CONTENTS

PARTICULAR PAGE NO.

OBJECTIVES 1

INTRODUCTION 2

Company Profile

Vision Of Company

MUTUAL FUNDS 6

Introduction

Types Of Mutual Funds

Financial Plan In Mutual Funds

Regulatory Aspects Of Mutual Funds

Mutual Funds In India

RESEARCH METHODOLOGY 49
DATA ANALYSIS AND FINDINGS 52

CONCLUSION 67

RECOMMENDATIONS 69

ANNEXURE: 71

Bibliography

Questionnaire
 OBJECTIVES

1. TO UNDERSTAND THE CONCEPT OF MUTUAL FUNDS.

2. TO STUDY THE INVESTMENT PATTERN IN THE MARKET FROM THE

INVESTOR’S POINT OF VIEW.

3. TO STUDY THE DIFFICULTIES FACED BY THE INVESTORS WHILE INVESTING

IN MUTUAL FUNDS.

1
INTRODUCTION

2
MUTUAL FUNDS:

3
 Introduction
A mutual fund is a pool of money, collected from investor and is invested according to certain
investment objectives.

A mutual fund is created when investors put their money together. It is therefore a pool of the investors’
funds. The most important characteristic of a mutual fund is that contributors and the beneficiaries of the
fund are the same class of people, namely the investors. The term mutual means that investors contribute
to the pool, and also benefit from the pool. There are no other claimants to the funds. The pool of funds
held mutually by investors is the mutual fund.

A mutual fund’s business is to invest the funds thus collected, according to the wishes of the investors
who created the pool. In many markets these wishes are articulated as “investment mandates.” Usually,
the investors appoint professional investment managers, to manage their funds. The same objective is
achieved when professional investment managers create a “product,” and offer it for investment to the
investor. This product represents a share in the pool, and pre-states investment objectives. For example, a
mutual fund, which sells a “money market mutual fund,” is actually seeking investors willing to invest in
a pool that would invest predominantly in money market instruments. The money accumulated in a
mutual fund is managed by professionals who decide on behalf of shareholders on investment strategy.
These professionals choose investments that best match the fund’s objectives as described in the
prospectus. Their investment decisions are based on extensive knowledge and research of market
conditions and the financial performance of individual companies and specific securities. As economic
conditions change, the fund may adjust the mix of its investments to adopt a more aggressive or a more
defensive posture to meet its investment objective.

A mutual fund is an investment company that pools money from shareholders and invests in a diversified
portfolio of securities. An estimated 91.2 million individual Americans in 53.3 million U.S. households
own mutual fund shares. In India, investors in the mutual fund industry today have a choice of around 40
mutual funds offering more than 500 products. Though the categories of products offered could be
classified under about a dozen generic heads, competition in the industry has lead to innovative
alterations to standard products. It is also possible for investors to decide the manner in which their
4
returns would be distributed, and choose from daily, monthly, quarterly or annual painvestort; or re-
investment of dividends into the mutual fund product itself; or a growth option that would seek growth in
investment over distribution of income. The most important benefit of product choice is that it enables
investors to choose an option that suits their return requirements and risk appetite. Investors can combine
the options to arrive at their own mutual fund portfolio that fit with the financial planning objectives.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial
goal. The money thus collected is then invested in capital market instruments such as shares, debentures
and other securities. The income earned through these investments and the capital appreciations realized
are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is
the most suitable investment for the common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.

The flow chart below describes broadly the working of a mutual fund:

Fig. 1.1: Mutual Fund Operation Flow Chart

5
Important Characteristics of a Mutual Fund

 A mutual fund belongs to the investors who have pooled their funds. The ownership of mutual
fund is the hands of the investors.
 Investment professionals and other service providers, who earn a fee for their services, from the
fund, manage the mutual fund.
 The pool of funds is invested in a portfolio of marketable investments. 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
Asset Value or NAV.
 The investment portfolio of the mutual fund is created according to the stated investment of the
fund.

6
 EVOLUTION OF MUTUAL FUND

Mutual funds have been around for a long time, dating back to the early 19th century. The first modern
American mutual fund opened in 1924, yet it was only in the 1990's that mutual funds became
mainstream investments, as the number of households owning them nearly tripled during that decade.
With recent surveys showing that over 88% of all investors participate in mutual funds, investor're
probably already familiar with these investments, or perhaps even own some. In any case, it's important
that investor know exactly how these investments work and how investor can use them to investorr
advantage.

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

Second Phase-1987-93
Third Phase-1993-2003
Fourth Phase-Since Feb 2003

I. First Phase – 1964-87

Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. 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)
7
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.

II. 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 Canbank Mutual Fund
(Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989
while GIC had set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores.

III. 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.

IV. 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
8
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 September 2004, there were 29 funds, which manage assets of
Rs.153108 crores under 421 schemes.

Chairman's Message

Chairman's Message

Profile

Profile

History

History

Board Of Directors

9
Board Of Directors

Vision & Mission

Vision & Mission

Awards & Achievements

Awards & Achievements

Shareholder Information

Shareholder Information

Foreign Branches

Foreign Branches

Subsidiaries

Subsidiaries

10
Tenders

Tenders

Sale Notice

Sale Notice

Notifications

Notifications

EOI

EOI

Press & Media

Press & Media

Procurements

Procurements

11
For Auditors

For Auditors

Work Culture

Work Culture

Positions Open

Positions Open

Application Process

Application Process

Other Services

Other Services

Consultancy Services

Consultancy Services

12
 Call Centre Services

Call Centre Services

Customer Service Sections

Customer Service Sections

PROFILE

A Brief Profile of the Bank

Widely known for customer centricity, Canara Bank was founded by Shri
Ammembal Subba Rao Pai, a great visionary and philanthropist, in July
1906, at Mangalore, then a small port in Karnataka. The Bank has gone
through the various phases of its growth trajectory over hundred years of
its existence. Growth of Canara Bank was phenomenal, especially after
nationalization in the year 1969, attaining the status of a national level
13
player in terms of geographical reach and clientele segments. Eighties
was characterized by business diversification for the Bank. In June 2006,
the Bank completed a century of operation in the Indian banking industry.
The eventful journey of the Bank has been characterized by several
memorable milestones. Today, Canara Bank occupies a premier position
in the comity of Indian banks. With an unbroken record of profits since its
inception, Canara Bank has several firsts to its credit. These include:

• Launching of Inter-City ATM Network

• Obtaining ISO Certification for a Branch

• Articulation of ‘Good Banking’ – Bank’s Citizen Charter

• Commissioning of Exclusive Mahila Banking Branch

• Launching of Exclusive Subsidiary for IT Consultancy

• Issuing credit card for farmers

• Providing Agricultural Consultancy Services

Over the years, the Bank has been scaling up its market position to
emerge as a major 'Financial Conglomerate' with as many as nine
subsidiaries/sponsored institutions/joint ventures in India and abroad. As
at June 2010, the Bank has further expanded its domestic presence, with
3057 branches spread across all geographical segments. Keeping
customer convenience at the forefront, the Bank provides a wide array of
alternative delivery channels that include over 2000 ATMs- one of the
highest among nationalized banks- covering 732 centres, 2681 branches
providing Internet and Mobile Banking (IMB) services and 2091 branches
offering 'Anywhere Banking' services. Under advanced payment and
settlement system, all branches of the Bank have been enabled to offer
Real Time Gross Settlement (RTGS) and National Electronic Funds
Transfer (NEFT) facilities.

Not just in commercial banking, the Bank has also carved a distinctive
mark, in various corporate social responsibilities, namely, serving national
priorities, promoting rural development, enhancing rural self-employment
through several training institutes and spearheading financial inclusion
objective. Promoting an inclusive growth strategy, which has been formed
14
as the basic plank of national policy agenda today, is in fact deeply rooted
in the Bank's founding principles. "A good bank is not only the
financial heart of the community, but also one with an obligation of
helping in every possible manner to improve the economic
conditions of the common people". These insightful words of our
founder continue to resonate even today in serving the society with a
purpose. The growth story of Canara Bank in its first century was due,
among others, to the continued patronage of its valued customers,
stakeholders, committed staff and uncanny leadership ability
demonstrated by its leaders at the helm of affairs. We strongly believe
that the next century is going to be equally rewarding and eventful not
only in service of the nation but also in helping the Bank emerge as a
"Global Bank with Best Practices". This justifiable belief is founded on
strong fundamentals, customer centricity, enlightened leadership and a
family like work culture.

15
FUND STRUCTURE AND CONSTITUENTS
Organization of a Mutual Fund

There are many entities involved and the diagram below illustrates the organizational set up of a mutual
fusnd:

Fig. 1.2 Organization of a Mutual Fund

Trustee

A trust is a notional entity that cannot contract in its own name so the trust enters into contracts in the name
of the trustees. Trustees can either be individual or corporate body. Trustees appoint the asset management
company secure necessary approvals, periodically monitor how the AMC functions, and hold the properties
of the various schemes in the trust for the benefit of the investors. Trustees can be held accountable for the
financial irregularities of the mutual fund.

Sponsors

The sponsor of mutual fund is like the promoter of a company. The sponsor may be bank, a financial
institution, or financial service company. It may be Indian or foreign. Sponsor appoints the trustees,
16
custodians and the AMC with the prior approval of the SEBI and in accordance with SEBI regulations.
Sponsor must be carrying on business in financial services for a minimum period of 5years.

 Net worth of sponsor is positive in all preceding 5 years

 Net worth in immediately preceding year is more than capital contribution to AMC.

 Sponsor must have been profit making in at least 3 of the immediately preceding 5 years including the
5th year.

 Sponsor must contribute 40% of the net worth of the AMC.

Custodian

The custodian handles the investment back office operations of a mutual fund. Inter alia, it looks after the
receipt and delivery of securities, collection of income, distribution of dividends, and segregation of assets
between schemes. The sponsor of mutual fund cannot act as its custodian. This condition is meant to ensure
that the asset of mutual fund is not in the hand of the sponsor. They keep the investment account of the
mutual fund, and also collect the dividend and interest payment due on mutual fund investments.

On the advice of the fund managers they act on the corporate actions.

Registrar and Transfer Agents

The registrar and transfer agents are responsible for investor servicing functions as they maintain the records
of investors on mutual funds. They process investor application; record details provided by the investors on
the application form; send out the investors details regarding their investment in the mutual fund; send out
periodical information on the performance of the mutual fund; process dividend painvestort to the investors;
in corporate changes in information as communicated by investors; and keep the investor record up to date,
by recording new investors and removing investors who have withdrawn their funds. In many cases they
also provide additional services by tracking investor behavior for mutual funds, tracking the performance of
selling and distributing agents; and creating database for use in marketing of mutual fund products.

Selling and Distributing Agents

Mutual fund products are reached to investors across the country through selling agents and distributors.
Selling agents are usually individuals who bring in investors fund for a commission. Distributors are
institutions that appoint agents and other mechanism to mobilize funds from investors. Bank that function as
distributors; for example, tend to offer mutual fund products to their chosen customers. Some agencies use
direct marketing agents to sell mutual fund products. Some agencies cross sell mutual fund products to
clients, to whom they are already offering other financial products.

Most agents and distributors are paid commissions on the fund they mobilize from investors. These
commissions are split into a initial commission, which is paid on mobilization of funds; and trail
17
commission, which is paid depending on the length of stay of the investor in the mutual fund. Some agents
also pass on the commission they receive, to the investor as an incentive.

Legal Advisors and Auditors

Legal advisors advice mutual funds on regulatory and taxation issues. Every mutual fund has an employee
designated as compliance officer, who work under the advice of the legal advisors. The accounts of the
mutual funds are actually the accounts of the pool in which the investors have invested. Therefore each
mutual fund scheme created by an AMC has to maintain a separate book of account and draw up its annual
report. The AMC also has its accounts and annual report. These two sets of accounts are required to be
statutorily audited. SEBI regulation stipulated that auditors of the mutual fund couldn’t also be the auditors
of the AMC. The two sets of the accounts have to be audited by two separate auditing firms. Auditors charge
a fee from the mutual fund for these services.

Brokers

Brokers support the investment management function of the mutual fund, by enabling the investment
managers to buy and sell securities. Brokers are registered members of stock exchanges. They charge a
commission for their services. In many cases, brokers also provide investment managers with research report
on the performances of various companies and industrial sectors, and investment recommendations. Brokers
also are an important source of market information to fund managers.

If the broker is associated with the sponsor or its associates then the AMC shall not purchase or sell
securities through that broker in excess of 5% of the aggregate of purchase and sale of securities made by the
mutual fund in its entire scheme.

For transactions through any other broker the AMC can exceed the limit of 5% provided it has recorded
justification in writing and report of such exceeding has been sent to trustee on a quarterly basis.

Depository Participant

Depository participants hold the securities of mutual funds in dematerialized form. They work with the
custodian and handle the operational aspects of actually making/receiving delivery of securities into the
account of the mutual funds. On instructions from the custodian, they deliver/receive securities from the
company/stock exchange, in dematerialized form. They also communicate the custodian’s instructions on
corporate actions to the company.

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 UNDERSTANDING MUTUAL FUND
Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and
invest the money thus collected into asset classes that match the stated investment objectives of the
scheme. Since the stated investment objectives of a mutual fund scheme generally forms the basis for an
investor's decision to contribute money to the pool, a mutual fund can not deviate from its stated
objectives.
Every Mutual Fund is managed by a fund manager, who using his investment management skills and
necessary research works ensures much better return than what an investor can manage on his own. The
capital appreciation and other incomes earned from these investments are passed on to the investors (also
known as unit holders) in proportion of the number of units they own.

19
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.
For example:
A. If the market value of the assets of a fund is Rs. 100,000
B. The total number of units issued to the investors is equal to 10,000.
C. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00
D. Now if an investor 'X' owns 5 units of this scheme
E. Then his total contribution to the fund is Rs. 50 (i.e. Number of units held multiplied by the NAV
of the scheme)

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 ADVANTAGES OF MUTUAL FUND

Portfolio Diversification Mutual Funds invest in a well-diversified portfolio of securities which enables
investor to hold a diversified investment portfolio (whether the amount of investment is big or small).

Professional Management: Fund manager undergoes through various research works and has better
investment management skills which ensure higher returns to the investor than what he can manage on
his own.

Less Risk: Investors acquire a diversified portfolio of securities even with a small investment in a
Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities.

Low Transaction Costs: Due to the economies of scale (benefits of larger volumes), mutual funds pay
lesser transaction costs. These benefits are passed on to the investors.

Liquidity: An investor may not be able to sell some of the shares held by him very easily and quickly,
whereas units of a mutual fund are far more liquid.

Choice of Schemes: Mutual funds provide investors with various schemes with different investment
objectives. Investors have the option of investing in a scheme having a correlation between its investment
objectives and their own financial goals. These schemes further have different plans/options

Transparency: Funds provide investors with updated information pertaining to the markets and the
schemes. All material facts are disclosed to investors as required by the regulator.

Flexibility: Investors also benefit from the convenience and flexibility offered by Mutual Funds.
Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of
systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-
end schemes.

Safety: Mutual Fund industry is part of a well-regulated investment environment where the interests of
the investors are protected by the regulator. All funds are registered with SEBI and complete
transparency is forced.

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 DISADVANTAGES OF MUTUAL FUND
Costs Control Not in the Hands of an Investor: Investor has to pay investment management fees and

fund distribution costs as a percentage of the value of his investments (as long as he holds the units),

irrespective of the performance of the fund.

No Customized Portfolios: The portfolio of securities in which a fund invests is a decision taken by the

fund manager. Investors have no right to interfere in the decision making process of a fund manager,

which some investors find as a constraint in achieving their financial objectives.

Difficulty in Selecting a Suitable Fund Scheme: Many investors find it difficult to select one option

from the plethora of funds/schemes/plans available. For this, they may have to take advice from financial

planners in order to invest in the right fund to achieve their objectives.

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 TYPES OF MUTUAL FUNDS
General Classification of Mutual Funds

Open-end Funds | Closed-end Funds

Open-end Funds

Funds that can sell and purchase units at any point in time are classified as Open-end Funds. The fund
size (corpus) of an open-end fund is variable (keeps changing) because of continuous selling (to
investors) and repurchases (from the investors) by the fund. An open-end fund is not required to keep
selling new units to the investors at all times but is required to always repurchase, when an investor
wants to sell his units. The NAV of an open-end fund is calculated every day.

Closed-end Funds

Funds that can sell a fixed number of units only during the New Fund Offer (NFO) period are known as
Closed-end Funds. The corpus of a Closed-end Fund remains unchanged at all times. After the closure of
the offer, buying and redemption of units by the investors directly from the Funds is not allowed.
However, to protect the interests of the investors, SEBI provides investors with two avenues to liquidate
their positions:

1. Closed-end Funds are listed on the stock exchanges where investors can buy/sell units from/to
each other. The trading is generally done at a discount to the NAV of the scheme. The NAV of a closed-
end fund is computed on a weekly basis (updated every Thursday).

2. Closed-end Funds may also offer "buy-back of units" to the unit holders. In this case, the corpus
of the Fund and its outstanding units do get changed.

Load Funds | No-load Funds

Load Funds

Mutual Funds incur various expenses on marketing, distribution, advertising, portfolio churning, fund
manager's salary etc. Many funds recover these expenses from the investors in the form of load. These
funds are known as Load Funds. A load fund may impose following types of loads on the investors:

• Entry Load - Also known as Front-end load, it refers to the load charged to an investor at the time
of his entry into a scheme. Entry load is deducted from the investor's contribution amount to the fund.

23
• Exit Load - Also known as Back-end load, these charges are imposed on an investor when he
redeems his units (exits from the scheme). Exit load is deducted from the redemption proceeds to an
outgoing investor.

• Deferred Load - Deferred load is charged to the scheme over a period of time.

• Contingent Deferred Sales Charge (CDSC) - In some schemes, the percentage of exit load
reduces as the investor stays longer with the fund. This type of load is known as Contingent Deferred
Sales Charge.

No-load Funds

All those funds that do not charge any of the above mentioned loads are known as No-load Funds.

Tax-exempt Funds | Non-Tax-exempt Funds

Tax-exempt Funds

Funds that invest in securities free from tax are known as Tax-exempt Funds. All open-end equity
oriented funds are exempt from distribution tax (tax for distributing income to investors). Long term
capital gains and dividend income in the hands of investors are tax-free.

Non-Tax-exempt Funds

Funds that invest in taxable securities are known as Non-Tax-exempt Funds. In India, all funds, except
open-end equity oriented funds are liable to pay tax on distribution income. Profits arising out of sale of
units by an investor within 12 months of purchase are categorized as short-term capital gains, which are
taxable. Sale of units of an equity oriented fund is subject to Securities Transaction Tax (STT). STT is
deducted from the redemption proceeds to an investor.

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 BROAD MUTUAL FUND TYPES

Fig. 1.3

1 Equity funds:

Equity funds are considered to be the more risky funds as compared to other fund types, but they
also provide higher returns than other funds. It is advisable that an investor looking to invest in an
equity fund should invest for long term i.e. for 3 years or more. There are different types of equity
funds each falling into different risk bracket. In the order of decreasing risk level, there are
following types of equity funds:

a. Aggressive Growth Funds - In Aggressive Growth Funds, fund managers aspire for maximum
capital appreciation and invest in less researched shares of speculative nature. Because of these
speculative investments Aggressive Growth Funds become more volatile and thus, are prone to
higher risk than other equity funds.

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b. Growth Funds - Growth Funds also invest for capital appreciation (with time horizon of 3 to 5
years) but they are different from Aggressive Growth Funds in the sense that they invest in
companies that are expected to outperform the market in the future. Without entirely adopting
speculative strategies, Growth Funds invest in those companies that are expected to post above
average earnings in the future.

c. Speciality Funds - Speciality Funds have stated criteria for investments and their portfolio
comprises of only those companies that meet their criteria. Criteria for some speciality funds could
be to invest/not to invest in particular regions/companies. Speciality funds are concentrated and
thus, are comparatively riskier than diversified funds.. There are following types of speciality
funds:

i. Sector Funds: Equity funds that invest in a particular sector/industry of the market are
known as Sector Funds. The exposure of these funds is limited to a particular sector (say
Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer
Goods) which is why they are more risky than equity funds that invest in multiple sectors.

ii. Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in
one or more foreign companies. Foreign securities funds achieve international
diversification and hence they are less risky than sector funds. However, foreign securities
funds are exposed to foreign exchange rate risk and country risk.

iii. Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market
capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds.
Market capitalization of Mid-Cap companies is less than that of big, blue chip companies
(less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies have
market capitalization of less than Rs. 500 crores. Market Capitalization of a company can
be calculated by multiplying the market price of the company's share by the total number
of its outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies
are not as liquid as of Large-Cap Companies which gives rise to volatility in share prices of
these companies and consequently, investment gets risky.

iv. Option Income Funds*: While not yet available in India, Option Income Funds write
options on a large fraction of their portfolio. Proper use of options can help to reduce
volatility, which is otherwise considered as a risky instrument. These funds invest in big,
high dividend yielding companies, and then sell options against their stock positions,
which generate stable income for investors.

d. Diversified Equity Funds - Except for a small portion of investment in liquid money market,
diversified equity funds invest mainly in equities without any concentration on a particular
sector(s). These funds are well diversified and reduce sector-specific or company-specific risk.
However, like all other funds diversified equity funds too are exposed to equity market risk. One
26
 prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As
per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times.
ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time
of filing the income tax return. ELSS usually has a lock-in period and in case of any redemption
by the investor before the expiry of the lock-in period makes him liable to pay income tax on such
income(s) for which he may have received any tax exemption(s) in the past.

e. Equity Index Funds - Equity Index Funds have the objective to match the performance of a
specific stock market index. The portfolio of these funds comprises of the same companies that
form the index and is constituted in the same proportion as the index. Equity index funds that
follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that
follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are
less diversified and therefore, are more risky.

f. Value Funds - Value Funds invest in those companies that have sound fundamentals and whose
share prices are currently under-valued. The portfolio of these funds comprises of shares that are
trading at a low Price to Earning Ratio (Market Price per Share / Earning per Share) and a low
Market to Book Value (Fundamental Value) Ratio. Value Funds may select companies from
diversified sectors and are exposed to lower risk level as compared to growth funds or speciality
funds. Value stocks are generally from cyclical industries (such as cement, steel, sugar etc.) which
make them volatile in the short-term. Therefore, it is advisable to invest in Value funds with a
long-term time horizon as risk in the long term, to a large extent, is reduced.

g. Equity Income or Dividend Yield Funds - The objective of Equity Income or Dividend Yield
Equity Funds is to generate high recurring income and steady capital appreciation for investors by
investing in those companies which issue high dividends (such as Power or Utility companies
whose share prices fluctuate comparatively lesser than other companies' share prices). Equity
Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as
compared to other equity funds.

2. Debt / Income Funds

Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial
institutions, governments and other entities belonging to various sectors (like infrastructure companies
etc.) are known as Debt / Income Funds. Debt funds are low risk profile funds that seek to generate fixed
current income (and not capital appreciation) to investors. In order to ensure regular income to investors,
debt (or income) funds distribute large fraction of their surplus to investors. Although debt securities are
generally less risky than equities, they are subject to credit risk (risk of default) by the issuer at the time
of interest or principal payment. To minimize the risk of default, debt funds usually invest in securities
from issuers who are rated by credit rating agencies and are considered to be of "Investment Grade".
Debt funds that target high returns are more risky. Based on different investment objectives, there can be
following types of debt funds:
27
a. Diversified Debt Funds - Debt funds that invest in all securities issued by entities belonging to all
sectors of the market are known as diversified debt funds. The best feature of diversified debt
funds is that investments are properly diversified into all sectors which results in risk reduction.
Any loss incurred, on account of default by a debt issuer, is shared by all investors which further
reduces risk for an individual investor.

b. Focused Debt Funds* - Unlike diversified debt funds, focused debt funds are narrow focus funds
that are confined to investments in selective debt securities, issued by companies of a specific
sector or industry or origin. Some examples of focused debt funds are sector, specialized and
offshore debt funds, funds that invest only in Tax Free Infrastructure or Municipal Bonds. Because
of their narrow orientation, focused debt funds are more risky as compared to diversified debt
funds. Although not yet available in India, these funds are conceivable and may be offered to
investors very soon.

c. High Yield Debt funds - As we now understand that risk of default is present in all debt funds,
and therefore, debt funds generally try to minimize the risk of default by investing in securities
issued by only those borrowers who are considered to be of "investment grade". But, High Yield
Debt Funds adopt a different strategy and prefer securities issued by those issuers who are
considered to be of "below investment grade". The motive behind adopting this sort of risky
strategy is to earn higher interest returns from these issuers. These funds are more volatile and
bear higher default risk, although they may earn at times higher returns for investors.

d. Assured Return Funds - Although it is not necessary that a fund will meet its objectives or
provide assured returns to investors, but there can be funds that come with a lock-in period and
offer assurance of annual returns to investors during the lock-in period. Any shortfall in returns is
suffered by the sponsors or the Asset Management Companies (AMCs). These funds are generally
debt funds and provide investors with a low-risk investment opportunity. However, the security of
investments depends upon the net worth of the guarantor (whose name is specified in advance on
the offer document). To safeguard the interests of investors, SEBI permits only those funds to
offer assured return schemes whose sponsors have adequate net-worth to guarantee returns in the
future. In the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI)
that assured specified returns to investors in the future. UTI was not able to fulfill its promises and
faced large shortfalls in returns. Eventually, government had to intervene and took over UTI's
payment obligations on itself. Currently, no AMC in India offers assured return schemes to
investors, though possible.

e. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end schemes having short
term maturity period (of less than one year) that offer a series of plans and issue units to investors
at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the exchanges.
Fixed term plan series usually invest in debt / income schemes and target short-term investors. The
objective of fixed term plan schemes is to gratify investors by generating some expected returns in
a short period.

28
3. Gilt Funds
Also known as Government Securities in India, Gilt Funds invest in government papers (named dated
securities) having medium to long term maturity period. Issued by the Government of India, these
investments have little credit risk (risk of default) and provide safety of principal to the investors.
However, like all debt funds, gilt funds too are exposed to interest rate risk. Interest rates and prices of
debt securities are inversely related and any change in the interest rates results in a change in the NAV of
debt/gilt funds in an opposite direction.

4. Money Market / Liquid Funds

Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt
instruments. These securities are highly liquid and provide safety of investment, thus making money
market / liquid funds the safest investment option when compared with other mutual fund types.
However, even money market / liquid funds are exposed to the interest rate risk. The typical investment
options for liquid funds include Treasury Bills (issued by governments), Commercial papers (issued by
companies) and Certificates of Deposit (issued by banks).

5. Hybrid Funds
As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities, debts
and money market securities. Hybrid funds have an equal proportion of debt and equity in their portfolio.
There are following types of hybrid funds in India:

a. Balanced Funds - The portfolio of balanced funds include assets like debt securities, convertible
securities, and equity and preference shares held in a relatively equal proportion. The objectives of
balanced funds are to reward investors with a regular income, moderate capital appreciation and at
the same time minimizing the risk of capital erosion. Balanced funds are appropriate for
conservative investors having a long term investment horizon.

b. Growth-and-Income Funds - Funds that combine features of growth funds and income funds are
known as Growth-and-Income Funds. These funds invest in companies having potential for capital
appreciation and those known for issuing high dividends. The level of risks involved in these
funds is lower than growth funds and higher than income funds.

c. Asset Allocation Funds - Mutual funds may invest in financial assets like equity, debt, money
market or non-financial (physical) assets like real estate, commodities etc.. Asset allocation funds
adopt a variable asset allocation strategy that allows fund managers to switch over from one asset
class to another at any time depending upon their outlook for specific markets. In other words,
fund managers may switch over to equity if they expect equity market to provide good returns and
switch over to debt if they expect debt market to provide better returns. It should be noted that

29
 switching over from one asset class to another is a decision taken by the fund manager on the basis
of his own judgment and understanding of specific markets, and therefore, the success of these
funds depends upon the skill of a fund manager in anticipating market trends.

6. Commodity Funds
Those funds that focus on investing in different commodities (like metals, food grains, crude oil etc.) or
commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity
fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a
commodity fund that invests in all available commodities is a diversified commodity fund and bears less
risk than a specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in gold,
gold futures or shares of gold mines) are common examples of commodity funds.

7. Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized
assets of housing finance companies, are known as Specialized Real Estate Funds. The objective of these
funds may be to generate regular income for investors or capital appreciation.

8. Exchange Traded Funds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end
mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like
a single stock at index linked prices. The biggest advantage offered by these funds is that they offer
diversification, flexibility of holding a single share (tradable at index linked prices) at the same time.
Recently introduced in India, these funds are quite popular abroad.

9. Fund of Funds
Mutual funds that do not invest in financial or physical assets, but do invest in other mutual fund
schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a portfolio
comprising of units of other mutual fund schemes, just like conventional mutual funds maintain a
portfolio comprising of equity/debt/money market instruments or non financial assets. Fund of Funds
provide investors with an added advantage of diversifying into different mutual fund schemes with even
a small amount of investment, which further helps in diversification of risks. However, the expenses of
Fund of Funds are quite high on account of compounding expenses of investments into different mutual
fund schemes.

* Funds not yet available in India

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FINANCIAL PLAN IN MUTUAL FUND:

Fig. 1.4

Systematic Investment Plan (SIP):

An SIP is a method of investing a fixed sum, on a regular basis, in a mutual fund scheme. It is similar to
regular saving schemes like a recurring deposit. An SIP allows one to buy units on a given date each month or
quarter, so that one can implement a saving plan for themselves.
SIP is actually a Systematic Investment Plan of investing in Mutual Fund. It is specially designed for those
who aim to build wealth over a long period and want a better future for him and their dependants.

The investment in a Mutual fund can be done in two ways. First way is onetime payment i.e. making payment
to a fund at once and gets the units of the fund as per the Net Asset Value (NAV) of the fund on that day.

A person wishes to invest in a fund Rs. 24,000/- . On the day of Investment, the NAV of the fund was Rs.
10/-.He gets 2400 units @ Rs. 10/- per unit.

The other way of investment is making payment to the fund periodically, which is termed as Mutual Fund
SIP. When investor commit to invest a fixed amount monthly in a fund, it is called as Systematic Investment.

31
It is actually beneficial for those investors who wish to invest a large amount in a fund and wishes to create a
large chunk of wealth for long term but due to financial constraints are able to do so.

The SIP provides them a way to invest in the fund of their choice in installments.

Eg. A person wishes to invest Rs. 24000/- in a fund but due to other obligations, it is not possible for him to
invest such an amount in a fund. He takes the SIP route and contributes to the fund Rs. 2000/- monthly for a
year. At the end of the year, he’ll have invested Rs. 24,000/- in the fund. When the NAV is high, he will get
the fewer units and when the NAV is low, he’ll get the more units. So, he’ll get the benefit of averaging
through the SIP route.

The NAV in the first month was Rs. 10/-, he’ll get 200 units in the first month
The NAV in the second month was Rs. 9.50/-, he’ll get 210.52 units in second month
The NAV for the following month was Rs. 10, he’ll get 200 units in the next month
So, at the end of the year he may get more units as compared to the units he’ll get through single investment.

Benefits of SIP

1. SIP can be started with a minimum investment of Rs. 500/- per month or Rs. 1000/- per month.
2. It is good and effective way of creating wealth for long term.
3. ECS facility is available in case of Investment through SIP.
4. A small withdrawal from the account doesn’t affect the bank balance of an individual as compared to a
hefty withdrawal.

5. It can be for a year, two years, three years etc. if a person at any point of time couldn’t be able to continue
its SIP, he may give instructions atleast 25 days before to the fund house. His SIP be discontinued.
6. All type of funds except Liquid funds, cash funds and other funds who invest in very short fixed return
investments offers the facility of SIP.
7. Capital gains, if applicable, are taxed on a first-in first-out basis.
8. As the investment made through SIP are not at one time. Some units bought at high price and some at low
price, so chances of making gain through SIP is higher than the one time investment.

In short, SIP is a simple and effective way to create wealth but to create such wealth, one should think about
the investment in SIP for a period of atleast for time frame of three years because it pays to invest in a longer
run.

32
Systematic Withdrawal Plan (SWP):

SWP is a smart way to plan for investorr future needs by withdrawing amounts systematically from investorr
existing portfolio either to reinvest in another portfolio or to meet investorr expenses. Investorr savings no
longer remain idle. Investorr money can earn better returns if reinvested, instead of lying idle in a savings
account for meeting investorr regular payments.

Under SWP, the Unit holders shall have an option to predetermine the withdrawal from the scheme. Under
the SWP facility, investors may choose between (a) Fixed Amount Withdrawal and (b) Capital Appreciation
Withdrawal
A systematic withdrawal plan is a financial plan that allows a shareholder to withdraw money from an
existing mutual fund portfolio at predetermined intervals. The money withdrawn through a systematic
withdrawal plan can be reinvested in another portfolio or used to pay for something else. Often, a systematic
withdrawal plan is used to fund expenses during retirement. However, this type of plan may be used for other
purposes as well.

With a systematic withdrawal plan, a fixed or variable amount is withdrawn at regular intervals. Withdrawals
can be made on a monthly, quarterly, semi-annual, or annual schedule. The holder of the plan may choose
withdrawal intervals based on his or her commitments and needs.

Systematic withdrawal plans offer many benefits. For example, systematic withdrawal plans allow account
holders to access their money exactly when they need it. This makes it easier for account holders to carry out
their financial plans and meet their goals.

A systematic withdrawal plan allows the account holder a certain level of independence from market
fluctuations. By making periodic withdrawals, account holders are able to enjoy average return values that
often exceed average sale prices. In this way, systematic withdrawal plan holders are able to secure higher
unit prices than those attainable by withdrawing everything at once.

Systematic withdrawal plans also offer tax advantages. With a systematic withdrawal plan, withdrawals are
made from capital. As such, long-term gains are paid at a lower tax rate. Many individuals use systematic
withdrawal plans as part of their tax-planning strategies in an effort to make the most of this lower rate of
taxation.

With a systematic withdrawal plan, an investor’s money will continue to grow as long as the investment is
performing at a rate that is higher than the rate of withdrawal. For this reason, it is wise to diversify investorr
investments. However, diversification makes sense for quite a few types of investments besides mutual funds.

33
Benefits of Systematic Withdrawal Plans

The primary benefit of a systematic withdrawal plan is in providing the investor with the money they need
when they need it. SWPs can also offer tax advantages. As opposed to taking a lump sum payment, spreading
the income out across multiple intervals can lower the total tax bill. In making periodic withdrawals of fixed
amounts, SWPs can also help to protect investors against market fluctuations.

SWPs can be particularly appealing to individuals who do not have a fixed pension or government plan
secured as retirement income. These individuals can rely on continuous distributions from their own savings
and investments to provide the cash flow needed for retirement. It is also worth noting that SWP distributions
can be changed at any time to accommodate changing cash flow needs.

Types of Systematic Withdrawal Plans

Capital Retention Systematic Withdrawal Plan (CRSWP): These plans operate with the goal of protecting
invested capital (through proper diversification) while maintaining fixed rates of payment.

Capital Depletion Systematic Withdrawal Plans (CDSWP): Under this type of SWP, the income provided
to the investor is not pre-set. Instead, payments are made on both principal and accrued income by a pre-
determined date.

34
Systematic Transfer Plan:
Investor should first understand SIP . SIP is way of investing in Mutual funds monthly, where a fixed amount
of money goes from investorr Bank Account to Mutual funds, so if investor do a SIP of 1,000 for 1 yr, it
means that every month on a fixed date (chosen by investor) 1,000 will be invested in a Fixed Mutual fund
investor choose. Lets understand STP now, In STP we invest a lump sum amount in some Mutual Fund and
then a fixed sum is transferred from that mutual fund to another mutual fund .

A plan that allows the investor to give a mandate to the fund to periodically and systematically transfer a
certain amount from one scheme to another.

STP provides for transfer of specified amount from one scheme/plan/option in which the original investment
is made to any other scheme/plan/option of JM Financial Mutual Fund, at the end of specified periodic
interval viz., either weekly, fortnightly, monthly or quarterly.

Fig. 1.5

35
Why and When to use STP
There are three ways, where the total returns provided by mutual funds can be enjoyed by investors:

• Income is 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.

• If the fund sells securities that have increased in price, the fund has a capital gain. Most 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 fund's shares increase in
price. Investor can then sell investorr mutual fund shares for a profit. Funds will also usually give
investor a choice either to receive a check for distributions or to reinvest the earnings and get more
shares.

REGULATORY ASPECTS OF
MUTUAL FUND

36
Guidelines of Mutual Fund:

• The asset management company shall launch no scheme unless the trustees approve such scheme
and a copy of the offer document has been filed with the Board.

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

• 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.

• 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.
• Every close ended scheme shall be listed in a recognized stock exchange within six months from
the closure of the subscription
• The asset management company may at its option repurchase or reissue the repurchased units of a
close-ended scheme.
• A close-ended scheme shall be fully redeemed at the end of the maturity period. "Unless a
majority of the unit holders otherwise decide for its rollover by passing a resolution".
• The mutual fund and asset management company shall be liable to refund the application money
to the applicants,-
37
(i) If the mutual fund fails to receive the minimum subscription amount referred to in 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).

• 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.

Rules Regarding Advertisement:

• The advertisement for each scheme shall disclose investment objective for each scheme.
• An advertisement shall be truthful, fair and clear and shall not contain a statement, promise or
forecast which is untrue or misleading.
• Advertisements shall not be so framed as to exploit the lack of experience or knowledge of the
investors.
• All advertisements issued by a mutual fund or its sponsor or Asset Management Company, shall
state "all investments in mutual funds and securities are subject to market risks and the NAV of
the schemes may go up or down depending upon the factors and forces affecting the securities
market".
• The advertisement shall not compare one fund with another, implicitly or explicitly, unless the
comparison is fair and all information relevant to the comparison is included in the advertisement.
• The offer document and advertisement materials shall not be misleading or contain any statement
or opinion, which are incorrect or false.

Investment Objectives and Valuation Policies:

• The moneys collected under any scheme of a mutual fund shall be invested only in transferable
securities in the money market or in the capital market or in privately placed debentures or
securitized debts.
38
 • Provided that moneys collected under any money market scheme of a mutual fund shall be
invested only in money market instruments in accordance with directions issued by the Reserve
Bank of India;
• The mutual fund shall not borrow except to meet temporary liquidity needs of the mutual funds
for the purpose of repurchase, redemption of units or payment of interest or dividend to the unit
holders.
• The mutual fund shall not advance any loans for any purpose.
• Every mutual fund shall compute and carry out valuation of its investments in its portfolio and
publish the same in accordance with the valuation norms specified in Eighth Schedule
• Every mutual fund shall compute the Net Asset Value of each scheme by dividing the net assets
of the scheme by the number of units outstanding on the valuation date.
• The Net Asset Value of the scheme shall be calculated and published at least in two daily
newspapers at intervals of not exceeding one week:
• The price at which the units may be subscribed or sold and the price at which such units may at
any time be repurchased by the mutual fund shall be made available to the investors.

General Obligations:

• Every asset management company for each scheme shall keep and maintain proper books of
accounts, records and documents, for each scheme so as to explain its transactions and to disclose
at any point of time the financial position of each scheme and in particular give a true and fair
view of the state of affairs of the fund and intimate to the Board the place where such books of
accounts, records and documents are maintained.

• The financial year for all the schemes shall end as of March 31 of each year.
• Every mutual fund or the asset management company shall prepare in respect of each financial
year an annual report and annual statement of accounts of the schemes and the fund as specified
in Eleventh Schedule.
• Every mutual fund shall have the annual statement of accounts audited by an auditor who is not in
any way associated with the auditor of the asset management company.

Procedure for Action In Case Of Default:

39
 • On and from the date of the suspension of the certificate or the approval, as the case may be, the
mutual fund, trustees or asset management company, shall cease to carry on any activity as a
mutual fund, trustee or asset management company, during the period of suspension, and shall be
subject to the directions of the Board with regard to any records, documents, or securities that
may be in its custody or control, relating to its activities as mutual fund, trustees or asset
management company.

Restrictions on Investments:

• A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a
single issuer, which are rated not below investment grade by a credit rating agency authorized to
carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV
of the scheme with the prior approval of the Board of Trustees and the Board of asset
management company

• A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments
issued by a single issuer and the total investment in such instruments shall not exceed 25% of the
NAV of the scheme. All such investments shall be made with the prior approval of the Board of
Trustees and the Board of asset Management Company.
• No mutual fund under all its schemes should own more than ten per cent of any company's paid
up capital carrying voting rights.
• Transfers of investments from one scheme to another scheme in the same mutual fund shall be
allowed only if, -
1. Such transfers are done at the prevailing market price for quoted instruments on spot basis.
2. The securities so transferred shall be in conformity with the investment objective of the scheme
to which such transfer has been made.
 A scheme may invest in another scheme under the same asset management
company or any other mutual fund without charging any fees, provided that aggregate inter
40
 scheme investment made by all schemes under the same management or in schemes under the
management of any other asset management company shall not exceed 5% of the net asset value
of the mutual fund.
 The initial issue expenses in respect of any scheme may not exceed six per cent of
the funds raised under that scheme.
 Every mutual fund shall buy and sell securities on the basis of deliveries and shall
in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the
securities and shall in no case put itself in a position whereby it has to make short sale or carry
forward transaction or engage in badly finance.
 Every mutual fund shall, get the securities purchased or transferred in the name of
the mutual fund on account of the concerned scheme, wherever investments are intended to be of
long-term nature.
 Pending deployment of funds of a scheme in securities in terms of investment
objectives of the scheme a mutual fund can invest the funds of the scheme in short term deposits
of scheduled commercial banks.
 No mutual fund scheme shall make any investment in;

Any unlisted security of an associate or group company of the sponsor; or

Any security issued by way of private placement by an associate or group company of the
sponsor; or

The listed securities of group companies of the sponsor that is in excess of 30% of the net assets of all
the schemes of a mutual fund.

 No mutual fund scheme shall invest more than 10 per cent of its NAV in the
equity shares or equity related instruments of any company. Provided that, the limit of 10 per cent
shall not be applicable for investments in index fund or sector or industry specific scheme.
 A mutual fund scheme shall not invest more than 5% of its NAV in the equity
shares or equity related investments in case of open-ended scheme and 10% of its NAV in case of
close-ended scheme.

Self-Regulatory Organizations
41
Self-regulatory organizations are the second –tier regulatory mechanism created by market participants,
to regulate the working of a group of persons/organizations. If the self-regulatory organization is
registered with the regulatory authority, they have the powers to enforce rules, seek information, conduct
inspections, and award penalties. A registered self-regulatory organization obtains these powers from the
regulatory authority, which has delegated these to them. For example, though the stock exchanges are
regulated by SEBI, they are also registered self-regulatory organizations. They can form rules and code
of conduct for their members, and enforce them. In this sense they are the second tiers of regulation.

There are a number of industry bodies like the fixed income money market and derivative associations
(FIMMDA), Primary Dealers Association of India (PDAI) and the Association of Mutual Funds in India
(AMFI), which are industry associations. These are not registered self-regulatory organization, and
therefore can only issue guidelines to members. They cannot enforce regulation. However, in order to
enable orderly growth of the industry, and bring about uniformity and standards in practice, most
members tend to abide by the guidelines of these industry associations. Regulators also find it convenient
to discuss regulatory issues with these associations, rather than deal with each regulated entity in
isolation. A number of significant changes that have raised the level of disclosure and standards for the
mutual fund industry have been enabled by the AMFI, despite it not being a self-regulatory organization
yet.

Regulation of Mutual Fund through companies act:

The AMC and the trustee company may be structure as limited companies, which come under the
regulatory purview of the company law board. The provisions of the companies Act, 1956, are applicable
to these company forms of organizations. The CLB is the apex regulatory authority for companies. CLB
is also the appellate authority for all the issues relating to the companies Act. Any grievance against the

AMC or the Trustee Company can be addressed to the CLB for redressal.

The Registrar of Companies (ROC) oversees the compliance by the AMC and trustee company, with the
provisions of the Companies Act. Periodic reports and annual accounts have to be filed by the companies
with the ROC.

42
The Department of Company Affairs (DCA) is responsible for the formulation and modification of the
laws relating to the companies including the Indian Companies Act. The DCA also has the powers to
prosecute directors for non-compliance provision of this act.

SEBI’s Regulation of Mutual Funds

For smooth conduct and regulation of the mutual fund several guidelines have been issued by the SEBI
regarding the investment, disclosure, accountability distribution of its profits to its members and asset
management companies. SEBI has issued regulation and code of conduct in 1993 that provided a basic
legal framework for the functioning of the mutual fund. The Mutual Fund Regulation Act 1996 has
provided a sound footing and considerable leeway to fund management. The new elements incorporated
in the year 1998, have placed the investors in a better position with regard to proper asset management
and disclosure.

Disclosure norms:

With the number of mutual fund schemes ever on the increase the investors should be kept well informed
about the nature and functioning of the mutual funds. It should start right from the offer document. The
offer document should essential information to assist the investors to take informed and correct decision.
According to the SEBI regulations, the standard offer document should give the following details:
1. Standard and scheme specific risk factors. The later may be related to investment objective,
investment strategy, asset allocation, and risks from non-diversification if any, and from investing in
close ended schemes.
2. Due diligence by the Asset Management Company (AMC)
3. Fundamental attributes such as type of scheme, investment objective and terms of issue. Details of
offer such as sale, purchase, minimum corpus and pricing of units in relation to NAV.
4. Likely initial issue expenses, actual issue expenses for schemes launched during the last year,
expenses borne by AMC and annual recurring expenses.
5. Identification of AMC and background of fund managers.
6. Asset allocation pattern with indicative range of investments or the maximum investment in a
certain asset class.
7. The policy of diversification or concentration to be pursued.

43
8. The policy turnover policy and the effects of investment techniques on total portfolio turnover.
9. The policy with respect to dividends and distributions, including any options for unit holders.
10. The policy of the fund regarding inter scheme transfers.
11. Associate transactions
12. The borrowing policy, including the intent and purpose of borrowing and any stock lending by the fund.
13. Valuation of assets, accounting policies and NAV.
14. The manner of determination of redemption and repurchase price of the units.
15. Tax treatment of investments in mutual funds, investor rights and services and redressal of investor
grievances.
The amendments in 1998 made a significant change in information disclosure pertaining to
litigation/penalties. SEBI has now mandated the disclosure of information contained in reports of
investigation and inspection conducted by it. So far, such information was neither disclosed in the offer
document nor in the annual reports. Now, all mutual funds have to disclose in their offer documents the
information pertaining to the following areas.

1. All cases of penalties awarded by SEBI or any other regulatory body against the sponsor of the
mutual fund, the trustee company/board of trustees, or any of the directors or key personnel of the
AMC and Trustee Company. The nature of the penalty must be disclosed.
2. Pending material litigation proceedings including pending criminal and economic cases against any
of the afore mentioned parties. The name of the court or agencies in which the proceedings are
pending, the date instituted, the principal parties thereto, a brief description of the factual basis
alleged to underline the proceedings and relief sought, if any, shall be indicated.
3. Any deficiency in the systems and operations of the sponsors of the mutual fund or any company
associated with the sponsor in any capacity such as the AMC or the trustee company. This must
pertain to matters that SEBI has specifically directed disclosures. The full portfolio disclosure in the
annual reports is mandatory.
SEBI has enacted the SEBI (mutual funds) regulations, 1996, which provides the scope of regulations of
mutual funds in India. All mutual funds are required to be mandatorily registered with SEBI. The
structure and formation of mutual funds, appointment of key functionaries, operations of the mutual
funds, accounting and disclosure norms, rights and obligations of functionaries and investors, investment
restriction, compliance and penalties all are defined under the SEBI regulation. Mutual funds have to
send half yearly compliance report to SEBI, and also provide all other information about their operations
as SEBI may require. SEBI is also empowered to periodically inspect mutual fund organization to ensure

44
compliance with SEBI regulations. SEBI also regulates other fund constituents such as AMCs, trustees,
custodians, R&T agents and brokers.

Regulatory Jurisdiction RBI Over Mutual Funds

RBI is the monetary authority of the company and is also the regulator of the banking system. Earlier
bank sponsored mutual fund were under the dual regulatory control of RBI and SEBI. Money market
funds, which invested in short term instruments, were also regulated by RBI. These provisions are no
longer vogue. SEBI is the regulator of all mutual funds. The present position is that RBI is involved with
the mutual fund industry, only to a limited extent of being the regulator of the sponsors of the bank-
sponsored mutual funds. Specifically, if the sponsor has made any financial commitment to the investors
of mutual funds in the form of guaranteeing assured returns such as guarantees can no longer be made
without the prior approval of the RBI. RBI will review the financial condition and capital adequacy of
the sponsoring bank, before permitting it to make such guarantees. RBI is the issuer of the government
securities and also the regulator of money market. Mutual funds invest in these securities, and are
affected by the RBI stipulations on the structure, issuance, pricing and trading of these instruments.

MUTUAL FUND IN INDIA

45
 MUTUAL FUND IN INDIA

Mutual Fund is an instrument of investing money. Nowadays, bank rates have fallen down and are
generally below the inflation rate. Therefore, keeping large amounts of money in bank is not a wise
option, as in real terms the value of money decreases over a period of time. One of the options is to
invest the money in stock market. But a common investor is not informed and competent enough to
understand the intricacies of stock market. This is where mutual funds come to the rescue.

A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio
of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By pooling money
together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if
they tried to do it on their own. Also, one doesn't have to figure out which stocks or bonds to buy. But the
biggest advantage of mutual funds is diversification. Diversification means spreading out money across
many different types of investments. When one investment is down another might be up. Diversification
of investment holdings reduces the risk tremendously.

Some facts for the growth of mutual funds in India :

• 100% growth in the last 6 years.

46
 • 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 are much less than US having more than 800.
There is a big scope for expansion.

• Mutual fund can penetrate rural 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.

Association of Mutual Funds in India

Objectives:

• To define and maintain high professional and ethical standards in all areas of operation of mutual
fund industry.

• To recommend and promote best business practices and code of conduct to be followed by
members and others engaged in the activities of mutual fund and asset management including
agencies connected or involved in the field of capital markets and financial services.

• 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 develop a cadre of well trained Agent distributors and to implement a programme of training
and certification for all intermediaries and other engaged in the industry.

47
 • To undertake nationwide 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.

TRENDS IN INDIAN MUTUAL FUNDS INDUSTRY

The industry has also seen many new products. Close-ended funds are back. There are now a host of sector-
specific and thematic funds. Fund of funds, exchange traded funds; mid-cap funds, fixed maturity plans and
arbitrage funds have all made their appearance. Indian mutual funds are now allowed to invest in foreign
securities. On the anvil are gold funds, real estate funds and capital protection funds.

There has also been some consolidation. Franklin Templeton, HDFC and Birla Sun Life took over big fund
houses like Kothari Pioneer, Zurich and, more recently, Alliance Capital, propelling them into the big
league. Among the smaller takeovers, Principal bought out Sun F&C schemes, while Canbank Mutual Fund
took over GIC Mutual Fund. Consolidation is a trend that is bound to continue — there have been reports
saying that Morgan Stanley, UBS and Schroder are in the race to take over the mutual fund business of
Standard Chartered.

Another trend has been the return of close-ended funds. Until Sebi changed the rules for amortizing initial
issue expenses, funds could charge 6 per cent and amortize it over a 5-year period. That allowed AMCs to
push their new funds by offering commissions as high as 5-6 per cent. So the distributors churned investors
from existing mutual funds to the new offerings. While the short-term investor went in and out of schemes,
48
long-term investors had to bear a disproportionately large share of the initial issue expenses. By allowing
only close-ended funds to amortize their expenses, Sebi has paved the way for the resurrection of close-
ended funds.

Some other trends are not so encouraging. The proliferation of funds and keen competition from private
equity and hedge funds has resulted in a severe shortage of fund managers. Salaries have gone through the
roof. While a senior fund manager commands an annual salary (including bonus) of around Rs 75 lakh per
annum, a chief investment officer would get between Rs 75 lakh and Rs 2 crore. Chief executive officers
earn about Rs 1 crore-5 crore. The competition for fund managers has naturally led to a lot of churn.

Another concern is that the ability of Indian fund managers to beat their benchmarks may slowly diminish
as the industry matures, competition intensifies and more research on Indian companies becomes available.
As a study by the IBM Institute for Business Value has pointed out, between 1993 and 2004, only 29 per
cent of US active fund managers outperformed the Morgan Stanley Capital International US Broad Market
2500 Index. The study expects a shift from traditional active funds to hedge funds on the one hand and to
index funds on the other. So far, index funds have proved to be damp squibs in India and it is likely that
their popularity will increase as investors become more aware of costs.

GROWTH IN ASSETS UNDER MANAGEMENT

49
 Fig. 1.6
Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of
India effective from February 2003. The Assets under management of the Specified Undertaking of the
Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from
February 2003 onwards.

50
RESEARCH METHODOLOGY

51
RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It may be understood as a
science how research is done scientifically. In it we study the various steps that are generally adopted by
a researcher in studying his research problem along with the logic behind them. It is necessary for the
researcher to know not only the research methods/ techniques but also the methodology. Researchers not
only need to know how to develop certain tests; how to calculate the mean, the mode, the median or the
standard deviation; how to apply particular research techniques, but they also need to know which of
these methods or techniques are relevant and which are not, and what would they mean and indicate and
why. Researcher also needs to understand the assumptions underlying various techniques and they need
to know the criteria by which they can decide that certain technique and procedures will be applicable to
certain problems and others will not.

Thus, when we talk of research methodology we not only talk of the research methods but also consider
the logic behind the methods we use in the context of our research study and explain why we are using a
particular method or technique and why we are not using the others.

I have used descriptive research methodology technique.

PRIMARY DATA:

The primary data refers to that data which is collected afresh and for the first time, and thus happen to be
original in character. We collect primary data during the course of doing experiments in an experimental
research but in case we do research of the descriptive type and performs surveys.

Modes of collecting primary data:

There are several modes or methods of collecting primary data. The most popular and frequently used
method is questionnaire method. I have also used this method for my project report. Apart from these I
have also conducted some informal interviews with the people.

SECONDARY DATA

The secondary data refers to that data which is already available i.e that has been collected and analyzed
by someone else. When the researchers utilizes secondary data then he has to look into various sources
from where he can obtain it. In this case he is certainly not confronted with the problems that usually
associated with the collection of the original data.

Modes of collecting secondary data:

Secondary data may either be published or unpublished data. The secondary data required for my project
has been collected from the following sources;

1. Books.

2. Journals, Magazines and Brochures.

52
 3. Internet.

SIZE OF SAMPLE:

This refers to the number of items to be selected from the universe to contribute a sample. An optimum
sample is one, which fulfills the requirements of efficiency, representativeness, reliability and flexibility.

Sample size: 50

SAMPLE DESIGN:

A sample design is definite plan for obtaining a sample from a given population. It refers to the technique
or the procedure that the researchers would adopt in selecting items for the samples.

SAMPLE TYPE:

Convenience Sampling- When population elements are selected for inclusion on the sample based on the
access, it can be called convenience sampling.

ANALYSIS TOOLS:

It is a technique used to analyze the data by the way of graphs, pie diagrams, scatter diagram etc.

ANALYSIS TOOLS: Graphs and Pie charts.

53
 PROFILE

A Brief Profile of the Bank

Widely known for customer centricity, Canara Bank was founded by Shri Ammembal Sub
Rao Pai, a great visionary and philanthropist, in July 1906, at Mangalore, then a small por
Karnataka. The Bank has gone through the various phases of its growth trajectory over
hundred years of its existence. Growth of Canara Bank was phenomenal, especially after
nationalization in the year 1969, attaining the status of a national level player in terms of
geographical reach and clientele segments. Eighties was characterized by business
diversification for the Bank. In June 2006, the Bank completed a century of operation in th
Indian banking industry. The eventful journey of the Bank has been characterized by seve
memorable milestones. Today, Canara Bank occupies a premier position in the comity of
Indian banks. With an unbroken record of profits since its inception, Canara Bank has sev
firsts to its credit. These include:

• Launching of Inter-City ATM Network

• Obtaining ISO Certification for a Branch

• Articulation of ‘Good Banking’ – Bank’s Citizen Charter

• Commissioning of Exclusive Mahila Banking Branch

• Launching of Exclusive Subsidiary for IT Consultancy

• Issuing credit card for farmers

• Providing Agricultural Consultancy Services

54
Over the years, the Bank has been scaling up its market position to emerge as a major
'Financial Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint
ventures in India and abroad. As at June 2010, the Bank has further expanded its domes
presence, with 3057 branches spread across all geographical segments. Keeping custom
convenience at the forefront, the Bank provides a wide array of alternative delivery chann
that include over 2000 ATMs- one of the highest among nationalized banks- covering 732
centres, 2681 branches providing Internet and Mobile Banking (IMB) services and 2091
branches offering 'Anywhere Banking' services. Under advanced payment and settlemen
system, all branches of the Bank have been enabled to offer Real Time Gross Settlement
(RTGS) and National Electronic Funds Transfer (NEFT) facilities.

Not just in commercial banking, the Bank has also carved a distinctive mark, in various
corporate social responsibilities, namely, serving national priorities, promoting rural
development, enhancing rural self-employment through several training institutes and
spearheading financial inclusion objective. Promoting an inclusive growth strategy, which
been formed as the basic plank of national policy agenda today, is in fact deeply rooted in
Bank's founding principles. "A good bank is not only the financial heart of the commu
but also one with an obligation of helping in every possible manner to improve the
economic conditions of the common people". These insightful words of our founder
continue to resonate even today in serving the society with a purpose. The growth story o
Canara Bank in its first century was due, among others, to the continued patronage of its
valued customers, stakeholders, committed staff and uncanny leadership ability demonstr
by its leaders at the helm of affairs. We strongly believe that the next century is going to b
equally rewarding and eventful not only in service of the nation but also in helping the Ban
emerge as a "Global Bank with Best Practices". This justifiable belief is founded on stro
fundamentals, customer centricity, enlightened leadership and a family like work culture.

55
 Chairman's Message

Chairman's Message

Profile

Profile

History

History

Board Of Directors

Board Of Directors

Vision & Mission

Vision & Mission

Awards & Achievements

Awards & Achievements

Shareholder Information 56
 DATA ANALYASIS
AND
FINDINGS:

ANALYSIS OF MARKET RESEARCH:

57
 • Number of Respondents –
Femal
e
20%
Male: 40

Female: 10

Male
80%

Findings: Out of total respondents a huge percentage is of male respondents, which mainly reflects the
dominance of male decision makers.

• Age
40-55 55 & 18-25
(Years) a bove (Years)
17% 2% 21%

25-40
(Years)
60%

18-25 25-40 (Years) 40-55 (Years) Above 55

(Years) (Years)

11 30 8 1

58
-Educational Background

Others
3% Graduate
23%

Professional
63% Post-
Graduate
11%

Graduate Post-Graduate Professional Others

10 8 30 2

Finding: Large portion of investors were highly educated with Post Graduates and Professionally
qualified respondents at equal percentage of 23% and 2% respondents were Graduates and rest with other
qualifications. Business
Class
20%

- Occupation:

Professionals
5% 59 Salaried
Class
75%
Salaried Class Self Employed Business Class Other

37 3 10 -

Findings:
75% a very
large number of respondents were from the service/salaried class while 20% were from the business and
the rest.

-What is investor’s income per month?

60
 ABOVE 0-10000
25000 19%
31%

10000-15000
15000-25000 38%
12%

0-10000 10000-15000 15000-25000 ABOVE 25000

10 19 6 15

Finding: 19% respondents have monthly income below 10000, 38% respondents had income between
10000-15000, 12% respondents had income between 15000-25000 and 31% respondents had income
above 25000.

-What percentage of income investor saves?

61
 30-40%
2% ABOVE 40%
0%

15-30%
44% 0-15%
54%

0-15% 15-30% 30-40% ABOVE 40%

27 22 1 -

Finding: 54% respondents saved less than 15% of their saving, 44% respondents saved 15-30% of their
savings and 2% respondents saved of 30-40% of their saving.

-Purpose of investor’s investment

62
 WEALTH SAVINGS
CREATION/I 51%
NVESTMEN
T
49%

SAVINGS WEALTH
CREATION/INVESTMENT

26 24

Finding: For 51% respondents the purpose was saving and for 49% the purpose was wealth creation and
investment.

MUTUAL
REAL ESTATE FUNDS
13% 25%

GOLD
11%
-If investor prefer investment, then in which of the following type?

INSURANCE
11% GOVT. SHARES
BONDS/BANK 63 21%
FD’S/POST
OFFICE
DEPOSITS
19%
Finding: 24% respondents preferred Mutual funds and investors equally preferred other investments.
With increasing gold prices and real estate prices they were getting less popular as investment options.

-How would investor like to do trading ONLINE

in share market?
41%
THROUGH
PERSONAL
ADVICE
59%
64
ONLINE THROUGH PERSONAL
ADVICE

20 30

Finding: 41% respondents preferred online trading in share market while 59% preferred share trading
through personal advice.

-Does fluctuation in share market affect investor’s investment plan?

65
NOT AT ALL LITTLE BIT MODERATE VERY MUCH

18 16 13 3

Finding: According to the responses only 6% were worried about fluctuation in share market and that
affected their investment plan. 36 % respondents were not at all worried about share market fluctuations
and 31% were little bit afraid and 27% were moderately worried.

YES
30%

-Does investor have proper knowledge about the concept of mutual funds?
PARTIAL, I
WOULD
LIKE TO
KNOW NO
MORE 66 14%
56%
 YES NO PARTIAL, I WOULD
LIKE TO KNOW
MORE

15 7 28

Finding: 30% respondents had proper knowledge about the Mutual Funds and 14% did not have
knowledge about the Mutual Funds. 56% respondents wanted to know about the Mutual Funds as they
had partial knowledge about the Mutual Funds.

BALANCED
36%

-If investor prefer mutual fund as his way of investment,EQUITY

then in which kind of
mutual fund would investor invest? 48%

DEBT 67
16%
EQUITY DEBT BALANCED

24 8 18

Finding: 48% respondents prefer Equity funds, 16% respondents prefer Debt Funds and 36% preferred
balanced funds.

-How much of investor’s total portfolio is in equity?

68
0-25% 25-50% 50-75% 75-100%

12 28 8 2

Finding: 32% respondents had invested less than 25% in equity funds, 56% have invested in 25-50%
equity, 10% had invested 50-75% in equity funds and 2% respondents have invested 75-100% in equity
funds.

-Does investor have any knowledge about financial planning?

69
YES NO Partial, I would like to know
more

19 17 14

Finding: 37% respondents have knowledge about financial planning, 32% respondents had very little
knowledge about financial planning. While 31% respondents had partial knowledge about financial
planning and were eager to know more about financial planning.

-Did investor’s consultancy firm provide him/her financial planning services/other

value added services?

70
YES NO

37 13

71
 CONCLUSION:

Equity is one of the best investments but it requires fairly large corpus, deep market knowledge and
fairly regular monitoring. Mutual funds provide the right opportunity to the millions of investors - who
lack money, expertise and/or time - to profit from the equity markets.

Mutual funds are supposed to make life simple! However, the story on the ground is somewhat different.

• The no. of Asset Management Companies has already crossed 40 and the number is growing.
HDFC, Birla, Reliance, Franklin, Principal, Sundaram, LIC, Tata, SBI, UTI, ICICI Pru, Kotak,
DSPML, Fidelity etc. have been around for quite some time now. But the tribe is growing with
new entrants like Axis, Bharti AXA, Peerless, Motilal Oswal etc. joining the party. While this
competition is good as it allows better products & services to be offered, it becomes difficult for
an ordinary investor to decide where to go.

72
 • Then comes the bewildering mix of funds – short term debt funds, long term debt funds, short
term floating rate funds, long term floating rate funds, gilt funds, index funds, tax-saving funds,
diversified equity funds, growth funds, dividend yield funds, mid-cap funds, sector-specific
funds, close-ended/open-ended funds, etc. not to mention specialty funds like derivative funds,
gold funds etc. Many funds have similar names which makes it difficult to distinguish between
them. Many funds have exotic names. Again, all this variety is good, but it leaves a lay-investor totally
foxed.

• That’s not the end of the story. Having chosen an AMC and a particular fund, investor are again
caught in a quandary, when investor sit down to fill-up the form. Should investor opt for Growth
or Dividend? If Dividend, then whether Painvestort or Reinvestment.

• Mostly investors like themselves to do trading transactions through personal guidance/ interaction
while some do the trading online without anyone’ consultation.

Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian

Stock Market and also the psyche of the small investors. This study has made an attempt to understand

the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC),

Products, Channels etc .I observed that many of people have fear of Mutual Fund. They think their

money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related

terms. Many of people do not have invested in mutual fund due to lack of awareness although they

have money to invest. As the awareness and income is growing the number of mutual fund investors is

also growing.

73
 RECOMMENDATIONS

RECOMMENDATIONS:

1. The company must assist the customer in every aspect and understand the investor’s
position and their targets.

74
2. Portfolio managers are often seen on TV and radio program talking of how well their
funds are doing but a portfolio manager’s appearance on a show does not necessarily
reflect the shows recommendations for that fund.

3. The background of anyone providing mutual fund advice and recommendation should be
evaluated. Their websites should have their biography showing their track record as
investment advisor.

4. The company should not focus only on making profits by charging irrelevant brokerage or
commission from the investors rather it should focus on making a clean deal with the
customer so as to satisfy all the parties involved.

5. Investor should be given a clear view about the commission charged on the investment in
terms of loads.

6. Portfolio managers recommending funds on financial channels should not be taken as the
only parameter for investment. Investors should do self research based on their guidance.

7. The consultancy firms should also provide the investors with some other facilities like
financial planning services or value added services other than the normal trading service
option.

75
 ANNEXURE:

BIBLIOGRAPHY
76
BOOKS:

Bhalla, V. K. (2004). Managing International Investment and Finance. New Delhi, Anmol

Bhall, L.M. (4th ed., 2004). Financial Institutes & Markets. Tata McGraw Hill

WEBSITES:

www.indiabullsinvestment.wordpress.com

www.indiabulls securities.com

www.mutualfundindia.com

Wikipedia.org

NEWSPAPER AND JOURNALS:

Economic times,

Hindustan times business.

77
 QUESTIONNAIRE

Questionnaire
1. Name of the respondent:

2. Age:
78
>18-25 >25-40

>40-55 >Above 55

3. Educational Background:

>Graduate >Post-Graduate

>Professionals >Others

4. Occupation:

>Salaried Class >Self Employed

>Business Class >Others

5. Monthly Income:

>0-10,000 >10,000-15,000

>15,000-25,000 >Above 25,000

6. What % of income investor save?

>0-15% >15-30%

>30-40% >Above 40%

7. What is the purpose of investorr investment?

>Savings >Wealth Creation/investment

8. If investor prefer investment, then in which of the following type?

>Real Estate >Gold

>Mutual Fund >Insurance

>Shares >Govt. Bonds

9. How would investor like to do trading in share market?

>Online >through personal advice

10. Does fluctuation in share market effect investorr investment plan?

>Not at all >Little Bit

>Moderate >Very Much

11. Do investor have proper knowledge about the concept of mutual funds?
79
>Yes >No

>Partial, I would like to know more.

12. If investor prefer Mutual fund as investorr way of investment, then in which kind of mutual fund
would investor prefer?

>Equity >Debt

>Balanced

13. How much of investorr total portfolio is in Equity?

>0-25% >25-50%

>50-75% >75-100%

14. Do investor have any knowledge about financial planning?

>Yes >No >Partial, I would like to know more

15. Did investorr consultancy firm provide investor financial planning services/other value added
services?

>Yes >No

80