CHAPTER-I

INTRODUCTION

INTRODUCTION
Introduction to the study
Mutual Fund Industry which is a relatively of a post-economic reforms phenomena
in India, has been expanding during this Period in branch and bound Many commercial banks,
insurance companies entered into mutual fund industry apart from foreign players. In the early
years of evolution of mutual fund industry in the Indian financial market it was a monopoly and
continued to be the same till very recent time. Then many players both foreign and Indian
entered in the Mutual Fund Industry.
This increased the competition between the various firms working in the mutual fund
Industry. The need for developing various new
schemes arises so as to attract investors towards the firm and equally encouraging them to invest.
This growth in the Mutual Fund Industry and scope of increasing markets has further increased
the competition between the firms in the industry.
The competitions had given raise to demand for specialized products and skills of
various individuals who can contribute towards the containment and growth of individual firms
in the mutual firm industry. This gave rise to various related organizations and individuals
working as specialized teams in the various areas of mutual funds. One such organization is
Karvy it comes into pictures where the investors apply for the units in a Mutual Fund schemes
and verify the validity and eligibility of the investor and allots the units
The mutual fund companies now receive millions of applications if a new scheme is
launched. This is due to the wide spread awareness created among the urban and rural
Population of India. It therefore becomes a Herculean task to Manage the flooding applications
However it should be noted that this is a One time activity similar to that of a short run project
It is needless to State that a given mutual fund firm will not be possessing.
The technological, human and knowledge resources to take up such a gigantic task, it is
in fact not needed by a mutual fund firm to create such a vast organizational structure when it is

seen from the point of view scale of economies. Further to this problem, the mutual fund
industry does not know where it stands in the current volatile and turbulent environment.
This may be the reason they prefer to hire the service of professionals firm with
specialized knowledge and Expertise. These developments have led to an outcome that
today, launching of mutual fund scheme has become a well organized activity which is
accomplished through the coordinated endeavors of task groups.

The asset management companies have designed various schemes in accordance with
the requirements of the various sections on investors on basis of equity linked, debt instruments
linked, commodities linked and specific industry linked instruments. The investor today is given
a wide range of options to invest in various types of funds according to his interests and
capabilities.
Mutual funds enable even a small investor to investor to invest, as most of the mutual
funds just start from a minimum amount of investment of RS. 5000 hence even a small investor
can invest into a mutual fund and reap returns in the same proportions as the other big time
investors. This shows that mutual fund industry is one which aims at every section of the
society.

To deal with this large population of investors and the competition, the asset

management company has been forced to develop and design new schemes and hire the services
of professionals.

Mutual fund industry involves various operations from the stage of identification of the
target group or defining a market segment, designing a scheme which comes up to the
expectations and aspirations of the target group or market segment, reaching the selected market
through launching the scheme which is thereby called NFO, till the stage of investing the amount
3

raised in accordance with the norms stipulated with offer document and distributing the returns
to the investor by way of dividend, after making adequate provision for taxation and other
operating costs. All this process is well organized and performed in a specific order. There are
various related organizations which specialize in the activities at various stages of the
functioning of the mutual funds.

It is therefore felt expedient to examine the various intricacies involved in the new
fund offer (NFO). Specifically the various documents that are being processed, the parameters
evolve either customarily or by legal mandate to scrutinize the applications. Various stages
involved in the scrutiny, the rejection criteria, the creation of human organization to monitor the
activities, the communication channel and the structure of the organized activities and the legal
environment of NFO to some extent. Such a dissertation would help to come out with a
comprehensive report which may serve as a guide for the prospective entrants into mutual fund
investment and to the existing mutual fund investors to some extent.

Objectives of the study:

*

To study the technical, procedural, legal dimensions of the NFO

To examine briefly the organizational structure, communication network,

resource requirements to launch a new fund

To study a sample of application drawn from Reliance Mutual Fund.

Methodology of study:
To fulfill the objective of the study both primary and secondary data has been
collected. Primary data is the data collected specifically for the study. Data is collected directly
from people and organizations via questionnaires or surveys before being analyzed to reach
conclusions concerning the issues covered in the questionnaire or survey.
In this study primary data was collected through interaction with staff of
Karvy. and the applications of Reliance equity fund.
Secondary data is the data collected previously by someone else for some other
purpose which can be analyzed and interpreted according to requirements. For example, sources
of secondary data are government publications, newspapers, worldwide web etc.
In this study the Secondary data is mainly taken from
*

The companys training material.

Reconciliation statements.

Other documents generated with in the organization

Which have to Access?

* www. Karvy.com, www.amfiindia.com,www.sebi.com.

Limitations of study:

Analysis of the applications is carried out by taking the applications from

Reliance equity Fund. The data available is therefore restricted by the design
of the application.

The inspection of applications is done on the basis of a sample of 120

applications. Though the sample is drawn randomly, the possibility of sampling
fluctuations affecting the findings cannot be ruled out.

Numerical data like number of applications received, total subscription amount

received, statement of accounts, investor details, etc are not available and
therefore a description of these aspects is given.

NFO process may not be same for all mutual funds that are released. It may
differ from one fund to other depending upon the size like the no. of
applications received, subscription amount received, etc.

CHAPTER-II
REVIEW OF LITERATURE

REVIEW OF LITERATURE
Mutual fund is a mechanism for pooling the resources by issuing to the investors and
investing funds in securities in accordance with objectives as disclosed in offer document.
Investments in securities are spread across a wide cross-section of industries and sectors
and thus the risk is reduced, Diversification reduces the risk because all stocks may not move in
the same direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of mutual funds are
known as unit holders.
The profits or losses are shared by the investors in proportion to their investment. The
mutual funds normally come out with a number of schemes with different investment objectives
which are launched from time to time. A mutual fund is required to be registered with Securities
and Exchange Board of India (SEBI) which regulates securities markets before it can collect
funds from the public.
Mutual fund is a collection of stocks and / bonds. A mutual fund as a company brings
together a group of people and invests their money in stocks, bonds and other securities. Each
investor owns shares, which represent a portion of the holdings of the fund.

With increased uncertainties or fluctuations in the primary market and decreasing bank
interest rates, mutual funds are gaining popularity day by day Now-a- days mutual funds are
performing well will high returns to the investors. There are various types of schemes and plans
available to all type of investors.

Let us assume that you inertia million rupees over night and want to invest the same to
get better returns you can consider the following investment avenues that are popular in Indian
context
Company shares
Fixed deposits in banks
Government bonds
Fixed deposits in NBFC
Chit fund
Real estate
Other local money lending options

Pros and cons of the investments:

SNO.

Investment
avenue

Risk

Return

1.

Company shares and

stocks
Fixed deposits in
banks
Govt. bonds
Fixed deposits in
NBFC
Chit funds
Real estate
Other money lending
options

High

High

Effort required to
track/maintain
investment
High

Low

Low

Low

Medium
High

Medium
Medium

Medium
Medium

High
Medium
Medium

Medium
Medium
Medium

Medium
Medium
Depends

2.
3.
4.
5.
6.
7.

10

How you can make money from a mutual fund?

If the fund sells the securities that have increased in price, the fund has a capital gain
Most of the funds also pass on these gains to investors in a distribution.
If fund holdings increase in price but are not sold by the fund manager, the funds shares
increase in price. You can then sell your mutual fund units for profit. Funds will also usually give
you a choice either to receive a check for distributions or to reinvest the earnings and get more
shares.
Income it earned from dividends on stocks and interest on bonds. A fund pays out nearly
all income it receives over the year to fund owners in the form of a distribution.

11

Types of Funds:
Mutual funds also come in various sizes and shapes. There are about dozen fund classes
but all of them are derivatives of three basic classes are as follows.
Growth
Income
Liquidity

Growth: Long term growth, since these funds invest in equities, they are also called as equity
funds. Their risk level is high so is the return.

Income: This type of fund provides regular income by investing in debt instruments like bonds,
debentures etc., Because of their nature of investment, they are also called debt schemes. Their
risk and return levels are medium.

Liquidity: These are primarily invested in money market instruments and thus most volatile,
safer and give lower returns. These funds are also known as cash or money market funds.
In addition to the above type there are other derivative classes as listed below.

12

Type of fund...

Invest in this area

Balanced fund

Is an investment blend of equity and dept

Instruments

Index fund

Invests in the companies that participate in stock market

indices in the same weight age comprising of an index

Sector fund

Invests in companies pertaining to specific

sectors like healthcare,banking, FMCG,technology etc.

Ells / Tax funds

Invests is Government bonds and generally long term in

nature. They provide tax

benefits.

These are called mutual fund schemes. It is based on the investment

objective. There is another Classification based on the capitalization of funds. If the fund
offers purchase or selling on a Continuous basis it is called open ended mutual fund. On
the contrary, if the fund is open only for a particular period, it is called closed ended fund.

Differences:

Open ended and Closed ended funds

13

SNO.
1.
2.
3.
4.
5.

Feature
Capitalization
Any time entry
Any time exit
Tax advantage
Available for a fixed period

6.

Listed on the exchange

Open ended
Unlimited
Yes
Yes
Yes
No
(with exemption of
FMP schemes)
Generally No

Closed ended
Limited
No
No
No
Yes
Yes

Open ended funds gained popularity because of their flexibility and variety of features
they offer. For this reason, majority of the mutual funds are open in nature.

Arms of a mutual fund:

14

Primarily mutual fund is formed as a trust by a group of sponsors. They are the owners
of the mutual funds and forms trust by a group of sponsors. They are the owners of the mutual
funds and forms trustees who in turn appoint AMC and manage the mutual fund.
SEBI regulations require that at least two at least two thirds of the directors of trustee
company or board of trustees must be independent i.e. they should not be associated with the
sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required
to be registered with SEBI before they launch any scheme.
Entity
Sponsor
Trustees
Asset management company
Registrar
Distributors

Performance
Forms Mf as a trust. Registers with SEBI.
Holds funds invested in a form of units.
Ensure compliance with SEBI. Appoints
AMC
Floats MF Schemes, Manages funds and
cash.
Holds investor data. Do services to
investors
Market various schemes of MF

Transaction types (commercial & non-commercial):

Lets compare various transactions of mutual funds with those of banks.
In a bank, you will
Open an account with initial deposit
Deposit money
With draw money
Opt for a recurring deposit

In a mutual fund
You subscribe in a scheme and buy units
Do additional purchases
You redeem units
Start a systematic investment plan

Since mutual fund offers many more options to investors, it will have many more
transaction types as well. Let us see some popular transactions in mutual funds

15

SNO.
1.

Transaction
New purchase

2.

Additional purchase

3.

Redemption

4.

Switch/shift

5.

Dividend

6.

Systematic investment

7.

Systematic with drawl

Description
New investment. Buying
units in a scheme
Buying additional units in
a scheme
Selling units and getting
money back.
Transferring investment
from one scheme to other.
When AMC announces
dividend in a scheme.
Investing fixed amounts
periodically like a
recurring deposit.
Reverse of systematic
investment Selling units
periodically

Rest are relating to general maintenance only. So they are non-commercial transactions.

Net asset value:

As you must have noticed, we always talk about units in a mutual fund and not
money itself. A unit is basic measure of investment n a mutual fund.
Each scheme / plan will have a different market value is called the Net asset value or
simply NAV. Since market value of the underlying securities changes every day, NAV of a
scheme also varies on a day to day basis.

NAV = Total assets Total liabilities/Number of units

SEBI Guidelines on New Fund Offer:

16

1. Procedure for launching of schemes:

(1)

No scheme shall be launched by the asset management company unless such scheme

is approved by the trustees and a copy of the offer document has been filed with the Board.
(2)

Every mutual fund shall along with the offer document of each scheme pay filing

fees as specified in the Second Schedule.

2. Disclosures in the offer document:
(1)

The offer document shall contain disclosures which are adequate in order to enable

the investors to make informed investment decision [including the disclosure on maximum
investments proposed to be made by the scheme in the listed securities of the group companies of
the sponsor].
(2) The

Board may in the interest of investors require the asset management company to

carry out such modifications in the offer document as it deems fit.

(3)

In case no modifications are suggested by the Board in the offer document within 21

[working] days from the date of filing, the asset management company may issue the offer
document.
(4)

No one shall issue any form of application for units of a mutual fund unless the form

is accompanied by the memorandum containing such information as may be specified by the

Board

3. Advertisement material:

17

(1)

Advertisements in respect of every scheme shall be in conformity with the

Advertisement Code as specified in the Sixth Schedule and shall be submitted to the Board
within 7 days from the date of issue.
(2)

The advertisement for each scheme shall disclose [investment objective for each

scheme]
4. Misleading statements:
The offer document and advertisement materials shall not be misleading or contain any
statement or opinion, which are incorrect or false.
5. Listing of close ended schemes:
Every close ended scheme shall be listed in a recognized stock exchange within six
months from the closure of the subscription Provided that listing of close ended scheme shall not
be mandatory.
(a)

If the said scheme provides for periodic repurchase facility to all the unit holders

with restriction, if any, on the extent of such repurchase; or

(b)

if the said scheme provides for monthly income or caters to special classes of

persons like senior citizens, women, children, widows or physically handicapped or any special
class of persons providing for repurchase of units at regular intervals; or
(c)

If the details of such repurchase facility are clearly disclosed in the offer document;

(d)

If the said scheme opens for repurchase within a period of six months from the

or

closure of subscription.
6. Repurchase of close ended scheme:

18

(1)

The asset management company may at its option repurchase or reissue the

repurchased units of a close ended scheme.

(2)

The units of close ended schemes referred to in the proviso to regulation may be

open for sale or redemption at fixed pre-determined intervals if the maximum and minimum
amount of sale or redemption of the units and the periodicity of such sale or redemption has been
disclosed in the offer document.
(3) The units
(a)

of close ended scheme may be converted into open ended scheme.

If the offer document of such scheme discloses the option and the period of such

conversion; or
(b) The unit
(4)

holders are provided with an option to redeem their units in full.

A close ended scheme shall be fully redeemed at the end of the maturity period

[Provided that a close ended scheme may be allowed to be rolled over if the purpose, period and
other terms of the roll over and all other material details of the scheme including the likely
composition of assets immediately before the roll over, the net assets and net asset value of the
scheme, are disclosed to the unit holders and a copy of the same has been filed with the Board.
Provided further, that such roll over will be permitted only in case of those unit holders
who express their consent in writing and the unit holders who do not opt for the roll over or have
not given written consent shall be allowed to redeem their holdings in full at net asset value
based price.

7. Offering Period:

19

No scheme of a mutual fund other than the [initial] offering period of any equity linked
savings schemes shall be open for subscription for more than 45 days
8. Allotment of Units and refund of money:
(1)

The Asset management company shall specify in the offer document

(a) The minimum

(b)

subscription amount it seeks to raise under the scheme and

In case of over subscription the extent of subscription it may retain Provided that

where the asset management company retains the over subscription referred to in clause (b), all
the applicants applying up to five thousand units shall be given full allotment subject to the
oversubscription mentioned in clause (b).
(2)

The mutual fund and asset Management Company shall be liable to refund the

application money to the applicantsIf the mutual fund fails to receive the minimum subscription amount referred to in

(i)

clause (a) of sub-regulation (1);

(ii)

If the moneys received from the applicants for units are in excess of subscription as

referred to in clause (b) of sub-regulation (1).

(3)

Any amount refundable under sub-regulation (2) shall be refunded within a period of

six Weeks from the date of closure of subscription list, by Registered A.D and by cheque or
Demand Draft marked "A/C Payee" to the applicants.
(4)

In the event of failure to refund the amounts with in the period specified in sub -

regulation (3) , the asset management company shall be liable to pay interest to the
applicants at a rate of fifteen percent per annum on the expiry of six weeks from the
date of closure

of the subscription list.

9. Unit certificates or Statement of Accounts:

20

The asset management company shall issue to the applicant whose application has been
accepted, unit certificates or a statement of accounts specifying the number of units allotted to
the applicant as soon as possible but not later than six weeks from the date of closure of the
[initial subscription list and or from the date of receipt of the request from the unit holders in any
open ended scheme].Provided that if an applicant so desires, the asset management company
shall issue the unit certificates to the applicant within six weeks of the receipt of request for the
certificate.
10. Transfer of units:
(1) A unit certificate unless otherwise restricted or prohibited under the scheme, shall be
freely transferable by act of parties or by operation of law.
(2) The asset management company shall, on production of instrument of transfer
together with relevant unit certificates, register the transfer and return the unit certificate to the
transferee within thirty days from the date of such production. Provided that if the units are with
the depository such units will be transferable in accordance with the provisions of the Securities
and Exchange Board of India (Depositories and Participants) Regulations, 1996.
11. Dispatch of warrants and proceeds:
Every mutual fund and asset management company shall,
(a)

Dispatch to the unit holders the dividend warrants within [30 days] of the

declaration of the dividend.

(b) Dispatch the redemption or repurchase proceeds within 10 working days from the
date of redemption or repurchase.

21

(c) In the event of failure to dispatch the redemption or repurchase proceeds within the
period specified in sub-clause (b), the asset management company shall be liable to pay interest
to the unit holders at such rate as may be specified by Board for the period of such delay.
(d) Aside payment of such interest to the unit holders under sub-clause (c) the asset
management company may be liable for penalty for failure to dispatch the redemption or
repurchase proceeds within the stipulated time.
Wherever an application for a total value of RS. 50,000 or more, the applicant or in the
case of application in joint names, each of the applicants, should mention his/her permanent
account number (PAN) allotted under the Income Tax Act, 1961 or where the same has not been
allotted, the GIR number and the income-tax Circle/Ward/District should be mentioned. In case
where neither the PAN nor the GIR number has been allotted, the fact of non-allotment should be
mentioned in the application form. Any application form without these details should not be
accepted by the mutual fund. The above clarification is being issued in accordance with
Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996.
12. Instructions for filing scheme offer document with SEBI:
As advised in SEBI circular MFD/CIR/06/275/2001 dated July 9, 2001, while filing
offer document for launching a new scheme/revising and filing existing offer document with
SEBI, the mutual funds should highlight and clearly mention the page number of the offer
observation has been incorporated. In case of any amendment to Regulations, the new provisions
should be incorporated in the offer documents.

22

CHAPTER-III
INDUSTRY PROFILE & COMPANY PROFILE

INDUSTRY PROFILE
STOCK BROKING OPERATIONS AN OVER VIEW

23

As capital market operations is a complex activity which require an in depth knowledge

of stock market and about the company performance, security analysis of the stock. A full time
practicing firm/person is needed to advise for our investment; in fact a broker can also invest his
own money to make profit out of stock market operations.
A stockbroker invests in the stock market for individuals or corporations so whenever
individuals or corporations want to buy or sell stocks they must go through a brokerage house.
Stockbrokers often advise and counsel their clients on appropriate investments. Brokers explain
the workings of the stock exchange to their clients and gather information from them about their
needs and financial ability, and then determine the best investments for them. The broker then
sends the order out to the floor of the securities exchange by computer or by phone. When the
transaction has been made, the broker supplies the client with the price. The buyer pays for the
stock and the broker transfers the title of the stock to the client and performs clearing and
settlement procedures. The settlement process is discussed in subsequent pages. The beginning
stockbrokers first priority is learning the market. One broker said, First you have to decide
whether you have an interest in the stock market. This will determine how well you will do. If
you are just interested in making money you wont get very far. Stockbrokers spend their time
in a fast-paced office, usually working from nine to five, unless they are just starting out or have
to meet with clients. The new broker spends many hours on the phone building up a client base.
Sometimes brokers teach financial education classes to expose themselves to potential investors
who may then become their clients.
Brokerage clerks handle much of the day-to-day operations of brokerages, performing a
number of different jobs with a wide range of responsibilities; all involve computing and
recording data pertaining to securities transactions.
Brokerage clerks also may contact customers, take orders, and inform clients of changes
to their accounts. Some of these jobs are more clerical. Brokerage clerks, who work in the
operations departments of securities firms, on trading floors, and in branch offices, also are
called margin clerks, dividend clerks, transfer clerks, and brokers assistants.
Brokerage clerks in the operations areas of securities firms perform many duties to
facilitate the sale and purchase of stocks, bonds, commodities, and other kinds of investments.
These clerks produce the necessary records of all transactions that occur in their area of the

24

business.

Job titles for many of them depend upon the type of work that they perform.

Purchase-and-sale clerks, for example, match orders to buy with orders to sell. They balance and
verify trades of stock by comparing the records of the selling firm with those of the buying firm.
Dividend clerks ensure timely payments of stock or cash dividends to clients of a particular
brokerage firm. Transfer clerks execute customer requests for changes to security registration
and examine stock certificates to make sure that they adhere to banking regulations. Receiveand-deliver clerks facilitate the receipt and delivery of securities among firms and institutions.
Margin clerks record and monitor activity in customers accounts to ensure that clients make
payments and stay within legal boundaries concerning their purchases of stock.
Technology is changing the nature of many of these jobs. A significant and growing
number of brokerage clerks use custom-designed software programs to process transactions more
quickly. Only a few customized accounts are still handled manually. Furthermore, the rapid
expansion of online trading reduces the amount of paperwork because brokerage clerks are able
to make trades electronically.

Stockbroker and the investor:

The stockbroker should provide adequate information regarding the stocks. He should
be capable of giving short term and long-term investment suggestions to the investor and able to
confirm the purchase and sale of securities quickly. He should have adequate experience in the
market to take correct decision. He should have contact with other stock exchanges to execute
the orders profitably and also offer incidental service like arranging for financing the clients
transaction.

Types of stockbrokers
The stock brokers the key players in secondary market. There are various categories
of brokers as stated below.

25

Floor Brokers: They are representatives of the brokers, who enter the trading floor and
execute orders for their clients of for members.

Commission Broker: A commission broker is a broker who buys and sells securities
on behalf of his clients for a commission. He does not purchase or sell his own name. A
broker act for the large number of his clients, and therefore, he deals in a large variety of
securities.

Jobbers: A jobber is an independent broker who deals in securities as a owner, keeps

them for a very short period and sells them for profit known as the jobbers turn.
Thus a jobber does not work for commission but works for profits. A jobber
transacts in the market for quick returns. In the London Stock Exchange even member
has to act as a broker or as a jobber. In India, there is no such rigid classification.

Badla Financiers/Badliwallas: Badliwallas are the intermediaries who finance the

forward deals in specified securities in return for interest. This interest is called Badla
rate.

Arbitragers: They are brokers who buy securities in one market and sell them in
another market to take the advantages of the price differences prevailing in different
markets for same scripts.

Wolves: They are clever speculators. They perceive the changing trends in the market
and trade fast and make a fast duck.

Buying and selling of shares:

To buy and sell the script the investor has to locate register broker or a sub broker who
render prompt and efficient services to him. The order to buy of sell specified number of
scrip of the company of investors choice ate laced with the broker, the order may be of any of
the below mentions type after receiving the order the broker tries to execute the order in his
computer terminal. Once matching order is found, the order is executed. The broker delivers
the contract note.
To the investor, it gives the details regarding the name of the company,
number of scripts bought, price, brokerage, and the date of delivery of share. In the physical

26

trading form, once the broker gets the script certificate through the clearing houses the stock
broker delivers the share certificate along with transfer deed to the investor. The investor has
to fill the transfer deed and stamp it. The stamp duty is one of the percentage consideration,
the investor should lodge the share certificate and transfer deed to the register or transfer
agent of the company if it is bought in the demit form the broker has to give a matching
instruction to his depository participant to transfer shares bought to the investor account. The
investor should be account holder in any of depository participant. In the case of sell of
shares on receiving payment from the purchasing broker, the broker effects the payment to the
investor

Orders:
Buy and sell orders placed with members of the stock exchange by the investor. The
broker is responsible for getting the best price for his customer at the time the order is placed.

Online Trading:
The Net is used as a medium of trading in Internet trading. Orders are communicated to
the stock exchange through website. Internet trading started in India on 1 st April 2000 with 79
members seeking permission for online trading.

The SEBI committees on Internet based

securities trading services trading services has allowed the net to be used as an Order Routing
System (ORS) through registered stock brokers on behalf of their clients for execution of
transaction.
The user should have the user id and password to enter into the electronic ring. He
should also have a demat account and bank account. The system permits only a registered client
to log in using user ID and password. Order can be placed using place order window of the
website.
The client has to enter stock code and other parameters such as quantity and price of the
scrip on the place order window.
The client can review the order placed by clicking the review option. He can also reset to
clear the values
Satisfactory orders are sent by clicking the send option.

27

 The client receives an order confirmation message with order number and value of the
order.
If the order is rejected by the broker or stock exchange of r certain reasons such as invalid
price limit, a related message appears at the bottom of the screen. The time taken to
execute the order is 10 seconds.
When the trade is executed, the broker asks for the transfer of funds by the investor to his
account.

Stocks are credited/debited according to the buy/sell order in the demat

accounts.
Regulatory Framework
The securities and Exchange Board of India was constituted in 1998 under a resolution of
government of India. It was later made statutory body by the SEBI act 1992. According to this
act, the SEBI shall constitute of a chairman and five other members appointed by the central
government with the coming into effect of the Securities and Exchange Board of India act, 1992.
Some of the power and functions exercised by the central government, in respect of the
regulation of stock exchange were transferred to the SEBI.
Objects and functions of SEBI:
I. To protect the interest of investors in securities.
II. Regulation the business in stock exchange and any other securities market.
III. Registering and regulation the working of intermediaries associated with securities
market as well as working of mutual fund.
IV. Promoting and regulating self-regulating organizations.
V. Prohibiting insides trading in securities.
VI. Regulation substantial acquisition of share and take over of companies.
VII. Performing such functions and exercising such powers under the provisions of capital
issues (control) act, 1947 and the securities to it by the central government.
Securities and Exchange Board of India (Stock Brokers And Sub-Brokers)

28

Regulations, 1992,In respect of stockbroker and sub-broker, SEBI has made 12 amendments
from November 28, 1995 to September 27,2002.
SEBI has been setup to ensure that the stock exchanges discharge their self-regulatory role
properly. Even since SEBI began to monitor brokers, stock broker.
Stock broking is emerging as a professional advisory service, in tune with the requirements of
a mature, sophisticated, screen-based, ring less, automated stock exchanges in the country.

New Membership -CM and F&O segment

Eligibility
The following persons are eligible to seek membership of the Exchange as Trading
Members (Brokers):
a. Individuals
b. Partnership Firms registered under the Indian Partnership Act, 1932.
c. Corporations, Companies or institutions or subsidiaries of such Corporations,
Companies or institutions set up for providing financial services.
d. Such other persons or entities as may be permitted from time to time by RBI/SEBI
under the securities Contracts (Regulations) Rules, 1957.

General Eligibility Conditions:

Criteria

Individuals

Firms

Corporate

AGE

Minimum age:

Minimum age:

Minimum age:

21 years

21

years 21

Maximum age: (applicable

partners)
60 years
STATUS

Indian Citizen

for (applicable

under
partnership
1932
29

for

directors)

Registered
partnership

years

Corporate
firm registered

Indian The

under

Companies

Act, Act, 1956 (Indian)

COMPANY PROFILE

30

- Yours online personal Finance Advisor -

KARVY BACKGROUND:
In 1982, a group of Hyderabad based practicing Chartered Accountants started Karvy
Consultants Limited with a capital of Rs. 1,50,000 offering auditing and taxation services
initially. Later, it forayed into the Registrar and Share Transfer activities and subsequently into
financial services. All along, Karvys strong work ethic and professional background leveraged
with Information Technology enabled it to deliver quality to the individual.
A decade of commitment, professional integrity and vision helped Karvy achieve a
leadership position. In its field when it handled the largest number of issues ever handled in the
history of the Indian stock Market in a year. Thereafter, Karvy made inroads into a host of
capital-market services, - corporate and Retail which proved to be a sound business synergy.
Today, Karvy has access to millions of Indian shareholders, besides companies, banks,
financial institutions and regulatory agencies. Over the past one and half decades, Karvy has
evolved as a veritable link between Industry, finance and people. In January 1998, Karvy
became the first Depository Participant in Andhra Pradesh. An ISO 9002 company, Karvys
commitment to quality and retail reach has made it an integrated Financial Services Company.

CORE VALUES:

31

Karvys adherence to its core values integrity, enterprise and innovation has earned it an
enviable reputation amongst all the intermediaries and regulatory authorities of the capital and
financial markets.
Karvy capability has now been extended service global customers. The foray into global
processing services began in 1999 to cater to health care industry needs. The first step Medical
Transcription a service then required capability in understanding a customers voice, conversion
to text with timeliness and accuracy and completion to a legally acceptable framework will now
provide its service globally.
VISION:
Karvys aspiration of establishing itself as an integrated financial services company is
propelled by a vision that is shared by its entire work force. Towards this end, Karvy has
dedicated itself to:
To have a single minded focus on investor services;
To establish Karvy as a household name for financial services;
To set industry standards;
To establish a leadership position in all chosen areas of business.

KARVYS PHILOSOPHY:
Karvys core activities provide insights into the reasons for its consistent, positive
performance.

Assistance beyond service

Leadership through Quality

Innovation & Market Creation

Relationship Building

Integrity & Transparency

32

KARVYS COMPETITIVE EDGE:

Human Resources
Training
Technology
Software
Mailroom
RANGE OF SERVICES:
Issue Servicing
Corporate Shareholder Servicing
Mutual Fund Investor Service
Asset Financing
Merchant Banking & Underwriting Services
Corporate Advisory Financing & Project Financing
Retail Financial Products
Karvy Depositor Services
Electronic Custodial Services
Depository Participant
Investor Services
Karvy - The OTCEI Dealer
Medical Transcription
Financial Products Marketed Through Karvy:

Initial Public Offerings

Fixed Income Products

Fixed Deposits
Debt Instruments
Bonds
Mutual Funds

Tax Saving Schemes

33

Personal Banking Products

Personal Loans & insurance

GROUP COMPANIES & DIVISIONS:

KARVY CONSULTANTS LIMITED: Deals in Registrar and Investment Services
KARVY SECURITIES LIMITED: Deals in distribution of various investment
products, viz., equities, mutual funds, bonds and debentures, Fixed deposits, insurance
policies for the investor
KARVY INVESTOR SERVICES LIMITED: Deals in Issue management, Investment
Banking and Merchant Banking,
KARVY STOCK BROKING LIMITED: Deals in buying and selling equity shares and
debentures on the National Stock Exchange (NSE), the Hyderabad Stock Exchange
(HSE) and the Over-The-Counter Exchange of India (OTCEI),

ALLIANCES:
Karvy has a strategic alliance with Jardine Fleming India Securities Limited (JFISL)
one of Asias most prestigious investment bankers to leverage on the latters investment
banking expertise. This would augment the retail distribution reach and provide the Indian
access to the best global and local insights on financial markets.

Jardine is a respected

investment banker with a demonstrated track-record of delivering value to its clients spread over
43 countries. It is ranked amongst the worlds TOP 3 Foreign Institutional Investors (FIIs).

QUALITY POLICY:
To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by
combining its human and technological resources, to provide superior quality financial services.
In the process, Karvy will strive to exceed Customers expectations.

34

QUALITY OBJECTIVES:
As per the Quality Policy, Karvy will:
Build in-house processes that will ensure transparent and harmonious relationships with its
clients and investors to provide high quality of services.
Establish a partner relationship with its investor service agents and vendors that will help in
keeping up its commitments to the customers.
Provide high quality of work life for all its employees and equip them with adequate
knowledge & skills so as to respond to customers needs.
Continue to uphold the values of honesty & integrity and strive to establish unparalleled
standards in the business ethics.
Use state-of-the art information technology in developing new and innovative financial
products and services to meet the changing needs of investors and clients.
Strive to be a reliable source of value-added financial products and services and constantly
guide the individuals and institutions in making a judicious choice of same.
Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers and
regulatory authorities) proud and satisfied.

KARVYKEY PEOPLE:
Board of Directors Karvy Consultants Limited
C. Parthasarathy - Chairman And Managing Director
M. Yugandhar

- Managing Director

M.S. Ramakrishna - Director

Prasad V Potluri

- Director

Dr. P.V.S. Jaganmohan Rao Company Secretary

Price Water House, Hyderabad Auditors
Bankers: UCO Bank, Bank Of Baroda, HDFC Bank, Standard Chartered Grindlays Bank.
35

Registered Office: Karvy House, 46, Avenue 4, Street No.1, Banjara Hills, Hyderabad,
Andhra Pradesh, India.

KARVY MUTUAL FUND SERVICES (MFS DIVISION)

-

building a heritage of confidence

There is a wide range of mutual fund services available at KARVY MUTUAL FUND
SERVICES to the various categories like Asset Management Companies, Investors, Distributors
and General Users.

We can use mutual fund services through web also, the web site is

karvymfs.com, with a click of the mouse we can enter into the karvy mutual fund services, this
provides Interactive Fund Service to query for account related details and register specific
services requests.
Since its inception in 1982, Karvy has demonstrated a dedication coupled with dynamism
that has inspired trust for various segments corporate, government bodies and individuals.
Karvy has since been performing a pivotal role as the intermediary the interface between
these players.
With Mutual Funds emerging as a distinct asset class, Karvy has made a strategic choice
to leverage the power of latest technology to provide a cutting edge to its services. This, today,
service nearly 40% of the asset management companies (AMCs) across an extensive network of
service centers with assets under service in excess of Rs.10,000 crores.
Karvys ability to mass customize and offer a diverse range of products for diverse range
of customers has helped mutual fund companies to uniquely position themselves in the market
place. These diverse range of services cut across multiple delivery channels service centers,
web, mobile phones, call center has brought hone the benefits of technology to investors,
distributors, and the mutual funds.
Going forward, it shall strive to create new products and services, which would address
the needs of the end customer. Its single-minded focus in delivering products for customers has
given the distinguished position of being the preferred provider of financial services in the
country. These services can be broadly categorized as below:
36

 Investor Services
Distributor Services
AMC Services
General Services or Information Services

a) INVESTOR SERVICES:
- Keeping ahead with the changing investor expectations Investor is a person who invests in the mutual funds in the mutual funds concept. He
placed in the bottom of the structure, but he plays a pivotal role, without investor we cannot
imagine the mutual funds. There is a wide range of investor services provided by karvy mutual
fund services to the investors and also Mutual Fund Investors have the convenience of logging
on to the web site and utilize various account related services. To utilize these web services the
investor has to first register himself with the karvymfs.com in the investor services with the web
site, the karvymfs.com gives authorized ID and Password to the registered user, with a click of
the mouse he can gets the services, without authorized ID and Password he cannot get the
services. The major online services for investors can be categorized as below:
View their account statements online
Get a snapshot of all their investment serviced by Karvy:
Portfolio Valuation Services
NAV Broadcast Services
NAV Alert Services
Receive Account statements by email
Apart from the afore-mentioned services, any visitor from the web site has the option to
know Mutual Fund Concepts, check out the latest NAVs of his/her favorite Mutual Funds, etc.,
obtain dividend information, get the latest load structure information etc.

b) DISTRIBUTOR SERVICES:
- Re-defining service -

37

Karvy recognizes the distributor, as on invaluable customer, in the Mutual Fund transaction
chain. Keeping this in mind, Karvy has engineered several initiatives for the distributors and for
the benefit of his clients.

AMC SERVICES:
- Your partners in progress There is wide range of AMC Services provided by Karvy Mutual Fund Services to the
registered Asset Management Companys (AMCs).The AMC can now viewing investor
information and requesting various reports related to the investor, is possible through the web
site also, just by the click of the mouse. In order to use the respective AMC services on the site,
Mutual Fund AMCs must enter into agreement with Karvy Consultants Limited, whereby users
are assigned a User ID and Password at the fund level. AMC may use this ID and Password to
access all the site services. It provides registered AMCs can check out various ONLINE and
MAIL-BACK services and gets an update on the investments of its investors.

Online Services:
1. Investor Account Statements
2. Query on application number
3. Query on investors name
Mail-Back Services:
1. Transaction Reports
2. Net Assets Under Management Report
3. Asset Movement Report
4. Slab Report
5. Status-wise holdings report

c) GENERAL/INFORMATION SERVICES:

38

In addition to the afore-mentioned services Karvy mfs provides general or information

services to the users. These services can be broadly classified as below:
1. Dividend History
2. Fund Information
3. Load Structures
4. Special Products
5. Karvy Network

MUTUAL FUNDS AT KARVY

The Mutual Fund umbrella of Karvy consists both Open-ended and Close-ended Mutual
Funds. The following are the various mutual fund AMCs for which Karvy acts as a Registrar.
1) BOB Mutual Fund
2) BOI Mutual Fund
3) DEUTSCHE Mutual Fund
4) GIC Mutual Fund
5) IDBI Mutual Fund
6) IL & FS Mutual Fund
7) MORGAN STANLEY Growth Fund
8) PNB Mutual Fund
9) RELIANCE Capital Mutual Fund
10) SBI Mutual Fund
11) UTI Mutual Fund

39

INDUSTRY PROFILE
INFORMATION TECHNOLOGY
Information technology, and the hardware and software associated with the IT
industry, are an integral part of nearly every major global industry.

The information technology (IT) industry has become of the most robust industries in the
world. IT, more than any other industry or economic facet, has an increased productivity,
particularly in the developed world, and therefore is a key driver of global economic growth.
Economies of scale and insatiable demand from both consumers and enterprises characterize this
rapidly

growing

sector.

The Information Technology Association of America (ITAA) explains 'information

technology' as encompassing all possible aspects of information systems based on computers.

Both software development and the hardware involved in the IT industry include
everything from computer systems, to the design, implementation, study and development of IT
and

management

systems.

Owing to its easy accessibility and the wide range of IT products available, the demand for IT
services has increased substantially over the years. The IT sector has emerged as a major global
source of both growth and employment.
THE ROLE OF IT INDUSTRY:

40

The IT industry can serve as a medium of e-governance, as it assures easy accessibility to

information. The use of information technology in the service sector improves operational
efficiency and adds to transparency. It also serves as a medium of skill formation.
VISION:
The Development council for Electronics Industry has formulated an India Information
Technology vision 2012 plan to make India a global information technology force and one of the
largest generators and exporters of software in the world. The council has put India's software
export target at $9.35bn by 2001 and domestic software consumption at $5.07bn.
This would represent a growth of 50% annually. Vision 2012 has a 25-point action plan to be
implemented in three phases in a time bound manner

IT INDUSTRY OUTLOOK
Information Technology (IT) industry in India is one of the fastest growing industries. Indian IT
industry has built up valuable brand equity for itself in the global markets. IT industry in India
comprises of software industry and information technology enabled services (ITES), which also
includes business process outsourcing (BPO) industry. India is considered as a pioneer in
software development and a favorite destination for IT-enabled services.
The origin of IT industry in India can be traced to 1974, when the mainframe manufacturer,
Burroughs, asked its India sales agent, Tata Consultancy Services (TCS), to export programmers
for installing system software for a U.S. client. The IT industry originated under unfavorable
conditions. Local markets were absent and government policy toward private enterprise was
hostile. The industry was begun by Bombay-based conglomerates which entered the business by
supplying programmers to global IT firms located overseas.
During that time Indian economy was state-controlled and the state remained hostile to the
software industry through the 1970s. Import tariffs were high (135% on hardware and 100% on
software) and software was not considered an "industry", so that exporters were ineligible for
bank finance. Government policy towards IT sector changed when Rajiv Gandhi became Prime
41

Minister in 1984. His New Computer Policy (NCP-1984) consisted of a package of reduced
import tariffs on hardware and software (reduced to 60%), recognition of software exports as a
"deli censed industry", i.e., henceforth eligible for bank finance and freed from license-permit
raj, permission for foreign firms to set up wholly-owned, export-dedicated units and a project to
set up a chain of software parks that would offer infrastructure at below-market costs. These
policies laid the foundation for the development of a world-class IT industry in India.
Today, Indian IT companies such as Tata Consultancy Services (TCS), Wipro, Infosys, HCL et al
are renowned in the global market for their IT prowess. Some of the major factors which played
a key role in India's emergence as key global IT player are:
Indian Education System
The Indian education system places strong emphasis on mathematics and science, resulting in a
large number of science and engineering graduates. Mastery over quantitative concepts coupled
with English proficiency has resulted in a skill set that has enabled India to reap the benefits of
the current international demand for IT.
High Quality Human Resource
Indian programmers are known for their strong technical and analytical skills and their
willingness to accommodate clients. India also has one of the largest pools of English-speaking
professionals.
Competitive Costs
The cost of software development and other services in India is very competitive as compared to
the West.
Infrastructure Scenario
Indian IT industry has also gained immensely from the availability of a robust infrastructure
(telecom, power and roads) in the country.
In the last few years Indian IT industry has seen tremendous growth. Destinations such as

42

Bangalore, Hyderabad and Gurgaon have evolved into global IT hubs. Several IT parks have
come up at Bangalore, Hyderabad, Chennai, Pune, Gurgaon etc. These parks offer Silicon Valley
type infrastructure. In the light of all the factors that have added to the strength of Indian IT
industry, it seems that Indian success story is all set to continue.

CHAPTER-IV
DATA ANALAYSIS AND
INTERPRETATION

43

DATA ANALYSIS & INTERPRETATION

NFO process:
When a mutual fund Assets Management Company (AMC) announces a public
issue of units of & new fund/scheme, it is called a new fund offer (NFO).
The new fund is planned and sources from where it should be collected and where
the amount should be invested is planned by the AMC.
According to the SEBI rules any new fund launched should be approved by SEBI. Once the
AMC get the approval of SEBI for the fund it does the marketing of the fund by it self or
through brokers. The investors who are willing to invest in a particular fund deposit the amount
they plan to invest in the bank as directed by the AMC.
These banks collect the application and amount and direct

it towards the

registrar specified by the AMC.From this point India info line came into the picture as the
registrar.
The role, responsibilities, activities, forms and reports involved in this process of
NFO is general, are AMC fund manager, SIP I/c, Switches I/c., NFO Coordinator. Internal
auditor ,Systems (S/W) dept, IPO Centre coordinator, IPO-RTI, IPO-EDP, Scanning and
Printing & Dispatching.

44

Teams involved in the NFO process Mutual fund unit

Technology team
Data entry team
Verification team
External audit team
Scanning team
Franking and dispatching team

45

46

47

48

Description of NFO process:

Bank wise segregation:
The Karvy branches collect the applications of the investors across India and abroad for
all the branches of the bank that is involved in this NFO. These applications are sent to Karvy
processing center, Hyderabad. After receiving, these applications are segregated bank wise and
branch wise.
IH Numbering:
IH numbering is also called as In house Numbering. Karvy gives this IH numbering to
those applications. This is done for their convenience in doing back office functions easily. All
the data on the application is entered into systems through software developed by Karvy
technology team called K-Bolt. Later on, we can get any information of a particular application
or investor that we require by entering this IH number.
Binding:
All the applications that are received are given for binding. Binding of application is
done by segregating them according to the bank and branch fro which they are received. Karvy
does this Binding because to keep all these applications safe, out of any damage and miss-place.

First Entry:
After finishing binding of applications they are sent to Date Entry team. Here the
first time entry is done. All the information or date of an investor that is available on the
application like name of the applicant, age, Address, PAN, Bank details, broker code, sub broker
code, email addresses, guardian name, amount invested, name of the scheme or plan invested in,
etc., are entered into the systems of Karvy.
49

Second Entry:
After first entry the data is again sent for the second entry. Here in second entry, the data
that is entered in first entry is checked and the information what ever is missing is entered.

Online Matching:
After entering the data like applicant, age, Address, PAN, Bank details, broker code, sub
broker code, email addresses, guardian name, amount invested, name of the scheme or plan
invested in, etc., in the first entry and once again in the second entry it is sent to the online
matching. Here in online matching the physical form of application are kept side by an checking
of data that was entered in the first entry and second entry is done.
First time verification:
Data from online matching is sent to the verification team. This team verifies mistakes
that are left in online matching. Mistakes like blank address, PAN blank for amount greater than
or equal to 50000 RS. Name blank, bank details blank, invalid or blank broker code etc., are
rectified in the first time verification.
First time CCL:
First time check clearing list is in short is called as first time CCL. First Time CCL is
prepared based on the data that is provided after first time verification.
External Audit:
First time check-clearing list is sent to an external audit team. Karvy appoints this team
before the NFO processes. They are nowhere related to the organization. This external audit team
will mainly check name of the investor, amount invested, bank details PAN number, name of the
scheme/plan and mode of holding (MOH). But in total they will check more than 30 characters

50

Second time verification:

If the external auditing is not satisfied and if they find any mistakes or missing
information they will send the first time CCL for second time verification. Here they verify the
check list once again and mistakes like invalid mode of folding (MOH), invalid email address,
status minor without guardian name, invalid date of birth for minor, invalid existing account
number, blank/null application number, NRI with blank account type, saving or current, investor
signature missing are rectified.
Second time CCL:
Second check the verification team prepares clearing after verifying the mistakes that
are pointed out by the external audit team. After preparing second time CCL it is again sent to
external audit team.
Integrity Check (NFO team):
Check clearing list will be given by the external audit team to the NFO team in Karvy
This NFO team in Karvy will once again check further mistakes like spelling mistakes in the
name of the applicant etc., and rectify them.
Integrity Check (by Audit):
After integrity check by the NFO team it is once checked by the internal audit team of
Karvy.

Scanning Default Values, Verification of Mismatch cases:

Entire data is filtered at each and every step and finally it is given to the scanning team
for scanning here scanning team will detect and rectify any further default values and mismatch
cases.

51

Reconciliation, Rejections and Cheque returns:

Cheques of the investors are sent are sent by the balk to Karvy Reconciliation team.
Here this team will verify bank details of the investor like PAN number, bank a/c number,
comparing the amount invested with that of the minimum amount that has to be invested cheques
with out hue signature of the investor bounced cheques etc., and they are rejected. These rejected
cheques are dispatched to the investors. A sample statement of accounts (SOA) is prepared by
this reconciliation team.

Handling over the data to MFS:

Entire data after getting filtered at each and every step will be handing over to mutual
fund services team. This MFS team will once again verify the data and the final data will come
out any mistakes and default values.

Porting in Task MF:

Task MF is the software developed by Karvy Technology team. It is prepared according
to the suggestion given by AMC. This Task MF will resemble the style or Performa or outlook of
the statement of accounts. Final data that they got after filtering the mistakes and default values
is ported in the task MF.

Allotment of units:
Allotment of units is done as per the amount that is invested by investors. They will
avail the units taking the Net Asset Value (NAV) of that particular scheme as base.

52

Sample SOA verification by audit:

Statement of accounts (SOA) is picked up randomly from a huge lot and the audit team
does verification. This verification will result in preparing a statement of accounts which in cent
percent correct and exact.
This SOA contains data like:
* Name of the investor
* Address
* Bank details
* Pan Number
* Guardian name
* Broker code
* Sub broker code
* Nominee name
* Nominee addresses
* 2nd and 3rd applicant name
* Amount invested
* No. Of units allotted
* Fund name, Scheme Name, Plan Name & A/c no
* Transaction type details
* Mode of redemption payment
* Mode of dividend payment
* Mode of dispatch
* Status, occupation.
* Current balance, average price, current cost, current NAV etc.,
Dispatch of SOA:
Statement of accounts (SOA) once prepared is dispatched to the investor. SOAs are
neatly packed in an envelope and dispatched to the investors by the dispatch team through
courier.
53

New Fund Report:

Karvy will finally prepare New Fund Report. This new fund report has to be submitted
to the AMC. Then AMC will submit a copy of the same to the SEBI, which is mandatory. The
new fund report details like
1)

Scheme details
* Scheme name
* Scheme type
* Date of opening
* Date of closing the scheme / initial subscription period
* Target amount
* Minimum amount to be raised

2)

Subscription / Allotment details

* Number of applications received with in the country
* Number of NRI applications received
* Subscription amount received with in the country
* Subscription amount received form NRI
* Date of allotment of units

3)

Initial issue expenses

4)

Date of dispatch of refund of refund orders

5)

Unit holding pattern

6)

Distribution schedule

7)

Geographical Dispersion list

Holding profile of applicant:

54

Particulars

Single

Joint

Anyone

Total

No. of applicants

89

31

120

% of applicants

74

26

100

Interpretation:
It can be seen that majority of the applicants prefer to hold the allotted units
individually and 26% prefer to hold anyone/survivors. This corroborates with the age profile of
the applicants.

Occupation profile of applicants:

55

Particular
No. of
applicants
% of
applicants

Business Service Student Professiona

l
34
46
2
4

Retired Housewife Others Tota

l
7
23
5
120

28

38

19

Interpretation:
Majority of the applicants are from services personnel at 38%, next comes business
People are 28%. The housewife occupy 3rd highest at 19%. It is found that professionals and retired are
at the lowest.

STATUS:

56

100

a) Residential status of individual applicants:

Particulars
No. of applicants
% of applicants

Resident
104
96

NRI
4
4

Total
108
100

Interpretation:
It can be observed from the table and the chart that the majority
of applicants are resident individuals constituting 96% the applicants and remaining 4% are the
Non-resident Indians.

b) Status of non-individuals:
Particulars
No. of applicants
% of applicants

Partnership
1
10

AOP/BOI
0
0
57

Trust
0
0

HUF
10
80

Fll
0
0

Banks
0
0

Particulars
Company
No. of applicants 1
% of applicants 10

Society
0
0

Fl
0
0

SME
10
80

Others Total
0
0
0
0

Interpretation:
In the non-individuals category HUF occupied the highest at 80% and next 10% is for
partnerships. In all other non-individual entities have recorded zero applications.

Age profile of the applicants:

Particulars Below 18
No. of
0
applicants

18-30
30

31-60
72

58

Above 60
18

Total
120

% of
applicants

25

60

15

100

Interpretation:
The age of the profile applicants shows that the majority of the applicants fall into
the age Group 31-60 years and the percentage of them being 60.
This is followed by the age Group 18-30 years and 15% of the applicants are above
60 years.

Investment profile of the applicants:

Particulars

500025000

25001-

5000150000

59

100000

Above
100000

Total

No. of applicants 78

32

120

% of applicants

27

100

65

Interpretation:
Amount of investment is high at 65% in the range 5000-25000 and it
is very low at 3% in 50001-100000, but the next slab. Above 100000 has registered 5%.

Scheme profile of applicants:

Particulars

Growth

Bonus

Dividend

Dividend Total

No. of applicants

option
59

option
4

reinvestment
37

payout
20

60

120

% of applicants

49

31

17

Interpretation:
Majority of the applicants Opted the growth option and the option
of dividend reinvestment is 31%. This means that 80% of the applicants
are not investing for income sake rather they look at the accumulation
of profits.

Analysis of mode of payment:

Particulars
No. of applicants
% of applicants

Cheque
119
99

DD
1
1

61

Total
120
100

100

Interpretation:
The mode of payment reflects upon the quality of applicants. On an average 99% have
paid through cheques and therefore the NFO is able to attract good quality retail investors.

Analysis of type of account:

Particulars SB
No. of
119

Current
1

NRO
0

NRE
0

FCNR
0

Total
120

applicants
% of

100

99

applicants
62

Interpretation:
Majority of the payments have been made from Savings Bank account (SB). No
payments have been found from NRO, NRE, and FCNR even though 4% of the applicants are
NRI s.

Gender profile of the applicants:

Particulars
No. of applicants
% of applicants

Male
89
74

Female
31
26

63

Total
120
100

Interpretation:
The female participation in the NFO is low at 26%. The male applicants are very
high at 76% as is not normally in found in institutional investments.

Geographical distribution of applicants:

Particulars

Andhra Bihar

Chandighar Delhi

Gujarat Karnataka

No. of

Pradesh
4
1

17

11

applicants
% of

14

applicants

64

Particulars

Madhya

Maharastr Rajastha

Punja

Uttar

Tamilnad

Pradesh

Pradesh

No. of

48

applicants
% of

40

applicants
Particulars
West Bengal
No. of applicants 10
% of applicants 8

65

Others
6
5

total
120
100

Interpretation:
A predominant feature is that 40% of the applications are from Maharastra and next
highest 14% is registered for Delhi. Lowest numbers
of applications are from Bihar and Chandighar.

CHAPTER-V
FINDINGS,SUGGESTIONS AND
CONCLUSION

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FINDINGS:
*

The NFO is found to be a complex activity calling for creating an organization

polling the knowledge and expertise of people in different areas.

The NFO process is simple and well structured as long as it is to investor to investor,
but thereafter the process is lengthy time consuming and found to be overlapping at
some stages.

The SEBI regulations governing NFO are comprehensive and protect investor's
interest at each level.

Different funds have been designing different forms of applications for NFO.

An analysis of sample of applications revealed the following

O

Majority applicants prefer to hold the units individually.

Majority of the applicants are in service.

NRI s share is about 4% of the total.

More than 2/3 rd of the applicants are HUF s.

The model age group is 31-60.

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The most common investment amount is 5000-25000.

About half of the applicants prefer Growth option.

Almost all applicants make the payments by cheques.

There were no NRO, NRE and FCNR accounts.

Majority the applicants are male, and.

Majority applications are from state of Maharastra

SUGGESTIONS :
*

Different funds have been using different forms of applications. A standardized form of
application maybe designed by the competent authority and should be made mandatory
for all funds to use the standard application form.

The NFO process is very complex and there is a need to simplify the process by
eliminating certain unnecessary steps in the process ie instead of carrying out audit for
three times and appropriate internal check system maybe devised to keep the errors
within the tolerance limits.

The NRI subscribers to the fund maybe encouraged to make the payments from NRO,
NRE and FCNR accounts.

The application from institutional investors and foreign institutional investors are to be
encouraged through a package of incentives.

The participation of senior citizens in the NFO s may be encouraged as they are likely
to hold more surpluses compared to others.

The holding of units in joint names shall be encouraged.

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There is a need to investigate the reasons for HUF s occupying more than 2/3 rd share
in the non-individual applications as its not a body corporate.

A savings from all channels of India / World are to be tapped by the NFO rather than
one or two states applying for a loin share of the option.

CONCLUSIONS:
*

Different funds have been using different forms of applications. A standardized form of
application maybe designed by the competent authority and should be made mandatory
for all funds to use the standard application form.

The NFO process is very complex and there is a need to simplify the process by
eliminating certain unnecessary steps in the process ie instead of carrying out audit for
three times and appropriate internal check system maybe devised to keep the errors
within the tolerance limits.

The NRI subscribers to the fund maybe encouraged to make the payments from NRO,
NRE and FCNR accounts.

The application from institutional investors and foreign institutional investors are to be
encouraged through a package of incentives.

The participation of senior citizens in the NFO s may be encouraged as they are likely
to hold more surpluses compared to others.

The holding of units in joint names shall be encouraged.

69

There is a need to investigate the reasons for HUF s occupying more than 2/3 rd share

in the non-individual applications as its not a body corporate.

*

A savings from all channels of India / World are to be tapped by the NFO rather than
one or two states applying for a loin share of the option.

BIBILOGRAPHY

NFO propeller of Karvy.

NFO records of Reliance Mutual Fund.

Mutual Funds in India by H SADHAK.

www. KARVY.com

www.sebi.com

www.amfiindia.com

70

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