INTRODUCTION

Investment can be defined as an item of value purchased for income or capital appreciation.
Investments are made to achieve a specific objective andsavings are made to meet an
unforeseen [Link] are various avenues of investments in accordance with individual
preferences. Investments are made in different asset classes depending on anindividual’s risk
and return characteristics Investment choices are physical assetsand financial [Link] and
Real estates are examples of physical assets, which have a physical form to them. There is a
strong preference for these assets, as theseassets can be purchased with cash and held for a
long term. The obviousdisadvantages with physical assets are the risks of loss and theft, lower
levels of return; illiquid secondary markets; and adhoc valuations and [Link]
assets are securities, which are certificates embodying afinancial contract between parties.
Bonds, Equity shares, Deposits and Insurance policies are some of the examples of financial
assets. In financial assets investorsonly hold the proof of their investments in the form of a
certificate or [Link] products are usually liquid, transferable and in most cases,
storedelectronically with high degree of [Link] a minimum amount of cash is always kept in
hand for transactions and contingencies. To face the contingencies and unexpected eventsthe
insurance came into [Link] avenue of investment is mutual funds. It is created
wheninvestors put their money together. It is therefore a pool of the investor’s [Link] most
important characteristics of a mutual fund is that the contributors andthe beneficiaries of the
fund are the same class of people, namely the [Link] term mutual means that investors
contribute to the pool, and also benefitfrom the pool. There are no other claimants to the funds.
The pool of funds heldmutually by investors is the mutual fund.
3
A mutual fund pools the money of people with similar investmentgoals. The money in turn is
invested in various securities depending on theobjectives of the mutual fund scheme, and the
profits (or loss) are shared amonginvestors in proportion to their [Link] fund
schemes are usually open-ended (perpetually open for investments and redemptions) or closed
end (with a fixed term). A mutual fundscheme issues units that are normally priced at Rs.10
during the initial [Link], the number of units you own as against the total number of units
issued bythe mutual fund scheme determines your share in the profits or loss of a [Link]
the case of open-end schemes, units can be purchased from or sold back to the fund at a Net
Asset Value (NAV) based price on all business [Link] NAV is the actual value of a unit of the
fund on a given [Link], when you invest in a mutual fund scheme, you normally get an
accountstatement mentioning the number of units that have been allotted to you and the NAV
based price at which the units have been allotted. The account statement issimilar to your bank
[Link] funds invest basically in three types of asset classes:
Stocks:
Stocks represent ownership or equity in a company, popularly known asshares.
Bonds:
These represent debt from companies, financial institutions or Government agencies.
4

Money market instruments:

These include short-term debt instruments such astreasury bills, certificate of deposits and inter-
bank call money.

A mutual fund’s business is to invest the funds thus collected, according to thewishes of the
investors who created the pool. In many markets these wishes arearticulated as investment
[Link] of The perception towards these mutual funds is done herein this project.
Even what factors the investors look before investing can also beobserved.
5

OBJECTIVES
•
To study the level of awareness of mutual funds
•
To analyse the perception of investors towards mutual funds.
•
To study the factors considered by the investors and those whichultimately influence him while
investing.
•
To determine the type of mutual fund investor prefers the most.
RESEARCH METHODOLOGY
6

Primary data is data that is tailored to a company’s needs, by customizing trueapproach focus
groups, survey, field-tests, interviews or [Link] data delivers more specific results
than secondary research,which is an especially important consideration when one launching a
new product or service. In addition, primary research is usually based on
statisticalmethodologies. The tiny sample can give an accurate representation of a particular
[Link] data is based on information gleaned from studies previously performed by
government agencies, chambers of commerce, trade associationsand other organizations. This
includes census bureau information. Much kind of this information can be found in libraries or on
the web, but looks and business publications, as well as magazines and [Link]
of individual investment patterns can be done by this primarydata analysis. In this project I have
done a survey with a questionnaire with asample size of 100 individuals who are employees and
tax payees. Thequestionnaire includes the economic status of the individuals, age group,
maritalstatus, investments made [Link] Karvy securities ltd. distributes several investment
products likemutual funds, insurance, shares, debentures etc. This survey will help them
indeveloping marketing strategies for their investment products.

LIMITATIONS
Geographic Scope: The sample used for the study has been taken from theinvestors of the twin
cities Hyderabad and [Link] work: Sampling frame (i.e the list of population
members) from which thesample units are selected was incomplete as it takes into
consideration only those(target investors) who have made their investments during March and
[Link] adequate care was taken to elicit the accurate information from
therespondents, some of them have felt difficulty in crystallizing their feelings intowords. Apart
from the problem faced in articulating, it is the validity of thefeedback can be [Link]
the above limitations the study is useful in that it does point out thetrends and helps to identify
the dimensions for improving the scope of mutualfunds.
8
MUTUAL FUNDS
9

THEORITICAL BACKGROUND

Mutual fund is a mechanism for pooling the resources by issuing units to theinvestors and
investing funds in securities in accordance with objectives asdisclosed in offer document.A
mutual fund is an investment vehicle for investors who pool their savings for investing in
diversified portfolio of securities with the aim of attractive yieldsand appreciation in their
[Link] in securities are spread across a wide cross-section of industries andsectors
and thus the risk is reduced .Mutual funds issues units to the investors inaccordance with
quantum of money invested by them. Investors of mutual fundsare known as unit-holders. The
profit or losses are shared by the investors in proportion to their investments. The mutual funds
normally come out with anumber of schemes with different investment objectives, which are
launchedfrom time to time. A mutual fund is required to be registered with securities
andexchange board of India.A mutual fund is setup in the form of a trust, which has1. Sponsor
2. Trustees3. Asset Management Company and4. [Link] trust is established by a
sponsor or more than one sponsor who is like promoter of a company. The trustees of mutual
fund hold its property for the benefit of the unit-holders. Asset management company (AMC)
approved bySEBI manages the funds by making investments in various types of
[Link] asset management companies (AMC) management mutual fundschemes.
Different business groups have sponsored these AMC some international funds are also
operation independently in India like Aliens andTemplate.
10

A BRIEF HISTORY OF MUTUAL FUND

The concept of” mutual fund” is a new feather in Indian capital market but not tointernational
capital markets. The formal origin of mutual funds can be traced toBelgium where society
generated Belgium was established in 1822 as aninvestment company to finance investments in
National Industries with highassociated risk. The concept of mutual funds spread to USA in the
beginning of 20
th
century and three investment companies were started in 1924 since

then theconcept of mutual funds has been growing all around the worldIn India, first mutual fund
was started in 1964 when unit trust of India (UTI) wasestablished in the similar line of operation
of the [Link] term ‘Mutual fund’ has not been explained in British literature but it isconsidered
as synonym of investment trust of
DEFINITIONS

The concept of mutual fund has been defined in various ways.“The mutual fund as an important
vehicle for bringing wealth holders and deficitunits together indirectly”

...Mr. James pierce“Mutual fund as financial intermediaries which being a wide variety of
securitieswith in the reach of the most modest of investors”.…Frank RelicyAccording to SEBI
mutual fund regulations 1993, “Mutual fund means a fundestablished in the form of trust by
sponsor to raise moneys by the trusteesthrough the sale of units to the public under one or
more schemes for investing insecurities in accordance with these regulations.
11
CONCEPT OF MUTUAL FUNDS
A Mutual Fund is a trust that pools the savings of a number of investorswho share a common
financial goal. The money thus collected is then invested incapital market instruments such as
shares, debentures and other securities. Theincome earned through these investments and the
capital appreciation realizedare shared by its unit holders in proportion to the number of units
owned bythem. Thus a Mutual Fund is the most suitable investment for the common manas 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:

12

Value Chain of Mutual Fund

VALUE CHAIN OF MUTUAL FUND
SPONSOR:
Any person who, acting alone or in combination with another body corporate,establishes a
mutual fund.
Asset Management Company
A firm that invests the pooled funds of retail investors in securities in linewith the stated
investment objectives. For a fee, the investment company provides more than diversification,
liquidity, and professional managementservice than is normally available to individual investors.
Trustee
The Board of Trustees or the Trustee company who hold the property of theMutual Fund in trust
for the benefit of the unit holders.
Mutual Fund
A fund established in the form of a trust to raise money through the sale of units to the public or
a section of the public under one or more schemes for investing in securities, including money
market instruments.
Transfer Agent
13

A transfer agent is employed by a mutual fund to maintain records of shareholder accounts

calculate and disburse dividends and prepare and mailshareholder account statements, federal
income tax information and other shareholder notices.
Custodian
Mutual funds are required by law to protect their portfolio securities by placing them with a
custodian. Nearly all mutual funds use qualified bank custodians.
Unit HolderA person who is holding units in a scheme of a mutual [Link] OF
SCHEMES
•
By StructureOpen-ended
A scheme where investors can buy and redeem their units on any business [Link] units are not
listed on any stock exchange but are bought from and sold to themutual fund.
Close-ended
A mutual fund scheme that offers a limited number of units, which have a lock-in period, usually
of three to five years. The units of closed-end funds are oftenlisted on one of the major stock
exchanges and traded like securities at prices,which may be higher or lower than its [Link]
India 90% of the schemes isopen-ended fund and the rest 10% is close-ended funds. There are
1062 open-ended funds and 119 close-ended funds.
14
By Objective
A scheme can also be classified as growth scheme, income scheme, or balancedscheme
considering its investment objective. Such schemes may be open-endedor close-ended
schemes as described earlier. Such schemes may be classifiedmainly as follows:
Growth / Equity Oriented Scheme
The aim of growth funds is to provide capital appreciation over the medium tolong- term. Such
schemes normally invest a major part of their corpus inequities. Such funds have comparatively
high risks. These schemes providedifferent options to the investors like dividend option, capital
appreciation, [Link] the investors may choose an option depending on their preferences.
Theinvestors must indicate the option in the application form. The mutual funds alsoallow the
investors to change the options at a later date. Growth schemes aregood for investors having a
long-term outlook seeking appreciation over a periodof time.
15
Income / Debt Oriented Scheme
The aim of income funds is to provide regular and steady income to [Link] schemes
generally invest in fixed income securities such as bonds,corporate debentures, Government
securities and money market [Link] funds are less risky compared to equity
schemes. These funds are notaffected because of fluctuations in equity markets. However,
opportunities of capital appreciation are also limited in such funds. The NAVs of such funds
areaffected because of change in interest rates in the country. If the interest ratesfall, NAVs of
such funds are likely to increase in the short run and vice [Link], long-term investors
may not bother about these fluctuations.
Balanced Fund
The aim of balanced funds is to provide both growth and regular income as suchschemes invest
both in equities and fixed income securities in the proportionindicated in their offer documents.
These are appropriate for investors lookingfor moderate growth. They generally invest 40-60%
in equity and debtinstruments. These funds are also affected because of fluctuations in share
pricesin the stock markets. However, NAVs of such funds are likely to be less volatilecompared
to pure equity funds.
Money Market or Liquid Fund
These funds are also income funds and their aim is to provide easy liquidity, preservation of
capital and moderate income. These schemes invest exclusivelyin safer short-term instruments
such as treasury bills, certificates of deposit,commercial paper and inter-bank call money,
government securities, etc. Returnson these schemes fluctuate much less compared to other
funds. These funds areappropriate for corporate and individual investors as a means to park
their surplus funds for short periods.
16
Gilt Fund
These funds invest exclusively in government securities. Government securitieshave no default
risk. NAVs of these schemes also fluctuate due to change ininterest rates and other economic
factors as, is the case with income or debtoriented schemes.
Index Funds
Index Funds replicate the portfolio of a particular index such as the BSESensitive index, S&P
NSE 50 index (Nifty), etc These schemes invest in thesecurities in the same weightage
comprising of an index. NAVs of such schemeswould rise or fall in accordance with the rise or
fall in the index, though notexactly by the same percentage due to some factors known as
"tracking error" intechnical terms. Necessary disclosures in this regard are made in the offer
document of the mutual fund [Link] are also exchange traded index funds launched by
the mutual funds thatare traded on the stock exchanges.
AVENUES OF INVESTMENTS
Savings form an important part of the economy of any nation. With the savingsinvested in
various options available to the people, the money acts as the driver for growth of the country.
Indian financial scene too presents a plethora of avenues to the investors.
Banks:
Considered as the safest of all options, banks have been the roots of the financialsystem in
India. For an ordinary person though, they have acted as the safestinvestment avenue wherein
a person deposits money and earns interest on it. Oneand all have effectively used the two
main modes of investment in banks, savingsaccounts and fixed deposits. However, today the
interest rate structure in the
17

country is headed southwards, keeping in line with global trends. With the banksoffering little
above 7% in their fixed deposits for one year, the yields have comedown substantially in recent
times. Add to this, the inflationary pressures ineconomy and you have a position where the
savings are not earning. Theinflation is creeping up, to almost 8% at times, and this means that
the value of money saved goes down instead of going up. This effectively mars any change f
gaining from the investments in banks.
Post office Schemes
Among all saving options, post office schemes have been offering the highestrates. Added to it
is that the investments are safe with the department being agovernment of India entity. So the
two basic and most sought for features, thoseof return safety and quantum of returns were
being handsomely taken care of Public Provident Funds act as options to save for the post
retirement period for most people and have been considered good option largely due to the fact
thatreturns were higher than most other options and also helped people gain from tax benefits
under various sections. The following are the post office savingsschemes available for the
investors:
Monthly Income scheme:
This scheme offers an interest of 8%p.a, payable monthly and a bonus of 10% payable at
maturity after 6 years. There is no tax deductible at source (TDS)applicable on investments
made in this scheme.
National Savings Scheme:
This scheme offers an interest of 8% p.a; compounded half yearly and payableat maturity in 6
years.
18

Post Office Time Deposits:

There are 4 options available to investors depending on the term of investmentdesired by the
investor. They are:1 year) this gives an interest of 6.25% p.a2 year) This gives an interest of
6.5% p.a3 year) This gives an interest of 7.25% p.a4 year) This gives an interest of 7.5% p.a
Kisan Vikas Patra:
An important feature of this scheme is that it assures that the money investeddoubles in 8 years
and 7 months.
Public Provident Fund:
This scheme gives a return of 8% per annum, compounded annually for maturity of 15 years.
Government of India Bonds:
The GOI Bonds have the following investment options:
6.5% Tax free bonds
There is no ceiling on the amount of investment in these bonds. The effectiveyields of these
bonds are 9.28% p.a for the period of 5 years and prematureencashment

option available to investors only after the completion of 3 years.

19

8% Taxable Bonds
:These bonds do not have any TDS charged on them. There is no maximumlimit of investment
in these bonds but there should be a minimum investment of Rs.1, 000. The maturity period is 6
years. The investor has the option of interest payable half yearly or cumulative. The investors
can also avail tax benefit under section 80L of income Tax Act, up to Rs. 15,000.
Company Fixed Deposits:
Companies have used fixed deposit schemes as a means of mobilizing fundsfor their operations
and have paid interest on them. The safer a company is rated,the lesser the return offered has
been the thumb rule. However, there are several potential roadblocks in [Link] danger of
financial position of the company not being understood by theinvestor lurks.1. Liquidity is a
major problem with the amount being received monthlyafter the due dates.2. The safety of
principal amount has been found lacking.
Stock markets:
Stock markets provide an option to invest in a high risk, high return [Link] the potential
return is much more than 10-11% any of the optionsdiscussed above can generally generate,
the risk is undoubtedly of the highestorder. However, as it might appear, people generally are
clueless as to how thestock market functions and in the process can endanger the hard-earned
[Link] those who are not adept at understanding the stock market, the task of generating
superior returns at similar levels of risk is arduous to say the [Link] is where mutual funds
come into picture.
20

COMPARISION OF OTHER AVENUES WITH MUTUAL FUNDS

The mutual fund sector operates under stricter regulations as compared tomost other
investment avenues. Apart from offering investors tax efficiency andlegal comfort, how do
mutual funds compare with other products?
Company Fixed Deposits versus Mutual Funds
Fixed deposits are unsecured borrowings by the company accepting thedeposit. Credit rating of
the fixed deposit program is an indication of the inherentdefault risk in t he investment. The
money of investors in a mutual fund schemeare invested by the AMC in specified investments
under that scheme. Theseinvestments are held and managed in-trust for the benefit of the
scheme’sinvestors. On the other hand, there is no such direct correlation between acompany’s
fixed deposit mobilization, and the avenues where it deploys [Link] can be no
certainty of yield, unless a named guarantor assures areturn or to a lesser extent, if the
investment is in a serial gilt scheme. O the other hand, the return under a fixed deposit is
certain, subject only to the default risk of the [Link] basic value at which fixed deposits
are encashable is not subject tomarket risk. However, the value at which units of a scheme are
redeemedentirely depends on the market. If securities have gained value during the period,then
the investor can even earn that is higher than what she anticipated when sheinvested.
Conversely, she could also end up with a [Link] encashment of fixed deposits is always
subject to a penalty charged by the company that accepted the fixed deposit. Mutual fund
schemes also havethe option of charging a penalty on ”early” redemption of units (by way of
an“exit load”).
21

Bank Fixed Deposits versus Mutual Funds

Bank fixed deposits are similar to company fixed deposits. The major difference is that banks
are more stringently regulated than are companies. Theyeven operate under stricter
requirements regarding Statutory Liquidityratio(SLR) and Cash Reserve Ratio (CRR) mandated
by [Link] the above are for comfort, bank deposits too are subject to defaultrisk. However,
given the political and economic impact of bank defaults, thegovernment as well as Reserve
Bank of India (RBI) tries to ensure that banks donot [Link], the Deposit Insurance and
Credit Guarantee Corporation(DICGC) protect bank deposits up to Rs. 100,000. The monetary
ceiling of Rs.100,000 is for all the deposits in all the branches of a bank, held by thedepositor in
the same capacity and right.
Bonds and Debentures versus Mutual funds
As in the case of fixed deposits, credit rating of a bond or debenture is anindication of the
inherent default risk in the investment. However, unlike fixeddeposits, bonds and debentures
are transferable [Link] an investor may have an early encashment option from the
issuer ( for instance through a “put” option), liquidity is generally through a listing in themarket,
implications of this are:The value that the investor would realize in an early exit is subject
tomarket risk. The investor could have a capital gain or a loss. This aspect issimilar to a mutual
fund scheme.A hypothecation or mortgage of identified fixed and / or current assetscould back
debt securities, e.g secured bonds or debentures. In such a case, if
22

there is a default, the identified assets become available for meeting

[Link] unsecured bond or debenture is for all practical purposes like a
fixeddeposit, as far as access to assets is concerned.A custodian for the benefit of investors in
the scheme holds the investmentof a mutual fund scheme.
Equity versus Mutual fund
Investment in both equity and mutual funds are subject to market [Link] in an open-
end mutual fund eliminates this direct risk of not beingable to dell the investment in the market.
An indirect risk remains, because thescheme has to realize its investments to pay investors.
The AMC is however in a better position to handle the situation. Further, on account of various
SEBIregulations, such as illiquid securities are likely to be only a part of the scheme’s
[Link] benefit of equity mutual fund scheme is that they give investors the benefit of
portfolio diversification through a small investment.
23

RISK AND RETURN GRID:

An investor has mainly three investment objectives.
1. Safety of Principal
2. Return
3. Liquidity

Pricing
The net asset value of the fund is the cumulative market value of the asset fundnet of its
liabilities. In other words, if the fund is dissolved or liquidated, byselling off all the assets in the
fund, this is the amount that the shareholderswould collectively own. This gives rise to the
concept of the net asset value per unit, which is the value, represented by the ownership of one
unit in the fund. Itis calculated simply by dividing the net asset value of the fund by the number
of units. However, most people refer loosely to the NAV per unit as NAV, ignoringthe “per unit”.
We also abide by the same convention.
24
Calculation of NAV
The most important part of the calculation is the valuation of the assetsowned by the fund. Once
it is calculated, the NAV is simply the net value of assets divided by the number of units
outstanding. The detailed methodology for the calculation of the asset value is given below.
Asset value = (Value of investments+ receivables+ accrued income+ othercurrent assets-
liabilities- accrued expenses) /Number of units [Link] OF INVESTING IN
MUTUAL FUND:Number of options available
Mutual funds invest according to the underlying investment objective asspecified at the time of
launching a scheme. Mutual fund have equity funds, debtfunds, gilt funds and many others that
cater to the different needs of the [Link] equity funds can be as risky as the stock
markets themselves, debt fundsoffer the kind of security that is aimed for at the time making
investments. Theonly pertinent factor here is that the fund has to be selected keeping the risk
profile of the investor in mind because the products listed above have differentrisks associated
with them.
Diversification
Diversification reduces the risk because all stocks don’t move in the samedirection at the same
time. One can achieve this diversification through a MutualFund with far less money that one
can on his own.
Professional Management
25
Mutual Funds employ the services of the skilled professionals who haveyears of experience to
back them up. They use intensive research techniques toanalyze each investment option for the
potential of returns along with their risk levels to come up with the figures for the performance
that determine thesuitability of any potential investment.
Potential of returns
Returns in the mutual are generally better than any option in any other avenue over a
reasonable period of time. People can pick their investmenthorizon and stay put in the chosen
fund for the duration.
Liquidity
The investors can withdraw or redeem money at the Net Asset Valuerelated prices in the open-
end schemes. In the Closed-end Schemes, the units can be transacted at the prevailing market
price on a stock exchange. Mutual Fundsalso provide the facility of direct repurchase at NAV
related prices.
Well Regulated
The Mutual Fund industry is very well regulated. All investment has to beaccounted for,
decisions judiciously taken. SEBI acts as a true watch dog in thiscase and can impose penalties
on the AMC’s at fault. The regulations designed to protect the investors interests are
implemented effectively.
Transparency
Being under a regulatory frame work, Mutual Funds have to disclose their holdings, investment
pattern and all the information that can be considered asmaterial, before all investors. This
means that investment strategy, outlooks of the markets and scheme related details are
disclosed with reasonable frequencyto ensure that transparency exists in the system.
26
Flexible, Affordable and Low costMutual Funds offer a relatively less expensive way to invest
whencompared to other avenues such as capital market operations. The fee in terms of
brokerages, custodial fees and other management fees are substantially lower than other
options and are directly linked to the performance of the [Link] in Mutual Funds
also offer a lot of flexibility with features such asregular investment plans, regular withdrawal
plans and dividend investment plans enabling systematic investment or withdrawal of funds.
Convenient Administration
Investment in the mutual fund reduces paper work and helps you avoidmany problems such as
bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds
save your time and make investing easyand convenient.
TAXATION ON MUTUAL FUNDS
An Indian mutual fund registered with the SEBI, or schemes sponsored byspecified public
sector banks/financial institutions and approved by the centralgovernment or authorized by the
RBI are tax exempt as per the provisions of section 10(23D) of the income tax act. The mutual
fund will receive all incomewithout any deduction of tax at source under the provisions of section
196(iv), of the income tax act.
27
INDUSTRIAL PROFILE
28

MUTUAL FUND INDUSTRYINDUSTRY OVERVIEW

The financial markets in India are in the process of maturing. Themarkets witnessed many
structural changes in the years gone by primarily due tothe market regulators proactive
approach to the changes in the global scenario aswell as to meet the needs of domestic
[Link] RBI has carried out major reforms in the Indian financial marketsin the last few
years primarily by reducing Cash Reserve ratio by 4% over threeyears and Bank Rate by 5%
over five years. It is due to measures like these thatthe Indian economy is currently showing
fundamental robustness, with the GDPexpected to grow by almost 8%. With rising exports and
stable inflation of around 5%, the foreign exchange reserves are at an all time high of $118
[Link] interest rates in the country are at record lows and have led to an increase incredit
flow to the commercial [Link] equity markets have passed through a tumultuous phase in
the last3 years. The improving macro-economic fundamentals of the Indian economyhave led
the market players to expect a bright future. During the year, the equitymarkets around the
world are showing good performance. However the marketsin India outperformed the world
major scripts showed around more than 75%growth in last 12 months. The year began with
resumption of peace process withPakistan and end of war in Gulf. The market also has
welcome robust increase inagriculture production with more-than-normal monsoons. Most of
thegroundwork for the disinvestment completed over the last few years, the lastGovernment had
started disinvestments and new government has alreadyacquired shape and started it is not
reluctant of divestment.
29
The debt markets have witnessed a rally for over 2 years and now seemto be stabilizing. The
measures to deepen and widen the debt markets continuedthroughout the year. A key step in
developing the markets was the launch of Negotiated Dealing System (NDS). NDS allows
electronic bidding in primarymarkets, thereby bringing about transparency in trading, electronic
settlement of trades and better monitoring and controls. Issuances of a 30-year paper,
floatersranging from 5 to 15 years and securities with call and put options by thegovernment will
also go a long way in deepening the markets. In a bid toincrease the retail participation, non-
competitive bidding is being encouraged bythe RBI.
INDUSTRY STRUCTUREGlobal Scenario
At the end of 2006:Q3, mutual fund assets worldwide were $ 17.28 trillion,having increased 18
percent over the year 2005:Q3.
Worldwide mutual fund assets
(trillions of US dollars)
30

Worldwide assets of Equity, Bond, Money Market & Balanced fund(

Billions of US dollars)
31
Composition of world Wide mutual fund assets by the types of fund 2006 Q4

Source: [Link]
The end of 2006:Q3, mutual fund assets were split into 44% Equity, 18% Moneymarket, 20%
Bonds, 9% Balanced / Mixed and remaining 8% unclassified.
Worldwide mutual fund assets by region 2006;Q3
32

At the end of 2006:Q3 by region, 55% of the global assets was in America, 34%in Europe and
the remaining 11% in Africa and Asia / Pacific.
World wide mutual funds by the type of fund 2006;Q2
At the end of the fourth quarter of 2006, the number of mutual funds worldwidestood at 54,986.
By type of fund, 41 percent were equity funds, 24 percent were bond funds, 20 percent were
balanced/mixed funds, and 6 percent were moneymarket funds.
Number of funds 2000-2006;Q3
33

MUTUAL FUNDS IN INDIAN SCENARIO

Unit Trust of India was the first mutual fund set up in India in the year 1963. Inearly 1990s,
Government allowed public sector banks and institutions to set upmutual [Link] the year
1992, Securities and exchange Board of India (SEBI) Act was [Link] objectives of SEBI
are – to protect the interest of investors in securities andto promote the development of and to
regulate the securities [Link] far as mutual funds are concerned, SEBI formulates policies
and regulates themutual funds to protect the interest of the investors. SEBI notified regulations
for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were
allowed to enter the capital market. The regulations were fullyrevised in 1996 and have been
amended thereafter from time to time. SEBI hasalso issued guidelines to the mutual funds from
time to time to protect theinterests of investors.
34

All mutual funds whether promoted by public sector or private sector entitiesincluding those
promoted by foreign entities are governed by the same set of Regulations. There is no
distinction in regulatory requirements for these mutualfunds and all are subject to monitoring
and inspections by SEBI. The risksassociated with the schemes launched by the mutual funds
sponsored by theseentities are of similar type. It may be mentioned here that Unit Trust of
India(UTI) is not registered with SEBI as a mutual fund (as on January 15, 2002).In February
2003, following the repeal of Unit Trust of India act 1963; UTI was bifurcated into two separate
entities. One is the specified undertaking of UTIwith assets under the management of Rs.29,
835 crores as at the end of January2003; representing broadly, the assets of US 64 scheme,
assured return andcertain other schemes. The specified undertaking administrator & under
rulesframed by Government of India and does not come under the purview of mutualfund
[Link] second is the UTI mutual fund Ltd sponsored by SBI, BOB & [Link] is registered
with SEBI & functions under the mutual fund regulations. Withthe bifurcation of the erstwhile UTI
which had in March 2000, more than Rs76,000 crores of assets under management and with
setting up of a UTI mutualfund, conforming to the SEBI, mutual fund regulation and with recent
mergerstaking place among different private sector funds, the mutual fund industry hasentered
its current phase of consolidation and [Link] at the end of September,2004, there were 29
funds which manage assets of Rs. 231358.03 crores under 421 schemes.
35
GROWTH IN ASSETS UNDER MANAGEMENT

36

Company Profile
37
The Company Background:
In 1982, a group of Hyderabad-based practicing Chartered Accounts startedKarvy Consultants
Limited with a capital of rs.1, 50,000 offering auditing andtaxation services initially. Later, it
forayed into the Registrar and Share Transfer activities and subsequently into financial services.
All along, Karvy’s strongwork ethic and professional background leveraged with Information
Technologyenabled it to deliver quality to the individual.A decade of commitment, professional
integrity and vision helped Karvyachieve a leadership position in its field when it handled the
largest number of issues ever handled in the history of the Indian stock market in a
[Link], Karvy made inroads into a host of capital-market services,-corporateand retail
which proved to be a sound business synergy.
GROUP OF COMPANIES
KARVY CONSULTANTS LIMITE

Deals in Registrar and Investment Services

KARVY INC
Deals in distribution of various investment products, viz., equities, mutual funds, bonds and
debentures, fixed deposits, insurance policies for the investor.
KARVY INVESTOR SERVICES LIMITED
38
Deals in Issue management, Investment Banking and Merchant Banking.
KARVY STOCK BROKING LIMITED
Deals in buying and selling equity shares and debentures o the National stock Exchange (NSE),
the Hyderabad Stock Exchange (HSE) and the Over-The-Counter Exchange of India. (OTCEI).
KARVY COMPUTERSHARES LIMITEDKARVY GLOBAL SERVICES LIMITED

KARVY COMMODITIES BROKING LIMITED

39
BOARD OF [Link].M [Link]
POLICY
To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to providesuperior quality financial services.
In the process, Karvy will strive to exceedCustomer’s expectations.
Quality objectives
As per the Quality Policy, Karvy will:
•
Build in-house processes that will ensure transparent and harmoniousrelationships with its
clients and investors to provide high quality of services.
•
Establish a partner relationship with its investor services agents andvendors that will help in
keeping up its commitments to the customers.
•
Provide high quality of work life for all its employees and equip themwith adequate knowledge &
skills so as to respond to its customer’sneeds.
•
Continue to uphold the values of honesty & integrity and strive toestablish unparalleled
standards in business ethics.
•
Use state-of-the art information technology in developing new andinnovative financial products
and services to meet the changing needs of invetors and clients.
40
Start Free Trial
Cancel Anytime.

•
Strive to be a reliable source of value-added financial products andservices and constantly
guide the individuals and institutions in making a judicious choice of it.
•
Strive to keep all stake-holders (shareholders, clients, investors,employees, suppliers and
regulatory authorities) proud and satisfied.
ACHIEVEMENTS
•
Largest mobiliser of funds as per PRIME DATABASE.
•
First ISO-9002 Certified Registrar in India.
•
A Category –I-Merchant banker.
•
A Category-I-Registrar to public Issues.
•
Ranked as “The Most Admired Registrar” by MARG.
•
Handled the largest-ever public issue-IDBI
•
Handled over 500 public issues as registrars.
•
Handling the reliance Account which for nearly 10 million accountholders.
•
First Depository Participant from Andhra Pradesh.
Major issues managed as arrangers
•
Kerala state electricity board.
•
Power Finance Corporation.
•
A.P. Water resources Development Corporation.
•
A.P Roads Development corporation.
•
A.P state electricity board.
•
Haldia Petrochemicals ltd.
41
Major issues managed as co-managers
•
IDBI Equity
•
Morgan Stanley Mutual Fund.
•
Bank of Baroda
•
Bank of Punjab Ltd
•
Corporation Bank
•
IndusInd Bank Ltd
•
Jammu and Kashmir bank Ltd

•
Housing and Urban Development corporation (HUDCO) Ltd
•
Madras refineries Ltd
•
Tamil Nadu Newsprint & Paper Ltd
•
BPL Ltd
•
Birla 3M Ltd
•
Essar Steels Ltd
•
Hindustan Petroleum corporation Ltd
•
Infosys technologies Ltd
•
Jindal Vijaynagar Steels Ltd
•
Nagarjuna Fertilizers & Chemicals Ltd
•
Rajshree Polyfil Ltd
Karvy securities Ltd.
•
Karvy has secured over rs.500 crore in the following debt issues.
•
Andhra Pradesh road development corporation Ltd
•
ICICI Bonds (private placement)
•
ICICI Bonds-96
•
ICICI Bonds-97-I
•
ICICI Bonds-97-II
•
ICICI safety Bonds March 98.
42

•
IDBI Bonds 96
•
IDBI Flexi Bonds I
•
IDBI Flexi Bonds II
•
IDBI Flexi Bonds III
•
Kerala state electricity Board
•
Krishna Bhagya Jala Nigam Ltd
•
Power Finance Corporation Ltd
•
Andhra Pradesh Water Resources Development Corporation
•
Andhra Pradesh state Electricity Board
KARVY CAPABILITIESTechnology infrastructure
It has desktops and 200 plus enterprise class servers having licensedsoftware across
technology platforms. It has wide area network connecting branches all over India. It has 24 * 7
back up and Redundancy support for critical business data.
PHYSICAL INFRASTRUCTURE
It has 40 branches and 65 investor centers connected with communicationfacilities like Email,
Fax, Videoconferencing, WAN and LAN.
MAN POWER
It has work force of over 2000 highly trained people. It has experience of processing over 120
million transactions. The Domain experience in theareas of Data processing operations,
Technology, Management andFinancials and legal processing. It has specialist expertise in
quality controland cast management.
QUALITY PROCESS
43

It is an ISO 9002 certified operations by DNV Norway. It performs regular internal and external
audits for quality standards.
TRAINING
It has full-fledged learning center to train 150 people simultaneously. Ithas simulated
environment and on the Job training facilities.
BUSINESS CONTINUITY
It is a two-decade-old company of repute in the industry. It has a disaster recovery center at
separate location. It has investment in infrastructure.
VALUES
INTEGRITYTRANSPARENCYPASSION FOR QUALITYHARD WORK AND TEAM
PLAYLEARNING AND INNOVATIONEMPATHY AND HUMILITYSENSE OF OWNERSHIP.
KARVY ACHIEVEMENTS
•
India’s # 1 public issue registrars with 655-market share.
•
# 2 in India in mutual fund registraring and investor servicing.
•
Amongst the top 5 mobilizers of funds in India.
•
Among the top 3 depository Participants.
•
Among the top 5 retail brokers in the country.
•
ISO 9002 certified operations by DNV.
•
Among the top 10 medical transcriptionists.
•
Adjudged as one of the top 50 IT users in India by MIS Asia.
44

Data Analysis and Interpretation

45
DATA ANALYSYS
SOME OF THE SCHEMES OF MUTUAL FUNDS:

Standard Chartered Mutual Fund

Schemes:
Grindlays cash fund: It is an Open-ended Income scheme with high liquidity. Ascheme that
invests in money market instruments like Treasury Bills, Callmoney, Repos , Short-term
Corporate Debentures, Commercial Papers,Certificate of Deposits, etc that provide a high level
of stability and easy liquidity.
Tax:
The GCF is also very taxed efficient. It comes with a daily (compulsoryreinvestment), Weekly
(compulsory reinvestment), Monthly and Bi-monthlydividend options. Each day gains are
declared in the form of dividends and thenreinvested after netting it off against Dividend
Distribution Tax (currently20.91%).This dividend is completely tax free. So the net tax incidence
is just20.91% as compared to 36.5925% for comparable non mutual fund option.

Grindlays Floating Rate Fund: It seeks to generate stable returns with a low risk strategy by
creating a portfolio that is substantially invested in good qualityfloating rate debt or money
market instruments, fixed rate debt and moneymarket instruments.
46
GFRF primarily invests in Floating rate debentures and bonds, Short tenor fixed rate
instruments and long tenor fixed rate instruments swapped to floatingrate.
Plans:
The fund comes in two plans

Short term plan for investors with a time horizon of 1-6 months.

Long term plan for investors with a time horizon of beyond 6 [Link] Debt Funds:

Debt funds are funds that invest only in debt securitiesand are designed to primarily protect your
capital and provide better returns by investing in high quality debt securities.

Operations of Debt funds: There are two important sources of revenuethat a debt fund earns:
a) Interest income
When you invest in a Bank / Company deposit, it offers you a fixed rate of interest with the
principal being returned on maturity. Similarly when a debt fundinvests in various debt securities
the issuers of these securities offer a rate of interest and the principal on maturity. The issuers
of these securities could either could either be various corporates like Reliance,

Hindalco, ICICI, BharatPetroleum or the Government of India.

b) Mark to Market gain/loss
As interest rates on bank fixed deposits change frequently so do interest rates ondebt
securities. Interest rates and debt security prices are in fact the two sides inseesaw. In general,
prices fall when interest rates rise and rise when interest ratesfall.

If the interest rates were to decline then newer bonds would be issued at
47

lower interest rates than existing bonds. Consequently old bonds would be dearer and hence
prices of these older bonds would [Link] if interest rates were to raise then value of old
bonds would fall, asnewer bonds would bear higher interest rates. The traded price of a bond
maythus differ from its face value. The longer a bonds period to maturity, the moreits price tend
to fluctuate as market interest rates change.

SchemesLiquidity Fund:
It is an open-ended fund liquid scheme seeking to generate a reasonablereturn commensurate
with low risk and high degree of liquidity from a portfolioconstituted of money market securities
and high quality debt securities.
Floating rate Fund:
It is an open-ended income scheme seeking to generate

incomecommensurate with prudent risk from a portfolio substantially constituted of floating rate
debt securities and fixed rate debt securities swapped for floatingrate returns. The scheme may
also invest in fixed rate debt securities and moneymarket securities.
Short term Fund:
It is an open-ended income scheme seeking to generate income commensuratewith prudent
risk, from a portfolio constituting of money market securities,floating rate debt securities and
debt securities.
Bond fund:
48

It is an open-ended income scheme seeking to generate an attractivereturn, consistent with

prudent risk from a portfolio, which is substantiallyconstituted of high quality debt securities of
issuers predominantly domiciled inIndia.
Equity Fund:
It is an open ended growth scheme seeking to generate long term capitalappreciation, from a
portfolio which is substantially constituted of equity andequity related securities of issuers
domiciled in India. The scheme may alsoinvest a certain portion of its corpus in debt and money
market securities, inorder to meet liquidity requirements from time to time.
T.I.G.E.R Fund:
It is an open ended growth scheme whose primary investment objective isto seek to generate
capital appreciation, from a portfolio that is substantiallyconstituted of equity securities of
corporates, which could benefits fromstructural changes brought about by continuing
liberalization

in economic policies by the government and / or from continuing investments ininfrastructure,

both by public and private sector.
49

SchemesHDFC Growth Fund:

It is a open ended scheme seeking to generate long term capitalappreciation from a portfolio
that is invested predominantly in equity and equityrelated instruments
HDFC Equity Fund:
It is an open-ended growth scheme to achieve capital appreciation.
HDFC Top 200 Fund:
It is an open-ended growth scheme seeking to generate long-term capitalappreciation from a
portfolio of equity and equity-linked instruments primarilydrawn from the companies in BSC 200
index.
HDFC Balanced Fund:
It is an open ended balanced scheme seeking to generate capitalappreciation along with current
income from a combined portfolio of equity andequity related and debt & money market
instruments.
HDFC Tax Savers Fund:
50

It is an open-ended equity linked saving scheme with a lock-in period of 3yrs seeking to
generate long term growth of capital.
HDFC Gilt Fund:
It is an open-ended income scheme seeking to generate credit risk-freereturns through
investments in sovereign securities issued by central governmentor state government.

HDFC MUTUAL FUND

SchemesHDFC Growth Fund:
It is a open ended scheme seeking to generate long term capitalappreciation from a portfolio
that is invested predominantly in equity and equityrelated instruments
HDFC Equity Fund:
It is an open-ended growth scheme to achieve capital appreciation.
HDFC Top 200 Fund:
It is an open-ended growth scheme seeking to generate long-term capitalappreciation from a
portfolio of equity and equity-linked instruments primarilydrawn from the companies in BSC 200
index.
HDFC Balanced Fund:
It is an open ended balanced scheme seeking to generate capitalappreciation along with current
income from a combined portfolio of equity andequity related and debt & money market
instruments.
HDFC Tax Savers Fund:
50

It is an open-ended equity linked saving scheme with a lock-in period of 3yrs seeking to
generate long term growth of capital.
HDFC Gilt Fund:
It is an open-ended income scheme seeking to generate credit risk-freereturns through
investments in sovereign securities issued by central governmentor state government.

Birla Sun Life Mutual Fund:

SchemesBirla Advantage Fund:
It is an open-ended diversified equity fund and portfolio remains over waitacross banks MNC
pharma, IT and Telecom.
Birla Dividend Yield Plus:
It is an open-ended growth scheme investing in high dividend yield companiesand continuously
having a positive outlook on banking sector.
Birla Mid cap Fund:
It is an open ended growth scheme investing primarily in mid cap stocksand the portfolio
remains well diversified across pharmaceutical, banking,consumer non durable, IT, Hotels.
Birla MNC Fund:
It is an open-ended growth scheme investing in multi national companiesand the portfolio
remains over weight across consumer non-durable, IT, Agrochemicals.
Birla Gilt Plus
:
51

It is an open-ended government security scheme.

Birla Equity Plan:
It is an open-ended equity linked savings scheme with a lock-in for threeyears.
Kotak Mutual Fund

Schemes:Kotak 30:
It is an open-ended equity growth scheme seeking to generate capitalappreciation from a
portfolio of predominantly and equity related securities withinvestment in, generally, not more
than 30 stocks.
Kotak opportunities:
It is an open-ended equity growth scheme seeking to generate capitalappreciation from a
diversified portfolio of equity and equity related securities.
Kotak Global India:
It is an open-ended growth scheme seeking to generate capital appreciationfrom a diversified
portfolio of equity and equity related securities issued byglobally competitive Indian companies
.Kotak Liquid:
It is an open-ended debt scheme to provide reasonable returns and highlevel of liquidity by
investing in debt and money market instruments of differentmaturities so as to spread the risk
across different kinds of issuers in debtmarkets.
52
Chola mutual fund
:
Schemes:Cholamandalam growth fund:
It is an open ended scheme seeking to generate long term capital appreciation,income through
investments in equity & equity related instruments; thesecondary objective is to generate some
current income and distributivedividend.
Chola midcap fund:
It is an open ended scheme seeking to generate capital appreciation by investing primarily in
mid cap stocks. The scheme will invest primarily that have a marketcapitalization between
Rs.300 crores to Rs. 3000 crore.
Chola opportunities fund:
It is an open ended scheme which will invest mainly to generate long termcapital appreciation
from a diversified portfolio of equity and equity relatedsecurities.
Chola Multi-cap fund:
It is an open-ended growth scheme which will provide long term capitalappreciation by investing
in a well diversified portfolio of equity and equityrelated instruments across all ranges of market
capitalization.
Chola Gilt investment plan:
53

It is an open-ended growth scheme seeking to generate returns from a portfolio by investing in

Government securities.
Chola monthly income plan:
It is

an open-ended growth scheme seeking to generate monthly income throughinvestment in range

of debt, equity and money market instruments.
CHOOSING FUNDS
When it comes down to it, the decision to invest in a mutual fund is oneyou have to make on
your own. When you try to choose an investment, however,it is a good idea to seek the
guidance of a financial advisor who will review itsobjective to make sure it supports your
[Link] an investor, your goals are unique, and a financial advisor can helpmatch you
with the best funds. Remember, however, when you are choosingfunds, to consider how much
risk you are comfortable with and when you'll needthe money. If you have the time to weather
the market's ups and downs, you maywant to consider equity [Link] you select a
mutual fund, it is essential to read the prospectuscarefully to learn all you can about the fund's
performance, investment goals,risks, charges and expenses.
DECISION MAKING FACTORS WHILE INVESTING IN MUTUALFUNDS
Before looking at the mutual funds available to you, it may be best to decidethe mix of stock,
bond, and money market funds you prefer. Some experts believe this is the most important
decision in investing. Here are some general points to keep in mind when deciding what your
investment strategy should be.
54

Diversify.
It is a good idea to spread your investment among mutual funds thatinvest in different types of
securities. Stocks, bonds, and money market securitieswork differently. Each offers different
advantages and disadvantages. You mayalso want to diversify within the same class of
securities. Diversifying can keepyou from putting all your eggs in one basket and therefore, may
increase your returns over along period oftime.
Consider the effects of inflation.
Since the money you set aside today may beintended to be used several years down the road,
you need to look at [Link] measures the increase of general prices over
[Link] investments like money market funds often may be popular because they
are managed to keep a steady value. But their return after accounting for the inflation rate can
be very low, perhaps even [Link] example, a 4% inflation rate over a period of many
years could erase amoney market fund's 3% yield over the same period of time. So even
thoughsuch an investment may give some safety of principal, it may not be able to growenough
in value over the years or even keep up with the rate of inflation.
Patience is a virtue.
It's no secret—the prices of common stocks can changequite a bit from day to day. Therefore,
the part of your account invested in stock funds would likely fluctuate in value much the same
[Link] you don't need your money right away (for at least 5 years), you probably don'tneed to
panic if the stock market declines or you find that your quarterlystatement shows the value of
your investment has fallen. In the past, the stock market has regained lost value over time.
Although you are not assured it will doso in the future, try to be patient and allow your stock
funds time torecover.
55

Remember the saying, "buy low, and sell high." Switching out of a stock mutualfund when prices
are low is usually not the way to make the most of your investment. Of course, if a fund
continues to under-perform over time as well asyour other fund choices, you may want to
consider changing funds.
Look at your age.
Younger investors may be more at ease with stock funds, because they have time to wait out
the short-term ups and downs of stock [Link] investing in a stock fund, they might be able to
receive high returns over [Link] the other hand, people who are closer to retirement
may be more interested in protecting their money from possible drops in prices, since they'll
need to use itsoon. In this case, it may be wise to place a greater percentage of money in
bondand/ or money market funds, which may not have such large changes invalue.
How can you determine an investment mix appropriate for your age?
Oneway is to subtract your age from 100. The answer you come up with may be agood number
to start with in deciding what portion of your total investments to put intostockmutualfunds.
Risk.
When you are choosing funds, be sure to consider how much risk you arecomfortable with and
how close you are to retirement. If retirement is around thecorner, you may want a portfolio with
very little risk. On the other hand, if youare younger, and have the time to weather the market's
ups and downs, you maywant to choose a more aggressive investment strategy.
READ FUND DOCUMENTS
Your primary source of data concerning the mutual fund will be the [Link] is a legal
document illustrating the rules and regulations that a mutual fundmust follow and contains
information on the fund's goal and strategy, risks,
56

performance, financial highlights fees and expenses, and a wide variety of information that you
should know before investing.
What are the fund' s goal and strategy?
Goals vary from fund to fund, and they're important to understand so youcan decide if they
match your personal objectives. Some funds generateincome for their shareholders, while
others concentrate on capital [Link] focus on a combination of the two, and others
are oriented towards tax benefits or preservation of [Link] also implement differing
strategies to help accomplish their goals. TheGoals and Strategies section of a prospectus
details the types of securities inwhich fund managers can invest and how managers analyze
themFunds can be limited to domestic investments, focus on a certain country or region, or
invest anywhere in the world. In addition, some funds invest only inspecific industries or in
particular types of companies. Others invest in large-,medium- or small-capitalization
companies.
What are the risks?
As with all investments, each fund, whether domestic, international or sector specific, carries
different risks. The Main Risks section of a prospectus explainswhich ones are associated with
the securities in that particular fund, which mayhelp you decide what level of risk you're
comfortable having in your investment portfolio.
How has a fund performed?
57

While historical performance doesn't predict how a fund will do in the future,you may be
interested in how it performed in past market [Link] on the age of the fund, a
prospectus will provide its 1- 5- and 10-year average annual returns, including a comparison to
its benchmark index over thesame period.
What are financial highlights?
In this section a prospectus lists 5 years of annual financial information, if a fundis less than 5
years old, provides data since inception. Information includes netasset values at the beginning
and end of each year, and details the gains or losses,dividends and distributions that account
for any [Link] Highlights also show fund asset information such as net assets ratios
toaverage net assets for expenses and net investment income, and portfolioturnover rates.
What are the expenses of a fund?
Operating a fund entails some costs you should be aware of. The Fees andExpenses section
breaks out these costs and who pays them. In addition, anexample of fund expenses is
provided to help you compare the cost of investingin one fund versus another.
Who's managing the fund?
In the Management section, a prospectus gives a brief biography of a fund' smanagers,
including how long they have worked on the fund and their overallindustry experience.
MARKET SEGMENTATION
58
Market segmentation is the division of market into homogeneous groups,which will respond
differently to promotions, communications, advertising andother marketing mix variables. A
different marketing mix can target each group,or “segment”, because the segments are created
to minimize inherent differences between respondents within each segment and maximize
differences betweeneach [Link] segmentation was first described in the 1950’s, when
productdifferentiation was the primary marketing strategy used. In the 1970’s and1980’s, market
segmentation began to take off as a means of expanding sales andobtaining competitive
[Link] of Market SegmentationThere are many good reasons for dividing a market
into smaller segments. The primary reasons:
Easier marketing
It is easier to address the needs of smaller groups of customers, particularly if they have many
characteristics in common (e.g. seek the same benefits, same age, gender, etc.).
Find niches
Identify under-served or un-served markets. Using “niche marketing”,segmentation can allow a
new company or new product to target less contested buyers and helps a mature product seek
new buyers.
Efficient
More efficient use of marketing resources is by focusing on the bestsegments for the investor
offering—product, price, promotion, and place(distribution). Segmentation can help avoid
sending the wrong message or sending message to the wrong people.
Classification variables
59

Classification variables are used to classify survey respondents intomarket segments. Almost
any demographic, geographic, Psychographic or behavioral variable can be used to classify
people into [Link] variables
—
Age, gender, income, ethnicity, martial status,education, occupation, household size, length of
residence, type of residence, [Link] variables – City, state, zip code, census tract,
country, region,metropolitan or rural location, population density, climate, [Link]
variables
–
Attitudes, lifestyle, hobbies, risk aversion, personalitytraits, leadership traits, magazines read,
television programs watched, PRIZMclusters, [Link] variables
–
Brand loyalty, usage level, benefits sought, distributionchannels used, reaction to marketing
factors, etc.
Summary
Target marketing or market segmentation based on customer needs andwants can increase
profits. Target market identifies customer groups and thereasons they purchase. Market
segmentation helps a business be more responsiveto changing customer needs. An overall
marketing plan or strategy visuallyshows how all aspects of a marketing effort work together.
The ultimate goal of any business is to sell the product or service.
PRIMARY DATA FOR THE PROJECT:
For the customized needs o the project, primary data was collectedthrough a survey in the twin
cities of Hyderabad & Secunderabad. A Randomsample of 100 investors were surveyed. They
were all asked to answer aquestionnaire true to their knowledge. The feedback obtained from
the customer was instrumental, gauging the perception of the investors towards mutual funds.
60

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It also throws light on the factors, which influence them to make decisions whileinvesting.
Further the interaction with few of the investors goes a long way inunderstanding the inlaid
reasons for their decisions.
SECONDARY DATA:
The main sources of secondary data are the web sites of various mutualfund houses like
cholamandalam mutual fund, Franklintempletonindia, ICICI,BIRLA SUNLIFE, KOTAK and more
such houses. Many references werecollected from different libraries to gain an insight on mutual
funds. Previousstudies conducted in this field provided valuable help. In addition to the
abovesources, Working with Karvy associates and interaction with their personnel provided a
pragmatic edge to my theoretical concepts.
Survey Details
Total Sample Size 100Economic Status Criterion Tax payees & Non tax payeesAge groups 23
years and aboveMartial Status Criterion Married, Married with children &Unmarried
61

FACTORS CONSIDERED BY INVESTORSWHILE INVESTING

Every investor considers several factors while investing in any of the products asit deals with the
most important need of life “money”.The five main factors that were considered are:1. Safety &
security2. Tax exemption3. Liquidity4. Profitability5. Return pattern

Factors considered by investorsWhile investing

31%26%12%14%17%
Safety & security Tax exemptionLiquidity ProfitabilityReturn pattern

62

SAMPLE SIZE 100ECONOMIC STATUS TAX PAYEES AND NON-TAX PAYEESThe above
graph shows that 31% people consider safety & security as the mainfactor while investing, 26%
goes for Tax exemption, 17% considered return pattern in the investment, 14% went with
profitability and 12% showed interestin liquidity.
ANALYSIS OF THE ABOVE GRAPH:
In a developing country like India most of the people fall in the lower middleclass and middle
class sectors. The attitude of the investors is of primaryconcern. As more and more options that
warrant high returns are available in themarket, investor tends to be more skeptical. So, while
investing in any avenue,their first priority is safety and security. Even the age of the investor
plays amajor role in the decision-making. For example, if the investor is in the age of 50and
above, he usually looks for low or no risks while investing. Therefore, 31%of investors surveyed
preferred safety & [Link] is the “tax exemption”; as there is tremendous boom in the
corporatesector and the remuneration system for a particular sector has changed. Thiscreated a
change in income levels and thereby affected the expenditure [Link] the past, it took
employee years of time to reach a five-figured salary. But,gradually the system has changed.
Even the employee in the lower level or themiddle level of the corporate ladder is receiving a
handsome emolument. So,they are opting for the exemption of tax. Therefore, the next
preference is for taxexemption that is 26% of the [Link] investors going for Safety &
security, there are investors who optfor return on investments they made. They are mainly in the
age group of 23 and35. Because these investors are likely to think that, at this age they are
mentallymore stable and feel that they can cope with financial risks. Any profits made
63

would further bolster their financial stability. And so, 17% went with return pattern of their
investment. In the same way, 14% of the investors look for profitability, especially those who
are already doing business, i.e. those who arealready accustomed to taking [Link] of the
total, 12% of investors preferredliquidity. The main reason for this could be that, that making the
invested moneyliquefied as and when required is important, and this is not possible if
theinvestments are made in any insurance, Bank deposits, [Link] there are numerous
factors that can be attributed to an investor’s psyche, by large, we can conclude that maximum
number of investors isinvesting in those sectors where there is safety & security for their
principal. Theother factors antecede safety.
INVESTMENT PATTERN:

Sample size 100Economic status Tax payees & non-tax payeesFrom the above graph, it is
clear that 42% opted for an investment in bank deposits, 31% for insurance, 7% for shares, 9%
for mutual fund, 2% for bonds,
Investment pattern
42%31%9%2%7%5%4%Bank deposits insurance mutual fundbonds shares Equitynone
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5% for equity and remaining 4% have invested in some other investments suchas real estates
etc.
ANALYSIS OF THE ABOVE GRAPH:
The investment pattern of an investor is also very important because this showsthe avenues
where the people are really interested. Here, 42% have invested in bank deposits as it is very
safe and risk free. Out of the sample of 100,it isobserved that those who opted for an
investment in banks in the form of depositsare found to be in the age group of 40 and above
and are in government [Link] next preference, as observed in the pie chart for
investment pattern is“Insurance”. People generally opt for life insurance because it promotes a
senseof safety & security for the dependents on the person and even his [Link], the
next priority is insurance. 7% of the investors went for an investment inshares as it brings quick
returns, although shares are prone to high [Link] shown 9% of the investors opted for an
investment in mutual [Link] this we can infer that the market of mutual fund is picking up
[Link] to the survey, the people who have invested in the mutual funds belong to
high-income range and they want an exemption from tax and a mere2% opted for bonds, 5% for
investment in equity and 4% have invested in other investments such as Real estate to make
quick returns on their investments.
65

AWARENESS TOWARDS MUTUAL FUNDS:

Awareness towards mutualfunds
87%13% Aware of mutual fundNot aware of mutual fund
In the above pie chart, we can observe that nearly 90% of investors are aware of mutual funds
and only 13% people are not aware of it. This shows that most of the investors know about
mutual funds in one or the other way.
ANALYSIS OF THE ABOVE GRAPH:
Of the sample surveyed, almost all of the people are aware of mutual funds. Theyare aware of
the term “mutual fund”. Though the questionnaire cannot identifythe extent of the awareness.
Through the interaction it is found that they are notactually aware of the advantages in investing
mutual funds, various types of mutual funds and different schemes offered in it. It is found that
People oftenhave an inhibition that investments in mutual funds can be done only by thosewho
have surplus amount of money with them and want to avail tax redemption.
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MUTUAL FUND INVESTMENTS:

Mutual funds are medium risk investments. Though Investing in mutual funddoesn’t assure a
fixed amount of returns, nevertheless, they are not low. Theawareness about mutual funds is
the primary criterion.

Mutual fund investments

75%6%19%Equity fundsDebt fundsLiquid funds
Sample size 16Criterion Mutual fund investors in the surveyFrom the graph, it is clear that only
16 out of 100 invested in mutual funds. Fromthose 16, 12 have invested in Equity funds, 3 in
liquid funds and the remaining 1in debt funds.
ANALYSIS OF THE ABOVE GRAPH:
Only 16 out of 100 invested in mutual funds this can be mainly attributed to thelow level of
awareness, various inhibitions and a not so clear idea about themutual funds. It is very
important to have a clear perception of mutual funds,
67

how they work and how the money is invested in different portfolios accordingto the investors’
[Link] who opted for equity funds are 12 of 16 percent. Equity funds being the
majority preference can be reasoned as they want their investments to be put in various sectors
i.e. DIVERSIFIED FUNDS so that they can make profits out of it easily. Even some went for
INDEX FUNDS as the investmentsare made in Bench Nark Index Stock like BSE, NSE.A few
(3%of 16%) investors made investments in liquid funds as theywant a Short term investments
where the investor need not wait for much timefor the return. These are also called as Money
Markets for short [Link] a single investor went for debt funds where investments are in
variousdebt products like Certificate of Deposits (CD’s), Commercial papers and callmoney as
the investor want a secured investment, which he can avail in DebtFunds.
68

FINDINGS
•
Many of the investors are aware of mutual funds but most of their perception towards them is
not positive.
•
Investors are mainly concerned with the risk factors of mutual funds andare not directing
towards them.
•
The investors who have invested in mutual funds mainly go for it becauseof the Liquidity matter
and Tax exemption.
•
Most of the people don’t know the advantages of mutual funds and thevarious types of mutual
funds.
•
There are nearly 1173 schemes of mutual funds offered by various mutualfund houses, which
an ordinary person is not aware.
•
A common investor basically looks for the Tax exemption and Safety &security while investing.
•
Investors often feel that those people, who have surplus amount with themand invest to avail
Tax exemption, can do investing in mutual funds.
69
70

SUMMARY
This report is an attempt to provide an analysis of the perception of an investor towards mutual
funds. However, what has been reported is only the tip of icebergin terms of data that are
[Link], my examinations suggests that employees are interested toinvest in mutual
funds provided sufficiently educated and a know-how is provided on its working. Though the
self-employed are investing in mutual fundsand insurance, they are investing small amounts in
them because they do notwant to take high risks. Karvy stock broking ltd should educate the
people about the variousadvantages of investing in mutual funds and create an awareness
regardingvarious investment [Link] conclusion, it is important to remember that the main
purpose for initiating the project is to analyze the perception of an ordinary investor towardsthe
mutual funds and the aspects that guide him to make investment [Link] study does not
aim to advocate investments in mutual funds.
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CONCLUSION
Mutual funds are still and would continue to be the unique financial tool in thecountry. One has
to appreciate the fact that every aspect of life as its periods of high and lows. This has been the
case with the stock markets. Why not apply thesame logic to mutual funds? Mutual funds have
not failed in any country wherethey worked with regulatory frame work. Their future is bright.
The poor performance of many mutual funds schemes may be mostly attributed to thequality of
personal involved and their matter of fund management.
72

SUGGESTIONS
Make people aware of mutual funds by:

Arranging free seminars in different organizations about mutual fundinvestments.

Arranging stalls in Public places is a good publicity.

More advertisements need to come to explain the various advantages of mutual funds and even
the various schemes offered by them.
What to expect from a financial advisor
The key for mutual fund investors is to define and recognize the value of professional financial
services, and then insist on getting that value. Whenyou pay a sales charge or a fee, what can
you expect a professional to do for you? Your advisor should at least:
•
Understand investor needs and help him formulate long-term
[Link] making specific recommendations, advisor should try to
gain a whole picture of investors past experience, lifestyle and goals, as well as his other
investments and current financial situation. When the investor planning toretire, for example?
Does the investor have life insurance? Does he own realestate? How secured is his job?
•
Help the investor develop realistic expectations by discussing the risks
[Link] investment choice has its strengths andweaknesses, and
investor should never feel less than fully informed. Wheninvestor ask questions, or have doubts,
73

•
Investor should expect your financial advisor to answer honestly, and helphim develop a
strategy that is both realistic and comfortable for him.
•
Match investor’s goals and objectives with appropriate mutual [Link] should expect your
advisor to make clear and specificrecommendations, and explain the reasons behind them in
terms he canunderstand. Of course, the advisor should be confident and well informedabout the
management and portfoliostrategiesofanymutualfundsrecommended.
•
Continually monitor investor portfolio and help you interpret [Link] advisor cannot
influence or predict a fund's results. However, he or sheshould discuss results with you and help
you judge your progress. You shouldfeel that you canalwaysaskyouradvisor,"HowamIdoing?"
•
Conduct regular reviews to ensure that your strategy continues to provideoptimal results for you.
•
One of the most valuable services your advisor can provide is to help you"stay on course" with
your investment program. But "staying on course" longterm does not necessarily mean staying
put. Expect your financial advisor towork with you to adjust your portfolio in response to any
significant changein your lifestyle, priorities, assets or responsibilities.
•
These are the basic services that investors should expect from their financialadvisors. Beyond
the basics, many investors could use even more specializedassistance, like advice on
retirement plan distribution options, setting up andservicing retirement plans for small
businesses and self-employedindividuals,developing tax-advantaged strategies for children's
college education,insurance, estate, and trust planning; and year-end mutual fund tax advice. If
you need specialized services, there are many financial advisors who can helpyou obtain the
help you n
74

BIBLIOGRAPHY
[Link] of the AuthorPublisherPage Nos.
75

1
PunithavathiPandyan

Securities Analysis and PortfolioManagement

29,30,411&4122
[Link]

Investment and Securities Markets inIndia

427,428
MAGAZINES:1. Business standard2. Economic timesMarketing dictionary A. [Link]
WEBSITE’S MONTH OF SEARCH1 [Link] 20072
[Link] 20073 [Link] May20074 [Link]
20075 [Link] 20076 [Link] June
2007
76

77
Investor’s perception towards Mutual Funds
PERSONAL INFORMATIONA) Name:B) Type of Business:C) Address:D) Telephone: Mobile:E)
Fax: Email:F) Annual Income:
 ANNEXURE
[Link] which part of these modes have you made your major part of investment?
[]

Shares [] Equity [] Mutual Fund [] Insurance[] Bank Deposit [] Bonds[] Others

Specify---------------------------------
[Link] do you prefer the above option?
[] Return Pattern [] Tax Exemption[] Liquidity [] Safety & Security[] Profitability [] Guaranteed
Return[] Others Specify-----------------------------------
[Link] long would you like to invest?
[] Short term (below 1yr) [] Medium term (up to 2yrs)[] Long term (above 3yrs)
[Link] you seen any advertisements for Mutual Funds?
[] Yes [] No
78

[Link] yes, what are the advertisement have you seen for?
[] Birla sunlife mutual funds

[] Reliance mutual fund[] Chola mutual funds [] Standard charted mutual funds[] Franklin
Templeton mutual fund [] Sundaram mutual fund[] HDFC mutual fund [] UTI mutual fund[] ING
VYSA mutual fund [] Any other specify--------------------[] Prudential ICICI mutual fund
6. Rank the following services preferred by you from a financial AdvisoryInstitution?

Services Rank
1. Telephone services

2. Online services3. Mobile services4. Personal services

7. Mention the names of mutual funds you have
invested?---------------------------------------------------------------------8. In which scheme of mutual
funds have you invested?
[] Debt [] Equity[] Liquidity [] Mixed (Debt & Equity)[] Others specify---------------------------
9. What was the approximate return you got on your investment?
[] Debt [] Equity[] Liquidity [] Mixed[] Others specify---------------------------
10. Which factors you consider the most while, investing in mutual funds?
[] Return patterns [] Performance[] Services [] Risk factors[] Quality of portfolio [] Professional
management[] Wealth creation.
79
11. Which period of dividend income you prefer the most?
[] Monthly [] Quarterly[] Half yearly [] Annual
12. How often you need reminders (recall) about mutual fund?
[] Monthly [] Quarterly[] Half yearly [] Annual
13. If you need so, which mode you would prefer?
[] Account statements [] Remainder letters[] Television & Internet [] News papers & Magazines
14. Please rank your expectations from a mutual funds Advisory concernExpectations Rank
1. Right Advice2. Speed of transaction3. Research inputs4. Reputations5. Reliability6. Investor
facilitation7. Advertisements8. Easy procedure
15. Are you willing to invest in mutual funds?
[] Yes [] No
If no, specify the reason------------------------------------------If yes, do you need further assistance
from Wealth ManagementExecutives fromKarvy Consultants Ltd?
[] Yes [] No
16. As investors please specify your needs, expectations andrecommendations to Develop the
mutual funds.
80