Report Miss Vidya Salian.pdf

Summer Internship Project Report On

A COMPARATIVE STUDY ON THE EQUITY FUNDS AND THE MUTUAL FUNDS At KARVY STOCK BROKING LTD.

Submitted in partial fulfilment of the degree of MMS Program of Thakur College of Management Studies and Research

Submitted to:

Submitted by:

Mrs. Payal Morge

Miss Vidya Salian MMS class of 2018

Thakur College of Management Studies and Research Batch 2017-2019

CERTIFICATION OF COMPLETION

ii

CERTIFICATION OF COMPLETION

iii

DECLARATION

Title of Project Report: ‘A Comparative Study on the Equity Funds and the Mutual Funds Investing’ I declare (a)That the work presented for an assessment in the Summer Internship Report is mine, and that it has not been previously presented for any assessment years and that for my debts (I.e. for data, ideas, words and arguments) has been appropriately acknowledged

(b)That this information has been appropriately acknowledge and the work coincide to the guidelines for the presentation and the style set out for the relevant documentation.

Date:

Miss Vidya Salian MMS Batch 17-19

iv

ACKNOWLEDGEMENT

On completion of my project I would like to take this platform as an opportunity to thank all the people who has helped me to do my project. An undertaking of my work life - this has never an outcome particularly of a single person; but rather it bears an imprint of number of people who has directly or indirectly has helped me in completing my present study. I would be failing if I won't say a word of thanks to all those people who had made my training period an educative and a pleasurable one. I am so thankful to Karvy Stock Broking Ltd. who has given me an opportunity to do my summer training in their company. First of all, I’m extremely grateful to my mentor Mr. Abhishek Kumar for his guidance, tutelage and encouragement during my course of internship despite of his extremely busy schedule. My sincere thanks to him for providing me an opportunity to do my project and for the support which he has given me throughout as my mentor. I express my sincere gratitude and thanks to “Mrs. Payal Mogre’’ for her guidance and support throughout my project. I’m also thankful to her for giving her suggestions in preparation of the project report and encouraging me throughout my project and also helping me continuously in each and every stage.

v

PREFACE

In our country, private sector is amongst the fastest growing sectors. After the liberalization, Private industry still has a vast opportunity for the young and the experienced professionals. Amongst the Private Stock Broking Companies, the Karvy Stock Broking Ltd. Is one of the key players that is making efforts for improving efficiency and customer services. Many companies are still in the market which provides the financial product such as general insurance, insurance, de-mat account services, mutual funds, gold coins, portfolio management services, money changing, wealth management, money transfers and any more. Along with de-mat Account services Karvy Stock Broking Ltd. offers many services such as insurance, mutual fund services, gold coin exchange, stock broking services, commodity, IPO services and foreign exchange services, Mutual Fund Registry, Share Registry and PAN Service below a single roof. So, Karvy Stock Broking Ltd. Is the company which provides many financial products and services in a single window. It consists of seven units such as: •

Stock broking services

•

Mutual Funds

•

Commodity

•

De-mat

•

IPO

•

Gold

•

Forex

vi

TABLE OF CONTENTS Chapter 1: Industry overview...................................................................................1 1.1: Introduction to Financial Market..........................................................................1 1.2: Contribution to Indian Financial Market..............................................................3 Chapter 2: Overview of the Company.....................................................................4 Chapter 3: Introduction to the Topic......................................................................14 3.1: The Equity Capital...............................................................................................14 3.2: Advantages of Equity Shares..............................................................................16 3.3: Disadvantages of Equity Shares..........................................................................17 3.4: The Mutual Fund.................................................................................................18 3.5: Various Types of Mutual Funds...........................................................................20 3.6: Various Types of Schemes...................................................................................21 3.7: Equity Funds.......................................................................................................22 3.8: Advantages of Mutual Fund................................................................................24 3.9: Disadvantages of Mutual Fund...........................................................................25 Chapter 4: Literature Review.....................................................................…........26 Chapter 5: Research Methodology……………………………………………....29 5.1: Rational for the Study........................................................................................29 5.2: Statement of the Problem...................................................................................29 5.3: Objectives of the Study.......................................................................................30 5.4: Scope of the Study..............................................................................................30 Chapter 6: Research Design....................................................................................31

vii

6.1: Data Sources.......................................................................................................31 6.2: Sampling Design.................................................................................................31 6.3: Selection Criteria for the Study...........................................................................32 Chapter 7: Limitation to the Study.........................................................................33 Chapter 8: Analysis and Interpretations................................................................34 Chapter 9: Conclusion..............................................................................................66 Recommendation....................................................................................68 References..................................................................................................................55 Annexure....................................................................................................................70

List of Tables 1. Figure 1: Institutional Classification of Financial Market.................................1 2. Figure 2: Milestone of Karvy Group..................................................................5 3. Figure 3: Equity Shares.....................................................................................14 4. Figure 4: Mutual Fund Operation Flow chart...................................................19 5. Table 1: Showing growth of Hindustan Unilever Ltd.......................................36 6. Table 2: Showing growth of Infosys Ltd...........................................................38 7. Table 3: Showing growth HDFC Bank.............................................................40 8. Table 4: Showing growth Larsen & Toubro......................................................42 9. Table 5: Showing growth Tata Consultancy Services Ltd................................44 10. Table 6: Showing returns and growth of ICICI Prudential Blue-chip Fund-Growth.....................................................................................................47 11. Table 7: Showing returns and growth of HDFC Top 100 Fund-Growth............49 12. Table 8: Showing returns and growth of SBI Magnum Equity FundGrowth................................................................................................................51 13. Table 9: Showing returns and growth of Reliance Growth Fund-Growth.........53 viii

14. Table 10: Showing returns and growth of Aditya Birla Sun Life Equity Fund- Growth........................................................................................55 15. Annexure figure 1: A bull in stock market........................................................73 16. Annexure figure 2: A bear in stock market.......................................................74

List of Graphs 1. Graph 1: Nifty Historical Returns....................................................................34 2. Graph 2: Hindustan Unilever Ltd....................................................................36 3. Graph 3: Infosys Ltd........................................................................................38 4. Graph 4: HDFC Bank......................................................................................40 5. Graph 5: Larsen & Toubro...............................................................................42 6. Graph 6: Tata Consultancy Services Ltd.........................................................44 7. Graph 7: ICICI Prudential Blue-chip Fund-Growth........................................47 8. Graph 8: HDFC top 100 fund-growth.............................................................49 9. Graph 9: SBI Magnum Equity Fund-Growth..................................................51 10. Graph 10: Reliance Growth Fund-Growth......................................................53 11. Graph 11: Aditya Birla Sun Life Equity Fund-Growth...................................55 12. Graph 12: Age Profile.....................................................................................57 13. Graph 13: Academic Qualification.................................................................58 14. Graph 14: Annual Income Range...................................................................59 15. Graph 15: On the Basis of Asset Class...........................................................60 16. Graph 16: Preferable Route to Investing in Mutual Funds.............................60 17. Graph 17: On the Basis of Structure...............................................................61 18. Graph 18: Saving Habits.................................................................................62 19. Graph 19: Satisfaction Level..........................................................................62 20. Graph 20: Most Popular Fund House in Terms of Highest Investments.....................................................................................................63

ix

EXECUTIVE SUMMARY

A comparative study is the process of conducting the studies of two or more subject with the respect of their features. It is a comparison between their respective pros and the cons. The study helps in finding out the best things from the ones which are been compared. Here in this project I have made a comparative study on the equity funds and the mutual funds. The objective of the study is to find out the best security in which we can invest in the Indian Financial Market as per an investor. This study helps to understand the factors, which are as following: •

Performance of the equity shares and the mutual funds for the following past 10 years

•

To understand about the stock market crash which happened in the year 2008

•

Gives me a lot of information about Indian Financial Market

I have done project on “A Comparative Study on the Equity Funds and the Mutual Funds” of eight weeks during the summer internship training at Karvy Stock Broking Ltd, under the guidance of Mr. Abhishek Kumar. I tried my best to put all my best effort so that this report will help others to know about Indian Capital Market, which includes the equity shares and the mutual funds. This report has many features, such as: •

The language and concept which has been used to explain is quite simple to understand by any reader.

•

I have also added several websites for reference, which might be helpful for the reader to get an additional information

•

I have also added some interesting facts about this study, which might definitely make a reader more enthusiastic about it.

x

Industry overview

1. INDUSTRY OVERVIEW

1. INTRODUCTION TO FINANCIAL MARKET The financial market is the broad term which describes any market place where trading of securities which includes bonds, equities, currencies, commodities like valuable metals and derivatives are exchanged at efficient market prices. Financial market prices may or may not indicate a true intrinsic value of the stock due to various macroeconomic forces like taxes. In addition to this, the prices of the securities are been heavily reliant on the informational transparency to ensure an efficient and an appropriate price are been set by the market.

Figure 1: Institutional Classification of Financial Market

Ø Capital Market

Capital Market consists of a primary market and a secondary market. In the primary market a newly issued bonds and the stocks are been exchanged and in the secondary market the buying and the selling of an already existing bonds and the stocks takes place.

Chapter 1, Section 1 The Capital Market can be further divided: •

The Bond Market is a market which provides financing through the bond issuance and through the bond trading.

•

The Stock Market is a market which provides financing through the shares or the stock issuance and through the share trading.

As a whole, The Capital Market facilitates the raising of a capital. Ø Financial Market for Stocks

The stock market is the financial market which enables the investors to buy and sell the shares of a publicly traded companies. A primary stock market is where the new issues of the stocks are first offered to the investors. Any subsequent trading of the stock securities which occurs in the secondary market. Ø Over-The-Counter Market

An (OTC) over the counter market is an example of the secondary market. An OTC is a market which handles the exchanging of the public stocks that are not listed on the NASDAQ, American Stock Exchange and New York Stock Exchange. Companies with the stocks trading on an OTC market are usually the smaller organizations as these financial markets requires a less regulation and it is less expensive to be traded on. Ø Financial Market for Bonds

The bond is the security in which the investor loans for money for a defined period of time at the pre-established rate of interest. Bonds are the instruments which are not only issued by the corporations but can also be issued by the municipalities, the states and the federal governments from whole around the world. Also referred to be as the debt, the credit or the fixed-income market, these bond market sells the securities such as the notes and the bills which are issued by the United States Treasury. Ø Money Market

A money market is the portion of a financial market which trades in highly liquid and in the short-term maturities. The intention of this market is for the short-term borrowings and for

2

Industry Overview lending of securities with the maturity typically for less than 1 year. The financial market trades in certificates of deposit, the banker’s acceptances, certain bills, notes and commercial papers. The derivatives market is a financial market that trades securities that derive its value from its underlying asset. The value of a derivative contract is determined by the market price of the underlying item. This financial market trades derivatives including forward contracts, futures, options, swaps and contracts-for-difference. Ø Forex Market

It is a financial market where the currencies are been traded. The financial market is the most liquid in the market in the whole world as the cash is the most liquid assets. An inter-bank market is a financial system which trades in currency between the banks.

2. CONTRIBUTION OF FINANCIAL MARKETS

Financial Markets are an essential element for the fund raising. Through Financial Market, the borrowers can find a suitable lender for them. Banks can also help in the process of the financing by working as an intermediary. These banks use the money that is saved and deposited in the bank by group of people; which helps for giving loans to another group of people which need it. Generally, the banks provide financing in a form of mortgages and loans. Except for the banks other intermediaries which are there in the Financial Market are Insurance Companies and also the Mutual Funds. In Financial Market, complicated transactions take place in the stock exchange. In the stock exchange, a company can also trade in other company's shares either by buying or by selling own's shares in order to raise the funds or either they can buy back their own shares which are already existing in the market.

3

Chapter 2, Section 1

2. COMPANY OVERVIEW

KARVY STOCK BROKING

1. HISTORY The flagship company, the Karvy Consultants Limited which was found with a vision and the enterprise of a small group of the practicing Chartered Accountants on the modest scale in 1981, at Hyderabad. It was initiated with just one activity and later it has carved roads into the fields of registry as well as share accounting. From that time there was no stopping at all. A decade of the professional integrity, commitment and vision helped the Karvy to achieve the leadership position in its own fields. In a particular year, it is now known to handle the largest number of issues which never happened in the history of Indian stock market before. Thus, over the past 20 years Karvy has really travelled its success route, towards building the reputation as an integrated financial service provider, which offers a wide spectrum of services. And have made this journey by versatility in the services, path breaking innovations into services, taking the route of quality service and finally totality in the services. Their cutting-edge technology, total customer focus, highly qualified employers and comprehensive infrastructure had secured them the position of an emerged financial service provider gently enjoying the confidence and the support of enviable clientele across the diverse fields in the financial world.

2. OVERVIEW

Karvy Group is an indomitable player in the financial realm since the 3 decades with a rich experience that provides a wide range of the services. Karvy has now created a niche for itself for its well-known integrity, the quality service and the customer centric approach. The Group offers services like Data management, Stock Broking, Data Analytics, Registrar and Transfer

4

Company Overview services, among others. The company is also proud to be associated with its investor in each and every sphere of the life of an investor by way of their gamut of services. Karvy’s financial services business has ranked amongst the top-5 in the country all across its business segments. The Karvy Group services for over 70 million individual investors in various capacities, and also provides the investor services to over 600 corporate houses, which comprises the best of the Corporate India. Karvy Stock Broking, who is the broking arm of the Karvy Group offers a tangible and the customized solutions to the corporate, the institutions and an individual investor. With a cutting edge of the technology and a professional management, they always thrive to be one of the best in the industry. The client's approach to the various investment avenues with the help of their comprehensive trading account which lets them to invest in an integrated fashion providing the investors the facility to transact with an ease.

3. MILESTONE’S Figure 2: Milestone of Karvy Group

5

Chapter 2, Section 4

Karvy has travelled a success route for over a past 20 years and it positioned itself the emerging financial services in which it embeds its confidence and support of enviable patrons all across the financial world. Patrons are of the diversified fields that includes 16 million of the individual investors in various the capacities and 300 corporates which comprise the best out of whole lot. Years of experience of the hostile financial services and the expertise in this industry which has helped it to gain the status which it enjoys and also cherish today.

4. MISSION “Our mission is to be a leading and preferred service provider to our customers, and we aim to achieve this leadership position by building up an innovative, enterprising, and technology driven organization which will set the highest standards of service and business ethics”

5. VISION “To be pioneering financial service company and continue to grow at a healthy pace, years after years, decades after decades”

6. MANAGEMENT

Ø Mr. C. Parthasarathy - Chairman and Managing Director Mr. C. Parthasarathy is Chairman and Managing Director of diversified financial services of the Karvy group. Mr. C Parthasarathy (better known as CP in the Industry), has an uncanny knack of staying right ahead of a curve and his foresight to spot the opportunities that seems invisible on horizon for other people. Over the years, Mr. CP’s vision and his leadership skills has helped the whole group navigate through a turbulent time with the strong sense of a

6

Company Overview purpose and the clarity of thought. Karvy has won for numerous industry awards as well as accolades, under his guidance and his leadership, Ø Mr. M. Yugan Dhar - Managing Director Mr. M. Yugan Dhar, the Managing Director is the founder member of Karvy Group. He is the Fellow Member of an Institute of the Chartered Accountants of India and he has a varied experience in a field of the financial services spanning for over thirty odd years. Yugan Dhar has also helped the position and has built a strong brand for this group in a registry and the other financial services businesses. Mr. Dhar has played the key role in building a strong relationship with the public sector banks and the other PSUs which helped Karvy to win some of the important mandates which will be given from some of the India’s renowned companies. Karvy group under his guidance and support has helped to create an equity cult and substantially helped to build a retail investor wealth. Ø Mr. M. S. Ramakrishna – Director Mr. M. S. Ramakrishna, Director, the founder member of the Karvy group, he is an orchestrator of the technology initiatives such as a call center for the service of the customer. Mr. Ramakrishna was the member of Hyderabad Stock Exchange and he has more than thirty years of experience in financial services arena. He has helped Karvy group diversify into a field of the medical transcription for leveraging on company's core competency of the transaction processing, Ø Mr. V. Mahesh Managing Director Mr. V. Mahesh Managing Director of the Karvy Data Management and he has a work experience spanning for over two decades with a in depth exposure to the operations on most of the financial services businesses. Commencing on his professional stint with Registry business where he needs to credit the managing over 300 IPOs along with other forms of the offerings, he was also amongst first few to work very closely on Book Building process which was initiated by the SEBI in 1995. After an initially working with the MCS as Assistant Vice President, he had moved to the Karvy and he was also responsible for initiating the process of setting up Depository participant business in the Karvy and was also responsible for both operations as well as marketing of the business. He has also been 7

Chapter 2, Section 7 nominated by NSDL to the various committees in which he addressed the key changes to an overall process and the policies for the De-mat business.

7. PRODUCTS AND SERVICES

Ø Stock Broking: Karvy is been working as Capital Market Intermediaries. The Stockbrokers are regulated by the SEBI [the Stock-brokers and the Sub-brokers] Regulations, 1992. Stockbroker is a member of a stock exchange. The Stockbrokers are the intermediaries that are allowed to trade in the securities on an exchange of that they are the members. They can buy and sell on their own as well as on behalf of their own clients. Stockbrokers can expand their own business by engaging a sub-broker. Subbroker means any person not being a member of stock exchange and who acts on the behalf of the stock brokers as an agent of it or otherwise for assisting an investor in dealing or buying and selling of securities through such a stock-broker. Ø Distribution of financial products: The paradigm shift from a pure selling to knowledge-based selling drives this industry in today’s life. With its wide range of portfolio offerings, Karvy occupies all the segments in a retail financial services industry. The team of 1600who are highly qualified and are dedicated professionals, are drawn from the best academic and the professional backgrounds is been committed for maintaining high levels of the client service delivery. This has propelled its wing in order to grab a good position among the top distributors for the equity and the debt issues with an estimated market share that is of 15% in the terms of the applications which are mobilized, besides being established as a leading procurer in all the public issues. In order to further tap an immense growth potential in capital markets, it has enhanced its scope of their retail brand, Karvy the Fina polis, thereby providing a planning and advisory services to a mass affluent. Here they try to understand their customer needs and their lifestyle in the context of their present earnings and also provides with adequate advisory services that will necessarily help in increasing the wealth. Judicious planning which is customized to meet its future needs of the customer and deliver a service which

8

Company Overview is exemplary. The market-savvy and ignorant investors, both of them find this service as very satisfactory service. •

De-mat services: Karvy is the depository participant with National Securities Depository Limited (NSDL) for the trading and settlement of the dematerialized shares. Depository Participants (DPs) are been described as an agent of this depository. They are an intermediary between depository and investors. The relationship between the Depository Participants and depository is been governed by an agreement which is made between the two under Depositories Act. A DP can offer a depository-related services only when they have obtained a certificate of registration from the SEBI. Since Karvy is also in a broking business, the investors who use Kary's depository services gets a dual benefit out of it. They can use Kary's brokerage services to execute the transactions and Kary's depository services in order to settle them.

•

Investment Advisory Services: Under their retail brand ‘Karvy – the Fina polis', they deliver an advisory service to cross-section of the customers. The service is been backed by a team of a dedicated and expert professionals with a varied experience and background in handling the investment portfolios. They are continuously engaged in designing an appropriate investment portfolio for each of their customer according to the individual needs and the budget considerations with the comprehensive support system which focuses much on trading the customers' portfolios and providing the valuable inputs and monitoring and managing those portfolios through the varied technological initiatives. This was made possible by an expertise that they had gained in their business over the years. Another venture towards being an investor-friendly is circulation of the monthly magazine which is called ‘Karvy - the Fina polis'. Covering the latest news of market, new trends, the investment schemes and the research-based opinions from the experts in the various financial fields.

•

Private Client Group / Customized Portfolio Management Services: This specialized division was been set up to cater to a high net worth individual and the institutional clients keeping in the mind that they would require different kind of the financial planning and management which will augment not just by existing finances but also their life-style as well. Here they follow hard-nosed business approach along with soft touch of the dedicated customer care and a personalized attention. For this purpose, they offer

9

Chapter 2, Section 7 comprehensive and a personalized service which encompasses the planning and protection of the finances, planning of the business needs and the retirement needs and the host for other services, all been provided on one-to-one basis. Their research reports were widely been appreciated by this segment. The delivery and the support modules are been fine-tuned by giving their clients access to the online portfolio information's, constant updates about their portfolios as well as a value-added advice on the portfolio churning, the sector switches etc. The investment recommendations which were given by their research team which are here in the cash market had enjoyed the high success rate. Ø Registrars & Transfer agents: In the year1985, Karvy entered into the Registrar and Share Transfer Business in order to create the market niche in a competitive field of the financial services. In the year 1994-95, it had reached a milestone when it had processed 104 Public Issues which constituted 46 per cent of the market share. Now in its 2nd decade of its existence, Karvy is a leader in the industry: In the opinion poll conducted which was conducted by an independent market research agency - MARG, Karvy was been rated as the India’s Most Admired Registrar on various parameters, such as: •

Overall Excellence.

•

Handling of Volumes

•

Timely Dispatch

•

Quality Management and Technological Up gradation/ the SEBI Category 1 Registrar, so far, Karvy had handled over 675 issues as the Registrars to the public issues which processed over 52 million applications and is been servicing over 16 million investors from the various locations that is spread over 205 clients.

Ø Investment banking: Deepening of Financial Markets and ever-increasing sophistication in the corporate transactions, has made the role of the Investment Bankers an indispensable to the organizations seeking the professional counseling and expertise, for raising the financial resources through the capital market apart from the Project Advisory, Mergers & Acquisitions, Capital and Corporate Restructuring and the entire gamut of the Financial Market activities. Karvy Investor Services Limited (‘KISL’), the SEBI registered as Merchant Banker has emerged as the leading Investment Banking entity in the country for over a decade of an experience. KISL has built its reputation through capitalizing on its own qualified professionals, who has successfully executed large numbers of complex and unique

10

Company Overview transactions. Their quality professionals' team and their work-oriented and dedication has propelled them to offer a value-added corporate financial service and to act as the professional navigator for a long-term growth of their clients, which includes leading State Governments, Corporates, Foreign Institutional Investors, private and public sector companies and banks, of Indian and global markets. They had also emerged as the trailblazer in arena of relationships, both in the customer and the trade levels because of their innovative solutions, seamless service and unshakable integrity which in tuned to meet the varied needs. Their team of the committed industry specialists, who has an extensive experience in the capital markets, will further nurtures this relationship.

8. ACHIEVEMENTS

Ø

Among the top 5 stock brokers in India (4% of NSE volumes)

Ø First ISO - 9002 Certified Registrar in India Ø India's No. 1 Registrar & Securities Transfer Agents Ø Handled over 500 Public issues as Registrars Ø Among the top 3 Depository Participants Ø Largest Network of Branches & Business Associates Ø Among top 10 Investment bankers Ø Largest Distributor of Financial Products Ø Adjudged as one of the top 50 IT uses in India by MIS Asia Ø Full Fledged IT driven operation Ø Handling the Reliance Account which accounts for nearly 10 million account holders

11

Chapter 2, Section 9 9. WHAT MAKES THEM STAND TALL?

Personalized Investment Planning "You name it and They have it" They cater to their specific needs by providing a viable solution that help in fulfilling all the financial goals on an investor. You are their Priority They aspire to outperform the company each and every day in order to offer an outstanding service to the investors. By the means of innovation and an expertise, they constantly update the company in terms of the technology and in processes to enhance their trading experience. Embracing Technology With the world class smart trading platform which are fast and efficient, the trading becomes more seamless and also hassle free. Mobile app helps the investors to trade without any difficulty anytime anywhere. Markets at your finger tips The investors will never be able to be away from the Markets! You can get all the relevant market data for all the time. Experts View The reports and recommendations of the company backed by the strong research experts will guide the investors in their investment journey. Always within reach With the pan India presence, they are always near you to provide the feasible investment solutions.

12

Company Overview 10. YOUR WISH OUR COMMAND

State of an art technology World class tools and the platforms that provides smooth, uninterrupted and a flawless trading experience to its investors. Karvy Online with advanced mobile app will assists the investors to make the right strategies for their investments. Explore Now Professional Advice Experienced financial advisors will offer an efficient service by rendering an appropriate investment idea and will also provide the solutions. Their expert team are well equipped to resolve all your investment related queries. Ask the Expert Customers at the core “We walk an extra mile to see their customers smile.” Trust, integrity and quality are in the DNA and they strive every bit to make their investors to be happy. Experience Now Wide range of Investment Products Their comprehensive trading account also helps the clients to approach various investment avenues in integrated fashion, thus providing them a facility to transact with an ease. They also have a combined account facility which caters to all the investment opportunities like trade in Derivatives, Equities, Currency and also by investing in Mutual funds, IPOs and NCDs. Invest Now

13

Chapter 3, Section 1

3. INTODUCTION TO THE TOPIC

1. Equity Shares / Direct Investments

Equity share is the main source of finance in any company giving an investor a right to vote, claim on assets and share profits. It can be traded in the secondary market. Figure 3: Equity Shares

14

Introduction to the Topic ACQUIRING EQUITY SHARES: There are two methods: •

In the primary market you may either subscribe to issues made by the corporate. Resources are mobilized in the primary markets, by the corporates through a fresh public issues (IPOs) or through a private placement.

•

Or you can purchase shares either from the secondary market. You should approach a SEBI which is a registered trading member which is also known as a broker of the recognized stock exchange for the buying and selling of any securities.

These are further categorized into following categories as per the stock market: Ø Blue Chip: It is a well-established, nationally recognized and financially sound company. These stocks are highly liquid in nature since they are frequently been traded in the market. Ø Growth Shares: It is a share in the company that is expected to grow at a rate that is significantly above the average in the market. These stocks generally don't pay dividends to the investors, as these companies usually want to re-invest any earnings in order to escalate growth in their short terms. Ø Cyclic Shares: It is a stock that is particularly sensitive to the swings in the economic conditions. Ø Defensive Shares: It is a stock that provides the investors a stable earnings and constant dividend regardless of the dignity of the overall stock market. Ø Income Shares: This share class pays out distributions and dividends to its investors. It has a relatively limited growth opportunities and fairly stable operations.

15

Chapter 3, Section 2 Ø Speculative Shares: It is a stock which has a high degree of risk due to the high volatility relative to the blue-chip stocks, which boosts an opportunity to generate a greater return.

2. Advantaged of Equity Shares

Ø More Income: Equity shareholders are residual claimant for the profits after the company meets all its fixed commitments. The company might add up in the profits by trading on the equity. Thus, equity capital might get more dividend at a high price during the boom period. Ø Right to participate in the Control and Management: Equity shareholders has a voting rights and can elect the competent persons as the directors for controlling and managing the affairs of its company. Ø Capital profits: The market value of the equity shares might fluctuate directly from the profits of its company and the real value based on their net worth of its assets. An appreciation in a net worth in the company's assets will eventually increase the market value of the equity shares which brings the capital appreciation in the investments of the company. Ø An Attraction of Persons having Limited Income: Equity shares are usually of a lower denomination and the people with limited recourses can only purchase these kinds of shares. Ø Tax Advantages: Equity shares also offers tax advantages to its investor. The larger yield on the equity shares usually results from the increase in the principal or the capital gains, which may be taxed at lower rates than the other incomes in the most countries. Ø Other Advantages: It generally appeals mostly to the speculators in the market. The prices of these stocks in the security market are generally more fluctuating in nature.

16

Introduction to the Topic

3. Disadvantages of Equity Funds

Ø Uncertain and Irregular Income: The dividend on the equity shares is generally subject to the availability of the profits and the intention of Board of Directors (BOD) and so the incomes are quite irregular and uncertain in nature. They might not get any dividend even though they might have sufficient profits with them. Ø Capital loss: During the recession or the depression periods, the profits of the company might come down and consequently the rate of dividend might also come down. Due to the low rate of dividends and the certain other factors that the market value of the equity shares might go down resulting into a capital loss to investors. Ø Loss on Liquidation: In a case, if the company goes into a liquidation, the equity shareholders are worst suffered. They are been paid in the last stage only if there are any surplus which is available with the company after every other claim which are yet to pay including the claim of the preference shareholders are been settled. It is an evident from the advantages and the disadvantages of the equity share capital that we had discussed above is that the issue of the equity share capital is must for any company, yet it must not solely depend upon it. In order to make the capital structure more flexible, it should raise the funds from any other sources also. Ø Dividend at the board’s mercy: The rate of the dividend is to be recommended by the Board of Director. The shareholders in AGM can’t declare for a higher rate than generally what is been recommended by the Board of Director. Ø Illiquid: Since the shares are not refundable in nature they are been treated as an illiquid in nature.

Ø Speculation: Higher the dividends during the prosperous periods and lower the dividends during the depression period may lead to an ample speculation.

17

Chapter 3, Section 4

4. Mutual Funds

A mutual fund is the financial intermediary which pools the savings of the investors for a collective investment in the diversified portfolio of the securities. A fund is known as “mutual” as all of its returns gained, minus all its expenses, are been shared by its fund’s investors. The SEBI that is The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 has defines the mutual fund as ‘a fund that is established in the form of the trust to raise the money from the sale of the units to public or a section of public for one or more schemes to invest in the securities, which also includes money market instruments. As per the above definition, the resources for the mutual fund in India can be raise from the sale of the units to the public. Under the Indian Trust Act, the fund can be established in a form of Trust. Mutual fund acts as a link between an investor and a securities market which is done by mobilizing the savings from its investors and then investing them in a securities market for generating returns from it for its investors. Thus, a mutual fund is similar to a (PMS) Portfolio Management Services. Although, both these terms are conceptually same, but they are initially different from each another. Portfolio management services are been offered to an individual who has a high net worth; while taking into the account the risk profile of that particular investor, the investments of that particular investor are been managed separately by them. In mutual funds, the savings of the small investors are been pooled under a particular scheme and the returns from it are been distributed in such a proportion in which an investor/ unit holder have invested in the scheme. this scheme d is a collective savings scheme. Mutual funds also play an important role in the mobilization of the savings of the small investors and channelizing the same for the productive ventures that are there in the Indian.

18

Introduction to the Topic Figure 4: Mutual Fund Operation Flow chart

Mutual Fund Operation Flow Chart

Mutual Fund industry of the country like India is continuously evolving. Along the way, there are several industry bodies that are also investing towards an investor education. Although, according to the report by the Boston Analytics, less than 10% of the households consider the mutual funds as an investment avenue. Still today it is been considered as the high-risk option. In fact, the basic inquiry regarding any types of the mutual funds reveals that it is perhaps the one of the most flexible, a comprehensive and the hassle-free modes of an investments which can accommodate the various types of an investor needs. Various types of the mutual fund's categories are been designed to allow an investor to select a scheme based on their goals, the investable amount, the investment term and most important the risk they willing to take, and the other factors.

19

Chapter 3, Section 5

5. Types of mutual fund

•

Open-Ended:

This scheme continuously offers to sell and to repurchase its units at NAV-related prices or at the Net Asset Value (NAV) which are been declared on a daily basis. Unlike the closeended schemes, the open-ended ones don't need to be listed in the stock exchange which can also offer the repurchase soon after the allotment. Investors can either enter and exit this scheme at any point during the life of a fund. Open-ended schemes don't have the fixed corpus. This scheme does not have the fixed maturity date. The key feature of the openended funds is the liquidity. •

Closed-Ended: In India, this type of scheme has fixes corpus and a stipulated maturity period ranging between 5 to 10 years. Investors can invest only during the initial launch period known as the NFO (New Fund Offer) period. This scheme is valid for a period not exceeding forty-five days. The fund in this scheme has no interaction with its investors until the redemption except for paying any dividend/bonus. If an investor who sells the units directly to this fund, he can't enter the fund once again, as the units bought back by this fund can't be reissued. This scheme can also be converted into the open-ended scheme

• Interval: Operating as the combination of both i.e. the open ended and the closed ended schemes, it allows the investors to trade units at a pre-defined interval at the NAV related prices

20

Introduction to the Topic

6. Types of Schemes Ø Debt/ Income: In a debt/income scheme, the major part of an investable fund is

channelized towards a debenture, bonds, the government securities, the commercial papers and the other debt instruments. The main aim of the funds is to provide a safety of investments and provide regular income to the investors. Although the capital appreciation is quite low (compared to that of an equity mutual funds), it is a comparatively low risk return investment avenue which is an ideal for the investors who is seeing a steady income. Ø Money Market/ Liquid: This scheme is ideal for the investors who are looking to utilize

the surplus funds available with them to invest in short term instruments while they are waiting for some better options. These schemes invest the funds in the short-term debt instruments and also tries to seek reasonable returns for the investors. Ø Balanced Funds: This scheme allows investors to enjoy growth, capital appreciation and

income at a regular interval. Funds are invested in between the equities and the fixed income securities; the proportion is pre-determined, and the funds are distributed in such a way that the portfolio of an investor is been balanced and also it discloses the proportion during an offer in the scheme related documents. These funds are ideal for a cautiously aggressive investor. Ø Gilt Fund: The gilt funds invest exclusively in the government securities. Government

securities has no default risk involved. NAVs of the gilt funds schemes can also fluctuate due to the change in the interest rates and also due to the other economic factors as in the case with the income or the debt-oriented schemes in the market.

Ø Equity/ Growth Funds: Equities are the popular mutual fund category amongst the retail investors. Although it is a high-risk investment in the equity investments for the short term, investors can expect the capital appreciation over the medium to the long run. If you are at your prime earning stage and looking for long-term benefits, growth schemes could be an ideal investment.

21

Chapter 3, Section 7

7. Equity Funds

An equity fund is the type of the mutual fund or the private investment fund, such as the hedge fund, which buys an ownership in businesses (and so the term "equity") mostly in the form of a publicly traded stock. In other times, an ownership is in the form of private equity, that is when an equity fund who invests in the privately held companies which aren't been traded on any of the stock market. The common denominator of an equity fund is for the desire of the fund management to find a good opportunities to invest in that businesses that will grow in the future, throwing off an everincreasing gushers of the profit for owners, as it is been opposed to a bond fund or a fixed income fund, that uses the shareholder money in order to provide loans for the companies or the governments, and to collect an interest income.

Ø Index Funds: These Funds follows the passive investment strategy where the

investments replicate the portfolio of a particular index benchmarks such as the S&P NSE 50 index (Nifty), BSE Sensitive index, etc. The schemes invest in the same weightage comprising of an index in the particular securities. NAVs of such schemes will rise or will fall down in accordance to the rise or fall of the index, though the rise and fall will not be exactly by the same percentage because of some factors that is known as "tracking error" according to the technical terms. The mutual fund schemes provide the necessary disclosures which are required to be made in their offer letter documents. Ø Tax Saving Funds: Tax-saving schemes are been designed on the basis of the tax policy with a special tax incentive to investors. The funds in this scheme are been invested in the equity which offers a long-term growth opportunity to an investor. The mutual funds schemes have introduced a variety of tax benefit / saving schemes. An investor can avail the encashment facilities provided by this scheme after 3 years, although the investment period is for 10 years as these are closed ended schemes. The schemes contain a various option like the income, the growth or the capital appreciation. This scheme also enables the investors to reduce the tax incidence on dividends which they have to pay from as

22

Introduction to the Topic Ø high as 30% on the amount to as low as 3- 4% from the latest scheme which is been

offered by this scheme which is the (SWP) Systematic Withdrawal Plan. Ø Sector Funds: The funds are been invested in a particular sector or a specific industry of

the economy such as telecommunications, energy, health care, IT, construction, real estate, transportation, banking, financial services, etc. or in the segments of the capital market such as the small cap, mid-caps, large caps. Within the equity space, these schemes tend to provide a high-risk returns opportunity.

Ø Equity-linked savings scheme (ELSS): The government has come up with the taxconcessions through some special schemes, to encourage the investors in order to invest in the equity market. Tax saving mutual funds which is known as the Equity Linked Savings Schemes usually has a 3-year lock in period. Investments in this scheme entitles an investor to claim for an income tax rebate, but as these schemes carry a lock-in period an investor cannot withdraw the funds before the end of the lock in period of this scheme.

23

Chapter 3, Section 8

8. Advantages of a Mutual Fund

Ø Professional Management: Qualified professionals manage the money, but they are not

the only ones who does it. They have research team along with them that continuously does an analyzes on the performance and prospects of companies. They even select the suitable investments to achieve an objective of that scheme, so it is the continuous process which takes lot of time and an expertise which will add the value to the investment. To manage the investments and to get higher returns from it, the fund managers are there who are in a better position to achieve it. Ø Diversification: The cliché which is, "Don’t put all your eggs in one basket" is really

applicable for this concept of an intelligent investing. Diversification lowers the risk of loss which spreads the money all across the various industries. It is a very rare occasion when all the stock's decline at a same time and in a same proportion. Sector funds will spread the investment only across one industry and it is not wise for any of the portfolio to be skewed to any of these types of funds for the obvious reasons. Ø Choice of Schemes: Mutual funds offer a variety of schemes which suits the investors

needs over their lifetime. When they enter the new stage of their life, all they needed to do is to sit down with an investment advisor who will then help you to rearrange your portfolio that will suit to your altered lifestyle. Ø

Affordability: A small investor will find that it maybe not possible for him to buy shares of the larger corporations. Mutual funds usually buy and sells the securities in a very large volumes that allows the investors to be benefited from the lower trading costs. Even the smallest investor may start investing in the mutual funds dur to the minimum investment requirements. One may invest with minimum of Rs.500 in SIP that is A Systematic Investment Plan on a regular interval of time.

Ø Tax Benefits: Investments which are held by the investors for the period of 12 months or

more that qualifies for the Capital Gains and which will be taxed accordingly to 10% of the amount at which an investment is been appreciated, or 20% after it has been factorized in the benefit of the cost indexation, whichever is lower among them. The investments will also get a benefit of indexation.

24

Introduction to the Topic Ø Liquidity: With open-end funds, you can redeem all or part of investment any time you

wish and receive the current value of the shares or the NAV related price. Funds are more liquid than most investments in shares, deposits and bonds and the process is standardized, making it quick and efficient so that you can get cash in hand as soon as possible.

9. Disadvantages of Mutual Funds

The following are some of the reasons which are deterrent to mutual fund investment:

Ø Costs despite Negative Returns: Investors have to pay many charges such as the annual fees, sales charges, and the other expenses related to the funds regardless of how the fund has performed. And, also depending on the timing of the investment they have made, the investors may even have to pay for the taxes on any of the capital gains distribution they might have received or may receive — even if the fund has not performed well after they have bought the shares.

Ø Lack of Control: At any given time, investors typically can't ascertain how the exact the fund portfolio is made up, nor they can directly influence the fund manager which securities they buy and sell or either the timing of those trades which they do.

Ø Price Uncertainty: With the individual stocks, you may obtain a real- time (or it may be close to real-time) pricing information with a relative ease by either checking on the financial websites or calling the broker. You may also monitor the changes of the stock's price which happens from hour to hour basis or it may change even from second to second. By a contrast, with the mutual fund, the fund may not calculate the price until many hours have been passed after you've placed your order for the mutual funds for the price at which you have already purchased or have redeemed your shares as it typically depends upon on the fund's NAV. In general, the mutual funds need to calculate their NAV for at least once after every business day, say typically they need to calculate when the major U.S. exchanges gets close.

25

Chapter 3, Section 4

4. REVIEW OF LITERATURE

A large number of studies have already been conducted in India and also in the abroad covering different aspects of the Mutual fund but here I'm working on the part which is " A Comparative Analysis on the Equity Funds and the Mutual Funds " that has not been done by any other authors till now thereby showing a broader picture about the investment pattern.

M. Vijay Anand in IFMR, Chennai (June 2000) in his paper “Analysis of Performance of Equity funds (Diversified) Open-end Mutual Fund during 1997 – 2000” was focused to know the position of the various schemes provided by the Birla Sunlife and that of its competitors schemes available in the market. The study was done on the Analysis of Performance of the Equity fund for 3-years and along with it he also did a SWOT Analysis of Birla Sunlife by the Delphi technique, Literature survey in the depth financial review in order to identify amongst the equity funds which are been selected which earns a higher returns than the benchmark and from its competitors and he has concluded that Birla Sunlife has performed quite well as compared to the benchmarks and its competitors. Soumya Guha Deb, Prof. BB Chakrabarti, Prof. Ashok Banerjee in IIM, Calcutta (2005) in his research paper “Performance of Indian Equity Mutual Funds, Their Style Benchmarks– An Empirical Exploration” for all Indian equity mutual funds he aims for doing the style analysis by use of Sharpe's RBSA approach and for performing a return-based style analysis of the equity mutual funds which are provided in India and also to analyze their relative performance with due respect to the style benchmarks. As per the analysis the Indian equity mutual fund managers have showed that they have not been capable enough to beat the style benchmarks on an average. They have showed that although all the funds in their sample were equity funds, because of the returns of the component securities their fixed income asset classes had come out to be an important component of the style exposures which are the mid cap stocks Subhash Chander and Jaspal Singh in the University Guru Nanak Dev University, Punjab (2006) have studied in the research paper “Investors' Preference for Investment in Mutual

26

Review of Literature Funds: An Empirical Evidence” that the investors preferred gold instruments as a good investment, which was been followed by the Post Office schemes and NSC which was indicated in their studied that the basic psyche of Indian investor till today prefers to keep their savings in a form of the yellow metal. Their studied had also indicated that investors belonging to the age group of around 20-35 which usually belongs to a salaried category have showed an inclination towards the close-ended growth that is an equity-oriented schemes are been preferred over any other scheme type. Deepak Agrawal in Truba College of Management & Technology, Indore (2007) has studied in the research paper “Measuring Performance of Indian Mutual Funds” an overview of the mutual fund activities that are emerging in the current markets, and to describe the asset allocation, their size, also to analyze an Indian Mutual Fund Industry’s pricing mechanism with the help of an empirical studies on their valuation, to analyzes data at both the fund-manager and fund-investor levels . The study revealed that the performance is affected saving and investment habits of the people at the second side the confidence and loyalty of the fund Manager and rewards affects the performance of the MF industry in India. Prof. Bijan Roy and Kaushik Bhattacharjee in ICFAI University (2008) have studied in the research paper “Fund Performance measurement without benchmark – A case of selected Indian Mutual funds” it is actually the replication of study which was been conducted by Grin blatt & Titman and which has calculated the PCM for the sample of the fifty Indian mutual funds for over the period of 26 months, in a Indian context actually with the view which validated their study and also to know whether the selected mutual funds which are now called funds is been able to outperform in the market on an average or not over a studied time period. Their study had concluded that there has been a positive signal of the information asymmetry happening in the market with the mutual fund managers which have a superior information on the returns of stocks as the whole. A longer time horizon was been considered for a better assessing process to know the actual performance of the particular mutual fund. Navdeep Agarwal and Mohit Gupta, in ICFAI University (2009) have studied in the research paper “Mutual Fund Portfolio Creation Using Industry Concentration” that there very little research has been done on the construction of the mutual fund portfolio is been done till that date. They tried to fill this gap in their study. Their objective was to construct a portfolio by

27

Chapter 3, Section 4 using a cluster method, by taking an industry concentration as the variable and that to compare the performance of 2 types of the portfolios with the selected benchmarks, which was been selected according to prevalent modes of the mutual fund purchases which where been done. Encouraging results where been found out, as far as the risk mitigation is to be concerned. This research was also expected for help in construction of the funds. Hao-Chen liu and Lonnie L. Bryant, published on Global finance journal (2011) published a research paper “Mutual fund industry management structure, risk and the impacts to shareholders” have studied with the help of Sharpe ratio, the effects on the risk volatility of the funds managed of the multiple fund management structure. By using the sample of the 1480 funds which are managed by 407 managers, they have found the impacts which the mutual fund management structure has in the fund risk volatility and they have also found out that the structure needs to be motivated with the need to achieve the economies of scale and will reduce cost of the fund managers, shareholders which are been driven by the strategic reason Dr. Anasuya and J. Lilly on the International journal of scientific research (2014) in their research paper “An empirical study of performance evaluation of selected ELSS mutual fund schemes” have studied on the performance of the 49-tax saving ELSS schemes which was selected by them by applying the Treynor ratio, Sharpe ratio, Jensen’s alpha measure ratio and Sortino and has also found out about the LIC NOMURA MF GROWTH and the dividend schemes has a highest return and these are risk borne when they are been compared to the other schemes. R.Nithya in the IFMR Chennai (2004) in the Research “Performance Evaluation of Franklin Templeton Mutual Funds” have studied analyzing the performance of all the schemes which were been available in the following Mutual funds and emphasizing the values of the mutual funds to target people by identifying for a AMC (Asset Management Company) that is being performing well and also identifying the top schemes in this category which are Income in the AMC and Equity based balanced and Monthly Income Plan (MIP). The AMC which was been chosen was The Franklin Templeton Mutual funds. The fund has performed well and has met the expectations.

28

Research Methodology

5. RESEARCH METHODOLOGY

1. RATIONAL FOR THE STUDY

Target Population The target population which are mainly included are the youth and the service class people. Hence convenient sampling is been used for deciding on target population. Research Design: First an exploratory research is been conducted to get some of the insights about this topic. Secondary data analysis is been performed. It was then followed by the questionnaire filling. Findings of exploratory research are regarded as an input to the further research. This research will be followed by a descriptive design.

2. STATEMENT OF THE PROBLEM

Mutual funds are the artery for investors to reap out the benefits from the stock market performance. Investing directly in the equity is fraught with the highest level of the risks and uncertainty. It is a necessity to create an awareness for the utility of investing in the mutual funds schemes to enjoy the returns which will be an inflation adjusted real returns. So, this project is been taken to assess the investor's perception towards the mutual fund investment. This project will evaluate the financial performance of mutual fund schemes.

29

Chapter 5, Section 3

3. OBJECTIVES OF THE STUDY

•

To know the comparison between the equity funds and mutual funds

•

To study the future opportunity of mutual fund schemes in the developing country like India

•

To study these schemes with the point of attractiveness to investors

•

To assist investors to make a right choice of an investment, while considering an inherent risk factor

4. SCOPE OF THE STUDY

This study primarily deals with the study on an equity funds and mutual funds' investments. The study covers 5 randomly selected equity funds from the top 50 companies of the NSE CNX NIFTY companies and 5 randomly selected mutual funds from the mutual fund for comparison. The analysis is based on the net asset value of mutual funds and the share prices which will help investor to identify for the better investment artery in the market.

Product scope The research is been conducted so as to know about the different preference of that of the target audience / population either for Equity Diversified Mutual Funds or for the Direct Equity. Besides this the research was also been conducted to find out about the different reasons for preferring the mutual funds and the direct equity funds.

30

Research Design

6. RESEARCH DESIGN

1. DATA SOURCES

Secondary Data The Secondary data is been collected from the various sources such as the internet, magazines, newspapers and financial book Primary Data In Primary data, structured questionnaire was been made and the target respondents where been asked to fill up the questionnaire.

2. SAMPALING DESIGN

A. Sampling technique: - Since the population is of heterogeneous stratified, random sampling where been taken B. Sample size: - Five companies for equity and five of the mutual fund schemes where been selected. C. Sample description: - In this study five companies has been selected from Nifty and five of the mutual funds has been selected on the basis of the Returns of the funds and after that a comparison was made between them.

31

Chapter 6, Section 3

3. SELECTION CRITERIA FOR SCHEMES:

Selection of the equity diversified funds are made here on the basis of the risk, liquidity, return, entry-exit load, affordability and their performance over the few years. Also, •

Only an open-ended funds are been considered here while choosing for the best equity related mutual funds.

•

Amongst the growth and the dividend schemes, only the growth scheme has been taken into consideration for avoiding repetition (as the portfolio of both the options remains same)

•

Selection is been made on the basis of the last one-year performance.

32

Limitation of the Project Work

7. LIMITATION OF THE PROJECT WORK •

Due to the limitations of time all the sectors have not been studied in this project, few sectors have been studied

•

The data on an equity funds and mutual funds are taken from the time horizon due to the non- availability of the data

•

The sample size is been limited to 5 each of mutual funds and equity shares

•

The comparison is been strictly made on the price of the equity shares and the Returns of the mutual funds, the study hasn't gone into deep in the other factors

• The benchmark for the mutual funds and equity shares are NSE CNX NIFTY

33

Chapter 8, Section 1

8. DATA ANALYSIS AND INTERPRETATION

1. Benchmark: NSE CNX NIFTY

The NSE CNX NIFTY have performed so well for the long and the medium term. For the short term except in the year 2008-09 and 2011-12 the Nifty have performed quite well. One of the main things is that Nifty haven’t shown the negative returns for a continuous long-term and short-term period. In the year 2007-2008, the period in which the stock market crash happened, in spite of that the Nifty didn’t showed badly in its performance. The high percentage of the returns Nifty have given was in the year 2013-14 which is 234% for the continuous 10-year period. The main reason for a good performance of the Nifty is because the stock embeds in it. Overall the Nifty have given a good support to, •

Long-term investors – Better

•

Medium-term investors – Good

•

Short-term investors – Fair

Graph 1: Nifty Historical Returns Figure: Showing Nifty Historical Returns

34

Data Analysis and Interpretation

2. Equity Shares

Following are the equity shares selected for the study from NSE CNX NIFTY:

1. Hindustan Unilever limited 2. Infosys Ltd. 3. HDFC Bank 4. Larsen & Toubro 5. Tata Consultancy Services Ltd.

35

Chapter 8, Section 2

HINDUSTAN UNILEVER LTD. Compounded growth of sales, profits and returns on equity of the company is as follows:

Table 1: Showing growth of Hindustan Unilever Ltd. Years

Compounded Sales Growth

Compounded Profit Growth

Return on Equity

TTM

9.89%

19.17 %

77.57 %

3 years

3.87%

13.02 %

76.47 %

5 years

5.9 %

10.53 %

85.40 %

10 years

6.13 %

8.72 %

86.60 %

Graph 2: Hindustan Unilever Ltd.

36

Data Analysis and Interpretation

Analysis: Hindustan Unilever limited (HUL) is one of the top FMCG in India. HUL was established in 1933 as Lever Brothers and, in 1956, became known as “Hindustan Unilever Limited”, as a result of a merger among Lever Brothers. The company has seen an upward trend in its compounded sales growth which is from 6.13% in the span of 10 years to 9.89% in the Trailing Twelve Months (TTM). It can be inferred that the demand for the products of the HUL company has increased in the current period. More and more people are demanding for the products offered by HUL. With the right portfolio of brands catering to every Indian household, the value-based pricing strategy, distribution network that reaches consumers to the remotest rural area and right manufacturing units helps the country to accelerate economic development. Due to the demand of the products of the company in the market, the company has always made profits in its operation. As you can see in the tables and charts, the company has seen an upward trend only in its compounded profits growth. The profits in the past 10 years span was 8.72% and in the TTM it is 19.17%, which is double the percentage that the company had earned in the past 10 years. HUL has given good returns to its shareholders during the period of 10 years span. The company has given a Return on Equity (ROE) of 86.60% in the life span of 10 years as compared to 77.57% in the TTM to its shareholders. This indicated that the company values its shareholders he most. The commitment to serve many Indians has helped the company to achieve their top one position in Indian markets. By reducing the environmental footprint and creative a positive and favorable impact to all the stakeholders the vision of the company is to double the size of its business.

37

Chapter 8, Section 2

INFOSYS LTD. Compounded growth of sales, profits and returns on equity of the company is as follows:

Table 2: Showing growth of Infosys Ltd. Years

Compounded Sales Growth

Compounded Profit Growth

Return on Equity

TTM

5.51 %

12.20 %

23.36 %

3 years

9.77 %

8.15 %

22.97 %

5 years

11.81 %

10.65 %

23.93 %

10 years

13.99 %

11.25 %

25.27 %

Graph 3: Infosys Ltd.

38

Data Analysis and Interpretation

Analysis: Infosys Limited (formerly Infosys Technologies Limited) is an Indian multinational corporation that provides business consulting, information technology and outsourcing services. The company changed its name to Infosys Technologies Private Limited in April 1992 and to Infosys Technologies Limited when it became a public limited company in June 1992. It was later renamed to Infosys Limited in June 2011. Infosys is the second-largest Indian IT company by 2018 revenues and 596th largest public company in the world in terms of revenue. The company’s compounded profits growth is not quite good, as there is an upward and downward trend. In the period of 3 years the profits were 8.15% as compared to the period of 5 years which was 10.65%. The software product revenues of India’s second biggest IT firm Infosys declined by close to 10% in FY15 largely due to certain challenges associated with Finacle, its core banking software. It was on account of slower deal ramp-ups, pricing decline and adverse cross-currency impact. The company has maintained a good trend on Returns on Equity (ROE). As you can see in the table and chart, the ROE which the company has given to its shareholders is stable enough in the last 10 years span which is a good indicator that even though the company faced problems in the year 2015 as the profits were declined, still the company’s priority were its shareholders. As Infosys at a glance has given positive return for long as well as short term horizon. From the past 10 years period both short- and long-term return is at the deepest level, As the company overall given short term investors a good return. In the year 2004 and 2006 Infosys Limited had issued bonus shares in the ratio 3:1 and 1:1 respectively, which is an indirect return for an investor, as investor got additional shares without paying money.

39

Chapter 8, Section 2

HDFC BANK Compounded growth of sales, profits and returns on equity of the company is as follows:

Table 3: Showing growth HDFC Bank Years

Compounded Sales Growth

Compounded Profit Growth

Return on Equity

TTM

17.72%

19.66 %

17.87 %

3 years

18.30 %

19.65 %

18.00 %

5 years

18.01 %

21.05 %

18.60 %

10 years

19.35 %

25.63 %

18.10 %

Graph 4: HDFC Bank

40

Data Analysis and Interpretation

Analysis: HDFC Bank Limited is an Indian banking and financial services company. HDFC Bank provides a number of products and services including wholesale banking, retail banking, treasury, auto loans, two-wheeler loans, personal loans, loans against property and credit cards. The amazing thing about HDFC Bank is that its stock never showed a negative return for the continuous 10-year period. Investing in HDFC Bank for long term has given investors higher returns as compared to same sector. For the short and medium investors HDFC has given a good return as the profits were in a positive trend as you can see in the table and charts from 25.63% in the past 10 years span to 19.66% in the Trailing Twelve Months (TTM). In 2007 and 2008 period were disappoint period for almost all investors, but after that HDFC Bank had solved the problems with high returns. One of the noticing things is that from the last 5 years span the Return on Equity (ROE) was 18.60%, but the ROE has dropped a little bit from the last 3 years span and the period of TTM the return on equity was 18.00% and 17.87% respectively to its shareholders, 2013-14 it. Shares of HDFC Bank Ltd fell as much as 1.6 per cent to Rs.2,080, its lowest since July 4 as the lender had said on Friday that its Deputy Managing Director, Paresh Sukthankar, had resigned and will vacate his post in 90 days. The country’s most valuable bank managed to increase its market share in both deposits as well as advances during the year as most other banks struggled with non-performing assets (NPA) The stock is a top holding in many equity portfolios by a large margin. The biggest reason why every fund manager is holding the stock is expectation of strong profit growth to continue. The stock has rewarded investors handsomely over the long term. The stock has been one of the best compounders in the long run for investors. Since its listing in May 1995, the stock has given an annualized return of 27 per cent. Overall, we can say that HDFC Bank was most flavored to long term investors.

41

Chapter 8, Section 2

LARSEN & TOUBRO Compounded growth of sales, profits and returns on equity of the company is as follows:

Table 4: Showing growth Larsen & Toubro Years

Compounded Sales Growth

Compounded Profit Growth

Return on Equity

TTM

11.45 %

23.67 %

16.61 %

3 years

9.19 %

27.28 %

13.23 %

5 years

9.97 %

13.97 %

12.66 %

10 years

12.85 %

12.97 %

14.40 %

Graph 5: Larsen & Toubro

42

Data Analysis and Interpretation

Analysis: Larsen and Toubro Limited is one of the best infrastructure sector company in India. But its growth and returns show a little bit disappointing for the long term as well as short term investor. The compounded sales growth was 12.85% in the period of last 10 years span which was been reduced during the life span between 3-5 years period which nearly came down to 9.19% to 9.97% respectively. The decline in private sector spending is also a function of over investment in the Financial Year 2008-12 time-frame and low demand off-take over the past several years The contribution of order inflows from private sector and overseas orders has almost halved for L&T over the last few years. This has resulted in the decline in the revenues of the company which you can see above and because of it the company couldn't pay much returns to its investors. The ROE has a downfall in the period of 3 years span and 5 years span with the returns of 12.23% to 12.66% as compared to 14.40% in the period of 10 years span. The region, which is still struggling from low oil prices, has reduced the share of overseas orders for L&T to 20% levels in YTD FY18, as compared to 30-45% levels reported over FY2014-17. However, recent uptick in oil and commodity prices seen over the past few months may finally restart the investment cycle in these regions. However, a sharp uptick in fresh order inflows led by government spending in India, is aiding the heavy engineering major tide over sluggishness. This can be seen in the graph as the compounded sales growth, profits and returns on equity has increased as compared to the past years. In TTM, the compounded sales growth has increased to 11.45% as compared to 9.19% in the last 3 years, profits have increased to 23.67% and returns on equity has increased to 16.61% as compared to 13.23% which was given in the past 3 years span period. It had guided a growth of 12%-14% over last year’s order inflows in the beginning of the year. It closed the FY 2016-17 with an order inflow worth Rs.1.43 lakh crore. A noticing point is that when stock market crash many of the company’s share price where at the lowest level, but L&T is one which shows the highest return at that time. If an investor has got L&T in his portfolio he cannot face a big down on his portfolio. According to a short-term investor L&T did not give any high return except on 2007-08 period.

43

Chapter 8, Section 2

TATA CONSULTANCY SERVICES LTD.

Compounded growth of sales, profits and returns on equity of the company is as follows:

Table 5: Showing growth Tata Consultancy Services Ltd. Years

Compounded Sales Growth

Compounded Profit Growth

Return on Equity

TTM

8.06%

5.01%

36.14%

3 years

9.16 %

13.06 %

36.03 %

5 years

14.34 %

9.95 %

33.99 %

10 years

17.97 %

19.37 %

30.03 %

Graph 6: Tata Consultancy Services Ltd.

44

Data Analysis and Interpretation

Analysis: Tata Consultancy Services Limited (TCS) is one of the Indian multinational Information Technology (IT) in India, is part of the Tata Group and operates in 46 countries. But looking into its sales growth the company has not given a huge return except in 2007-08 period. The company has seen a sales growth of 17.97% in the span of 10 years and now it has a sale growth of 8.06% in TTM (Trailing Twelve Months) which indicates that the company has demand for its services in the market. Tata Consultancy Services is also one of the companies which has given a high return during the stock market crashed period. The company has faced a steep downfall in its profits which was 9.95% in the past 5 years span as compared to the 19.37% in the past 10 years span. The company was being disrupted and it was aggressively leveraging their technology leadership and global resources to lead that disruption, But the company has overcome this disruption as we can see its results as the profits has increased from 9.95% to 13.06% in the 3 years span which indicates that the company is been performing better than its past performance. As you can see in the tables and charts the Returns on Equity (ROE) provided by the company is very good as you can just see an upward trend only in it. The company has given a ROE of 30.03% to 36.16% in the span of 10 years to TTM respectively. Thus, it indicates that the tech services firm Tata Consultancy Services (TCS) is performing quite well. Largest tech services firm Tata Consultancy Services (TCS) has outshone its peers Infosys Ltd and Wipro on both topline and bottom-line front in the January-March period. Overall the stock has performed so well with respect to the short- and long-term time horizon

45

Chapter 8, Section 3

3. Mutual Funds

For the study her I had chosen equity mutual funds which are of from diversified equity funds, large cap funds, multi-cap funds, and small and medium cap funds. All funds are of high risk. The selected mutual funds are: 1. ICICI prudential blue-chip fund-growth 2. HDFC top 100 fund-growth 3. SBI Magnum Equity ESG Fund-Growth 4. Reliance growth fund-growth 5. Aditya Birla Sun Life Equity Fund-Growth

46

Data Analysis and Interpretation

ICICI PRUDENTIAL BLUE-CHIP FUND—GROWTH

Average returns and growth percentage returns of the fund is as follows:

Table 6: Showing returns and growth of ICICI Prudential Blue-chip Fund-Growth Years

Fund Returns

Category Avg. Returns

% Growth

1 month

5.84 %

4.00 %

5.84 %

3 months

5.89 %

4.10 %

5.89%

6 months

6.47 %

5.50 %

6.47%

1 year

13.53 %

10.20 %

13.53%

3 years

12.99 %

9.80 %

44.25%

5 years

20.22 %

18.10 %

151.16%

Graph 7: ICICI Prudential Blue-chip Fund-Growth

47

Chapter 8, Section 3

Analysis:

ICICI Prudential Blue-chip is the large and the multi cap focused fund started in the year 2008. The Fund is an open-ended equity fund that aims for growth by investing in large cap companies with a proven track record, quality management and good growth potential. These large cap stocks provide reasonable returns compared with other stocks by way of lower volatility and may turn out to be a good investment option in turbulent economic conditions. The fund has well performed for long term investors as it gives 20.22% of return in last 5 years period. One of the main things is that the fund has not achieved the returns in negative, as the fund’s returns is moving in the systematic way. The fund has given a well return to its short-term investors as it gives 5.84% to its investors in just one months. The category average return of the fund has shown a good sign by giving a return of 10.20% in the life span of one year as compared to a return of 9.80% in the last three years. The fund as shown a slight downfall in the 3 years but in the last 1 years span the fund has given a category average return of 4.96% after a downfall in the last 3 months which a good indicator of a good period for a long-term investor to take profits. The fund has also performed well, in the terms of growth percentage as in the past 5 years the fund has a growth rate of 151.61 %, which is good indicator in a diversified equity fund. The fund has shown a good sign in growth percentage which indicates that the fund is performing at a good pace. ICICI Prudential Blue-chip is suitable for all investors and specifically for those who wish to contain volatility within the constraints of the inevitable gyrations in equity markets. This is one of the best diversified funds. This fund beats all its peers and has provided 18% annualized returns in the last 5 years compared to the balanced fund category in the similar period. Overall the fund is best suited for long term investors.

48

Data Analysis and Interpretation

HDFC TOP 100 FUND- GROWTH

Average returns and growth percentage returns of the fund is as follows:

Table 7: Showing returns and growth of HDFC Top 100 Fund-Growth Years

Fund Returns

Category Avg. Returns

% Growth

1 month

7.21 %

4.67%

7.21%

3 months

7.16 %

6.84 %

7.16 %

6 months

4.32 %

8.65 %

4.32 %

1 year

9.59 %

14.59 %

9.59 %

3 years

10.45 %

10.72 %

34.72 %

5 years

19.53 %

17.40 %

143.96 %

Graph 8: HDFC top 100 fund-growth

49

Chapter 8, Section 3

Analysis:

HDFC top 100 fund is a large cap focused fund which was incepted in the year 1996. The fund is an open-ended equity scheme predominantly investing in large cap stocks. The objective of this fund is to provide long-term capital appreciation/income by investing predominantly in LargeCap companies. There is no assurance that the investment objective of the Scheme will be realized. The fund is too for short term investors as it has given had given 7.21% and 7.16% of fund return in the current period of 1 month and 3 months respectively. The fund has given a return of 10.45% and 19.53% in the life span of 3 years and five years respectively which shows that the fund is growing in a stable stage. The fund has faced a downfall in its category average return as it gave the returns of 10.72% and 14.995% in the 1-year span and 3 years span respectively. The graph shows that the fund has overcome from his obstacles has performed well during the past 3 years. For the past four years the fund is a good performer. As the graph and the table shows that the fund has a good growth rate of 143.96% which is beneficial to its long- and medium-term investors. Also, the fund has goodwill and brand image in the market and thus investors prefer to invest in such a brand as the investors have trust on the brand. The investors seeking capital appreciation with minimized risk should park their funds in this plan Overall the fund mostly supported long and medium-term investors.

50

Data Analysis and Interpretation

SBI MAGNUM EQUITY ESG FUND –GROWTH

Average returns and growth percentage returns of the fund is as follows:

Table 8: Showing returns and growth of SBI Magnum Equity Fund-Growth Years

Fund Returns

Category Avg. Returns

% Growth

1 month

3.70 %

4.30 %

3.70 %

3 months

6.71 %

2.20 %

6.71 %

6 months

9.02 %

2.66 %

9.02 %

1 year

12.32 %

10.24 %

12.32 %

3 years

10.28 %

9.93 %

34.13 %

5 years

18.56 %

19.64 %

134.27 %

Graph 9: SBI Magnum Equity Fund-Growth

51

Chapter 8, Section 3

Analysis:

SBI Magnum Equity ESG fund is a large cap – oriented fund, which started in the year 1991. Which is one of an oldest funds of the SBI. The fund is a consistent performer which is mainly supported by its long-term investors. The fund has given 18.56% and 9.02% of fund returns in the period of 5 years and 6 months respectively. The category average return of the fund has shown a good sign by giving a return of 10.20% in the life span of one year as compared to a return of 9.80% in the last three years. The fund as given a return of 4.30% in the last 1 month which show that the fund is giving good average returns. The fund has also performed well, in terms of growth percentage as it has given a growth of 3.70% which shows that the fund is growing on its own pace as is has brand image in the market. It has also performed well, as in the past 5 years the fund has a growth rate of 134.27 %, which is good indicator in a diversified equity fund. The fund has shown a good sign in growth percentage which indicates that the fund is been preferred by the investors. The fund is also a fair supporter for short term investor in the initial and middle phase of the 5year period. As the NAV is lower the investors can buy a greater number of units with lesser amount of money. Concluding the fund is mostly favored to the long-term investors.

52

Data Analysis and Interpretation

RELIANCE GROWTH FUND- GROWTH Average returns and growth percentage returns of the fund is as follows:

Table 9: Showing returns and growth of Reliance Growth Fund-Growth Years

Fund Returns

Category Avg. Returns

% Growth

1 month

5.67%

4.96 %

5.67 %

3 months

0.49 %

-0.21 %

0.49 %

6 months

-1.01 %

0.65 %

-1.01 %

1 year

5.90 %

8.02 %

5.90 %

3 years

9.48 %

10.60 %

31.22 %

5 years

22.70 %

27.40 %

178.08 %

Graph 10: Reliance Growth Fund-Growth

53

Chapter 8, Section 3

Analysis:

Reliance growth fund was incepted in the year 1995, which is a large cap focused fund. The fund has given a well support to long- and short-term investors as the fund has given 22.70% of the fund return in the life span of 5 years period. Which is of the second highest amongst the funds which are compared here. As in the period of last 6 months the fund has shown a downward for short and medium investors as the fund returns was –1.01%. The category average return of the fund has shown a good return of 27.40% in the life span of 5 years. The fund as shown a downfall for –0.21% in the current 3 months but in the last one month spans the fund has given a category average return of 4.96% after a downfall in the last 3 months which a good indicator of a good period for a long-term investor to take profits. The fund has also performed well, in the terms of growth percentage as in the past 5 years the fund has a growth rate of 178.08 %, which is good indicator in a diversified equity fund. After the negative performance the fund has recovered quite well from –1.01% to 5.67% from the last 6 months span. But as the NAV is lower the investors has got an opportunity to buy a greater number of units. After all this fund is most among the long-term investors as well as short term investors.

54

Data Analysis and Interpretation

ADITYA BIRLA SUN LIFE EQUITY FUND-GROWTH Average returns and growth percentage returns of the fund is as follows:

Table 10: Showing returns and growth of Aditya Birla Sun Life Equity Fund-Growth

Years

Fund Returns

Category Avg. Returns

% Growth

1 month

5.26 %

5.39 %

5.26 %

3 months

4.28 %

2.56 %

4.28 %

6 months

6.18 %

2.66 %

6.18 %

1 year

4.84 %

9.15 %

4.84 %

3 years

12.04 %

11.39 %

40..56 %

5 years

25.30 %

22.44 %

208.89 %

Graph 11: Aditya Birla Sun Life Equity Fund-Growth

55

Chapter 8, Section 3

Analysis:

Birla Sun Life Equity Fund-Growth is the diversified equity fund, which was started in the year 1998. The fund has performed quite well in its own time horizon, as it gives 25.30% of fund returns in the life span for last 5 years, which is amongst highest in a diversified equity fund. The funds give a good support to its long-term investors. For the short-term investors also, the fund is so favorable as it gives 4.84% of fund return in 1year period. The category average return of the fund has shown a positive return from 22.44% in the life span of 5 years and in the current one month span the fund has given a category average return of 5.39% which shows that the fund is performing well. It is the highest return amongst all the mutual funds which are compared here. The fund has also performed quite well, in the terms of growth percentage as in the past 5 years the fund has a growth rate of 208.89 %, which is amongst highest in a diversified equity fund. This shows that most of the investors would prefer to invest in the fund as the performed extremely good from the other funds which are compared there. Overall the fund has mainly focused for the long and medium-term investors than short term investors.

56

Data Analysis and Interpretation

4. INVESTOR SURVEY ANALYSIS

Graph 12: Age Profile

From the above chart, it can easily be inferred that the people aged between 31-40 years preferers mutual funds the most because of many factors of it, but mainly due to the stability in the earnings and the career of the people, their responsibility towards their family etc. Also, we have found that only 1 respondent is a female in the pilot study, so we shall see to it what numbers it will extend because this number shall give us the rough idea about the mutual fund awareness among the women in a particular and also the financial awareness in general.

57

Chapter 8, Section 4 Graph 13: Academic Qualification

From the above chart, it can be inferred that the majority of respondents are the graduates, therefore now we need to see that up to what extent the post graduates and the professional have interest in the mutual funds.

Graph 14: Annual Income Range

From the above chart, it can be inferred that the majority of the respondents are from Rs.2,00,000-5,00,000 range, and therefore it now remains to see that how many are from a range less than rupees two lakh category as here lies an opportunity for the AMCs to generate the huge volumes by offering the innovative funds. 58

Data Analysis and Interpretation

5. INVESTMENT OBJECTIVES: Among the given options which includes “others” category the majority of respondents prefers good returns as their primary objective of the investment.

6. CHANNELS USED BY RESPONDENTS FOR INVESTING: From a study it can be inferred that the majority of the respondents (70%) now invest directly in the mutual funds, especially after the SEBI guidelines which came recently which says that there might not be any ENTRY LOAD for the investors who are investing in the mutual fund schemes directly.

7. INVESTMENT HORIZON: From the study it can be inferred that the majority of the respondents invest in the mutual funds for “More than 3 year” the perspective (53%), that means once an investor comes to the services available in the market he will then invest in the scheme for at least 3 years, hence today it has become very essential that the AMCs and especially the SBI must focused on coming up with innovating ways in order to serve the customers by giving SMS to the investors time to time, also giving the value added services such as debit cards, free insurance, etc.

8. INVESTMENT AMOUNT: From the pilot study it can be inferred that the majority of the respondents (46%) has investments in the mutual funds in the range of “More than Rs.1,00,000” the category that implies that, if the investor sees that his capital is been growing over a period of time than a probability of his subsequent investments becomes very strong.

59

Chapter 8, Section 9

9. SCHEME PREFERENCES: Graph 15: On the Basis of Asset Class

When it comes to the scheme preferences majority of the retail investors prefer the Equity Schemes (93.33%), followed by the Balanced Schemes (6.66%) with not a single retail investor preferring the debt or the fixed income instruments such as the Fixed Maturity Plans (FMPs). It shows that in the future there is a huge potential for the debt instruments in the economy market which is been unearthed by the retail investors due to its low awareness, complexity, etc.

Graph 16: Preferable Route to Investing in Mutual Funds

60

Data Analysis and Interpretation As the above chart indicates that the majority of the respondents (57%) take a self-decision once they start investing in the mutual funds. Only 10 % of the respondents take help of any Brokers/Advisors when it comes to final decision for investing. Therefore, it shows that the AMCs in general needs to be more informative in order to provide best service, material and information to facilitate the subsequent investment of the retail investors.

10. SCHEME PREFERENCES: Graph 17: On the Basis of Structure

When it comes to the scheme preference on a basis of its structure, majority of the retail investors prefer an “Open Ended Scheme” primarily due to the flexibility of the redemptions, good return, investments and liquidity. None of the investors like to prefer “Interval Scheme", in fact few of the retail investors got confused by the very name of the “Interval Schemes.”

61

Chapter 8, Section 10 Graph 18: Saving Habits

When it comes to the Saving Habits of the retail investors it comes out that the majority of the respondents saves between 15 - 20% p.a. basis followed by an “above 25%” category (20%), hence at this stage it becomes very difficult to comment anything about the saving preferences about the retail investors. Other categories such as 10-15 % and 20-25 % are been equally preferred by the respondents but showed a positive clue that only 7% of the respondents saves below 5%.

Graph 19: Satisfaction Level

62

Data Analysis and Interpretation From the above chart, it can be inferred that majority of the respondents (47 %) were considerably satisfied up to this stage when they were been asked about the overall experience with Mutual Funds which includes the services, funds, returns etc., but still it remains to been seen that which of the category will lead with a completion of the survey because the second-best category which was been preferred by the investors was “Reasonably Satisfied” that means that yet there still more to do on for the Customer Satisfaction Graph 20: Most Popular Fund House in Terms of Highest Investments

When asked about the highest investment in the AMC majority of the investors (27%) which gave the name of the SBI which is been followed by the Reliance (23%), the ICICI (20%), and the rests in “others” which is led by UTI. Thus, there is a stiff competition in the market and also it still remains to see that which of the fund house will take the lead with a completion of the project in the market.

63

Chapter 8, Section 11

11. COMPARATIVE ANALYSIS AND INTERPRETATION

As we had seen 5 equity shares and 5 mutual funds, and their performance for 10 financial years and 5 financial year period respectively. Most of the equity shares has given an unexpected return to its long, medium, and the short-term investors. Mutual funds also not that bad in giving returns, but these funds are performing in a very systematic way. One of the main advantages for investing directly into the equity stocks is that, there is huge fluctuations in it which will affect 100% positively to its investors or negatively as per the fluctuations. Where in such huge fluctuations will be balanced in the mutual funds, as the mutual funds has a bunch of the equity stocks in its portfolio. Thus, investing in the mutual funds are less risky as compared to directly investing in equity. Here 2 of the companies – Hindustan Unilever Limited and Tata Consultancy Services has given returns on equity to its long-term investors are 30s percent. The mutual funds haven’t given such huge returns to its investors. As the graphs and tables shows that the returns of direct investing in the equity stocks is too high than the returns of the mutual funds, also the prices of equity are high as compared to the mutual funds, which is not affordable for the investors with a small amount of money. For example, in the investor has Rs.1000 in his hand, with that money he might not be able to buy a stock of HDFC, L&T, etc. But he might be able to buy at least 2 to 5 units of mutual funds of his choice. One of the main advantages of mutual fund is that diversification, if an investor has got lessor money, as he buys mutual fund units, his/her money is investing in diversified manner. In a mutual fund industry, the portfolio is managed by the fund manager and his team. But in a direct investing method his/her portfolio has to manage by the investors himself. All is about the investor’s preference; some investors find satisfaction in managing his funds in portfolio. An investor can’t order the fund manager to buy stocks of his preference in a mutual fund investing. The main 3 things every investor has to bear in mind before going to invest directly are: 1. The time of the entry, 2. Choosing of a company

64

Data Analysis and Interpretation 3. time of exit But the above features are not that important when the investors invest in any mutual funds, because the fund manager would take care of such things. Only 1 thing an investor needs to bear in his mind, that is choosing a right scheme from a bunch of the schemes of a AMCs. If an investor invests his money through a distributor, then he will help an investor for choosing a better fund that suit with the financial goals of an investor. As there is huge fluctuation in the equity shares, few of the examples of the stock which had fluctuate more in the past 10 years are: •

Suzlon Energy – low: Rs.5.72 (mid 2013) and high: Rs.460 (early 2008)

•

Adani Enterprises – low: Rs.5 (mid 2001) and high: Rs.785.25 (late 2011)

•

Reliance Communications – low: Rs.46.50 (mid 2012) and high: Rs.844 (early 2008)

•

Wock Pharma – low: Rs.67.50 (early 2009) and high: Rs.2166.05 (early 2013)

The above high and the low rates this shows that if the investor has purchased any of the abovementioned stocks, he would have got returns of 40 to 50 times more than what he had invested. This is one of the features of direct investing – an unexpected returns or profits. Here choosing a company, the time of entry and the time of exit plays a very important role. In the mutual funds such a huge fluctuating's would never occur as a huge return from one company is been balanced by the low return of another company as the portfolio of an investor is been diversified. Here in a comparison I have chosen the equity stocks from NSE CNX NIFTY, but a benchmark hasn’t given such huge returns in the last ten financial year period, that’s because of the balancing of the high and low returns.

65

Chapter 9, Section 1

9. FINDINGS AND SUGGESTIONS

1. CONCLUSION

Investments can be done either in direct equities or mutual funds which requires a lot of your time and energy. Each approach may have its own advantages as well as disadvantages. Direct equity investing is considered to be more dynamic in nature by an investor community and hence, those who willing to keep a continuous tab on equity markets prefer to have the route of direct equity as it will give the investors much needed zing and the excitement. However, in the direct equity the risk also comes along with the dynamism of this investment. So, only those people who are capable to understand Nitty-Gritty of equity markets and who will be able to devote their time and energy may adopt this route to the equity, that doesn’t mean that all the investors might have the same level of intelligence and understanding and even though if the investors have the ability to get to know about the direct equity route, he / she might lack their time to devote in such investment activity and so they might prefer to take an indirect route to the equity investments that is the mutual funds. Mutual funds provide a much-needed ease to its investors while they invest in equity asset class. As it is shown above, how the equity mutual funds of various categories like the large, mid, small caps and the diversified has given an average return over 10 years of span and in the other hand, some stocks that mutual fund has given less return over 10 years or even some has given a negative return also. Thus, this shows us that how risky it might be in investing in the individual stocks in a comparison to investing through a mutual fund. Despite mutual funds hasn’t given that much return for over 5 years of span still they have outperformed in the market for over 5 years of the span. Hence according to me the individual should first decide the purpose for his / her investment they want to do than only they should select an investment plan which is according to it, for e.g. if the investor wants to go for a short term investment for 1-2 years than he must go with a debt instrument or if he has a long horizon for his investment and if he is looking to invest in the

66

Findings and Suggestions equity market than rather investing directly in a selected equity they must go for the top mutual fund schemes option as investing directly in the stock market involves a high risk and one might lose his / her money or might even get very small returns from it ono the other hand if they opt for mutual fund scheme than there is a chance that they might get a higher returns over 5 years of the span. As return of few stocks had outperformed badly and the return of mutual fund schemes like few has given a good return, it might not happen that the investor can be always right that he might get an opportunity to select such stocks as few has also given a negative return too. Thus, to be on a safer side one might intelligently opt for the mutual fund schemes.

67

Chapter 9, Section 2

2. RECOMMENDATIONS

As the recommendations which are mentioned here are my personal views, as an investor in the stock market. My recommendations are: Ø Direct investing in the equity shares is the efficient way to learn and know about the stock market and the economy of a nation. Ø If you really know to manage your portfolio, then you should choose direct investing. Ø If getting the income is your main concern and if you don’t have enough knowledge about the stock market, you should choose the mutual fund scheme. Ø Make a good study about the market before choosing any investment option. Ø Be aware of a certain risk, before investing in any securities whether it is direct investing or mutual fund investing. Analysis the risk involved in it with the help of the financial backups and then prefer to choose any investment option. Ø Finding a right fund is very important task but even more important than it is to keep a track of the way these funds are performing in the market. Ø “Don’t put all the eggs in one basket” this old age adage, is of the utmost importance. No matter however the risk profiles of a person is, it’s always advisable to investor to diversify the risks associated. So, putting one’s money in the different asset classes are generally a best option as it averages all the risks in each category. Ø An investor should prefer to go with a well-diversified portfolio in comparison to stick with either one or two of the investment's avenues.

68

Findings and Suggestions

3. LEARNING OUTCOME FOR THE STUDENT . As a comparative study helps you to find out answers to so many questions before investing in direct equity and mutual fund. The concluded points are: v For a start-up investor, the mutual fund investment method is the most favorable and a

affordable one, as the risk is quite low as compared to the direct investing. v For an investor who does not have sufficient money, he/she should go for the mutual fund

investing as the NAV is lower than that of the price of a particular stock. v If an investor wants to earn profits out of the speculation, then he/she must choose direct

investing option in equity shares. v Investing in the direct equities makes an investor to know more about that company, the

financial market, and also about the economy. v People who needs a systematic way for investing must opt for the mutual fund investing. v Investing with a fixed income strategy, should choose mutual fund as an investment choice. v Short term and medium-term investors should be opting for direct equity investing as their

investment choice. v Mutual fund investing is been termed as the long-term horizon for getting a good return,

as the fund is been doing good and it is going in a systematic way. v If an investor who has got time in making the market study and also managing his/her

portfolio, then he/she should invest in the equity shares, otherwise they can go for the mutual fund investing. v If an investor likes to buy and sell the stocks, manage the stocks in his/her portfolio then

he/she must should opt for investing in equity stocks.

69

Chapter 10, Section 1

10. ANNEXURE

1. QUESTIONNAIRE A study of preferences of the investors for investment in mutual funds.

1). Personal Details: (a). Name: (b). Age: Below 30

31-40

41-50

Above 50

(c). Qualification: Graduation

Post Graduate

Professional

(d). Occupation. Pl tick (√) Professional

Salaried

Business

Retired

Others

(f). What is your monthly family income approximately? Pl tick (√). Less than Rs.2,00,000

Rs.2,00,001 5,00,000

Rs.5,000,00110,00,000

Above Rs.10,00,000

2.What kind of investments you prefer most? Pl tick (√). All applicable a. Saving account e. Post Office-NSC, etc. I. PPF

b. Fixed deposits f. Shares/Debentures j. PF

c. Insurance g. Gold/ Silver

d. Mutual Fund h. Real Estate

3. While investing your money, which factor you prefer most? Any one Capital Appreciation

Liquidity

Safety

Tax Benefit

70

Good Return

Annexure 4. Where from you purchase mutual funds? Directly from the AMCs

Brokers only

Brokers / Sub-brokers

Other Sources

5. How much is your investment horizon? Within a year

Between 1-3 years

More than 3 years

6. How much amount do you invest in the Mutual Funds? Less than Rs.50,000

Between Rs.50,00010,00,000

More than Rs.10,00,000

7. How satisfied you are with your experience of investing in Mutual Funds? Highly Satisfied Unsatisfied

Considerably Satisfied Highly Unsatisfied

Reasonably Satisfied

8. In which Mutual Fund you have invested? Please tick (√). All applicable. a. SBIMF b. UTI c. HDFC d. Reliance e. ICICI prudential funds f. Birla g. DLF h. Other. Specify 9.Scheme Preferences: Equity Fixed Maturity Plan (FMP)

Debt Others

10.How do you come to know about Mutual Fund?

71

Balanced

Chapter 10, Section 1 a. Advertisement

b. Peer Group

c. Banks

d. Financial Advisors

11. Which mutual fund scheme have you used? Open-ended

Close-ended

Interval

12. How much of your income you able to save? Below 5 % 15 – 20 %

5 -10 % 20 –25 %

10 – 15 % Above 25%

13. When you invest in Mutual Funds which mode of investment will you prefer? a. One Time Investment

b. Systematic Investment Plan (SIP)

14. How would you like to receive the returns every year? a. Dividend payout

b. Dividend re-investment

72

c. Growth in NAV

Annexure

2. Annexure 1: Trends in Stock Market You may have heard about some of the animal’s names in the Stock Market activities. I will like to share the real meaning for those Words / Names through this article. They are as follows: Ø Bull Ø Bear Ø Lamp Ø Deer Ø Dead Cat Bounce Ø Hound Dog Ø Lame Duck

Ø Bull: In Jallikattu, the bull is raising its horns that shows its maximum strength. As when the prices are continuously to be in ascending in the stock market such market is known as a Bullish Market. The term (BULLISH) is been used to indicate us that, stock market is being dominated by a bull. The investors tend to always like a bullish market because the prices will go up and as a result they are going to earn more profit. Annexure figure 1: A bull in stock market

73

Chapter 10, Section 2 Ø Bear: Bear in the stock market is otherwise known as “Anucnu”. When the prices are continuously to be in descending in the stock market that market is known as “BEARISH MARKET”. If a person might get caught by a bear, the bear might cause more damages to the body. As like, when the stock market is catch by a bear, the investors might take more time in order to recover himself from that damage. So, if the investor is not investing his money during this period and I he is selling the shares (that he had bought in the low prices) he might suffer loss as the share price of that shares are been reduced. Annexure figure 2: A bear in stock market

Ø Lamp: The investors don’t have any basic knowledge about the stock market. They don’t have any interest to know about the stock market, but they might like to invest the money in the stock market. This type of the investors is mostly dependent upon others such as the stock brokers etc., sometimes they might lose their money (that they had invested) and might get cheated by others. Ø Deer: Dear is not a familiar term amongst the investors. Investors who are applying for a new issue of shares in capital market, after they have bought the shares form the firms, they usually don’t sell the shares as early as possible. They usually wait for the raises in the share and if the share prices of their share meet their expected level they sell their shares. These investors are more patience in the market activities (I.e. Buying & Selling). Such types of the investors are known as DEER.

74

Annexure Ø Dead Cat Bounce: DEAD CAT BOUNCE is the term that is derived from real time incident i.e. if the dead cat falls down from the great height it might bounce back to some extent. Just like, when share market meets the biggest fall it indicates us that, it might bounce back to some extent. It was the famous term during 1985, now it's not famous amongst investors. Ø Hound Dog: Hound Dog indicates that an investor who has an ability to make their decisions for purchasing and selling according to the market fluctuations”. Ø Lame Duck: Lame Duck term is mostly been in Europe. The term was been invented in 18th century. The term is used in the London Stock Exchange in order to indicate a default in the debt of the investors and the brokers. A continuous increase in the default of debt will lead into bankrupt. The investors who are making more trades without any profits they are termed as Lame Duck.

75

Chapter 10, Section 3

3. Annexure 2: Facts about Indian Stock Market Ø Equity Averse: Indians hugely are an equity averse. Only 1.2% of Indian household financial savings is been directly invested in the shares (2010-2011). This amounts to be in figure of $2.5 Billion approx. for all the entire Indian household population. Ø Low Participation: In a country of more than 1.2 billion, there are hardly even 20 Million de-mat accounts (for e.g.: a dematerialized account for an individual Indian citizen to be traded in the listed stocks or in the debentures in the electronic form) and around 248 portfolio managers. Ø Foreigners vs Locals: Foreign Institutional Investors (FIIs) holds a larger stake in the listed Indian companies (10.45%) than a combined stake of the Indian Mutual Funds (2.68%) and the Indian Financial Institutions / Insurance Companies (5.32%) Ø Inflows vs Outflows: In January - March 2012, Foreign Institutional Investors (FIIs) has invested $8.89 Billion in Indian stock markets. In the same period, the domestic institutions such as the mutual funds, the insurance companies etc. had sold these instruments around $4 Billion worth. Ø Total Market Cap to GDP: The current (2018) Market Cap to GDP ratio is around 75.34%. In last 19 years, the ratio has ranged from the low of 25.1 (!) in year 1992-93 to the high of 101 in year 2007-2008. Ø Exchanges: The two of the main stock exchanges for the Equity Trading in India are Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). BSE is considered to be the oldest stock exchange in the Asia and it claims to have a largest number of the listed companies around the world. However, out of 8900 scripts (stocks) that are been listed, only about one- third (around 3000) of it are been traded every day. Ø Volume: The daily turnover in Equity Cash segment of the National Stock Exchange is around Rs30130 crore and that of the Bombay Stock Exchange is Rs2,888.38 crore. Three- fourths (75%) of the turnover ratio could be attributed to top 100 scripts.

Ø Derivatives: The National Stock Exchange has the monopoly in Equity Derivatives market. It ranks in a very high position in the global rankings for number of the contracts traded – 2nd in the Stock Index Options, 3rd in the Stock Index Futures and 3rd in the Single Stock Futures.

76

Annexure

4. REFERNCES

Websites: Ø www.nseindia.com

Ø www.economictimes.indiatimes.com Ø www.moneycontrol.com Ø

www.globalsearch.co.in

Ø

www.valuesearchonline.com

Ø

www.amfi.com

Ø www.sebi.gov.in Ø www.nseindia.moneycontrol.in Ø

www.businesstimes.com

Ø

www.economictimes.com

Ø

www.rediff.com/business

Ø

www.screener.in

Magazines: Ø NISM: Workbook for – NISM Series 5-A: Mutual Fund Distributors Certification

Examination.

77

Chapter 10, Section 5

5. BIBLIOGRAPHY •

Shanmugham, R., 2000, “Factors Influencing Investment Decisions”, Indian Capital Markets – Trends and Dimensions (ed.), Tata McGraw-Hill Publishing Company Limited, New Delhi, 2000

•

Sujit Sikidar and Amrit Pal Singh, 1996, Financial Services: Investment in Equity and Mutual Funds – A Behavioral Study, in Bhatia B.S., and Batra G.S., ed., Management of Financial Services, Deep and Deep Publications, New Delhi, Chapter 10, 136-145

•

Syama Sundar, P.V., 1998, “Growth Prospects of Mutual Funds and Investor perception with special reference to Kothari Pioneer Mutual Fund”, Project Report, Sri Srinivas Vidya Parishad, Andhra University, Visakhapatnam

•

Sitkin and Pablo (1992), “Reconceptualizing the Determinants of Risk Behavior”, academy of Management Review. Vol. 17, Issue 1, pp. 9-39.

•

Sharma C. Lall, 1991, “Mutual Funds – How to keep them on Right Track”, Yojana, Vol.35, No.23, Dec. 18-19.

•

Samir K. Barua et al., 1991, “Master Shares: A bonanza for large Investors”, Vikalpa, Vol.16, No.1 (Jan-Mar) 29-34.

•

Thaler, R.D., Kahneman, and Knetsch J, 1992, The Endowment Effect, loss aversion and status quo bias, in R. Thaler, ed., The Winner's Curse: Paradoxes and Ana molies of Economic Life, The Free Press, New York

•

Madhusudan V. Jambodekar, 1996, Marketing Strategies of Mutual Funds – Current Practices and Future Directions, Working Paper, UTI – IIMB Centre for Capital Markets Education and Research, Bangalore.

•

Raja Rajan V., 1997, “Chennai Investor is conservative”, Business Line, Feb. 23-25

•

Raja Rajan, 1997, “Investment size-based segmentation of individual investors”, Management Researcher, 3 (3 & 4), 21-28.

•

Raja Rajan, 1998, “Stages in life cycle and investment pattern”, The Indian Journal of Commerce, 51 (2 & 3), 27 – 36.

78