1.

1) INTRODUCTION TO THE INDUSTRY

WHAT IS MUTUAL FUND?

“A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. 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:”

Pool their money with

Investors
Fund managers

Invest in

Passed back to

Returns Securities

“Mutual Funds are popular among all income levels. With a mutual fund, we get a
Generates
diversified basket of stocks managed by professionals”
These trusts are run by experienced Investment Managers who use their knowledge and
expertise to select individual securities, which are classified to form portfolios that meet
predetermined objectives and criteria.”
These portfolios are then sold to the public. They offer the investors the following main
services:
 Portfolio Diversification
 Marketability: A new financial asset is created that may be more easily marketable
than the underlying securities in the portfolio.

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HISTORY OF MUTUAL FUND
1963:”UTI is India’s first mutual fund.
1964: UTI launches US-64.
1971: UTI’s ULIP (Unit-Linked Insurance Plan) is second scheme to be Launched.
1986: UTI Master share, India’s first true ‘mutual fund’ scheme, launched.
1987: PSU banks and insurers allowed floating mutual funds; State Bank of India (SBI) first
off the blocks.
1992: The Harshad Mehta-fuelled bull market arouses middle-class interest in shares and
mutual funds.
1993: Private sector and foreign players allowed; Kothari Pioneer first private fund house to
start operations; SEBI set up to regulate industry.
1994: Morgan Stanley is the first foreign player.
1996: SEBI’s mutual fund rules and regulations, which forms the basis of most current laws,
come into force.
1998: UTI Master Index Fund is the country’s first index fund.
1999: The takeover of 20th Century AMC by Zurich Mutual Fund is the first acquisition in
the mutual fund industry.
2000: The industry’s assets under management crosses Rs 1, 00,000 crore.

2001: US-64 scam leads to UTI overhaul.

2002: UTI bifurcated, comes under SEBI purview; mutual fund distributors banned from
giving commissions to investors; floating rate funds and Foreign debt funds debut.

2003: AMFI certification made compulsory for new agents; fund of funds launched.

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

2
FIRST PHASE: 1964 – 87
Unit”Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by
the Reserve Bank of India and functioned under the regulatory and administrative control of
the Reserve Bank of India. 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 the 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 June1987
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.’

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 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.
”

3
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 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.”

TYPES OF MUTUAL FUND SCHEMES

Mutual fund schemes may be classified,on the basis of its structure and its investment
objective
MUTUAL FUND SCHEMES BY STRUCTURE
Open-ended Funds:
An open-end fund is one,that is available for subscription all through the year. These do not
have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value
("NAV") related prices. The key feature of open-end schemes is liquidity
Closed ended Funds:
A closed-end fund has a stipulated maturity period,which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can invest
in the scheme at the time of the initial public issue and thereafter they can buy or sell the
units of the scheme on the stock exchanges where they are listed. In order to provide an exit
route to the investors, some close-ended funds give an option of selling back,the units to the
Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate
that at least one of the two exit routes is provided to the investor.”
Interval Funds:
Interval funds combine the features of,open-ended and close-ended schemes. They are open
for sale or redemption during pre-determined intervals at NAV related prices.

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MUTUAL FUND SCHEMES BY INVESTMENT OBJECTIVES
Growth Funds:
The aim of growth funds,is to provide capital appreciation over the medium to long term.
Such schemes normally invest a majority of their corpus in equities. It has been proved that
returns from stocks, have outperformed most other kind of investments held over the long
term. Growth schemes are ideal for investors having a long term outlook seeking growth over
a period of time.’
Income Funds:
The aim of income funds,is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures and
government securities. Income Funds are ideal for capital stability and regular income.
Balanced Fund:
The aim of balanced funds-is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the
NAV of these schemes may not normally keep pace, or fall equally when the market falls.
These are ideal for investors looking for a combination of income and moderate growth.’
Money Market Funds:
The aim of money market funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer short-term instruments such as-
treasury bills,certificates of deposit, commercial paper and inter-bank call money. Returns on
these schemes may fluctuate depending upon the interest rates prevailing in the market. These
are ideal for Corporate and individual investors as a means to park their surplus funds for
short periods.

OTHER FUNDS

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.”

5
Industry Specific Schemes
Industry Specific Schemes,invest only in the industries specified in the offer document. The
investment of these funds is limited to specific industries like InfoTech, FMCG, and
Pharmaceuticals etc.’

Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50.
Sectoral Schemes

Sectoral Funds are those,which invest exclusively in a specified sector. This could be an
industry or a group of industries or various segments such as 'A' Group shares or initial public
offerings.’

ADVANTAGES OF MUTUAL FUND

There are numerous benefits of investing in mutual funds and one of the key reasons for its
phenomenal success in the developed markets like US and UK is the range of benefits they
offer, which are unmatched by most other investment avenues. We have explained the key
benefits in this section. The benefits have been broadly split into universal benefits,
applicable to all schemes and benefits applicable specifically to open-ended schemes.

6
1. AFFORDABILITY
A”mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the
investment objective of the scheme. An investor can buy in to a portfolio of equities, which
would otherwise be extremely expensive. Each unit holder thus gets an exposure to such
portfolios with an investment as modest as Rs.500/-. This amount today would get you less
than quarter of an Infosys share! Thus it would be affordable for an investor to build a
portfolio of investments through a mutual fund rather than investing directly in the stock
market.

2.DIVERSIFICATION
The”nuclear weapon in your arsenal for your fight against Risk. It simply means that you
must spread your investment across different securities (stocks, bonds, money market
instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information
technology etc.). This kind of a diversification may add to the stability of your returns, for
example during one period of time equities might underperform but bonds and money market
instruments might do well enough to offset the effect of a slump in the equity markets.
Similarly the information technology sector might be faring poorly but the auto and textile
sectors might do well and may protect your principal investment as well as help you meet
your return objectives.”

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 3.VARIETY
Mutual funds,offer a tremendous variety of schemes. This variety is beneficial in two ways:
first, it offers different types of schemes to investors with different needs and risk appetites;
Secondly, it offers an opportunity to an investor to invest sums across a variety of schemes,
both debt and equity.”

4.PROFESSIONAL MANAGEMENT
Qualified investment professionals,who seek to maximize returns and minimize risk monitor
investor's money. When you buy in to a mutual fund, you are handing your money to an
investment professional that has experience in making investment decisions. It is the Fund
Manager's job to (a) find the best securities for the fund, given the fund's stated investment
objectives; and (b) keep track of investments and changes in market conditions and adjust the
mix of the portfolio, as and when required.

5.TAX BENEFITS
Any,income distributed after March 31, 2002 will be subject to tax in the assessment of all
Unit holders. However, as a measure of concession to Unit holders of open-ended equity-
oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a
confessional rate of 10.5%. In case of Individuals and Hindu Undivided Families a deduction
unto Rs. 9,000 from the Total Income will be admissible in respect of income from
investments specified in Section 80L, including income from Units of the Mutual Fund. Units
of the schemes are not subject to Wealth-Tax and Gift-Tax.”

6.REGULATIONS
Securities Exchange Board of India (“SEBI”), the mutual funds regulator has clearly defined
rules, which govern mutual funds. These rules relate to the formation, administration and
management of mutual funds and also prescribe disclosure and accounting requirements.”

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DISADVANTAGES OF MUTUAL FUND
1. No assured returns and no protection of capital

If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not
offer assured returns and carry risk.

There”are strict norms for any fund that assures returns and it is now compulsory for funds to
establish that they have resources to back such assurances. This is because most closed-end
funds that assured returns in the early-nineties failed to stick to their assurances made at the
time of launch, resulting in losses to investors.”

2. Restrictive gains

Diversification helps, if risk minimization is your objective. However, the lack of investment
focus also means you gain less than if you had invested directly in a single security.”

INDUSTRY STRUCTURE

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 STRUCTURE OF MUTUAL FUND

The Fund Sponsor

‘Sponsor’ is,defined under SEBI Regulations as any person who, acting alone or in
combination with another body corporate establishes a mutual fund. The sponsor of a fund is
akin to the promoter of companies he gets the fund registered with SEBI. The sponsor will
form a Trust and appoint a Board of Trustees. All these appointments are made in accordance
with the SEBI Regulations. As per the existing SEBI Regulations, for a person to qualify as a
sponsor, must contribute at least 40% of the net worth of the AMC and issues a sound
financial track over five years prior to registration.”

Mutual Funds as Trusts

Mutual Fund in India is,constituted in the form of a Public Trust under the Indian Trust Act
1882. The fund invites investors to contribute their money in the common pool by
subscribing to units issued by various schemes established by the Trust as evidence of their
beneficial interest in the fund. The Trust or Fund has no legal capacity itself rather it is the
Trustee(s) who have legal capacity and therefore the trustees take all acts in relation to the
Trust itself.”

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Trustees
A,Board of Trustees – a body of individuals, or a trust company – a corporate body, may
manage the Trust. Board of Trustees manages most of the funds in India. The Trust is created
through a document called the Trust Deed that is executed by the Fund Sponsor in favors of
the trustees. They are the primary guardian of the unit holder’s funds and assets. They ensure
that AMC’s operations are along professional lines.”
 Right of Trustees
a) Appoint the AMC with the prior approval of SEBI
b) Approve each of the schemes floated by the AMC
c) Have the right to request any necessary information from the AMC concerning the
operations of various schemes managed by the AMC
 Obligations of the AMC and its Directors
They must ensure that:
a) Investment of funds is in accordance with SEBI Regulations and the Trust Deed
b) Take responsibility for the act of its employees and others whose services it has
procured
c) Do not undertake any other activity conflicting with managing the fund

Asset Management Company

The,role of an Asset Management Company (AMC) is to act as the investment manager of
the trust under the Board supervision.

Transfer Agents
Transfer Agents are responsible for issuing and redeeming units of the mutual fund and
provide other related services such as preparation of transfer documents updating investor’s
records. A fund may choose to opt this activity in-house or by an outside transfer agent.”

Distributors
AMCs usually appoint distributors or brokers, who sell units on behalf of the fund. Some
funds,require that all transactions to be routed through such brokers.”

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Bankers
A fund’s activities involved dealing with the money on a continuous basis primarily with
respect to buying and selling units, paying for investment made, receiving the proceeds from
sale of investment and discharging its obligations towards operative expenses. A fund’s
banker therefore plays a crucial role with respect to its financial dealings.

Custodian and Depository

The custodian is appointed by the Board of Trustees,for safekeeping of securities in terms of
physical delivery and eventual safe keeping or participating in the clearing system through
approved depository companies.

ASSOCIATION OF MUTUAL FUND

With the increase in mutual fund players in India, a need for mutual fund association in India
was generated to function as a nonprofit organization. Association of Mutual Funds in India
(AMFI) was incorporated on 22nd August, 1995.
AMFI is a apex body of all Asset Management Companies (AMC) which has been registered
with SEBI. Till date all the AMCs are that have launched mutual fund schemes are its
members. It functions under the supervision and guidelines of its Board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a
professional and healthy market with ethical lines enhancing and maintaining standards. It
follows the principle of both protecting and promoting the interests of mutual funds as well as
their unit holder.”

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It
has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The
objectives are as follows:
 This mutual fund association of India maintains high professional and ethical standards
in all areas of operation of the industry.
 It also recommends and promotes the top class business practices and code of conduct
which is followed by members and related people engaged in the activities of mutual fund
and asset management. The agencies who are by any means connected or involved in the

12
 field of capital markets and financial services also involved in this code of conduct of the
association.
 AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund
industry.
 Association of Mutual Fund in India does represent the Government of India, the Reserve
Bank of India and other related bodies on matters relating to the Mutual Fund Industry.
 It develops a team of well,qualified and trained Agent distributors. It implements a
program of training and certification for all intermediaries and other engaged in the
mutual fund industry.
 AMFI undertakes all India awareness programmed for investor’s in order to promote
proper understanding of the concept and working of mutual funds.
 At last but not the least association of mutual fund of India also disseminate information’s
on Mutual Fund Industry and undertakes studies and research either directly or in
association with other bodies.”

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1.2) INTRODUCTION TO THE COMPANY

HDFC BANK
HDFC Bank Limited is a major Indian financial services company based in India,
incorporated in August 1994, after the Reserve Bank of India allowed establishing private
Sector banks. The Bank was promoted by the Housing Development Finance Corporation, a
premier housing finance company (Set up in 1977) of India. HDFC Bank has 1,725 branches
and over 5,000 ATMS, in 780 cities in India, and all branches of the bank are linked on an
online real-time basis.

The headquarters of HDFC Bank is in Mumbai, India. And its area Served is worldwide.

Organizational Goals

HDFC’S main goals are to:

a) To have close relation with customer.

b) Be a good premier housing finance institution

c) To covert idea into a proper working.

d) Providing high returns to Shareholder.

e) To grow via diversification by leveraging off the Existing client.

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The Subsidiaries of HDFC consist of:

1. HDFC Bank

2. HDFC Mutual Fund

3. HDFC Standard Life Insurance Company

4. HDFC Realty

5. HDFC Chubb General Insurance Company Limited.

6. Credit Information Bureau (India) Limited

7. Other Companies Co – Promoted by HDFC

a) HDFC Trustee Company Ltd.

b) GRUH Finance Ltd

c) HDFC Developers Ltd.

d) HDFC Venture Capital Ltd.

e) HDFC Securities Ltd

f) HDFC Holding Ltd.

g) Home Loan Services India Pvt. Ltd

HDFC BANK LIMITED – PROFILE

BACKGROUND

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to Set up a bank in
the private Sector, as part of RBI'S liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operation as a Scheduled
Commercial Bank in January 1995.

PROMOTER

HDFC is India's premier housing finance company and enjoys an impeccable track record in
India as well as in international markets. Since its inception in 1977, the Corporation has
maintained a consistent and healthy growth in its operation to remain the market leader in
mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC

15
has developed Significant expertise in retail mortgage loans to different market Segments and
also has a large corporate client base for its housing related credit facilities. With its
experience in the financial markets, Strong market reputation, large Shareholder base and
unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian
environment.

BUSSINESS FOCUS

HDFC Bank's mission is to be a World Class Indian Bank. The objective is to build Sound
customer franchises across distinct businesses So as to be the preferred provider of banking
Services for target retail and wholesale customer Segments, and to achieve healthy growth in
profitability, consistent with the bank's risk appetite. The bank is committed to maintain the
highest level of ethical Standards, professional integrity, corporate governance and regulatory
compliance. HDFC Bank's business philosophy is based on four core values: Operational
Excellence, Customer Focus, Product Leadership and People.

AMALGAMATION OF TIMES BANK & CENTURION BANK OF PUNJAB WITH

HDFC BANK

On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was
formally approved by Reserve Bank of India to complete the Statutory and regulatory

16
approval process. AS per the Scheme of amalgamation, Shareholder of CBOP received 1
Share of HDFC.

The merged entity will have a Strong deposit base of around RS1,22,000 crore and net
advances of around RS89,000 crore. The balance Sheet Size of the combined entity would be
over RS1,63,000 crore. The amalgamation added Significant value to HDFC Bank in terms of
increased branch network, geographic reach, and customer base, and a bigger pool of Skilled
manpower.

In a milestone transaction in the Indian banking industry, Times Bank Limited (another
new private Sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged
with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private
banks in the New Generation Private Sector Banks. AS per the Scheme of amalgamation
approved by the Shareholder of both banks and the Reserve Bank of India, Shareholder of
Times Bank received 1 Share of HDFC Bank for every 5.75 Shares of Times Bank.

DISTRIBUTION NETWORK

HDFC Bank is headquartered in Mumbai. AS on December 31, 2009, the Bank has a network
of 1725 branches in 771 cities across India. All branches are linked on an online real-time
basis. Customers in over 500 locations are also Serviced through Telephone Banking. The
Bank's expansion plans take into account the need to have a presence in all major industrial
and commercial centers, where its corporate customers are located, as well as the need to
build a Strong retail customer base for both deposits and loan products

The Bank also has a network of 3898 ATMS across India. HDFC Bank's ATM network can
be accessed by all domestic and international Visa / MasterCard, Visa Electron / Maestro,
Plus / Cirrus and American Express Credit / Charge cardholders.

MANAGEMENT

Name Designation

Shyamala Gopinath Chairman / Chair Person

Paresh Sukthankar Deputy Managing Director

Bobby Parikh Director

Partho Datta Director

UmeSh Chandra Sarangi Director

Aditya PuriManaging Director

Kaizad Puri Executive Director

17
Keki Mistry Director

Malay Patel Director

Srikanth Nadhamuni Director

TECHNOLOGY

HDFC Bank operates in a highly automated environment in terms of information technology

and communication Systems. All the bank's branches have online connectivity, which enables
the bank to offer Speedy funds transfer facilities to its customers. Multi-branch access is also
provided to retail customers through the branch network and Automated Teller Machines
(ATMS).

The Bank has made Substantial effort and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. In terms of core
banking Software, the Corporate Banking business is supported by Flexcube, while the Retail
Banking business by Finware, both from i-flex Solutions Ltd.

The Bank has prioritized its engagement in technology and the internet as one of its key
goalS and has already made Significant progress in web-enabling its core businesses. In each
of its businesses, the Bank has Succeeded in leveraging its market position, expertise and
technology to create a competitive advantage and build market Share.

BUSINESS PROFILE

HDFC Bank caters to a wide range of banking Services covering commercial and investment
banking on the wholesale Side and transactional / branch banking on the retail Side. The bank
has three key business Segments:

a) Wholesale Banking

The Bank's target market is primarily large, blue-chip manufacturing companies in the Indian
corporate Sector and to a lesser extent, Small & mid-Sized corporates and agri-based
businesses. For these customers, the Bank provides a wide range of commercial and
transactional banking Services, including working capital finance, trade Services,
transactional Services, cash management, etc. The bank is also a leading provider of
Structured Solutions, which combine cash management Services with vendor and distributor
finance for facilitating Superior Supply chain management for its corporate customers. Based
on its Superior product delivery / Service levels and Strong customer orientation, the Bank
has made Significant inroads into the banking consortia of a number of leading Indian
corporates including multinationals, companies from the domestic business houses and prime

18
public Sector companies. It is recognized as a leading provider of cash management and
transactional banking Solutions to corporate customers, mutual funds, Stock exchange
members and banks.

b) Treasury

Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalization of the financial markets in India, corporates need more Sophisticated risk
management information, advice and product Structures. These and fine pricing on various
treasury products are provided through the bank's Treasury team. To comply with Statutory
reserve requirements, the bank is required to hold 25% of its deposits in government
Securities. The Treasury business is responsible for managing the returns and market risk on
this investment portfolio.

c) Retail Banking

the objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking Services, giving the customer a one-Stop window for all
his/her banking requirements. The products are backed by world-class Service and delivered
to customers through the growing branch network, as well as through alternative delivery
channels like ATMS, Phone Banking, Net Banking and Mobile Banking.

Mission and Business Strategy

Our mission is to be "a World Class Indian Bank", benchmarking ourselves against
international Standards and best practices in terms of product offerings, technology, Service
levels, risk management and audit & compliance. The objective is to build Sound customer
franchises across distinct businesses. Our business Strategy emphasizes the following:

• Increase our market Share in India expanding banking and financial Services industry
by following a disciplined growth Strategy focusing on quality and not on quantity and
delivering high quality customer Service.

• Leverage our technology platform and open Scale able System to deliver more
product to more customers and to control operating cost.

• Maintain our current high Standard for asset quality through disciplined credit risk
management.

• Develop innovative product and Services that attract our targeted customers and
address inefficiencies in the Indian financial Sector.

19
• Continue to develop product and Services that reduce our cost of fund.

• Focus on high earning growth with low volatility.

PRODUCTS AND SERVICES

1) PERSONAL BANKING SERVICE

A) Account & Deposits

Savings Account

• Regular Saving Account

• Saving Plus Account

• Saving Max Account

• Senior Citizen Account

• Payroll Salary Account

• Regular Salary Account

• Kid Advantage Account

• Pension Saving Bank Account

• Family Savings Account

20
Current Account

• plus Current Account

• Trade Current Account

• Premium Current Account

• Regular Current Account

• Apex Current Account

• Max Current Account

B) Loans

• Personal Loans

• Home Loans

• Two Wheeler Loans

• New Car Loans

• Overdraft against C

• Loan against Securities

• Loan against Property

• Commercial Vehicle Finance

• Working Capital Finance

• Construction Equipment Finance

C) InveStments & InSurance

• Mutual Fund

D) Payment Services

• Net Safe

• Payzapp

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• Bill Pay

• Direct Pay

• Visa Money Transfer

• Chiller

• Excise & Service Tax Payment

E) Access Your Bank - One View

• SMS Alerts

• Mobile Banking

• ATM

2 WHOLESALE BANKING SERVICES

• Funded Services

• Non Funded Services

• Value Added Services

• Internet Banking

• Clearing Sub-Membership

• RTGS – Sub membership

• Fund Transfer

• ATM Tie-up

• Corporate Salary a/c

• Tax Collection

• Financial Institution

• Mutual Fund

• Stock Broker

• Insurance Companies

• Commodities Business

• Trust

22
3) Product of HDFC Bank :

• Payzapp

• Chillers

• Mobile banking app

• Smart buy

• Miss call banking

• SMS Banking

• Phone Banking

23
1.3) INTRODUCTION TO THE TOPIC
INTRODUCTION TO MUTUAL FUNDS

Mutual fund”is a buzz in the market these days. The mutual fund industry is burgeoning, it is
completely untapped market. Only few % of total potential of this industry has been grabbed.
Hence this industry has a lot of opportunities in it. That’s why it is so much interactive.

The Indian stock market and companies,have become lucrative for foreign investors. More
and more fund is pouring in our country. This is increasing liquidity in the market and hence
increasing the money in the hands of people and thus investment. As the future prospects for
Indian companies are bright, they have lots of opportunities to expand their business
worldwide, the investment in Indian companies.

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 appreciations 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

24
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 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 20 th 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”draft offer document is to be prepared at the time of launching the fund. Typically, it pre
specifies the investment objectives of the fund, the risk associated, the costs involved in the
process and the broad rules for entry into and exit from the fund and other areas of operation.
In India, as in most countries, these sponsors need approval from a regulator, SEBI
(Securities exchange Board of India) in our case. SEBI looks at track records of the sponsor
and its financial strength in granting approval to the fund for commencing operations.”

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..”

25
 CONCEPT OF MUTUAL FUND

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.”

26
THE INVESTMENT NEEDS OF AN INVESTOR

By and large, most investors have eight common needs from their investments:

1. Security of Original Capital;

2. Wealth Accumulation;

3. Comfort Factor;

4. Tax Efficiency;

5. Life Cover;

6. Income;

7. Simplicity;

8. Ease of Withdrawal;

9. Communication.

27
Security of original capital:”The chance of losing some capital has been a primary need.
This is perhaps the strongest need among investors in India, who have suffered regularly
due to failures of the financial system.”

Wealth accumulation:”This is largely a factor of investment performance, including both

short-term performance of an investment and long-term performance of a portfolio. Wealth
accumulation is the ultimate measure of the success of an investment decision.”

Comfort factor:”This refers to the peace of mind associated with an investment. Avoiding
discomfort is probably a greater need than receiving comfort. Reputation plays an important
part in delivering the comfort factor.”

Tax efficiency:”Legitimate reduction in the amount of tax payable is an important part of

the Indian psyche. Every rupee saved in taxes goes towards wealth accumulation.”

Life Cover:”Many investors look for investments that offer good return with adequate life
cover to manage the situations in case of any eventualities.’

Income:”This refers to money distributed at intervals by an investment, which are usually

used by the investor for meeting regular expenses. Income needs tend to be fairly constant
because they are related to lifestyle and are well understood by investors.”

Simplicity:”Investment instruments are complex, but investors need to understand what is

being done with their money. A planner should also deliver simplicity to investors.’

Ease of withdrawal:”This refers to the ability to invest long term but withdraw funds when
desired. This is strongly linked to a sense of ownership. It is normally triggered by a need to
spend capital, change investments or cater to changes in other needs. Access to a long-term
investment at short notice can only be had at a substantial cost.”

Communication:”This refers to informing and educating investors about the purpose and
progress of their investments. The need to communicate increases when investments are
threatened.”

 Security of original capital is more important when performance falls.

 Performance is more important when investments are performing well.
 Failures engender a desire for an increase in the comfort factor.

28
Perfect”investment would have been achieved if all the above-mentioned needs had been
met to satisfaction. But there is always a trade-off involved in making investments. As long
as the investment strategy matches the needs of investor according to the priority assigned
to them, he should be happy.”

The”Ideal Investment strategy should be a customized one for each investor depending on
his risk-return profile, his satisfaction level, his income, and his expectations. Accurate
planning gives accurate results. And for that there must be an efficient and trustworthy
roadmap to achieve the ultimate goal of wealth maximization.”

REGULATORY AUTHORITIES

“To protect the interest of the investors, SEBI formulates policies and regulates the mutual
funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time
to time. MF either promoted by public or by private sector entities including one promoted by
foreign entities is governed by these Regulations.””

SEBI”approved Asset Management Company (AMC) manages the funds by making

investments in various types of securities. Custodian, registered with SEBI, holds the
securities of various schemes of the fund in its custody.”According to”SEBI Regulations, two
thirds of the directors of Trustee Company or board of trustees must be independent.’

The Association of’Mutual Funds in India (AMFI) reassures the investors in units of mutual
funds that the mutual funds function within the strict regulatory framework. Its objective is to
increase public awareness of the mutual fund industry.”AMFI also is engaged in upgrading
professional standards and in promotingbest industry practices in diverse areas such as
valuation, disclosure, transparency etc.

29
2.0)REVIEW OF LITERATURE

Friend et al., (1962)“made an extensive and systematic study of 152 mutual funds found that
mutual fund schemes earned an average annual return of 12.4 percent, while their composite
benchmark earned a return of 12.6 percent. Their alpha was negative with 20 basis points.
Overall results did not suggest widespread inefficiency in the industry. Comparison of fund
returns with turnover and expense categories did not reveal a strong relationship.”

Brown et al., (1965)”analyzed issues relating to investment policy, portfolio turnover rate,
performance of mutual funds and its impact on the stock markets. They identified that mutual
funds had a significant impact on the price movement in the stock market. They concluded
that, on an average, funds did not perform better than the composite markets and there was no
persistent relationship between portfolio turnover and fund performance.Results indicated
that while investors continue to place too much emphasis on prior performance, the provision
of supplemental information, particularly in a graphical format, interacts with performance
and investment knowledge to influence perceptions and evaluations of mutual funds.”

Treynor (1965)”used ‘characteristic line’ for relating expected rate of return of a fund to the
rate of return of a suitable market average. He coined a fund performance measure taking
investment risk into account. Further, to deal with a portfolio, ‘portfolio-possibility line’ was
used to relate expected return to the portfolio owner’s risk preference.”

Sharpe (1966) developed a composite measure of return and risk. He evaluated 34 open-end
mutual funds for the period 1944-63. Reward to variability ratio for each scheme was
significantly less than DJIA (Dow Jones Industrial Average) and ranged from 0.43 to 0.78.
Expense ratio was inversely related with the fund performance, as correlation coefficient was
0.0505. The results depicted that good performance was associated with low expense ratio
and not with the size.

Treynor and Mazuy (1966)”evaluated the performance of 57 fund managers in terms of

their market timing abilities and found that, fund managers had not successfully outguessed
the market. The results suggested that, investors were completely dependent on fluctuations
in the market. Improvement in the rates of return was due to the fund managers’ ability to
identify under-priced industries and companies.”

Jensen (1968)”developed a composite portfolio evaluation technique concerning risk-

adjusted returns. He evaluated the ability of 115 fund managers in selecting securities during
the period 1945-66. Analysis of net returns indicated that, 39 funds had above average
returns, while 76 funds yielded abnormally poor returns. Using gross returns, 48 funds
showed above average results and 67 funds below average results. Jensen concluded that,

30
there was very little evidence that funds were able to 22 perform significantly better than
expected as fund managers were not able to forecast securities price movements.”

Fama (1972)”developed methods to distinguish observed return due to the ability to pick up
the best securities at a given level of risk from that of predictions of price movements in the
market. He introduced a multiperiod model allowing evaluation on a period-by-period and on
a cumulative basis. He concluded that, return on a portfolio constitutes of return for security
selection and return for bearing risk. His contributions combined the concepts from modern
theories of portfolio selection and capital market equilibrium with more traditional concepts
of good portfolio management.”

Williamson (1972)”compared ranks of 180 funds between 1961-65 and 1966-70. There was
no correlation between the rankings of the two periods. The investment abilities of most of
the fund managers were identical. He highlighted the growing prominence of volatility in the
measurement of investment risk.”

Klemosky (1973) analyzed investment performance of 40 funds based on quarterly returns

during the period 1966-71. He acknowledged that, biases in Sharpe, Treynor, and Jensen’s
measures, could be removed by using mean absolute deviation and semi-standard deviation
as risk surrogates compared to the composite measures derived from the CAPM (Capital
Asset Pricing Modal).”

McDonald and John (1974) examined 123 mutual funds and identified the existence of
positive relationship between objectives and risk. The study identified the existence of
positive relationship between return and risk. The relationship between objective and risk-
adjusted performance indicated that, more aggressive funds experienced better results.

Gupta (1974)”evaluated the performance of mutual fund industry for the period 1962-71
using Sharpe, Treynor, and Jensen models. All the funds covered under the study
outperformed the market irrespective of the choice of market index. The results indicated that
all the three models provided identical results. Return per unit of risk varied with the level of
volatility assumed and he concluded that, funds with higher volatility exhibited superior
performance.”

Klemosky (1977)”examined performance consistency of 158 fund managers for the period
1968-75. The ranking of performance showed better consistency between four-year periods
and relatively lower consistency between adjacent two-year periods.”

Chang and Lewellen (1984)”used the method processed by Henryksson Merton and studied
67 mutual funds between 1971 and 1979. They divided data into up and down market
components and computed two separate slope coefficient b1 and b2. Of the 67 mutual fund
studied, only 28 in 5 cases, data displayed statistically significant difference between b1 and
b2. Majority of them were in the negative direction, suggesting poor market timings and they
concluded that neither skillful market timing nor clever security selection abilities are evident
in abundance in the observed mutual fund return data.”

31
 Bondt and Thaler (1985)”while investigating the possible psychological basis for investor
behavior, argue that mean revision in stock prices is an evidence of investor over reaction
where investors overemphasize recent firm performance in forming future expectations.”

William et al., (1988)”explored the investment styles in mutual fund hedge funds. The
results indicated that there were 39 dominants mutual fund styles that were mixed or
specialized subsets of 9 broadly defined user classes. There was little evidence of market
timing of asset class rotation in these dominants mutual fund styles.”

Ippolito’s (1989)”results and conclusions were relevant and consistent with the theory of
efficiency of informed investors. He estimated that risk-adjusted return for the mutual fund
industry was greater than zero and attributed positive alpha before load charges and identified
that fund performance was not related to expenses and turnover as predicted by efficiency
arguments.”

Gupta (1989) evaluated fund performance in India comparing the returns earned by schemes
of similar risk and similar constraints. An explicit risk-return relationship was developed to
make comparison across funds with different risk levels. His study decomposed total return
into return from investors risk, return from managers’ risk and target risk.

Varuan (1991) made an attempt to,evaluate the master share scheme of UTI using the data
from 1987 to 1980. Their conclusion was that the Master Share Scheme outperformed the
market in terms of net assets value (NAV) and the master share scheme (MSS) benefited
large investors rather than small investors.

Obaidulla and Sridhar (1991) evaluated the performance of two major growth oriental
mutual fund schemes - Master share and Canshare. They both concluded that both the funds
provided abnormal returns. Master share out performed based on market risk.

Gupta (1992) attempted a household survey of investors with the objective of identifying
investors’ preferences for mutual funds so as to help policy makers and mutual funds in
designing mutual fund products and in shaping the mutual fund industry.

Sharma (1992)”identified that, the household sector’s share in the Indian domestic savings
increased from 73.6 percent in 1950-51 to 83.6 percent in 1988-89. The share of financial
assets increased from 56 percent in 1970-71 to over 60 percent in 1989-90 bringing out a
tremendous impact on all the constituents of the financial market.”

Sitkin and Pablo (1992)”developed a model of determinants of risk behavior. They found
that personal risk preferences and past experiences form an important risk factor in which
social influence also affects the individual’s perception.”

Uma (1993)”critically examined the rationale and relevance of mutual fund operations in
Indian Money Markets. She pointed out that money market mutual funds with low-risk and
low return offered conservative investors a reliable investment avenue for short-term
investment.”

32
Ansari (1993)”stressed the need for mutual funds to bring in innovative schemes suitable to
the varied needs of the small savers in order to become predominant financial service
institution in the country.”

Lunderberg et al., (1994) men tend to be more confident, trade more frequently, rely less on
brokers and believe that returns are more predictable and anticipate higher returns than
women..”

Shukla and Singh (1994)”attempted to identify whether portfolio manager’s professional

education brought out superior performance. They found that equity mutual funds managed
by professionally qualified managers were riskier but better diversified than the others.
Though the performance differences were not statistically significant, the 25 three
professionally qualified fund managers reviewed outperformed others.”

Gupta (1994)”made a household investor survey with the objective to provide data on the
investor preferences on Mutual Funds and other financial assets. The findings of the study
were more appropriate, at that time, to the policy makers and mutual funds to design the
financial products for the future.”

Sitkin and Weingart (1995)”extended this model leading to the definition that risk
perception and propensity are the mediators in risk behaviors of uncertain decision-making.
In this hypothesis, past investment establishes the frame for the propensity to risk, risk
transfer, and risk awareness which impact decision-making behavior. Thus risk orientation
and risk perception are reduced to antecedent variables in decision-making behavior under
risk.”

Fortin and Michelson (1995)”studied 1,326 load funds and 1,161 no load funds and
identified that, no-load funds had lower expense ratio and so was suitable for six years and
load funds had higher expense ratio and so had fifteen years of average holding period. No-
load funds offered superior results in nineteen out of twenty-four schemes. He concluded
that, a mutual fund investor had to remain invested in a particular fund for very long periods
to recover the initial front-end charge and achieve investment results similar to that of no-
load funds.”

Sikidar and Pal Singh (1996)”carried out a survey with an objective to understand the
behavioral aspects of the investors of the North Eastern region towards equity and mutual
funds investment portfolio. The survey revealed that the salaried and self employed formed
the major investors in mutual fund primarily due to tax concessions. UTI and SBI schemes
were popular in that part of the country then and other funds had not proved to be a big hit
during the time when survey was done.”

Ciccotello and Terry (1996)”study identified a negative correlation between asset size of
the fund and the expense ratio. The results of the study brought out that, larger funds had
lower expense acquire information for trading decision and were consistent with the theory of
information pricing.”

33
Gupta and Sehgal (1997)”evaluated investment performance for the period 1992 to 1996.
Aspects of Mutual fund such as fund diversification, consistency of performance, consistency
between risk measures, fund objectives and risk return relation in general were studied. For
the study 80 mutual fund schemes of private and public sector were taken. Out of 80
schemes, 54 were close-ended and the 26 were open-ended. Results showed that income
growth schemes were the best performers with mean weekly returns of .0087 against mean
weekly returns from income growth schemes of .0021 and .0023 respectively. LIC
Dhansahyog, Reliance growth and Birla Income Plus were the best income growth and
growth income schemes respectively.”

Gupta and Sehgal (1998)”evaluated performance of 80 mutual fund schemes over four years
(1992-96). The study tested the proposition relating to fund diversification, consistency of
performance, parameter of 26 performance and risk-return relationship. The study noticed the
existence of inadequate portfolio diversification and consistency in performance among the
sample schemes.”

Harless and Peterson (1998)”explained that investors tend to choose funds based on
previous performance but stick to these funds despite their poor return in a recent study of
consumers rationally and the mutual fund purchase decision. Ippolito (1992) documents the
reaction of investors to performance in mutual fund industry. His findings have shown that
poor relative performance results in investors shifting their assets into other funds.”

Chakarabarti and Rungta (2000)”stressed the importance of brand effect in determining

the competitive position of the AMCs. Their 30 study revealed that brand image factor,
though cannot be easily captured by computable performance measures, influences the
investor’s perception and hence his fund/scheme selection.”

Peterson et al., (2000)”conducted a study on Portfolios of equity mutual funds .They

proposed two-index model using both the value-weighted and an equally weighted index.
Estimated models using a sample of 506 mutual funds show that the two-index model
provides a better fit than the single-index model and identifies a larger set of funds with
abnormal performance.”

Chander (2000)”examined 34 mutual fund schemes with reference to the three fund
characteristics with 91-days treasury bills rated as risk-free investment from January 1994 to
December 1997. Returns based on NAV of many sample schemes were superior and highly
volatile compared to BSE SENSEX. Open-end schemes outperformed close-end schemes in
term of return. Income funds outsmarted growth and balanced funds. Banks and UTI
sponsored schemes performed fairly well in relation to sponsorship. Average annual return of
sample schemes was 7.34 percent due to diversification and 4.1 percent due to stock
selectivity. The study revealed the poor market timing ability of mutual fund investment. The
researcher also identified that 12 factors explained majority of total variance in portfolio
management practices.”

Borensztein and Gelos (2001)”explores the behavior of emerging market mutual funds using
a novel database covering the holdings of individual funds over the period January 1996 to

34
March 1999. An examination of individual crises shows that, on an average, funds withdrew
money one month prior to the events. The degree of herding among funds is statistically
significant, but moderate. Herding is more widespread among open-ended funds than among
closed-end funds, but 31 not more prevalent during crisis than during tranquil times. Funds
tend to follow momentum strategies, selling past losers and buying past winners, but their
overall behavior is more complex than often suggested.”

Quill (2001)”examined the evidence that investor behavior is frequently detrimental to the
achievement of investors’ long-term goals. The picture that emerges from this analysis is one
of investors who have lost a good portion of their potential returns because of the excessive
frequency and poor timing of their trading activities. They established that investors trade
much more than they realize and much more than is conducive to the achievement of their
financial plans. Investors think long-term in theory, but act according to short-term influences
in practice. This excessive turnover, combined with a propensity to buy relatively over-
valued investments and ignore relatively under-valued ones, has caused the average mutual
fund investor to underperform substantially over the past decade.”

Gupta (2001)”evaluated the performance of 73,selected schemes with different investment

objectives, both from the public and private sector using Market Index and Fundex. NAV of
both close-end and open-end schemes from April 1994 to March 1999 were tested. They
found that sample schemes were not adequately diversified, risk and return of schemes were
not in conformity with their objectives, and there was no evidence of market timing abilities
of mutual fund industry in India.”

Karthikeyan (2001)”conducted research on Small Investors Perception on Post office Saving

Schemes and found that there was significant difference among the four age groups, in the
level of awareness,for Kisan Vikas Patra (KVP), National Savings Scheme (NSS), and
Deposit Scheme for Retired Employees (DSRE). The Overall Score confirmed 32 that the
level of awareness among investors in the old age group was higher than in those of young
age group. No differences were observed among male and female investors.””

Narasimhan and Vijayalakshmi (2001)”analyzed the top holding of 76 mutual fund

schemes from January 1998 to March 1999. The study showed that, 62 stocks were held in
portfolio of several schemes, of which only 26 companies provided positive gains. The top
holdings represented more than 90 percent of the total corpus in the case of 11 funds. The top
holdings showed higher risk levels compared to the return. The correlation between portfolio
stocks and diversification benefits was significant at one percent level for 30 pairs and at five
percent level for 53 pairs.

Pendaraki et al.,(2001) studied construction of mutual fund portfolios, developed a multi-

criteria methodology and applied it to the Greek market of equity mutual funds. The
methodology is based on the combination of discrete and continuous multi-criteria decision
aid methods or mutual fund selection and composition. UTADIS multi-criteria decision aid
method is employed in order to develop mutual fund’s performance models. Goal

35
programming model is employed to determine proportion of selected mutual funds in the
final portfolios.

Berkowitz and Katouritz (2002) in their paper examined the relationship between the fees
changes by mutual funds and their performance. The work distinguished between high & low
quality funds and sheds some additional light on the growing controversy concerning the role
of independent directors as monitors of the fee setting practices written the funds. They found
that for high quality managers, there is a positive relationship between fees & performance.
In contrast for lower Quality Managers, there is a negative relationship between fees and
performance. The authors believed this reflects the incentive for poor managers to extract
shorter benefits from investors as the likelihood of survival is lower for poor performing
managers. The results were consistent with the notion that the independent directors whose
responsibility is to safeguard the interest of shareholders may not be effective in doing so.

Rao et. al.,(2003) evaluated performance of Indian mutual funds in a bear market through
relative performance index, riskreturn analysis, Treynor’s ratio, Sharpe’s ratio, Jensen’s
measure, and Fama’s measure. The study used 269 open-ended schemes (out of total schemes
of 433) for computing relative performance index. Then after excluding funds whose returns
are less than risk-free returns, 58 schemes are finally used for further analysis. The results of
performance measures suggest that most of mutual fund schemes in the sample of 58 were
able to satisfy investor’s expectations by giving excess returns over expected returns based on
both premium for systematic risk and total risk.

Roy and Deb (2003) in the article “conditional alpha & performance persistence for Indian
Mutual funds Empirical evidence” investigated the Indian MF mangers contribution to better
performance. The research found that on an average the Indian MF managers only captures
the opportunities from the available economic information, they do not contribute beyond it.
The paper stresses that, the above basing on when the beta the fund is conditioned to lag
economic information variables, the fund on an average becomes negative. The information
variables used in the study are interest rates, dividend yields, term structure yield spread and
a dummy. The authors also examined the evidence of persistence in the performance of IMF
based on cross sectional regressions of future excess returns on a measure of past fund
performance and used both conditional & unconditional measures of performance as measure
of part fund performance. The results indicated that conditional measures of past performance
predict the future fund returns significantly.

Tripathy(2004) in the article entitled “An Empirical Evaluation of Market Timing Abilities
of Indian fund Managers on Equity Linked Saving Scheme” analysed the market timing
abilities of Indian Fund manager in form of two models, one by Treynor and Mazuy and the
other by Henriksson and Merton. The results indicated that Indian fund managers are not able
to time the market correctly. There is only one scheme out of 31which exhibited the timing
ability of the fund manager.

Rao (2005) in the study “Investment styles and performance of equity MFs in India”
classified 419 open ended equity MF schemes into six investment styles and analyzed the

36
performance selected open ended equity MF schemes for the period 1 April 2005 – 31 march
2006 pertaining to the two dominant investment styles and tested the hypothesis whether the
differences in performance are statistically significant. The variables chosen or analyzing
financial performance are monthly compounded mean return, risk per unit return and sharp
ratio. A comparison of the financial performance of 21 open ended equity dividend plans was
made and found that 17 growth plans gave hyper returns than dividend plans but at a higher
risk. 1 dividend plan generated higher return than growth plan & 3 growth plans & dividend
plans had the same returns. It was also found that out of 21 growth plans 4 growth plans had
higher co-efficient of variation (risk per unit) than corresponding dividend plans & 13
dividend plans had higher coefficient of variation than growth plans offered by AMC. Three
growth plans & dividend plans had almost equal risk per unit return. A comparison of the
Sharpe’s ratio’s of growth plans & the corresponding dividend plans indicated 18 growth
plans out of 21 had better risk adjusted excess returns highlighting the fat that growth plans
are likely to reward the investors more for the extra risk they are assuming. Finally Pearson’s
correlation coefficient between the 2plans found to be moderate and proved equity growth
funds provide higher returns than that of equity dividend funds and differences were
statistically significant.

Anand and Murugaiah (2006) in the paper “Analysis of Components of Investment

Performance - An Empirical Study of Mutual Funds in India” examined the components and
sources of investment performance in order to attribute it to specific activities of Indian fund
managers. The author also attempted to identify a part of observed return which is due to the
ability to pick up the best securities at given level of risk. For this purpose, Fama's
methodology is adopted here. The study covered the period between April 1999 and March
2003 and evaluated the performance of mutual funds based on 113 selected schemes having
exposure more than 90 percent of corpus to equity stocks of 25 fund houses. The empirical
results reported here reveal the fact that the mutual funds were not able to compensate the
investors for the additional risk that they have taken by investing in the mutual funds. The
study concluded that the influence of market factor was more severe during negative
performance of the funds while the impact selectivity skills of fund managers was more than
the other factors on the fund performance in times of generating positive return by the funds.
It was also observed from the study that selectivity, expected market risk and market return
factors have shown closer correlation with the fund return.

Panwar and Madhumathi (2006) in the paper entitled “characteristics and performance
evaluation of selected mutual funds in India” studied a sample of public sector sponsored &
private sector sponsored funds of varied net assets to investigate the differences in
characteristics of assets held, portfolio diversification and variable effects of diversification
on investment performance for the period may 2002 to may 2005. The paper resulted that
public sector sponsored funds also not differ significantly from private sector sponsored
funds in term of mean returns percent however they said there is a significant difference
between public sector sponsored MFs. & private sector sponsored MFs in terms of average
standard deviation, average variance and average co-efficient of variation. It is also found out
that there is no statistical difference between sponsorship classes in terms of excess standard

37
deviation adjusted returns as a performance measure. When they used residual variance (RV)
as a measure of MF portfolio diversification characteristic, there was a statistical difference
between public – sector sponsored mutual fund and private sector sponsored MF for the study
period. The model built on testing the impact of diversification on fund performance they
found a statistical difference among sponsorship classes when residual variance is used as a
measure of portfolio diversification and excess standard deviation adjusted returns as a
performance measure.

Rao (2006) 4 step model to evaluate performance of mutual funds in Saudi Arabia” studied 4
step model for selecting the right equity fund and illustrated the same in the context of equity
mutual funds in Saudi Arabia. The study revealed that most of the funds invested in Arab
stocks had been in existence for less than a year and the volatility of the GCC stock markets
contributed to the relatively poor performance of these funds and the turnaround of these
funds could take place only with the rallying of GCC and other Arab markets. Out of the six
categories of equity mutual funds in Saudi Arabia discussed above, Funds invested in Asian
and European stocks were more consistent in their performance and yielded relatively higher
returns than other categories, though funds invested in Saudi stocks yielded higher 3-year
returns. Given the future outlook of Asian economies, particularly China and India and the
newly emerging economies such as Brazil and Russia, funds invested in the stocks of these
countries are likely to continue their current performance in near future.

Khorana et al., (2007) in the study named “Board structure, mergers, and shareholders
wealth. A study of the mutual fund industry” studied mutual fund mergers between 1999 and
2001 to understand the role and effectiveness of fund boards. The study found some fund
mergers typically across family mergers benefit target shareholders but are costly to target
fund directors. Such mergers are more likely when funds underperform and their boards have
a larger percentage of independent tributes, suggesting that more independent boards tolerate
less under performance before initiating across family mergers. The paper indicated the effect
is most pronounced when all of the funds directors are independent, not the 75 percent level
of independence required by the SEC. It is also said higher paid target fund board is less
likely to approve across family mergers that cause substantial reductions in their
compensation.

Karoui et al., (2008) in the paper “Performance and characteristics of mutual fund” studied
the performance and portfolio characteristics of 828 newly launched U.S. equity mutual funds
over the time period 1991-2005 using Carhart (1997) 4 factor asset pricing model. The study
revealed new U.S. equity mutual funds outperformed their peers by 0.12 percent per month
over the first three years. However, there were distinct patterns in this superior risk adjusted
performance estimated using Carhart’s (1997) 4 factor model. The number of fund that
started to outperform older funds shrunk substantially after one to three years. These results
suggested that the initially favorable performance was to some extent due to risk taking and
not necessarily superior manager skill. Scrutinizing the returns further confirmed that the
returns of the fund started to exhibit higher standard deviations and higher unsystematic risk
that could not be explained by the risk exposure to the four factors of the Carhart model.

38
Guha et al.,(2009) in the article entitled “Downside risk analysis of Indian equity MFs A
value at risk approach” put forward downside risk lends of Indian equity MF using a VaR
measure.Three parametric models random walk, moving average,exponentially weighted
moving average and one non parametric model were employed to predict the VaR of a
sample of equity MFs in India in a rolling basis and actual changes in NAV registered by the
funds were compared with the estimated VaR post facto. The results indicated
presence of considerable downside risk for an investor in equity MFs for the study period
under consideration. The study also tested the robustness of the models using two popular
back testing approaches. The statistical tests of the models based on the framework indicated
that random walk model & moving average model suffered from a down ward bias and err by
underestimating the VaR frequently. The EWMA and historical simulation methods are
relatively free from that bias but they show a few instances of providing too conservating
estimates of VaR. The researchers have put forward on case for adapting VaR based risk
management systems for investment industry as a whole in India.

Guha et al., (2010) studied “Return Based Style Analysis (RBSA) to evaluate equity mutual
funds in India” using quadratic optimization of an asset class factor model proposed by
William Sharpe and analysis of the relative performance of the funds with respect to their
style benchmarks. The study found that the mutual funds generated positive monthly returns
on the average, during the study period of January 2000 through June 2005. The ELSS funds
lagged the Growth funds or all funds taken together, with respect to returns generated. The
mean returns of the growth funds or all funds were not only positive but also significant. The
ELSS funds also demonstrated marginally higher volatility (standard deviation) than the
Growth funds.

Chavali (2011) has done an empirical study named “Investment performance of equity –
linked saving schemes”. Analysis was made to compare equity linked saving schemes with
other traditional forms of tax saving schemes, analyzed equity linked saving schemes picked
at random on the basis of risk & return and also made an attempt to understand level of
awareness regarding mutual funds among balanced class and various factors that informed
individual investors to invest in equity linked saving schemes. The analysis has been made by
selecting 5 sectors and diversified portfolio composition of ELSS. The results of the study
were based upon comparison of ELSS funds on the basis of return, risk (SD Beta, Alpha,
Sharpe ratio) with its benchmarks S&P.CNX Nifty. The study is further extended by
analyzing the questionnaire filled in by the investors. The study proved that it is not just the
past performance of returns, but qualitative criteria like reputation and performance of fund
house, credential and expertise of fund manager and other funds managed by him affects the
performance of ELSS. It also proved that ELSS can be considered for investment because of
dual advantage of tax savings and high returns but the right choice has to be made by the
investor which matches the risk appetite.

Lakshmi (2012) in the research paper entitled “performance of the Indian MF industry a
study with special reference to growth schemes” found out that MF serve those individuals
including to invest but lack the newline technical investment expertise. Funds mobilized by
the industry had grown new here by 57 percent and AUM by 14 percent during 1997-2006.

39
Analysis of performance of newline seven schemes should that, all the sample schemes
outperformed the newline market in terms of absolute returns without adequate returns to
over total newline risk. All the three risk adjective performance measures showed newline
underperformance of sample schemes. Investors and fund Managers agreed newline that
investing in MF were less risky. Goodwill was the main newline criterion of choosing MF
organizations. Investors were moderately newline satisfied with the performance & services
offered by the industry.

Santhi and Gurunathan (2013) in the article “The growth of MutualFunds and Regulatory
Challenges” from Indian Journal of Applied Researchhave mentioned that as mutual fund
industry has grown tremendously over pastfew years, Regulators are keeping close watch on
any potential impact of mutualfund products on financial stability and market volatility. The
growth of mutualfunds has been accompanied by innovative products and servicing
methods.Regulators will have to do balancing act by carefully managing risks and
notimposing unnecessary regulation.

Iqbal (2013) in an article titled, “Market Penetration and Investment Pattern ofMutual Fund
Industry” from International Journal of Advanced Research inManagement and Social
Sciences has mentioned that although mutual funds arepredominantly present in urban areas
but have started capturing rural marketsalso through new range of products, new strategies
adopted for Rural MarketPenetration and with new awareness programs. As rural market
integrate moreand more with urban, there will be huge inflow of investors. The responsibility
ofvarious intermediaries’ especially mutual funds will increase manifold.

Sharma and Pandya (2013) in the article “Investing in Mutual Fund: Anoverview” from
Asian Research Journal of Business Management mentionedthat still number of people are
not clear about functioning of Mutual Funds, as aresult so far they have not made a firm
opinion about investment in mutual funds.As far existing investors, return potential and
liquidity have been perceived to bemost attractive.

Debasish (2014) in the paper “Investigating Performance of Equity-based Mutual Fund

Schemes in Indian Scenario” mutual funds said the performance of the mutual fund products
become more complex in context of accommodating both return and risk measurements while
giving due importance to investment objectives. The paper attempted to study the
performance of selected schemes of mutual funds based on risk-return relationship models
and measures. A total of 23 schemes offered by six private sector mutual funds and three
public sector mutual funds have been studied over the time period April 1996 to March 2009
(13 years). The analysis has been made on the basis of mean return, beta risk, and coefficient
of determination, Sharpe ratio, Treynor ratio and Jensen Alpha. The overall analysis finds
Franklin Templeton and UTI being the best performers and BSL, HDFC and LIC mutual
funds showing poor below-average performance when measured against the risk-return
relationship models.

Vasantha et al., (2015) in an article “Evaluating the Performance of someselected open

ended equity diversified Mutual fund in Indian mutual fundIndustry” from International

40
Journal of Innovative Research in Science,Engineering and Technology have stated that risk
appetite of an investor plays animportant role in selection of mutual fund. While deciding
their investment inmutual funds investor should take decision based on their investment
objective\and analyze the fund based on various criteria such as risk prevailing in themarket,
variations on the return and deviations in the return etc.

Agrawal (2016) in the study “Measuring Performance of Indian Mutual Funds” touched the
development of Indian capital market and deregulations of the economy in 1992. Since the
development of the Indian Capital Market and deregulations of the economy in 1992 there
have been structural changes in both primary and secondary markets. Mutual funds are key
contributors to the globalization of financial markets and one of the main sources of capital
flows to emerging economies. Despite their importance in emerging markets, little is known
about their investment allocation and strategies. This article provided an overview of mutual
fund activity in emerging markets. It described about their size and asset allocation. The
paper is a process to analyze the Indian Mutual Fund Industry pricing mechanism with
empirical studies on its valuation. The data is also analyzed at both the fund-manager and
fund-investor levels. The study revealed that the performance is affected by the saving and
investment habits of the people and the second side the confidence and loyalty of the fund
Manager and rewards affects the performance of the MF industry in India.

Jani and Jain (2017) in an article “Role of Mutual Funds in Indian FinancialSystem as a
Key Resource Mobilizer” from Abhinav Journal (InternationalMonthly Referred Journal of
Research in Management & Technology) havereiterated that since fundamentals of Indian
economy are relatively strong, theeconomy will be on a successful path in the coming year.
As economy grows,Mutual Funds are going to be key resource mobilizer for Indian financial
system.Indian Mutual Fund industry is going to observe good growth rate in near Future.

Nair (2018) in the article “Indian Mutual Fund Market – A tool to stabilizeIndian Economy”
from International Journal of Scientific and ResearchPublications has reiterated that a Mutual
fund is a powerful tool to stabilize Indianeconomy. The products of mutual funds are playing
a vital role in mobilizingcattered savings among investors and channelize these funds to
infrastructuraldevelopment of the country. The banks and Financial Institutions are also
playinga crucial role by promoting mutual fund business in the country

41
3.0) RESEARCH METHODOLOGY

It is a systematic and scientific way to solve research problem. The methodology may vary
from problem to problem. Every problem is differing so their solution is also differing. The
scope of research methodology is wider. Research methodology deals with the research
methods. Research methodology includes many of techniques and methods which are helpful
to solve the problem.

Research

Research means searching again and again to gain knowledge or to find the solution of any
problem occur. Research also helpful to learn something new. It helps to find new things. It is
a process to gather data and knowledge. Many of the information can be collected on the
basis of which decision can be taken. In the project research is helpful to get the data related
to the logistic companies. Research is helpful to collect data, how the services are provided
by the company to their customers.

3.1) CONCEPTULIZATION

“Mutual fund is a buzz in the market these days. The mutual fund industry is burgeoning; it is
completely ,untapped market. Only few % of total prospective of this industry has been
grasped. Hence this industry has a lot of prospects in it. That’s why it is so much interactive.

The”Indian stock market and companies have become lucrative for foreign investors. More
and more fund is pouring in our country. This is growing liquidity in the market and hence
growing the money in the hands of people and thus investment. As the future visions for
Indian companies are bright, they have lots of opportunities to expand their business
worldwide, the investment in Indian companies.”

3.2) SIGNIFICANCE OF THE STUDY

The”study is conducted to know the awareness in the customers about mutual funds and how
they are investing their funds in different investments like equity market, fixed deposits,
insurance etc. In general, investments in Funds are risky, because they are exposed to
economic forces or factors, which the future is uncertain.”By its very nature, risk concerns

42
the uncertain future. If investors know what happened”to a Fund’s returns in the past, they
can predict the likely range of Fund’s returns in future.”The greater is this range, the more
risky are Fund’s prospects. Thus, investors and their advisors need more information to help
them assess the risks of Mutual Funds.”

Ignorance of Law is no excuse.”Investors must ultimately be responsible for understanding or

making predictions about the regulations and risks associated with the major market sectors,
as well as the extent to which sectors are likely to move with one another. Much of this
information is common to many Funds and can be most efficiently provided to investors
by,third parties, such as financial planners and database providers. But, most of the investors
are not aware of the complete information about the risks.”Various studies were made on the
Mutual Funds, but the research on the investors’ perceptions-towards risk disclosures of
Mutual Funds was scanty. Hence, it is necessary to find out how the companies are providing
information about the investments to the investors, whether that information is sufficient
to,educate the investors regarding the risks of Funds; and how for the investors are
benefited.””

3.3) OBJECTIVES OF THE STUDY

It is essential to specify the objectives of the study.”This is because of specification of

objectives will enable us to study various areas and aspects with precision.

 To understand the mutual funds and different aspects of,mutual funds and their
functioning in the market.

 To”know the purpose and performance of investment in mutual fund.”

 To know how a customer looks at the scheme and what kind of benefit they want
from s the scheme.

 To understand the consumer perception towards making investment in any kind of

stock and in mutual fund.

HYPOTHESIS

Null hypothesis -

 Ho-“People will not prefer investment in,Mutual Fund as Compared to Other

Investment Options

43
Alternative hypothesis -

 Ha-“People will prefer investment in Mutual Fund as Compared to Other

Investment Options.

3.4) SCOPE OF THE STUDY

 The study will aim at understanding and scrutinizing the types Mutual Fund and other
investment options
 I will evaluate the funds depending,on their schemes like equity, income, balance
 Subject matter is related to the investor’s attitude towards mutual funds and other
investment preferences in Indian market

3.5) RESEARCH DESIGN

 DESCRIPTIVE RESEARCH- In this study we have used descriptive research

design.
This research is carried out to describe the phenomenon of market characteristics.
This study is conducted to understand the buyer behavior and for evaluating the
preferences of the customers.

STEPS OF RESEARCH DESIGN

 Define the information needed: -“This first step states that what the information that
is actually required is.’Information in this case, we require is that what is the approach
of investors while investing their money in mutual funds and other investment
options, e.g. what do they consider while,deciding as to invest in which of the two
i.e.-Mutual funds or other investment options. Also, it studies the extent to which the
investors are aware of the various costs that one bears while making any investment.
So, the information sought and information generated is only possible after defining
the information needed.
 Design the research:”A research design is a framework or blueprint for conducting
the research project. It details the procedures necessary for obtaining the information
needed to solve research problems. In this project, the research”design is descriptive
in nature.

44
  Specify the scaling procedures:”Scaling involves creating a range on which
measured objects are located.”Both nominal, and interval scales have been used for
this purpose.”
 Construct and pretest a questionnaire:_A questionnaire is a formalized set of
questions for obtaining information,from respondents. Whereas, pretesting refers to
the testing of the questionnaire on a small sample of respondents in order to identify
and eliminate potential problems.
”

3.6) COLLECTION OF DATA

Data is gathered both from primary,as well as secondary sources as mentioned below:
Approach constitutes of both-

I. Primary”data.
II. Secondary”data.

3.7) SOURCES OF DATA COLLECTION

PRIMARY SOURCES

Primary data are those, which were collected anew& for the first time and thus happen to be
original in character. However, there are many methods of collecting the primary data. The
ones that have been used in present study”were:
 Questionnaire Analysis

SECONDARY SOURCES

It”refers to those data that was already being corrected by and investigated by someone else.
This data is collected”from:

 Books
 Website
 Journal Reports
 Magazines’

45
3.8) SAMPLING TECHNIQUE
Sample Unit: Investors,and Non-Investor

Sample Size: This,study involves 100 plaintiffs.

Sampling Type: The sample size has been taken by non-random convenience sampling
technique.

3.9) ANALYTICAL TOOLS USED IN STUDY

 Questionnaire:”It is a systematic designed questionnaire is used for gathering primary

data.”These data are used for further descriptive research.”

 Graphical tool

 Pie chart has been used for the analysis.

3.10) LIMITATIONS OF THE STUDY

No study is free from limitations. The limitations of this study are:

 The”study will,conduct only for 2 months”

 Sample size taken,is small.”
 The study only conducted in 2 geographical,area
 Respondent,bias and sampling,error.”

46
4.1) SWOT ANALYSIS
A”SWOT analysis emphases on the internal and external environments, analyzing strengths
and weaknesses in the internal environment and opportunities and threats,in the external
environment.”

Let’s analyze SWOT in order to know as to where the company stands.

47
STRENGHTS
 High profitability and revenue.
 Skilled workforce.
 Strong financial base.
 High growth rate of the company.
 It has experienced business units.
 Brilliant services.
 Vitally strong with good paying capabilities.
 Pioneering products, technology, organization culture
and climate.

WEAKNESSES

 Lot of the players are in the market offer same product by the name difference in the premium
and offerings.
 Small business units.
 Lack of knowledge and expertise.
 Lack of penetration in rural areas.
 Higher premiums as compared to the other companies.
 High targets for the financial advisors and the sales department. They have to compete
with the Government Companies like LIC and UTI who has been very established in
this field. So they will have to attain the same trust of the public as it is in case of LIC
and UTI.
 Future debt rating.

48
OPPORTUNITIES

 Growing rural market potential.

 Urban youth with growing income.
 Income level is at constant increase.
 Growing economy is a big opportunity for the company.
 Growth rates and profitability of the company.

THREATS

 Presence of very strong competitors.

 Illiteracy and unemployment also poses threat.
 People are hesitant to invest and put their hard earned money to the private company
with the fear of getting lost.
 Risk of economic crisis and economic instability.
 Tax changes and price changes are coming threats for the company.
 Large number of other companies.

49
4.2) ANALYSIS & INTERPRETATION

4.2.1AGE GROUP OF THE RESPONDENTS

TABLE4.2.1
Age Group Response (No. of Person)
20-30 14
30-40 50
40-50 12
50 and above 24
TOTAL 100

FIGURE4.2.1

PERCENTAGE OF AGE GROUP OF

RESPONDENTS

No. of Person, 20-

30, 7, 14%
No. of Person,
50 and above,
12, 24%
No. of Person, 40-
50, 6, 12% No. of Person,
30-40, 25,
50%

INTERPRETATION:

It is concluded that Maximum i.e. 50% of respondents are from age group of 30-40 and
Minimum i.e. 12% of respondents are from age group of 40-50.

50
4.2.2 OCCUPATION OF THE RESPONDENT
TABLE4.2.2

SCALE RESPONSE(No. of Person)

Government employee 24
Private employee 46
Self employee 18
Professional 12
TOTAL 100

FIGURE4.2.2

PERCENTAGE OF OCCUPATION OF
RESPONDENTS

RESPONSE,
Professional, 6,
12%
RESPONSE,
government
employee, 12, 24%
RESPONSE,
Self Employee,
9, 18%

RESPONSE,
Private
Employee, 23,
46%

INTERPRETATION:

The analysis shows that 46% of employees are private employees,24% are government
employees’ 18% are self employed and 12% are professionals.

51
4.2.3 EDUCATION LEVEL OF THE RESPONDENT

TAQBLE4.2.3
SCALE RESPONSE (No. of Person)
SSC 6
PUC 24
Graduate 30
Post Graduate 24
Others 16
TOTAL 100
FIGURE 4.2.3

EDUCATION LEVEL OF THE RESPONDENTS

RESPONSE, SSC,
3, 6%
RESPONSE,
Others, 8, 16%

RESPONSE, PUC,
RESPONSE, Post 12, 24%
Graduate, 12, 24%

RESPONSE,
Graduate, 15, 30%

INTERPRETATION:

The analysis shows that 30% of the respondents are graduates,24% are PUC, 6% are ssc, 24%
are post graduate and rest 16% belongs to others categogries.

52
4.2.4 INCOME GROUP OF THE RESPONDENTS

TABLE 4.2.4

SCALE RESPONSE (No. of Person)

Below 2,50,000 34
2,50,000 22
4,00,000-5,50,000 42
5,50,000-8,00,000 2
8,00,000 and above 0
TOTAL 100

FIGURE 4.2.4

INCOME GROUP OF THE RESPONDENTS

RESPONE,
550000-800000, 1,
2% RESPONE, 800000
and above, 0, 0%

RESPONE, Below
RESPONE, 250000, 17, 34%
400000-550000,
21, 42%

RESPONE,
250000-400000,
11, 22%

INTERPRETATION:

The analysis shows that 42% of respondents are having income between 4,00,000-5,50,000,
22% of the respondents are having income between 2,50,000-4,00,000, 34% of respondents
have income below 2,50,000, 2% of the respondents have income between 5,50,000-8,00,000
and 0% of respondents have income between 8,00,000 & above.

53
4.2.5 MONTHLY HOUSEHOLD INCOME THAT COULD BE
ACCESIBLE FOR INVESTMENT
TABLE 4.2.5
SCALE RESPONSE (No. of Person)
10-15% 64
16-20% 8
21-25% 18
26-30% 10
30% & above 0
TOTAL 100

FIGURE 4.2.5

PERCENTAGE OF INCOME ACCESIBLE FOR INVESTMENT

response, 26-30%,
5, 10%
response, 30% &
above, 0, 0%

response, 21-
25%, 9, 18%

response, 10-15%,
response, 16-20%, 32, 64%
4, 8%

INTERPRETATION:

The analysis shows that 64% of respondents invest 10-15% of their income 10% of
respondents invest 26-30% of their income, 18% of the respondents invest 21-25% of their
income, 8% of the respondents invest 16-20% of their income and 0% of respondents invest
30% & above of their income.

54
4.2.6 INVESTMENT OBJECTIVE OF THE RESPONDENT
TABLE 4.2.6
SCALE Response (No. of Person)

Dividend Gain 0

Capital Gain 16

Tax Saving 38

Return 30

Low Risk & Low Return 8

High Risk & High Return 8

TOTAL 100

FIGURE 4.2.6

PERCENTAGE OF INVESTMENT OBJECTIVE OF THE

RESPONDENT
INVESTMENT
OBJECTIVE, High INVESTMENT
Risk & High Return, OBJECTIVE,
4, 8% Capital Gain, 8,
16%
INVESTMENT
OBJECTIVE, Low
Risk & Low Return,
4, 8%

INVESTMENT
INVESTMENT OBJECTIVE, Tax
OBJECTIVE, Saving, 19, 38%
Return, 15, 30%

INTERPRETATION:

The analysis shows that maximum i.e. 38 % of respondents choose Tax saving as their
investment objective and minimum i.e. 0% of respondents choose Dividend gain as their
investment objective.

55
 4.2.7 AWARENESS ABOUT VARIOUS MUTUAL FUND SCHEMES
TABLE 4.2.7
SCALE Response (No. of Person)
Banks 26
Agents 32
Newspaper 4
Television 8
Friends 30
TOTAL 100

FIGURE 4.2.7

PERCENTAGE OF AWARENESS AMONGST

RESPONDENTS ABOUT MUTUAL FUNDS SCHEMES

Know about
Know about
various Mutual
various Mutual
Fund Schmes,
Fund Schmes,
Banks, 13, 26%
Friends, 15, 30%

Know about various

Know about various Mutual Fund
Mutual Fund Schmes, Agents, 16,
Schmes, Television, 32%
4, 8% Know about various
Mutual Fund
Schmes, Newspaper,
2, 4%

INTERPRETATION:

The analysis shows that 32% of respondents are come to know about various Mutual Fund
from Agents, 26% fom banks,30% from friends, 8% form television and4% of them from
Newspaper.

56
4.2.8 TIME DURATION OF INVESTMENT

TABLE 4.2.8

SCALE RESPONSE(No. of Person)

Less than 3 months 18
3 months – 6 months 8
6 months – 8 months 4
8 months – 12 months 18
More than 12 months 52
TOTAL 100

FIGURE 4.2.8

PERCENTAGE OF TIME DURATION OF

TIME
INVESTMENT DURATION
(INVESTMENT),
Less than 3
months, 9, 18%

TIME
DURATION
(INVESTMENT),
3 months - 6
TIME months, 4, 8%
DURATION TIME
(INVESTMENT), DURATION
More than 12 (INVESTMENT),
months, 26, 52% 6 months - 8
months,
TIME2, 4%
DURATION
(INVESTMENT),
8 months - 12
months, 9, 18%

INTERPRETATION:

The analysis shows that 52% of respondents investing from more than 12 months , 18% are
investing from 8 months-12 months, another 18% are investing from less than 3 months, 8%
are investing from 3 months-6 months and 4% of them are investing from 6 months – 8
months.

57
4.2.9 INVESTMENT IN MUTUAL FUNDS
TABLE 4.2.9
SCALE RESPONSE (No. of Person)
Yes 80
No 20
TOTAL 100

FIGURE 4.2.9

PERCENTAGE OF INVESTMENT IN MUTUAL

FUNDS

INVESTIN IN
MUTUAL FUND,
No, 10

INVESTIN IN
MUTUAL FUND,
Yes, 40

INTERPRETATION:

The analysis shows that 80% of respondents investing in Mutual Fund and 20% of
respondents not investing in Mutual Fund.

58
 4.2.10 OTHER INVESTMENT OPTIONS

TABLE 4.2.10

SCALE RESPONSE (No. of Person)

Fixed Deposit 16
Post Office 4
Govt. Bonds 32
Insurance 18
Gold 2
Home Loan 0
Equity/ Shares 8
Real State 20
TOTAL 100
FIGURE 4.2.10

PERCENTAGE OF OTHER INVESTMENT

OPTIONS

20% 16% 4%
Real Fixed Deposits Post O ffice
Estate

8%
0%
Shares
Home
Loan 32%
2% 18% Govt. Bonds
Gold Insurance

INTERPRETATION:

The analysis shows that maximum32 respondents invest in Govt. Bond and minimum 0
respondents invest in Home Loans.

59
4.2.11 INVESTING SECTOR

TABLE 4.2.11

SCALE RESPONSE (No. of Person)

Govt. Sector 54
Private Sector 46
TOTAL 100
FIGURE 4.2.11

PERCENTAGE OF INVESTING SECTOR

Investint Sector,
Private Sector, 23
Investint Sector,
Govt. Sector, 27

INTERPRETATION:

The analysis shows that 54% respondents are investing in Govt. Sector
and 46% respondents are investing in Private Sector.

60
4.2.12 MOST OF THE INVESTMENTS DONE

TABLE 4.2.12

SCALE RESPONSE (No. of Person)

Saving A/c and PO Schemes 8
Mutual Fund investing in Bond 38

Mutual Fund investing in Stocks 28

Balanced Mutual Fund 6
Individual Stocks & Bonds 4
Ulips 8
Other instruments like Real State, Gold 8
TOTAL 100
FIGURE 4.2.12

PERCENTAGE OF MOST OF THE INVESTMENTS

DONE

8%
8% Other Saving A/c 8%
Instruments Ulips
4%
Individual Stocks
&Bonds

6%Balanced 38%
Mutual fund Mutual Fund
28% investing in
Mutual Fund Bond
investing in
Stocks

INTERPRETATION:

The analysis shows that maximum19 respondents was invested in Mutual Fund investing in
Bonds and minimum 2 respondents was invested in Individual Stock & Bonds.

61
4.2.13 REASONS TO CONSIDER FOR INVESTMENT

TABLE 4.2.13

SCALE RESPONSE (No. of Person)

Safety of Capital 34
Low Risk 20
High Returns 46
Maturity 0
TOTAL 100

FIGURE 4.2.13

PERCENTAGE OF REASONS TO CONSIDER FOR

REASON
INVESTMENT
(INVESTMENT),
Maturity, 0, 0%

REASON
REASON
(INVESTMENT),
(INVESTMENT),
Safety of Capital,
High Returns, 23,
17, 34%
46%

REASON
(INVESTMENT),
Low Risk, 10,
20%

INTERPRETATION:

The analysis shows that 46% respondents are investing in Mutual Fund & Other investment
options for High Returns and 0% respondents are investing in Mutual Fund & Other
investment options for Maturity.

62
4.2.14 INVESTMENTS IN SHARE MARKET

TABLE 4.2.14

SCALE RESPONSE (No. of Person)

Yes 26
No 74
TOTAL 100
FIGURE 4.2.14

PERCENTAGE OF INVESTMENT IN SHARE

MARKET

INVEST IN SHARE
MARKET, YES, 13,
26%

INVEST IN SHARE
MARKET, NO, 37,
74%

INTERPRETATION:

The analysis shows taht74% respondents not investing their money in share market and 26%
respondents investing their money in share market.

63
4.2.15 MONITORING OF INVESTMENTS

TABLE 4.2.15

SCALE RESPONSE (No. of Person)

Daily 4
Weekly 0
Monthly 50
Yearly 46
TOTAL 100

FIGURE 4.2.15

PERCENTAGE OF MONTORING THE INVESTMENT

INVESTMENT
TIMING, Daily, 2,
4%

INVESTMENT
TIMING, Yearly, 23,
46%
INVESTMENT
TIMING, Monthly,
25, 50%

INTERPRETATION:

The analysis shows that 50% respondents are investing their money in monthly basis and 0%
respondents are investing their money in weekly basis.

64
4.2.16 SATISFACTION LEVEL IN MAKING INVESTMENTS

TABLE 4.2.16

SCALE RESPONSE (No. of Person)

Low 52
Moderate 26
High 22
TOTAL 100
FIGUREV 4.2.16

PERCENTAGE OF SATISFACTION LEVEL IN

MAKING INVESTMENTS

Comfort level in Comfort level in

making Investment making Investment
Decicion, Low, 26 Decicion, High, 11

Comfort level in
making Investment
Decicion,
Moderate, 13

INTERPRETATION:

The analysis shows that 52% respondents have their comfort level in making investment
decision as low and 22% respondents have their comfort level in making investment decision
as high.

65
4.2.17 FIRST INVESTMENT CHOICE IN FUTURE
TABLE 4.2.17
SCALE RESPONSE (No. of Person)
Canara Bank Mutual Fund 0
HSBC Mutual Fund 2
ICICI Prudential Mutual Fund 18
Birla Sun Life Mutual Fund 6
Tata Mutual Fund 14
Sahara Mutual Fund 6
Standard Charted Mutual Fund 0
SBI Mutual fund 54
TOTAL 100

FIGURE 4.2.17

PERCENTAGE OF FIRST INVESTMENT CHOICE IN

FUTURE
2%
0% HSBC Mutual fund
18%
Canara Bank Mutual
ICICI Prudential Mutual
Fund Fund
6%
54% Birla Sun Life Mutual
SBI Mutual fund Fund

14%
Tata Mutual Fund

6%
Sahara Mutual Fund
0%
Standard Charted
Mutual Fund

INTERPRETATION:

The analysis shows that 27 respondents want to invest in future in SBI Mutual Fund and 0
respondents want to invest in future in Canara Bank Mutual Fund & Standard Charted Mutual
Fund.

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5.0)FINDINGS
The findings from the study are as under:

 The people are basically of conservative nature and hence are very precautious about
their hard earned money. Hence they would like to play it safe when it comes to
spending of their money.
 Security and returns are the two main reasons that are taken into consideration before
making an investment.
 Bank fixed deposits and post office savings seem to be most preferred one among the
investors because it is considered to be the most secured one.
 Shares and mutual funds were considered to be very risky and hence that seemed to
be the last choice of the general mass
 Amongst mutual fund and shares people preferred shares because the possessed
complete knowledge about the shares but had very little knowledge about the mutual
fund industry.
 The people who do not invest in mutual fund basically fear that they are less secured
as compared with other investments.
 The others were aware about the concept of mutual fund but were not full aware of its
intricacy hence were not interested in investing in it.
 Most of the investors who invest in Mutual Fund substitute the same against the Bank
Deposits, insurance and other saving schemes. The investors are not willing to invest
in mutual fund industry unless they are guaranteed about minimum returns.
 The increase in mutual fund and various schemes have left many investors confused
as to which scheme to opt for even if they want to invest in mutual fund.
 The increase in Mutual fund and various schemes have increased competition. Hence
it has been remarked by many investors “mutual funds are too busy trying to race
against each other”. As a result they lose their stabilizing factor in the market

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5.1)SUGGESTIONS

 Educate the people: There are lots of alternatives available in the present time. But
because of lack of knowledge people are not ready to try them. Even because of the
fear to try new ones the investment industry has limited itself. The same can be done
through arranging events that promote such innovations.
 Preconceptions rule: The preconceptions that a person carries tries rule his
investment decisions. The past record of shares and mutual fund restrict the people in
investing in the same. Though the rules and regulations have changed a lot but there
are still people who are not ready to accept such facts.
 Let them know where there amount in reinvested: The investors should know that
the amount that is invested in the company how the funds are used and for what
purpose .They have the right to know where are their funds reinvested i.e. the
companies should be transparent.
 Do not cut others line for showing yourself bigger: The promoters to promote their
funds degrading the other modes of investment and hence this limits their investment
scopes itself because this act degrades the company in the eyes of the customers
 Lead through Innovation: Although there is enough room in the market,
unfortunately in Indian market, all mutual funds have been chasing the same set of
investors with the same set of products and inducements. Product differentiation is the
first step towards escaping competition and attracting more investors.
 Manage risks through derivatives: India has a wide range of derivatives products in
the market. Mutual Fund should also come forward with more of such products. In the
Business World dated 24th November 2003 there was news that Benchmark fund is
coming out with an Equity Arbitrage Fund called “Dynamic Arbitrage Fund”.
Otherwise SEBI has not allowed any AMC to float a hedge fund in India.
 Disclosure of risks: The fund should disclose the level of risk associated with the
investment in the fund return in offer documents and is comparative levels of Return
and risk.
 Educating the Agents: While investing the agents/ salesmen should clearly explain
the investors all the features both positive as well as negative associated with the
fund.

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 Simple terminology: The details of both facts and figures should be in Plain English
and figures must be explained, for example when Sharpe ratio is mentioned they
should clearly tell its significance.
 Customer care division: Along with internet access the customers' queries about any
schemes should be answerable and attract through well suitable counseling.

• add new features in its policies

• focus on advantage of its policies

• sale the benefits to the customers

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5.3)CONCLUSION

The”future of primary market is emerging at a very high speed. Taking this thing into
consideration, there are lots of opportunities for the Mutual Funds Management Private
Limited to tap the golden opportunities from the Indian market.”

Mutual”Funds Management Pvt. Ltd has come out a very strong player in the field of
distribution of financial product within a short period of one year time in Northern India and
is giving firm competition to all the players in the market including the banks. ”It is
expanding its area of business, if the growth of MF goes in the same way, than I can say that
there is bright future for MF in coming years. They have much potential to expand their
distribution network in northern India.”

The” company is currently following huge investment and growth strategies. Apart from the
market growth rate the distribution industry doesn’t seem so attractive. ”Hence the firm
should be selective using growth strategies. This is not to undermine the bright future of MF,
just a check to be a cautious.”

“There is slight consciousness about mutual fund in India; people have accepted it as a one of
the major investment avenue. Mutual funds will become one of the sought after investment
avenues. As far as the other investment products marketed by MF are concerned, they have a
ready market. The only thing, which it needs to focus on, is that they should have a strong
network so that prompt services and availability of forms is made accessible to the investor at
a short notice, and if it keeps the traditional base for marketing in India, which is a price
sensitive market, we can say that MF has a great future ahead.” The government also has to
take some measures to encourage people to invest in mutual funds. Government prescribed a
common format for all mutual funds schemes to disclose their portfolios at half-yearly
intervals. MFs are required to disclose various types of instruments and percentage of
investment in each script to the total NAV. It is believed that these measures could lift the
confidence of investor towards mutual fund industry which has been crippled for years

The government also has to take some measures to encourage people to invest in mutual
funds. Government prescribed a common format for all mutual funds schemes to disclose

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their portfolios at half-yearly intervals. MFs are required to disclose various types of
instruments and percentage of investment in each script to the total NAV. It is believed that
these measures could lift the confidence of investor towards mutual fund industry which has
been crippled for years

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