ACKNOWLEDGEMENT
Success is a mixture of guidelines, hard work, co-operation encouragement and inspiration.
I here by take the pleasure of thanking all who have contributed to the making of this project report.
Firstly, I would like to thank Mrs. Rekha Panwar (Branch Manager) who gave the chance to make project and also gave introduction of ICICI Prudential and the employees of the bank. He has provided full liberty and co-operation during the training. He also comes with me to the customers to approach. For his care and concern from sharing knowledge of this field with me always with smile I am thankful to him.
I would like to thank Mr. K.G. Mantri (RM) to give permission for taking training in ICICI Prudential.
Encouragement and inspiration is the basic ingredients of success given by Director Karunesh Saxena and Project Guide Mr. M.S. Pahwa faculty member of Pacific Institute of Management.
I would be failing my duty if I don’t acknowledge the depth gratitude to the efficient manpower of ICICI Prudential. I cannot retain from saying that all this help and concern made me feel homely while on training.
Thanking you all,
GARIMA SHARMA
I here by take the pleasure of thanking all who have contributed to the making of this project report.
Firstly, I would like to thank Mrs. Rekha Panwar (Branch Manager) who gave the chance to make project and also gave introduction of ICICI Prudential and the employees of the bank. He has provided full liberty and co-operation during the training. He also comes with me to the customers to approach. For his care and concern from sharing knowledge of this field with me always with smile I am thankful to him.
I would like to thank Mr. K.G. Mantri (RM) to give permission for taking training in ICICI Prudential.
Encouragement and inspiration is the basic ingredients of success given by Director Karunesh Saxena and Project Guide Mr. M.S. Pahwa faculty member of Pacific Institute of Management.
I would be failing my duty if I don’t acknowledge the depth gratitude to the efficient manpower of ICICI Prudential. I cannot retain from saying that all this help and concern made me feel homely while on training.
Thanking you all,
GARIMA SHARMA
Introduction :
The Indian mutual fund industry is going through a phase of transformation since liberalization. Liberalization has paved the way for foreign investors in the mutual fund industry. This has increased the pace of evolution in the industry and made more products and services available to investors. But intensifying competition and steady growth of mutual funds has forced AMCs to increase their reach in non- metro cities and small towns, where the potential is high and penetration is low.
Now the AMCs are making strategies to realize the potential of retail investors. So researcher survey would go a long way in helping the mutual fund companies better understand not only the existing customers but also the potential ones. The information would also help them shape products suitable for the customers and market them effectively.
Prudential ICICI Mutual Fund is the largest private sector mutual fund in India with assets of over Rs.34,119 crore under management as of Aug 2006. The asset management company, Prudential ICICI Asset Management Company Limited, is a joint venture between Prudential Plc, Europe's leading insurance company and ICICI Bank, India's premier financial institution.
Prudential Plc holds 55 per cent of the asset management company and the balance by ICICI Bank. In a span of just over six years, Prudential ICICI Asset Management Company has emerged as one of the largest asset management companies in the country.
Mutual Fund
A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest in equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc.
INVESTORS
Invest/ Pool
their Money
Profit/Loss
from Portfolio
of Investment
MUTUAL FUND CO.
(Pool of Money)
Invest in a number
of Stocks/Bonds
Profit/Loss
from Individual
Investment
MARKET (Fluctuates)
Being trainee at ICICI Mutual Fund, I got an exposure to a blend of activities providing me with enough opportunities to learn about the nuances specifically in the Mutual Fund Industry.
The very first step in my voyage of learning at ICICI Mutual Fund, was taking NCFM- AMFI (Advisors’ Module) Test. It was very important to have a clear understanding of how a Mutual Fund operates and what are its advantages and limitations. The course proved useful as it also provided knowledge of technical and essential operational details involved and henceforth it added to my existing knowledge.
The Indian mutual fund industry has already started opening up many of the exciting investment opportunities to Indian investors. We have started witnessing the phenomenon of more savings now being entrusted to the funds than to the banks. Despite the expected continuing growth in the industry, mutual funds are still a new financial intermediary in India. Hence, It is important that the investors, the mutual fund agents/distributors, the investment advisors and even the fund employees to acquire better knowledge of what mutual funds are, what they can do for investors and what they cannot, and how they function differently from other intermediaries such as the banks.
The Indian mutual fund industry is going through a phase of transformation since liberalization. Liberalization has paved the way for foreign investors in the mutual fund industry. This has increased the pace of evolution in the industry and made more products and services available to investors. But intensifying competition and steady growth of mutual funds has forced AMCs to increase their reach in non- metro cities and small towns, where the potential is high and penetration is low.
Now the AMCs are making strategies to realize the potential of retail investors. So researcher survey would go a long way in helping the mutual fund companies better understand not only the existing customers but also the potential ones. The information would also help them shape products suitable for the customers and market them effectively.
Prudential ICICI Mutual Fund is the largest private sector mutual fund in India with assets of over Rs.34,119 crore under management as of Aug 2006. The asset management company, Prudential ICICI Asset Management Company Limited, is a joint venture between Prudential Plc, Europe's leading insurance company and ICICI Bank, India's premier financial institution.
Prudential Plc holds 55 per cent of the asset management company and the balance by ICICI Bank. In a span of just over six years, Prudential ICICI Asset Management Company has emerged as one of the largest asset management companies in the country.
Mutual Fund
A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest in equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc.
INVESTORS
Invest/ Pool
their Money
Profit/Loss
from Portfolio
of Investment
MUTUAL FUND CO.
(Pool of Money)
Invest in a number
of Stocks/Bonds
Profit/Loss
from Individual
Investment
MARKET (Fluctuates)
Being trainee at ICICI Mutual Fund, I got an exposure to a blend of activities providing me with enough opportunities to learn about the nuances specifically in the Mutual Fund Industry.
The very first step in my voyage of learning at ICICI Mutual Fund, was taking NCFM- AMFI (Advisors’ Module) Test. It was very important to have a clear understanding of how a Mutual Fund operates and what are its advantages and limitations. The course proved useful as it also provided knowledge of technical and essential operational details involved and henceforth it added to my existing knowledge.
The Indian mutual fund industry has already started opening up many of the exciting investment opportunities to Indian investors. We have started witnessing the phenomenon of more savings now being entrusted to the funds than to the banks. Despite the expected continuing growth in the industry, mutual funds are still a new financial intermediary in India. Hence, It is important that the investors, the mutual fund agents/distributors, the investment advisors and even the fund employees to acquire better knowledge of what mutual funds are, what they can do for investors and what they cannot, and how they function differently from other intermediaries such as the banks.
Benefits of Mutual Funds
There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK is the range of benefits they offer, which are unmatched by most other investment avenues. The benefits have been broadly split into universal benefits, applicable to all schemes, and benefits applicable specifically to open-ended schemes.
Universal Benefits
Affordability
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.500/-. Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.
Diversification
The nuclear weapon in arsenal for fight against Risk. It simply means that the investment is spread across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of the returns.
Variety
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity.
Professional Management
Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. The investors are handing their money to an investment professional that has experience in making investment decisions. It is the Fund
Manager's job to
(a) find the best securities for the fund, given the fund's stated investment objectives; and
(b) keep track of investments and changes in market conditions and adjust the mix of the portfolio, as and when required.
Tax Benefits
For men: up to Rs 1,10,000 and;
For women: upto Rs 1,35,000
Rebate u/s 80c
Regulations
Securities Exchange Board of India (“SEBI”), the mutual funds regulator has clearly defined rules, which govern mutual funds. .
Benefits of Open-ended Schemes
1. Liquidity
2. Convenience
3. Flexibility
4. Transparency
Mutual Fund Structure
Types of Schemes
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 The Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases:
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) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by 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.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. 29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of June 2005, there were 39 funds, which manage assets of Rs.1,64,546 crores.
The graph indicates the growth of assets over the years.
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.
ICICI Mutual Fund
Vision
To be a dominant player in the Indian mutual fund space, recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.
Sponsors
Products and services to more than 21 million customers, policy holders and unit holders worldwide with over US$580 (as of 31st December, 2006) billion in funds under management. Prudential employs some 23,000 staff worldwide.
In Asia, Prudential has life insurance and funds management operations across twelve countries - China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam. Prudential has championed customer-centric products and services for over 80 years, supported by an extensive network of over 145,000 staff and agents across the region.
Standard Life Investments Limited
The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. In 1998, Standard Life Investments Limited became the dedicated investment management company of the Standard Life Group and is owned 100% by The Standard Life Assurance Company. Standard Life Investments Limited is one of the world's major investment companies .
Management:
ICICI Trustee Company Limited:
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908
ICICI Asset Management Company Limited (AMC):
The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund.
Registrar and Transfer Agent
The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form; redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor records.
ICICI Mutual Fund Products
Schemes
Equity Funds
ICICI Growth Fund
Dividend Option
Growth Option
ICICI Tax plan
Dividend Option
Growth Option
ICICI service industry fund
Dividend Option
Growth Option
ICICI Infrastructure fund
Dividend Option
Growth Option
ICICI Power plan
Dividend Option
Growth Option
ICICI Emerging s.t.a.r. (stock targeted at returns)
Dividend Option
Growth Option
Balanced Fund
ICICI Balanced Fund
Dividend Option
Growth Option
Debt Funds
ICICI Income Fund
Dividend Option
Growth Option
ICICI Liquid Fund
Dividend Option
Growth Option
ICICI Gilt Fund Short Term Plan
Dividend Option
Growth Option
ICICI Gilt Fund Long Term Plan
Dividend Option
Growth Option
ICICI Short Term Plan
Dividend Option
Growth Option
ICICI Floating Rate Income Fund Short Term Plan
Dividend Option
Growth Option
ICICI Floating Rate Income Fund Long Term Plan
Dividend Option
Growth Option
Value Added Services
SIP (Systematic Investment Plan)
STP (Systematic Transfer Plan)
SWAP (Systematic Withdrawal Advantage Plan)
FORM 60
FORM 61
Any time cheques
Nomination Form
Systematic Investment Plan
It is a practice of investing a constant amount regularly, usually a month. When the market goes up, then the money invested in that period gets translated into little number of units and when the market goes down, the amount gets translated into more number of units. Therefore, in the long run, on an average, the number of units tends to be constant but the value of investment keeps increasing due to stock appreciation.
NAVSystematic Withdrawal Plan:
SWP is just the opposite of SIP. Under SWP, the investor withdraws constant amount periodically. The benefit of SWP is the same as that of SIP, that is, to moderate the effect of highs and lows of the market.
Systematic Transfer Plan:
STP is the practice of systematically transferring moneys between schemes depending upon the market situations so as to maintain the target mix between debt and equity.
For example, if an investor holds 40 debentures at the rate of Rs. 10 per debenture and 60 shares at the rate of Rs. 10 per share, thus in the ratio of 40:60. If the share market booms and debt market goes down then say total value of shares goes up to Rs. 650 and the value of debentures goes down to Rs. 350, thus changing the ratio to 3.5:6.5. In order to re-balance the ratio to 40:60, the investor will have to sell off few shares and invest in debentures.
When the same is done by a mutual fund between schemes, it is known as Systematic Transfer Plan
What is Research ?
Research is a common parlance, which refers to a search for knowledge. One can define research as scientific and systematic search for per pertinent. Research is of a great importance to find out the nature, extent and cause of the research issue under study.
Research Methodology is the process in which various steps that are generally adopted by a research are outlined.
The stages which are there in research process are as follows :
1. Problem formulation or Objectives of the Study
2. Preparation of the research design
3. Data Sources
4. Data Collection Techniques
5. Market Segmentation
6. Sample Design
7. Data Analysis & Interpretation
8. Development Logical Conclusion
1. Objectives of the Study
n To identify the investment patterns of investors regarding mutual funds.
n To find out the factors which affect the perception of investors while investing in mutual fund.
n To find out the current market scenario of the company.
2. Preparation of the Research Design
A research design is the arrangement of the conditions for collection & analysis of data. Actually it is the blue print of research project. The research design is as follows :
(A) Exploratory Research
i. Search of secondary data ii. Survey of respondents selected
iii. Descriptive Research a. Survey Method b. Questionnaire Method
3. Data Sources
The data collection process was carried out in various stages. These stages can be clubbed under two major heads.
(A) Primary Source Survey (B) Secondary Source
(A) Primary Source Survey
A random survey was carried out according to my convenience while going out to contact the respondents. The different govt. offices, private offices & different business houses were kept in mind.
(B) Secondary Source Survey
Internal : Company’s Prospectus External : Books, Magazines, Journal’s
4. Data Collection Techniques
The Data was collected through questionnaire. The data collection period was 48 days i.e. from 13 June, 2007 to 31 July, 2007.
(A) Questionnaire
The data was collected through open and close ended questionnaire, in which questions were asked in a logical order. Each question has a specific meaning. The data analysis is based on the data collected through these questions.
5. Market Segmentation
The market segmentation was done keeping in mind that what types of clients were available in the market. These segments are namely :
A. Business Class B. Service Class
Each Segment is clearly defined as follows :
A. Businessmen: All the people who are running their own business i.e. owners of marble unit, readymade garments, departmental & general stores, etc. were approached.
B. Service class : All the people who are employed either by the central or state governments of India i.e. employees who are working in RSMM Ltd., PWD, BSNL, Education Department (Govt. Schools & Colleges) etc. were approached. We also approached those people who are employed by privately owned organizations of India i.e. employees who are working in various private banks (HDFC, ICICI, IndusInd and IDBI) and other private firms & companies were approached.
6. Sample Design
Sample design refers to the technique as the procedure that a researcher would adopt in selective item for the sample.
(A) Target Population or Sampling Unit
The Universe for the research is Udaipur City.
(B) Sample Size
The sample size taken for the study is 80 respondents. The sample was designed as follows :
Business class 40 Service class 40
(C) Sampling procedure
Sampling procedure used in the project is non-probability sampling. The required information was collected through convenience and judgmental sampling.
7. Data Analysis & Interpretation
Analysis of the data was done by drawing inferences through what was collected as input from the respondents. The data analysis & interpretation part is dealt in detail on the next page.
Interpretation was given on the basis of data analysis.
Segment wise Income Analysis
Income range
(p.a.)
Service Class
Business Class
No.
%
No.
%
0-1 Lakh
8
20
5
12.5
1-2 Lakh
21
52.5
20
50
2-3 Lakh
11
27.5
7
17.5
3 & Above
-
-
8
20
Total
40
100
40
100
Observations:
Majority of investors i.e. 51.25% fall in the annual income of 1-2 lakh
Segment wise Savings analysis
Monthly Saving
(Rs.)
Service Class
Business Class
No.
%
No.
%
0-2000
5
25
10
25
2000-5000
20
50
16
40
5000-10000
3
7.5
6
15
10000 & Above
2
5
8
20
Total
40
100
40
100
Observation:
Majority of investors i.e 56.25% saves between 2000-5000 per month.
Segment wise Investment Objectives Analysis
Investment Service Class Business Class
Objectives
Service Class
Business Class
No.
%
No.
%
Capital Gain
4
10
10
25
Secure Future
6
15
5
12.5
Tax Saving
20
50
10
25
Return
3
7.5
15
37.5
Safety of Investment
7
17.5
0
0
Total
40
100
40
100
Observation:
Service Class investors are more concerned about the tax saving objective while business class investors are more concerned about the return.
Segment wise Investment in Mutual Funds Companies
Mutual Funds
Companies
Service Class
Business Class
No.
%
No.
%
Principal PNB
10
20
5
10
H.D.F.C.
5
10
5
10
Reliance
20
40
20
40
ICICI
10
20
15
30
UTI of Investment
5
10
5
10
Total
50
100
50
100
Observation:
Majority of investors invest their money in ICICI Prudential mutual funds. i.e. 37.5 % belongs to service class and 45% from business class.
Another popular mutual fund, next to ICICI is Reliance.
Reasons for Investment in Mutual Funds Companies
Reasons
Service Class
Business Class
No.
%
No.
%
Brand Name
25
62.5
20
50
Performance
12
30
18
45
Range of Products
3
7.5
2
5
Total
40
100
40
100
Observation:
Majority of investors i.e. above 50% invest their money in mutual funds because of Brand name followed by Performance factor.
Investment in Different Schemes of Mutual Funds
Schemes
Service Class
Business Class
No.
%
No.
%
Tax Saving
20
50
10
25
Growth Scheme
15
37.5
25
62.5
Income Scheme
5
12.5
5
12.5
Total
40
100
40
100
Observation:
Majority of the service class i.e. 50% invest their money in Tax Saving Schemes, while business class i.e. 62.5% prefers Growth Scheme.
Duration of Investment in Mutual Funds
Duration
Service Class
Business Class
No.
%
No.
%
0-6 Months
3
7.5
0
0
6-12 Months
5
12.5
12
30
1-2 Years
6
15
20
50
2 & Above Years
24
60
8
20
Total
40
100
40
100
Observation:
Majority of service class investors i.e.60% keep their investment upto 2 & above years, while majority of business class investors i.e.37.5% keep their investment 6-12 months.
Knowledge of Mutual Funds
Knowledge
Service Class
Business Class
No.
%
No.
%
Daily
5
12.5
0
0
Weekly
10
25
5
12.5
Monthly
15
37.5
15
37.5
Randomly
10
25
20
50
Total
40
100
40
100
Observation:
Majority of the service class i.e. 37.5% monitor their investment monthly, while majority of business class i.e. 50% monitor their investment randomly.
Sources of Information Regarding Mutual Funds
Source
Service Class
Business Class
No.
%
No.
%
Print Media
5
12.5
5
12.5
Electronic Media
5
12.5
3
7.5
Friends
10
25
7
17.5
Financial Advisor
20
50
25
62.5
Total
40
100
40
100
Observation:
Majority of the investors i.e. of both the classes get information through financial advisor.
n As per income analysis, majority of investors i.e 51.25% in total (service and business class) lies in the range of 1-2 lakh Rs.per annum.
n Majority of investors i.e 56.25% in total saves between 2000-5000 per month.
n Service Class investors are more concerned about the tax saving objective while business class investors are more concerned about the return.
n Popular Mutual Fund according to service class is Reliance and business class is ICICI Pru Mutual funds.
n Service class relies more on brand name before investing and business class relies more on the performance of the product of the company.
n Majority of service class investors i.e.60% keep their investment upto 2 & above years, while majority of business class investors i.e.37.5% keep their investment 6-12 months.
n Company's image and advice of financial advisor influence on investor’s perception for investment in mutual fund.
n Current mutual fund investors are least bothered towards their investment in mutual fund. They do not have serious approach.
n Majority of investors i.e. 60% are satisfied with their investment in mutual fund,10% of investors are very satisfied,15%are somewhat satisfied,while15%are not satisfied.
n Majority of the service class i.e. 50% invest their money in Tax Saving Schemes, while Business class i.e. 62.5% prefers Growth Scheme.
LIMITATIONS
Every research has its own limitations & the present research work is no exception to this general rule. The inherent limitations of the study are as under:
n Questionnaire method, can be used only when respondents are literate & cooperative.
n Non-response by some of the respondents.
n There was a certain degree of misinterpretation or mislead by the respondents about the points raised in the questionnaire.
n To success of questionnaire method, lies more a quality of questionnaire it self.
n 45 days time was not sufficient for this subject.
SUGGESTION
Company should introduced more FMP’s per year so as to retain and attract the customers.
To capture more market, promotional activities should be taken care of.
Proper training should be provided to agents.
There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK is the range of benefits they offer, which are unmatched by most other investment avenues. The benefits have been broadly split into universal benefits, applicable to all schemes, and benefits applicable specifically to open-ended schemes.
Universal Benefits
Affordability
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.500/-. Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.
Diversification
The nuclear weapon in arsenal for fight against Risk. It simply means that the investment is spread across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of the returns.
Variety
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity.
Professional Management
Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. The investors are handing their money to an investment professional that has experience in making investment decisions. It is the Fund
Manager's job to
(a) find the best securities for the fund, given the fund's stated investment objectives; and
(b) keep track of investments and changes in market conditions and adjust the mix of the portfolio, as and when required.
Tax Benefits
For men: up to Rs 1,10,000 and;
For women: upto Rs 1,35,000
Rebate u/s 80c
Regulations
Securities Exchange Board of India (“SEBI”), the mutual funds regulator has clearly defined rules, which govern mutual funds. .
Benefits of Open-ended Schemes
1. Liquidity
2. Convenience
3. Flexibility
4. Transparency
Mutual Fund Structure
Types of Schemes
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 The Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases:
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) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by 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.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. 29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of June 2005, there were 39 funds, which manage assets of Rs.1,64,546 crores.
The graph indicates the growth of assets over the years.
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.
ICICI Mutual Fund
Vision
To be a dominant player in the Indian mutual fund space, recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.
Sponsors
Products and services to more than 21 million customers, policy holders and unit holders worldwide with over US$580 (as of 31st December, 2006) billion in funds under management. Prudential employs some 23,000 staff worldwide.
In Asia, Prudential has life insurance and funds management operations across twelve countries - China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam. Prudential has championed customer-centric products and services for over 80 years, supported by an extensive network of over 145,000 staff and agents across the region.
Standard Life Investments Limited
The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. In 1998, Standard Life Investments Limited became the dedicated investment management company of the Standard Life Group and is owned 100% by The Standard Life Assurance Company. Standard Life Investments Limited is one of the world's major investment companies .
Management:
ICICI Trustee Company Limited:
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908
ICICI Asset Management Company Limited (AMC):
The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund.
Registrar and Transfer Agent
The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form; redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor records.
ICICI Mutual Fund Products
Schemes
Equity Funds
ICICI Growth Fund
Dividend Option
Growth Option
ICICI Tax plan
Dividend Option
Growth Option
ICICI service industry fund
Dividend Option
Growth Option
ICICI Infrastructure fund
Dividend Option
Growth Option
ICICI Power plan
Dividend Option
Growth Option
ICICI Emerging s.t.a.r. (stock targeted at returns)
Dividend Option
Growth Option
Balanced Fund
ICICI Balanced Fund
Dividend Option
Growth Option
Debt Funds
ICICI Income Fund
Dividend Option
Growth Option
ICICI Liquid Fund
Dividend Option
Growth Option
ICICI Gilt Fund Short Term Plan
Dividend Option
Growth Option
ICICI Gilt Fund Long Term Plan
Dividend Option
Growth Option
ICICI Short Term Plan
Dividend Option
Growth Option
ICICI Floating Rate Income Fund Short Term Plan
Dividend Option
Growth Option
ICICI Floating Rate Income Fund Long Term Plan
Dividend Option
Growth Option
Value Added Services
SIP (Systematic Investment Plan)
STP (Systematic Transfer Plan)
SWAP (Systematic Withdrawal Advantage Plan)
FORM 60
FORM 61
Any time cheques
Nomination Form
Systematic Investment Plan
It is a practice of investing a constant amount regularly, usually a month. When the market goes up, then the money invested in that period gets translated into little number of units and when the market goes down, the amount gets translated into more number of units. Therefore, in the long run, on an average, the number of units tends to be constant but the value of investment keeps increasing due to stock appreciation.
NAVSystematic Withdrawal Plan:
SWP is just the opposite of SIP. Under SWP, the investor withdraws constant amount periodically. The benefit of SWP is the same as that of SIP, that is, to moderate the effect of highs and lows of the market.
Systematic Transfer Plan:
STP is the practice of systematically transferring moneys between schemes depending upon the market situations so as to maintain the target mix between debt and equity.
For example, if an investor holds 40 debentures at the rate of Rs. 10 per debenture and 60 shares at the rate of Rs. 10 per share, thus in the ratio of 40:60. If the share market booms and debt market goes down then say total value of shares goes up to Rs. 650 and the value of debentures goes down to Rs. 350, thus changing the ratio to 3.5:6.5. In order to re-balance the ratio to 40:60, the investor will have to sell off few shares and invest in debentures.
When the same is done by a mutual fund between schemes, it is known as Systematic Transfer Plan
What is Research ?
Research is a common parlance, which refers to a search for knowledge. One can define research as scientific and systematic search for per pertinent. Research is of a great importance to find out the nature, extent and cause of the research issue under study.
Research Methodology is the process in which various steps that are generally adopted by a research are outlined.
The stages which are there in research process are as follows :
1. Problem formulation or Objectives of the Study
2. Preparation of the research design
3. Data Sources
4. Data Collection Techniques
5. Market Segmentation
6. Sample Design
7. Data Analysis & Interpretation
8. Development Logical Conclusion
1. Objectives of the Study
n To identify the investment patterns of investors regarding mutual funds.
n To find out the factors which affect the perception of investors while investing in mutual fund.
n To find out the current market scenario of the company.
2. Preparation of the Research Design
A research design is the arrangement of the conditions for collection & analysis of data. Actually it is the blue print of research project. The research design is as follows :
(A) Exploratory Research
i. Search of secondary data ii. Survey of respondents selected
iii. Descriptive Research a. Survey Method b. Questionnaire Method
3. Data Sources
The data collection process was carried out in various stages. These stages can be clubbed under two major heads.
(A) Primary Source Survey (B) Secondary Source
(A) Primary Source Survey
A random survey was carried out according to my convenience while going out to contact the respondents. The different govt. offices, private offices & different business houses were kept in mind.
(B) Secondary Source Survey
Internal : Company’s Prospectus External : Books, Magazines, Journal’s
4. Data Collection Techniques
The Data was collected through questionnaire. The data collection period was 48 days i.e. from 13 June, 2007 to 31 July, 2007.
(A) Questionnaire
The data was collected through open and close ended questionnaire, in which questions were asked in a logical order. Each question has a specific meaning. The data analysis is based on the data collected through these questions.
5. Market Segmentation
The market segmentation was done keeping in mind that what types of clients were available in the market. These segments are namely :
A. Business Class B. Service Class
Each Segment is clearly defined as follows :
A. Businessmen: All the people who are running their own business i.e. owners of marble unit, readymade garments, departmental & general stores, etc. were approached.
B. Service class : All the people who are employed either by the central or state governments of India i.e. employees who are working in RSMM Ltd., PWD, BSNL, Education Department (Govt. Schools & Colleges) etc. were approached. We also approached those people who are employed by privately owned organizations of India i.e. employees who are working in various private banks (HDFC, ICICI, IndusInd and IDBI) and other private firms & companies were approached.
6. Sample Design
Sample design refers to the technique as the procedure that a researcher would adopt in selective item for the sample.
(A) Target Population or Sampling Unit
The Universe for the research is Udaipur City.
(B) Sample Size
The sample size taken for the study is 80 respondents. The sample was designed as follows :
Business class 40 Service class 40
(C) Sampling procedure
Sampling procedure used in the project is non-probability sampling. The required information was collected through convenience and judgmental sampling.
7. Data Analysis & Interpretation
Analysis of the data was done by drawing inferences through what was collected as input from the respondents. The data analysis & interpretation part is dealt in detail on the next page.
Interpretation was given on the basis of data analysis.
Segment wise Income Analysis
Income range
(p.a.)
Service Class
Business Class
No.
%
No.
%
0-1 Lakh
8
20
5
12.5
1-2 Lakh
21
52.5
20
50
2-3 Lakh
11
27.5
7
17.5
3 & Above
-
-
8
20
Total
40
100
40
100
Observations:
Majority of investors i.e. 51.25% fall in the annual income of 1-2 lakh
Segment wise Savings analysis
Monthly Saving
(Rs.)
Service Class
Business Class
No.
%
No.
%
0-2000
5
25
10
25
2000-5000
20
50
16
40
5000-10000
3
7.5
6
15
10000 & Above
2
5
8
20
Total
40
100
40
100
Observation:
Majority of investors i.e 56.25% saves between 2000-5000 per month.
Segment wise Investment Objectives Analysis
Investment Service Class Business Class
Objectives
Service Class
Business Class
No.
%
No.
%
Capital Gain
4
10
10
25
Secure Future
6
15
5
12.5
Tax Saving
20
50
10
25
Return
3
7.5
15
37.5
Safety of Investment
7
17.5
0
0
Total
40
100
40
100
Observation:
Service Class investors are more concerned about the tax saving objective while business class investors are more concerned about the return.
Segment wise Investment in Mutual Funds Companies
Mutual Funds
Companies
Service Class
Business Class
No.
%
No.
%
Principal PNB
10
20
5
10
H.D.F.C.
5
10
5
10
Reliance
20
40
20
40
ICICI
10
20
15
30
UTI of Investment
5
10
5
10
Total
50
100
50
100
Observation:
Majority of investors invest their money in ICICI Prudential mutual funds. i.e. 37.5 % belongs to service class and 45% from business class.
Another popular mutual fund, next to ICICI is Reliance.
Reasons for Investment in Mutual Funds Companies
Reasons
Service Class
Business Class
No.
%
No.
%
Brand Name
25
62.5
20
50
Performance
12
30
18
45
Range of Products
3
7.5
2
5
Total
40
100
40
100
Observation:
Majority of investors i.e. above 50% invest their money in mutual funds because of Brand name followed by Performance factor.
Investment in Different Schemes of Mutual Funds
Schemes
Service Class
Business Class
No.
%
No.
%
Tax Saving
20
50
10
25
Growth Scheme
15
37.5
25
62.5
Income Scheme
5
12.5
5
12.5
Total
40
100
40
100
Observation:
Majority of the service class i.e. 50% invest their money in Tax Saving Schemes, while business class i.e. 62.5% prefers Growth Scheme.
Duration of Investment in Mutual Funds
Duration
Service Class
Business Class
No.
%
No.
%
0-6 Months
3
7.5
0
0
6-12 Months
5
12.5
12
30
1-2 Years
6
15
20
50
2 & Above Years
24
60
8
20
Total
40
100
40
100
Observation:
Majority of service class investors i.e.60% keep their investment upto 2 & above years, while majority of business class investors i.e.37.5% keep their investment 6-12 months.
Knowledge of Mutual Funds
Knowledge
Service Class
Business Class
No.
%
No.
%
Daily
5
12.5
0
0
Weekly
10
25
5
12.5
Monthly
15
37.5
15
37.5
Randomly
10
25
20
50
Total
40
100
40
100
Observation:
Majority of the service class i.e. 37.5% monitor their investment monthly, while majority of business class i.e. 50% monitor their investment randomly.
Sources of Information Regarding Mutual Funds
Source
Service Class
Business Class
No.
%
No.
%
Print Media
5
12.5
5
12.5
Electronic Media
5
12.5
3
7.5
Friends
10
25
7
17.5
Financial Advisor
20
50
25
62.5
Total
40
100
40
100
Observation:
Majority of the investors i.e. of both the classes get information through financial advisor.
n As per income analysis, majority of investors i.e 51.25% in total (service and business class) lies in the range of 1-2 lakh Rs.per annum.
n Majority of investors i.e 56.25% in total saves between 2000-5000 per month.
n Service Class investors are more concerned about the tax saving objective while business class investors are more concerned about the return.
n Popular Mutual Fund according to service class is Reliance and business class is ICICI Pru Mutual funds.
n Service class relies more on brand name before investing and business class relies more on the performance of the product of the company.
n Majority of service class investors i.e.60% keep their investment upto 2 & above years, while majority of business class investors i.e.37.5% keep their investment 6-12 months.
n Company's image and advice of financial advisor influence on investor’s perception for investment in mutual fund.
n Current mutual fund investors are least bothered towards their investment in mutual fund. They do not have serious approach.
n Majority of investors i.e. 60% are satisfied with their investment in mutual fund,10% of investors are very satisfied,15%are somewhat satisfied,while15%are not satisfied.
n Majority of the service class i.e. 50% invest their money in Tax Saving Schemes, while Business class i.e. 62.5% prefers Growth Scheme.
LIMITATIONS
Every research has its own limitations & the present research work is no exception to this general rule. The inherent limitations of the study are as under:
n Questionnaire method, can be used only when respondents are literate & cooperative.
n Non-response by some of the respondents.
n There was a certain degree of misinterpretation or mislead by the respondents about the points raised in the questionnaire.
n To success of questionnaire method, lies more a quality of questionnaire it self.
n 45 days time was not sufficient for this subject.
SUGGESTION
Company should introduced more FMP’s per year so as to retain and attract the customers.
To capture more market, promotional activities should be taken care of.
Proper training should be provided to agents.
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