Asset Value (NAV) denotes the performance of particular scheme of a mutual fund Mutual Funds invest he money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day-to-day basis. The NAV per unit is market value of securities of scheme divided by the total number of units of the scheme on any particular date.

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Investors preferences towards Mutual Funds of Kotak


Formula of the calculation of Net Asset Value:

Market Value of Investments - Liabilities Net Asset Value = -------------------------------------------------------------No. of units Outstanding

However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit".

Asset Management Company (AMC)


Professional managers run an AMC. The AMC conducts the necessary research & based on it, manages the fund or portfolio. It is responsible for floating, managing, redeeming the schemes; it also handles the administrative chares. It receives the fees for the services rendered by it.

Risk
Risk may relate to loss of capital, delay in repayment of capital, non-payment of interest, or variability of returns.

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Investors preferences towards Mutual Funds of Kotak 2.5 RESEARCH METHODOLOGY

Primary Analytical Research Method was used for the study. Questionnaire was prepared and used for collecting the data about individual investors preference towards various investment avenues, their portfolio behaviors. The research required primary and secondary source of data. The primary data is obtained through structured questionnaires which were collected from Investors in Jayanagar Banks and Brokerage Offices such as Axis Bank, Reliance Money, Bajaj Capital etc,. Secondary Datas are the one which is collected from web site of Kotak Mahindra, investors and company records.

Sampling Design The Sampling technique used in this research is Convenient Judgment Sampling Method. Judgment Random Sampling, which by using the available information, concerning the population, attempts to design a more efficient sample. The study includes investors, financial institutions, investors who are interested in Kotak Mahindra Asset Management Companys mutual fund and also the individuals who are interested in the investment on the mutual fund. The individuals without investment are also included in the study.

Sample Size A sample size of 100 people was selected for the study. The sample for data collection was within the geographical boundaries of Bangalore City, Jayanagar.

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Investors preferences towards Mutual Funds of Kotak


Sources of Data Primary data was collected by Questionnaires Question schedules Interviews

Secondary data was collected from Fact Sheets of the Company Websites, newspapers and journals.

Period of Study The study was made during 1st January 2008 to 31st January 2008.

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Investors preferences towards Mutual Funds of Kotak 2.6 LIMITATIONS OF THE STUDY

1. A descriptive research was undertaken for the purpose of project. But descriptive research has its own limitations regarding the selection of sample size of sample unit. 2. Some of the data gathered from the mutual fund holders may not be reliable. 3. Time limit was also a constraint while conducting the study. So, the study does not give a picture of the whole market. 4. Time factor, as a period of one month, for gathering data is inadequate gamut of information needs to be synchronized to give much more view of the problems and prospects. 5. Detailed and depth research was not conducted due to financial factors. 6. The study curtails comparison as it was done only in one city i.e. Bangalore. 7. The information provided by the organizations was limited to a far extent due to drawbacks like competition. as the

comprehensive

37

Investors preferences towards Mutual Funds of Kotak 2.7 OVERVIEW OF THE REPORT

In Chapter 1 this report bring out the General Introduction and explains the theoretical background of the organization

Chapter 2 includes the Design of the study. It covers the objectives, scope, statement of the problem, Review of literature, operational definitions, Research Methodology, statement of hypothesis, sampling methods, Data Analysis tool, overview of the Report and the limitations.

Chapter 3 includes the profile of the organization, profile of the study unit, organizational chart and functional department of the organization.

Chapter 4 includes the analysis. It covers the Analysis & Interpretation

Chapter 5 includes the summary, which covers findings, contribution of the study, Suggestions, Conclusion, Questionnaire and Bibliography.

38

Investors preferences towards Mutual Funds of Kotak 3.1 PROFILE OF THE ORGANISATION

Corporate Profile Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates.

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has over 4 Lac investors in various schemes. KMMF offers schemes catering to investors with varying risk - return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. KMMF has been registered with SEBI vide registration number MF/038/98/1 dated 23rd June 1998.

The sponsor company, Kotak Mahindra Finance Limited (KMFL), was converted into Kotak Mahindra Bank Limited (Kotak Bank) in March 2003 their being granted a Banking License by Reserve Bank of India. KMFL promoted by Mr. Uday S Kotak, Mr. S.A.A.Pinto and Kotak & Co., was incorporated on November 21, 1985, under the name Kotak Capital Management Finance Limited.

39

Investors preferences towards Mutual Funds of Kotak


In early 1986, the promoters were joined by Late Mr.Harish Mahindra and Mr. Anand G Mahindra and the Companys name was changed to Kotak Mahindra Finance Limited. Kotak & Co is a highly respected trading company of Mumbai, with international business. KMFL started with a capital base of Rs.30.88 lakhs. From being a provider of a single financial product, KMFL grew substantially during the seventeen years of its existence into a highly diversified financial services company and has now converted into a Bank. As on September 30, 2005, the net worth of Kotak Bank is around Rs. 800 crore and combined with its subsidiaries, the Group net worth (before minority interest) is around Rs. 2,000 crore. There are over 47,000 shareholders of Kotak Bank.

The Sponsor and its subsidiaries / associates offer wide ranging financial services such as loans, lease and hire purchase, consumer finance, home loans, commercial vehicles and car finance, investment banking, stock broking, primary market distribution of equity and debt products and life insurance. The group has offices in over 88 Indian cities and also present internationally in Mauritius, London, Dubai and New York. Kotak Mahindra (UK) Limited, an ultimate subsidiary of Kotak Bank, is the first company owned from India to be registered with the Financial Services Authority in UK. Kotak Mahindra Old Mutual Life Insurance Limited is a joint venture between Kotak Bank and Old Mutual Plc based in the UK and with large presence in the South African insurance market.

Some of the other subsidiaries of Kotak Bank are Kotak Mahindra Securities Limited, Kotak Mahindra Prime Limited, Kotak Mahindra International Limited, Kotak Mahindra Private-Equity Trustee Limited, Kotak Mahindra Investments Limited, Kotak Mahindra Inc., and Kotak Forex Brokerage Limited.The Sponsor has been consistently profitable and dividend paying company since inception. All group companies are professionally run companies, employing over 5,000 professional staff including CAs, MBAs and Engineers.

40

Investors preferences towards Mutual Funds of Kotak

Credit recognitions and awards :

NDTV AWARDS, 2006 LIPPER FUND AWARDS, 2006 ICRA AWARDS, 2006 ICRA MFR 1 (December 2004 & December 2005) OUTLOOK MONEY BEST WEALTH CREATOR DEBT 2003 CRISIL BEST FUND AWARD 2003

3.2 KOTAK MAHINDRA GROUP

41

Investors preferences towards Mutual Funds of Kotak

Kotak Mahindra is one of India's leading financial conglomerates, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the diverse financial needs of individuals and corporate. The group has a net worth of over Rs. 5,609 crore, employs around 17,100 people in its various businesses and has a distribution network of branches, franchisees, representative offices and satellite offices across 344 cities and towns in India and offices in New York, London, Dubai, Mauritius and Singapore. The Group services around 3.6 million customer accounts. The journey so far

42

Investors preferences towards Mutual Funds of Kotak Key group companies and their businesses

Kotak Mahindra Bank The Kotak Mahindra Group's flagship company, Kotak Mahindra Finance Ltd which was established in 1985, was converted into a bank- Kotak Mahindra Bank Ltd in March 2003 becoming the first Indian company to convert into a Bank. Its banking operations offer a central platform for customer relationships across the group's various businesses. The bank has presence in Commercial Vehicles, Retail Finance, Corporate Banking, Treasury and Housing Finance.

Kotak Mahindra Capital Company Kotak Mahindra Capital Company Limited (KMCC) is India's premier Investment Bank. KMCC's core business areas include Equity Issuances, Mergers & Acquisitions, Structured Finance and Advisory Services.

Kotak Securities Kotak Securities Ltd. is one of India's largest brokerage and securities distribution houses. Over the years, Kotak Securities has been one of the leading investment broking houses catering to the needs of both institutional and non-institutional investor categories with presence all over the country through franchisees and coordinators. Kotak Securities Ltd. offers online (through www.kotaksecurities.com) and offline services based on wellresearched expertise and financial products to non-institutional investors.

43

Investors preferences towards Mutual Funds of Kotak


Kotak Mahindra Prime Kotak Mahindra Prime Limited (KMP) (formerly known as Kotak Mahindra Primus Limited) has been formed with the objective of financing the retail and wholesale trade of passenger and multi utility vehicles in India. KMP offers customers retail finance for both new as well as used cars and wholesale finance to dealers in the automobile trade. KMP continues to be among the leading car finance companies in India.

Kotak Mahindra Asset Management Company Kotak Mahindra Asset Management Company Kotak Mahindra Asset Management Company (KMAMC), a subsidiary of Kotak Mahindra Bank, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). KMMF manages funds in excess of Rs 20,800 crore and offers schemes catering to investors with varying riskreturn profiles. It was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities.

Kotak Mahindra Old Mutual Life Insurance Limited Kotak Mahindra Old Mutual Life Insurance Limited is a joint venture between Kotak Mahindra Bank Ltd. and Old Mutual plc. Kotak Life Insurance helps customers to take important financial decisions at every stage in life by offering them a wide range of innovative life insurance products, to make them financially independent.

DIRECTORS TRUSTEE COMPANY

44

Investors preferences towards Mutual Funds of Kotak

Uday S. Kotak B.Com, MMS has been an Executive Vice Chairman and Managing Director of Kotak Mahindra Bank Limited (Formerly known as Kotak Mahindra Finance Limited) since August 1, 2002. Mr. Kotak is the principal founder and promoter of Kotak Mahindra Finance Ltd. He is responsible for the growth of Kotak Mahindra from a fledgling finance company in 1985 to a financial institution providing the full basket of financial services today. He serves as Chairman of the Board.

Mr. Amit Desai is a graduate in Commerce and Law from the Bombay University. He is an advocate and has about 20 years of experience in criminal, economic and revenue laws. Mr. Desai is associated with the Sponsor.

Mr. Girish Sharedalal is a graduate in Commerce and Arts and also a Fellow of the Institute of Chartered Accountants of India. Formerly a Senior Partner of Messrs Dalal, Desai and Kumana, a firm of Chartered Accountants, he has about 44 years of experience in the field of audit, taxation and management consultancy.

Mr. Tushar Mavani is a graduate in Commerce and Law from the Bombay University. He is a partner with Messrs Mulla & Mulla & Craigie Blunt & Caroe and has about 14 years of experience in the legal field.

45

Investors preferences towards Mutual Funds of Kotak


Mr. Anirudha Barwe is a postgraduate in Mathematics and also a Certified Associate of Indian Institute of Bankers,Mumbai. Mr. Barwe has about 43 years of experience in the field of banking and financial services. Mr. Barwe was actively associated with and responsible to a great extent for the success of the Resurgent India Bond issue of SBI. Mr. Barwe retired as the Managing Director of SBI Capital Markets Limited in October 1998. After retirement, Mr. Barwe worked with IDFC as Chief Financial Officer for 3 years.

Mr. Chandrashekhar Sathe is a graduate with B. Tech.(Chemical Engineering) from IIT, Mumbai. He has over 27 years' experience in Banking and Finance. He has been a part of the Senior Management team of the Kotak Mahindra Group since 1992 and was responsible for setting up the Fixed Income Securities capability of Kotak Mahindra Capital Company. Mr. Sathe is a widely consulted expert on Foreign Exchange and Money Markets in India and is a frequent contributor to financial newspapers, magazines and TV News channels. Mr. Sathe was the Chief Executive Officer of the AMC for the period, 1st April, 1998 to 30th November, 2001 and currently heads the Risk Management function at Kotak Mahindra Bank Limited. Mr. Sathe is associated with the Sponsor.

46

Investors preferences towards Mutual Funds of Kotak 3.3 SCHEME DETAILS OF KOTAK MAHINDRA

1. KOTAK 30

Objective: - The investment objective is to generate capital appreciation from a portfolio of predominantly equity and equity related securities with investment in, generally not more than 30 stock. Structure :Open Ended Equity Growth Scheme

Minimum investment:- Rs 5,000

2. KOTAK TECH

Objective: - The investment objective is to generate capital appreciation from a predominantly equity and equity related securities issued by multinational companies. Structure: - Open Ended Equity Growth Scheme. Minimum investment:- Rs 5,000

47

Investors preferences towards Mutual Funds of Kotak


3. KOTAK MNC

Objective: - The investment objective is to generate capital appreciation from a portfolio of predominantly equity and equity related securities issued by multinational companies. Structure: Open Ended Equity Growth Scheme

Minimum investment: - Rs 5,000

4. KOTAK BALANCE

Objective: -

The investment objective is to achieve growth by investing in Equity

and equity related instruments, balanced with income generation by Investing in debt and money market instruments Structure :Open Ended Balanced Scheme.

Minimum investment:- Rs 5,000

48

Investors preferences towards Mutual Funds of Kotak


5. KOTAK INCOME PLUS

Objective: - To enhance returns over a portfolio of debt instruments with a moderate exposure in Equity & Equity related instruments Structure:- Open Ended Income Scheme Minimum Investment: - Rs 5,000

6. KOTAK GILT

Objective: - To generate risk free returns through investments in sovereign Securities issued by the central government and / or a state in such securities Structure: Open Ended Dedicated Gilt Scheme government and / or reverse repos

Minimum Investment: - Savings & investment Plan; Rs 5,000 Serial Plans; Rs 10 lakhs

49

Investors preferences towards Mutual Funds of Kotak


7. KOTAK BOND

Objective: -

To create a portfolio of debt and money market instruments of

different maturities so as to spread the risk across a wide maturity Horizon & different kinds of issuers in the debt market Kotak Bond Short Term Plan To provide reasonable returns and high level of liquidity by investing in debt & money market instruments of different maturities, So as to spread the risk across different kinds of issuers in the debt market.

Structure: -

Open Ended Debt Scheme

Minimum Investment: - Deposit Plan Rs 5,000 Wholesale Plan: Rs 1 lakh Short Term Plan: Rs5, 000 Institutional Plan; Rs 1 crore

50

Investors preferences towards Mutual Funds of Kotak


8. KOTAK LIQUID

Objective; - To provide reasonable returns and high level of liquidity by across different kinds of Issuers in the debt markets Structure; - Open Ended Debt Scheme Minimum Investment: - Rs 5,000 Institutional plan: Rs 1 crore Institutional Premium Plan: Rs 20 crores

Investing in

debt and money market instruments of different Maturities so as to spread the risk

9. KOTAK FLOATER

Objective: - To reduce the interest rate risk associated with investments in fixed rate instruments by investing predominantly in floating rate securities, money market Instruments and using appropriate derivatives Structure: Open Ended Debt Scheme

Minimum Investment: Rs 5,000.

51

Investors preferences towards Mutual Funds of Kotak


10. KOTAK DYNAMIC INCOME

Objective: To maximize returns through an active management of a portfolio of debt and securities. Structure: Open Ended Debt Scheme

Minimum Investment: Rs 5,000

11. KOTAK GLOBAL INDIA Objective: To generate capital appreciation from a diversified portfolio of

predominantly equity and equity related securities issued by globally competitive Indian Companies.

Highlights Investment in a diversified equity portfolio of Globally Competitive Indian Companies. Tax advantage Recurring Investment Facility available during continuous offer. Redemption on all Working days.

3.4 FACILITIES PROVIDED BY KOTAK MAHINDRA


52

Investors preferences towards Mutual Funds of Kotak

1. Systematic Investment Plan (SIP):

Management of one's finances to attain a defined goal calls for a lot of discipline, many a times self-imposed. Our Systematic Investment Plan is a tool, which can help you, inject this discipline in your financial management efforts. Our Systematic Investment Plan (SIP) provides you the facility to periodically invest a fixed sum over any defined period of time (6 months or more) in a disciplined manner. SIPs help in arresting uncertainties associated with trying to time the market and thus, in the long term tends to iron out market fluctuations. It brings down your average cost of acquisition of units. As you would allocate a fixed sum every month, you would buy more units when the prices of our units are lower than when they are higher.

2. Systematic Withdrawal Plan (SWP):

Our Systematic Withdrawal Plan (SWP) is designed receive a regular stream of payouts in a defined frequency and to book profits periodically Through our SWP you can redeem defined sums at a pre-defined frequency by giving a one-time instruction to us. You may choose to regularly withdraw either a fixed sum or just the appreciation on your investments.

This facility caters to two segments of investor needs: 1) Investors wanting defined, regular funds inflow from their investments. 2) Investors interested in booking gains at a regular interval.

53

Investors preferences towards Mutual Funds of Kotak


3. Systematic Transfer Plan (STP):

Systematic Transfer Plan (SWP) caters a phased entry into the Equity markets rather than putting in all your money at one trench and to book profits from your equity holdings. Through our STP you can choose to switch your investments from one Kotak Mutual scheme to another at a predefined frequency by giving a one-time instruction to us. You also have a choice between switching a fixed sum or only the appreciation on your investments. You can choose to transfer either a fixed sum every defined period or only the appreciation on your investments over that period from one scheme to another. The later is helpful, where you do not want the transfer to disturb your capital contribution.

4. Direct Credit Facility: Our Direct Credit Facility comes automatically to you (unless you choose otherwise) if you hold an account with any of the 12 banks listed below: ABN AMRO Bank Citi Bank Centurion Bank of Punjab Deutsche Bank HSBC HDFC ICICI IDBI Bank Indusind Bank Kotak Mahindra Bank Standard Chartered UTI Bank

Direct Credit is safer, faster and convenient compared to the conventional cheque payout mechanism.

54

Investors preferences towards Mutual Funds of Kotak

5. ECS of Dividends: ECS (Electronic Clearing Service) is a Reserve Bank of India offering to facilitate, among others, faster and seamless payout of dividends directly into your bank account. ECS as a mechanism for payout of Dividends is faster, convenient, cost-effective and hassle-free. Besides, you don't run the risk of loss of dividend instruments in transit and the associated delays in obtaining a duplicate instrument. This facility is currently offered across all banks in over 48 locations.

6. Online Transactions Facility: Our Online Transactions Facility allows you to have instant access to your investments at any time from anywhere just at the click of a button. Here's a list of all facilities you can avail by signing in for our Online Transactions Facility: -Redemption. -Switch Over. -Account Statement.

55

Investors preferences towards Mutual Funds of Kotak

7. Email Communication: The world over, e-mail has been revolutionizing communication. No more need to have paper trails; e-mail makes communication real-time, easy to store and retrieve and cost-effective. You can now opt to receive all your communication from us over e-mail: - Account Statement for your investments -Transaction Confirmations -Daily NAVs and Dividend Updates -Market Reviews -Information on product launches, service initiatives, dividends, etc. -Annual Reports -Other Statutory Communication

8. SMS Services: With cell phones fast qualifying for an assured parking in every pocket, we could not resist allowing you that extra convenience to be in touch with your investments whenever you wish, wherever you are. Try our SMS facility to : -Access the latest NAVs and Dividends for our various schemes on SMS.

-Receive information on product launches, service initiatives, dividends, etc. on SMS. -Post your queries to our Dedicated Services Desk.

56

Investors preferences towards Mutual Funds of Kotak

9. Updates from Markets: Market Review-Weekly Market Review [ended 29th February 2008] Performance-Monthly Performance Snapshot [as on 31/12/2007] Half Yearly Accounts and Portfolio- March 2007&September 2007 Fact Sheet- Current Month, Yearly Fact Sheet KMAMC Annual Report-2006 - 2007 Credit Policy for 2007-08

57

Investors preferences towards Mutual Funds of Kotak

4.1 ANALYSIS AND INTERPRETATION

TABLE NO 2.1 TO SEE THE RESPONDENT IS AN INCOME TAX ASSESSEE.

Sl. No. 1 2

Attributes Yes No Total

No. of respondents 76 24 100

Percentage 76 24 100

Source: Primary Data Interpretation: It is clear from the table that out of 100 respondents, 76% of the respondents say that they are income tax assesses and the rest 24% say that they are not.

This is illustrated in the following graph.

58

Investors preferences towards Mutual Funds of Kotak

GRAPH NO.1 TO SEE THE RESPONDENT IS AN INCOME TAX ASSESSEE.

80 Percentage 60 40 20 0

76

24

Yes Attributes

No

Source: - Table No: 2.1

59

Investors preferences towards Mutual Funds of Kotak

TABLE NO 2.2. TO SEE WHETHER REPONDENTS INVEST FOR TAX EXEMPTION OR TAX SAVINGS

Sl. No. 1 2

Attributes Yes No Total

No. of respondents 70 30 100

Percentage 70 30 100

Source: Primary Data Interpretation: It is clear from the table that out of 100 respondents, 70% of the respondents say that they invest for tax exemption and the rest 30% say that they do not.

This is illustrated in the following graph.

60

Investors preferences towards Mutual Funds of Kotak

GRAPH NO 2. TO SEE WHETHER REPONDENTS INVEST FOR TAX EXEMPTION OR TAX SAVINGS

80 Percentage 60 40 20 0

70

30

Yes Attributes
Source: Table No: 2.2

No

61

Investors preferences towards Mutual Funds of Kotak


TABLE NO 2.3. INVESTMENT PREFERENCE OF RESPONDENTS

Sl. No. 1 2 3 4 5

Attributes Fixed Deposits Real Estate Insurance Mutual Fund Gold Total

No. of respondents 33 27 21 9 9 100

Percentage 33 27 21 9 9 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 33% of the respondents invest in fixed deposits, 27% invest in Real Estate, 21% in Insurance, 9% in Mutual Fund and the rest 9% say that they invest in gold.

This is illustrated in the following graph.

GRAPH NO 3. INVESTMENT PREFERENCE OF RESPONDENTS

62

Investors preferences towards Mutual Funds of Kotak

35 30 25 20 15 10 5 0

33 27 21 9 9

Percentage

In su ra nc e M ut ua lF un d

ep os its

st at e

Fi xe d

ea lE

Attributes

Source: Table No: 2.3

TABLE

NO

2.4

REASONS

OF

INVESTMENT

PREFERENCE

G ol d
OF
63

RESPONDENTS

Investors preferences towards Mutual Funds of Kotak


Sl. No. 1 2 3 4 5 Attributes Less Risk Good Returns Liquidity Assured Returns Other Reasons Total No. of respondents 28 21 12 36 3 100 Percentage 28 21 12 36 3 100

Source: Primary Data Interpretation: It is clear from the table that out of 100 respondents, 28% of the respondents prefer investment due to less risk, 21% due to good returns, 12% due to liquidity, 36% due to assured returns and the rest 3% do it due to other reasons.

This is illustrated in the following graph.

GRAPH

NO

4.

REASONS

OF

INVESTMENT

PREFERENCE

OF

RESPONDENTS

64

Investors preferences towards Mutual Funds of Kotak

40 35 30 25 20 15 10 5 0

36 28 21 12 3
Less Risk Good Returns Liquidity Assured Returns Other Reasons

Percentage

Attribute

Source: Table No: 2.4

TABLE NO 2.5. CURRENT INVESTMENT PORTFOLIO OF RESPONDENTS

Sl. No.

Attributes

No. of respondents

Percentage

65

Investors preferences towards Mutual Funds of Kotak


1 2 3 Govt securities and bonds Mutual funds & company FDs Equity Shares Total 61 18 21 100 61 18 21 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 61% of the respondents invest in Govt securities and bonds, 18% in Mutual funds and company fixed deposits and the rest 21% in equity shares.

This is illustrated in the following graph:

GRAPH NO 5. CURRENT INVESTMENT PORTFOLIO OF RESPONDENTS

66

Investors preferences towards Mutual Funds of Kotak

70 60 50 40 30 20 10 0

61

Percentage

18

21

Govt securities Mutual funds & Equity Shares and bonds company FDs Attributes

Source: Table No: 2.5

TABLE NO 2.6. NATURE OF INVESTMENT THAT THE RESPONDENTS LIKE

67

Investors preferences towards Mutual Funds of Kotak


Sl. No. 1 2 3 Attributes Steadily At average rate Fast Total No. of respondents 61 27 12 100 Percentage 61 27 12 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 61% of the respondents like their investment to grow steadily, 27% in an average rate and the rest 12% in a fast rate.

This is illustrated in the following graph.

GRAPH NO 6. NATURE OF INVESTMENT THAT THE RESPONDENTS LIKE

68

Investors preferences towards Mutual Funds of Kotak

70 60 50 40 30 20 10 0

61

Percentage

27 12

Steadily

At average rate Attributes

Fast

Source: Table No: 2.6

TABLE NO 2.7 PERCENTAGE OF INCOME THAT THE RESPONDENTS INVEST

69

Investors preferences towards Mutual Funds of Kotak

Sl. No. 1 2 3

Attributes 5% 5% - 10% More than 10% Total

No. of respondents 24 37 39 100

Percentage 24 37 39 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 24% of the respondents invest 5% of their total income, 37% invests 5-10% and the rest 39% invest more than 10%.

This is illustrated in the following graph.

GRAPH NO 7. PERCENTAGE OF INCOME THAT THE RESPONDENTS INVEST

70

Investors preferences towards Mutual Funds of Kotak

45 40 35 30 25 20 15 10 5 0

37

39

Percentage

24

5%

5% - 10% Attribute

More than 10%

Source: Table No: 2.7

TABLE NO 2.8 TO SEE WHETHER THE RESPONDENT IS AN INVESTOR OF MUTUAL FUND

Sl. No.

Attributes

No. of respondents

Percentage

71

Investors preferences towards Mutual Funds of Kotak


1 2 Yes No Total 27 73 100 27 73 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, only 27% of the respondents are investors of mutual funds and the rest 73% are not.

This is illustrated in the following graph.

GRAPH NO 8. TO SEE WHETHER THE RESPONDENT IS AN INVESTOR OF MUTUAL FUND

72

Investors preferences towards Mutual Funds of Kotak

80 70 60 Percentage 50 40 30 20 10 0 Yes Attribute


Source: Table: 2.8.

73

27

No

TABLE NO 2.9 REASONS FOR NOT INVESTING IN MUTUAL FUNDS

Sl. No. 1

Attributes Awareness

No. of respondents 15

Percentage 15

73

Investors preferences towards Mutual Funds of Kotak


2 3 Risky Returns not assured Total 58 27 100 58 27 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 15% of the respondents do not invest in mutual funds because of lack of awareness, 58% as it is risky and the rest 27% as the returns are not assured.

This is illustrated in the following graph.

GRAPH NO 9. REASONS FOR NOT INVESTING IN MUTUAL FUNDS

74

Investors preferences towards Mutual Funds of Kotak

70 60 Percentage 50 40 30 20 10 0 Awareness Risky Attribute


Source: Table No: 2.9

58

27 15

Returns not assured

TABLE NO 2.10 REASONS FOR INVESTING IN MUTUAL FUNDS

75

Investors preferences towards Mutual Funds of Kotak


Sl. No. 1 2 3 4 Attributes Less Risky Liquidity Professional Mgmt Fast Appreciation Total No. of respondents 21 30 24 25 100 Percentage 21 30 24 25 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 21% of the respondents feel that investing in mutual funds are less risky and hence they invest, 30% invest due to liquidity, 24% due to Professional management and the rest 25% due to fast appreciation.

This is illustrated in the following graph.

GRAPH NO 10. REASONS FOR INVESTING IN MUTUAL FUNDS

76

Investors preferences towards Mutual Funds of Kotak

35 30 25 20 15 10 5 0

30 21 24

Percentage

25

Le ss

Pr of es si

Attribute
Source: Table No: 2.10

TABLE NO 2.11 KIND OF MUTUAL FUND THAT THE RESPONDENTS PREFER


77

Fa st A

pp re ci at io n

R isk y

di ty

Li qu i

on al M

gm t

Investors preferences towards Mutual Funds of Kotak

Sl. No. 1 2

Attributes Open-ended Closed-ended Total

No. of respondents 57 43 100

Percentage 57 43 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 57% of the respondents prefer open-ended mutual funds and the rest 43% closed-ended ones.

This is illustrated in the following graph.

GRAPH NO 11. PREFER

KIND OF MUTUAL FUND THAT THE RESPONDENTS

78

Investors preferences towards Mutual Funds of Kotak

60 50 Percentage 40 30 20 10 0

57 43

Open-ended

Closed-ended Attributes

Source: Table No: 2.11

TABLE NO 2.12 TYPE OF SCHEME THE RESPONDENTS PREFER

Sl. No. 1 2 3

Attributes Equity Debit Balance Total

No. of respondents 49 42 9 100

Percentage 49 42 9 100
79

Investors preferences towards Mutual Funds of Kotak

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 49% of the respondents prefer equity type of scheme, 42% prefer debit type of scheme and the rest 9% due to balance type of scheme.

This is illustrated in the following graph.

GRAPH NO 12. TYPE OF SCHEME THE RESPONDENTS PREFER

80

Investors preferences towards Mutual Funds of Kotak

60 50 Percentage 40 30 20 10 0 Equity Debit Attributes


Source: Table No: 2.12

49 42

Balance

TABLE NO 2.13. THE PREFERENCE AMONG DIFFERENT MUTUAL FUNDS

81

Investors preferences towards Mutual Funds of Kotak


Sl. No. 1 2 3 4 5 Attributes UTI Kotak HDFC Birla Sun Life LIC Total No. of respondents 25 15 23 20 17 100 Percentage 25 15 23 20 17 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 15% of the respondents prefer UTI mutual funds, 15% prefer Kotak, 30% prefer HDFC, 19% Templeton and the rest 21% prefer LIC.

This is illustrated in the following graph.

GRAPH NO 13. THE PREFERENCE AMONG DIFFERENT MUTUAL FUNDS

82

Investors preferences towards Mutual Funds of Kotak

30 25 Percentage 20 15 10 5 0 UTI Kotak HDFC Birla Sun life Attributes LIC 15 25 23 20 17

Source: Table No: 2.13

TABLE NO 2.14 TO ANALYSE WHETHER THE RESPONDENT SEES THE BRAND NAME WHILE INVESTING

83

Investors preferences towards Mutual Funds of Kotak


Sl. No. 1 2 Attributes Yes No Total No. of respondents 94 06 100 Percentage 94 06 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 94% of the respondents see brand name while investing and the rest 6% are not.

This is illustrated in the following graph.

GRAPH NO 14. TO ANALYSE WHETHER THE RESPONDENT SEES THE BRAND NAME WHILE INVESTING

84

Investors preferences towards Mutual Funds of Kotak

100 90 80 70 60 50 40 30 20 10 0

94

Percentage

6 Yes Attribute No

Source: Table: 2.14

TABLE NO 2.15 IMMEDIATE REACTIONS IN CASE OF SUDDEN DIP IN STOCK MARKET

Sl. No.

Attributes

No. of respondents

Percentage

85

Investors preferences towards Mutual Funds of Kotak


1 2 3 Would withdraw the investment Would wait and watch Would invest more in it Total 39 55 6 100 39 55 6 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 39% of the respondents would withdraw the investment, 55% would wait and watch the show and the rest 6% say that they would invest more.

This is illustrated in the following graph.

GRAPH NO 15. IMMEDIATE REACTION IN CASE OF SUDDEN DIP IN STOCK MARKET

86

Investors preferences towards Mutual Funds of Kotak

60 50 Percentage 40 30 20 10 0 39

55

6 Would Would wait and Would invest withdraw the watch more in it investment Attributes

Source: Table No: 2.15

TABLE NO 2.16 TO KNOW THAT THE RESPONDENTS HAVE HEARD OF KOTAK MUTUAL FUND

87

Investors preferences towards Mutual Funds of Kotak


Sl. No. 1 2 Attributes Yes No Total No. of respondents 100 00 100 Percentage 100 00 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, all 100 respondents have heard of Kotak Mutual Fund.

This is illustrated in the following graph.

GRAPH NO 16. TO KNOW THAT THE RESPONDENTS HAVE HEARD OF KOTAK MUTUAL FUND

88

Investors preferences towards Mutual Funds of Kotak

120 100 Percentage 80 60 40 20 0 Yes Attribute


Source: Table: 2.16

100

100

0 No

TABLE NO 2.17 VIEWS ON KOTAK MF AND ITS SCHEMES

Sl. No. 1 2

Attributes Good Moderate

No. of respondents 25 49

Percentage 25 49
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Investors preferences towards Mutual Funds of Kotak


3 Not aware Total 26 100 26 100

Source: Primary Data

Interpretation: It is clear from the table that out of 100 respondents, 15% of the respondents view that Kotak MF is good, 36% feel that it is moderate and the rest 49% say that they are not aware.

This is illustrated in the following graph.

GRAPH NO 17. VIEWS ON KOTAK MF AND ITS SCHEMES

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Investors preferences towards Mutual Funds of Kotak

60 50 Percentage 40 30 20 10 0 Good Moderate Attributes Not aware 25 26 49

Source: Table No: 2.17

5.1 FINDINGS

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Investors preferences towards Mutual Funds of Kotak


Majority of the respondents are income tax assesses and invest for the purpose of Tax exemption or savings.. Most of the respondents prefer to invest in Fixed Deposits, Real Estate and Insurance because of less risk and assured returns. The investment portfolio of majority of the respondents is in govt securities and bonds. Though mutual funds exist in the market, the people who tend to invest in it is very low compared to other investments. The reason behind is the high risk factor involved with Mutual Funds. Majority of the people prefer open-ended equity scheme. Majority of Investors prefer brand name of the company and then invest in their schemes so UTI as gained more investors as risk is less and there is an assured return. If there is a sudden dip in Stock Market majority of Investors doesnt withdraw their money instead wait for some time. Among the surveyed Investors everyone has heard Kotak Mutual Fund and majority of them have rated Kotak Mutual Fund schemes as Moderate.

5.2 CONTRIBUTION OF THE STUDY

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Investors preferences towards Mutual Funds of Kotak


From this study the financial institutions/Banks can improve in some of the following fields of services and communications: -

1.

Help the financial institutions (KM) to provide goods and services in private

sector and convenience factor offered by the public sector. 2. Help local banks/small institutions to have big market share (i.e. banks or institutions which are mot easily accessible gets more preference even if it is a local bank with out much brand image.) 3. Helps the bank and institutions to provide E-banking facility more effective

and accurate towards investors or customers. 4. money. 5. Help KM to find out, is KM users are considering KM as one stop shop most of the time. Help KM to find out, in Kotak Mahindra product perceived as being value for

5.3 SUGGESTIONS

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Investors preferences towards Mutual Funds of Kotak


1. Proper care should be taken to give the correct guidance to the investors so that they will invest more. 2. Good campaigns can be arranged so that people will know more about Mutual

Funds and will tend to invest in it. 3. Nice advertisements can be entertained so that people will get interest in

Mutual Funds. 4. 5. Kotak can come up with good, attractive schemes for its investors. Nowadays Indian Mutual fund Industry is attracting more and more retail

investors because of economic stability and increasing growth rate, it leads to gradual increase in the stock market indices. 6. Interest rates are falling gradually and mutual fund industry is booming

because of this reason investors can move from Bank deposits to mutual funds so mutual fund organizations should bring new schemes to satisfy the investors. 7. Mutual fund schemes have not gained importance as there is a lack of

awareness about Mutual fund schemes so the executives of the organization should take certain steps to educate the investors.

5.4 CONCLUSION

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Investors preferences towards Mutual Funds of Kotak


The study Investors preferences towards Mutual Funds was carried out on behalf of Mutual Funds of Kotak Mahindra Asset Management Company Ltd. The data was collected from various sources and also through the tools like questionnaires and relevant interactions with concerned persons. The needs were identified in the form of findings and suitable suggestions were put forth in the form of recommendations to the concerned authorities for further discussions. A few recommendations have been considered for implementation. Mutual fund schemes are subject to market risk. On the basis of above statements it has proved higher the risk higher the return and lower the risk lower the return. Nowadays Mutual Fund schemes are increasing because of falling interest rates so the organization can provide further new schemes and attract the new customers. Investment in Mutual fund schemes gives diversified portfolio to investors. Nowadays Indian Mutual Fund industry is attracting more and more retail investors because of economic stability and increasing growth rate, it leads to gradual increase in the stock market Indices.

QUESTIONNAIRE ON INVESTORS PREFERENCES TOWARDS MUTUAL FUNDS WITH REFERENCE TO KOTAK MUTUAL FUND

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Investors preferences towards Mutual Funds of Kotak

Dear Sir/Madam, I, Hemanth.S, student of R.V.I.M, would like your kind attention for a few minutes to answer this questionnaire. This is part of a survey on Investors preference towards Mutual Funds with reference to Kotak (KMAMC) as a partial fulfillment of BBM course. Therefore, I kindly request you to fill the following questionnaire. The information provided by you will be used for academic purpose only & will be kept confidential.

1. Name 2. Age 3. Gender 4. Occupation

: : : : Male Business Housewife Service () () () Female Profession Students () Others () () ()

() 5. Annual Income : Below 100,000 200,001 to 300,000 500,001 & above 6. Number of dependents: () () () 100,001 to 200,000 300,001 to 500,000 () ()

Please put tick on your answers for the following questions


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Investors preferences towards Mutual Funds of Kotak


1. Are you an Income Tax Assesse? Yes No No

2. Are you investing for tax exemption or tax savings? Yes No 3. What kind of invest options you prefer? Fixed Deposit Real Estate Insurance Mutual Fund Gold 4. Why you prefer the above option? Less Risk Good Returns Liquidity Assured Returns Other Reasons 5. Your current investment portfolio includes majority of Govt. securities and Bonds Mutual funds & company fixed deposits Equity shares 6. You would like your investment to grow Steadily At average rate Fast

7. What percentage of your income do you invest?


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Investors preferences towards Mutual Funds of Kotak


Up to 5 % 5%--- 10% More than 10% 8. Are you an investor in mutual fund? Yes No 9. If answer is No, why you are not investing in mutual fund? Awareness Risky Returns not assured 10. If answer is Yes, why do you prefer mutual fund? Less risky Liquidity Professional mgt. Fast appreciation 11. What kind of mutual fund you prefer? Open- ended Closed-ended 12. What type of scheme do you prefer? Equity Debt Balance

13. If you are an investor of MF, which Company you prefer?


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Investors preferences towards Mutual Funds of Kotak


UTI Kotak HDFC Birla Sun Life LIC 14. While buying a Mutual Fund scheme do you see brand name? Yes No 15. How would you react if the Stock Market immediately dips? I would withdraw my money I would wait & watch I I would invest more in it.

16. Have you heard of Kotak mutual fund and its scheme? Yes No 17. Your views on Kotak mutual fund and its scheme? Good Moderate Not aware Thank you very much for your valuable time & co-operation.

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Investors preferences towards Mutual Funds of Kotak

BIBLIOGRAPHY Books Author Ronald J Jordan V K Bhalla By I.M. Pandey L M Bhole Preethi Singh Journals and Newspapers Business World Mint Financial Express Websites www.kotakmutual.com www.google.com www.sebi.com www.mutualfundsindia.com www.amfiindia.com www.wikipedia.org
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Book Management Investment Management Financial Management 7th Edition Financial Institutions and Markets Portfolio Management