Investors Preferences Towards Mutual Funds With Reference To Kotak (Kmamc)

Investors preferences towards Mutual Funds of Kotak
1.1 GENERAL INTRODUCTION
Mutual fund is a pool of funds which is divided into units of equal value and sold to
investing public and the funds so collected are utilized for collective investments in
various capitals and money market instrument. In today’s market people invest money
to gain more. So when they take into account, they mostly look out for Investment
Company where they can get more income.
Investment companies can be classified into closed-end and open-end investment

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

financial company or financial service organization that sells shares/units/stocks in
itself, to the public to obtain its resources and it invests the savings so mobilized or
pooled in a large, diversified, & sound portfolio of equity shares, bonds, money
market instruments etc., Redeemable trust certificates are sold to investors at net asset
value (NAV) plus a small commission. All interest/dividend and principal repayments
are distributed to the holders of the certificates.
R.V. Institute of Management 1

1.2 THEORETICAL BACKGROUND
Meaning of Mutual Funds
Mutual fund is a pool of funds which is divided into units of equal value and sold to
investing public and the funds so collected are utilized for collective investment in
various capital and money market instrument. Investment is a commitment of a
person’s funds to derive future income in the form of interest, dividends, rent,
premiums, pension benefits or the appreciation of the value of their principal capital.
Investments have a return but there can be no return without risk.
Definitions
Different persons in different words have defined mutual fund.
The SEBI (MF) Regulations, 1993 defines mutual fund as “A fund established in the
form of a trust by a sponsor to raise money by the trustees through the sale of units to
the public under one or more schemes for investing in securities in accordance with
these regulations.”
Investment is the allocation of monetary resources to assets that are expected

to yield some gain or positive return over a given period of time. These assets range
from safe investments to risky investments. Investments in this form are also called
‘Financial Investments’.

Characteristics of MF
 A mutual fund actually belongs to the investors who have pooled their funds.
The ownership of the MF is in the hands of the investors.
 A MF is managed by investment professionals and other service providers,
who earn a fee for their services from the fund.
 The pool of funds is invested in a portfolio of marketable investment. The
value of the portfolio is updated every day.
 The investor’s share in the fund is denominated by units. The value of the
units changes with change in the portfolio’s value, every day. The value of one
unit of investment is called as the net assets value or NAV.
 The investment portfolio of the Mutual fund is vested according to the stated
Investment objectives of the fund.
Investment Company
A company or trust that uses its capital to invest in other companies. There are two
principal types – closed-ended and the open-ended. Shares in closed-ended
investment companies, some of which are listed on the New York Stock Exchange are
readily transferable in the open market and are bought and sold like other shares.
Open-ended funds sell their own shares to investors, stand ready to buy back their old
shares and are not listed. These funds are so called because their capitalization is not
fixed; they issue more shares as people want them.

Fig.1.1 Concept of Mutual Fund Industry
When an investor subscribes for the units of a mutual fund, he becomes part
owner of the assets of the fund in the same proportion as his contribution amount put
up with the corpus (the total amount of the fund). Mutual Fund investor is also known
as a mutual fund shareholder or a unit holder. Any change in the value of the
investments made into capital market instruments (such as shares, debentures etc) is
reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market
value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is
calculated by dividing the market value of scheme's assets by the total number of
units issued to the investors.

CONSTITUENTS OF MUTUAL FUND
There are many entities involved and the diagram below illustrates the constitut
ion of a mutual fund:
Fig.1.2 Constituents of Mutual Fund Industry
Formation process starts from sponsor {the investment advisor or manager}. Sponsor
selects & appoints the Board of Trustees.
Trustees again hire or contract a separate AMC that is run by professional managers.
The AMC conducts the necessary research & based on it, manages the fund or
portfolio. It is responsible for floating, managing, redeeming the schemes; it also
handles the administrative chares. It receives the fees for the services rendered by it.
The custodian is responsible for co-ordination with brokers, the actual transfer &
storage of stocks, & handling the property of the trust.

Finally the unit holders are investors from who a pool of money is collected &
invested according to the stated investment objectives. Mutual fund investors are like
share holders & they own the fund. They are neither lenders nor the deposit holders in
the fund. Unlike a holder of stock of company, unit holders have no voting rights.
Organization of a Mutual Fund
All mutual funds comprise four constituents – Sponsors, Trustees, Asset Management
Company (AMC) and Custodians.
1. Sponsors:
The sponsors initiate the idea to set up a mutual fund. It could be a registered
company, scheduled bank or financial institution. A sponsor has to satisfy certain
conditions, such as capital, record (at least five years’ operation in financial services),
de-fault free dealings and general reputation of fairness. The sponsors appoint the
Trustee, AMC and Custodian. Once the AMC is formed, the sponsor is just a
stakeholder.
2. Trust/ Board of Trustees:
Trustees hold a fiduciary responsibility towards unit holders by protecting their

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

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

mutual fund. Its responsibilities include receipt and delivery of securities, collecting
income-distributing dividends, safekeeping of the units and segregating assets and
settlements between schemes. Their charges range between 0.15-0.20 percent of the
net value of the holding. Custodians can service more than one fund.

Investment Alternatives
I. Direct Investment Alternatives

A. Fixed Principal Investments
i. Cash
ii. Savings account
iii. Savings Certificate
iv. Government Bonds
v. Corporate Bonds and Debentures
B. Variable Principle Securities
i. Equity Shares
ii. Convertible Debentures or Preference Securities
C. Non-Security Investments
i. Real Estate
ii. Mortgages
iii. Commodities
iv. Business Ventures
v. Art, Antiques and Other Valuables
II. Indirect Investment Alternatives
A. Pension Fund
B. Provident Fund
C. Insurance
D. Investment Companies
E. Unit Trust of India and Other Trust Funds
F. Mutual Funds

1.3 A comparison of different investment options with respect to their

Performance is as shown in the following table.
Options Returns Safety Volatility Liquidity Convenience

Equity High Low High High/Low Moderate
FI Bond Moderate High Moderate Moderate High
Debentures Moderate Moderate Moderate Low Low
Company FD Moderate Low Low Low Moderate
PPF Moderate High Low Moderate High
LIC Low High Low Low Moderate
Gold Moderate High Moderate Moderate Low
Real Estate High Moderate High Low Low
Mutual Fund High High Moderate High High
Bank Deposit Low High Low High High
Financial Institutions:

Financial institutions are business organizations that act as mobilizes & depositors of
savings & purveyors of credit or finance. Financial Institutions are engaged in these
activities
 Financing by way of loans, advances, and so on any activity except its own.
 Acquisition of shares/ stocks/ bonds/ debentures/ securities
 Hire- purchase
 Any class of insurance, stock- broking, etc.
 Chit funds and
 Collection of money by way of subscription/ sale of units or other instruments/
any other manner and their disbursement.
Fig 1.4. Typical Financial System

Financial System
Financial Financial Financial Financial

Institutions Services Markets Instruments
(Claims, assets,
Regulator Intermediaries Non- Others

intermediaries Primary Secondary
y
Banking Non-
banking
Short Medium Long

term term term
Organized Unorganized
Primary Secondary
Capital Money
Market Market
LEGAL & REGULATORY FRAME WORK:

Mutual funds are regulated by the SEBI (Mutual Fund) Regulations 1996. SEBI is the
regulator of all funds except off share funds. Where as Bank-sponsored mutual funds
are jointly regulated jointly by SEBI & RBI.
RBI also regulates money market & Government. Securities Markets, in which
mutual funds invest. Since the AMC & Trustee Company is Companies, they are
regulated by the department of Company affairs. They have to send periodic reports to
the Registrar of the Company (ROC) & the Company Law Board (CLB).
Regulatory institutions:
These institutions regulate Indian financial system. The major regulatory arms of the
Government of India are —
 Reserve Bank of India (RBI)

 Securities Exchange Board of India (SEBI) and
 Association of Mutual Fund Industry (AMFI)
Fig.1.5. The Structure of Mutual Fund Industry
Regulatory Bodies

SEBI RBI AMFI
Mutual Funds
Sponsor Trustee AMC Custodian Investor
Public Sector Funds Private Sector Funds
UTI Bank Financial Institutions

Sponsored Sponsored
Schemes
Domestic Offshore
Open ended Closed ended
Growth Income Balanced Sect oral Special purpose Tax saving

Funds Funds Funds Funds Funds Funds
THE RESERVE BANK OF INDIA (RBI):

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

U
N
C
T Supervisory functions
I
O Promotional functions
N
S Monetary planning and
control system
SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The SEBI was established on April.12.1982 through an administrative order, but it

became a statutory and really powerful organization only since 1992. SEBI was set up
on 21st February.1992 through an ordinance issued on 30th January.1992. The SEBI
Act on 4th April.1992 replaced the ordinance. The SEBI is under the overall control
of the ministry of Finance, and it has head office at Mumbai. It has now become a
very important constituent of the financial regulatory framework in India.
OBJECTIVES:
 To regulate stock exchanges & securities industry to promote their orderly

functioning.
 To protect the interest of investors so that there is a steady flow of savings in

to the capital market and educating individual investors.
 To prevent trading malpractices and aims at achieving a balance between self-

regulation by securities industry and its statutory regulation.
ASSOCIATION OF MUTUAL FUND INDUSTRY (AMFI)

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

proper understanding of the concept and working of mutual funds.
 To disseminate information on Mutual Fund Industry and to undertake studies

and research directly and/or in association with other bodies.
INDIAN MUTUAL FUND INDUSTRY
Structure Of The Indian Mutual Fund Industry

Structure wise Mutual fund Industry can be classified in to three categories:
Unit Trust of India
The Indian Mutual Fund industry is dominated by the Unit Trust of India, which has a
total corpus of Rs.51,100 crore collected from over 20 million investors. The UTI has
many funds/ schemes in all categories i.e. Equity, Balanced, Debt, Money Market etc.
With some being open ended and some being closed ended. The Unit scheme 1964
commonly referred to as US 64, which is a balanced fund, it is the biggest scheme
with a corpus of about 10,000 crore.
Public Sector Mutual Funds
The second largest categories of mutual funds are the ones floated by nationalized
banks. Canbank asset management floated by Canara Bank and SBI Funds
Management floated by State Bank of India are the largest of these. GIC AMC floated
by General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC
are some of the other prominent ones. The aggregate corpus of the funds managed by
this category of AMC’s is around Rs. 8,300 crore.
Private Sector Mutual fund
The third largest categories of mutual funds are the ones floated by the Private Sector
Domestic Mutual funds and the Private Sector Foreign Mutual Funds. The largest of
these in Private Sector Domestic Mutual funds are Cholamandalam Asset
Management Co.Ltd., J.M Capital Management Co. Ltd., Escort Asset Management
Ltd., Birla Sun Life Asset Management Pvt.Ltd., and in Private Sector Foreign
Mutual Funds these are Alliance Capital Asset Management Pvt.Ltd., Prudential
ICICI Management Co. Ltd. The aggregate corpus of the assets managed by this
category of AMC’s is about Rs. 42,200 crore .
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 the. The history
of mutual funds in India can be broadly divided into four distinct phases
First Phase – 1964-87
An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by
the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and
the Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI was Unit
Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under
management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual
fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end
of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores.
Amount 1992- Assets Mobilis

Mobilised 93 Under ation as

% of
gross
Management Domesti
c
Savings
11,057 UTI 38,247 5.2%
Public
1,964 8,757 0.9%
Sector
13,021 Total 47,004 6.1%
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual
fund industry, giving the Indian investors a wider choice of fund families. Also, 1993
was the year in which the first Mutual Fund Regulations came into being, under
which all mutual funds, except UTI were to be registered and governed. The erstwhile
Kothari Pioneer (now merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual
fund houses went on increasing, with many foreign mutual funds setting up funds in
India and also the industry has witnessed several mergers and acquisitions. As at the
end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805
crores. The Unit Trust of India with Rs.44, 541 crores of assets under management
was way ahead of other mutual funds.

Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit
Trust of India with assets under management of Rs.29,835 crores as at the end of
January 2003, representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores
of assets under management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking
place among different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth. As at the end of October 31, 2003, there
were 31 funds, which manage assets of Rs.126726 crores under 386 schemes.

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

Future of Mutual Funds in India
By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore.

It is estimated that by 2010 March-end, the total assets of all scheduled commercial
banks should be Rs 40,90,000 crore.
The annual composite rate of growth is expected 13.4% during the rest of the decade.
In the last 5 years we have seen annual growth rate of 9%. According to the current
growth rate, by year 2010, mutual fund assets will be double.
Let us discuss with the following table: Table 1.6
Aggregate deposits of Scheduled Banks in India (Rs.Crore)

Mar-
Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Sep-04 4-Dec
04
Deposits 605410 851593 989141 1131188 1280853 - 1567251 1622579
Change in %
15 14 13 12 - 18 3
over last yr
Source – RBI
Mutual Fund AUM’s Growth

Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sep-04 4-Dec
13762 15114
MF AUM's 68984 93717 83131 94017 75306 149300
6 1
Change in % over last yr 26 13 12 25 45 9 1
Source - AMFI

Some facts for the growth of mutual funds in India :
• 100% growth in the last 6 years.

• Number of foreign AMC's are in the que to enter the Indian markets
like Fidelity Investments, US based, with over US$1trillion assets under
management worldwide.
• Our saving rate is over 23%, highest in the world. Only
channelizing these savings in mutual funds sector is required.
• We have approximately 29 mutual funds which is much less than
US having more than 800. There is a big scope for expansion.
• 'B' and 'C' class cities are growing rapidly. Today most of the
mutual funds are concentrating on the 'A' class cities. Soon they will find
scope in the growing cities.
• Mutual fund can penetrate rurals like the Indian insurance industry
with simple and limited products.
• SEBI allowing the MF's to launch commodity mutual funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.
• Introduction of Financial Planners who can provide need based
advice.

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

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

Each investor in a fund is a part owner of all of the fund’s assets. This enables
him to hold a diversified investment portfolio even with a small amount of
investment that would otherwise require big capital.
• Professional Management:
Even if and investor has a big amount of capital available to him, he benefits
from the professional management skills brought in the management of the
investor’s portfolio. The investment management skills, along with the needed
research into available investment options, ensure a much better return than
what an investor can manage on his own. Few investors have the skills and
resources of their own to succeed in today’s fast moving, global and
sophisticated markets.

• Reduction/Diversification of Risk:
An investor in a mutual fund acquires a diversified portfolio, no matter how

small his investment. Diversification reduces the risk of loss, as compared to
investing directly in one or two shares or debentures or other instruments.
When and investor invests directly, all in the pool of funds with other
investors, any loss on one or two securities is also shared with other investors.
This risk reduction is one of the most important benefits of a collective
investment vehicle like the mutual fund.
• Reduction of transaction cost:
What is true of risk is also true of the transaction costs. A direct investor bears
all the costs of investing such as brokerage or custody of securities. When
going through a fund. He has the benefit of economies of scale; the funds pay
lesser costs because of larger volumes, a benefit passed on to its investors.
• Liquidity:
Often, investors hold shares or bonds they cannot directly, easily and quickly
sell. Investment in a mutual fund, on the other hand, is more liquid. An
investor can liquidate the investment, by selling the units to the fund if open-
end or selling them in the market if the fund is closed-end, and collect funds at
the end of a period specified by the mutual fund or the stock market.

• Convenience and Flexibility:
Mutual Fund management companies offer many investor services that a

direct market investor cannot get. Investors can easily transfer their holdings
from one scheme to the other; get updated market information, and so on.
RISK FACTORS ASSOCIATED WITH MUTUAL FUNDS
 Mutual funds & securities investments are subject to market risks and
there is no assurance or guarantee that the objectives of the Scheme
will be achieved.
 Past performance of the Sponsor or that of existing Schemes of the
Fund does not indicate the future performance of the Schemes.
 As with any securities investment, the NAV of the Units issued under
the scheme can go up or down depending on the factors and forces
affecting the capital and money market.
 Tax laws may change, affecting the return on investment in Units.

TYPES OF MUTUAL FUND SCHEMES
I. Schemes according to Maturity Period:
A mutual fund scheme can be classified into open-ended scheme or close-

ended scheme depending on its maturity period.
i. Open-ended Fund/ Scheme
An open-ended fund or scheme is one that is available for subscription and

repurchase on a continuous basis. These schemes do not have a fixed maturity
period. Investors can conveniently buy and sell units at Net Asset Value
(NAV) related prices which are declared on a daily basis. The key feature of
open-end schemes is liquidity.
ii. Close-ended Fund/ Scheme
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years.
The fund is open for subscription only during a specified period at the time of
launch of the scheme. Investors can invest in the scheme at the time of the
initial public issue and thereafter they can buy or sell the units of the scheme
on the stock exchanges where the units are listed. In order to provide an exit
route to the investors, some close-ended funds give an option of selling back
the units to the mutual funds NAV related prices. SEBI Regulations stipulate
that at least one of the two exit routes is provided to the investor i.e. either
repurchase facility or through listing on stock exchanges. These mutual funds
schemes disclose NAV generally on weekly basis.

II. Schemes according to Investment Objective:
A scheme can also be classified as growth scheme, income scheme, or

balanced scheme considering its investment objective. Such schemes may be
open-ended or close-ended schemes as described earlier. Such schemes may
be classified mainly as follows:
i. Growth / Equity Oriented Scheme
The aim of Growth funds is to provide capital appreciation over the medium to
long-term. Such schemes normally invest a major part of their corpus in
equities. Such funds have comparatively high risks. These schemes provide
different options to the investors like dividend option, capital appreciation, etc.
and the investors may choose an option depending on their preferences. The
investors must indicate the option in the application form. The mutual funds
also allow the investors to change the options at a later date. Growth schemes
are good for investors having a long-term outlook seeking appreciation over a
period of time.
ii. Income / Debt Oriented Scheme
The aim of the income funds is to provide regular and steady investors. Such
scheme generally invests in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such funds
are less risky compared to equity schemes. These funds are not affected
because of fluctuations in equity markets. The NAVs of such funds are
affected because of change in interest rates in the country.

iii. Balance Fund
The aim of balance funds is to provide both growth and regular income as
such schemes invest both in equities and fixed income securities in the
proportion indicated in their offer documents. These are appropriate for
investors looking for moderate growth. They generally invest 40-60% in
equity and debt instruments. These funds are also affected because of
fluctuations in share prices in the stock markets. However, NAVs of such
funds are likely to be less volatile compared to pure equity funds.
iv. Gilt Fund
These funds invest exclusively in government securities. Government

securities have no default risk. NAVs of these schemes also fluctuate due to
change in interest rates and other economic factors as are the case with income
or debt oriented schemes.
v. Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE
Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the
securities in the same weight age comprising of an index. NAVs of such
schemes would rise or fall in accordance with the rise or fall in the index,
though not exactly by the same percentage due to some factors known as
“tracking error” in technical terms.

vi. Money-Market Mutual Funds
These funds invest in highly liquid and safe securities like commercial paper,
banker’s acceptances, and certificates of deposits. Treasury bills… etc., which
are called money market instruments.
vii. Tax Saving Schemes
This schemes offer tax rebates to the investors under specific provisions of the
Indian Income Tax laws as the Government. Offers tax incentives for
investment in specified avenues. Investment made in Equity Linked Saving
Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the
Income Tax Act 1961.

2.1 OBJECTIVES OF THE STUDY
1. To track investor’s attitude, performance and behavior with respect to

financial institutions and financial products.
2. To find new and more effective ways of ensuring investor satisfaction

and to find efficient ways of communicating it.
3. To conduct the study with references to Kotak Mahindra products and

the competitive scenario in which Kotak Mahindra operates.
4. To study the structure of investment opportunities.
2.2 SCOPE OF THE STUDY
The study includes investors, financial institutions, investors who are interested in
Kotak Mahindra Asset Management Company’s mutual fund and also the individuals
who are interested in the investment on the mutual fund. The individuals without
investment are also included in the scope of the study.

2.3 STATEMENT OF THE PROBLEM
The investment objective of Kotak Mahindra Asset Management Co is “to generate

capital appreciation from a diversified portfolio of predominantly equity and equity
related securities or securities issued by central and state government”. Despite this
objective, the reasons like mutual fund investments are subject to market risk, there is
no assurance or guarantee that the objective of the scheme can be achieved and also
the Net Asset Value (NAV) of the units can go up or down depending on factors
affecting the capital and money market, many of the investors tend not to invest in the
mutual fund investment.
2.4 OPERATIONAL DEFINITIONS OF CONCEPTS
NET ASSET VALUE (NAV): -
Net Asset Value (NAV) denotes the performance of particular scheme of a mutual
fund Mutual Funds invest he money collected from the investors in securities markets.
In simple words, Net Asset Value is the market value of the securities held by the
scheme. Since market value of securities changes every day, NAV of a scheme also
varies on day-to-day basis. The NAV per unit is market value of securities of scheme
divided by the total number of units of the scheme on any particular date.

Formula of the calculation of Net Asset Value:
Market Value of Investments - Liabilities
Net Asset Value = --------------------------------------------------------------
No. of units Outstanding
However, most people refer loosely to the NAV per unit as NAV, ignoring the "per
unit".
Asset Management Company (AMC)
Professional managers run an AMC. The AMC conducts the necessary research &
based on it, manages the fund or portfolio. It is responsible for floating, managing,
redeeming the schemes; it also handles the administrative chares. It receives the fees
for the services rendered by it.
Risk
Risk may relate to loss of capital, delay in repayment of capital, non-payment of

interest, or variability of returns.

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

Method. Judgment Random Sampling, which by using the available information,
concerning the population, attempts to design a more efficient sample. The study
includes investors, financial institutions, investors who are interested in Kotak
Mahindra Asset Management Company’s mutual fund and also the individuals who
are interested in the investment on the mutual fund. The individuals without
investment are also included in the study.
Sample Size
A sample size of 100 people was selected for the study. The sample for data collection
was within the geographical boundaries of Bangalore City, Jayanagar.

Sources of Data
Primary data was collected by
• Questionnaires
• Question schedules
• Interviews
Secondary data was collected from
• Fact Sheets of the Company

• Websites, newspapers and journals.
Period of Study
The study was made during 1st January 2008 to 31st January 2008.

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

2.7 OVERVIEW OF THE REPORT
In Chapter 1 this report bring out the General Introduction and explains the
theoretical background of the organization
Chapter 2 includes the Design of the study. It covers the objectives, scope, statement
of the problem, Review of literature, operational definitions, Research Methodology,
statement of hypothesis, sampling methods, Data Analysis tool, overview of the
Report and the limitations.
Chapter 3 includes the profile of the organization, profile of the study unit,
organizational chart and functional department of the organization.
Chapter 4 includes the analysis. It covers the Analysis & Interpretation
Chapter 5 includes the summary, which covers findings, contribution of the study,
Suggestions, Conclusion, Questionnaire and Bibliography.

3.1 PROFILE OF THE ORGANISATION
Corporate Profile
Kotak Mahindra is one of India's leading financial institutions, offering complete

financial solutions that encompass every sphere of life. From commercial banking, to
stock broking, to mutual funds, to life insurance, to investment banking, the group
caters to the financial needs of individuals and corporates.
Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned

subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund
(KMMF). KMAMC started operations in December 1998 and has over 4 Lac
investors in various schemes. KMMF offers schemes catering to investors with
varying risk - return profiles and was the first fund house in the country to launch a
dedicated gilt scheme investing only in government securities. KMMF has been
registered with SEBI vide registration number MF/038/98/1 dated 23rd June 1998.
The sponsor company, Kotak Mahindra Finance Limited (KMFL), was converted into
Kotak Mahindra Bank Limited (Kotak Bank) in March 2003 their being granted a
Banking License by Reserve Bank of India. KMFL promoted by Mr. Uday S Kotak,
Mr. S.A.A.Pinto and Kotak & Co., was incorporated on November 21, 1985, under
the name Kotak Capital Management Finance Limited.

In early 1986, the promoters were joined by Late Mr.Harish Mahindra and Mr. Anand
G Mahindra and the Company’s name was changed to Kotak Mahindra Finance
Limited. Kotak & Co is a highly respected trading company of Mumbai, with
international business. KMFL started with a capital base of Rs.30.88 lakhs. From
being a provider of a single financial product, KMFL grew substantially during the
seventeen years of its existence into a highly diversified financial services company
and has now converted into a Bank. As on September 30, 2005, the net worth of
Kotak Bank is around Rs. 800 crore and combined with its subsidiaries, the Group net
worth (before minority interest) is around Rs. 2,000 crore. There are over 47,000
shareholders of Kotak Bank.
The Sponsor and its subsidiaries / associates offer wide ranging financial services
such as loans, lease and hire purchase, consumer finance, home loans, commercial
vehicles and car finance, investment banking, stock broking, primary market
distribution of equity and debt products and life insurance. The group has offices in
over 88 Indian cities and also present internationally in Mauritius, London, Dubai and
New York. Kotak Mahindra (UK) Limited, an ultimate subsidiary of Kotak Bank, is
the first company owned from India to be registered with the Financial Services
Authority in UK. Kotak Mahindra Old Mutual Life Insurance Limited is a joint
venture between Kotak Bank and Old Mutual Plc based in the UK and with large
presence in the South African insurance market.
Some of the other subsidiaries of Kotak Bank are Kotak Mahindra Securities Limited,
Kotak Mahindra Prime Limited, Kotak Mahindra International Limited, Kotak
Mahindra Private-Equity Trustee Limited, Kotak Mahindra Investments Limited,
Kotak Mahindra Inc., and Kotak Forex Brokerage Limited.The Sponsor has been
consistently profitable and dividend paying company since inception. All group
companies are professionally run companies, employing over 5,000 professional staff
including CAs, MBAs and Engineers.

Credit recognitions and awards :

 NDTV AWARDS, 2006
 LIPPER FUND AWARDS, 2006

 ICRA AWARDS, 2006
 ICRA MFR 1 (December 2004 & December 2005)
 OUTLOOK MONEY BEST WEALTH CREATOR DEBT 2003
 CRISIL BEST FUND AWARD 2003
3.2 KOTAK MAHINDRA GROUP

Kotak Mahindra is one of India's leading financial conglomerates, offering complete

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

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

(KMCC) is India's premier Investment Bank. KMCC's core business areas
include Equity Issuances, Mergers & Acquisitions, Structured Finance and
Advisory Services.
 Kotak Securities Kotak Securities Ltd. is one of India's largest brokerage and
securities distribution houses. Over the years, Kotak Securities has been one of
the leading investment broking houses catering to the needs of both
institutional and non-institutional investor categories with presence all over
the country through franchisees and coordinators. Kotak Securities Ltd. offers
online (through www.kotaksecurities.com) and offline services based on well-
researched expertise and financial products to non-institutional investors.

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

Management Company Kotak Mahindra Asset Management Company
(KMAMC), a subsidiary of Kotak Mahindra Bank, is the asset manager for
Kotak Mahindra Mutual Fund (KMMF). KMMF manages funds in excess of
Rs 20,800 crore and offers schemes catering to investors with varying risk-
return profiles. It was the first fund house in the country to launch a dedicated
gilt scheme investing only in government securities.
 Kotak Mahindra Old Mutual Life Insurance Limited Kotak Mahindra Old
Mutual Life Insurance Limited is a joint venture between Kotak Mahindra
Bank Ltd. and Old Mutual plc. Kotak Life Insurance helps customers to take
important financial decisions at every stage in life by offering them a wide
range of innovative life insurance products, to make them financially
independent.
DIRECTORS TRUSTEE COMPANY

 Uday S. Kotak B.Com, MMS has been an Executive Vice Chairman

and Managing Director of Kotak Mahindra Bank Limited (Formerly
known as Kotak Mahindra Finance Limited) since August 1, 2002.
Mr. Kotak is the principal founder and promoter of Kotak Mahindra
Finance Ltd. He is responsible for the growth of Kotak Mahindra from
a fledgling finance company in 1985 to a financial institution
providing the full basket of financial services today. He serves as
Chairman of the Board.
 Mr. Amit Desai is a graduate in Commerce and Law from the

Bombay University. He is an advocate and has about 20 years of
experience in criminal, economic and revenue laws. Mr. Desai is
associated with the Sponsor.
 Mr. Girish Sharedalal is a graduate in Commerce and Arts and also a

Fellow of the Institute of Chartered Accountants of India. Formerly a
Senior Partner of Messrs Dalal, Desai and Kumana, a firm of
Chartered Accountants, he has about 44 years of experience in the
field of audit, taxation and management consultancy.
 Mr. Tushar Mavani is a graduate in Commerce and Law from the

Bombay University. He is a partner with Messrs Mulla & Mulla &
Craigie Blunt & Caroe and has about 14 years of experience in the
legal field.

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

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

3.3 SCHEME DETAILS OF KOTAK MAHINDRA
1. KOTAK 30
Objective: - The investment objective is to generate capital appreciation from a

portfolio of predominantly equity and equity related securities with investment in,
generally not more than 30 stock.
Structure :- Open Ended Equity Growth Scheme
Minimum investment:- Rs 5,000
2. KOTAK TECH

predominantly equity and equity related securities issued by multinational
companies.
Structure: - Open Ended Equity Growth Scheme.

3. KOTAK MNC

portfolio of predominantly equity and equity related securities issued by multinational
companies.
Structure: - Open Ended Equity Growth Scheme
Minimum investment: - Rs 5,000
4. KOTAK BALANCE
Objective: - The investment objective is to achieve growth by investing in Equity

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

5. KOTAK INCOME PLUS
Objective: - To enhance returns over a portfolio of debt instruments with a moderate

exposure in Equity & Equity related instruments
Structure:- Open Ended Income Scheme
Minimum Investment: - Rs 5,000
6. KOTAK GILT
Objective: - To generate risk free returns through investments in sovereign Securities

issued by the central government and / or a state government and / or reverse repos
in such securities
Structure: - Open Ended Dedicated Gilt Scheme
Minimum Investment: - Savings & investment Plan; Rs 5,000
Serial Plans; Rs 10 lakhs

7. KOTAK BOND
Objective: - To create a portfolio of debt and money market instruments of

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

in debt & money market instruments of different maturities, So as to
spread the risk across different kinds of issuers in the debt market.
Structure: - Open Ended Debt Scheme
Minimum Investment: - Deposit Plan Rs 5,000
Wholesale Plan: Rs 1 lakh
Short Term Plan: Rs5, 000
Institutional Plan; Rs 1 crore

8. KOTAK LIQUID
Objective; - To provide reasonable returns and high level of liquidity by Investing in

debt and money market instruments of different Maturities so as to spread the risk
across different kinds of Issuers in the debt markets
Structure; - Open Ended Debt Scheme
Minimum Investment: - Rs 5,000
Institutional plan: Rs 1 crore
Institutional Premium Plan: Rs 20 crores
9. KOTAK FLOATER
Objective: - To reduce the interest rate risk associated with investments in fixed rate
instruments by investing predominantly in floating rate securities, money market
Instruments and using appropriate derivatives
Structure: Open Ended Debt Scheme
Minimum Investment: Rs 5,000.

10. KOTAK DYNAMIC INCOME
Objective: To maximize returns through an active management of a portfolio of debt

and securities.
Structure: Open Ended Debt Scheme
Minimum Investment: Rs 5,000
11. KOTAK GLOBAL INDIA
Objective: To generate capital appreciation from a diversified portfolio of

predominantly equity and equity related securities issued by globally competitive
Indian Companies.
Highlights
 Investment in a diversified equity portfolio of Globally Competitive Indian

Companies.
 Tax advantage
 Recurring Investment Facility available during continuous offer.
 Redemption on all Working days.
3.4 FACILITIES PROVIDED BY KOTAK MAHINDRA

1. Systematic Investment Plan (SIP):
Management of one's finances to attain a defined goal calls for a lot of

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

payouts in a defined frequency and to book profits periodically Through our SWP you
can redeem defined sums at a pre-defined frequency by giving a one-time instruction
to us. You may choose to regularly withdraw either a fixed sum or just the
appreciation on your investments.
This facility caters to two segments of investor needs:

1) Investors wanting defined, regular funds inflow from their investments.
2) Investors interested in booking gains at a regular interval.

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

choose otherwise) if you hold an account with any of the 12 banks listed below:
ABN AMRO Bank HSBC Indusind Bank
Citi Bank HDFC Kotak Mahindra Bank
Centurion Bank of Punjab ICICI Standard Chartered
Deutsche Bank IDBI Bank UTI Bank
Direct Credit is safer, faster and convenient compared to the conventional cheque
payout mechanism.

5. ECS of Dividends:
ECS (Electronic Clearing Service) is a Reserve Bank of India offering to facilitate,

among others, faster and seamless payout of dividends directly into your bank
account.
ECS as a mechanism for payout of Dividends is faster, convenient, cost-effective and

hassle-free. Besides, you don't run the risk of loss of dividend instruments in transit
and the associated delays in obtaining a duplicate instrument. This facility is currently
offered across all banks in over 48 locations.
6. Online Transactions Facility:
Our Online Transactions Facility allows you to have instant access to your
investments at any time from anywhere just at the click of a button.
Here's a list of all facilities you can avail by signing in for our Online Transactions
Facility:
-Redemption.
-Switch Over.
-Account Statement.

7. Email Communication:
The world over, e-mail has been revolutionizing communication. No more

need to have paper trails; e-mail makes communication real-time, easy to store and
retrieve and cost-effective.
You can now opt to receive all your communication from us over e-mail:
- Account Statement for your investments

-Transaction Confirmations
-Daily NAVs and Dividend Updates
-Market Reviews
-Information on product launches, service initiatives, dividends, etc.
-Annual Reports
-Other Statutory Communication
8. SMS Services:
With cell phones fast qualifying for an assured parking in every

pocket, we could not resist allowing you that extra convenience to be in touch with
your investments whenever you wish, wherever you are.
Try our SMS facility to :
-Access the latest NAVs and Dividends for our various schemes on SMS.
-Receive information on product launches, service initiatives, dividends, etc.

on SMS.
-Post your queries to our Dedicated Services Desk.

9. Updates from Markets:
 Market Review-Weekly Market Review [ended 29th February 2008]

 Performance-Monthly Performance Snapshot [as on 31/12/2007]
 Half Yearly Accounts and Portfolio- March 2007&September 2007
 Fact Sheet- Current Month, Yearly Fact Sheet
 KMAMC Annual Report-2006 - 2007
 Credit Policy for 2007-08

4.1 ANALYSIS AND INTERPRETATION
TABLE NO 2.1 – TO SEE THE RESPONDENT IS AN INCOME TAX ASSESSEE.
Sl. No. Attributes No. of respondents Percentage

1 Yes 76 76
2 No 24 24
Total 100 100
Source: Primary Data
Interpretation:
It is clear from the table that out of 100 respondents, 76% of the respondents say that
they are income tax assesses and the rest 24% say that they are not.
This is illustrated in the following graph.

GRAPH NO.1 – TO SEE THE RESPONDENT IS AN INCOME TAX ASSESSEE.
76
80
Percentage
60
40
24
20
0
Yes No
Attributes
Source: - Table No: 2.1

TABLE NO 2.2. TO SEE WHETHER REPONDENTS INVEST FOR TAX

EXEMPTION OR TAX SAVINGS

1 Yes 70 70
2 No 30 30
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 70% of the respondents say that
they invest for tax exemption and the rest 30% say that they do not.

GRAPH NO 2. TO SEE WHETHER REPONDENTS INVEST FOR TAX

EXEMPTION OR TAX SAVINGS
80 70
Percentage
60
40 30
20
0
Yes No
Attributes
Source: Table No: 2.2

TABLE NO 2.3. INVESTMENT PREFERENCE OF RESPONDENTS

1 Fixed Deposits 33 33
2 Real Estate 27 27
3 Insurance 21 21
4 Mutual Fund 9 9
5 Gold 9 9
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 33% of the respondents invest in
fixed deposits, 27% invest in Real Estate, 21% in Insurance, 9% in Mutual Fund and
the rest 9% say that they invest in gold.
GRAPH NO 3. INVESTMENT PREFERENCE OF RESPONDENTS

35 33
30 27
25
Percentage
21
20
15
9 9
10
5
0
d
e
e
its
d
un
nc
at
ol
os
G
st
lF
ra
ep
lE
su
ua
D
ea
In
ut
d
M
xe
Fi
Attributes
TABLE NO 2.4 REASONS OF INVESTMENT PREFERENCE OF

RESPONDENTS

1 Less Risk 28 28
2 Good Returns 21 21
3 Liquidity 12 12
4 Assured Returns 36 36
5 Other Reasons 3 3
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 28% of the respondents prefer
investment due to less risk, 21% due to good returns, 12% due to liquidity, 36% due
to assured returns and the rest 3% do it due to other reasons.
GRAPH NO 4. REASONS OF INVESTMENT PREFERENCE OF

RESPONDENTS

40 36
35
Percentage
30 28
25 21
20
15 12
10
5 3
0
Less Risk Good Liquidity Assured Other
Returns Returns Reasons
Attribute
TABLE NO 2.5. CURRENT INVESTMENT PORTFOLIO OF RESPONDENTS

1 Govt securities and bonds 61 61
2 Mutual funds & company FD’s 18 18
3 Equity Shares 21 21
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 61% of the respondents invest in
Govt securities and bonds, 18% in Mutual funds and company fixed deposits and the
rest 21% in equity shares.
This is illustrated in the following graph:
GRAPH NO 5. CURRENT INVESTMENT PORTFOLIO OF RESPONDENTS

70 61
Percentage 60
50
40
30 21
18
20
10
0
Govt securities Mutual funds & Equity Shares
and bonds company FD’s
Attributes
TABLE NO 2.6. NATURE OF INVESTMENT THAT THE RESPONDENTS LIKE

1 Steadily 61 61
2 At average rate 27 27
3 Fast 12 12
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 61% of the respondents like their
investment to grow steadily, 27% in an average rate and the rest 12% in a fast rate.
GRAPH NO 6. NATURE OF INVESTMENT THAT THE RESPONDENTS LIKE

70 61
Percentage 60
50
40
27
30
20 12
10
0
Steadily At average rate Fast
Attributes
TABLE NO 2.7 PERCENTAGE OF INCOME THAT THE RESPONDENTS

INVEST


1 5% 24 24
2 5% - 10% 37 37
3 More than 10% 39 39
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 24% of the respondents invest
5% of their total income, 37% invests 5-10% and the rest 39% invest more than 10%.
GRAPH NO 7. PERCENTAGE OF INCOME THAT THE RESPONDENTS

INVEST

45
39
40 37
35
Percentage
30
24
25
20
15
10
5
0
5% 5% - 10% More than 10%
Attribute
TABLE NO 2.8 TO SEE WHETHER THE RESPONDENT IS AN INVESTOR OF

MUTUAL FUND

1 Yes 27 27
2 No 73 73
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, only 27% of the respondents are
investors of mutual funds and the rest 73% are not.
GRAPH NO 8. TO SEE WHETHER THE RESPONDENT IS AN INVESTOR OF

MUTUAL FUND

80 73
70
60
Percentage
50
40
30 27
20
10
0
Yes No
Attribute
Source: Table: 2.8.
TABLE NO 2.9 REASONS FOR NOT INVESTING IN MUTUAL FUNDS

1 Awareness 15 15

2 Risky 58 58
3 Returns not assured 27 27
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 15% of the respondents do not
invest in mutual funds because of lack of awareness, 58% as it is risky and the rest
27% as the returns are not assured.
GRAPH NO 9. REASONS FOR NOT INVESTING IN MUTUAL FUNDS

70
58
60
50
Percentage
40
30 27
20 15
10
0
Awareness Risky Returns not
assured
Attribute
TABLE NO 2.10 REASONS FOR INVESTING IN MUTUAL FUNDS

1 Less Risky 21 21
2 Liquidity 30 30
3 Professional Mgmt 24 24
4 Fast Appreciation 25 25
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 21% of the respondents feel that
investing in mutual funds are less risky and hence they invest, 30% invest due to
liquidity, 24% due to Professional management and the rest 25% due to fast
appreciation.
GRAPH NO 10. REASONS FOR INVESTING IN MUTUAL FUNDS

35 30
30 24 25
Percentage 21
25
20
15
10
5
0
n
ty
y
t
gm
io
isk
di
at
i
R
M
qu
ci
ss
al
re
Li
on
pp
Le
si
A
es
st
of
Fa
Pr
Attribute
TABLE NO 2.11 KIND OF MUTUAL FUND THAT THE RESPONDENTS

PREFER


1 Open-ended 57 57
2 Closed-ended 43 43
Total 100 100
Interpretation:
open-ended mutual funds and the rest 43% closed-ended ones.
GRAPH NO 11. KIND OF MUTUAL FUND THAT THE RESPONDENTS

PREFER

60 57
50
43
Percentage
40
30
20
10
0
Open-ended Closed-ended
Attributes
TABLE NO 2.12 TYPE OF SCHEME THE RESPONDENTS PREFER

1 Equity 49 49
2 Debit 42 42
3 Balance 9 9
Total 100 100

Interpretation:
equity type of scheme, 42% prefer debit type of scheme and the rest 9% due to
balance type of scheme.
GRAPH NO 12. TYPE OF SCHEME THE RESPONDENTS PREFER

60
49
50
42
40
Percentage
30
20
9
10
0
Equity Debit Balance
Attributes
TABLE NO 2.13. THE PREFERENCE AMONG DIFFERENT MUTUAL FUNDS

1 UTI 25 25
2 Kotak 15 15
3 HDFC 23 23
4 Birla Sun Life 20 20
5 LIC 17 17
Total 100 100
Interpretation:
UTI mutual funds, 15% prefer Kotak, 30% prefer HDFC, 19% Templeton and the rest
21% prefer LIC.
GRAPH NO 13. THE PREFERENCE AMONG DIFFERENT MUTUAL FUNDS

30
25
25 23
20
20
Percentage
17
15
15
10
0
UTI Kotak HDFC Birla Sun LIC
life
Attributes
TABLE NO 2.14 TO ANALYSE WHETHER THE RESPONDENT SEES THE

BRAND NAME WHILE INVESTING

1 Yes 94 94
2 No 06 06
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 94% of the respondents see
brand name while investing and the rest 6% are not.
GRAPH NO 14. TO ANALYSE WHETHER THE RESPONDENT SEES THE

BRAND NAME WHILE INVESTING

100 94
90
80
70
Percentage
60
50
40
30
20
10 6
0
Yes No
Attribute
Source: Table: 2.14
TABLE NO 2.15 IMMEDIATE REACTIONS IN CASE OF SUDDEN DIP IN

STOCK MARKET

1 Would withdraw the investment 39 39
2 Would wait and watch 55 55
3 Would invest more in it 6 6
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 39% of the respondents would
withdraw the investment, 55% would wait and watch the show and the rest 6% say
that they would invest more.
GRAPH NO 15. IMMEDIATE REACTION IN CASE OF SUDDEN DIP IN STOCK

MARKET

60 55
50
39
Percentage
40
30
20
10 6
0
Would Would wait and Would invest
withdraw the watch more in it
investment
Attributes
TABLE NO 2.16 TO KNOW THAT THE RESPONDENTS HAVE HEARD OF

KOTAK MUTUAL FUND

1 Yes 100 100
2 No 00 00
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, all 100 respondents have heard
of Kotak Mutual Fund.
GRAPH NO 16. TO KNOW THAT THE RESPONDENTS HAVE HEARD OF

KOTAK MUTUAL FUND

120
100
Percentage 100
80
60
40 100
20
0
0
Yes No
Attribute
Source: Table: 2.16
TABLE NO 2.17 VIEWS ON KOTAK MF AND ITS SCHEMES

1 Good 25 25
2 Moderate 49 49

3 Not aware 26 26
Total 100 100
Interpretation:
It is clear from the table that out of 100 respondents, 15% of the respondent’s view
that Kotak MF is good, 36% feel that it is moderate and the rest 49% say that they are
not aware.
GRAPH NO 17. VIEWS ON KOTAK MF AND ITS SCHEMES

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

 Majority of the respondents are income tax assesses and invest for
the purpose of Tax exemption or savings..
 Most of the respondents prefer to invest in Fixed Deposits, Real
Estate and Insurance because of less risk and assured returns.
 The investment portfolio of majority of the respondents is in govt
securities and bonds.
 Though mutual funds exist in the market, the people who tend to
invest in it is very low compared to other investments. The reason
behind is the high risk factor involved with Mutual Funds.
 Majority of the people prefer open-ended equity scheme.
 Majority of Investors prefer brand name of the company and then
invest in their schemes so UTI as gained more investors as risk is
less and there is an assured return.
 If there is a sudden dip in Stock Market majority of Investors
doesn’t withdraw their money instead wait for some time.
 Among the surveyed Investors everyone has heard Kotak Mutual
Fund and majority of them have rated Kotak Mutual Fund schemes
as Moderate.
5.2 CONTRIBUTION OF THE STUDY

From this study the financial institutions/Banks can improve in some of the following
fields of services and communications: -
1. Help the financial institutions (KM) to provide goods and services in private
sector and convenience factor offered by the public sector.
2. Help local banks/small institutions to have big market share (i.e. banks or
institutions which are mot easily accessible gets more preference even if it is a local
bank with out much brand image.)
3. Helps the bank and institutions to provide E-banking facility more effective
and accurate towards investors or customers.
4. Help KM to find out, in Kotak Mahindra product perceived as being value for
money.
5. Help KM to find out, is KM users are considering KM as one stop shop most of
the time.
5.3 SUGGESTIONS

1. Proper care should be taken to give the correct guidance to the investors so
that they will invest more.
2. Good campaigns can be arranged so that people will know more about Mutual
Funds and will tend to invest in it.
3. Nice advertisements can be entertained so that people will get interest in

Mutual Funds.
4. Kotak can come up with good, attractive schemes for its investors.
5. Nowadays Indian Mutual fund Industry is attracting more and more retail
investors because of economic stability and increasing growth rate, it leads to gradual
increase in the stock market indices.
6. Interest rates are falling gradually and mutual fund industry is booming
because of this reason investors can move from Bank deposits to mutual funds so
mutual fund organizations should bring new schemes to satisfy the investors.
7. Mutual fund schemes have not gained importance as there is a lack of

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

The study “Investors preferences towards Mutual Funds” was carried out on behalf of
Mutual Funds of Kotak Mahindra Asset Management Company Ltd. The data was
collected from various sources and also through the tools like questionnaires and
relevant interactions with concerned persons. The needs were identified in the form of
findings and suitable suggestions were put forth in the form of recommendations to
the concerned authorities for further discussions. A few recommendations have been
considered for implementation.
 Mutual fund schemes are subject to market risk.

 On the basis of above statements it has proved higher the risk higher
the return and lower the risk lower the return.
 Nowadays Mutual Fund schemes are increasing because of falling
interest rates so the organization can provide further new schemes and
attract the new customers.
 Investment in Mutual fund schemes gives diversified portfolio to
investors.
 Nowadays Indian Mutual Fund industry is attracting more and more
retail investors because of economic stability and increasing growth
rate, it leads to gradual increase in the stock market Indices.
QUESTIONNAIRE ON INVESTORS PREFERENCES TOWARDS

MUTUAL FUNDS WITH REFERENCE
TO KOTAK MUTUAL FUND

Dear Sir/Madam,
I, Hemanth.S, student of R.V.I.M, would like your kind attention for a few
minutes to answer this questionnaire. This is part of a survey on ‘Investors
preference towards Mutual Funds with reference to Kotak (KMAMC)’ as a
partial fulfillment of BBM course. Therefore, I kindly request you to fill the following
questionnaire. The information provided by you will be used for academic purpose
only & will be kept confidential.
1. Name :
2. Age :
3. Gender : Male () Female ()
4. Occupation : Business () Profession ()
Housewife () Students ()
Service () Others
()
5. Annual Income : Below 100,000 () 100,001 to 200,000 ()
200,001 to 300,000 () 300,001 to 500,000 ()
500,001 & above ()
6. Number of dependents:
Please put tick on your answers for the following questions

1. Are you an Income Tax Assesse?

Yes
No No
2. Are you investing for tax exemption or tax savings?

Yes
No
3. What kind of invest options you prefer?

Fixed Deposit
Real Estate
Insurance
Mutual Fund
Gold
4. Why you prefer the above option?
Less Risk
Good Returns
Liquidity
Assured Returns
Other Reasons
5. Your current investment portfolio includes majority of

Govt. securities and Bonds
Mutual funds & company fixed deposits
Equity shares
6. You would like your investment to grow

Steadily
At average rate
Fast
7. What percentage of your income do you invest?

Up to 5 %
5%--- 10%
More than 10%
8. Are you an investor in mutual fund?

Yes
No
9. If answer is No, why you are not investing in mutual fund?

Awareness
Risky
Returns not assured
10. If answer is Yes, why do you prefer mutual fund?

Less risky
Liquidity
Professional mgt.
Fast appreciation
11. What kind of mutual fund you prefer?

Open- ended
Closed-ended
12. What type of scheme do you prefer?

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

UTI
Kotak
HDFC
Birla Sun Life
LIC
14. While buying a Mutual Fund scheme do you see brand name?
Yes
No
15. How would you react if the Stock Market immediately dips?
I would withdraw my money
I would wait & watch
I I would invest more in it.
16. Have you heard of Kotak mutual fund and its scheme?
Yes
No
17. Your views on Kotak mutual fund and its scheme?

Good
Moderate
Not aware
Thank you very much for your valuable time & co-operation.

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

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Investors preferences towards Mutual Funds of Kotak

1.1 GENERAL INTRODUCTION

Investment companies can be classified into closed-end and open-end investment

Mutual fund is a trust at law; it is a special type of managed, pooled portfolio

R.V. Institute of Management 1

1.2 THEORETICAL BACKGROUND

Meaning of Mutual Funds

Different persons in different words have defined mutual fund.

Investment is the allocation of monetary resources to assets that are expected

R.V. Institute of Management 2

R.V. Institute of Management 3

Fig.1.1 Concept of Mutual Fund Industry

R.V. Institute of Management 4

CONSTITUENTS OF MUTUAL FUND

Fig.1.2 Constituents of Mutual Fund Industry

R.V. Institute of Management 5

Organization of a Mutual Fund

2. Trust/ Board of Trustees:

Trustees hold a fiduciary responsibility towards unit holders by protecting their

R.V. Institute of Management 6

3. Fund Managers/ AMC:

Often an independent organization, it takes custody of securities and other assets of

R.V. Institute of Management 7

I. Direct Investment Alternatives

II. Indirect Investment Alternatives

R.V. Institute of Management 8

1.3 A comparison of different investment options with respect to their

Options Returns Safety Volatility Liquidity Convenience

R.V. Institute of Management 9

Fig 1.4. Typical Financial System

R.V. Institute of Management 10

Financial Financial Financial Financial

Regulator Intermediaries Non- Others

Short Medium Long

R.V. Institute of Management 11

 Reserve Bank of India (RBI)

Fig.1.5. The Structure of Mutual Fund Industry

R.V. Institute of Management 12

SEBI RBI AMFI

Sponsor Trustee AMC Custodian Investor

Public Sector Funds Private Sector Funds

UTI Bank Financial Institutions

Open ended Closed ended

Growth Income Balanced Sect oral Special purpose Tax saving

THE RESERVE BANK OF INDIA (RBI):

R.V. Institute of Management 13

F Central banking functions

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

R.V. Institute of Management 14

The SEBI was established on April.12.1982 through an administrative order, but it

 To regulate stock exchanges & securities industry to promote their orderly

 To protect the interest of investors so that there is a steady flow of savings in

 To prevent trading malpractices and aims at achieving a balance between self-

ASSOCIATION OF MUTUAL FUND INDUSTRY (AMFI)

R.V. Institute of Management 15

 To undertake nation wide investor awareness programme so as to promote

 To disseminate information on Mutual Fund Industry and to undertake studies

INDIAN MUTUAL FUND INDUSTRY

Structure Of The Indian Mutual Fund Industry

R.V. Institute of Management 16

Unit Trust of India

Public Sector Mutual Funds