Summer Internship Project

A PROJECT REPORT ON “INVESTOR’S ATTITUDE TOWARDS MUTUAL FUND WITH SPECIAL REFERENCE TO MUTUAL FUND” FOR MONEY MANTRA INVESTMENT SUBMITTED TO “SAVITRIBAI PHULE PUNE UNIVERSITY”

In the partial fulfilment of the requirement for the award of Master of Business Administration in Financial Management SUBMITTED BY

“MR. Mahesh Laxmikant Bhimale” UNDER THE GUIDANCE OF PROF. SHEENAM GOGIA

INTERNATONAL SCHOOL OF MANAGEMENT AND RESEARCH, PUNE BATCH 2017-2019

1

DELARATION

I Mahesh Bhimale, Roll No: 1757 of MBA17-19, a full time bonafide student of Second year of Master of Business Administration (MBA) Programme. I hereby certify that this project work was carried out by me under the supervision of Prof. Sheenam Gogia and the report submitted in partial fulfilment of the requirements of the Programme is an original work of mine. The work is “INVESTOR’S INTEREST TOWARDS MUTUAL FUNDS” not based or reproduced from any existing work of any other person or on any earlier work undertaken at any other time or for any other purpose, and has not been submitted anywhere else at any time.

2

ACKNOWLEDGEMENT

I want to show my sincere gratitude to all those who made this study possible. First of all I am thankful to the helpful staff and the faculty of International Institute of Management and Secondly, I would like to extend my sincere thanks to my Industry Guide, for their untiring cooperation. One of the most important tasks in every good study is its critical evaluation and feedback which was performed by my faculty guide Prof. Sheenam Gogia. I am very thankful to my Faculty as well as Industry guide for investing his precious time to discuss and criticize this study in depth, and explained the meaning of different concepts and how to think when it comes to problem discussions and theoretical discussions.

My sincere thanks go to my Institute and family, who supported and encouraged me.

Mahesh Bhimale MBA Batch 2017 -19

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EXECUTIVE SUMMARY A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. It throws the light on how mutual funds really work, how much risk involved in it and how they diversify themselves. Investing involves risk of loss of principal and is more concentrated on the return of investment. This total risk measured by standard deviation can be divided into two parts: Systematic risk and Unsystematic risk. Unsystematic risk is also called diversifiable risk. Systematic risk may be called non-diversifiable risk, unavoidable risk or market risk and can be measured by Beta. The Indian capital market has been increasing tremendously during last five years. With the reforms of economy, reforms of industrial policy, reforms of public sector and reforms of financial sector the economy has been opened up and many developments have been taking place in the Indian Money Market and Capital Market. This study helps to understand how companies diversify themselves in different sectors and in different companies to maximize the return and minimize the risk involved in it. It also taught me how to take every experience in the right spirit and learn from each one. Finally I shall consider all my hard work worthwhile, if this endeavor of mine is able to satisfy all those concerned and proves useful to any one or for any study in the future.

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TABLE OF CONTENTS

DECLARATION

(1)

ACKNOWLEDGEMENT

(2)

EXECUTIVE SUMMARY

(3)

SR. NO

Topics

Page No

1

Project Information

2

Objective of the project

7

Scope of the project

8

3

Company profile

9

4

Abstract and Introduction

12

1.1 Awareness of Retail customers about SBI mutual fund. 1.2 Why Retail customer’s awareness is so important 1.3 Common Features of the Govt. employee Awareness Activities Development of mutual fund in India Consumer awareness about mutual fund History of Mutual Fund Structure of Indian mutual fund Risks involved in mutual funds

5

1.4 1.5 1.6 1.7 1.8 Literature Review

30

6

Research Methodology

35

7

Data Analysis & Interpretation

43

8

Findings & Conclusion

49

9

Recommendation

51

10

Bibliography

52

11

Questionnaire

53 5

LIST OF TABLES

SR NO.

Topics

Page No.

1

Total Assets Managed By Various Fund Houses

27

2

Best Equity Mutual Fund

29

LIST OF FIGURES

SR NO.

Topics

Page No.

1

Structure of Mutual Fund

16

2

Mutual Fund Operation Flow Chart

17

3

History of Mutual Fund

21

4

Market share *(%) of mutual funds companies

24

5

Investing In Mutual Fund

36

6

Portfolio Analysis Tools

40

7

Preference Choice for Investment

44

8

Monthly Income profile of Investor

44

9

Awareness of Benefits of Investment in Mutual Fund

45

10

Preferred Reason to Invest In MIP

46

11

Preferred MIP Fund

46

12

Which factor of Mutual fund Allure you most

47

6

CHAPTER-1

7

OBJECTIVE AND SCOPE OF THE PROJECT

Objectives:  Empowering families to a better tomorrow by securing & enhancing their financial health.

 To be the most admired name in financial planning & wealth management.  To be the most admired name in financial planning & wealth management. Financial security, tax reduction and inflation protection all take time to plan and expert knowledge to successfully achieve.

 This success is necessary today to guarantee your future, your business’s future, and the future of all those who depend on your investment decisions.

 Money Mantra strives to create financial freedom for the clientele.

8

Scope of the project

Scope of Mutual Funds has grown enormously over the years. In the first age of mutual funds, when the investment management companies started to offer mutual funds, choices were few. Even though people invested their money in mutual funds as these funds offered them diversified investment option for the first time. By investing in these funds they were able to diversify their investment in common Mutual’s, preferred Mutual’s, bonds and other financial securities. At the same time they also enjoyed the advantage of liquidity. With Mutual Funds, they got the scope of easy access to their invested funds on requirement. But, in today’s world, Scope of Mutual Funds has become so wide, that people sometimes take long time to decide the mutual fund type, they are going to invest in. Several Investment Management Companies have emerged over the years, who offer various types of Mutual Funds, Each type carrying unique characteristics and different beneficial features.

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COMPANY PROFILE

About Money Mantra Investment Money Mantra offers a unique approach to helping individuals to reach financial success. Your financial growth are the most important aspects of our business. Good financial advice and sound investment selections are available to any individual that has taken the time and expended the energy to acquire even modest wealth. However, financial security does not happen by accident. You spend long hours making you successful, but often have little time to plan or fully understand where or how to best invest your individual wealth or retirement savings. Financial security, tax reduction and inflation protection all take time to plan and expert knowledge to successfully achieve. This success is necessary today to guarantee your future, your business’s future, and the future of all those who depend on your investment decisions. Money Mantra strives to create financial freedom for the clientele. We are committed to being informed, educated, and experienced in managing your financial affairs. We at Money Mantra take care of your financial life right from the basics of doing budgeting, maintaining network, making tax efficient, sound investment decisions and being tax compliant to aligning your savings such that your future financial aspirations and commitments are met. With comparative analysis, consistent implementation and continuous monitoring, we take away the fears associated with the financial markets so as to build growth oriented investment portfolio. The Pioneer of Financial Planning business in Latur district, Money Mantra Investments was established in 2007 to create awareness among retail investors about financial planning & mutual funds and today it stands proudly as the most efficient service provider for all the financial products & services

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including the new age financial instruments like mutual funds, debentures and other investment & insurance products.

Company Logo

VISION: To be the most Admired name in Financial Planning & Wealth Management.

MISSION: Empowering families to a better tomorrow by Securing & Enhancing their Financial health.

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HISTORICAL AND DEVELOP OF COMPANY

Company Name: Money Mantra Invest PVT LTD. Company Activity: Investment Registration date: 13 Feb 2007 Registration No: 135435 Main Branch: Latur State: Maharashtra Registered address: Shri prabha Arcade, Near HDFC Bank, Opp. Town Hall, Main Road, Latur Category: Company limited by Guarantee Sub category: Non-Government Company Company class: Private Company Listed: Listed Company Status: Active

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ABSTACT 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 then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. Monthly Income Plans or MIPs invest maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These schemes rank slightly high on the risk-return matrix when compared with other debt schemes. There is considerable amount of research being done regarding investment in mutual funds. However very little research has been done to study the perception of investors regarding investment in mutual funds especially MIP funds. Like most developed and developing countries the mutual fund cult has been catching on in India. The reasons for this interesting occurrence are:  

Mutual funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation.



Mutual fund brings the benefits of diversification and money management to the individual investor, providing Opportunity for financial success that was once available



only to a select few. 

Mutual funds are essentially invested vehicles where people with similar investment objective come together to pool their money and then invest accordingly. Each unit of any



scheme represents the proportion of pool owned by the unit holder (investor). Appreciation or reduction in values of investment is reflected in net asset value (NAV) of the concerned scheme, which is declared by the funds from time to time. Mutual fund schemes are managed by respective Asset Management Companies (AMC). Different business groups/financial institutions/banks have sponsored these AMCs, either alone or

13

in collaboration with reputed international firms. Several international funds like Alliance and Templeton are also operating independently in India.

1.1 Awareness of Retail customers about mutual fund It was found out mostly the Retail customers preferred fixed income investments like bank deposits and fixed deposits rather than other investment avenues .over 50 percentage of the respondents are aware of mutual funds but some of the new concepts like opportunity funds ,IT funds ,Gilt funds ,money market funds are still new to them. Some of the investors have lost their faith in mutual funds industry and also in operations of the stock market with recent sprits. Most of the respondents are not willing to take risk in investing in mutual funds. Over 50 percentage of the Retail customers are approaching agents for investments in mutual funds and other investment avenues. Majority of the Retail customers are approaching SBI Mutual Fund, for their investments in mutual funds. The Retail customers are satisfied with the services rendered by SBI Mutual Fund, regarding their helping with guidance and advice, supplying and collecting applications forms but also dissatisfied with giving information about the new schemes and sorting out problems or complaints with mutual funds. Finally it was suggested that the details of the schemes, their advantages and introduction of new schemes should be explained to them and also the safety schemes should be stressed .To create awareness about the company, the services rendering and about the mutual funds, publicity campaigns should be conducted. Finally, the investors are very well satisfied with SBI capital, regarding and supplying and collecting the applications forms ,guidance and advices but they are dissatisfied with pooling of knowledge of new schemes and sorting out the complaints and problems with the mutual funds . If they do these services better, the satisfaction of the investors will be high.

1.2 Why Retail customer’s awareness is so important Most Retail customers do not know or fully appreciate the value of mutual fund.  

Confusion exists as to what is mutual fund and lack of awareness and misunderstanding about mutual fund.

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



Many Govt. employees believe in the fixed deposit.



Deposit insurance is not a concern to depositors; it is an expectation, a blind trust.

1.3 Common Features of the Govt. employee Awareness Activities

 



Corporate design



Reference to one another (e.g. Toll-free number and Web address on television advertisement)



Created to complement each other.

15

STRUTURE OF MUTUAL FUND

SEBI

Trustee

AMC

Sponsor

MKT. / Sales

Operation Fund Manager

MKT. / Sales Mutual Fund Distributor Schemes

Investor

16

MUTUAL FUND OPERATION FLOW CHART

Investor

Fund Manager

Returns

Securities

1.4 DEVELOPMENT OF MUTUAL FUND IN INDIA The mutual fund industry in India started in 1963 with the formation of unit trust of India at the initiative of government of India and reserve bank of India. The history of mutual fund.

In India phases can be divided into four: FIRST PHASE:

1964 -87

SECOND PHASE: 1987-93 (ENTRY OF PUBLIC SECTOR FUNDS) THIRD PHASE:

1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS)

FOURTH PHASE: SINCE FEBURARY 2003

17

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases

First Phase – 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canara bank Mutual Fund (Dec 87),

Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds) with the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now 18

functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of s. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds. Fourth Phase – since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifrcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.

1.5 CONSUMER AWARENESS ABOUT SBI MUTUAL FUND Over all study of consumer and Retail customers’ awareness about mutual fund. “This project was conducted so as to understand the concept of Mutual Funds and its usage as an investment avenue. The study also aims to find out the awareness of mutual funds and its preference over other investments.

Awareness of Financial Products and Choice of Investment Advice Financial knowledge, behavior and attitude are necessary but not sufficient for a person to make sound financial choices. A good financial choice also requires an awareness of the different 19

products and services that are available. The survey results show relatively low levels of awareness about commonly available saving, insurance, and credit related products: •Only about 7% among the employees (and 9% among the retired) have heard of all the commonly available products. •Awareness about even fixed deposits, a very common product available with the banks, is not universal.

•More than half of the young employees are not aware of employee specific vehicles for long-term wealth creation like PPF and pension-fund. •Awareness about many of the financial market saving vehicles, like shares, bonds, and mutual funds is not very high. •About one-fourth of the employees seem to be aware of only three products, which include savings account, fixed deposits, and insurance. The lack of awareness has implications both for households and for the broader economy: •Low awareness leads to poor diversification of risk across products and subopuuntimal investment of savings for the household. •Low awareness could lead to inefficient allocation of capital in the economy. The survey results also show a high level of dependence on informal sources of financial advice: •The most frequently used advice in the choice of financial products by the retired is sought from friends and relatives who are not associated with the financial industry. •Less than a quarter of the respondents depend on independent financial advisers and advertisements.

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1.6 HISTORY OF MUTUAL FUND

In 1924 three Boston securities executives pooled their money together to create the first mutual fund. The idea of pooling money together for investing purposes started in Europe in the mid1800s. The first pooled fund in the U.S was created in 1893 for the faculty and staff of Harvard University on March 21st, 1924 the first official mutual fund was born. It was called the Massachusetts Investors Trust. However in India UTI was the first to introduce mutual funds in the Indian markets and it commenced its operations from July 1964, Government allowed public sector banks and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of SEBI are – to protect the interest of investors in securities and to promote the development of and to regulate the securities market.

21

As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors. All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. It may be mentioned here that Unit Trust of India (UTI) is not registered with SEBI as a mutual fund (as on January15, 2002. The end of millennium marks 36 years of existence of mutual funds in our country. The ride through these 36 years is not been smooth. Investor opinion is still divided. While some are for mutual funds others are against it.



MUTUAL FUND SCHEMES



Mutual funds offer a variety of schemes to investor so as to provide steady income or growth or both. They differ according to the investment policies. The funds like individual investor have different goals. Of the investor who will first ascertain his investment objectives, thinking that the units of a fund have an investment goal paralleling his objectives



FUND MUTUAL BASICS



As you probably know, mutual funds have become extremely popular over the last 20years. What was once just another obscure financial instrument is now a part of our daily lives. In fact, too many people, investing means buying mutual funds. After all, its common knowledge that investing in mutual funds is (or at least should be) better than simply letting your cash waste 22

away in a savings account, but, for most people, that's where the understanding of funds ends. It doesn't help those mutual fund sales people speak a strange language that, sounding sort of like English, is interspersed with jargon like MER, NAVPS, load/no-load, etc.

Originally mutual funds were heralded as a way for the little guy to get a piece of the market. Instead of spending all your free time buried in the financial pages of the investment Journal, all you have to do is buy a mutual fund and you'd be set on your way to financial freedom. As you might have guessed, it's not that easy. Mutual funds are an excellent idea in theory, but, in reality, they haven't always delivered. Not all mutual funds are created equal, and investing in mutual’s isn't as easy as throwing your money at the first salesperson who solicits your business.

ADVANTAGES OF SBI MUTUAL FUND

   



1-Professional Management -



2-Diversification



3-Economies of Scale



4-Liquidity



5-Simplicity-

DISADVANTAGES OF SBI MUTUAL FUND





1-Costs



2-Taxes

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1.7 STRUCTURE OF INDIAN MUTUAL FUND INDIAN MUTUAL FUND INDUSTRY The rising Indian mutual funds industry probably never had it better, as far as the entry of individual or retail investors is concerned. The industry’s total AUM in December 2006 stood at a hefty Rs 3, 23,598 Crore, with a total of 2.89 Crore depositor folios, of which 2.32 Crore depositor folios had invested inequity schemes. The share of direct investors, on the other hand, has been dropping, stating that more retail investors see mutual funds as a preferred route for investing in the markets. Existing and new market players as well as Exchange Traded Funds are likely to hit the market in the coming months with a flurry of new Mutual Funds schemes. An action packed first quarter of 2008 was forecasted to witness at Least 21 new schemes which are waiting on the sidelines to be launched.

Market share *(%) of mutual funds companies

24

1.8 RISKS INVOLVED IN MUTUAL FUND In short, how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised, or repay your principal when the investment matures?       



Inflation risk



Effect of loss of key professional and inability to adopt



Managing risk



Interest rate risk



Credit risk



Exchange risks



Investment risks



Changes in government policy

VARIOUS MUTUAL FUND SCHEME





Mutual Fund Schemes:-

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.

   By Structure  



Open - Ended Schemes



Close - Ended Schemes



Interval Schemes



Growth Schemes



Income Schemes



Balanced Schemes



Money Market Schemes

   By Investment Objective   

25



1.9 FREQUENTLY USED TERMS IN MUTUAL FUND

NET ASSET VALUE Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

SALE PRICE The price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.

REPURCHASE PRICE The price at which units under open-ended schemes are repurchased by the Mutual Fund. Such prices are NAV related.

REDEMPTION PRICE The price at which close-ended schemes redeem their units on maturity. Such prices are NAV related.

SALES LOAD A charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes that do not charge a load are called ‘No Load’ schemes.

REPURCHASE OR BACK END LOAD A charge collected by a scheme when it buys back the units from the Unit holders.         26

1.10 TOTAL ASSET MANAGED BY VARIOUS FUND HOUSES   FUND HOUSE JUN 2017 MAR 2017

DEC 2017

HDFC MF

165,013

161,634

150,468

ICICI Prudential MF

155,522

148,559

136,763

SBIMF

144,693

137,124

126,069

Birla Sun Life MF

125,502

119,752

107,968

UTI MF

92,730

92,751

87,390

SBI MF

83,693

74,942

72,141

Franklin Templeton MF

74,312

70,444

63,643

IDFC MF

54,498

51,715

47,920

Kotak Mahindra MF

48,077

41,378

38,796

DSP Black Rock MF

36.036

37,838

37,532

AXIS MF

28,365

26,624

24,251

TATA MF

28,045

26,968

24,115

L&T MF

22,213

22,497

21,336

Principal

20,333

22,789

21,522

Figures in Rs crores

 

INTERPRETATION: The amount of assets managed by AMCs varies every year. Following is the table that depicts the total amount of asset managed by the well-known AMCs in India. It also shows the ranking of AMCs for the year 2015, based on the above mentioned parameter.   27



UTI MF was the best performer in June 2015 with total Rs. 12, 29,223.13 Crore to its assets and 10.23% market share. 



SBIMF has become one of the fastest growing & developing mutual fund house in the country by adding a very Impressive Rs1,26,069 Crore to assets under management.



 Previous Top Fund House Birla Sun Life MF declined by Rs574 Crore and lost its top position to UTI MF.

 

 SBI MF was able to acquire 5th position with total AUM of Rs.1, 12,223.13 Crore.   Tata MF gained Rs1, 045 Crore and able to secure its position in top 10. 

                   

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1.11 BEST EQUITY MUTUAL FUNDS: (As on 30th June, 2017) Following is the ranking of the best mutual funds and their NAVs as on 30thJune, 2015. The rankings are based on 1 year returns of the Equity Mutual Funds available in the market. S.NO.

SCHEME NAME

1 Yr. return (%)

Present NAV

Large Cap Fund 1

SBI Blue Chip Fund

11.9

27.56

2

Franklin India Oppor.

11.1

54.22

3

Birla Sun Life

6.1

41.34

Small & Mid-Cap 1

JP Morgan(1)

27.7

19.30

2

Can Robeco Emerg-Equities

23

58.68

3

Principal Emerging Blue Chip

19.2

67.10

Diversified Fund 1

UTI MNC Fund

32.3

152.19

2

Birla SL India GenNext

20.9

52.94

3

L&T India Value Fund

20

24.25

Debt Short Term 1

DWS Banking & PSU Debt

10.4

12.45

2

HDFC Short Term Opportunities

9.6

15.77

3

L&T Short Term Opportunities

9.2

13.83

     29

   

CHAPTER-2                     30

LITERATURE REVIEW 1) Sarish, (Mar-2012) “A study of opportunities and Challenges for Mutual Fund in India Vision 2020”.

Mutual funds are among the most preferred investment instruments. For middle income individuals, investing in mutual funds yields higher interest and comes with good principle amount at the end of the maturity period of the mutual fund investment. Another important fact is that mutual funds are safe, with close to zero risk, offering an optimized return on earnings and protecting the interest of investors. It is important to gain good understanding of mutual fund investments, companies in the field. And mutual fund experts, as customers are easily misguided by the advertisements and offers promoted by various financial institutions. As a professionally managed type of investment mechanism, the mutual fund works by pooling money from many individuals. Investing in a diverse portfolio of securities such as short-term money market instruments, bonds, and stocks. And other financial instruments and commodities, for instance, precious metals. The mutual fund is run by a fund manager who is responsible for the buying and selling of investment in accord with the investment objectives of the fund. Funds registered with the Securities and Exchange Commission, should distribute almost all of their net realized and net income from the sale of securities and no gains. 2) Dr Shanta Mehta, (Sep-2011) “Preference of Investors for Indian Mutual Funds and its Performance Evaluation”. Mutual funds have opened new vistas to millions of small investors by virtually taking investment to their doorstep. In India, a small investor generally goes for such kind of information, which do not provide hedge against inflation and often have negative real returns. He finds himself to be an odd man out in the investment game. Mutual fund have come, as a much needed help to these investors. Thus the success of MFs is the result of the combined efforts of competent fund managers and alert investors. A competent fund manager should analyses investor behavior and understand their needs up performance investor requirement Therefore, in this current scenario it is very identify of funds investors, their preference for mutual funds schemes and its performance even In this research paper, researcher has an objective to know preference of mutual funds investors and performance evaluation of the preferred schemes by the investors. The survey is undertaken of 100 educated investors of Ahmedabad and Baroda city and the major Findings reveal the major factors that influence buying behavior mutual funds investors sources that investor rely more while making 31

investment and preferable mode to invest in mutual funds market. The study will immensely useful AMC Brokers, distributors and to the other potential investors and last but not least to academician. 3) Sahil Jain, (Apr-2012) “Analysis of Equity Based Mutual Funds in India”. The last decade has seen a tremendous growth in the mutual fund industry. As per the latest data the assets under management in this industry is more than Rs.6.8 thousand billion. Today the Indian market is flooded with more than a thousand mutual fund schemes, promising better returns than others. In this paper an attempt has been made to analyses there of equity based mutual funds. A total of 45 schemes offered by performance 2 private sector companies 2 public sector companies, have been studied over the And period April 1997 to April 2012 O5 years). The analysis has been made using the risk return relationship and Capital Asset Pricing Model (CAPM). The overall analysis finds that HDFC and ICICI have been the best performers, UTI an average performer and LIC the worst performer which gave below- expected returns on the risk-return relationship. S.Pandey, (may-2013) “comparative study of investor’s preference and their satisfaction between mutual funds and direct investment in equity market”. Simple forms of savings in the form of deposits or administered savings are no longer sufficient to meet the ever-increasing requirements of the household. Thus the time has come to save intelligently through the various avenues the time to look at investment avenues, which can beat inflation and help our money to grow further in order to meet our future requirements. Investments in various forms will enable us to meet inflation and protect our purchasing power along with aiding us to generate a sustained income post retirement. Of the available investment avenues is investment in stock market. It has been One including ours, that statistically proven in many markets, as an over time, equity outperform most asset classes. It helps to think of risk market opportunity. "Nothing ventured, nothing gained" applies just as much to the stock peak as to other aspects of life. Both stock market and mutual fund is yet to reach it’s the level. There is still a lack of knowledge about Mutual fund and Stock market amongst majority of market players. High degree of volatility in the recent times in the Indian market has led development of Mutual fund. Prefer more Mutual fund to enter into stock market rather invest directly in stock market. Objective of this study is to find and analyses which is more satisfied investment instrument direct investment in equity market or investing through mutual fund on the basis of different

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parameters like risk, returns, cost etc. The study would facilitate the reader to know the future prospects of mutual fund and stock market. Roggeroffen, (mar-2012) presented empirical study focuses on “European Mutual Fund”. This paper presents an overview of the European mutual fund industry and investigates mutual fund performance using a survivorship bias controlled sample of 506 funds from the 5 most important mutual fund countries. The latter is done using the Carhart (1997) 4-factor assetpricing model. In addition we investigate whether European fund managers exhibit "hot hands persistence in performance. Finally the influence of fund characteristics on risk-adjusted performance is considered. Our overall results suggest that European Mutual funds, and especially small cap funds are able to add value, as indicated by their positive after cost alphas. If we add back management fees, 4 out of 5 countries exhibit significant out-performance at an aggregate level. Finally, we detect strong persistence in mean returns for funds investing in the United Kingdom. Our results deviate from most US studies that argue mutual funds underperform the market by the amount of expenses they charge.

6) Russ Wermersf, (sep-2013) presented empirical study focuses on “Mutual Fund Performance”. We measured the performance of the mutual fund industry from 1975 to 1994, and we decomposed fund returns and costs into various components. This decomposition is made possible by employing a new database not previously available to researchers. This database is created by merging a database of mutual fund holdings with a database of mutual fund net returns, expenses, turnover levels, and other characteristics. With the database, we are able to address issues that have been problematic to the study of mutual fund performance for decades for example, we provide an estimate of quarterly transactions costs for each mutual fund in our sample to determine the role of trading costs in the performance puzzle. our results over the 1975 to 1994 period indicate that mutual funds held stock portfolios that outperform a broad market index the CRSP value weighted index! By 1.3% per year. About 60 basis points is due to the higher average returns associated with the characteristics of stocks held by the funds, whereas the remaining 70 basis points is due to talents in picking stocks that beat their characteristic benchmark portfolios.

7) Dr.Binod Kumar, (Mar-2012) presented empirical study focuses on the “A study on investors' attitude towards mutual funds as an investment option”. The study shows that most of respondents are still confused about the mutual funds and have not formed any attitude towards 33

the mutual fund for investment purpose has been observed that most of the respondents having lack of awareness about the various function of mutual funds. Moreover, as far as the demographic factors are concerned. Gender, income and level of education have significantly influence the investors' attitude towards mutual funds. On the other hand the other two demographic factors like age and occupation have not been found influencing the attitude of investors' towards mutual funds. As far as the benefits provided by mutual funds are concerned. Return potential and liquidity have been perceived to be most attractive by the invertors' followed by flexibility, transparency and affordability.

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CHAPTER-3

35

RESEARCH METHODOLOGY

PROBLEM STATEMENT The intention of the research is to establish the understanding of the various mutual fund schemes and to study the attitude of the investor towards mutual fund as an investment option. Analyzing the risk involved in each fund is a vital part of this research report as risk is related to uncertainty and uncertainty is related to future. Thus, people are afraid of investing in a highly volatile fund. To solve this problem this research is conducted so that risk can be analyzed in detail and the returns can be estimated. SUB-PROBLEMS



 

Identify the factor that affect the preference of mutual fund as an investment. To study the risk and return measures associated with mutual funds.

               36



SOURCES OF DATA COLLECTION

PRIMARY DATA- The primary require for this project has been collected through questionnaire.

SECONDARY DATA- The secondary data has been collected through various journals & websites. Secondary data is based on information gleaned from studies previously performed by govt. agencies trade association & other organizations. Much kind of this information can be found in libraries or on the web, books & business newspapers. The research provided an interesting insight into awareness about the mutual funds, differences in age groups, occupation, income levels, risk taking ability of individuals, investment options preferred.

RESEARCH DESIGN A research design is the "blue print" of the study. The design of a study defines the study type and sub-research question, hypotheses, independent and dependent variables, experimental design, and, if applicable, data collection methods and a statistical analysis plan. Research design is the framework that has been created to seek answers to research questions. The Research Design which is applied in this research study is ANALYTICAL as well as DESCRIPTIVE research design. DESCRIPTIVE RESEARCH DESIGN- The main aim of descriptive research is to provide an accurate and valid representation of (encapsulate) the factors or variables that pertain / are relevant to the research question.

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ANALYTICAL RESEARCH DESIGN- The main aim of explanatory research is to identify any causal links between the factors or variables that pertain to the research problem. Sometime referred to as explanatory study. This research study deals with analyzing the risk and returns of different schemes of mutual funds at SBI wherein analytical research design i.e. based on facts and figures analysis is done and descriptive research design i.e. description of the various funds is used for analyzing the details of various aspects of risk and returns of the respective funds.

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CHAPTER -4

39

ANALYSIS OF RISK AND RETURN PORTFOLIO ANALYSIS TOOLS WHAT IS BETA VALUE? A high beta is good or bad depending on the state of the market. If the market sentiments are bullish i.e. market is seeing a rise in general, then a high beta stock is better and if the market sentiment is bearish then low beta is preferred. A beta of 1 indicates that the security’s price will move with the market. A beta is less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security’s price will be more volatile than the market. Beta measures the volatility of a fund relative to a benchmark index.

Suppose there were two schemes, with monthly returns as follows: Scheme 1: 5%, 4%, 5%, 6%. Average=5% 40

Scheme 2: 5%, -10%, +20%, 5% Average=5% Although both schemes have the same average returns, the periodic (monthly) returns fluctuate a lot more for Scheme 2. Variance measures the fluctuation in periodic returns of a scheme, as compared to its own average return. Variance as a measure of risk is relevant for both debt and equity schemes.

STANDARD DEVIATION Standard deviation is the most commonly used measure of risk. It measures the extent to which actual returns deviate from the average. The average of such deviations over time, is the standard deviation. Higher the standard deviation of returns, higher the risk. RISK ADJUSTED RETURN Risk adjusted return is computed by comparing the return of a fund after adjusting for the risk it has assumed. Popular methods of measuring risk adjusted returns are:



 

Sharpe ratio



Turnover ratio

Risk adjusted return ratios are used to rank the funds. They should be computed for an identified peer group. The returns and risk should be computed for the same period for all funds being ranked. It is common to use 3-5 year historical return as a reasonable period for evaluation. SHARPE RATIO Sharpe ratio is computed as:

= Return – Risk Free Rate Standard Deviation 41

The Sharpe ratio or Sharpe index or Sharpe measure or reward to variability ratio is a measure of the excess return (or risk premium) per unit of risk in an investment asset or a trading strategy, named after William Forsyth Sharpe. A fund’s Sharpe ratio will be high if: 

It earns a higher return for the same risk.



It earns the same return for lower risk.



Higher the Sharpe ratio, better the fund.

 

Sharpe ratio can be used to rank investments within a comparable universe.

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CHAPTER- 5

43

DATA ANALYSIS AND INTERPRETATION (a) Preference Choice Preference Choice : % 30 20 10 0

Interpretation: Majority of the Investors prefer Investing in Mutual fund (30%) followed by Fixed Deposit, Gold/ Silver and Insurance. Only 5% prefer Direct Investment in stock Market.

(b) Monthly Income profile of Investor

monthly Family income profile 50001 to 70000

70001 and above

30001 to 40000

20001 to 30000 50001 to 70000

30001 to 40000

20001 to 30000

70001 and above

Interpretation: The monthly income profile of the investor reflects that 50% of the investor belongs to the income level of Rs. 70001/- and above followed by 33.3% of the investor belongs to the income group of Rs. 30001 to Rs.40000.

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(c) Awareness of Benefits of Investment in Mutual Fund

Awareness of Benefits of Mutual Fund % Fully Aware

80

Some Knoeledge

18

Totally Ignorant

2 0

10

20

30

40

50

60

70

80

90

Column1

INTERPRETATION:  80% of the population is aware of the benefits of Investment in Mutual Fund.  18% have some knowledge of Investment in Mutual fund.

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(d) Preferred Reason to Invest In MIP

Preferred Reason to Invest In MIP : %

Less Risk Continuous Return Consistent Return 0

10

20

30

40

50

60

INTERPRETATION: Consistent Return is the main factor / preferred reason to investing in MIP Fund

(e) Preferred MIP Fund

MIP Fund in Which You Have Invested Others

Reliance MIP LIC MF Floater MIP Birla Sun Life MIP SBI Magnum MIP HDFC MIP 0

5

10

15

20

25

30

35

INTERPRETATION: HDFC MIP is the most preferred MIP Fund Followed by Reliance MIP.

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(f) Which factor of Mutual fund Allure you most

Which Factor of Mutual Fund Allure You Most : % Population Tax Benefit

Regular Income Reduction In Risk Better Return And Safety Diversified 0

5

10

15

20

25

30

35

INTERPRETATION: Diversified is the main reason for investing in Mutual fund. Tax benefit and better return factor also attract investor to invest in Mutual fund.

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CHAPTER-6

48

FINDINGS AND CONCLUSION

FINDINGS

  



Mutual funds are not much popular among retail customers



Debt funds are less volatile then equity funds



Average return of both debt and equity is positive



Return on both debt and equity fund is more than the normal risk Involved

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CONCLUSION The study conducted shows that most of the investors are aware of various schemes of mutual funds. The Mutual Fund investors mainly belong to the age group from 19 years to 55 years and fall in the income group of Rs 30,000 to Rs 70,000 and above. Diversification of portfolio and tax benefit are the main factors of mutual fund that allure the investors. Most of the investors are aware of MIP Funds and the preferred reason for investing in MIP fund is consistent returns given by these funds. The fund industry has already overtaken the banking industry, more funds being under mutual fund management than deposited with banks. With the emergence of tough competition in the market mutual funds are launching a variety of schemes to cater to the requirement of the particular class of investors. Risk takers for getting capital appreciation should invest in growth, equity schemes. Investors who are in need of regular income should invest in income plans. The stock market has also been rising for over three years now. This in turn has not only protected the money invested in funds but has also to help grow these investments. This has also instilled greater confidence among fund investors who are investing more into the market through mutual fund route than ever before. After doing study it is concluded that yes mutual funds are better investment options but as future is uncertain so no one can give a sure guarantee of good returns, no matter whether it is equity or mutual fund. Investors can minimize their risk by doing little research before investing in the markets which will help them to decide the right investment plan or product.

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RECOMMENDATIONS

       



As it has been found from the above Findings that mutual funds are providing better returns and gaining its importance in the finance industry. Therefore mutual fund companies in India should make vice investment decisions and provide more benefits to the investors. As many investors get fooled by some mutual fund companies which give false promises to investors for investing their money in their mutual fund. So government should make strict  rules for all mutual fund companies in order to safeguard the investments of all investors. The charges should be reduced to minimum and also the lock in period should be minimized so as to allure the investors from the market. Key features of mutual funds like diversification, systematic investment plan (SIP’S), tax benefits should be mentioned in the advertisements otherwise people will see mutual funds  as normal shares in which we invest. Mutual funds should use simple names for their schemes which match the feature of the schemes so that investors are not confused and not feel cheated after investing in mutual funds.

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BIBILOGRAPHY  Books 

Dr. Binod Kumar (Mar- 2012), “A study on investors' attitude towards mutual funds as an investment option”,



The Journal of Research in Management.



Sarish (Mar- 2012), “A study of opportunities and Challenges for Mutual Fund in India Vision 2020”, Peer-reviewed and open access journal, ISSN: 1804-1205; BEH - Business and Economic Horizons; Volume 3 | Issue 3.



Dr Shanta Mehta (Sep-2011), “Preference of Investors for Indian Mutual Funds and its Performance Evaluation”, IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 5, Issue 6. Ver. III, PP 19-23.



Sahil Jain (Apr-2012), “Analysis of Equity Based Mutual Funds in India”, The Indian Economic Review, Volume XLVIII.



S.Pandey (May-2013) “comparative study of investors preference and their satisfaction between mutual funds and direct investment in equity market”, Revista Tinerilor Economist (The Young Economists Journal)



Russ Wermersf (Oct-2001), “Mutual Fund Performance: An Empirical Decomposition into Stock-Picking Talent, type, Transactions Costs, and Expenses”, IIMA Working Paper No. 2001-10-04.



Roggeroffen (Feb- 2013), “Determinants of European Mutual Funds: An Empirical Study of European Listed Companies”, Andreas William Hay Jensen.

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WEBSITE: http://www.nism.ac.in http://www.amfiindia.com http://www.bseindia.com http://www.nseindia.com http://www.sbi.co.in http://www.sebi.gov.in http://www.moneycontrol.com http://www.financialexpress.com

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QUESTIONAIRE

1. Name:

2. Gender: Male Female Transgender 3. Income Group Below 20000 20000 to 40000 40001 to 60000 Above 60000 4. How many times you have save money for investing in Mutual fund? Once in a year More than 6 times Less than 6 times Every Month

5. Preferred Investment option? Shares Mutual Fund Fixed Deposit Other 6. Are you fully aware about Mutual Fund? Yes NO 54

7. How you know about Mutual Fund?

Through advertisement Friends Calls Other source

8. Why you like Mutual Fund? For getting better return For liquidity Tax saving Other reason

9. Which is the best Mutual Fund as per your opinion?

Reliance Birla sun life SBI Other

10.How you would like to invest in Mutual fund?

In Lum-Sum SIP

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