Professional Documents
Culture Documents
1
UTI Mutual Fund
Reliance Mutual Fund
ICICI Prudential Mutual Fund
Research Methodology
This report is based on primary as well secondary data,
however primary data collection was given more importance
since it is overhearing factor in attitude studies. One of the most
important users of research methodology is that it helps in
identifying the problem, collecting, analyzing the required
information data and providing an alternative solution to the
problem .It also helps in collecting the vital information that is
required by the top management to assist them for the better
decision making both day to day decision and critical ones.
Data sources:
Research is totally based on primary data. Secondary data can be
used only for the reference. Research has been done by primary
data collection, and primary data has been collected by
interacting with various people. The secondary data has been
collected through various journals and websites.
Sampling:
Sampling procedure:
The sample was selected of them who are the customers/visitors
of JM Financial, irrespective of them being investors or not or
2
availing the services or not. It was also collected through personal
visits to persons, by formal and informal talks and through filling
up the questionnaire prepared.
Sample size:
Sample design:
Data has been presented with the help of bar graph, pie charts,
line graphs etc.
Limitation:
3
4
Chapter-1
Introduction
CONCEPT
Individuals or institutions when have surplus money, i.e.
savings, would like to invest with the common and logical motive
of growing money by getting returns on the investments. There
are various avenues to park money towards fulfillment of your
objective of return on investment.
5
One can invest money either where you can get assured returns
& hence the risk is low but returns also are low compared to the
high risk investments.
The other way is through investing in shares i.e. equity market.
Generally the returns on equity investments are higher than debt
investment but risk also is higher. To get good returns one really
needs to understand the economy and performance of companies
where you are investing money. For a common man it may be
cumbersome while managing own profession, job or business.
Hence the concept of mutual fund has evolved to manage the
funds i.e. on behalf of the investor; fund managers will be taking
decisions to maximize the investor’s returns.
6
company, in which case the purchase makes the investor a part
owner of the company and its assets. In fact, in the USA, a mutual
fund is constituted as an investment company and an investor
“buys in to the fund” meaning he buys the shares of the fund. In
India, a mutual fund id constituted as a trust an investor
subscribes to the “units” issued by the fund, which is where the
term Unit Trust comes from. . Mutual funds issues units to the
investors in accordance with quantum of money invested by
them. Investors of Mutual funds are known as Unit Holders.
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the assets, the value of the total assets of the fund when divided
by the total number of units issued by the mutual fund gives us
the value of one unit. This is generally called the Net Asset Value
(NAV) of one unit or one share. The value of an investor’s part
ownership is the determined by the NAV of the number of units
held.
Example: If the value of a fund’s assets stands at Rs 1000 and it
has 10 investors who have bought 10 units each, the total
numbers of units issued are 100, and the value of one unit is Rs
10 (1000/100). If a single investor in fact owns 3 units, the value
of his ownership of the fund will be Rs 30 (1000/100*3). Note that
the value of the fund’s investments will keep fluctuating with the
market price movements, causing the NAV also fluctuate. For
example, if the value of our funds assets increased from Rs 1000
to Rs 1200, the value of our investors holding of 3 units
(1200/100*3) Rs 36. The investment value can go up and down,
depending on the market value of the fund’s assets.
Advantages of Mutual Funds
i) Portfolio Diversification
Mutual Funds spread the investment across different
securities (stocks, bonds, money market instruments, real estate,
fixed deposits etc.) by investing in a number of companies across
a broad cross-section of industries and sectors (auto, textile,
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information technology etc.). This kind of a diversification may
add to the stability of your returns and reduces the risk with far
less money than you can do on your own. 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.
iv) Liquidity
In open-end schemes, the investor gets the money back
promptly at net asset value related prices from the Mutual Fund.
In closed-end schemes, the units can be sold on a stock exchange
at the prevailing market price or the investor can avail of the
facility of direct repurchase at NAV related prices by the Mutual
Fund.
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v) Affordability
Investors individually may lack sufficient funds to invest in
high-grade stocks. A mutual fund because of its large corpus
allows even a small investor to take the benefit of its investment
strategy.
vi) 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.
viii) Transparency
Open-ended mutual funds disclose their Net Asset Value
(NAV) daily and the entire portfolio monthly. This level of
transparency, where the investor himself sees the underlying
assets bought with his money, is unmatched by any other
financial instrument.
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Disadvantages of Mutual Funds
i) No Tailor-made-Portfolios
Investing through funds means, the investor delegates the
decision of investing through which securities to fund manager.
The very high-net-worth individuals or large corporates may find
this as a constraint in achieving their objectives. However this
constraint can be overcome to some extent by offering families of
schemes to investor, within the same fund.
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History of the Indian Mutual Fund
Industry
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 of India. The history of
mutual funds in India can be broadly divided into four distinct
phases:-
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1987 marked the entry of non- UTI, public sector mutual
funds set up by public sector banks and Life Insurance
Corporation of India (LIC) and General Insurance Corporation of
India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Canbank 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.
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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.
The second is the UTI Mutual Fund, 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.
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15
Major Mutual Fund Companies in India:
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1999, and was approved to act as an Asset Management
Company for the HDFC Mutual Fund by SEBI vide its letter dated
June 30, 2000. HDFC Mutual Fund was setup with two sponsors
namely Housing Development Finance Corporation Limited and
Standard Life Investments Limited.
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Reliance Mutual Fund
Reliance Mutual Fund (RMF) was established as trust under
Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital
Limited and Reliance Capital Trustee Co. Limited is the Trustee. It
was registered on June 30, 1995 as Reliance Capital Mutual Fund
which was changed on March 11, 2004. Reliance Mutual Fund was
formed for launching of various schemes under which units are
issued to the Public with a view to contribute to the capital
market and to provide investors the opportunities to make
investments in diversified securities.
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Equity schemes, Open end Hybrid schemes, Open end Tax Saving
schemes, Open end Income and Liquid schemes, Closed end
Income schemes and Open end Fund of Funds schemes to offer.
21
Alliance Capital Mutual Fund was setup on December 30,
1994 with Alliance Capital Management Corp. of Delaware (USA)
as sponsor. The Trustee is ACAM Trust Company Pvt. Ltd. and
AMC, the Alliance Capital Asset Management India Private Ltd.
with the corporate office in Mumbai.
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GIC Mutual Fund, sponsored by General Insurance
Corporation of India (GIC), a Government of India undertaking and
the four Public Sector General Insurance Companies, viz. National
Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA),
The Oriental Insurance Co. Ltd (OIC) and United India Insurance
Co. Ltd. (UII) and is constituted as a Trust in accordance with the
provisions of the Indian Trusts Act, 1882.
SEBI
The Securities Exchange Board of India (SEBI) is the
regulatory authority for all the mutual funds sponsored by the
public/private sector banks, financial institutions, private sector
companies, non- banking finance companies and foreign
institutional investors. SEBI has laid down the rules and
regulations regarding the obligations of the entities involves in a
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mutual fund, its establishment and launch of different schemes,
investments and valuation, financial reporting, conduct and
operations of mutual funds.
Intermediaries
They act as a link between the mutual fund companies and
the investors. The intermediaries include brokers, sub- brokers,
and investment houses. The other intermediary- registrar and
transfer agents perform activities, which are associated with
maintaining records concerning units already issued or to be
issued by the company. The registrar also performs other
activities such as dividend payment, investor grievance, etc.
Investors
Investors subscribe to the units issued by the mutual funds
in the hope of getting a return commensurate with the risk
involved. SEBI protects the interest of the investors through the
guidelines laid down under SEBI (Disclosure and Investor
24
Protection) Guidelines, 2000. The mutual fund investor mainly
includes individual, HUF, corporate and trusts.
25
ORGANISATION OF A MUTUAL FUND
26
Types of Mutual Fund Schemes
Wide variety of Mutual Fund Schemes exists to cater to the
needs such as financial position, risk tolerance and return
expectations etc. The table below gives an overview into the
existing types of schemes in the Industry.
By Structure
i) 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)
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related prices. Hence, the unit capital of the schemes keeps
changing each day. Such schemes thus offer very high liquidity to
investors and are becoming increasingly popular in India. Please
note that an open-ended fund is NOT obliged to keep
selling/issuing new units at all times, and may stop issuing further
subscription to new investors. On the other hand, an open-ended
fund rarely denies to its investor the facility to redeem existing
units.
By Investment Objective
i) Growth Funds
The aim of growth funds is to provide capital appreciation
over the medium to long- term. Such schemes normally invest a
majority of their corpus in equities. It has been proven that
returns from stocks, 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.
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are ideal for investors looking for a combination of income and
moderate growth.
Other Schemes
i) Sectoral Schemes
Sectoral Funds are those, which invest exclusively in a
specified industry or a group of industries or various segments
such as 'A' Group shares or initial public offerings. In these funds
or schemes the investor invests in the securities of only those
sectors or industries which are specified in the offer documents.
E.g. Pharmaceuticals, software, Fast Moving Consumers goods
(FMCG), petroleum stocks, etc. the return on these funds is
dependent on the performance of the respective
sector/industries. While these funds may give higher returns, they
are more risky compared to the diversified funds. Investors need
to keep a watch on the performance of these sectors and must
exit at an appropriate time. They may seek an advice of an
expert.
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ii) Tax saving Schemes
These schemes offer tax rebates to the investors under specific provisions of
the Indian Income Tax laws as the Government offers tax incentives for
investment in specified avenues. Investments made in Equity Linked Savings
Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the
Income Tax Act, 1961. The Act also provides opportunities to investors to save
capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the
capital asset has been sold prior to April 1, 2000 and the amount is invested before
September 30, 2000.
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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.
Gilt Fund
32
33
Advertisements of Mutual Funds
➢ Advertisements through Holdings/Posters
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covering at least 80% of the total screen space and
accompanied by a voice-over reiteration. The remaining
20% space can be used for the name of the mutual fund or
logo or name of scheme, etc.
➢ Performance Advertisements
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and distribution taxes (if applicable), in the main body
of the advertisement.
Distribution Model
AMC
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IFAs
Banks
Institutional
Brokers
Customer Segments
37
Multi - Channel Distribution
Distribution Channels
In highly competitive environment, product innovation or
development has become a necessity for mutual fund players to
stay ahead. Increasing commoditization and growing needs of the
customers are forcing players to shift to solution based models
from production based ones. In either model, the role of
distribution channel remains critical as it helps stave off
competition by maintaining relationships, providing advisory
services and customizing need-based solution
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Banking Financial AMCs (NBFC) as distribution channels to
leverage their reach and huge client base. UTI is distributing its
offerings through selected branches of Indian Bank, Corporation
Bank, Bank of India an Allahabad Bank, besides, they are also
appointing sales personnel to meet investors, educate them and
sell their products and JM using Distribution houses like Niyojit
Financial.
Challenges in Distribution
➢ Lack of awareness
➢ Risk aversion
➢ Extensive availability of the central govt. assured return
➢ Delay (in Liquidity)
➢ Tardy inter-city payment system
➢ Transaction cost of establishing contact centers
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It has been a big challenge for the Mutual Fund Industry. As
most of the investors are still not aware how it functions. They
sometime feel that it is a costly affair. Educating investors about
the advantages of investing in mutual funds compared to risk-
free savings instrument is a big task for the industry. According to
the Securities Market Infrastructure- Leveraging Expert (SMILE),
the transaction cost of establishing contact centers, delay in fund
transfer and tardy inter-city payment system are the major
impediments. So enhancing the reach through the existing
distribution model will require more investments.
40
The extensive availability of the central govt. assured return on
small products are restricting the competition as well as
penetration of wide variety of mutual fund products, particularly
in the smaller towns where investors are not willing to take risk.
This poses a great challenge for the industry to realize its
potential.
41
Though the Indian Mutual Fund industry has a huge
potential, it is yet to be realized. To realize its growth potential,
industry will have to focus on its reach in the retail segment.
According to Chairman of AMFI there are about 180 million
households in India, of which just 11.8 millions invest in mutual
funds, making it penetration of 6.7% in the urban areas 13.7% of
the households invest in mutual funds; in rural areas this
percentage is just 3.8%. So there is a need to focus on rural
penetration for future growth. To achieve its growth, educating
the customer about the mutual funds as a saving vehicle will be
critical. More efforts are required from the regulators and the
industry to manage the wealth of individuals to further propel the
growth of the industry by popularizing the use of mutual funds.
The govt. should properly regulate and monitor the regulation so
that a favorable climate can be created. Regulations should be
tightened to curb unethical practices. They should also develop a
comprehensive risk management system so that it can induce
more investment. The industry should focus on product
innovation and maintain transparency, flexibility, service and
innovation to realize its potential.
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Offer Document
When an AMC or a Fund Sponsor wishes to launch a new
mutual fund scheme, they are required to formulate the details of
the schemes and register it with SEBI before announcing the
scheme and inviting the investors to subscribe to the fund.
Launch of a new mutual fund scheme is called a New Fund Offer
(NFO). The document containing the details of the new fund offer
that the AMC or the Sponsor prepares and circulates to the
prospective investors is called the Offer Document.
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The investor can choose to receive a part of the profits
of the mutual fund at some intervals before their
redemption. This option is Dividend Option. Investors who
choose dividend option can again have 2 sub options:
➢ Growth Option:
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to get some money or profits back, they would sell a part of
their units. This is Growth Option.
45
Example: Investments in special “Equity Linked Savings
Scheme” are eligible for tax rebates. In order to enjoy the
tax rebate, the investor is required to stay invested for a
period of 3 years.
• Purchases:
46
In respect of valid applications received upto 3
p.m. by the Mutual Fund, same day’s closing NAV shall
be applicable.
• Redemption:
➢ Liquid funds
• Purchases:
• Redemption
47
NAV shall be applicable. In respect of valid applications
received after 10:00 a.m.by the Mutual Fund, same
day’s NAV shall be applicable.
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Investment Plans
The term “investment plans” generally refers to the portfolio
flexibility that the funds to investors offering different ways to
invest or reinvest. The different investment plans are an
important consideration in the investment decision, because they
determine the level of flexibility available to the investor. Also,
the investment plan offered by a fund allows the investors
freedom with respect to investing one time or at regular intervals,
making transfers to different schemes within the same fund
family, or receiving income at specified intervals or accumulating
distributions. These are some of the investment plans offered by
mutual funds in India:
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• Systematic Investment Plan (SIP):
These require the investor to invest a fixed sum
periodically, thereby letting the investor save in a
disciplined and phased manner. The mode of investment
could be though direct debit to the investor’s salary or bank
account. A modified version of SIP is the Voluntary
Accumulation Plan (VAP) that allows the investor flexibility
with respect to the amount and frequency of investment.
Tax Provisions
Income earned by any mutual fund registered with SEBI
(Mutual Fund) Regulation, 1996 is fully exempt from tax under
section 10 (23D) of the IT act.
51
➢ However, income distributed to unit-holders by a closed-end
or debt fund is liable to a dividend distribution tax at a rate
stipulated by the Government. This tax is not applicable to
distributions made by open-end-equity-oriented funds (funds
with more than 50% of their portfolio in Equity).
➢ The fund cannot avoid the tax even if the investor chooses
to reinvest the distribution back into the fund.
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Tax Benefits to the Investor
➢ Dividends Received from Mutual Funds:
• If the units were held for over one year, the investor
gets the benefit of “Indexation”, which means his
purchase price is marked up by an inflation index, so
his capital gain amount is less than otherwise.
Purchase Price of a long term capital asset after
indexation is computed as:
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Cost of Acquisition or Improvement:
Restrictions on Investments
➢ A mutual fund scheme shall not invest more than 15% of its
NAV in debt instruments issued by a single issuer, which are
rated not below investment grade by a credit rating agency
authorized to carry out such activity under the Act. Such
investment limit may be extended to 20% of the NAV of the
scheme with the prior approval of the Board of Trustees and
the Board of Asset Management Company.
➢ A mutual fund scheme shall not invest more than 10% of its
NAV in unrated debt instruments issued by a single issuer
and the total investment in such instruments shall not
exceed 25% of the NAV of the scheme. All such investments
shall be made with the prior approval of the Board of
Trustees and the Board of Asset Management Company.
➢ No mutual fund under all its schemes should own more than
10% of any company's paid up capital carrying voting rights.
➢ Such transfers are done at the prevailing market price for
quoted instruments on spot basis. The securities so
transferred shall be in conformity with the investment
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objective of the scheme to which such transfer has been
made.
➢ A scheme may invest in another scheme under the same
asset management company or any other mutual fund
without charging any fees, provided that aggregate inter
scheme investment made by all schemes under the same
management or in schemes under the management of any
other asset management company shall not exceed 5% of
the net asset value of the mutual fund.
➢ The initial issue expenses in respect of any scheme may not
exceed 6% of the funds raised under that scheme.
➢ Every mutual fund shall buy and sell securities on the basis
of deliveries and shall in all cases of purchases, take delivery
of relative securities and in all cases of sale, deliver the
securities and shall in no case put itself in a position
whereby it has to make short sale or carry forward
transaction.
➢ Every mutual fund shall, get the securities purchased or
transferred in the name of the mutual fund on account of the
concerned scheme, wherever investments are intended to
be of long-term nature.
➢ No mutual fund scheme shall make any investment in;
• Any unlisted security of an associate or group
company of the sponsor; or
• Any security issued by way of private
placement by an associate or group
company of the sponsor; or
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• The listed securities of group companies
of the sponsor which is in excess of 30%
of the net assets (of all the schemes of
a mutual fund)
➢ No mutual fund scheme shall invest more than 10 per cent
of its NAV in the equity shares or equity related instruments
of any company. Provided that, the limit of 10% shall not be
applicable for investments in index fund or sector or industry
specific scheme.
A mutual fund scheme shall not invest more than 5% of its NAV in
the equity shares or equity related investments in case of open-
ended scheme and 10% of its NAV in case of close-ended
scheme.
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instruments. It has been observed that 90% of a managed
portfolio comes from right levels of asset allocation between
stocks and bonds/cash.
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15% in Medium Term Bond
Fund
4. A Complex Managed Portfolio: 20% in Diversified Equity
Fund
20% in Aggressive
Growth Funds
10% in Specialty Funds
30% in Long-Term Bond
Funds
20% in Short-Term Bond
Funds
5. A Readymade Portfolio: Single Index Fund with 60/40
Equity/Bond holding
➢ Strategic Asset Allocation
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Income & Gilt Funds 15 – 30%
Cash Funds 5%
Bogle gives a nice rule of thumb for asset allocation: Debt portion
of an investor’s portfolio should be equal to his age.
59
cycle and with different needs. Therefore, Jacobs gives 4
different models:
60
Recently Retired Couple 35% in Conservative Equity Funds for
Capital Preservation/Income
Accumulation Investing for long term Growth options and long term
Stage
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identified financial goals products. High risk appetite.
Transition Stage Near term needs for funds as Liquid and medium term
pre-specified needs draw investments. Lower risk
closer appetite
62
Comparison of Investment Products
Investors tend to constantly compare one form of investment
with another. There are 2 kinds of comparisons possible among
different investment options.
63
Life Low High Low Low
Insurance
Gold Moderate High Moderate Moderate
Real High Moderate High Low
Estate
Mutual High High Moderate High
Funds
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Deposits Low
Bank Income Generally Low Flexible-All
Deposits Times
65
Medium Partially Debt, Balanced Liquidity,
Partially Equity Funds, Some Better Post-Tax
Diversified returns, Better
Equity Funds Management,
and some debt Diversification
Funds, Mix of
shares and
Fixed Deposits
66
Administrative High Low
Expenses
Risk Low Moderate
Investment Less More
Options
Network High penetration Low but improving
Liquidity At a cost Better
Quality of Not transparent Transparent
Assets
Interest Minimum balance between Everyday
calculation 10th
& 30th. of every
month
Guarantee Maximum Rs.1 lakh on None
deposits
67
Recent Trends in the Mutual Fund
Industry
➢ Funds betting on Natural Resources
68
monthly or quarterly) from this fund to any of the
existing equity schemes.
69
○ A brand image is very important for mutual funds and
investors base their decisions on known and
dependable brands. Brand-building exercises are
mostly taken up by foreign players and big industrial
houses which have deep pockets, while fund houses
with lower corpus can only attract investors by
showing good performance.
70
Impact on Mutual Fund Industry of the
Union Budget
Easing in Income Tax slabs
71
Threshold limit of Income Tax exemption for individuals rose as follows -
Up to Rs.160,000 - NIL
Impact
This is expected to increase the disposable income in the hands of the
individuals to some extent which could translate into increased retail investments
in mutual funds.
Impact
People are investing in infrastructure. The infrastructure is
developing.
72
Decision of SEBI for Mutual Fund
Industry
Before this if anyone want to invest or buy the mutual fund that
he has to pay the entry load for the fund.
73
Chapter-2
Company Profile
74
Vision
To be the most trusted partner for every
stakeholder in the financial world.
We believe:
Profile
75
JM Financial Trustee Company Private Limited
JM Financial Trustee Company Private Limited (formerly
known as J.M. Trustee Company Private Limited)
Chairman: Mr.
has been promoted by J.M. Financial & Investment Nimesh N.
Kampani
Consultancy Services Pvt. Ltd. and JM Financial
Ltd. JM Financial Trustee Company Pvt. Ltd. is registered under
the Companies Act, 1956 and was incorporated on 9th June 1994.
The Sponsors have executed a Trust Deed on 1st September
1994 appointing JM Financial Trustee Company Pvt. Ltd. as
Trustee Company of JM Financial Mutual Fund.
Corporate Profile
JM Financial Mutual Fund is one of India 's first private
sector mutual funds-an integral part of the first wave that
commenced operations in 1993-94. We are a part of JM Financial
Group , which has a rich heritage,built over three decade. We are
one of the many successful companies that have emerged out of
JM Financial Group's strong foundation in financial services.
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Our Group's origins can be traced back to the 1950s when the
Kampani family began to get involved in India's then nascent
capital markets. JM Financial & Investment Consultancy Services
was founded on September 15, 1973. Under the leadership of
Chairman Nimesh N. Kampani, the JM Financial Group has
played a stellar and multi-faceted role in the development of
India's capital markets. Apart from helping companies raise
finance, the Group has also been instrumental in educating a
burgeoning and prospering middle class about the advantages of
investing in blue chip companies.
77
Awards
Year Name of Award Details
2008 Outlook Money Best Merchant
NDTV Profit Banker -
Awards Runners Up
78
2007 ICRA Mutual Open Ended
Funds Awards Sectoral–
Healthcare-1
year
performance
(till 31.12.
2006), Gold - JM
Healthcare
Sector Fund
2006 CNBC TV18 – Floating Rate
CRISIL Mutual Plan - JM
Fund Awards Floater Short
Term Plan
Euro Money
Awards of Best M&A
Excellence House, India
Finance Asia
79
Best India Deal
- Reliance
Industries USD
4.8 billion
restructuring
2004 Finance Asia Best India
Deal - USD 1.2
billion Tata
Consultancy
Services IPO
Asset Asian
Awards Best
Privatisation -
USD 2.4 billion
ONGC follow-on
offering
Asia Money
Best Deal in
India - OIL &
Asia Money Natural Gas
Corporation
Best Overall
Strategy –
Asia Money Brokers
80
Best Overall
Macroeconomic
s – Brokers
2002 Crisil Best Fund Best
Awards Performing
Open-end Debt
Scheme - JM
Income Fund
81
authorities), the philanthropic arm of the JM Financial Group
believes in strengthening and uplifting the lesser privileged
communities by enabling them to be self reliant. It does this by
adopting a dual platform of ‘education for children’ & ‘health for
all’. The Foundation has partnered with several NGOs to work on
a number of outreach initiatives.
The Group has Project Drishti, in aid of the blind. Every month, JM
Financial employees collect all their old glossy magazines and
brochures and donate these to a school meant for the visually
challenged. The school uses this material for preparing Braille, a
method used by the visually challenged to read and write. Braille
is best on glossy material, which most magazines/ brochures use.
The Group has also organised an Eye Donation Awareness camp
in association with Eye Bank Donation and Coordination Centre,
an NGO, to educate people about donating eyes and encourage
them to do it.
82
employees can volunteer as individuals and also form groups to
assist these NGOs.
Market Share
Market share of the JM Financial Asset Management
Company Pvt. Ltd.
is 8000 Crores.
83
SWOT Analysis
84
85
Chapter-3
Main Chapter
(Comparative
Analysis)
86
87
Funds which have been compared are:
➢ JM Financial
Category Fund
Equity Fund Scheme JM Equity – Dividend
Debt Fund Scheme JM Floater Fund - Long Term -
Premium – Dividend
Tax Shield Scheme JM Tax Gain Fund – Dividend
Income Plan JM Income – Dividend
Balanced Fund JM Balanced – Dividend
Gilt Fund JM G Sec Regular Plan –
Dividend
➢ Kotak
Category Fund
Equity Fund Scheme Kotak 30 – Dividend
Debt Fund Scheme Kotak Floater - Long Term -
Monthly Dividend
Tax Shield Scheme Kotak TaxSaver – Dividend
Income Plan Kotak Income Plus - Monthly
Dividend
88
Gilt Fund Kotak Gilt - Investment
Regular Plan – Growth
Balanced Fund Kotak Balance – Dividend
➢ HDFC
Category Fund
Equity Fund Scheme HDFC Equity Fund-Dividend
Debt Fund HDFC Floating Rate Income
Fund - Long Term Fund –
Dividend
Balanced Fund HDFC Balanced Fund-Dividend
Tax Shield Scheme HDFC TaxSaver – Dividend
Income Plan HDFC Income Fund – Dividend
Gilt Fund HDFC Gilt Fund Long Term Plan
– Dividend
➢ UTI
Category Fund
Equity Fund Scheme UTI Equity Fund – Dividend
Debt Fund Scheme UTI - MIS - Advantage Fund -
Monthly Dividend
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ELSS Tax Saver UTI Equity Tax Savings Plan –
Dividend
Monthly Income Plan UTI Monthly Income Scheme –
Dividend
Balanced Fund UTI Balanced Fund – Dividend
Gilt Fund UTI Gilt Advantage Fund - Long
Term - Provident Fund Plan -
Dividend
➢ ICICI
Category Fund
Equity Fund Scheme ICICI Prudential Blended Plan -
Option A – Dividend
Debt Fund Scheme ICICI Prudential Floating Rate
Fund - Plan A – Dividend
Tax Shield Scheme ICICI Prudential Tax plan –
Dividend
Income Plan ICICI Prudential Flexible
Income Plan - Premium - Daily
Dividend
Gilt Fund ICICI Prudential Gilt Fund
Investment Plan – Dividend
Balanced Fund ICICI Prudential Balanced –
90
Dividend
➢ Reliance
Category Fund
Equity Fund Scheme Reliance Equity Fund – Dividend
Debt Fund Scheme Reliance Floating Rate Fund –
Dividend
Tax Shield Scheme Reliance Tax Saver Fund –
Dividend
Income Plan Reliance Income Fund - Retail -
Annual
Risk
Risk can be defined as the potential for harm. But when
anyone analyzing mutual funds uses this term, what is actually
being talked about is volatility.
Volatility is nothing but the fluctuation of the Net Asset Value
(price of a unit of a fund). If there is high volatility, then there will
be greater fluctuations in NAV.
91
Generally, past volatility is taken as an indicator of future risk and
for the task of evaluating a mutual fund, this is an adequate
approximation.
How risk is measured?
There are 2 ways in which you can determine how risky a fund
is.
➢ Standard Deviation
Standard Deviation is a measure of how much the
actual performance of a fund over a period of time deviates
from the average performance.
Since Standard Deviation is a measure of risk, a low
Standard Deviation is good.
➢ Sharpe Ratio
The Sharpe Ratio of a fund measures whether the
returns that a fund delivered were commensurate with the
kind of volatility it exhibited.
This ratio looks at both, returns and risk, and delivers a
single measure that is proportional to the risk adjusted
returns.
Since Sharpe Ratio is a measure of risk-adjusted
returns, a high Sharpe Ratio is good.
92
Standard Deviation allows you to evaluate the volatility
of the fund. Volatility is often a direct indicator of the risks
taken by the fund. The standard deviation of a fund
measures this risk by measuring the degree to which the
fund fluctuates in relation to its mean return, the average
return of a fund over a period of time. A security that is
volatile is also considered higher risk because its
performance may change quickly in either direction at any
moment. A fund that has a consistent four-year return of
3%, for example, would have a mean, or average, of 3%.
The standard deviation for this fund would then be zero
because the fund's return in any given year does not differ
from its four-year mean of 3%. On the other hand, a fund
that in each of the last four years returned -5%, 17%, 2%
and 30% will have a mean return of 11%. The fund will also
exhibit a high standard deviation because each year the
return of the fund differs from the mean return. This fund is
therefore more risky because it fluctuates widely between
negative and positive returns within a short period.
• Beta
Beta is a fairly commonly used measure of risk. It
basically indicates the level of volatility associated with the
fund as compared to the benchmark. So quite naturally the
success of Beta is heavily dependent on the correlation
between a fund and its benchmark.
A beta that is greater than one means that the fund is more
volatile than the benchmark, while a beta of less than one
93
means that the fund is less volatile than the index. A fund
with a beta very close to 1 means the fund's performance
closely matches the index or benchmark. If, for example, a
fund has a beta of 1.03 in relation to the BSE Sensex, the
fund has been moving 3% more than the index. Therefore,
if the BSE Sensex increased 10%, the fund would be
expected to increase 10.30%.
• R-Squared
The R-squared of a fund advises investors if the beta of
a mutual fund is measured against an appropriate
benchmark. Measuring the correlation of a fund's
movements to that of an index, R-squared describes the
94
level of association between the fund's volatility and
market risk, or more specifically, the degree to which a
fund's volatility is a result of the day-to-day fluctuations
experienced by the overall market.
95
Each dot represents a fund’s return plotted against the market
returns in the same period.
The line is the beta of the returns. While the beta is the same in
both, it is far more
Alpha
96
Important Points:
➢ Don't just look at the NAV, also look at the risks-
returns
Kotak 30 has 3 stars & Kotak Opportunities has 4 stars.
That does not mean that their NAV is approximately the
same. In fact, the NAV of Kotak 30 is 90.22 & NAV of Kotak
Opportunities is 40.48
However, Kotak 30 took a below average risk and delivered
an above average return, while Kotak Opportunities took an
average risk to get the high returns. So, don’t just look at
the NAV also consider the risks-returns of the fund.
➢ Higher rating does not mean better returns
A fund with more stars does not indicate a higher
return when compared with the rest. All it means is that you
will get a good return without putting your money at too
much risk.
ICICI Prudential Liquid Fund has a 4-star rating while ICICI
Prudential Growth Fund has a 3-star rating. However, the
fund with the 3-star rating has a higher NAV (109.08) than
the one with the 4-star rating (11.73).
➢ Higher rating does not mean more risk
HDFC Top 200 has an NAV of 140.47 while UTI
Infrastructure has an NAV of 36.60
This does not necessarily mean that HDFC Top 200 is
offering a higher risk since the return is higher.
97
In fact, according to the ratings, HDFC Top 200, a 5-star fund
has a low risk while UTI Infrastructure, a 5-star fund has an
average risk.
2) Kotak 30 – Dividend
Risk Measures
Standar Beta Alpha R- Rating
d Squared
Deviatio
n
Jm 41.94 1.15 -9.48 0.93 Above
98
Avg.
Kotak 32.43 0.90 1.94 0.97 Below
Avg.
HDFC 36.38 1.00 3.34 0.95 Avg.
UTI 29.33 0.81 1.32 0.96 Below
Avg.
ICICI 1.38 0.09 2.30 0.00 Below
Avg.
Reliance 29.54 0.81 0.15 0.94 Low
Return Measures
1 Month 6 Month 1 Year 5 Year Since
Inceptio
n
Jm 8.29 51.21 5.45 28.16 17.96
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UTI 11.96 56.69 15.38 23.37 9.10
Analysis
According to Risk JM have high Beta and low Alpha and
have above average rating in the Risk Measures. According to the
list and rating JM is good for investment.
100
4) UTI - MIS - Advantage Fund - Monthly Dividend
Risk Measures
Standar Beta Alpha R- Rating
d Squared
Deviatio
n
Jm 0.24 0.01 1.81 0.00 Below
Avg.
Kotak 0.27 0.51 2.15 0.49 Low
HDFC 0.73 0.15 4.02 0.01 Above
Avg.
UTI 7.84 0.72 3.12 0.65 Above
Avg.
ICICI 0.26 0.59 1.43 0.70 Above
Avg.
Reliance 0.20 0.42 2.38 0.63 Below
Avg.
101
Compari Reliance UTI ICICI ICICI
son
Return Measures
1 Month 6 Month 1 Year 5 Year Since
Inceptio
n
Jm 0.39 2.26 5.80 NA 5.14
Analysis
102
According to the Risk ICICI have low alpha and High R-
Square & have above average rating in the Risk Measures. Other
2 schemes of HDFC and UTI also have above average rating but
in the list ICICI is good for investment.
Risk Measures
103
Standar Beta Alpha R- Rating
d Squared
Deviatio
n
Jm 6.68 1.07 -1.50 0.93 Above
Avg.
Kotak 37.78 1.03 -1.35 0.92 Avg.
HDFC 34.29 0.94 -1.10 0.95 Below
Avg.
UTI 32.21 0.89 -3.93 0.96 Low
ICICI 37.85 1.00 -4.17 0.87 Above
Avg.
Reliance 29.54 0.81 0.15 0.94 Below
Avg.
Return Measures
1 Month 6 Month 1 Year 5 Year Since
104
Inceptio
n
Jm 2.00 55.78 -24.50 NA -30.45
Analysis
According to the Risk JM have lowest standard deviation and
highest beta have above average rating. ICICI also have lowest
Alpha and have above average rating but according to the list JM
is good for investment.
105
Income Plan
1) JM Income – Dividend
Risk Measures
Standar Beta Alpha R- Rating
d Squared
Deviatio
n
Jm 3.13 0.23 -10.60 0.13 Avg.
Kotak 6.90 0.57 -6.28 0.53 Above
Avg.
HDFC 0.73 0.15 4.02 0.01 Above
Avg.
UTI 5.29 0.50 4.06 0.70 Below
Avg.
ICICI 1.38 0.09 2.30 0.00 Below
106
Avg.
Reliance 29.54 0.81 0.15 0.94 Above
Avg.
Return Measures
1 Month 6 Month 1 Year 5 Year Since
Inceptio
n
Jm -0.43 -4.55 -3.93 1.27 5.73
107
Analysis
According to the Risk Reliance have highest Beta and
Highest R-Squared and have above average rating. Kotak and
HDFC also have above average rating and HDFC have lowest
Standard deviation. But according to the list Reliance is good for
investment.
Balanced Fund
1) JM Balanced – Dividend
108
Risk Measures
Standar Beta Alpha R- Rating
d Squared
Deviatio
n
Jm 34.85 1.27 -8.54 0.89 High
Kotak 25.55 0.96 -0.30 0.95 Avg.
HDFC 25.31 0.93 0.96 0.90 Below
Avg.
UTI 25.64 0.97 -0.87 0.96 Avg.
ICICI 24.73 0.94 -3.95 0.96 Avg.
Reliance 29.54 0.81 0.15 0.94 Avg.
Return Measures
109
1 Month 6 Month 1 Year 5 Year Since
Inceptio
n
Analysis
According to the Risk JM have highest Beta and lowest Alpha
and also have High rating. According to the rating and list JM is
good for investment.
110
Gilt Fund Scheme
1) JM G Sec Regular Plan – Dividend
Risk Measures
Standar Beta Alpha R- Rating
d Squared
Deviatio
n
Jm 8.35 0.40 11.84 0.30 Below
Avg.
Kotak 12.52 0.59 3.22 0.29 Above
Avg.
111
HDFC 12.01 0.50 -1.48 0.23 Avg.
UTI 14.23 0.62 2.19 0.25 Avg.
ICICI 14.61 0.63 8.75 0.24 High
Reliance 29.54 0.81 0.15 0.94 Above
Avg.
Return Measures
1 Month 6 Month 1 Year 5 Year Since
Inceptio
n
Jm 0.96 2.76 29.30 8.34 7.72
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Compari HDFC HDFC JM HDFC Reliance
son
Analysis
According to the Risk Reliance have high Beta and High R-
Squared and have above average rating and Kotak also had
above average rating also. According to return Reliance is good
for investment.
113
Chapter-4
Analysis &
Findings
114
Age <= 31-35 36-40 41-45 46-50 >50
Group 30
No. of 12 28 40 34 20 16
Investor
s
Findings:
most are in the age group of 36-40 yrs. i.e. 25%, the second most
investors are in the age group of 41-45yrs i.e. 20% and the least
115
2. Educational Qualification of investors
Educational Number of
Qualification Investors
Graduate/ Post Graduate 98
Under Graduate 34
Others 18
Total 150
Findings:
116
Out of 150 Mutual Fund investors 65% of the investors are
Graduate/Post Graduate, 23% are Under Graduate and 12% are others
(under HSC).
Occupation No. of
Investors
Govt. Service 35
Pvt. Service 55
Business 50
Agriculture 4
Others 6
117
Findings:
118
15,001-20,000 38
20,001-30,000 53
>30,000 32
Findings:
119
5. Investors invested in different kind of investments.
Kind of No. of
Investments Respondents
Saving A/C 150
Fixed deposits 30
Insurance 100
Mutual Fund 120
Post office 10
(NSC)
Shares/Debent 100
ures
Gold/Silver 40
Real Estate 30
120
Findings:
20% have Fixed Deposits, 80% have Mutual Fund, 20% have
121
6. Preference of factors while investing
No. of 34 50 50 16
Responde
nts
122
Findings:
123
Response Yes No
No. of 135 15
Respondents
Findings:
124
From the above chart it is inferred that 90%
People are aware of Mutual Fund and its operations and 10%
Fund
Source of No. of
information Respondents
Advertisement 18
Peer Group 20
Bank 30
Financial Advisors 72
125
Findings:
Response No. of
Respondents
YES 120
NO 30
126
Findings:
127
10. Reason for not invested in Mutual Fund
Reason No. of
Respondents
Not Aware 15
Higher Risk 10
Not any Specific 5
Reason
Findings:
128
Out of 30 people, who have not invested in Mutual Fund,
81% are not aware of Mutual Fund, 33% said there is likely to
Co. (AMC)
129
Findings:
Reason No. of
Respondents
130
Trust 10
Good Return 5
Agent’s Advice 10
Findings:
131
13. Preference of Investors for future investment in
Mutual Fund
132
Findings:
Fund Investment
Advisor
No. of 72 18 30
Respondent
133
Findings:
134
15. Mode of Investment Preferred by the Investors
Respondents
Findings:
135
Out of 120 Investors 65% preferred One time
Investment Plan.
136
Findings:
Investors
Payout Reinvestme
nt
No. of 25 10 85
Respondent
137
Findings:
Reinvestment Option.
138
Chapter-5
Conclusion &
Recommendatio
ns
Conclusion
139
Running a successful Mutual Fund requires complete
understanding of the peculiarities of the Indian Stock Market and
also the psyche of the small investors. This study has made an
attempt to understand the financial behavior of Mutual Fund
investors in connection with the preferences of Brand (AMC),
Products, Channels etc. I observed that many of people have fear
of Mutual Fund. They think their money will not be secure in
Mutual Fund. They need the knowledge of Mutual Fund and its
related terms. Many of people do not have invested in mutual
fund due to lack of awareness although they have money to
invest. As the awareness and income is growing the number of
mutual fund investors are also growing.
140
invest directly who know well about mutual fund and its
operations and those have time.
Recommendations
The most vital problem spotted is of ignorance. Investors
should be made aware of the benefits. Nobody will invest until
and unless he is fully convinced. Investors should be made to
realize that ignorance is no longer bliss and what they are losing
by not investing.
By considering these four things they can take the customers into
consideration-:
141
➢ Younger people aged under 30 will be a key new customer
group into the future, so making greater efforts with
younger customers who show some interest in investing
should pay off.
142
Appendices
143
Questionnaire
1. What is the Age distribution of the Investors?
40
Graduate
(c) Others
Business
144
(a) <=10000 (b) 10,001-15,000 (c)
15,001-20,000
145
5. In which sector you want to Invest your money?
(f)Shares/Debentures
146
9. Do you have Mutual Fund?
specific reason
Prudential
(g) Others
Agent’s advice
147
(d) Reliance (e) Kotak (f) ICICI
Prudential
(g) Others
AMC
Investment plan
(f) Gilt
Growth
148
149
List of Tables
150
Risk & Return 69-
71
XI. Comparison of the Schemes
77-88
151
Glossary
AMC - Asset Management Company
Divulge - Make known to the public information that was previously known only to a few people or that
was meant to be kept a secret
Evidence - Your basis for belief or disbelief; knowledge on which to base belief
Letting - Make it possible through a specific action or lack of action for something to happen
152
Spectrum - A broad range of related objects or values or qualities or ideas or activities
Wooing – To attract
Bibliography
➢ News Papers
➢ www.mutualfundsindia.com
➢ www.moneycontrol.com
➢ www.amfiindia.com
➢ www.valueresearchonline.com
➢ www.jmfinancial.in
➢ www.jmfinancialmf.com
➢ www.investopedia.com
153
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