Report On Mutual Funds

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ACKNOWLEDGEMENT I take this opportunity to acknowledge and express my gratitude towards some of the most eminent person whose presence is noteworthy & seminal in giving me a grand opportunity to associate myself with an esteemed organization like Suresh Rathi Securities Private Ltd.

Firstly, I am grateful to Mr. Saurabh Rathi, by entrusting upon me the confidence and providing a chance to get an experience in the various fields of operations under his guidance. His enterprising, dynamic, forward-looking, radical approach provided an opportunity to work under him to inculcate and instill valuable talent. Secondly, to Mr. Bhavesh Mundra and Ms. Munmun Pungalia, whose sustained guidance and teachings helped me in progressing forward, also, for their endeavor towards providing continuous guidance to help build an understanding of the practical aspects of the work and gain knowledge & valuable experience. I would also like to thank all the staff members for their support and co-operation during my summer training.

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THE ORGANISATION- Suresh Rathi Securities Pvt. Ltd. M/s Suresh Rathi Securities Pvt. Ltd. is a Member of Stock Exchange Mumbai and was incorporated on June 19, 1997 and it commenced business on December 29, 1997. Earlier Stock Broking Business was done in the name of our erstwhile firm M/s Suresh Rathi & Co. since 1989.

The Company is in business of Stock Broking and allied activities and is providing services like Equity Broking, Investor Guidance & Education, nationwide distribution of Mutual Funds & IPOs.

The Company is a Depository Participant of Central Depository Services Ltd, since June 1999 with a DP branch at Jodhpur & 6 other cities. CDSL’s ‘easiest’ facility has been recently provided to facilitate the instructions through internet.

The Company is also a Member of National Stock Exchange of India. It is also a trading member in the Futures & Options Segment of NSE and Derivatives Segment of BSE. Internet trading facility has also been made available for investors on BSE. Needless to mention, entire back-office operations are fully computerized, giving us that technological edge to service the clients effectively.

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The company has Network of more than 90 Business branches all over Rajasthan and in the financial capital of the nation- Mumbai. The company’s business is also running in some of the other parts of the country. The company has staff strength of 40 at their H.O. with experienced and professional personnel managing operations with effective risk control .

Duration and Area of the Training Process

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The overall training process lasted for 6 weeks. In these 6 weeks we were provided with conceptual knowledge of various investment options (primarily Mutual Funds and IPOs) along with the field training. Whole 1 week was devoted to building fundamentals of capital market including Mutual Funds, Secondary Market and DP Operations. Remaining 5 weeks were spent learning field operations by actually performing them. Here we met with the potential customers and try to market our products. It is the real training period in which we were also provided with opportunities to interact with professionals. Various sessions were conducted to give us an insight on local market and marketing skills using tools like role playing, web links, fact sheets of various fund houses, etc.

SRSPL has a bouquet of services to offer which includes Equity Broking, Investor Guidance & Education, Mutual Fund & IPO distribution and Depository operations. Our major area of training was IPO distribution and marketing of Mutual Funds. For this we targeted potential customers in the Mandore mandi (wholesale market of grains, pulses, tea, etc.) in the town. They have also given a chance to meet their existing clients to get more business. Other than that I’ve also been exposed to area of portfolio management and analysis.

NATURE OF TRAINING

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On the very first day of my training Mr.Saurabh Rathi,Director of the company, made a team of 8 trainees with a very clear vision that all of us need to work in a team as this is the way to work in real corporate life where every small contribution counts without any great burden on any individual .He introduced us with other employees who are working there from several years and gave us an overview of the work. Many times the Director of the company as well as some industry professionals have taken various sessions and gave us personalized opinions about our progress .they have used ROLEPLAYS, Fundamental building classes and many more tools to make us better equipped with what we should. They have provided data of some listed companies so as to analyze their performance in the past and watch out for future. It was a holistic learning process at SRSPL but certain times I encountered with some Problems -:  Despite of so much media hype a big amount of ignorance still lies therein. 

There are still many people who do not want to even look at the equity or the mutual funds “saying that it is a mere gamble and nothing more than that.” They say that it is a game for those who can believe in chances and luck.

 A few people who really want to invest, have their own contacts and they do not want to do business with others. 

People are still living with their conservative mindsets of getting “JUST A MAGICAL TIP”. If anybody is explaining them that how that could happen Then They are least interested in it.

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LIMITATIONS I enjoyed my training process thoroughly .Sometimes I got some of the chances to work and learn beyond the jobs I have entitled to do so. My seniors are also kind and helpful. They always encouraged me and pushed me and opened up more challenges and opportunities for me. But one limitation is there if I had to mention it---My workplace is the H.O.(head office) of the company and thee is a great amount of workload on each of the employee. Therefore there are some instances when the person concerned is not there or not in a position to help me out or to solve my query. CONTRBUTION As the training was done in the marketing of financial services arena so the basic contribution towards the company SRSPL is totally related to the same. Emphasis was laid upon selling of the products that includes following- : 1. Mutual Funds a) New Fund Offers b) Existing Funds 2. Initial Public Offerings (IPO’s) 3. Opening NEW D-MAT Accounts Though it was not an easy task still a fair amount of contribution was made in this regard. Initially I was encountered with a few difficulties but at the time of end of my training I landed

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up with a business of Rs. 1.2 lacks and more than 20 new customers with D-MAT accounts are added. I was also exposed to the arena of Equity analysis and portfolio management.

KNOWLEDGE GAINED

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The knowledge and exposure gained at SRSPL was just not limited to how organizations like them work, but was multi faceted. Since my training place was HO of the organization almost all operations were carried out and controlled from their. So I got a good idea about almost all operations of the company. Marketing of the financial products require:

• Acute financial knowledge • Marketing skills Financial knowledge gained by me is following:

1. Mutual Funds a) New Fund Offers b) Existing Funds 2. Initial Public Offerings (IPO’s) 3. Equity analysis

Mutual Fund - An Introduction A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the schemes is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable

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investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

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

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Closed-end Funds A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. Interval Funds Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices. By Investment Objective Growth Funds The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proved that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time. Income Funds The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income. Balanced Funds The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

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Money Market Fund The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. Other Schemes Tax Saving Schemes These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds. Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, Pharmaceuticals etc. Index Schemes Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. Index schemes are also referred to as unmanaged schemes (since they are passive) or tracker schemes (since they seek to track a specific index).Passive investment places lower demands on the time and efforts of the AMG. All that is required is a good system that would integrate the valuation of securities (from the market) and information of sales and repurchases of units (from the registrar) and generate the requisite buy and sell orders. Therefore, management fees for index funds are lower than for managed schemes.

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Alternately, a mutual fund, through its research can identify a basket of securities and / or derivatives whose movement is similar to that of the index. Schemes that invest in such baskets can be viewed as active index funds. . Sectoral Schemes Sectoral Funds are those which invest exclusively in a specified sector. This could be an industry or a group of industries or various segments such as 'A' Group shares or initial public offerings. Enhanced Index Funds The enhanced index fund is a managed index fund that seeks to beat the performance of its benchmark index by at least 0.1 per cent, but no more than 2 per cent. If the index fund's performance were to exceed this 2 per cent cap, it would then be considered an equity mutual fund. Exchange Traded Funds (ETFs) Exchange traded funds are open-end funds that trade on the exchange. Like index funds, ETFs are benchmarked to a stock exchange index. ETFs differ from index funds in the following respects: A single NAV is applicable for the day in the case of open-end funds. Therefore, a single price would be applicable for all investors who buy units of an open-end index fund on any particular day. Similarly, a single price would be received by all investors who exit from an open-end index fund on any particular day. .An ETF, on the other hand, is, traded in the market place. Therefore its unit price keeps changing during the day. This intra-day fluctuation in ETF's unit price appeals to short-term investors The AMC of an ETF does not offer sale and re-purchase prices for the units. Instead, it appoints designated market intermediaries (market makers) who buy or sell units' from the investors. This constitutes the secondary market for the ETF.Thus, an investor who wants to invest in an ETF would go to a market maker who is expected to offer two-way quotes at all times. An investor who chooses to invest in the ETF would thus know precisely how many units in the ETF he will get against investment. It is as simple as buying or selling a share. The transaction is executed through the share trading terminal of the market maker. Since these secondary market trades are between purchasers and sellers in the stock market, the corpus of the scheme is not affected. . A unique feature of ETFs is that besides the secondary market, they also have a primary market, i.e. a facility for investors to exchange their ETF units for the underlying shares (redemption) or exchange their investment in shares for units of the ETF (sale). Such sale and redemption transactions entail change in the

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corpus of the scheme. The ETF, for administrative convenience, can set a minimum size for such primary market transactions. The market maker makes money based on the spread in the two-way quote. Competition between market makers is expected to keep the bid-ask spread low. This structure also ensures that the AMC does not need to pay a commission to market intermediaries for bringing investors into the fund. Similarly, there are no loads recovered by the AMC. Thus, a significant element of cost is eliminated for the investors. Investors only bear a cost that is implicit in the bid-ask spread. Low expense ratio is another attraction for an investor in ETFs. Fixed Maturity Plans I Serial Schemes An investor in a debt security gets expected yield if he holds a fixed coupon debt security until maturity. But if he sells security earlier, then what he recovers would depend on the market situation at the time of sale. He could equally end up with a capital gain or a capital loss. A fixed maturity plan (FMP) seeks to eliminate the risk of such capital loss by investing exclusively in a pre-specified debt security. Thus, if an investor is desirous of investing for four years, he can invest in a fund that will invest in a pre-specified 4-year security. .. On maturity, the scheme would redeem the security and pay the investor. The investor, however, can exit earlier. But what would recover in an early exit would depend on the market situation at her time of exit. Thus, an investor is assured a fixed return if he stays invested in the scheme for the period originally envisaged. But he also has an earlier exit option in case he invests in a FMP that is structured as an open-end scheme. Normally, an assured returns scheme can be offered only if there is a named guarantor who offers the guarantee. An FMP is an assured returns scheme through the back door, since the investor is reasonably assured of the expectedreturn - (subject to credit risk and re-investment risk) if she holds the units for the originally envisaged period - but the return is assured without a named guarantor. Fund of Funds Schemes Mutual fund schemes generally invest in securities issued by the government or various companies. Fund of funds schemes, on the other hand, invest in other mutual fund schemes (which, in turn, invest in the government or companies). The investment could be in mutual fund schemes promoted by the same AMC, or in schemes promoted by other AMCs SEBI has recently permitted such schemes. Managers of fund of funds, being professional investors, are better placed to handle the information complexities arising out of increasing number of schemes that are available with varying structures. This is a benefit for investors. The problem is .the cost involved, because investors would effectively be bearing fund management costs twice;

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first, at the level of the fund of funds, and second, at the level of the schemes in which the fund of funds invest Load Fund & No Load Fund: Marketing of a new mutual fund scheme involves initial expenses. These expenses may be recovered from the investors in different ways at different times. Three usual ways in which a fund’s sales expenses may be recovered from the investors from the investors are:  At the time of investor’s entry into the fund/scheme, by deducting a specific amount from his initial contribution.  By charging the fund/scheme with a fixed amount each year, during the stated number of years.  At the time of the investor’s exit from the fund/schemes, by deducting a specified amount from the redemption proceeds payable to the investors These charges made by the fund managers to the investors to cover distribution/sales/marketing expenses are often called “Load”. The load charged to the investor at the time of his entry into a scheme is call a front-end or entry load. This is the first case above. The load amount charged to the scheme over a period of time is called a “deferred load” This is the second case above. The load that the investor pays at the time of his exit is called a “back-end or exit load”. This is the third case above. Some fund may also charge different amounts of loads to the investors; depending upon how many years the investor has stayed with the fund. The front-end load amount is deducted form the initial contribution/purchase amount paid by the incoming investor, thus reducing his initial investment amount. Similarly exit loads would reduce the redemption proceeds paid out to the outgoing investor. If the sales charge is made on a deferred basis directly to the scheme, the amount of the load may not be apparent to the investor, as the scheme’s NAV would reflect the net amount after the deferred load. Fund that charge front-end, back-end or deferred load are called load funds. Funds that make no such charges or loads for sales expenses are called no-load fund. As an example: If a open end fund NAV per unit is Rs. 11 with a front-load of 2% the price at which an investors can buy a unit is Rs. 11.22 .If the redemption price is Rs. 10.70 with a back-end load of 2% the exit load charged by the fund amount to be Rs. 0.21% so net sales proceeds will be 10.70-0.21=10.49. NET ASSET VALUE Market value of fund invested + accrued income – Fund liability

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No. of units The market value of fund invested means that total value of invested fund in particular securities and accrued income means interest or dividend which has declared but not received and fund liability mean any expenditure which incurred but not paid or not adjusted. If the number of unit goes up/down every time fund issue new unit or repurchase existing unit. The unit capital of open-end mutual fund is not fixed but variable. Certain condition of Close ended mutual fund gets them listed on a stock exchange. Trading through a stock exchange enables the investor to buy or sell unit of a close-ended mutual fund from each other’s, through a stock broker in the same passion as buying and selling share of a company. The price may be low or high according to demand/supply or future prospect of the securities. Thus the Close ended capital remain fixed not variable which as in open ended schemes. Systematic Investment Plan (SIP), Systematic Withdrawal Plan (SWP), Systematic Transfer Plan (STP) The benefits of spreading one's exposure namely, diversification across asset classes, sectors,etc in any investment activity are well chronicled. What is less highlighted is the benefit arising out of spreading the timing of one's actions.Rather than investing, disinvesting or switching the entire portfolio at a single point of time, it is prudent to spread these actions systematically over a period of time. This also curbs the tendency of an investor to time the market, an investment style that several researchers have statistically proved as having a poor chance of success. 'This principle of time diversification has given rise to the concepts of -: Systematic Investment Plan (SIP) SIP refers to the practice of investing a constant amount regularly, generally every month. When the market goes up, then the money invested in that period gets translated into a fewer number of units for the investor. If the market goes down, then the same money invested gets translated into more units. Ilustration -- SIP in three market scenarios, when the investor invests Rs. 1,000 per month over a 12-month period. The results are summarized below: Market Scenario (change each month) Up1% Down 1 %

Gain Loss (Rs.) +681 -637

/

Acquisition Cost (% to Point NA (% to current V average NAV) Change NAV) +5.4% + 11.6% 99.99% -5,6% -10.5% 99.99% Gain / Loss Point to

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Random

+200

+ 1.6%

0.0%

98.40%

Thus, it is clear that: When the market gained 11.6% during the year, 'the gain for the investor was only 5.4%. On the 'other hand, when the market fell 10.5% during the year, the investor's loss was only 5.6%. SIP, therefore, tempers the gain or loss from investment. SIP does not offer protection from losses. If the market turns adverse, then you can lose money even in a SIP but ensures that your acquisition cost approximates the average NAV. Therefore, this investment style is also called rupee cost averaging. A related concept is value averaging. Here, the investor operates with a certain target value for her investment. If the investment appreciates beyond that? target value, he encashes part of the investment. If the investment depreciates below the target value, the investor brings in fresh funds to bridge the gap. Value averaging, ensures that the investor books profits in a rising market and invests in a falling market. Systematic Withdrawal Plan (SWP) " SWP is a mirror image of SIP. Under SWP, the investor would withdraw constant amounts periodically. The benefits are the same, namely that through. SWP the investor can temper gains and losses, though it does not prevent losses. SWP also has income tax implications. Systematic Transfer Plan (STP) Investors' exposure to different types of securities, whether. debt or equity should flow from their risk profile or risk appetite which, as seen earlier, is a function of their financial position and personal position.An investor's exposure to securities changes in two situations: 1)On investment or disinvestment (this is where SIP I SWP are useful); 2)On change in the value of the securities in the market place. For instance, an investor may start with a 40:60 mix of debt and 'equity, as determined by her risk profile. But if equity markets boom and debt securities lose value, then the 40:60 mix could get significantly distorted towards equity. In such a situation, it would be prudent to sell some equity and re-invest the redeemed amount in debt to re-balance the mix of debt and equity. In the context of mutual funds, such re-balancing can be achieved by systematically moving moneys between schemes. Through a systematic transfer of investment between schemes, it is possible to maintain' a target mix of debt and equity in one's portfolio. Mutual funds make it convenient, and sometimes free of cost, to systematically transfer investments between schemes of the same mutual fund BENEFITS OF MUTUAL FUNDS

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Professional management. Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. Convenient Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. Return Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Low CostMutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV relatedprices by the Mutual Fund. Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook. Flexibility Through features such as regular investment plans, regular withdrawal plans and

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dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience. Affordability Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

Comparison with Other Investment avenues The mutual fund sector operates under strict regulations as compared to most other investment avenues. Apart from offering investors tax efficiency and legal comfort how do mutual funds compare with other products? Bank Fixed Deposits versus Mutual Funds

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Bank fixed deposits are similar to company fixed deposits. The major difference is that banks are more stringently regulated than are companies. They even operate under stricter requirements regarding Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) mandated by RBI. While the above are causes for comfort, bank deposits too are subject to default risk. However, given the political and economic impact of "bank defaults, the government as well as Reserve Bank of India (RBI) try to ensure that banks do not fail, Further, bank deposits up to Rs. 100,000 are protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC), so long as the bank has paid the required insurance premium of 5 paise per annum for every Rs. 100. of deposits. The monetary ceiling of Rs. 100,000 is for all the deposits in an the branches of a bank, held by the depositor in the same capacity and right. Bonds and Debentures versus Mutual Funds As in the case of fixed deposits, credit rating of a bond or debenture is an indication of the inherent default risk in the investment. However, unlike fixed deposits, bonds and debentures are transferable securities The value that the investor would realize in an early exit is subject to market risk. The investor could have a capital Gain or a capital loss. This aspect is similar to a mutual fund scheme. It is possible for an astute investor to earn attractive returns by directly investing in the debt market, and actively managing the positions. Given the market realities in India, however, it is difficult for most investors to actively manage their debt portfolio. Further, at times it is difficult to execute trades in the debt market even when the transaction size is as high as Rs. 1 crofe. In this respect, investment in a debt scheme would be beneficial. Debt securities could be backed by a hypothecation or mortgage of identified fixed and / or current assets, e.g. secured bonds or debentures. In such a case, if there is a default, the identified assets become available for meeting redemption requirements. An unsecured bond or debenture is for all practical purposes like a fixed deposit, as far as access to assets is concerned. Equity versus Mutual Funds Investment in both equity and mutual funds are subject to market risk. An investor holding an equity security that is not traded in the market place has a problem in realizing value from it. But investment in an open-end mutual fund eliminates this direct risk of not being able to sell the investment in the market. An indirect risk remains, because the scheme has to realise its investments to pay investors. The AMC is however in a: better position to handle the situation. Further, on account of various SEBI regulations such illiquid securities are likely to be only a part of the scheme's portfolio. Another benefit of equity mutual fund schemes is that they give investors the benefit of portfolio diversification through a small investment. For instance, an investor can take an exposure to the index by investing a mere Rs. 5,000 in an index fund.

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Life Insurance versus Mutual Fund Life insurance is a hedge against risk - and not really an investment option. So, it would be wrong to compare life insurance against any other financial product. Occasionally on account of market inefficiencies or mis-pricing of products "in India, life insurance products have offered a return that is higher than a comparable "safe" fixed return security - thus, you are effectively paid for getting insured! Such opportunities are not sustainable in the long run. .

How to invest in Mutual Fund

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Step one- identify your needs Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs which could be regular income, buying a home or finance a wedding or educate your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements. Step Two - Choose the right Mutual Fund The important one identify your needshing is to choose the right mutual fund scheme which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same Fund Manager. Some factors to evaluate before choosing a particular Mutual Fund are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category. Other factors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the frequency and quality of their communications. Step Three - Select the ideal mix of Schemes Investing in just one Mutual Fund scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals.

Step Four - Invest regularly The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average

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cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematic investment plan facility offered by many open end funds. Step Five- Start early It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return. Step Six - The final step Need to do now is to go for online application forms of various mutual fund schemes and start investing. One may reap the rewards in the years to come. Mutual Funds are suitable for every kind of investor - whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking. CHECKLIST FOR AN INVSTOR BEFORE INVESTING IN A MUTUAL FUND  There are various mutual funds available in the markets which are further divided in several schemes and options. Here selecting the right one is the key to success.  Selection of a fund is subjected to some parameters like risk, cost and time all of which an investor can control and not the future returns which he cannot control.  Rights of a Mutual Fund Unit holder A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds) Regulations is entitled to: 1. Receive unit certificates or statements of accounts confirming the title within 6 weeks from the date of closure of the subscription or within 6 weeks from the date of request for a unit certificate is received by the Mutual Fund. 2. Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme. 3. Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase. 4. Vote in accordance with the Regulations -: a. Approve or disapprove any change in the fundamental investment policies of the scheme, which are likely to modify the scheme or affect the interest of the unit holder. The dissenting unit holder has a right to redeem the investment.

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b. Change the Asset Management Company. c. Wind up the schemes. Inspect the documents of the Mutual Funds specified in the scheme's offer document. One should read the offer document and key information memo with due diligence while investing in NFO(New Fund Offer) and not to think that this is a cheap one than the exiting .  The Role of Dividend (Dividend v/s Growth dilemma) Whenever a dividend is paid, the NA V goes down because funds flow out of the scheme. The reduced NA V, immediately after a dividend distribution is referred to as "Ex-Dividend NA V". If we calculate returns based only on movement in NA V, then it can lead to understatement of return, whenever a dividend is paid. However, if a scheme has a growth option, namely an option, i.e. where no dividends are declared, then the earnings would be fully reflected in the NA V. In such cases, the return can be calculated based on the opening and closing NA V. Among the investors who subscribe to a scheme’s investment philosophy ,some might prefer a regular income flow (dividend),while others might prefer their income from the scheme to grow in scheme itself(growth option). SO it is clear that it is just a facility or you can say two different approaches for two different types of investors.  Asset allocation, relative risk levels in different investment avenues should also be considered before investing  One should not go for a one best fund and should distribute the money among 3-5 different schemes  Exit from a scheme is not like getting divorced so do it when it becomes essential. like-: A) When one is overweight on a worst performing fund B) When one gets a handsome and reasonable return

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MUTUAL FUND A GLOBALLY PROVEN INVESTMENT AVENUE Worldwide, Mutual Fund or Unit Trust as it is referred to in some parts of the world, has a long and successful history. The popularity of Mutual Funds has increased manifold in developed financial markets, like the United States. As at the end of March 2006, in the US alone there were 8,002 mutual funds with total assets of over US$ 9.36 trillion (Rs.427Iakh crore). Indian Scenario In India, the mutual fund industry started with the setting up of the Unit Trust of India in 1964. Public sector banks and financial institutions were allowed to establish mutual funds in 1987. Since 1993, private sector and foreign institutions were permitted to set up mutual funds. In February 2003, following the repeal of the Unit Trust of India Act 1963 the erstwhile UTI was bifurcated into two separate entities viz. The Specified Undertaking of the Unit Trust of India, representing broadly, the assets of US 64 scheme, assured returns and certain other schemes and UTI Mutual Fund conforming to SEBI Mutual Fund Regulations. As at the end of March 2006, there were 29 mutual funds, which managed assets of Rs. 2,31,862 crores ( US $ 52 Billion) under 592 schemes. This fast growing industry is regulated by the Securities and Exchange Board of India(SEBI).

ABOUT AMFI (Association of Mutual Funds in India)

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AMFI is the umbrella body of all the Mutual Funds including Unit Trust of India. Incorporated in August 1995, it is a non-profit organization committed to develop the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas with a view to protecting and promoting the interests of mutual funds and their unit holders. Mutual Fund both conceptually and operationally is different from other savings instruments. Mutual Funds invest in instruments of capital markets which have different risk return profile. It is very necessary that the investors understand properly the conceptual framework of mutual fund and its operational features List of Mutual Fund Companies in INDIA S.N.O Name of Company 1. ABN Amro Mutual Fund 2. Alliance Capital Mutual Fund 3. Benchmark Mutual Fund 4. Birla Sunlife Mutual Fund 5. BoB Mutual Fund 6. Canbank Mutual Fund 7. Chola Mutual Fund 8. Deutsche Mutual Fund 9. DSP Merrill Lynch Mutual Fund 10. Escorts Mutual Fund 11. Fidelity Mutual Fund 12. Franklin Templeton Mutual Fund 13. GIC Mutual Fund 14. HDFC Mutual Fund 15. HSBC Mutual Fund 16. ING Vysya Mutual Fund 17. JM Mutual Fund 18. LIC Mutual Fund 19. Principal Mutual Fund 20. Prudential ICICI Mutual Fund 21. Reliance Mutual Fund 22. Sahara Mutual Fund 23. SBI Mutual Fund 24. Standard Charted Mutual Fund 25. Tata Mutual Fund 26. Taurus Mutual Fund 27. UTI Mutual Fund

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Initial Public Offerings (IPO’s) Corporate may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. This Initial Public Offering can be made through the fixed price method, book building method or a combination of both. Book Building - About Book Building Book Building is basically a capital issuance process used in Initial Public Offer (IPO) which aids price and demand discovery. It is a process used for marketing a public offer of equity shares of a company. It is a mechanism where, during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The process aims at tapping both wholesale and retail investors. The offer/issue price is then determined after the bid closing date based on certain evaluation criteria. The Process: The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'. • • •

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The Issuer specifies the number of securities to be issued and the price band for orders. The Issuer also appoints syndicate members with whom orders can be placed by the investors. Investors place their order with a syndicate member who inputs the orders into the 'electronic book'. This process is called 'bidding' and is similar to open auction. A Book should remain open for a minimum of 5 days. Bids cannot be entered less than the floor price. Bids can be revised by the bidder before the issue closes. On the close of the book building period the 'book runner evaluates the bids on the basis of the evaluation criteria which may include o Price Aggression o Investor quality

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•

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o Earliness of bids, etc. The book runner and the company conclude the final price at which it is willing to issue the stock and allocation of securities. Generally, the number of shares are fixed, the issue size gets frozen based on the price per share discovered through the book building process. Allocation of securities is made to the successful bidders. Book Building is a good concept and represents a capital market which is in the process of maturing.

Guidelines for Book Building Rules governing book building is covered in Chapter XI of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines 2000. BSE's Book Building System • •

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BSE offers the book building services through the Book Building software that runs on the BSE Private network. This system is one of the largest electronic book building networks anywhere spanning over 350 Indian cities through over 7000 Trader Work Stations via eased lines, VSATs and Campus LANS The software is operated through book-runners of the issue and by the syndicate member brokers. Through this book, the syndicate member brokers on behalf of themselves or their clients' place orders. Bids are placed electronically through syndicate members and the information is collected on line real-time until the bid date ends. In order to maintain transparency, the software gives visual graphs displaying price v/s quantity on the terminals. In case the issuer chooses to issue securities through the book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner:

a. 100% of the net offer to the public through the book building route.

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b. 75% of the net offer to the public through the book building process and 25% through the fixed price portion.

Difference between shares offered through book building and offer of shares through normal public issue: Featur Fixed Price process Book Building process es Pricing Price at which the Price at which securities will be securities are offered/allotted is not known in offered/allotted is known advance to the investor. Only an in advance to the indicative price range is known. investor. Deman Demand for the Demand for the securities d securities offered is offered can be known everyday known only after the as the book is built. closure of the issue Payme Payment if made at the Payment only after allocation. nt time of subscription wherein refund is given after allocation.

Before investing in an IPO one should go for this checklist  Lead managers and their credibility.  Growth prospects of the company vis-à-vis the sector.  Promoter holdings, both pre issue and post issue.  To find out whether profits projected by company are realistic or not.  Ultimately what will be the use of the money to be invested in the company?

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Do not invest only for the listing gains. Invest in IPO if you believe in that company and investing for a longer period will fetch u better returns. One should always read the offer document and prospectus of the issue thoroughly before investing it.

Management of Equity Portfolio Investment and disinvestment decisions are broadly taken based on either of the following two approaches. . Technical Analysis Technical analysis is a review of the movements of the stock price in the market. Based on a comparison of these movements with past volume and price trends of the stock as well as with the market movements, technical analysts form a view on whether the market or an individual stock is over-bought or over-sold, whether a stock is near a support level or resistance level and accordingly choose to sell or buy the stocks While the data for a fundamental analysis comes sporadically, for instance when the financial results are announced or an earnings warning is issued, data for technical analysis gets added with every day of trading. Generally, fundamental analysis is seen to help decide on what action to take, namely buy or sell, when to implement the decision, (the timing) could be determined by technical analysis. Fundamental Analysis. Fundamental analysis is a study of the industry scenario, company's financials, management, etc. collectively known as a company's fundamentals, to determine whether the company's stock is properly valued. If the view is that it is undervalued, then the portfolio manager may choose to buy the security. If it is overvalued, the decision would be to sell the existing stock. The value drivers mentioned below are all examples of fundamental analysis. Value Drivers in Equity Market

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EPS and PE Ratio (PRICE EARNING RATIO) These are easily the most popular tools for determining valuation. For instance, if the aluminum industry has a PE ratio of 10 times, and if Company Z has an EPS of Rs. 12, then the value of Company z. stock should, theoretically, be EPS x P/E Ratio, namely Rs. 120 per share. When the current market price is compared with past earnings, it is referred to as "historical PIE". When the comparison is with projected earnings, it is referred to as "prospective P/E" or "projected P/E". .

A high P/E ratio means either of two things: A) Market views the stock favorably, or B) The share is over-valued - perhaps being pushed up by manipulators. A low P/E ratio could mean the reverse. Namely either the market does not view the stock favorably or that it is undervalued (value stock). The skill of the analyst is in identifying which of the implications is applicable for any stock. This is a critical judgment call that determines whether the stock would be bought or sold. CEPS and PRICE Ratio Earnings are calculated after depreciation, which, in turn, is a function of accounting policy. Cash earnings (earnings plus depreciation and other non-cash charges) are less affected by accounting policy. In the earlier example, if the CEPS of Company Z is Rs. 15, and the PICE ratio of the industry is 9 times, then the price of each share of Company Z should theoretically be Rs. 15 x 9, namely Rs. 135. This measure is particularly useful when a stock has positive cash earnings, but negative earnings after non-cash charges. Price to Book Value

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In industries such as Banking and Non-banking finance companies, where financial assets are a significant component of the balance sheet, price to book value of the industry, multiplied by the book value of the individual stock could give an indication of the value of the stock.' This measure would be meaningful in all situations where the book value is representative of realizable values. In the case of companies whose balance sheet is dominated by physical assets, e.g. cement' manufacturing companies, book value may not be representative of realizable value. Price to book value may not be a useful ratio ill such situations. Turnover Multiple This ratio is calculated as sales turnover divided by market capitalization of the company. Market capitalization is the total number of equity shares issued by the company x market price of the shares in the market place.Turnover is a surrogate for market share and significance of the company's role in a sector -particularly in a multi-product set-up. For instance, if Hindustan Lever were looking at taking over either of two companies, namely Company Z whose turnover multiple is 20 times or, a Company Y whose turnover multiple is 25 times. If other factors such as fitment in product mix, margins, location advantages, company culture, etc. are comparable, then Hindustan Lever would prefer Company Y, because, for every rupee that it spends on the acquisition, it will gain sales of Rs. 25. Comparatively, it will gain only Rs. 20 of incremental sales for every rupee it invests in acquiring Company Z. Others The above are the commonly used tools. But analysts tend to use several creative tools. For instance, during the height of the dotcom boom, companies were enamored with market capitalization to eye-balls comparison. Retailers are valued based on stock keeping units (SKU). Billing rates and mix of offshore and onsite revenues are relevant for software development companies. Classification of shares on the basis of market performance The Companies Act, 1956 does not permit issue of different 'classes of equity shares. Therefore, all equity shares of a

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company are pari passu (similar), except to, the extent that dividend payment could be made on a pro rata basis on new equity shares issued during the year. Some of them are as follows -: Growth stocks are shares that are expected to demonstrate earnings growth that is better than the market. From time to time various promising sectors in the economy emerge, like software during 1998-2000. Good companies in such sectors are viewed as growth stocks and attract high level of investment interest. Ultimately, growth, like beauty, lies in the eyes of the beholder. "For one fund, the paradigm of a growth stock might be CocaCola; for another fund, it might be Amazon.com. In India we may well be talking of Reliance in a similar vein. Income stocks are shares that provide a good dividend return on the amount invested. In accounting terminology, they provide a good dividend yield (Dividend to Market Price ratio). In the old days, these shares were often called "widow and orphan" stocks a reference to the once "typical" investors who would buy the stock for the reliability and size of the dividend payments If we look at power generation companies for instance, once the plant is set up and it maintains operation, the off take is relatively certain, and so is the price. In such a situation, the profits are steady, thus giving the company the luxury of declaring stable dividends. In India, concerns over the financials of most state electricity boards, which buy the power from the power generating company, raise issues of credit risk. Such risks would be reduced in a situation of direct supply to consumers coupled with right to disconnect power to consumers who do not pay. In such an event, companies like Tata Electric Companies, for instance, would qualify as income stocks. Cyclical stocks are shares that move in tandem with the economy. Basic industries such as cement, steel, etc. are examples of industries whose performance is closely linked to the economy. This is why stocks of companies belonging to such industries are cyclical in nature. Defensive stocks are shares that are relatively protected from economic cycles. Pharmaceutical stocks are a good example,

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because consumption of medicine does not vary with the turns of the economy. Pivotals or momentum stocks are the shares that move the market. Hindustan Lever, Reliance Industries and Infosys are examples of such stocks in India. Value stocks are shares whose current valuation does not reflect some aspect of a company that could be extremely valuable. For instance, an investor, who feels that the last mile connectivity that MTNL has in the two important cities of Mumbai and Delhi is not fully reflected in the price, would be viewing it as a value stock. She would aim to "unlock value" when the market appreciates the value of last mile connectivity and pushes the stock valuation up. The "under valuation" is normally viewed through fundamental analysis measures such as PIE and P/BV ratios. Above all I got a good learning about various styles of investing and making money and also luring the money of outsiders in the organization

Marketing knowledge gained The very first thing I learnt is “Selection of particular customer and the segment of customer is essential to the very purpose of marketing” Identifying and understanding the different needs of the targeted customer group and offering them schemes accordingly. So marketing starts for me FROM KNOWING THE INVESTOR.

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KNOWING THE INVESTOR Risk Profiling A heart patient won a lottery worth Rs. 100 crore. The family wanted to break the good news as softly as possible. The job\vas delegated to. the family doctor. The 'conversation went along the following lines:' Doctor: What will you do if you win a lottery of Rs. 1,000? Heart Patient: I will take my family out for dinner. Doctor: What will you do if you win a lottery ofRs. 1,000,000? Heart Patient: I will repay my housing and car loans. Doctor: What will you do if you win a lottery of Rs. 100 crore? Heart Patient: I will give you 50 per cent of it. Immediately, the doctor suffered a heart attack! Depending on the health risk a doctor is in the best position to advise a patient on whether she should climb the Himalayas, or whether she should satisfy herself up Malabar Hill in Mumbai. Similarly, a financial planner has to advise investors on their finances depending on their risk profile. While the investor is dreaming about her financial goals, her guard would be down. The intermediary needs to look for verbal and non-verbal cues to assess her risk appetite. At one end of the spectrum would be an aggressive risk taker - and at the other, an impulsive risk avoider. While risk profiling is a highly subjective exercise, it can safely be said that appetite for risk reduces with: • Age; • Increase in dependents; • Reduction in earning members; • Any serious health related issues in the family; and • Job insecurity. On the other hand, a person would be inclined to take more risks when: • Major expenses are taken care of. For instance, when the investor has her own house and loans are repaid; • Other major aspirations are met or provided for; • The investor is a professional whose income streams are on the upswing; and

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• The investor has hit a jackpot. It would be possible to generate a standard list of questions, the answers to which would be pointers to an investor's risk profile. However, no ready reckoner of questions can substitute the need for a financial advisor to keenly observe the investor and her behavior. For instance: A person who jumps the red signal in a traffic crossing is clearly a person who is inclined to take risks. A person who complains for half an hour about the extra onerupee wrongly charged by a bus conductor is a difficult equity investor. If discussions indicate certain submissiveness on an investor's part to the views of her superior at work, and an obsessive concern about job security, then the person is likely to be risk averse. Even the type of dreams mentioned would be an indication of an investor's risk profile. A Richard Branson who wants to circumnavigate the earth in a hot air balloon would top the chart in terms of risk preference! Also, in phases of economic uncertainty (layoffs), it would be better for an investor to tone down the risks taken. A risk profiling exercise would result in suggestions on how an investor should distribute her portfolio between different asset classes. Asset Classes As seen earlier, investing the entire portfolio in debt is not necessarily a prudent option. Inflation and re-investment risks can wreak havoc to the lives of such investors. Prudence, therefore, lies in investing in a mix of asset classes. The performance of different asset classes hinges on how the economy performs. Economies tend to move in cycles - often referred to as business cycles. From a trough, the economy -expands, then reaches a peak, and then contracts back into a trough. One categorization of assets would be debt and equity. In India, even gold is an important asset category. Besides, real estate could be another component of a client's asset portfolio. '

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An asset categorization relevant for a mutual fund distributor is' liquid schemes, gilt schemes, bond schemes, balanced schemes, index schemes, diversified equity schemes, sectoral or focused schemes, etc. Every asset class and mutual fund type implies a risk-return tradeoff. Generally, one has to take a greater risk for a chance to earn a higher return. The AMFI Mutual Fund Testing Programme workbook provides a useful comparison of investments alternatives.

Equity FI Bonds

Return

Safety

Volatility

Liquidity

High

Low

High

High

High

Moderat e

Moderat e Moderat e

High low Moderat e Low

Low

Low

Low

Moderate

High

Low

High

High

High

Low

High

High

Low

Moderat e Low

High

Moderat e High

Moderat e Low

Low

Moderat e

High

High

Moderat e Co. Moderat Debentur e es Co. FDs Moderat e Bank Low Deposits PPF Moderat e Life Low Insuranc e Gold Moderat e Real High Estate Mutual High Funds

Moderat e High

Convenie nce or Moderate

Low

Moderate

Low

A financial planner has to obtain information about the investor's current distribution of investment between asset classes and investment types. These would determine what is already available to finance the client's goals, and the risk

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underlying her investment portfolio. They may also offer clues to possible needs of re-balancing the portfolio Asset Allocation Credit card issuers use a decision support model to decide whether or not to issue a credit card to the applicant and the exposure limit in case they decide to issue one. It is the same with loan companies. In all these cases, the back-end of the model synthesizes the information given by the applicant and throws up a decision. The parameters of this decision support model are based on statistics of past experiences.

Similarly, it would be possible to have a model that would suggest the mix of (asset categories for a client. “Optimum asset” allocation for a client would depend on her wealth cycle and life cycle The Wealth Cycle

People typically go through three wealth cycle phases: ACCUMULATION /SOWING

Where the person's saving is much more than current needs. So she is in a position to set apart something for the future. DISTRIBUTION / REAPING I HARVESTING Where the person's needs cannot be fully met by current savings the gap would need to be met out of savings or loans. . TRANSITION This is a phase between the accumulation and distribution phases, when the distribution needs are very clearly in the person's radar, although the harvesting may not have commenced. WINDFALL This is a phase that touches people's lives occasionally. It could be winning from a lottery, super-normal profits booked on investments, inheritance etc. The risk-based asset allocation will be different for each phase as described previously.

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Interactions with various customers having different opinions and views gave me a good overview of the local market and especially of my work area

Some other learnings Working in a team helps to improve individually and scale up the performance which in turn improves performance of the team as whole. • Regular meetings with seniors and the industry professionals made the training process interesting one and also encouraged us to learn more. • Regular reporting to the superiors (daily/weekly) made me more accountable because it shows how I’m performing. •

CONCLUSION The training experience at SRSPL (Suresh Rathi Securities Pvt. Ltd) was a memorable one. I had seen a glimpse of corporate life Knowing what is a the busy schedule and how to work everyday with a long list of work and a daily appointments diary .In between this everyday’s routine workload, always having a nice smile on the cheeks is not an easy task.

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Having said that I would like to mention “All these pains are taken to lure THE CUSTOMER and making a cordial relationship with him forever is really a great challenge.” I found myself very lucky and fortunate to be a part of SRSPL (Suresh Rathi Securities Pvt.Ltd.)for the time being in accepting this challenge.