1

A Final Report Presentation on Progress of Management Thesis Research On

A Macroscopic Examination of Mutual Fund as a goal achievement tool with focus on SIP vis--vis lump sum investment with particular reference to SBI, Birla Sun Life and HDFC Mutual Funds Prepared as a part of the Management Thesis Research-1 study as a the part of fulfillment of the requirements of the MBA Program conducted by the ICFAI National College Presented To:
Mr. Vipin Desai Senior Faculty and Research Guide ICFAI National College

Presented by
Abhishek S Apte(8NBVD069,0801213328)

ACKNOWLEDGEMENT

I am very much thankful to INC for providing us with a valuable opportunity by allowing us to pursue a research area and a platform for interacting directly with the industry experts and the customers also in the process. I would like to sincerely extend a vote of thanks to Mr. Vipin Desai, our faculty guide and senior member of the teaching staff for allowing us the opportunity to select such a live and interesting topic which involves a lot of dynamism and also allowed us to do a deeper research on the topic of mutual funds and for also allowing us to mould our self for a bright and solid career. Last but not the least I would like to thank various customers and personnel involved with the mutual fund industry who are also extending a full fledge support to us, helping us and even enlightening us on newer facts and knowledge regarding the mutual fund industry. By the time we conclude our research I hope will have gained enough and in-depth knowledge regarding the mutual fund industry and will be able to present ourselves as potential candidates for leading the future.

TABLE OF CONTENTS

Sr.No. 1 2

Particulars INTRODUCTION Introduction Management Thesis i. ii. iii. iv. v. History and Statistics regarding mutual funds Objectives Mutual Funds; Formation, working and types Advantages and Disadvantages of Mutual Funds Research Methodology Introduction to companies under study and short introduction to the schemes under comparison SBI, Birla Sun Life and HDFC Mutual Funds vi. vii. Analysis of data with illustraton and risks Findings and Facts and Conclusions

Page No. 4 5-33 5-13 13 14-22 23-30 30-35

35-48

48-81 82 83-90

viii. Appendices

Mutual Funds Industry in India

The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector entry to the fund family raised the AUM to Rs. 470 in March 1993 and till April 2004; it reached the height of 1,540 bn. Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking industry. The main reason of its poor growth is that the mutual fund industry in India is new in the country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund companies, to market the product correctly abreast of selling.

Unit Trust of India is the first Mutual Fund set up under a separate act, UTI Act in 1963, and started its operations in 1964 with the issue of units under the scheme US-64.

History of mutual funds and Statistics

PHASES OF 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 history of mutual fund in India can be broadly divided into four distinct phases.

Phases of Mutual Fund Industry in India

se a Ph

IV

Ph as

FIRST PHASE 1964-1987 Unit Trust of India (UTI) was established on 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,

Ph a
eII I

se

-II

Ph as e-I

UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme in 1964. At the end of 1988 UTI had Rs.6, 700 cores of assets under management. SECOND PHASE 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non-UTI, public sector mutual funds set up by the 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 Name of the Mutual Fund Company SBI Mutual Fund Can bank Mutual Fund Punjab National bank Mutual Fund Indian bank Mutual Fund Bank of India Mutual Fund Bank of Baroda Mutual Fund LIC Mutual Fund GIC Mutual Fund June December August Time of establishment 1987 1987 1989 1989 1990 1992 1989 1990

November June October June December -

At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 cores. 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 the mutual funds except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first privates 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 the total assets of Rs. 1, 12,805 cores. The Unit Trust of India with Rs. 44,541 cores of assets under management was way ahead of other mutual funds. FOURTH PHASE since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963, UTI was bifurcated into two separate entities. One is the specified undertaking of the Unit Trust of India with assets under management of Rs.29, 835 cores 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 cores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations and with the 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 cores under 421 schemes.

How Mutual Fund is working?

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There are many entities involved in the mutual funds. Let us now discuss each of these in details.

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Trust Indian Trust Act of 1882 is applicable to MF. It has to be formed under trust. It should have a board of trustees and trust. Two third of the trustees should be independent persons. Asset Management Company An asset management company of AMC approved by SEBI has to manage the funds by making investments in various types of securities. Minimum net worth for the AMC is Rs.10 cr. In the constitution of its board there should be 50% independent directors. Custodian There is necessity of a custodian to hold the securities of various schemes of the fund in its custody. It should be registered with SEBI, only when it is eligible to be a custodian of MF. Registrar The registrar maintains the account of investors for both the purpose of investment and disinvestment. Investors Whoever invests in the units of MF, he is an investor. He is the key person for the MF industry. Mostly small investors who cannot keep tract over the

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capital market and are hesitant to take direct risk invest in MF with the sole intention of maximizing returns.

STATISTICS

Market Potential: Market potential for the growth of mutual funds is huge as no investment avenue today is free from loopholes but they miss some finer aspects of the investors desires which mutual funds sharply satisfy during the natural course of operations. Demand for mutual funds:

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The demand for mutual funds as compared to other sources of investments is very low as compared to other sources as visible from the graph as given below: Banking Products have a large and seemingly unconquerable consumer base. Hot on the trail are life mutual fund products as a rise in the literacy rate has slowly started gaining awareness among the rural area and the typical Indian considers it a feasible and safe idea to not only secure his own future but also to leave a sustainable amount in the event of his demise. Silently following are debit cards which have slowly not only associated themselves to the ATM machines and easy cashless purchases but also removed the tedious and cumbersome process of doing routine banking activities like withdrawal and purchases of money. Today the Indian Banks can proudly boast not only anytime banking but anywhere banking. Mutual Funds are slowly taking a road ahead but will require some time to actually make a big stage appearance sooner or later. Ask anyone today what he wants to do with his income. The other person immediately shoots back Invest. But go a step further and ask where and a big question mark appears on his/her face. But every jungle has some or the other part/corner that is unexplored or less explored but contains the most unimaginable opportunities. Once such corner in todays world is Mutual Funds.

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Before we understand what is mutual fund, its very important to know the area in which mutual funds works, the basic understanding of stocks and bonds. Stocks: Stocks represent shares of ownership in a public company. Examples of public companies include Reliance, ONGC and Infosys. Stocks are considered to be the most common owned investment traded on the market. Bonds: Bonds are basically the money which you lend to the government or a company, and in return you can receive interest on your invested amount, which is back over predetermined amounts of time. Bonds are considered to be the most common lending investment traded on the market. There are many other types of investments other than stocks and bonds (including annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds.

Objectives
The proposed objectives for the study are as follows:

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To give a brief idea about the benefits available from Mutual Fund investment

To give an idea of the types of schemes available. To study the market trends of Mutual Fund investment. To study some of the mutual fund schemes and analyse them To observe the fund management process of mutual funds To give an idea about the regulations of mutual funds

What is mutual fund?

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A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are

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buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus 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. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. 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 Scope of Mutual Funds has grown enormously over the years. In the first age of mutual funds, when the investment management companies started to offer mutual funds, choices were few. Even though people invested their money in mutual funds as these funds offered them diversified investment option for the first time. By investing in these funds they were able to diversify their investment in common stocks, preferred stocks, bonds and other financial securities. At the same time they also enjoyed the advantage of liquidity. With Mutual Funds, they got the scope of easy access to their invested funds on requirements

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But, in todays world, Scope of Mutual Funds has become so wide, that people sometimes take long time to decide the mutual fund type, they are going to invest in. Several Investment Management Companies have emerged over the years who offer various types of Mutual Funds, each type carrying unique characteristics and different beneficial features.

Type of Mutual Fund Schemes

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BY STRUCTURE

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Open Ended Schemes An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Close Ended Schemes

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. Interval Schemes Interval Schemes are that scheme, which combines the features of openended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.

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BY NATURE
Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are subclassified depending upon their investment objective, as follows: Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS)

Debt funds: The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors.
Gilt Funds: Invest their corpus in securities issued by Government,

popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

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Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities.

MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds.

Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities,

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which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.

BY INVESTMENT OBJECTIVE

Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.

Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income

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securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

OTHER SCHEMES

Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those of the Index.

Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are

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dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. Types of returns 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. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.

Net Assets Value (NAV)

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The net asset value of the funds is the cumulative market value of the assets fund net of its liabilities. In other words, if the funds is dissolved or liquidated, by selling of all the assets on the fund, this is amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, respected by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the per unit. We also abide by the same convention.

Calculation of NAV
The most important part of the calculation is the valuation of the asset owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the assets value is given below.

Net Asset Value is equal to = Net Assets of the Scheme / Number of units outstanding i.e.

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(Market value of investment + Receivables +Other Accrued Income + Other Assets Accrued Expenses Other Payables Other Liabilities

Advantages
Portfolio Diversification An investment in mutual funds enables the unit holder to have a well diversified investment in various companies at almost a negligible cost in small volumes

Professional management

The investor in mutual funds is ridden from doing the cumbersome and time consuming job of studying and analyzing performances of various securities before investing as it is all professionally managed by the Fund Managers and investors pooled money is invested only in avenues which are in a growth stage or likely to hit the growth stage of the industry life cycle. Reduction / Diversification of Risk Here the investor enjoys a great advantage of investing in multiple stocks with a minimum amount at the same time with an expectation of good returns as a well diversified portfolio enables an investor to returns from multiple companies at the same time.

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Liquidity Unlike traditional sources of investment, the investors money does not get blocked up to a fixed maturity period. The invested amount can be withdrawn at the will of the investor by selling the existing units invested and it also adds up to cover the opportunity cost that he might incur.

Flexibility & Convenience Unlike traditional sources of investment, the investors money does not get blocked up to a fixed maturity period. The invested amount can be withdrawn at the will of the investor and it also adds up to cover the opportunity cost that he might incur.

Reduction in Transaction cost Unlike other forms of investment there are no large operational costs nor does the investor need to go to a broker or a broking firm for the purpose of investing. The transaction costs are as low as 2.5% entry load(abolished) and 1.25% exit load which is hardly anything as compared to investments in Life Insurance where the middleman earns as large as 10% per annum as trail commission.

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Safety Just like other investment avenues have one or the other regulatory body or an act governing them in the same manner mutual funds are well regulated by SEBI(Securities and Exchange Board of India) which not only issues regulatory guidelines for mutual funds but also ensures proper compliance with guidelines.

Disadvantages
No control over Cost in the Hands of an Investor As compared to the many advantages this is a small disadvantage with mutual funds investments, as unlike with stock broking firms the investor has no scope of negotiating with the brokerage costs as no cost is decided individually by any fund house but by a regulatory authority namely SEBI. No tailor-made Portfolios In the same manner as above the investor himself has no choice over how much of his money will be allotted in which funds as all these decisions lie in the Safe Hands of the Fund manager. Managing a Portfolio Funds Managing the portfolio no longer remains in the hand of the investor but the real power lies in the hands of the investor.

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Though the investor can withdraw his money anytime and invest it elsewhere yet during the time it lies with the fund house he/she has no control over how much and where to invest

RESEARCH METHODOLOGY
This report is based on primary data, however primary data collection is given more importance since it is overhearing factor in attitude studies. One of the most important users of research methodology is that it helps in identifying the problem, collecting, analyzing the required information data and providing an alternative solution to the problem .It also helps in collecting the vital information that is required by the top management to assist them for the better decision making.

Data sources: Research is totally based on primary data. Research has been done by primary data collection, and primary data has been collected by interacting with various people. Even secondary literature and guide books of National Stock Exchange on mutual funds has been referred.

Duration of Study:

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The study is being carried out for a period five months, from 1st August 2009 to 30th October 2009.

Sampling:

Sampling Technique

The sampling technique being used by me is stratified random sampling, where in I have divided my target customers for mutual funds into a strata of 10 customers per area and surveying each one separately.

Sampling procedure:

The sample is selected of them who are the customers and investors .It is also collected through personal visits to persons, shops and various brokering organization by informal talks and through filling up the questionnaire prepared. The data shall be analyzed by using mathematical/Statistical tools and techniques if possible.

Sample size:

The sample size of my project is limited to a sample population of 100 people.

Sample design:

Data can be presented with the help of bar graph, pie charts, line graphs etc.

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Procedure Adopted: 1. Studying the mutual fund concept

Reading about the mutual fund was the first step undertaken. This gave not only in depth knowledge about what is been offered by the mutual fund and its scope in the current financial market but also proved useful while developing the questionnaire.

2. Decision on objective needed to be work on.

The next step and probably the most important one of all was to develop the research objective for the study needed to undertaken for understanding the investors mindset and their awareness towards equity investments with reference to mutual funds. A thorough objective was already defined and that required a reasonable degree of clarity which I managed to acquire after consulting with our faculty guide Mr. Vipin Desai.

3. Developing Survey instruments

All of the trainees designed a rough draft of a suitable questionnaire format for the survey. After a little discussion with our expert faculty guide and after incorporating some changes incorporated by him the draft of the questionnaire was finalized and I got myself a photo copy of the draft and ultimately 100 copies of the draft per person.

After availing the copies, the survey work is under process at the end of
which the data so surveyed will be thoroughly analyzed under the expert guidance of the company guide.

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4. Getting questionnaire filled through interacting with different age groups, sex, monthly income and occupation. Accordingly I target and stand outside various places and survey them as per the table given below:
SBI Zonal Office Sayajigunj Landmark(ICICI Bank & IDEA Showroom) Race course Dandia Bazar

Progress
To this day I have completed surveying the stated sample of 100 people due to which I feel my progress is just on track and I am confident of the fact that I will be able to complete the analysis and presentation work soon.

Literature Viewed
The literature that has been viewed by me is mostly the reports readily available in the library of ICFAI National College. In addition the statistics produced in the leading magazines like The Competition Success Review, and Indian Management Journal as a source of additional reading.

The two reports that have been referred as previous reports are:

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Is direct investment in mutual funds better than share markets: An analytical overview: sadik hussain Mutual Funds Awareness survey: Birla Sun Life Mutual fund.
Both of the above reports aim at establishing a common belief that mutual funds awareness and progress is at a very slow level in Baroda City and by my research I would convince them that the mutual funds awareness in Baroda is also growing at a fast pace thanks to some active mutual fund distribution houses like Religare Fin Mart Securities Pvt. Ltd., Karvy Securities, Anand Rathi Investments etc. and also from the survey of the people and their awareness regarding mutual funds.

Scenario Of Mutual Funds In India

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Introduction to the companies under study

SBI Mutual Fund is one of the largest mutual funds in the country with an investor base as large as 5.4 million investors. With experience exceeding 20yrs, SBI MF brings forward its experience in delivering value to its investors.

The investment environment is becoming increasingly complex. Innumerable parameters need to be factored in to generate a clear understanding of market movement and performance in the near and long term future. At SBIMF, we devote considerable resources to gain, maintain and sustain our profitable insights into market movements. We consistently push the envelope to ensure our investors get the maximum benefits year after year. Research - the backbone of our Performance Our expert team of experienced and market savvy researchers prepare comprehensive analytical and informative reports on diverse

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sectors and identify stocks that promise high performance in the future. This team works in tandem with a compliance and risk-monitoring department, which ensures minimisation of operational risks while protecting the interests of the investors. Quite naturally many of our equity funds have delivered consistent returns to investors and have repeatedly out performed benchmark indices by wide margins.

THE BRAIN BEHIND THE GAME Head Portfolio Management Services / Fund Manager :
Nipa Ladiwala

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation.The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has grown immensely since its inception and today it is India's largest bank, patronised by over 80% of the top corporate houses of the country. SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset Management companies that manages over US $500 Billion Worldwide.In twenty years of operation, the fund has launched 38 schemes and successfully redeemed fifteen of them. In the process it has rewarded its investors handsomely with consistent returns.A total of over 5.4 million investors have reposed their faith in the wealth generation expertise of the Mutual Fund.

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Schemes of the Mutual fund have consistently outperformed benchmark indices and have emerged as the preferred investment for millions of investors and HNIs.Today, the fund manages over Rs. 34,441 crores of assets and has a diverse profile of investors actively parking their investments across 38 active schemes.The fund serves this vast family of investors by reaching out to them through network of over 130 points of acceptance, 28 investor service centers, 46 investor service desks and 56 district organisers. SBI Mutual is the first bank-sponsored fund to launch an offshore fund Resurgent India Opportunities Fund. Growth through innovation and stable investment policies is the SBI MF credo .

LEADING FUND SCHEMES

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The investments of these schemes will predominantly be in the stock markets and endeavor will be to provide investors the opportunity to benefit from the higher returns which stock markets can provide. However they are also exposed to the volatility and attendant risks of stock markets and hence should be chosen only by such investors who have high risk taking capacities and are willing to think long term. Equity Funds include diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds invest in various stocks across different sectors while sectoral funds which are specialized Equity Funds restrict their investments only to shares of a particular sector and hence, are riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a particular index and the performance of such funds move with the movements of the index. Magnum COMMA Fund Magnum Equity Fund Magnum Global Fund Magnum Index Fund Magnum Mid Cap Fund Magnum Multi cap Fund Magnum Multiplier Plus 1993

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Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Services Inc. of Canada. The joint venture brings together the Aditya Birla Group's experience in the Indian market and Sun Life's global experience. Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading Mutual Funds managing assets of a large investor base. The fund offers a range of investment options, which include diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds. BSLAMC follows a long-term, fundamental research based approach to investment. The approach is to identify companies, which have excellent growth prospects and strong fundamentals. The fundamentals include the quality of the companys management, sustainability of its business model and its competitive position, amongst other factors. Birla Sun Life Asset Management Company has one of the largest team of research analysts in the industry, dedicated to tracking down the best companies to invest in. SCHEMES BIRLA SUN LIFE CAPITAL PROTECTION ORIENTED FUND-3 YRS- DIVIDEND BIRLA SUN LIFE CAPITAL PROTECTION ORIENTED FUND-3 YRS- GROWTH Birla Sun Life Dynamic Bond Fund-Discipline Advantage PlanGrowth Birla Sun Life Dynamic Bond Fund-Retail Plan-Growth Birla Sun Life Dynamic Bond Fund-Retail Plan-Monthly Dividend Birla Sun Life Dynamic Bond Fund-Retail Plan-Quarterly Dividend Birla Sun Life Fixed Maturity Plan - Annual Series 3-Dividend Birla Sun Life Fixed Maturity Plan - Annual Series 3-Growth

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Avenues of Investment
Ranking of investment avenues
60 56 39 32 25 15 10 4 12 34 Debt Capital 36 30 23 9 2 36 18 25 13 8 1st Rank 2nd Rank 3rd Rank 4th Rank 5th Rank

Number of people

50 40 30 20 10 0 34 30

14 14 8 Others

Equity Capital

Fixed Real Estate Deposite

Avenues of investment

As evident from the above chart Fixed Deposits, Equity capital investments and Real estate form a major part of preferred investment avenues of people. The common belief that people displayed during the survey was that most of them gave a prominent nod on the mention of fixed deposits. But surprisingly from the survey it was revealed that fixed deposits no longer dominated the market as the leading and most trusted investment avenue but the category of others showed most people ranking as 1st rank. On inquiring people told that trust and safety was no longer a problematic factor due to efficient corporate governance on them and strict regulatory controls and avenues like gold exchange schemes, mutual funds, postal deposits and

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saving schemes, NSC, KVP and some people displayed a small preference towards bonds and debentures.

Motives behind investment

Investment needs of people
Number of people ranking 60 50 40 30 20 10 0 Tax benefits Return on investment Liquidity position Future Security Retirement Benefits 29 27 1718 9 43 26 15 9 7 8 52 39 25 18 10 28 21 20 22 9 11 1 27 1st rank 2nd rank 3rd rank 4th rank 9 5th rank

Investment needs

Our analysis of the consolidated answers of people revealed that maximum number of people naturally told they invested for returns. After the need for returns is satisfied the people opined that they save for meeting expected future needs for e.g marriage, pregnancy, educational fees of children, dayto-day expenses like provisions, medicines etc as well as for unpredicted future occurrences e.g. accident, donations and charity etc. After the above basic motives people opined that tax planning is the most important motive that they consider for which mutual funds ELSS (Equity Linked Savings Scheme) was opined as an effective avenue which provides an excellent level of returns in spite of having a three year bond period as it gives the option to switch between various schemes of the fund house and sti . Very

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few people opined for liquidity availability as a separate motive as it already gets covered and not surprisingly very few people consider retirement planning as an avenue for investment.

Span of investment

Span of investment in various avenues

19%

17% 1 year 1-3 year 3-5 year Excess of 5 years 43%

21%

The analysis of the responses of people revealed that most people invest for a period of 1 to 3which is considered (as medium term) as a safe and adequate period for investing their money and also getting a certain degree of attractive returns. Some people also believe in investing for a relatively higher period of 3 to 5 years for something more than the average investor. Some people invest for a very short period and mostly invest in short term sources of finance like liquidity fund, floating fund, monthly income plans in various mutual fund schemes. While, the premium investors having large

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idle funds prefer investments in the long term periods in excess of 5 years mostly consisting of avenues like Real Estate, Life Insurance products and even mutual fund schemes, national savings schemes and largely in equity capital of multiple number of companies

Awareness of mutual funds

On being questioned about awareness of people 47% of the people replied that they know about the concept of mutual funds while 53% of people honestly and bluntly replied that they knew nothing about mutual funds and neither were they interested in knowing about it as if it was something dangerous

Actual Investors in Mutual Funds

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From the analysis of the previous question we revealed tht a large proportion of the sample population were not aware about mutual funds and not surprisingly the number of people actually making the investment in mutual funds turned out to be a much lower 25% while the number of people actually not investing in mutual funds was relatively much higher i.e. 75% which revealed the fact that there are a significant number of people who invest in mutual funds without any actual basic knowledge and have invested just because of experiences and pressures from other people e.g. Family, relatives, marketing personnel, experiences of others etc. and also a distinct class who have fair amount of know-how of how of working of mutual funds but dont invest out of the fear of market uncertainty.

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AMC WiseInvestors

The above chart was the most complex chart to analyze because it was difficult to categorize the investors into fanatics or die-hard fans of a mutual fund house and of a purposeful and smart investor. As above chart Birla Sunlife Mutual Fund rules the market with 65 people noding of possession of units in BSL Muttual Fund House, followed by HDFC Joining the race after recent declaration of dividends and lagging way behind was found SBI Mutual Fund with a meagre fan-following. But a pleasant surprise was the number of people who were purposeful investors who had investments pooled into more than one of the fund houses and 10 to 12 people had investments in all the three fund houses. This meant a pleasant discovery on the part of the mutual fund houses and the realization of a fact that investors are now becoming smarter

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learning from the one and half yearly recession and the turbulent share market cyclones that passed through India..

Lumpsum V/S SIP

When enquired about the reasons for not investing in SIP as compared to lump sum investments in mutual funds, the people put forward the above reasons for not investing in mutual funds as per their understanding and probably due to varied experiences while playing in the share market.

My Portfolio, My Choice

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When the people were queried about how they preferred style of designing an investment portfolio then most of them were found pointing their fingers straight at their family members, relatives and friends as their chief financial advisors. Some salaried income group opined that they were getting the perceived value for thepayments they were getting from their broker or intermediary who in their opinion were doing a fair job and advising in the best intrest of their clients. Some knowledgeable citizens to pointed out the value of self help and the slogan My investment,my way.A small group of people still continues to follow the traditional method of consulting market experts and/or investment gurus.

Frequency of checking the portfolio

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The consumers on going through this question were found unwilling to answer this question honestly and many of them pointed out that they monitored their investments mostly each month while a distinct majority pointed out that they never bothered to check their portfolio and largely admitted that they had nothing like fixed expectations and whatever was available as returns to them would be agreeable unless it was a loss. While an equivalent majority of people decided larger frequency of time to monitor portfolios like quarterly and yearly and some even sincerely prefer to monitor their portfolios regularly at ten days or fortnight.

Ranking of reasons for investing in mutual funds

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From the consolidated answers of the people the reasons people put forward for investing in mutual funds were many. Majority of people out of those who invest in mutual funds pointed out at risk profile of the mutual funds and their ability to earn better returns as compared to traditional investment avenues like fixed deposits, life insurance etc. Some of the people pointed out that they liked the factors of professional management and past performance in dealings as the main factors influencing their decision to invest in mutual funds. Small majority of the people even pointed that they also considered investing because of the lower costs involved and the brand name of the asset management company as they perceived brand name as the level of security of their invested sum.

Reasons for not investing

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From the consolidated answers of the people the reasons people put forward for not investing in mutual funds were many. Majority of people out of those who invest in mutual funds blamed lack of knowledge, uncertainty of returns, and bad experiences of past mutual funds investment as common reasons. In addition people also agreed to limitations like Risk profile, difficult of choosing appropriate funds and lack of confidence in the ability of the fund managers.

The Way Forward for the Mutual Fund Investors

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There is no one mutual fund that will be suitable to all kinds of investors. Hence, mutual fund investors need to identify a suitable fund for them. This would be the first step towards making successful investments in mutual funds. Identifying a suitable fund can be done in a two-step manner as follow: a. Selecting a fund with investment objectives and preferences, return objectives, time horizon and risk tolerances that meet the requirements of the investor. b. Selecting a fund that has a detailed asset allocation strategy by fund type category to reflect the investment objectives of the fund. To select a suitable fund, investors should read the fund's prospectus completely before making investment. By reading investment objectives, the fund's financial goals and the type of securities chosen can be known. An investor can make out whether or not a fund is advisable for him by determining if the goals are congruent with his own investment goals. Investor should also ensure that the fund is comparing itself with an appropriate benchmark. Another important aspect investors have to carefully examine is the fees and expenses charged by the fund.

b.

c.
d. e.

Finally, investors should always be conscious of the fact that mutual funds invest their funds in capital market instruments such as shares, debentures, bonds and money market instruments, and that all the capital market instruments have risk. Therefore an investor is supposed to have full knowledge and understanding that mutual fund investments are subject to market risk and should manage the risks carefully for a safe and happy investment.

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Conclusions
It is note worthy to notice the following facts regarding the public awareness regarding various alternatives of investment and a growing shift from traditional investment avenues like PPF, Fixed Deposits and Bonds etc. to more profitable and short term investment avenues like mutual funds and equity exchange stock market. But still in a saturated markets like baroda mutual funds need to put extra efforts in pushing forward mutual fund as a profitable avenue for investment.

Findings and Facts.

Lack of proper efforts to educate people regarding mutual funds investment and promote themselves better as compared to the traditional avenues.

Due to the abolition of entry load on mutual funds investment the fund houses along with their broking partners have faced a large shake up as investors are increasing their rush to invest but the profitability of the fund houses has gone down. Large scale confusion among employees of mutual fund houses due to fear of unemployment due to lower profitability of fund house and cost cutting activities. Turbulent activity in the Indian Share Market has shattered mutual fund hopes of finding new business.

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Appendices

Questionnaire on the A Macroscopic view On Mutual Fund as a Goal Achievement Tool with Emphasis on SIP and Lump Some Investment (Please tick or write the required details as per the question format,*=compulsory)

CUSTOMER PROFILE *Name: _____________________________________________________ *Age: ________ Address: __________________________________________ __________________________________________ __________________________________________ __________________________________________

*Mobile No: __________________________ *Occupation: _____________________

*Annual Income:

Up to Rs. 200000

Rs. 200000-400000

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Rs. 400000-500000

> 500000

*Gender:

Male

Female

1. What is your preferred avenue for investment? (Rank from 1 to 5 as per your choice, 1=most preferred, 5=last preferred) a) b) c) d) e) Equity Capital Debt Capital/bonds Fixed Deposits in Banks Real Estate Others _____ _____ _____ _____ _____

2. What is your goal of investment? (Please Rank 1 to 4) 1) Tax Benefits 2) Returns on investment 3) Liquidity position 4) Future Security ______ ______ ______ ______

3. On an average what is the period for which you invest? 1 year 1-3 years 3-5 years

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Excess of 5 years 4. Do you know about mutual funds? Yes No

5. Do you invest in mutual funds? (If answer is yes then kindly skip question no 8, and if it is no then please skip Q6 and Q8) Yes No

6. If answer (to question no 5) is yes then kindly name the scheme you invest SBI Mutual Fund Birla Sun Life Others _____________________________________________________ (In case of other option kindly specify the name of the asset management company) HDFC Mutual Fund Multiple

7. How do you think you can describe your investment strategy in a word?

Aggressive

Consultative

Watchful

Conservative

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8. Do you know the concept of SIP (Systematic Investment Plan)? Yes No

9. How much have the last two financial years of recession affected your portfolio? Drastically Significantly Average Not at all

10. How lump sum investment can be beneficial as compared to SIP? ________________________________________________________ 11. Which goals are achieved by Mutual funds? _______________________________________________________________ _______________________________________________________________ 12. How SIP can be beneficial? _______________________________________________________________ _______________________________________________________________ _______________________________________________________________

13. How lump sum investment can be beneficial as compared to SIP? _______________________________________________________________ _______________________________________________________________ _______________________________________________________________

14. Which scheme(s) do you select? e.g. monthly income or fixed maturity plan etc.

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_______________________________________________________________ _______________________________________________________________ _______________________________________________________________

15. What are the preferable reasons for preferring those schemes? _______________________________________________________________ _______________________________________________________________ _______________________________________________________________ 16. Why do you prefer direct investment in mutual funds as compared to Equity trading? _______________________________________________________________ _______________________________________________________________ _______________________________________________________________

17. How do you design your mutual funds portfolio? _______________________________________________________________ _______________________________________________________________ 18. Would you prefer investment in real estate funds or gold funds?Why? _______________________________________________________________ _______________________________________________________________

19. At how much frequency do you prefer to check your portfolio?

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_______________________________________________________________

20. How do you perceive the service quality of mutual funds? _______________________________________________________________ _______________________________________________________________ _______________________________________________________________ 21. Do you assess how much money has grown in mutual funds? _______________________________________________________________ _______________________________________________________________

22. Do you know about the services of www.moneycontrol.com? _______________________________________________________________ _______________________________________________________________ 23. If mutual funds give you more than your traditional long term investments (e.g. Fixed Deposits, Bonds Etc.). Would you consider investing in mutual funds? Definitely Yes I dont know Definitely No

24. What factors would you consider while making an investment in mutual funds as compared to other sources of investment?(Please Rank 1 to 7)

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High returns Low costs Professional management Brand Name Risk Profile Past performance of the fund Transparency

_____ _____ _____ _____ _____ _____

25. What is the reason for not investing in mutual funds particularly as compared to mutual funds?(Please rank from 1 to 5) Bad Experience Lack of knowledge Lack of confidence in service provider Uncertainty of Returns Difficulty in choosing ______ ______ ______ ______ ______

ABBREVIATIONS USED IN MUTUAL FUNDS NSDL-National Securities Depository Limited SEBI- Securities and Exchange Board of India AMFI-Association of Mutual Funds in India

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AMC- Asset Management Company MFMutual Funds

MoF- Ministry of Finance Fun.Man-Fund Manager BSE-Bombay Stock Exchange