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A PROJECT REPORT ON CUSTOMER AWARENESS REGARDING MUTUAL FUNDS

CONDUCTED AT HSBC BANK, CHANDIGARH

IN PARTIAL FULFILMENT OF MASTER OF BUSINESS ADMINISTRATION

SUPERVISOR : Dr. Monika Aggarwal

SUBMITTED BY: Manisha Kumari

ACKNOWLEDGEMENT Behind every achievement lies an unfathomable sea of gratitude to those who have extended their support and without whom it would never have come into existence. To them I say my words of gratitude. HSBC Bank limited has given me the opportunity to gain invaluable experience under the guidance of Mrs Pratibha Soni (PowerVantage Relationship Manager), who took pains for making sure that I have every facility, which I need for my project. His continuous support and cooperation along with his valuable in-hand experience provided me with the conceptual understanding and practical approach needed to work efficiently for this project. I would like to express my deepest sense of gratitude to Mr. Sachin Vinayak (Branch Manager) for giving me this opportunity to undergo Summer Training at HSBC. I would also like to extend my heartfelt gratitude to his constant encouragement and valuable insight, guidance and facilities at all phases of the project. I also want to thank rest of staff at HSBC who helped one way, other or me during the project. I hope this report reflecting my learnings in the past eight weeks is as beneficial to the organization as it has been to me. (Manisha Kumari)

Table of Contents Chapter Name Acknowledgement Executive summary Declaration Certificates List of tables and graphs Chapter 1 : 1.1 Industry Profile 1.1Company Profile Chapter 2 : Research Methodology Chapter 3 : Analysis Chapter 4 : Findings / Conclusions Chapter 5 : Suggestions Chapter 6 : Bibliography Annexure Page No.

EXECUTIVE SUMMARY

The structural changes and innovations took place in Indian financial system during eighties and nineties. The income level of urban and middle class people is increasing and these people are saving a part of their income to invest in profitable and safe avenues. Generally people mix bank deposits and investments with each other. But there is difference in these terms. The money, which is deposited in the banks, earns interest. It may be in the form of fixed deposits, saving etc and there is not any type of risk. But investors take risks to earn profits. If the risk is high, the return will also be high and vice versa. So investments earns profits having risk. Mutual funds offer good investment opportunities to investors carries different types of risks for different types of customers having different perception towards risk and returns from their investment.

A study was done at HSBC Bank on the investors who invest their money in different investment avenues. The findings of study are that people prefer to invest more in mutual funds due to good returns and because of getting good returns their confidence level in mutual funds investment has increased. So most of the people want to invest more in mutual funds in future.

CHAPTER 1

1.1

INDUSTRY PROFILE

Introduction Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions. MUTUAL FUNDS A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Each Mutual Fund scheme has a defined investment objective and strategy.

Mutual Funds-Investment Objectives:

Preservation of Capital & Liquidity--Achieved by investing in very Income--Achieved by investing in bonds Balanced--Achieved by investing in bonds and stocks Growth--Achieved by investing in stocks

short-term bonds

IMPORTANT TERMINOLOGY Net Asset Value (NAV) Net Asset Value (NAV) is the market value per unit. It is the actual value of one unit of a given scheme on any given business day. The NAV reflects the liquidation value of the fund's investments on that particular day after accounting for all expenses. It is calculated by deducting all liabilities (except unit capital) of the fund from the realizable value of all assets and dividing it by number of units outstanding.

Asset Management Company (AMC)

An Asset Management Company or AMC is the investment manager of the respective trust, which is entitled to invest in different securities on behalf of unit holders, in line with the objectives of respective schemes. Load The charge collected by a Mutual Fund from an investor for selling the units or investing in it. Entry load: When a charge is collected at the time of entering into the scheme it is called an Entry load or Front-end load or Sales load. The entry load percentage is added to the NAV at the time of allotment of units. Exit load: An Exit load or Back-end load or Repurchase load is a charge that is collected at the time of redeeming or for transfer between schemes (switch). The exit load percentage is deducted from the NAV at the time of redemption or transfer between schemes. Systematic Investment Plan Systematic Investment Plan is normally offered by many open-ended mutual funds in order to encourage regular investments. This plan allows an investor to purchase additional units of the Scheme by investing fixed amount of rupees every month/quarter. The beauty of the plan is that as the market falls the number of units purchased by the investor increases as the purchases are linked to the NAV. This concept is called Rupee Cost Averaging. Rupee Cost Averaging does not guarantee a profit or protect against a loss. Rupee Cost Averaging can smooth out the market's ups and downs and reduce the risk of investing in volatile markets. Systematic Withdrawal Plan

The unit holder may set up a Systematic Withdrawal Plan on a monthly, quarterly or semi-annual or annual basis to redeem a fixed number of units Price/Earnings Ratio Abbreviated as P/E Ratio or P/E. Sometimes referred to as the "multiple." Calculated by dividing the stock's current price by the company's current annual earnings per share, usually from the last four quarters (known as the Trailing P/E Ratio), but sometimes from the estimates of the earnings expected in the next four quarters (the Projected P/E ratio), or from the sum of the last two actual quarters and the estimates of the next two quarters. In and of itself, the P/E Ratio tells very little, but can be usefully compared to the P/E Ratios of other companies in the same industry, or to the market in general, or to the company's own historical P/E Ratios, in order to determine how much the market is currently willing to pay for a share of the company's earnings. TYPES OF MUTUAL FUND There are wide varieties of Mutual Fund schemes that cater to investor needs, whatever the age, financial position, risk tolerance and return expectations. The mutual fund schemes can be classified according to both their investment objective (like income, growth, tax saving) as well as the number of units (if these are unlimited then the fund is an open-ended one while if there are limited units then the fund is close-ended).

CLASSIFICATION ACCORDING TO CAPITALIZATION OBJECTIVE:

I. Open ended and closes ended funds

Open-ended Funds An open-end fund is one that has units available for sale and repurchase at all the times at a price based on the NAV per unit generally calculated on every business day. Such funds are open for subscription the whole year. These schemes have unlimited capitalization, open-ended schemes do not have a fixed maturity - i.e. there is no cap on the amount you can buy from the fund and the unit capital can keep growing. These funds are not generally listed on any exchange. Open-ended funds are bringing in a revival of the mutual fund industry owing to increased liquidity, transparency and performance in the new open-ended funds promoted by the private sector and foreign players. Open-ended funds score over close-ended ones on several counts. Some of these are listed below: a) Any time exit option : The issuing company directly takes the responsibility of providing an entry and an exit. This provides ready liquidity to the investors and avoids reliance on transfer deeds, signature verifications and bad deliveries. b) Tax advantage : Though Budget 2004 proposals envisage a tax rate of 20.91%(Corporate investors) and 13.06875%(Non-Corporate investors) on dividend distribution made by the Debt funds, the funds continue to remain attractive investment vehicles. In equity plans there is no distribution tax. c) Any time entry option : An open-ended fund allows one to enter the fund at any time and even to invest at regular intervals (a systematic investment plan).

Close-ended Funds Close end funds can be subscribed to, only during the initial public offer. Thereafter the units of such funds can be bought and sold on the stock exchange on which they are listed through a broker. Such funds have a stipulated maturity period, limited capitalization and the units are listed on the stock exchange are called close-ended schemes. These schemes have historically seen a lot of subscription. This popularity is estimated to be on account of firstly, public sector MFs having floated a lot of close-ended income schemes with guaranteed returns and secondly easy liquidity on account of listing on the stock exchanges. CLASSIFICATION ACCORDING TO INVESTMENT OBJECTIVE: INVESTMENT OBJECTIVES Objectives Mutual funds have specific investment objectives such as growth of capital, safety of principal, current income or tax-exempt income. In general mutual funds fall into three general categories:

Equity Funds invest in shares or equity of companies. Fixed-Income funds invest in government or corporate securities that offer fixed rates of return.

Balanced Funds invest in a combination of both stocks and bonds.

I) GROWTH FUNDS

These funds seek to provide growth of capital with secondary emphasis on dividend. They invest in shares with a potential for growth and capital appreciation. Because they invest in well-established companies where the company itself and the industry in which it operates are thought to have good long-term growth potential, growth funds provide low current income. Growth funds generally incur higher risks than income funds in an effort to secure more pronounced growth. These funds may invest in a broad range of industries or concentrate on one or more industry sectors. Growth funds are suitable for investors who can afford to assume the risk of potential loss in value of their investment in the hope of achieving substantial and rapid gains. They are not suitable for investors who must conserve their principal or who must maximize current income. II) GROWTH AND INCOME FUNDS Growth and income funds seek long-term growth of capital as well as current income. The investment strategies used to reach these goals vary among funds. Some invest in a dual portfolio consisting of growth stocks and income stocks, or a combination of growth stocks, stocks paying high dividends, preferred stocks, convertible securities or fixed-income securities such as corporate bonds and money market instruments. Others may invest in growth stocks and earn current income by selling covered call options on their portfolio stocks. Growth and income funds have low to moderate stability of principal and moderate potential for current income and growth. They are suitable for investors who can assume some risk to achieve growth of capital but who also want to maintain a moderate level of current income.

III) FIXED-INCOME FUNDS The goal of fixed income funds is to provide current income consistent with the preservation of capital. These funds invest in corporate bonds or government-backed mortgage securities that have a fixed rate of return. Within the fixed-income category, funds vary greatly in their stability of principal and in their dividend yields. High-yield funds, which seek to maximize yield by investing in lower-rated bonds of longer maturities, entail less stability of principal than fixed-income funds that invest in higher-rated but lower-yielding securities. Some fixed-income funds seek to minimize risk by investing exclusively in securities whose timely payment of interest and principal is backed by the full faith and credit of the Indian Government. Fixed-income funds are suitable for investors who want to maximize current income and who can assume a degree of capital risk in order to do so. IV) BALANCED The Balanced fund aims to provide both growth and income. These funds invest in both shares and fixed income securities in the proportion indicated in their offer documents.Ideal for investors who are looking for a combination of income and moderate growth. V) MONEY MARKET FUNDS/LIQUID FUNDS

For the cautious investor, these funds provide a very high stability of principal while seeking a moderate to high current income. They invest in highly liquid, virtually risk-free, short-term debt securities of agencies of the Indian Government, banks and corporations and Treasury Bills. Because of their short-term investments, money market mutual funds are able to keep a virtually constant unit price; only the yield fluctuates. Therefore, they are an attractive alternative to bank accounts. With yields that are generally competitive with - and usually higher than -- yields on bank savings account, they offer several advantages. Money can be withdrawn any time without penalty. Although not insured, money market funds invest only in highly liquid, short-term, top-rated money market instruments. Money market funds are suitable for investors who want high stability of principal and current income with immediate liquidity. VI) SPECIALTY/SECTOR FUNDS These funds invest in securities of a specific industry or sector of the economy such as health care, technology, leisure, utilities or precious metals. The funds enable investors to diversify holdings among many companies within an industry, a more conservative approach than investing directly in one particular company. Sector funds offer the opportunity for sharp capital gains in cases where the fund's industry is "in favor" but also entail the risk of capital losses when the industry is out of favor. While sector funds restrict holdings to a particular industry, other specialty funds such as index funds give investors a broadly diversified portfolio and attempt to mirror the performance of various market averages.

Index funds generally buy shares in all the companies composing the BSE Sensex or NSE Nifty or other broad stock market indices. They are not suitable for investors who must conserve their principal or maximize current income.

MUTUAL FUND STRUCTURE A mutual fund comprises four separate entities, namely sponsor, mutual fund trust, AMC and custodian. The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be in the form of a deed registered under the provisions of the Indian Registration Act, 1908. The sponsor is required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the asset management company. The board of trustees manages the MF and the sponsor executes the trust deeds in favour of the trustees. It is the job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guidelines.

Sponsor

Mutual Trustee Fund

AMC

Custodian

TRUSTEE A Trustee is a Corporate Body governed by the provisions of Indian Trusts Act, required to comply with the provisions of the Companies Act, 1956. It acts as protector of the unit-holders' interests. It does not directly manage the portfolio of securities but, appoints an Asset Management Company and ensures that the fund is managed as per the defined objectives and in accordance with the trust deed and SEBI regulations. CUSTODIAN A Custodian, registered with SEBI, is appointed by the board of Trustees for safekeeping of securities or participating in any clearing system through approved depository companies on behalf of the mutual fund and must fulfill its responsibilities in accordance with its agreement with the mutual fund. Since mutual funds are in the business of buying and selling of securities in large volumes, handling of such securities in terms of physical delivery and safe- keeping is the responsibility of a Custodian. SPONSOR A Sponsor is any person who, acting alone or in combination with another body corporate, establishes a mutual fund. The Sponsor, who is akin to the promoter of a company, gets the fund registered with SEBI, forms a Trust and appoint a Board of Trustees, will also generally appoint an Asset Management Company as fund managers. The Sponsor, either directly or acting through the trustees,

will also appoint a Custodian to hold the fund assets. All these appointments are made in accordance with SEBI regulations. REGISTRAR/TRANSFER AGENT Transfer Agents are responsible for issuing and redeeming units of the mutual fund and provide other related services such as preparation of transfer documents and updating investor records. HOW TO INVEST IN MUTUAL FUND Step One - Identify the Investment needs :Our financial goals will vary, based on the age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess the needs. We can begin by defining the investment objectives and needs, which could be regular income, buying a home or finance a wedding or educate children etc.

Step Two - Choose the right Mutual Fund: The important thing is to choose the right mutual fund scheme, which suits our requirements. The offer document of the scheme tells us its objectives and provides supplementary details like the track record of other schemes managed by the same Fund Manager. Some factors to evaluate before choosing a particular Mutual Fund are the track record of the performance of the fund over the last few years. Other factors could be the portfolio allocation, the dividend yield and the degree of transparency etc.

Step Three - Select the ideal mix of Schemes: Investing in just one Mutual Fund scheme may not meet all the investment needs. We may consider investing in a combination of schemes to achieve our specific goals.

Step Four - Invest regularly: The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, we buy fewer units when the price is higher and more units when the price is low, thus bringing down the average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. We can also avail the systematic investment plan facility offered by many open-end funds.

Step Five- Start early: It is desirable to start investing early and stick to a regular investment plan. If we start now, we will make more than if we wait and invest later. The power of compounding lets us earn income on income and our money multiplies at a compounded rate of return.

Step Six - The final step: Finally we need to fill in the application forms of various mutual fund schemes and start investing. We may reap the rewards in the years to come. Mutual Funds are suitable for every kind of investor - whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking.

SWOT ANALYSIS OF MUTUAL FUNDS

Strengths of Mutual Funds are:

The fund industry has introduced the best products and services, and delivered

superlative performances.

It allows small investors to invest in market cheaply and efficiently. You get to own several companies no matter how much you decide to invest. In other

words you get instant diversification.


You can easily make monthly contributions. A professional manager is the one managing the money. Theoretically because of

his/her experience and knowledge you should receive above average returns.

Very high transparency, risk of fraud is very less. For every kind of profile (ie conservative, moderately aggressive , aggressive ) there

are investment options available.

Weaknesses of Mutual Funds are:

Load being charged for entry into and exit from a particular fund is the biggest

weakness of funds.

Lack of flexibility. Load is charged irrespective of the performance of the fund. Expense ratio is charged separately ie you pay management fee no matter if the fund

makes you money or not.

A large majority of mutual fund companies dont come close to beating market

averages like the S&P 500.

Opportunities for Mutual Funds:

Only .5% of Indian savings is invested in mutual funds. Therefore there is a large

potential for the fund industry to mobilize the savings of people into investments in MFs.

Mutual funds are currently not allowed to invest in real estate. MF making investments

in property should be allowed. Government is making necessary efforts.

Threats to the Mutual Funds:

One of the biggest ills plaguing the fund industry today is called late trading. The deal

is to offer preferential treatment to large investors by offering them backdated net asset values (NAVs).

ULIP (Unit Linked Investment Plan)- if the time horizon of the investor is more than

15 years, ULIP becomes a threat to fund industry. Also the brokers say (banks) get higher brokerage if an investor invests in ULIP rather than MFS.

PPF (Public Provident Fund) is also a threat since it gives guaranteed return since no

investment is risk free. Anyone who invests in mutual funds runs the risk of losing money.

Real estate also poses a big threat for the industry since investor prefers investing in

property rather than funds.

Portfolio management has now been started by various institutions such a (Kotak

securities), whereby a separate portfolio can be designed for an individual investor. Here an individual is saved if the fund manger does not make right decision regarding funds portfolio.

CURRENT PLAYERS IN THE MUTUAL FUNDS INDUSTRY The mutual fund sector in India currently comprises the following category of players.

A) BANK SPONSORED a) BOB Asset Management Co. Ltd. b) Canbank Investment Management Services Ltd. c) PNB Asset Management Co. Ltd. d) SBI Funds Management Ltd.

B) INSTITUTIONS a) GIC Asset Management Co. Ltd. b) IL and FS Asset Management Co.Ltd c) Jeevan Bima Sahayog Asset Management Co. Ltd.

C) PRIVATE SECTOR Indian a) b) c) d) e) f) g) Benchmark Asset Management Co. Ltd. Cholamandalam Asset Management Co. Ltd Escorts Asset Management Co. Ltd J.M. Capital Management Co. Ltd. Kotak Mahindra Asset Management Co. Ltd. Reliance Capital Asset Management Co. Ltd Sundaram Asset Management Co. Ltd

1.

2.

Joint Ventures - Predominantly Indian Birla Sun Life Asset Management Co. Ltd.

b) c) d) e) f)

Credit Capital Asset Management Co. Ltd. DSP Merrill Lynch Investment Managers (India) Ltd. First India Asset Management Private Ltd. HDFC Asset Management Co. Ltd. Tata TD Waterhouse Asset Management Co. Ltd.

3.

Joint Ventures- Predominantly Foreign Alliance Capital Asset Management (India) Pvt.Ltd. Deutche Asset Management (India) Pvt. Ltd. HSBC Asset Management (India) Private Ltd. ING Investment Management (India) Pvt. Ltd. Morgan Stanley Investment Management Pvt. Ltd. Prudential ICICI Management Co. Ltd. Standard Chartered Asset Management Co. Pvt. Ltd. Sun F & C Asset Management (I) Pvt. Ltd. Templeton Asset Management (India) Pvt. Ltd. Principal Asset Management Co. Ltd.

Systematic Investment Plan A program that allows an individual to have a set amount electronically transferred from one account to another at a specified frequency. Examples include stock and mutual fund reinvestment programs,

defined contribution plans, mutual fund contribution programs, and automatic withdrawal plans. also called automatic investment plan Features of SIP Systematic investing is simply a method whereby one automatically and systematically sets up an account to add funds to an investment regularly. Consequently, given the same dollar investment, when share prices of mutual funds or unit values of variable annuities are high a systematic investor buys less of them, they purchase more when prices are lower

Systematic investors have no regard to market timing and are adding the same dollar amount on a regular LONG TERM basis with the idea of accumulating additional mutual funds share (see information below) and or units of variable annuity (see information below) accounts.

Most of the major mutual fund companies and variable annuity companies offer flexible systematic accumulation plans for their investors. Typically, there is a minimum account opening amount needed, after which additional investments of as little as $25.00 per investment period can be added. The investment period might be weekly, bi-weekly, monthly, or quarterly.

Generally, systematic investment plans are set-up as direct periodic and automatic withdrawals from personal savings and or personal checking accounts. These plans can be stopped or started at anytime; and in addition to the automatic component of the program; investors can add or withdraw funds as they deem appropriate.

This type of plan does not assure a profit and does not protect against loss in a declining market. Investors should consider their financial ability to continue their purchases through periods of all price levels.

Overall, systematic investment programs have been recognized historically as an excellent method for developing what could be a substantial investment account, i.e., wealth accumulation.

WHY MUTUAL FUND? i) PROFESSIONAL INVESTMENT MANAGEMENT

Mutual funds hire full-time, high-level investment professionals. Funds can afford to do so as they manage large pools of money. The managers have real-time access to crucial market information and are able to execute trades on the largest and most cost-effective scale.

ii) DIVERSIFICATION Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund unit-holders can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities. iii) LOW COST A mutual fund let's you participate in a diversified portfolio for as little as Rs.5,000/-, and sometimes less. And with a no-load fund, you pay little or no sales charges to own them.

iv) CONVENIENCE AND FLEXIBILITY You own just one security rather than many, yet enjoy the benefits of a diversified portfolio and a wide range of services. Fund managers decide what securities to trade, collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised. It also uses the services of a high quality custodian and registrar in order to make sure that your convenience remains at the top of our mind. v) PERSONAL SERVICE One call puts you in touch with a specialist who can provide you with information you can use to make your own investment choices. They will provide you personal assistance in buying and selling your fund units, provide fund information and answer questions about your account status. Our Customer service centers are at your service and our Marketing team would be eager to hear your comments on our schemes. vi) LIQUIDITY In open-ended schemes, you can get your money back promptly at net asset value related prices from the mutual fund itself. vii) TRANSPARENCY You get regular information on the value of your investment in addition to disclosure on the specific investments made by the mutual fund scheme

1.2 COMPANY PROFILE

About HSBC Headquartered in London, HSBC Holdings plc is one of the largest banking and financial services organisations in the world. HSBCs international network comprises over 9,500 offices in 79 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With listings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings plc are held by nearly 200,000 shareholders in some 100 countries and territories. The shares are traded on the New York Stock Exchange in the form of American Depositary Receipts. Through an international network linked by advanced technology, including a rapidly growing e-commerce capability, HSBC provides a comprehensive range of financial services: 1. personal financial services; 2. consumer finance; 3. commercial banking; 4. corporate, investment 5. banking and markets; 6. private banking

At 30 June 2003, the Groups total assets amounted to US$983 billion (595 billion, HK$7,663 billion). It has 218,000 employees and nearly 200,000 shareholders around the world. Although the

Groups holding company, HSBC Holdings plc, was formed as recently as 1991, many of its principal constituent companies opened for business over a century ago and have

long experience in their home and international markets. The story of the growth and development of these companies is rich in variety and achievement, with an international pedigree that is unique in banking history. This brief history describes the origins and evolution of the companies that make up the HSBC Group. The history concludes with a summary of the far-reaching changes in recent years that have given HSBC its special place in todays major financial markets.

Origin of HSBC Group

The HSBC Groups name is derived from The Hongkong and Shanghai Banking Corporation Limited, the founding member of the modern Group. The bank owed its origins to the business communities of the China coast in the 1860s. At that time, the finance of trade in the region was not well developed and most transactions were still handled by the European trading houses, or hongs, rather than by professional banks. By the early 1860s, local businessmen needed larger and more sophisticated facilities. In Hong Kong, in particular, business leaders required specialist banking services preferably from a bank that was locally owned and managed. The founding of the bank in 1865 answered this need. The new company was the inspiration of Thomas Sutherland, then the Hong Kong Superintendent of the Peninsular and Oriental Steam Navigation Company, who produced a prospectus for a locally based bank operating on sound Scottish banking principles. The prospectus attracted the support of a broad spectrum of Hong Kong interests, including American and Indian trading houses as well as European firms, and the initial capital

of HK$5 million was quickly taken up in Hong Kong, Shanghai and Calcutta. On this basis, the bank opened for business in Hong Kong on 3 March 1865. Then, as now, the banks headquarters were at 1 Queens Road. One month later, on 3 April 1865, the banks Shanghai office opened for business. Initial response from customers in the two cities was favorable, both from the foreign business community and from the compradores, the influential Chinese intermediaries in charge of local staff and business dealings in the Chinese community. The new banks commitment to local ownership and management required a special arrangement for incorporation. Rather than operate under existing British or colonial regulations which would have required a London head office the banks directors persuaded the Treasury in London to accept incorporation under a special Hong Kong ordinance. This allowed the bank to maintain a head office in Hong Kong without losing the privilege of issuing banknotes and holding government funds. In this way, the bank (which had started life under a local Companies Ordinance as the Hongkong and Shanghai Banking Company Limited) assumed the name The Hongkong and Shanghai Banking Corporation in December 1866. Thereafter, the banks statutory framework remained basically unchanged until 1989, when registration under the Hong Kong Companies Ordinance was completed.

Early Business of the Group

Early business and development soon after its formation in Hong Kong and Shanghai, the bank established a network of agents and branches around the world. Although that network reached as far as Europe and North America, the emphasis was placed on building up representation in China and the rest of the Asia- Pacific region. In many of its branches and agencies in Asia, The Hongkong and Shanghai Banking Corporation was the pioneer of modern banking practices. From the outset, trade

finance was a strong feature of its local and international business, an expertise that has been recognised throughout its history. Bullion and exchange businesses were also important in the early years. In Japan, where a branch was opened at Yokohama in 1866, the bank acted as an adviser to the government on banking and currency. In 1888, it was the first bank to be established in Thailand, where it printed the countrys first banknotes. By 1900, the branch network in Asia extended to India (1867), the Philippines (1875) and Singapore (1877), and to cities in what are now Malaysia, Myanmar, Sri Lanka and Vietnam. In the 19th century, international banking of this kind required innovation and high levels of risk. The bank had its share of setbacks in its early years, including over-commitment to a number of local industrial ventures. From the mid-1870s, however, the bank renewed its focus on trade finance. Thomas Jackson, Chief Manager on three occasions between 1876 and 1902, dominated this period of the banks growth and led it to become the foremost financial institution in Asia. In achieving this reputation, Jackson and his successors were supported by a distinctive cadre of managers and staff. These officers, many of whom had begun their careers with English or Scottish joint-stock banks, were trained in London before taking up appointments in Asia. On reaching the higher levels of management, the banks officers could call on varied experience in the many different settings of the banks operations.

HSBC Group in India

The antecedents of the HSBC Group in India can be traced back to October 1853 when the Mercantile Bank of India, London and China was founded in Bombay (now Mumbai). Starting with an authorised capital of Rs 5 million, the Mercantile Bank soon opened offices in London, Madras(Chennai), Colombo and Kandy, followed by Calcutta(Kolkata), Singapore, Hong Kong,

Canton(Guangchow) and Shanghai by 1855. The following hundred years were in many ways propitious for the Mercantile Bank. In 1950 it moved into its new head office building in Mumbai at Flora Fountain. The acquisition in 1959 by The Hongkong and Shanghai Banking Corporation Limited of the Mercantile Bank was a decisive factor in laying the foundation for today's HSBC Group. Founded in 1865 to serve the needs of the merchants of the China coast and finance the growing trade between China, Europe and the United States, HSBC has been an international bank from its earliest days. After the Mercantile Bank was acquired by The Hongkong and Shanghai Banking Corporation, the Flora Fountain building became and remains to this day, the Head Office of the HSBC Group in India. Through the 1990s, HSBC has vigorously developed its role as one of the leading banking and financial services organisations in the world. Its strategy of 'managing for value' emphasises the Group's unique balance of business and earnings between older, mature economies and fastergrowing emerging markets. HSBC in India is proud to have retained the Group's pioneering streak by being an active partner in the development of the Indian banking industry - even giving India its first ATM way back in 1987. The organisation's adaptability, resilience and commitment to its customers have further enabled it to survive through turbulent times and prosper through good times over the past 150 years. In India, the Bank offers a comprehensive suite of world-class products and services to its corporate and commercial banking clients as also to a fast growing personal banking customer base. Services provided by HSBC in India Personal banking

HSBC offers a wide range of personal financial services, including personal lending and deposit products, through its branch network in Ahmedabad, Bangalore, Chennai, Chandigarh, Coimbatore, Gurgaon, Hyderabad, Jaipur, Kochi, Kolkata, Ludhiana, Mumbai, New Delhi, Noida, Pune, Thane, Trivandrum and Visakhapatnam, Patna`. Also offered branch-wide are international Gold and Classic credit cards from VISA and MasterCard and debit cards from Visa. Customers have access to 24-hour banking services through an extensive network of automated teller machines (ATMs), an integrated Call Centre, and internet banking - online@hsbc .

Non

Resident

Indian

banking

HSBC's Non Resident Indian Banking (NRI) centers located in Asia-Pacific, the Middle East, Europe and North America, together with HSBC's offices worldwide, provide the international Indian Diaspora access to a range of products and services. These include NRI related investment (both international and domestic), transactional and deposit products, together with a full range of personal and private banking products in India and overseas. Internet banking also provides easy access to HSBC's services.

Financial

planning

services

Services include investment and custodian management and access to stock broking and insurance services, which are offered to resident as well as non-resident Indians.

Corporate

banking

HSBC has well-established, long-term corporate banking relationships with large domestic Indian corporations and foreign multinationals operating in India. Services include term and working capital finance, trade facilities, corporate deposits, syndications, payments and cash management services and factoring.

Business

banking

HSBC's Extra Mile Business Banking offers two types of account to small and medium-sized businesses - The Business Account and the BusinessVantage Account. Services include Business PhoneBanking, Business Doorstep Banking and Multi Branch Business Banking.

Payments

and

cash

management

HSBC provides integrated domestic and regional transaction support to corporate clients through a sophisticated range of cash management solutions, including collection and payment services and integration with customer back- end systems. Operations and client services are ISO 9001 certified. Hexagon, the HSBC Group's dedicated electronic banking service allows users to perform financial transactions, obtain international financial markets information, and review details of their domestic and international accounts, from anywhere in the world, 24 hours a day.

Trade (international and domestic) and factoring services

A wide range of solutions tailored to meet customer's requirements for both domestic and international businesses is offered. HSBC is also one of the leading banks involved in the bullion business through its offices in Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi and is supported by the Group's global expertise in the precious metal business. HSBC is the leading provider of trade services in India and its trade centres are ISO 9002 certified.

Institutional

banking

Working closely with Group offices in India and overseas, trade services, payments and cash management, treasury and capital markets, custody and clearing, and correspondent and electronic banking activities are offered to banks, financial institutions, securities houses, insurance companies, asset management companies and other non-banking companies, non-government and development organisations operating in India.

Treasury

and

capital

markets

Clients consistently rate HSBC's Treasury business as one of the best in India. Its dealing room in Mumbai is one of the largest in the country, serving clients in Mumbai and in the major metropolitan centres across the country. It provides a comprehensive range of products which include - foreign exchange, money market and fixed income products and derivatives in both rupees and major currencies.

Custody

and

clearing

The leading custodian in Asia, HSBC's custody and clearing services are available in 28 markets in Asia-Pacific and the Middle East. With experienced staff and the latest technology, HSBC is the premier provider of sub-custodian and clearing services to foreign institutional investors (FIIs) in India. HSBC clients include the domestic fund management sector in both the retail and institutional segments. Institutional Fund Services launched by the bank offers a comprehensive suite of products to domestic mutual funds and insurance companies ranging from custody, fund administration services, unit distribution and cash management services

1) RISK PROFILING:
The financial planner will ask the client to consider:

Your time - Which stage of life are you in currently and what time frames do you need to consider for investments

Your attitude - Do you want to achieve your goals sooner or are you prepared to wait to see long term results? What risks are you prepared to take?

Your circumstances -What are your immediate cash flow needs? Do you want your investments to grow or do you need them to provide an income as well?

Your options - What are the most efficient tax strategies for you considering your current circumstances?

Together you and your financial planner will be able to build a personal profile from which your financial plan can be developed. A tool is used for this purpose known as the INVESTMENT SUITABILITY QUESTIONNAIRE

With the help of the tool of Investment Suitability Questionnaire;

questions pertaining to composition of existing portfolio, the clients investment motives, attitude towards investment volatility, experience, time horizon, etc advisor can ascertain the risk appetite of the client, which can be categorized into the following: Aggressive Moderately Aggressive Balanced Moderately Conservative Conservative

So this gives a fair idea about the possible avenues of asset allocation suited to clients needs.

2) PERSONAL FINANCIAL REVIEW:

To live comfortably, plan comprehensively HSBCs Relationship Managers take a different approach than other investment advisors. They work through an in-depth discovery process with the clients to understand and document what they want to do in this lifetime, from now until retirement, and from then on. Taking this information, and a similarly thorough understanding of all their assets and liabilities today, the Relationship Manager maps out a course to help the client achieve the income he will need to do exactly what he wants to, when he wants to. It is a software designed to identify and seek to achieve the returns necessary to get

client to the income he will need, based on how he intends to live, one year at a time. And ways to ensure that income. Start by seeing a complete picture of you today The Wealth Managers comprehensive approach to wealth management starts by identifying all the varied pieces of the clients financial life today. It will include analysis of the clients net worth, earnings, asset allocation, education funding, insurance, stock options and equity compensation, assets locked up in a business, real estate, loans, and retirement plan distributions and social security. It is a detailed procedure because what comes out will be a blueprint for the clients lifestyle. And craft a Blueprint for income, year by year The advisor works with the client to understand how long he wishes to work, where he would like to retire, and more. The outcomethe comprehensive wealth management planwill include sophisticated cash flow models for what the client will need today and what he will need in retirement in order to fund the lifestyle he envisions. And the HSBCs Relationship Manager will review with the client a range of strategies designed to help him accomplish the tasks identified together; strategies that go far beyond investments to incorporate every aspect of his financial picture.

Once the client and the financial planner have come to an understanding of what it is that he wishes to achieve, the next step is to develop his financial plan. The financial planner will recommend a financial strategy designed to meet the clients specific goals and objectives. He will talk the client through their recommendations, give them practical advice as to how can it be implemented and allow them to ask questions incase of any queries and make any necessary changes.

HOW DOES IT WORK?

In this particular software, it starts with asking the client to define what his major goals in life are. So first of all inputs are derived as to his major goals in life, Some examples of the same are: Childrens Education Childs Marriage Car House Vacation Retirement Property

Once the Relationship Manager gets an understanding of his aspirations and objectives, he makes adjustments for: Inflation Returns Expected

As the principle of time value of money comes into play and if he needs Rs. 4,00,000 to buy a car 5 years down the line it has to be adjusted for the inflation rate expected at that time for the plan to be effective. So the relationship manager makes all these adjustments and presents a plan so as to ensure the client to be able to meet cater to all these needs comfortably as and when the time comes and show how much money will the client make on an annual basis over and above meeting these obligations.

3)

PORTFOLIO DESIGNING:

Once the clients needs are identified, risk profiling done, financial review done and financial plan finalized, it's time to put it into action. As part of the financial planning service, HSBC helps the clients in lodging their investments. Portfolio Designing consists of two interrelated parts: Determining a Strategic Asset Allocation (deciding how much of your capital should be invested in each asset class) and

Investment Selection (choosing the investments within each asset class).

The client specifies their needs and risk profile. They also express how much capital are they willing to invest. It is then the wealth managers who decide the asset allocation across different asset classes. Once that is decided, they then decide how much should be allocated in each asset class chosen by them suited for the client according to his requirements.

4)

MONITORING, REVIEWING AND SERVICING:

Periodic formal reviews of the clients finances are essential to his ultimate financial success. The Relationship Managers review quarterly, semi-annual, or annually, as appropriate to the case and pre-agreed between client and the manager. These reviews can be done in person or by telephone with materials sent ahead by mail or internet. Each review will address market conditions, the return on clients portfolio for the preceding period, asset allocation and investment-specific updates. This is also a good time to discuss any changes in his financial circumstances or investment goals. It may be appropriate to review and update aspects of his financial planning. Finally, feedback is encouraged on what is being done right and what can be done better. HSBC provides statements quarterly, plus for any other month that there is activity in his account. It also provides an excellent system of secure internet access, should he wish to monitor his account on a more frequent basis. From time to time, HSBC mails out special updates on market conditions or on specific securities that its clients hold. Clients may also occasionally receive a call from a team member if it is felt that some action should be taken in the clients portfolio. Additionally, an email newsletter 6 to 8 times per year is also sent out. As time goes by, it is possible that the needs of the clients undergo a change. So the financial planner can help ensure that the financial plan continues to meet those changing circumstances. By providing him with ongoing support, the financial planner will be able to recommend options that best suit clients current needs, whether they revolve around wealth creation, wealth protection, superannuation or retirement incomes.

Last but not least, the Wealth Managers are always just a phone call away if the clients have questions. HSBC DEALS IN:

DEBT EQUITY (not direct equity) INSURANCE FIXED DEPOSITS LOANS ACCOUNTS

SELECTION OF MUTUAL FUNDS

HSBC has a Research Group which comprises of research analysts. They study the composition of the mutual funds, their past performance and determine the most promising funds. This list is known as the FUNDAMENTAL .This is a monthly newsletter containing the entire WHITELIST, Products classified as recommended funds may be recommended to customers by advisory salespersons (only). The recommended mutual funds are a subset of the white-listed funds and are identified on the basis of the scheme level due diligence process on the past performance. market So the relationship managers suggests the clients to park in their resources in these funds which have shown consistent returns over the past.

Since retail investors cannot invest in Debt funds so HSBC routs their in investments through the various Asset Management Companies. WHITE LISTED FUNDS IN HSBC Objectives of the study

There is always a purpose of every research study. In this research study, a real on ground management problem is being explored, which has been studied and is being evaluated in actual industrial scenario.

The main objectives of study are given below:

To know about the awareness of mutual funds. To know the customers expected return from Mutual Funds. To know the investment habit of the customers as percentage of savings in Mutual Funds. To know about the customers choice of investing in other investment avenues. To make comparison between Mutual Funds and other investment avenues.

CHAPTER 2 RESEARCH METHODOLOGY

This section deals with the Scope, need and significance of research, Research design, Data collection, Sample size, Sampling tools, Statistical tools used and Limitations of the study.

SCOPE This study can be made effects study will be conducted at Chandigarh. This study can be made effective by selecting sample size as large as possible. Deeper study can be conducted by including perception of investors.

Need And Significance The changing financial services scenario emerging by virtue of liberalization in last one decade has introduced a vast variety of concept Mutual Fund is one of those Mutual Funds in Indian context are a recent phenomenon. In a short span of less than one decade it has changed the investment pattern of

medium and small investors in India. To meet the changing needs of the economy, the educational institutions have been upgrading their curriculum. Consequently, study of Mutual Funds has become an essential ingredient for living in this financial world so there is a need to appraise the financial and operation performance of mutual funds.

RESEARCH DESIGN : The research design is a pattern or an outline of the research projects working. The present study being conducted followed DESCRIPTIVE RESEARCH design this is because it evaluate the performance of various mutual funds operating in India. DATA COLLECTION: Both primary and secondary source of information were used for data collection. For the purpose of data collection the sites of mutual funds are referred and questionnaire is prepared. SAMPLE SIZE: The total of 100 structures questionnaires have been distributed among people of all age at Chandigarh, Mohali. SAMPLING TOOLS: Percentage, average, systematic charts, Z test, Chi square test are used to analyze the questionnaire. STATISTICAL TOOLS USED

Different statistical tools have been used in this study. Mean or Average Average is an attempt to find one single figure to describe whole of figures. An average is sometimes describes as a number which is typical of the whole group. The formula for calculating mean is : Mean ( X ) = fX / f Where f = Frequency, Standard deviation Standard deviation is positive square root of mean of the squares of deviations of variable from their arithmetic mean and is denote by : (Standard deviation) = (X-X) N where n is number of observations and X = mean. For discrete series it is given by : (Standard deviation) = f(X -X) f X = Variable in question

Chi square test

It is symbolically written as 2

O = Observed Frequency, E = Expected Frequency, X = No. of Variables


Ho : O = E ( Null Hypothesis ) H1 : O E ( Alternate Hypothesis) Df = Degree of Freedom = (n-1) at 5% level of significance 2 (Calculated value) = (O - E)\E If 2 (Calculated value) < 2 ( Table Value) Null hypothesis is accepted and alternate hypothesis is rejected. If 2 (Calculated value) > 2 ( Table Value) Alternate hypothesis is accepted and Null hypothesis is rejected

Z- Test

If sample size is greater than 30 then it will be considered as large sample. While testing the significance of statistic, the concept of standard error is used.

(Standard deviation)

= f(X - X) f

Steps: Parametric Test N>30, therefore Z test is applied.

S.E (Standard error) = N

Two Tailed

Level of significance

Ho : Xs = Xp

H : Xs Xp

Z =

Xs - Xp

S.E

Limitations of the study

The study is based only on 100 investors of Chandigarh, Mohali and Panchkula. Study is not exhaustive and has a scope of further research.

The present study will relate to urban people only. Influence of certain variables like culture, experts views and suggestions of brokers etc. on investors behaviour and satisfaction cant be studied in detail due to time factor.

The result is based on primary and secondary data that has its own limitations. Personal bias involved in respondents answers becomes the major hurdle in obtaining the true information.

Analysis
1. Which of the following banks are you having an account? Table-No. 1 Bank Accounts Name of the bank ICICI HSBC HDFC SBI Standard Chartered Bank Others Respondents 60 32 52 38 23 20 Percentage 27% 14% 23% 17% 10% 9%

30% 25% Percentage 20% 15% 10% 5% 0% ICICI HSBC HDFC SBI SCB Others Name of Banks

Fig No. 1 Bank Accounts Thus it is analyzed that most of the people prefer ICICI and HDFC bank for opening their accounts.

O-E

(O - E)

(O - E)\E

1 2 3 4 5 6

27 14 23 17 10 9 100

16.65 16.65 16.65 16.65 16.65 16.65

10.35 -2.65 6.35 0.35 -6.65 -7.65

107.1225 7.0225 40.3225 0.1225 44.2225 58.5225

6.433784 0.421772 2.421772 0.007357 2.656006 3.514865 15.45556

O = Observed Frequency, E = Expected Frequency, X = No. of Variables Expected Frequency = 100/6 = 16.65 It is assumed that the preference of customers for opening an account is equal for all the banks. Ho : O = E ( Null Hypothesis ) H1 : O E ( Alternate Hypothesis ) Df = Degree of Freedom = (n-1) at 5% level of significance Therefore df = 5 at 5% level of significance is Chi square (2 ) = (O - E)\E = 15.45 2 ( Table Value) = 11.1 2 (Calculated value) > 2 ( Table Value) So alternate hypothesis is accepted and null hypothesis is rejected. INFERENCE 1. Difference is significant 2. It is interpreted that people are not equally interested in all the above banks opening their accounts. for

2. Which of these investment vehicles are you most comfortable with?

Investment Vehicle Savings Accounts Fixed Deposits Stock Market Mutual Funds Insurance

Respondents 30 20 13 22 15 100

Percentage 30% 20% 13% 22% 15%

35 30 25 Percentage 20 15 10 5 0 Savings Accounts Fixed Deposits Stock Market Mutual Funds Insurance

Investment Vehicles

Most of the people are comfortable in investing in saving accounts.

O-E

(O - E)

(O - E)\E

1 2 3 4 5

30 20 13 22 15 100

20 20 20 20 20

10 0 -7 2 -5

100 0 49 4 25

5 0 2.45 0.2 1.25 8.9

O = Observed Frequency, E = Expected Frequency, X = No. of Variables Expected Frequency = 100/5 = 20 It is assumed that all the investment schemes are equally good. Ho : O = E ( Null Hypothesis ) H1 : O E ( Alternate Hypothesis ) Df = Degree of Freedom = (n-1) at 5% level of significance Therefore df = 4 at 5% level of significance 2 (Calculated value) = (O - E)\E = 8.9 2 ( Table Value) = 9.49 2 (Calculated value) < 2 ( Table Value) So null hypothesis is accepted and alternate hypothesis is rejected. INFERENCE 1. There is no significant difference between the different schemes. 2. It is interpreted that all the investment vehicles are equally comfortable.

3. Do you invest in mutual funds ?

Options Yes No

Respondents 72 28

Yes No

Hence Majority of people that is 72% people invest in mutual funds.

4. How much do you invest in mutual funds of your total savings?

X 0-20% 20-40% 40-60% 60-80% 80-100%

Mid value(M) 10 30 50 70 90

Frequency (F) 16 27 25 20 12 100

MF 160 810 1250 1400 1080 4700

M-Mean -37 -17 3 23 43

(M-Mean) f (M-Mean) 1369 21904 289 7803 9 225 529 10580 1849 22188 62700

30 25 No. of investors 20 15 10 5 0 20-40% 40-60% 60-80% 80-100% Range of Investment

Thus on an average people invest 47% of their total savings in mutual funds.

4700

X = 100

= 47 62700

S.D = 100 Steps:

627 = 25.04

Parametric Test N>30, therefore Z test is applied. 25.04 = N 100 = 10 25.04 = 2.504

S.E =

Two Tailed Level of significance is 5% Ho : Xs = Xp H1 : Xs Xp Zc = Xs - Xp Xp = 50 S.E Zc = 47 50 = 2.504 2.504 3 = 1.19

Zt = 1.96 at 5% level of significance Comparing Zc and Zt 1.19 < 1.96 Zc < Zt So Null Hypothesis is accepted and Alternate Hypothesis is accepted. Thus the difference between sample mean and population mean is insignificant.

5. What is your primary purpose for investing in mutual funds ?


Purpose Respondents 34 13 23 16 14

Wealth Accumulation Educational Planning Current Income Major Purchase Other

Respondents

40 30 20 10 0 Current Income Wealth Accumulatio n Educational Planning Major Purchase Other

Purpose

Thus most o the people invest in mutual funds for the purpose of wealth accumulation.

O-E

(O - E)

(O - E)\E

1 2 3 4 5

34 13 23 16 14 100

20 20 20 20 20

14 -7 3 -4 -6

196 49 9 16 36

9.8 2.45 0.45 0.8 1.8 15.3

O = Observed Frequency, E = Expected Frequency, X = No. of Variables Expected Frequency = 100/5 = 20 It is assumed that the Ho : O = E ( Null Hypothesis ) H1 : O E ( Alternate Hypothesis ) Df = Degree of Freedom = (n-1) at 5% level of significance Therefore df = 4 at 5% level of significance is Chi square (2 ) = (O - E)\E = 15.3 2 ( Table Value) = 9.49 2 (Calculated value) > 2 ( Table Value) So alternate hypothesis is accepted and null hypothesis is rejected. INFERENCE 1.There is significant difference. 2. It is interpreted that the purpose of investing in mutual funds is different for different people.

6. Which option will be preferred by you while investing in mutual funds?

Options Growth Dividend Dividend Reinvest

Respondents 48 36 16 100

50 40 30 20 10 0

Growth

Dividend Dividend Reinvest Option

Majority of People would like to choose growth option while investing in mutual funds.

O-E

(O - E)

(O - E)\E

1 2 3

48 36 16 100

33.33 33.33 33.33

14.67 2.67 -17.33

215.2089 7.1289 300.3289

6.456913 0.213888 9.010768 15.68157

O = Observed Frequency, E = Expected Frequency, X = No. of Variables Expected Frequency = 100/3 = 33.33 It is assumed that the preference of customers for investing in all options is equal. Ho : O = E ( Null Hypothesis ) H1 : O E ( Alternate Hypothesis ) Df = Degree of Freedom = (n-1) at 5% level of significance Therefore df = 2 at 5% level of significance is 5.99 Chi square (2 ) = (O - E)\E = 15.68 2 (Calculated value) > 2 ( Table Value) So alternate hypothesis is accepted and null hypothesis is rejected. INFERENCE 1 There is significant difference. 2. It is interpreted that people are not equally interested in all the above options while investing in mutual funds.

7. Which one of the following statements best describes your attitude toward the trade-off between risk and return? Type of risk
Limiting Risk, low return Moderate Risk, Moderate Return High Risk, High Return

Respondents
18 47 35

60 40 20 0 Limiting Risk

Moderate Risk Risk

High Risk

Hence most of the people want to take moderate risk when they invest in mutual funds.

X 1 2 3

O 18 47 35 100

E 33.33 33.33 33.33

O-E -15.33 13.67 1.67

(O - E) 235.0089 186.8689 2.7889

(O - E)\E 7.050972 5.606628 0.083675 12.74128

O = Observed Frequency, E = Expected Frequency, X = No. of Variables Expected Frequency = 100/3 = 33.33 It is assumed that. Ho : O = E ( Null Hypothesis ) H1 : O E ( Alternate Hypothesis ) Df = Degree of Freedom = (n-1) at 5% level of significance Therefore df = 2 at 5% level of significance is 5.99 Chi square (2 ) = (O - E)\E = 12.74 2 (Calculated value) > 2 ( Table Value) So alternate hypothesis is accepted and null hypothesis is rejected. INFERENCE 1.Difference is significant. 2.It is interpreted that there is difference in consumer perception towards different types of risk which they have to take while investing in mutual funds.

8. What are your expectations regarding the average annual return of your portfolio?
Frequency (F) 5 17 33 30 15 100

X 0-20% 20-40% 40-60% 60-80% 80% above

Mid value(M) 10 30 50 70 90

MF 50 510 1650 2100 1350 5660

M-Mean -46.6 -26.6 -6.6 13.4 33.4

(M-Mean) f (M-Mean) 2171.56 10857.8 707.56 12028.52 43.56 1437.48 179.56 5386.8 1115.56 16733.4 46444

35 30 respondendts 25 20 15 10 5 0 0-20% 20-40% 40-60% percentage 60-80% 80% above

Hence we can see that majority of people expect near about 56% average annual return from their portfolio.

5660

X = 100

= 56.6 46444

S.D = 100 Steps:

464.44 =

21.55

Parametric Test N>30, therefore Z test is applied. 21.55 = N 100 = 10 21.55 = 2.15

S.E =

Two Tailed Level of significance is 5% Ho : Xs = Xp H1 : Xs Xp Z = Xs - Xp Xp = 50 S.E Z = 56.6-50 = 2.15 2.15 6.6 = 3.07

Zt = 1.96 at 5% level of significance Comparing Zc and Zt 3.7 > 1.96

Zc > Zt So Alternate Hypothesis is accepted and Null Hypothesis is accepted. Thus the difference between sample mean and population mean is significant. 9. What is the time horizon for achieving your investment objectives?

X Mid value(M) Frequency (F) 0-2yr 1 32 2-4yr 3 40 4-6yr 5 18 more than 6 yr 7 10 100

MF 32 120 90 70 312

M-Mean -2.12 -0.12 1.88 3.88

(M-Mean) f (M-Mean) 4.4944 143.8208 0.0144 0.576 3.5344 63.6192 15.0544 150.544 358.56

F 45 40 35 30 25 20 15 10 5 0 0-2yr 2-4yr Time period 4-6yr more than 6 yr

Hence majority of people want to achieve their investment objectives by investing in between 2-4 years.

Respondendts

312 X = = 3.12

100 S.D = Steps: Parametric Test N>30, therefore Z test is applied. S.E = N = 100 1.89 = 10 1.89 = .18 358.56 100 = 1.89

Two Tailed Level of significance is 5% Ho : Xs = Xp H1 : Xs Xp Z = Xs - Xp Xp = 4 S.E Z = 3.12 4 = .18 .18 .88 = 4.89

Zt = 1.96 at 5% level of significance Comparing Zc and Zt 4.89 Zc > Zt So Alternate Hypothesis is accepted and Null Hypothesis is accepted. It means the difference between sample mean and population mean is significant. 10. Are you satisfied with the returns you are getting by investing in mutual funds ? > 1.96

Options fully satisfied satisfied neutral dissatisfied highly dissatisfied

Respondents 18 36 29 14 3

40 35 30 25 20 15 10 5 0 fully satisfied neutral Level of Satisfaction highly dissatisfied

Hence we can see that most of the people are satisfied with the returns they are getting by investing in mutual funds.

Respondents

X 1

Frequency (F) 18

XF 18

X - Mean 2.48

(X-Mean) -1.48

f (XMean) 2.1904

f (XMean) 39.4272

2 3 4 5

36 29 14 3 100

72 87 56 15 248

2.48 2.48 2.48 2.48

-0.48 0.52 1.52 2.52

0.2304 0.2704 2.3104 6.3504

8.2944 7.8416 32.3456 19.0512 106.96

248 X = 100 106.96 S.D = 100 Steps: Parametric Test N>30, therefore Z test is applied. S.E = N = 100 1.03 = 10 1.03 = .10 = 1.0696 = = 2.48

1.03

Two Tailed Level of significance is 5% Ho : Xs = Xp H1 : Xs Xp Z = Xs - Xp Xp = 3 S.E Z = 2.48 - 3 = 0.10 0.10 0.52 = 5.2

Zt = 1.96 at 5% level of significance Comparing Zc and Zt 5.2 > 1.96 Zc > Zt

So Alternate Hypothesis is accepted and Null Hypothesis is accepted. This implies that the difference between sample mean and population mean is significant

11.In your opinion how well are mutual fund investments protected against practices that may harm investments.

Options poorly protected somewhat protected well protected very well protected

Respondents 5 32 41 22

50 40 30 20 10 0 poorly somewhat well very well protected protected protected protected

It shows that the mutual funds are well protected.

X 1 2 3 4

Frequency (F) 5 32 41 22 100

XF 5 64 123 88 280

(X-Mean) -1.8 -0.8 0.2 1.2

(X-Mean) 3.24 0.64 0.04 1.44

f (X-Mean) 16.2 20.48 1.64 31.68 70

280 X = 100 70 S.D = 100 = 0.7 = = 2.8

0.84

Steps: Parametric Test N>30, therefore Z test is applied. S.E = N = 100 0.84 = 10 0.84 = .084

Two Tailed Level of significance is 5% Ho : Xs = Xp H1 : Xs Xp Z = Xs - Xp Xp = 2.5 S.E Z = 2.8 2.5 = 0.084 0.08 0.3 = 3.75

Zt = 1.96 at 5% level of significance Comparing Zc and Zt 3.75 > 1.96 Zc > Zt So Alternate Hypothesis is accepted and Null Hypothesis is accepted. Thus the difference between sample mean and population mean is significant.

12. How much of an unrealized loss of capital are you prepared tolerate in your investments ?

X
0-5% 5-10% 10-15% 15-20% more than 20%

Mid value(M) 2.5 7.5 12.5 17.5 22.5

Frequency (F) 14 12 28 30 16 100

MF 35 90 350 525 360 1360

M-Mean -11.1 -6.1 -1.1 3.9 8.9

(M-Mean) 123.21 37.21 1.21 15.21 79.21

f (M-Mean) 1724.94 446.52 33.88 456.3 1267.36 3929

35 respondendts 30 25 20 15 10 5 0 0-5% 5-10% 10-15% loss 15-20% more than 20%

g Majority of people are ready to tolerate 15-20% loss in their investments. 1360 X = 100 S.D = Steps: Parametric Test N>30, therefore Z test is applied. 3929 100 = 6.27 = 13.6

S.E = =

6.27 =

6.27 = .62

100

10

Two Tailed Level of significance is 5% Ho : Xs = Xp H1 : Xs Xp Z = Xs - Xp Xp = 12.5 S.E Z = 13.6 12.5 = .62 .62 1.1 = 1.77

Zt = 1.96 at 5% level of significance Comparing Zc and Zt 1.77 Zc < Zt So Null Hypothesis is accepted and Alternate Hypothesis is accepted. Thus the difference between sample mean and population mean is insignificant. < 1.96

13.Over the past year how has your confidence level in mutual fund investment protection mechanism changed

Level of Confidence

Respondents

Diminished Increased Did not Change

14 68 18

Respondents

18%

14% Dimnished 68% Increased Did not Change

Thus we can notice that Confidence level of People for Mutual Fund investment is increasing.

X 1 2 3

O 14 68 18 100

E 33.33 33.33 33.33

O-E -19.33 34.67 -15.33

(O - E) 373.6489 1202.009 235.0089

(O - E)\E 11.21059 36.06387 7.050972 54.32543

O = Observed Frequency, E = Expected Frequency, X = No. of Variables Expected Frequency = 100/3 = 33.33

Ho : O = E ( Null Hypothesis ) H1 : O E ( Alternate Hypothesis ) Df = Degree of Freedom = (n-1) at 5% level of significance Therefore df = 2 at 5% level of significance is 5.99 Chi square (2 ) = (O - E)\E = 54.32 2 (Calculated value) > 2 ( Table Value) So alternate hypothesis is accepted and null hypothesis is rejected. INFERENCE 1.Difference is significant. 2.It is interpreted that confidence level of different customers is different for Mutual funds.

14. Do you want to invest in mutual funds in future ?

Options Yes No

Respondents 87 13

Respondents

13%

Yes No

87%

Thus we can see that 87% people want to invest in mutual funds in future and rest of the 13% people do not want to make any investment in mutual funds in future.

CHAPTER 4

Findings and conclusions

The findings and conclusions of the study are given below:

During the survey it was found that most of the people prefer ICICI and HDFC bank for opening their accounts and it is also interpreted that people are not equally interested in all the banks for opening their accounts. There is significant difference between different banks.

It is interpreted that all the investment vehicles like Savings accounts, Mutual Funds, Insurance, Fixed deposit, Stock Market are equally comfortable for people.

It is also interpreted that people are not equally interested in all the options like growth, dividend and dividend reinvest while investing in mutual funds and Majority of People would like to choose growth option while investing in mutual funds because they want to take moderate risk and get good returns and the purpose of majority of people is wealth accumulation.

Suggestions

The performance of Mutual funds depends on the previous years Net asset value of the fund. All funds are doing well. But the future is uncertain. So the AMC (Asset Management Company) should take the following steps:

Proper awareness of Mutual funds should be spread through effective communication channels like print media, television etc. so that every investor would be able to think about investing in Mutual Funds.

As the people are not ready to take high risk. So the AMC should launch more diversified funds so that the risk becomes minimum. This will lure more and more people to invest in mutual Funds.

The expectation of people from Mutual Funds is very high. So the portfolio of the fund should be prepared taking into consideration the expectations of the people.

BIBLIOGRAPHY

www.webconnect.com www.hsbc.co.in www.amfiindia.com www.moneycontrol.com www.valueresearchindia.com

ANNEXURE
Questionnaire

1. Which of the following banks are you having an account ? a. ICICI b. HSBC c. HDFC

d. SBI e. Standard Chartered Bank f. Others 2. Do you invest in mutual funds ? a. Yes b. No 3. Which of these investment vehicles are you most comfortable with? 1. Savings accounts 2. Fixed Deposits 3. Stock Market 4. Mutual funds 5. Insurance 4. How much do you invest in mutual funds of your total investments?
a. 0-20% b. 20-40%

c. 40-60% d. 60-80% e. 80-100%

5. What is your primary purpose for investing in mutual funds ? a. b. c. d. e. Wealth Accumulation Educational Planning Current Income Major Purchase Other (Please describe) __________________________________

6. Which option will be preferred by you while investing in mutual funds ? a. growth b. dividend c. dividend reinvest

7. Which one of the following statements best describes your attitude toward the trade-off between risk and return? a. I am primarily concerned with limiting risk. I am willing to accept lower expected returns in order to limit my chance of loss. b. Limiting risk and maximizing return are of equal importance to me. I am willing to accept moderate risk and a moderate chance of loss in order to achieve moderate returns. c. I am primarily concerned with maximizing the returns of my investments. I am willing to accept high risk and a high chance of loss in order to maximize my investment return potential. 8. What are your expectations regarding the average annual return of your portfolio? a. b. c. d. e. 0 - 20% 20 - 40% 40 - 60% 60 - 80% 80 - 100%

9. What is the time horizon for achieving your investment objectives? a. b. c. d. 0 2years. 2 4 years. 4 6 years. More than 6 years

10. Are you satisfied with the returns you are getting by investing in mutual funds ? a. b. c. d. e. Fully satisfied Satisfied Neutral Dissatisfied Highly dissatisfied.

11.In your opinion how well are mutual fund investments protected against practices that may harm investments. a. Poorly protected

b. Somewhat protected c. Well protected d. Very well protected 12. How much of an unrealized loss of capital are you prepared tolerate in your investments ? a. b. c. d. e. 0 - 5% 5 - 10% 10 - 15% 15 - 20% More than 20%

13.Over the past year how has your confidence level in mutual fund investment protection mechanism changed a. My confidence level diminished over the past year b. My confidence level increased over the past year c. My confidence level did not change. 14. Do you want to invest in mutual funds in future ? a. Yes b. No

Personal Details
First Name _ __________________ Last Name __________________
Age_______ Gender Male Marital Status _______________ Female

Income Group: 10000-20000 20000-50000 50000-100000 100000 above