Final Report 2

MUTUAL FUNDS: AN OVERVIEW INTRODUCTION A mutual fund is a trust that pools the savings of a number of investors that share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (pro rata). 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 portfolio at a relatively low cost. Anybody with an investible surplus of as little as a few thousand rupees can invest in mutual funds. Each mutual fund scheme has a defined investment objective and strategy. A mutual fund is the ideal investment vehicle for today’s complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues and bank transactions etc.

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A mutual fund is the answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a full time basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. In effect, the mutual fund vehicle exploits economies of scale in all three areas- researches, investments and transaction processing. While the concept of individuals coming together to invest money collectively is not new, the mutual fund in its present form is a twentieth century phenomenon.

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STRUCTURE Structure of the Indian Mutual Fund Industry The Unit Trust of India dominates the Indian mutual fund industry. The UTI has many funds/schemes in all categories i.e. equity, balanced, income, etc with some being open-ended and some being close-ended. UTI was floated by financial institutions and is governed by a special act of Parliament. Most of its investors believe that the UTI is government owned and controlled, which, while legally incorrect, is true for all practical purposes. The second category of mutual funds is the ones floated by nationalized banks. Canbank Asset Management floated by Canara Bank and SBI Funds Management floated by the State Bank of India are the largest of these. GIC AMC floated by General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones. The third largest category of mutual funds is the ones floated by the private sector and by foreign asset management companies. The largest of these are Birla Sun Life AMC, Standard Chartered AMC, etc.

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TYPES OF MUTUAL FUNDS Mutual fund schemes may be classified on the basis of its structure and its investment objective. (1) By Structure/Operational classification:

♦

Open-ended Funds-

An open-ended 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- ended schemes is liquidity.

♦

Closed-ended Funds-

A closed-ended fund has a stipulated maturity period that generally ranges from 3 to 15 years. The fund is open for subscription only during a specified period. 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.

♦

Interval Funds-

Interval funds combine the features of open-ended and closed-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

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(2) By Investment Objective/ Portfolio Classification: ♦ Growth FundsThe aim of growth funds is to provide capital appreciation over the medium to long term. Such scheme normally invests a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time.

♦

Income Funds-

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income funds are ideal for capital stability and regular income.

♦

Balanced Funds-

The aim of these funds is to provide both growth and regular incomes. Such schemes periodically distribute a part of their earnings and invest both in equities and debts. These are ideal for investors looking for a combination of income and moderate growth. ♦ Money Market FundsThe aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills commercial paper etc. These

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are ideal for Corporate and individual as a means to park their surplus funds for short-term periods. (3) Tax Saving Scheme ♦ These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes and pension schemes re allowed as deduction u/s 88 of I T Act 1961. (4) Special Schemes ♦ Industry Specific Scheme – Industry specific scheme invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.

♦

Index Scheme-

Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50

♦

Sectoral Scheme –

Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as ‘A’ group shares or initial public offerings.

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CONSTITUTION OF THE MUTUAL FUND An attempt was made for first time in SEBI GUIDELINES 1992 to spell out for managing the affairs of mutual funds ensuring arm’s length distance between the sponsor and the fund. The four custodians and asset management company. Moreover in reality pooled funds of small investors were being put to use for the advantage of the sponsors. Four constituents for the management of mutual fund are presented in chart

Sponsors (Promoters)

TRUSTEES (Holding property of Fund)

Mutual Fund (A Trust)

CUSTODIANS (SAFE CUSTODY OF FUND SECURITIES ETC.)

Asset Manageme nt Company (Managing the investments of fund)

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SPONSORS It refers to anybody corporate which initiates the launching of a mutual fund. It is this agency, which of its own or in collaboration with other body corporate comply the formalities of establishing a mutual fund. SEBI ensures that sponsors should have professional competence, financial soundness and general reputation of fairness and integrity in business transactions. Sponsor is normally not responsible for any loss or shortfall resulting from the operations of any scheme of the fund beyond its initial contribution towards the constitution of the trust fund. TRUSTEES A trustee is a person who holds the property of the mutual fund in trust for the benefits of the units holders. A company is appointed as a trustee to manage the mutual fund. To ensure fair dealings, mutual fund regulations require that one cannot be a trustee or a director of a trustee company in more than one mutual fund. Further at least fifty percent of the trustees are to be independent of the sponsors. Trustees take into their custody, or under their control all the property of the mutual fund. It is trustee’s duty to observe and ensure that AMC is managing schemes in accordance with the trust deed. Trustees for their services are paid trusteeship fee, which is to be specified in the trust deed. 8

CUSTODIANS SEBI requires that each mutual fund shall have a custodian for managing the scrips bought from the market who is not in anyway associated with the AMC. He cannot act as sponsor or trustee of any mutual fund. Further he is not permitted to act as a custodian of more than one mutual fund without the approval of SEBI. Custodian’s main assignment is safekeeping of the securities or participation in any clearing system on behalf of the client to effect deliveries of the securities. Depending on the volume there can be co-custodian for a mutual fund. These custodians are entitled to receive custodianship fee based on the average weekly value of net assets or sale and purchase of securities along with per certificate custody charges. Asset Management Company (Investment manager) Asset Management Company as the name implies is to be a body corporate whose Memorandum and Articles of Association are to be approved by SEBI. It is the AMC, which operates all the schemes of the fund. AMC can act as AMC an AMC of only one mutual fund and cannot act as a trustee of any other mutual fund. To ensure efficient management SEBI desires that existing AMC should have a sound track record, dividend paying capacity and profitability, etc. Regulations require that at least 50% of the directors should be such who do not have any association with the sponsors or the trustees. 9

WORKING OF ASSET MANAGEMENT COMPANY It is not required that AMC performs all its functions of its own. It can hire services of outside agencies as per its requirements or perform all functions of its own. The main agencies services of which an AMC may require are depicted in the chart.

ASSET MANAGEMENT COMPANY

Registrar And Transfer Agent Fund Accounting

♦ ♦ ♦ ♦ ♦ ♦ ♦

Lend Managers

Legal advisors Investment Advisors

Auditors

Fund Manager

REGISTRAR AND TRANSFER AGENT. FUND ACCOUNTING. LEND MANAGERS. INVESTMENT ADVISORS. LEGAL ADVISORS. FUND MANAGER. AUDITORS.

REGISTRAR AND TRANSFER AGENTS are assigned the job of receiving and processing the application forms of investors, issuing unit certificates, sending refund orders, according all transfers of all units and 10

maintaining all such records, repurchasing the units, redemption of units, issuing dividend or income warrants. FUND ACCOUNTING again depending upon on the size of the fund, its age and number of expected transactions may be assigned to specialized agencies. All accounting transaction is recorded and records are maintained by such agencies. LEAD MANAGERS select and co-ordinate activities of intermediaries such as advertising agency, printers etc. They normally engaged by AMC for extensive campaign about the scheme to attract the investors. They assist AMC in approach potential investors through personal as well as through impersonal promotion. INVESTMENT ADVISORS may be appointed by AMC if it cannot afford to cope up with the workload of its own. Investment advisors analyze the market and strategies on a continuous basis. Majority of Indian Mutual Fund have their own market analysis that design their own investment strategies. LEGAL ADVISORS are also sometimes appointed to get legal guidance about planning and execution of different schemes. A group of advocates and solicitors may be appointed as legal advisors. AMC is also required to have an auditor to undertake independent inspection and verification of its accounting activities. AMCs may also appoint a separate fund manager for each scheme. Such assets manager adheres to the guidelines evolved by AMC of its own or designed through investment advisors.

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Functions of AMC The two main functions of an Asset Management Company are discussed in detail here. {A} Investment The major strength of any AMC lies in its investment function. The investment department may be classified in four segments. These can be:  Fund Manager  Research and Planning Cell  Dealer  Underwriter [1] Fund Manager Asset Management Companies manage the investment of fund through a fund manager. His basic function is to decide about which, when, how much and at what rate securities are to be sold or bought. To a great extent the success of any scheme depends on the caliber of the fund manager. Many mutual funds especially in bank sponsored funds, the entire investment exercise is not left to one individual. One mutual fund has created two committees. First is Investment Committee which is broad based committee having even nominees of the sponsor. It collectively decides about the primary market investment. The second is Market Operation 12

Committee having the assignment of disinvestments and interacting with secondary market. [2] Research and Planning Cell This performs a very sensitive and technical assignment. Depending upon on the operational policies, such unit can be created by AMC on its own or research findings can be with respect of securities as well as prospective investors. This section also assists planning new schemes and designing innovations in schemes. [3] Dealer To executive the sale and purchase transactions in capital or money market, a separate section may be created under the charge of a person called dealer having deep understanding of stock market operations. Sometimes, this division is under charge of marketing division of AMC. Such brokers are to be approved Board of Directors of AMC. [4] Underwriter Recently mutual funds have been permitted by SEBI to go in for underwriting of public issues to generate additional income for their schemes. Activity will be subject to the following underwriting restrictions:

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 For the purposes of the SEBI underwriter’s regulations, the capital adequacy of the mutual fund shall be the original corpus of any of the scheme(s) and the undistributed gains lying to the credit of the scheme(s).  The total underwriting obligations of the scheme shall not exceed the total value of the corpus of any scheme together with undistributed profits lying to the credit of the scheme.  No understanding commitment may be undertaken in respect of the scheme during the period of six months prior to the date of redemption of any scheme.

{B} MARKETING Marketing is a big challenge in business especially for mutual fund. Mutual funds deal with small investors hard earned money. The main challenge of marketing to mutual fund is that with same product, customers with diversified profile viz demographic, socio-economic background, life style and psychographics’ are to be served. It is the marketing division, which complies with the formalities to market the product i.e. a new scheme. Marketing people also evolve the target amount of a scheme. The most crucial ‘marketing strategy’ is evolved to the best advantage of the fund. Marketing division has to evaluate the market potentials, strengths and weaknesses. For each scheme, what is its market share is very crucial question to design its future strategies. To identify which section of society is under serviced, is another important assignment of marketing division. 14

A mutual fund is an investment vehicle for those who want to spread their risk and seek returns, which are better than those available from bank deposits. Such investor education should also be taken up by marketing division to avoid facing situations of loose of faith of investor heavy offloading, resulting in the huge discount to NAV. Marketing people also have a say in dividend policy of the mutual fund. Sufficient infrastructure facilities are to be created for quality and prompt services. Marketing a scheme is to be taken as marketing a consumer product. Marketing for mutual fund is not deal-based but is relationship –based. The psychology of investor needs deep insight. There are potential investors in the present investors of the scheme. So understanding and responding to their needs obviously will bring mutual funds new investors besides retaining the present.

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NET ASSET VALUE (NAV) The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund ids dissolved or liquidated, by selling off the entire asset in the fund, this is the amount that the shareholders would collectively own. This give rise to the concept of net asset value per unit, which is the value represented by the ownership of one unit in the fund. 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 asset value of assets divided by the number of units outstanding the detailed methodology for the calculation of the asset value is given below: Asset value is equal to Sum of market value of shares/ debentures +Liquid assets/ cash held, if any +Dividend/ interest accrued

-Amount due on unpaid assets -Expenses accrued but not paid 16

NAV is computed as follows: (Market or Fair Value of scheme’s investments+ Current assets including accrued income-Current liabilities and Provisions including accrued expenses) / Number of units outstanding at the end of the day.

DETAILS OF THE ABOVE ITEMS For liquid shares/debentures, valuation is done on the basis of the last closing market price on the principal exchange where the security is trading. For illiquid and unlisted and /or thinly traded shares and debentures The value has to be estimated. For shares, this could be the book value per share or may be market price. For debentures and bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting liquidity. The value of fixed interest bearing securities moves in the direction opposite to the interest rate changes valuation of debentures and bond is a big problem since most of them are unlisted and thinly traded. This gives considerably leeway to the AMCs on the valuation and some of the AMCs are believed to take advantage of this and adopt flexible valuation policies depending on the situation. Interest is payable on these on a periodic basis. Accrued interest on a particular day is equal to the daily interest rate multiplied by the number o days since the last interest payment date. Usually, dividends are proposed at the time of the Annual General Meeting and become due on the record date. There is a gap between the dates on which it becomes due and the actual payment date. In the intermediate period, it is deemed to be: “accrued”.

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Expenses including management fees, custody charges etc. are calculated on a daily basis.

BENEFITS OF MUTUAL FUND INVESTMENT ♦ PROFESSIONAL MANAGEMENT Mutual fund provide the services of experienced and skilled professionals backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. ♦ DIVERSIFICATION Mutual fund invests in a number of companies across a broad cross-section of industries and sectors. This kind of diversification enables to reducing the risk. ♦ CONVENIENT ADMINISTRATION Mutual fund reduces paper work and helps to avoid many problems such as bad deliveries, delayed payment etc and improves the administration efficiency. ♦ RETURN POTENTIAL Over a medium to long term, mutual fund have the potential to provide higher return as they invest in a diversified basket of selected securities.

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♦ LOW COST Mutual fund are relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. ♦ LIQUIDITY In open-ended schemes, the investor gets the money back promptly at net asset value related prices from the mutual fund. In closed ended, units can be sold on a stock exchange at prevailing market price or the investor can avail of the direct repurchase at NAV related prices by the mutual fund. ♦ TRANSPERENCY You get regular information on the value of your investment in addition to disclosure on the specific investment made by your scheme, the proportion invested in each class of asset and the fund manager’s investment strategy and outlook. ♦ FLEXIBILITY Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience. ♦ AFFORDABILITY Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy 19

♦ WELL REGULATED All mutual funds are registered with SEBI and they function within the provision of strict regulations designed to protect the interests of investors. The operations of mutual funds are regularly monitored by SEBI

A PROFILE OF STANDARD CHARTERED

AN OVERVIEW STANDARD CHARTERED was named after two banks that merged in 1969. They were originally known as Standard Bank of British South Africa and the Chartered Bank of India, Australia and China. STANDARD CHARTERED is the world’s leading emerging markets bank headquartered in London. Their businesses however, have always been overwhelmingly international. It operates in more than 50 countries. It is one of the world’s most international banks, with a management team comprising 70 nationalities. It is listed on both the London Stock Exchange and the Stock Exchange of Hong Kong and is in the top 25 FTSE-100 companies, by market capitalization. The new millennium has brought with it two of the largest acquisitions in the history of the bank with the purchase of Grind lays Bank from the ANZ 20

Group and the acquisition of the chase consumer banking operations in Hong Kong in 2000. These acquisitions demonstrate standard chartered is firm committed to the emerging markets, where they have a strong and established presence and where they see future growth. EXECUTIVE DIRECTORS  Bryan Sanderson  Mervyn Davies  Mike De Noma  Chris Keljik  Richard Meddings  Kai Nargolwala  Peter Sands ETHICS STANDARD CHARTERED’S reputation is critical to being the world’s leading emerging market bank. The preservation and enhancement of that reputation depends upon business operating to the highest standards of ethical conduct. The principles that govern the behavior of the business and employees are reflected in a group code of conduct. It is a practical working document that guides employees through the many difficult issues that confront them. 21

There follows the summary of key elements in the Group Code of Conduct: Local Laws and Group Standards Confidentiality and Data Protection Suitable Products Money Laundering Insider Trading Bribery and Corruption Gifts and Entertainment Conflicts of interest Dealing in Standard Chartered shares Speaking up. AREAS OF OPERATIONS ♦ Personal Banking ♦ Business Financial Services ♦ Commercial Banking ACCOLADES 

Best Debt House in India



Euro money Awards for Excellence, 2003



Best Bond House in Thailand

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STANDARD CHARTERED MUTUAL FUNDS AN OVERWIEW ANZ Grindlays Mutual Fund, which has been renamed as Standard Chartered Mutual Fund had been constituted as a trust in accordance with the provision of Indian Trusts Act, 1882 vide a trust deed dated December 29,1999. Standard Chartered Bank had acquired the interest of ANZ Banking Group in the ANZ Grindlays AMC Pvt. Ltd. And subsequently these entities were renamed as Standard Chartered AMC Pvt. Ltd. and Standard Chartered Trustee Co. Pvt. Ltd. Perhaps among the only domestic fund house that focuses on debt markets. Standard Chartered Mutual Fund within a short span of 3 years manages assets in excess of Rs.9000crs. in its seven open-ended 100% equity free schemes. Standard Chartered Mutual Fund galvanized an otherwise document segment of debt funds with the launch of several innovative products and services. Chief among them the Short Term Plan, the Medium Term Plan and a truly actively managed debt fund-the Dynamic Bond Fund and redemptions the very next day for all classes.

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INVESTMENT ALLOCATION SCMF mainly looks towards that area of investments where they deal in 100% debts without taking leverage of equity so that risk level limits to its minimum. However, their area of operation directly gets influenced through bank rate and policies. From the above it can be concluded that:



Basic investment in debt market



Less risk



Influenced by bank rate

Categories of allocation Govt. of India (GOI) Securities 7.46% GOI 2017 9.39% GOI 2011 8.07% GOI 2017 5.64% GOI 2019 etc. PSU Bonds/ FIs IRFC National Thermal Power Company IDBI LIMITED Exim Bank etc. Corporate Debentures Reliance Industries Ltd. 24

HDFC Indo Gulf Corporation Ltd. Citibank NA GE Capital Services India Tata Power Co. Ltd. etc. Call Money Market T-Bill CBLO Bank Deposits Call / Reverse Repo / Others Note: -The investment portfolio varies from scheme to scheme. Subject to the regulations, the asset allocation pattern may change from time to time, keeping in view market conditions, market opportunities, applicable regulations and political and economic factors. It must be clearly understood that the asset allocation between various types of debt instruments can vary substantially depending upon the perception of the investment Manager, the intention being at all times to seek to protect the interests of the Unit holders. Such changes in the investment pattern will be for a short term and for defensive considerations only.

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SCHEMES of Standard Chartered Mutual Fund  Grindlays Cash Fund  Grindlays Floating Rate Fund  Grindlays Super Saver Income Fund- Short Term  Grindlays Super Saver Income Fund- Medium Term  Grindlays Super Saver Income Fund- Investment Plan  Grindlays Dynamic Fund  Grindlays Government Securities Fund

• GRINDLAYS CASH FUND Fundamental Attributes Type of Scheme

:Open ended income Scheme

Entry Load

:Nil

Exit

:Nil

Load

Investment Objective To generate optimal returns with high liquidity by investing in high quality money market and debt instruments. Investment Pattern

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The corpus of the Schemes will be invested in high quality debt and money market instruments including securities issued/guaranteed by Central Govt. / State Govt, corporate debt of both public and private sector, CD, commercial paper, treasury bills, interbank call and term money, securitized debt and other permitted debt instruments. The scheme may invest in other debt Schemes managed by the AMC or in the debt Schemes of any Other Mutual Fund , provided it is in confirmity to the investment objectives of the Scheme and in terms of the investment objectives of the Schemes and in terms of the prevailing regulations. GCF … at a glance



Ideal Investment Horizon: Parking of idle funds ranging from 1 day to 7 days.



Dividend Frequency: Daily / Weekly with compulsory investment

 Minimum fresh Application Amount: Rs. 25000/- and in multiples of Re. 1/

Systematic Investment Plan: Not applicable

 Systematic Withdrawal Plan: Not applicable

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• GRINDLAYS FLOATING RATE FUND Fundamental Attributes Type of Scheme

:Open ended income scheme

Entry Load

:Nil

Exit Load

:Nil

Investment Objective GFRF The primary objective of the Scheme is to generate stable returns with a low risk strategy by creating a portfolio that is substantially invested in good quality floating rate debt or money market instruments, fixed rate debt or money market instruments swapped for floating rate returns and fixed rate debt and money market instruments. Investment Pattern The corpus of the scheme will be invested in high quality debt and money market instruments including fixed and floating coupon bearing corporate debt of both, public and private sectors, certificates of deposit, commercial paper, treasury bills, inter bank call and term money, securitized debt and other permitted debt instrument. The scheme may invest in other debt scheme managed by the AMC or in the debt schemes of any other mutual 28

fund, provided it is in conformity to the investment objectives of the schemes and the terms of the prevailing regulations. The fund will use derivative instrument for the purpose of hedging and portfolio balancing. GFRF … at a glance  Ideal investment horizon: Protects investment in rising rate environment in 7-15 days or up to a month.  Dividend frequency: Monthly and daily / weekly with compulsory reinvestment 

Minimum fresh application amount: Rs 500/- in multiples of Re 1/-

 Systematic investment plan: Minimum of Rs 500/- per month with 6 PDCs or Rs 1500 per quarter with 4 PDCs 

Systematic withdrawal plan: Rs500/- and multiple of Re 1/-

• GRINDLAYS SUPER SAVER INCOME FUND – SHORT TERM Fundamentals Attributes Type of Scheme

:Open ended income scheme

Entry Load

:Nil 29

Exit Load

:Nil

Investment Objective The primary investment objective of the scheme is to seek to generate stable return with low risk strategy by creating a portfolio that is invested in good quality fixed income and money market security Investment pattern The corpus of the scheme will be invested in high quality debt and money market instrument including securities issued / guaranteed by central govt./ state govt, corporate debt both public and private sector certificate of deposit, commercial paper, treasury bills, inter bank call and term money, securitized debt and other permitted debt instruments investment in other debt schemes of other mutual fund can also be made subject to regulations. The scheme may invest in short term deposits of scheduled commercial banks as permitted under extant regulations. GSSIF-ST ….at a glance  Ideal investment horizon: More than 60 days  Dividend frequency: Monthly 

Minimum fresh application amount: 30

Rs500/- and multiple of Re 1/ Systematic investment plan: Minimum of Rs 500 p.m. with 6 PDCs or Rs 1500 p.q. with 4 PDCs

GRINDLAYS

SUPER

SAVER

INCOME

FUND-

MEDIUM TERM Fundamentals Attributes Type of Scheme

:Open ended income scheme

Entry Load

:Nil

Exit Load

:0.25 %

Investment objective The primary investment objective of the scheme is to seek to generate stable return with low risk strategy by creating a portfolio that is invested in good quality fixed income and money market security Investment pattern The corpus of the scheme will be invested in high quality debt and money market instrument including securities issued / guaranteed by central govt./ state govt, corporate debt both public and private sector certificate of deposit, commercial paper, treasury bills, interbank call and term money, securitized debt and other permitted debt instruments investment in other debt schemes of other mutual fund can also be made subject to regulations. 31

The scheme may invest in short term deposits of scheduled commercial banks as permitted under extant regulations. GSSIF-MT ….at a glance



Ideal investment horizon: More than 180 days

 Dividend frequency: Bi- monthly 

Minimum fresh application amount: Rs500/- and multiple of Re.1/



Systematic investment plan: Minimum of Rs 500 p.m. with 6 DCs or Rs 1500 p.q. with 4 PDCs



Systematic withdrawal plan: Rs. 500/- and in multiples of Re. 1/-

• GRINDLAYS SUPER SAVER INCOME FUNDINVESTMENT PLAN Fundamental Attributes Type of Scheme

:Open ended income scheme

Entry Load

:Nil

Exit Load

:0.5%

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Investment Objective It is designed for the investors seeking stable returns and generally has a medium to long-term maturity profile. It will provide stable returns over a relatively longer tenor period of investment by investing in good quality fixed income and money market securities. Investment Pattern The corpus of the scheme will be invested in high quality debt and money market instrument including securities issued / guaranteed by central govt./ state govt., corporate debt both public and private sector certificate of deposit, commercial paper, treasury bills, interbank call and term money, securitized debt and other permitted debt instruments investment in other debt schemes of other mutual fund can also be made subject to regulations. The scheme may invest in short term deposits of scheduled commercial banks as permitted under extant regulations. GSSIF-IP ….at a glance



Ideal investment horizon: More than 365 days



Dividend frequency: Quarterly / Half-yearly / Yearly

 Minimum fresh application amount: Rs.500/-and in multiples of Rs.1/ Systematic investment plan: Min. of Rs.500/- p.m. with 6PDCs or Rs.1500/- p.q. with 4PDCs 33



Systematic withdrawal plan: Rs.500/- & in multiples of Re.1/-

• GRINDLAYS DYNAMIC BOND FUND Fundamental attributes Type of scheme :Open ended income fund Entry load

:Nil

Exit load

:0.5 %

Investment objective To generate optimal returns with high liquidity by active management of the portfolio, by investing in high quality money market and debt instruments. Investment pattern The major investment in this scheme is in Cash Fund i.e. call money market and income fund. The portfolio of an Income Fund consists of GOI securities, corporate debentures, PSU bonds and money market instruments. A major part of the Corporate Bonds that the income funds invest in, are less liquid. 1) It will operate like a Cash Fund when interest rates are expected to rise and will run like an Income / Gilt Fund when interest rates are expected to fall. 34

2) The fund tries to maximize trading gains and minimize capital risk.

GDBF ….at a glance



Ideal investment horizon: More than 365 days



Dividend frequency: Quarterly / Yearly



Minimum fresh application amount: Rs.500/-and in multiples of Rs.1/-



Systematic investment plan: Min. of Rs.500/- p.m. with 6PDCs or Rs.1500/- p.q. with 4PDCs



Systematic withdrawal plan: Rs.500/- & in multiples of Re.1/-

• GRINDLAYS GOVERNMENT SECURITIES FUND Fundamental attributes Type of Scheme

:Open ended income scheme

Entry Load

:Nil

Exit Load

:0.5 %

Investment pattern

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1)

Investment Plan: This plan is for investor seeking returns without credited risk for more than one-year investment. It is an open ended dedicated gilt scheme with an objective to generate optimal returns with high liquidity by investing in Govt securities.

2)

Short term Plan: This plan is for investors seeking returns without credit risk for less than 4 months investment. It is an open ended dedicated gilt scheme with an objective to generate optimal returns with high liquidity by investing in Govt securities.

GGSF ….at a glance



Ideal investment horizon: Investment Plan (IP): More than 180 days Short Term (ST): More than 60 days.

 Dividend frequency: (IP): Quarterly / Half Yearly / Yearly (ST): Quarterly / Monthly. 

Minimum fresh application amount: Rs.500/-and in multiples of Rs.1/-



Systematic investment plan: Min. of Rs.500/- p.m. with 6PDCs or Rs.1500/- p.q. with 4PDCs



Systematic withdrawal plan: Rs.500/- & in multiples of Re.1/-

PLANS AVAILABLE

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Plan A: It is a regular plan for all categories of investment whether individuals or non-individuals. Minimum investment is Rs.500 and up to Less than Rs.1 Crore. Plan B: It is an institutional plan for non-individuals only. Minimum investment is Rs.1 Crore and up to Less than 10 Crore. Plan C: It is a super institutional plan for non-individuals only with minimum investments of Rs.10 Crore. OPTIONS AVAILABLE

1)

(a)

Dividend mode: In this option dividend is declared for the unit holders. Dividend Pay Out: It is suitable for the investors seeking a regular and attractive income with adequate safety by investing in a diversified portfolio of money market and debt instruments of varying maturities while retaining the benefit of continuous liquidity.

(b)

Dividend Reinvestment: Investors opting for the Dividend option may choose to reinvest the dividend to be received by them in additional units of the scheme. The dividend so reinvested shall constitute a constructive payment of the dividend to the unit holders and a constructive receipt of the same from each unit holder for reinvest in units.

2)

Growth Option: Seeks to provide capital appreciation with adequate safety by investing in a diversified portfolio of money market and debt instruments of varying maturities while retaining the benefit of 37

continuous liquidity. Dividends are not declared under this scheme. The income continues to remain invested in the scheme and will be reflected in the NAV of units.

SWOT ANALYSIS

STRENGTHS

WEAKNESSES



Fund manager skill.



Lower Rate of Interest.



Portfolio Management.



Lesser Goodwill.



Innovative Ideas.

OPPURTUNITIES

THREATS



Security Transaction Tax.



Rebate under section 88.



Long-term Investment Benefits.



Providend Fund Benefit.



Fixed Deposits and



Liquidity. Government

Securities. 



Lesser Risk. 

Rise in Inflation.



Unit Linked Insurance.

Tax Efficient.

SWOT Analysis implies that judging the organization on the basis of it strengths, weaknesses, opportunities, threats. So for the same purpose 38

generation of strengths and weaknesses come from the internal environment of the organization and opportunities and threats come from external macro environment like legal, economic, etc. The description of each is given below: STRENGTHS Fund manager’s skill: Investing the funds in the various debt schemes through fund manager is one of the strength for SCMF because they had to constantly look upon a well diversified sector for investment and investing in such a way as to provide optimal and maximum return. Portfolio management: Investment is made in diversified securities wit varying maturity period so as to provide reasonable and less risky returns to the investors. Innovative ideas: Standard Chartered AMC has innovative and objective oriented ideas regarding investments. Looking the current situation prevailing this mutual fund provides different schemes like short-term-cash funds schemes and long-term floaters. According to the needs of the investors like buying houses or children education, this mutual fund enables to provide satisfactory investment schemes.

WEAKNESSES Lower rate of Interest: One of the weaknesses which is usually suffered by this debt house is providing lesser rate of return as compared to what 39

investor gets in investing government securities and public provident fund and other schemes like insurance. Lesser goodwill: Being a foreign and private sector organization it has lesser goodwill than public sector funds like SBI mutual funds that has government backing. OPPORTUNITIES Security Transaction Tax: As per the current budget debt fund house is exempted from security transaction tax and thus has an edge over other equity mutual funds. Long-term Investment Benefits: The long-term investment schemes provided by the debt house not only gives a faster growth of NAV but also provides long-term capital gain tax benefits (10% without indexation and 20% with indexation). Liquidity: The schemes of SCMF provide high liquidity as the amount can be withdrawn any time with a lock in period of just 6 months in few schemes. Lesser Risk: Keeping the above points in the mind the possibility of uncertainty and risk comes to its minimal because of the fact that principal amount always remain intact and no kind of loss booking on it.

40

THREATS Rebate under section 88: The schemes do not enjoy the benefits of rebate under section 88 on investments. PF Benefits: As the PF provides stable 8% return on savings, which is not necessarily available in schemes. FD and the Government Securities: The investment in these schemes provides 100% safety of the amount, which is not as appropriate in the schemes. Rise in Inflation: In the current scenario because of the rise of crude oil prices and the delayed monsoons economy of India has touched 7.5% inflation rate and this has discouraged the investment in debt funds. Unit linked Insurance Plan: This scheme provides safety of investments as well as returns on the basis of market conditions, which proves to be the biggest threat to debt funds.

41

THE RESEARCH Research has to be undertaken in a systematic manner, to ensure tat problems dealt with properly and that nothing overlooked. The systematic way, in which research was undertaken and referred to as the research process, to which there are a number of stages. Each stage is explained in brief in context with the project undertaken, as written as under: NATURE OF MARKET RESEARCH Information plays an important role in helping firm to make decisions. A firm undertakes marketing research to uncover facts about both buyer and non-buyers of its products. This involves ascertaining the nature of wants and assessing the current and potential demand for products and services. Information can help to reduce the element of uncertainty and guess work in making marketing decision. Main divisions of marketing research are as follows:

•

Product research: Concerned with the design, development and testing of new products, the improvement of existing products and prediction of trends in consumer preferences related to styling, product performance, and quality of materials.

•

Customer research: Covering such matters as buyer behavior in relationship to social, economic and cultural factors.

•

Sales research: Examining the selling activities of a company, usually by sales outlets, territories, agencies and so on. 42

•

Promotion research: Concerned with testing and evaluation the effectiveness of the various methods used in promoting company’s products or services. This includes things such as exhibitions public relation campaigns, merchandising, consumer and trade advertising, etc.

Customer Research

Product Research

Sales Research

Promotion Research

TITLE 43

“Marketing of Mutual Funds with Competitive Analysis in Present Scenario.”

Problem Identification / Objectives of the Project For a project to be successful, definition of objectives is the most important thing. The main objective of the project undertaken were: a) To market the mutual funds. b) To have a Competitive Analysis with other players in the industry. It can be further segregated into following points: a) To increase the customer base regarding the SCMF which was launched in Jaipur in January only. b) To create awareness among the investors for this investment vehicle, which is still at inception stage in Jaipur context. c) To find out the attractiveness of the mutual funds as compared to other investment avenues. Significance of the study The underlying motives of the research were to furnish the organization with vital information and facilitate the researcher to gain a practical insight to the market scenario. The study proved significant in terms of catering to the interests of both the company and the researcher. 44

Significance to the organization The study enabled the organization to know about the perception of investors for investment in various investment avenues; the benefits people are looking forth from the mutual funds and the flaws in the various schemes.

RESEARCH METHODOLOGY

45

Research Design The research was “Descriptive” in nature as it dealt with describing the market and the buying behavior of consumers. The research was designed to discover the potentiality of the mutual fund market at Jaipur and also the survey of the investor’s to know about their perception, the psychological factors associated with the product, the benefits they are looking forth from the product and how do they rank in terms of risk and returns associated with it. The research was carried out after dividing the market into segments and the segment selected for the research was Jaipur Stock Exchange Limited (JSEL for Stock Brokers) and Industrialists considering them the potential investors for this investment avenue i.e. mutual fund.

Sample Design The first step in order to accomplish the task was to draw a sample. To serve this purpose, the sampling technique adapted was: “Random Sampling”. For that purpose JSEL and Industrial areas at Jaipur was visited and maximum number of Stock Brokers and Industrialists were surveyed with an avowed objective of minimizing bias and maximizing the reliability of the data. Also, by adopting this procedure it was ensured that the sample drawn would have the same composition and characteristics of the population.

46

Type of Universe The investors/potential investors were basically those from the JSEL and Industrialists at Jaipur. The Universe comprised of the finite number of customers and it can be considered homogenous in nature, to a great extent. Size of the Sample Since, the population was homogenous in nature to a large extent, hence a sample size of 25 respondents were taken into account to achieve the objective of the study. Other prominent factors, kept in view while determining the size of the sample were size of the population, the number of questions in the schedule, the sampling procedure adopted and the time constraint. Thus a sample consisting of 25 respondents were chosen, which fulfilled the requirements of efficiency, reliability and flexibility. Industries Selected: • Aditya Aluminum • Arora Industries • Jyoti Ice Factory • Vipul Motors Ltd • Roshan Motors • Modi Marble Industries • Kanta Tools • Vatika Arts 47

• Shree Shyam Oil & Dal Mills • Rajasthan Electronics • Gopal Ice Factory • Bhavani Printers • Chandan Craft Private Ltd • Exporters India • Hues India Private Ltd Stock Brokers Selected: • Mr. Sunil Bakliwal • Mr. Narendra Bharuka • Stock Holding Corporation • Binod Tholia & co • Flora Securities • Kamal Fincap Ltd • PKG Finstock Pvt Ltd • Raman Ramniwas • Mr. Rajendra Tapuria • Mr. Anshul Sharma Method of Data Collection

48

Schedule {Performa containing set of Questions} was developed to conduct the survey. The researcher put to the respondents the questions from the Performa and recorded the replies. The schedule was the best available alternatives for data collection. The other options were that of Interview and Questionnaire. The schedule had many features which added value to its use as a tool for accumulation of required information. Firstly, the segment i.e. Industrialists segment which is very busy profession; the chances of the non-response would have been very large. Moreover, if the mailing was used it would have made the task of follow up extremely difficult. Interview as a tool, is quite economical but it is difficult to record and retain the information and especially if the queries include open ended questions. Moreover, schedule serves the purpose of a structured form of the interview. Though, schedule has limitations like, error on behalf of researcher while recording the response or putting forward the query. It solved the purpose of data collection for the project. Contents of the Schedule The schedule mainly comprised close- ended questions. A structured schedule was preferred for the study. Also, the language of the questions was kept as simple as possible and the questions were made as unambiguous as possible. The questions have been arranged in a form to provide all the needed information in maximum possible standardized form. The schedule consisted of questions, which probed for the preference and the reasons for certain buying pattern of the respondents.

49

In order to evaluate the efficiency of the schedule, a pilot survey was carried out. On the basis of the findings of the pilot survey, necessary alternations were made in the schedule to make it more effective.

LIMITATIONS OF THE STUDY  Due to time constraint the survey could be conducted only in Jaipur. This proved to be a limitation because the results thus obtained cannot be accurately generalized for the entire country.  The nature of the project demanded the information to be collected in full details and hence the questionnaire was a much lengthier one. Which took much time of the subjects to fill and hence some of them did not give complete information.  The sampling error that appeared due to the kind of sampling technique adopted.  Indifference and lack of interest disposed by a few respondents leading to unauthentic responses.  Time proved to be a major constraint as far as collection and analysis of data was concerned. To overcome the above limitations and to minimize their impact on the findings of my report I had to meet more respondents than my actual sample size.

50

Q 1. With what purpose do you invest?

20%

30%

15%

35%

Savings Returns Tax benefit Safety

The investors’ main purpose of investment is good returns and then tax benefits. After that safety of funds is considered and then the savings. And so their investment pattern depends upon the above-mentioned factors.

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Q.2. Are you aware of mutual funds as an investment avenue?

10% Yes No 90%

Investors’ preference for financial assets is diverse and varied. 90% respondents said Yes and 10% said that they are unaware, such a high percentage of aware investors indicated that mutual fund concept is though recent in Jaipur, it is there in the mindset of the investors.

52

Q.3. Have you ever invested in a mutual fund?

22% No Yes 78%

Mutual fund is a recent phenomenon with regard to Jaipur. The study conveyed positive sentiments towards it, almost 78% said that they had invested in mutual fund and only 22% said that they have not invested.

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If no, is there any specific reasons for the same?

23% 45%

32%

Unassured returns Risky Both

The findings were based on three parameters1. Un assured returns 2. Risky 3. Both 45% of the investors are reluctant due to unassured returns while 32% investors find investment in MFs risky option while 23% don’t invest due to both the reasons.

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Q.4. How would you rank an investment in Mutual Funds on the following parameters

17% 42%

15%

26%

Liquidity Returns Safety Tax benefit

Considering the fact that every individual has got his/her requirements regarding an investment. Their investment decisions are mainly based upon1. Liquidity 2. Returns 3. Safety 4. Tax benefit In present scenario the mutual fund investor basically looks for liquidity next feature is returns, safety and then tax benefit.

55

Q.5. Would you like to invest in a low return and low risk Mutual Fund?

40% 60%

No Yes

Investors basically look for high return investments but still 40% investors prefer low return and low risk mutual fund i.e. 100% debt fund.

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Q.6. If in MF, then you invest in-

20% 50% 30%

Balanced Fund Equity Fund Debt Fund

50% of the investors make their investments in balance funds so as to have risk and returns in equal ratio. 30% of the investors make their investments in equity funds so as to earn higher returns. And, 20% of the investors make their investments in debt funds so as to have moderate returns with low risk.

57

Q.7. Investors' readiness stage about the products of SCMF

32%

36%

20%

12%

Unaware Aware Interested Intending to invest

This forms the behavioral base for segmenting the market. A market consists of people in different stages of readiness to buy a product. Some are unaware of, some are aware some are interested and some are intending by the product. 36% of the respondents are intending to buy the product. But 32% are unaware about the product 20% are interested and 12% are aware of the product of SCMF.

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For individual investors

Q.1 What is the general investment pattern.

21%

32%

11% 36%

Mutual Funds Insurance Share Market Real Estate

The investors like industrialists have their main investment in share market, as they are risk players i.e. 36 % and then 32 % have their investment in real estate and 21 % prefer to invest in mutual funds and 11 % in Insurance sector.

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Q.2 Schemes of SCMF most prefered

10%

5%

15% 70%

GDBF GSSIF-IP GSSIF-MT GGSF

The individual investors prefer mainly GDBF i.e. 70% as it as it is most active trading fund and it provides maximum returns with low risk. GSSIF-IP attracts 15% of individual investors GSSIF-MT is prefer by 10% investors and 5% prefer GGSF.

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Q.3 Options under schemes of SCMF prefered.

Growth

18% 7%

Dividend Pay Out 75%

Dividend Reinvestment

75% of the investors prefer growth plan in the schemes as it provides long term capital gain benefits along with the returns and then 18% prefer dividend reinvestment plan as the dividend gets reinvested thereby increasing number of units and 7% investors prefer dividend payout option which provides periodic returns.

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For institutional investors

Q.1 What is the general investment pattern.

20% 10%

5%

65%

Current Account Mutual Funds Share Market Others

65 % of the institutional investors have their investments in current account to avail the liquidity and 20 % prefer to invest in share market so as to earn higher returns while 10 % invest in mutual funds and 5 % in other investment avenues.

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Q.2 Schemes of SCMF most prefered

40% 60%

GCF GFRF

The 60 % institutional investors invests in GFRF as it provides 100 % capital preservation and adjust according to the increasing benchmark rate to give higher returns and, 40% investors invest in GCF.

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DEBT FUND HOUSE ….WHICH ASSURRES SAFETY Standard Chartered reflects for what it stands for a reflection that ultimately leads to well design products and services. Easy to follow and better sense to satisfy the need of investors. The vision they carry and the brand they have shows the dedication for the work they do for example, Standard Chartered Mutual Fund run a dummy portfolio for a period of 6 months before launching their one of the long-term investment plan. As a debt fund house or as a matter of fact the only 100% debt fund house in India go beyond the one ubiquitous debt fund inform products that had different maturity profile and hence appeal to a wider section of the investor that usually invests in the debt funds. Some of the Standard Chartered Mutual Funds are short-term GCF, in medium term GSSIF-MT, long-term Dynamic bond fund and GSSIF-IP. To study for the title: “MARKETING OF MUTUAL FUNDS WITH COMPETITIVE

ANALYSIS

IN

PRESENT

SCENARIO”.

The

researcher should undergo the various characteristics of Standard Chartered Mutual Fund (SCMF) before generating the marketing strategy of SCMF.

64

RISK-ASSOCIATION

CHARACTERISTICS EASY LIQUIDITY

RETURNS

DIVERSIFICATION

Risk Association: This is one of the area where what is right for one investor may be not for another as this attribute is subjective in nature. Being a debt fund house it keeps all the debt schemes with it, which counter balance the risk association attached with the securities trading and stock markets. Due to this reason of providing or covering the risk investor invest in debt funds. Returns: The schemes provide low but stable returns due to investments in money market securities and call money market, which is Safe Avenue. Easy Liquidity: This is the characteristic where funds can be withdrawn at any time, which ensures the availability at any point of time. Diversification: The investments of funds has diversified portfolio so as to ensure the liquidity as well as safety and moderate returns.

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After studying and analyzing the characteristics the marketing strategy of SCMF has to be defined which says that

Marketing strategy for an investing house generally considers as the investment strategy, which they use to attract the investor. Investment strategy for the present time can be analyzed by looking two dimensions that is Macro and Micro factors. When the researcher wants to tell the Macro factor it means the current present scenario of the Indian economy. This Indian economy can be judged by looking the present environment.  What is environment? The present environment is the amalgamation of three diverse features:

•

Richness: implies the resources it has.

•

Dynamism: implies the degree of changes present.

•

Complexity: states the degree of stability in the environment.

 What features exactly present environment has? The present environment can be defined with keeping the following points in mind: • Monsoon factor: The slow picked up monsoon took a lost in terms of output CMIE (Central Monitoring for Indian Economy) showed GDP 6%. 66

• The higher rate of crude oil prices increased the higher inflation, which affects on profitability of company depending upon their bargaining powers with consumers and suppliers. • Interest Rate is already up trend higher rate will impact both on investment and consumption activity of the economy. These are some points that depict the volatile nature and uncertainty of the current environment. After studying the environment it is equally important look further the budget of 2004-2005 regarding the effect of budget on debt funds. The summarized budget left its effect on various investment instruments. As per current budget the securities transaction tax of .15% of the value of transaction to be shared equally by the buyer and the seller of security tax has been levied on all stock market transactions, the quantum depends on the kind of trade carried out by the investor. Impact on debt fund and its dividend The new budget has put all dealings in bond and govt. securities out of transaction purview because they are not directly being traded in the stock market. This implies that the long-term capital gains on debt fund will be taxed at the existing rates. (10% without indexation benefits and 20% with indexation benefits)

67

Likewise short-term capital gains will attract tax at the marginal rate of income. Impact on dividend Dividends in the debt fund including (MIPs) will continue to attract 12.5% dividend distribution tax that will be paid by mutual funds.  Following are the micro factors in the summarized form telling the internal strengths and weaknesses of the SCMF. STRENGTHS Fund manager’s skill: Investing the funds in the various debt schemes through fund manager is one of the strength for SCMF because they had to constantly look upon a well diversified sector for investment and investing in such a way as to provide optimal and maximum return. Portfolio management: Investment is made in diversified securities wit varying maturity period so as to provide reasonable and less risky returns to the investors. Innovative ideas: Standard Chartered AMC has innovative and objective oriented ideas regarding investments. Looking the current situation prevailing this mutual fund provides different schemes like short-term-cash funds schemes and long-term floaters. According to the needs of the investors like buying

68

houses or children education, this mutual fund enables to provide satisfactory investment schemes.

WEAKNESSES Lower rate of Interest: One of the weaknesses which is usually suffered by this debt house is providing lesser rate of return as compared to what investor gets in investing government securities and public provident fund and other schemes like insurance. Lesser goodwill: Being a foreign and private sector organization it has lesser goodwill than public sector funds like SBI mutual funds that has government backing. After looking the characteristics, macro factors (including the relevant part of the budget), micro factors in the summarized form, now the researcher wants to highlight the working of the SCMF, which enables the researcher to generate the tentative strategy for the investment and enable to analyze its future prospects in Rajasthan.

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THE WORKNG OF STANDARD CHARTERED MUTUAL FUND Being an investment house it’s working can be measured in terms of returns on investment, average maturity profile of securities and net asset value (NAV). Returns on investments It implies that by investing in this debt fund, what returns does the investor get. For this purpose, it can be known as:  9% GOI 2014 means getting 9% interest rate till the maturity in the year 2014. Average maturity period It means the average maturity of security in which the investment by the debt fund has been made Net asset value It implies that summation of market value of securities and accrued income –(fund house expenses) /number of outstanding units.

70

COMPETITVE ANALYSIS OF STANDARD CHARTERED MUTUAL FUNDS WITH OTHER MUTUAL FUNDS AND INVESTING OPTIONS.

71

COMPARITIVE ANALYSIS OF THREE MONTHS WITHIN THE FUNDS

ON THE BASIS OFAVERAGE MATURITY PROFILE DETAILS SCHEMES

OF MAY 2004 (1)

JUNE 2004 (2)

NET EFFECT With increasing diversity of availability of floating rate instruments in the market, the scheme has been able to diversify its floating rate benchmarks to a considerable extent and reduce the average maturity. The scheme has reduced maturity to 20 months from 24 months in keeping with the general view on interest rate movements The average maturity of GDBF has been cut to 17 months from 50 months as gilt exposure has been reduced with maturity presence in the liquid sectors.

GFRF

98 DAYS

84 DAYS

GSSIF-MT

24 MONTHS

20 MONTHS

GDBF

50 MONTHS

17 MONTHS

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ON THE BASIS OF RETURNS DETAILS SCHEME

OF MAY-2004

GFRF GGSIF-MT GDBF

4.99 % 5.04 % 8.25 %

JUNE -2004

BENCHMARK PERFORMANCE*

4.90 % 5.17 % 6.82 %

4.74 % 4.43 % 5.11 %

* By: CRISIL * Source: CAGR.

The above done analysis was based on the of following parameters  On the basis of average maturity profile.  On the basis of returns.

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WITH OTHER INVESTING OPTIONS & MUTUAL FUNDS (a) Based on Returns Scheme Name

Returns (%)

On Date

Ranking

1 3 6 1 Since 1 3 6 1 Since Month Month Month year Launch Month Month Month year Launch

Prudential ICICI Short-term PlanDividend Monthly 0.49 1.01 2.31 4.54 7.00

Chola Freedom Income Short Term-Dividend Monthly Birla Bond Plus Retail - Growth

1

1

1

1

2

03 Sep 04

0.42 0.99 2.08 4.40 6.56

2

2

4

5

6

03 Sep 04

0.39 0.96 2.15 4.43 6.67

3

3

3

3

5

03 Sep 04

4

4

2

2

3

03 Sep 04

5

5

5

4

4

03 Sep 04

6

6

6

6

1

03 Sep 04

Templeton India Short-term Income Plan0.34 0.82 2.25 4.47 6.80 Dividend Monthly HDFC High Interest Short Term Plan0.33 0.73 1.99 4.42 6.80 Dividend Monthly Grindlays Super Saver Income Fund Short-term- 0.21 0.57 1.76 4.14 7.15 Dividend Monthly

The rankings displayed here are all intra group rankings and are based on the relative performance of each scheme vis-a-vis each other.

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Scheme Name

Returns (%)

On Date

Ranking

1 3 6 1 Since 1 3 6 1 Since Month Month Month year Launch Month Month Month year Launch

Chola Triple Ace0.84 -0.43 0.39 1.83 11.50 1 Dividend Quarterly Prudential ICICI Income Plan0.55 -1.47 -0.66 0.76 11.21 2 Dividend Quarterly Grindlays Super Saver Income 0.44 -1.42 -0.54 1.20 11.06 3 InvestmentDividend Quarterly

1

1

1

3

03 Sep 04

3

4

6

5

03 Sep 04

2

3

3

6

03 Sep 04

Birla Income Plus0.41 -1.77 -0.80 0.84 12.12 4 Dividend Quarterly

6

6

5

2

03 Sep 04

Templeton India Income Builder0.28 -1.72 -0.77 1.04 12.28 5 Quarterly Dividend

5

5

4

1

03 Sep 04

HDFC Income Fund-Dividend Quarterly

4

2

2

4

03 Sep 04

0.28 -1.49 -0.47 1.24 11.38 6

The rankings displayed here are all intra group rankings and are based on the relative performance of each scheme vis-a-vis each other.

75

Other Avenues (1) Public Provident Fund (PPF) – It is the most feasible option for the long term. But the interest rate on PPFs has fallen from 12% in 1998 to 8% now. For those in the highest tax slab, locking in money here is not tax-efficient. A PPF account locks in money for at least 15 years, albeit with limited liquidity. A loan can be taken from the account between the third and sixth financial years from the date of opening the account. Another benefit is that a PPF account cannot be attached by a court of law or through any decree. (2) Post Office Schemes– (a) Time Deposits: In the post office schemes, the rates Range from 6.25% for a one-year deposit to 7.50 % for a five-year deposit. The post office schemes interest income is eligible for tax exemption (till Rs. 9000 per FY) under-section 80L of income tax ACT. Post office deposits being a central govt. scheme are completely tax-free. There is a lock in period of six months. This is best for short to medium investment horizon. (b) National saving certificate, Kisan Vikas Patra – NSC carry an interest rate of 8 % and provides you a twin benefit of tax rebate under section 88 and interest income exemption under section 80L. KVPs don’t provide tax relief, they just serve as an assured long-term investment vehicle, and KVPs are suitable for investors nearing the 76

retirement. Investment in KVPs can be withdrawn after 2 ½ years; NSCs don’t offer such a window. (c) PO Monthly Income Scheme and Recurring Deposit Account – The Post Office monthly income scheme is possibly one of its kinds is offering an assured regular income. This gives an annual return of 8 %. For tax efficiency, financial planners recommend investors in the higher tax bracket to stay away from the post office monthly income scheme, as the interest income would be taxable at higher rates. (3) RBI Saving Bonds – In this scheme, there is 8% savings bond that is taxable, and a 6.5% tax- free savings bond – without any investment ceiling. The interest can be paid halfyearly or accumulated. The 6.5% tax-free bonds mature in 5 yrs., they can be encashed after 3 yrs.; the 8% bond locks in your money for six years. The 6.5% tax-free bonds are recommended for those in the high-income tax bracket and the 8% bonds for those in the lower bracket. (4) FDs – banks and companies– The falling interest rates have hit the bank FD holder the most. Over the past 4-5 yrs., bank FD interest rates have almost halved. And with inflation hovering above 5%investment can shrink in real terms. And interest income above rs 9000 is taxable.

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The increasing defaults in company deposits have made them riskier so investment for 1 to 3 years is best. (5) Unit Linked Insurance Plan (ULIP) – It is the product where the benefits are expressed in terms of no. Of units and unit price. It can be viewed as a combination of insurance and mutual funds. The advantage is that these are simple, clear, and easy to understand. It also leads to an efficient use of capital. The income on ULIP is exempted from tax and provides life insurance. The no. Of units that a customer would get depends on the unit price when he pays his premium. The daily unit price is based on market value of underlying assets (Bonds, shares, debentures, etc.) Strategy to invest in the SCMF is followed by the philosophy of SCMF follows for its investment pattern.

THE PHILOSPHY The investment philosophy of all schemes is to deliver upper quartile returns, but without compromising on the quality of credit. For instance, out of our total funds under management, around 96-97% is into AAA or equivalent securities. Managing the interest rate risk through a proprietary model called 3D-factor process. SCMF have identified 13 factors that drive interest rate track these 78

to give a full picture of what is happening in the market and helps to determine the future direction of interest rates, the credit risk monitor through credit evaluation model. After doing the summer training in SCMF looking it’s all dimensions of working its prospects, its strengths that are their core competencies. Now considering all the factors, researcher wants to give the tentative investment strategy which if incorporated enables to generate good amounts of funds.

Further the strategy is discussed with the future prospects as researcher believes that both strategy and the future prospects exists together and other highlighted points cannot be studied in isolation or under separate head.

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RECOMMENDATIONS

1. Investor friendly environment – Company should lay emphasis to create investor friendly environment by helping the investors in selecting the right type of the schemes. Hence manpower should be increased to handle the back office responsibilities. 2. Service Centers – Few of the potential cities of Rajasthan should have some kind of representation of the Standard Chartered Mutual Fund in the form of Investors service centers. 3. Investors education Programme – Timely organizing such kind of programmes by calling professionals from various fields of Finance and especially from the members from the Fund managing team at Mumbai will increase investors trust in the investment with the company. 4. Survey indicated Jaipur to be a highly potential city in terms of the potential customers of the Mutual Fund in near future. This can only increase by their continuous liasioning through advertising and properly coordinated promotional program.

5.

The Jaipur Branch office – the only at Rajasthan should undertake a really planned promotional program keeping in purview the whole of Rajasthan. Local newspapers, T.V. channels, Billboards and catchy hoarding should do it.

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6. The company should focus its attention on those schemes, which have given good returns over the years. This will give boost to the investor’s confidence in the company and also help the company in increasing its clientele.

7.

The company should categorize the investors into investors – potential investors – high net worth investors and so on, there profile should be properly maintained which will help in better understanding the needs of its customers and suggesting the optimum mix of the schemes accordingly.

8.

The recent launches like Grindlays Floating Rate Fund –Long Term Plan and All Seasons Bond Fund (Funds of Funds) looking at the volatility in the current market has proved to be efficient for the fund. The SCMF should look more forward to such schemes.

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BIBLIOGRAPHY 1. Bansal, Lalit, K., Mutual Funds – Management & Working, Deep & Deep Publications New Delhi, 1996. 2. Griffeth, Bill, The Mutual Fund Masters, Probus Publishing, Chicago, Illinois, Cambridge, England, 1995. 3. Jain Nabhi Kumar, Manuals of SEBI – Guidelines, Nabhi Publications, New Delhi, August 1996. 4. Kothari C.R., Research Methodology, New Delhi, Wishwa Prakashan, 1990. 5. Kotler P., Marketing Management, Prentice Hall of India Private Limited, New Delhi, 1999. 6. Kulshrestha C.M., Mastering Mutual Funds, New Delhi, Vision Books Pvt. Ltd., 1994.

Websites

1.

www.standardcharteredmf.com

2.

www.standardchartered.com

3.

www.indiainfoline.com

4.

www.moneycontrol.com

5.

www.indiatimes.com

6.

www.amfi.com

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Magazines 1. Business World 2. Business Today 3. Business India Newspaper 1. Economic Times 2. Financial Express 3. The Hindu 4. Business Standard

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