A Project Report On:

Need of financial advisors for mutual fund investors

(With special reference to KARVY)
Interim report SUBMITTED BY:

JYOTI VERMA
Roll no. - pgpm/07-09/23

Under the guidance of:

Mr. Rohit vyas mahapatra prof. p.

Product head( MF), Eastern region, faculty,ASBM,Bhubaneswar KARVY, Kolkata

ASIAN SCHOOL OF BUSINESS MANAGEMENT,

BHUBANESWAR

CONTENTS:

serial no 1 2 3 4 5 6 7 ! & 1# 11 12 13 14 15 16 17 Topic certificate by organization certificate by faculty guide Acknowledgement executive summary com any overview karvy at eastern zone mutual funds basics conce t of benc%marking financial lanning for investors w%y %as it becomet%e largest financial intermediary' %ow investors c%oose between funds' most o ular stocks among fund managers most lucrative sectors among fund managers (ystematic )nvestment *lan +in details, does fund ranking and erformance ersist' ortfolio analysis tools researc% re ort

Page no. 4 5 6 7 !"17 17"2# 21$$31 31 32 32$34 34$36 37 3!$3& 3&$41 42$43 44$4& 5#

DECLARATION

I, Ms. JyotiVerma do hereby declare that the project report titled NEED OF FINANCIAL ADVISORS FOR MUTUAL FUND INVETORS is a genuine research work undertaken by me and it has not been published anywhere earlier.

Date !lace Jyoti Verma "#$M, $hubaneswar

Mr. Rohit Vyas

!roduct &ead 'M(), *astern +one, ,"-V.

Certificate by the organization:

/his is to certi0y that Ms. Jyoti v r!a, pursuing !1!M at "sian #chool o0 $usiness Management, $hubaneswar has worked under my super2ision and guidance on her dissertation entitled Need of financial advisors for Mutual Fund investors at Karvy Stock Broking Limited, ,olkata 0rom "pril 34th 2445 to June %th 2445. 6 /o the best o0 my knowledge this is an original piece o0 work.

"ro#. ".Maha$atra "sian #chool o0 $usiness Management, $hubaneswar

Certificate by the faculty guide:

/his is to certi0y that the project report entitled %Need of financial advisors for Mutual Fund Investors & at Karvy Stock Broking Limited is a bona0ide record o0 work done by Jyoti V r!a, and submitted in partial 0ul0illment o0 the re8uirements o0 !1!M program o0 "sian #chool o0 $usiness Management, $hubaneswar.

Acknowledgement

#ometimes words 0all short to show gratitude, the same happened with me during this project. /he immense help and support recei2ed 0rom ,ar2y stock broking limited o2erwhelmed me during the project. My sincere gratitude to Mr.A'o( Chat)rv *i '&ead, eastern region, kar2y) and +r. Bis,a- t "atta.ai( 'Director, "#$M, $hubaneswar), 0or pro2iding me with an opportunity to work with kar2y stock broking limited. I am highly indebted to Mr. Rohit Vyas., product head ' M(), eastern +one, kar2y and company project guide, who has pro2ided me with the necessary in0ormation and his 2aluable suggestion and comments on bringing out this report in the best possible way. I also thank "ro#. ". Maha$atra, 0aculty guide, "#$M, $hubaneswar who has sincerely supported me with the 2aluable insights into the completion o0 this project. I am grate0ul to Mr. +hir .*ra "ra*ha. 'branch head, ,ar2y, JD-) and all o0 the members o0 -ashbehari "2enue branch, who ha2e helped me in the success0ul completion o0 this project, special mention o0 Ms. Debarati dey, Ms. :idhi dhingra, Mr. Debasish panda and Mr. Jyotirmoyee $hattacharjee.

<ast but not the least= my heart0elt lo2e 0or my parents, whose constant support and blessings helped me throughout this project.

E/ 0)tiv s)!!ary1

/his project has been a great learning e>perience 0or me= at the same time it ga2e me enough scope to implement my analytical ability. /his project as a whole can be di2ided into two parts /he 0irst part gi2es an insight about the mutual 0unds and its 2arious aspects. It is purely based on whate2er I learned at kar2y. ?ne can ha2e a brie0 knowledge about mutual 0unds and all its basics through the project. ?ther than that the real ser2ings come when one mo2es ahead. #ome o0 the most interesting 8uestions regarding mutual 0unds ha2e been co2ered. #ome o0 them are why has it become one o0 the largest 0inancial intermediaries@ &ow in2estors do chose between 0unds@ Most popular stocks among 0und managers, most lucrati2e sectors 0or 0und managers, a special report on #ystematic In2estment !lan, does 0und per0ormance persists and the topping o0 all the ser2ings in the 0orm o0 port0olio analysis tool and its application.

"ll the topics ha2e been co2ered in a 2ery systematic way. /he language has been kept simple so that e2en a layman could understand. "ll the datas ha2e been well analy+ed with the help o0 charts and graphs.

/he second part consists o0 datas and their analysis, collected through a sur2ey done on 244 people. It co2ers the topic6 need o0 0inancial ad2isors 0or mutual 0und in2estors6. /he data collected has been well organi+ed and presented. &ope the research 0indings and conclusions will be o0 use. It has also co2ered why people donAt want to go 0or 0inancial ad2isors@ /he ad2isors can take 0urther steps to approach more and more people and indulge them 0or taking their ad2ices.

Organization overview

I.tro*)0tio.1

Success is a journey, not a destination.

I0 we look 0or e>amples to

pro2e this 8uote then we can 0ind many but there is none like that o0 kar2y. $ack in the year 3B53, 0i2e people created history by establishing kar2y and company which is today known as kar2y, the largest 0inancial ser2ice pro2ider o0 India. S)00 ss s)tras o# (arvy1

34

/he success story o0 kar2y is dri2en by 5 success sutras adopted by it .a! 'y trust,

integrity, dedication, commitment, enterprise, hard work and team play, learning and innovation, empathy and humility.
/hese are the 2alues that bind success with kar2y. Visio. o# (arvy1 /o achie2e C sustain market leadership, ,ar2y shall aim 0or complete customer satis0action, by combining its human and technological resources, to pro2ide world class 8uality ser2ices. In the process ,ar2y shall stri2e to meet and e>ceed customerDs satis0action and set industry standards. Missio. stat ! .t1

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

Th s)00 ss 'a** r1

33

Co!$a.y ov rvi ,1

,ar2y was established as kar2y and company by 0i2e chartered accountants during the year 3B;BE54, and then its work was con0ined to audit and ta>ation only. <ater on it di2ersi0ied into 0inancial and accounting ser2ices during the year 3B53E52 with a capital o0 rs.374444. it achie2ed its 0irst milestone a0ter its 0irst in2estment in technology. ,ar2y became a known name during the year 3B57E59 when it 0orayed into capital market as registrar. Evo')tio. o# 2ARV31 It is well said that success is a journey not a destination and we can see it being pro2ed by kar2y. Fnder this section we will see that how this Gkar2y and company6 o0 3B54 became Gkar2y6 o0 2445. ,ar2y blossomed with the setting up o0 its 0irst branch at Mumbai during the year 3B5;E55. /he turning point came in the year 3B5B when it decided to enter into one o0 the not only emerging rather potential 0ield too i.e= stock broking. It added the 0eather o0 stock broking into its cap. "t the same time it became the member o0 &yderabad #tock *>change through associate 0irm kar2y securities ltd and then kar2y ne2er looked backHH..it went on adding ser2ices one a0ter another, it entered into retail stock broking in the year 3BB4. ,ar2y in2estor ser2ice centers were set up in the year 3BB2. ,ar2y which already enjoyed a wide network through its
32

in2estor ser2ice centers, entered into 0inancial product distribution ser2ices in the year 3BB3. ?ne year more and kar2y was now dealing into mutual 0und ser2ices too in the year 3BB% but it didnAt stopped there, it stepped into corporate 0inance and in2estment banking in the year 3BB7. ,ar2yAs strategy has always been being the 0irst entrant in the market. ,ar2y again hit the limelight by becoming the 0irst registrar in the country to be awarded I#? B442 in the year 3BB;. /hen it stepped into the other most happening sector i.e= I/ enabled ser2ices by establishing its own $!? units and at a gap o0 just 3 year it took the path o0 eE$usiness through its website www.kar2y.com . /hen it entered into insurance ser2ices in the year 2443 with the launch o0 its retail arm Gkar2yE the 0inapolis your personal 0inance ad2isor6. /hen in the year 2442 it launched its !I1'!ri2ate Ilient 1roup) which looks a0ter its &igh :etworth Indi2iduals .and maintain their port0olio and pro2ides them with other 0inancial ser2ices. In the year 2443, it commenced secondary debt and JDM trading. It was a decade which saw many Indian companies going globalH..so why the largest 0inancial ser2ice pro2ider o0 India should lag behind@ &ence, kar2y launched Gkar2y global ser2ices limited6 a0ter entering into a joint 2enture with Iomputershare, "ustralia in the year 244%.the year 244% also saw kar2y entering into commodities marketing through kar2y comtrade. .ear 2447 saw kar2y establishing a separate branch 0or its insurance ser2ices under the head G kar2y insurance broking ltd6 and in the same year, a0ter being impressed with the rapid growth o0 kar2y stock broking limited, !I1 group o0 &ong ,ong ac8uired 27K stake at ,#$<. In the year 2449, kar2y entered into one o0 the hottest sector o0 present time i.e real estate through ,ar2y realtyC ser2ices 'India) ltd. hence , we can see now kar2y being established as the lagest 0inancial ser2ice pro2ider o0 the country.

No, (arvy 4ro)$ 0o.sists o# 5 hi4h'y r .o,. * .titi s ,hi0h ar as #o''o,1

33

3.

/he 0irst securities registry to recei2e I#? B442 certi0ication in

India. -egistered with #*$I as Iategory I -egistrar, is :umber 3 -egistrar in the Iountry. /he award o0 being LMost "dmiredA -egistrar is one among many o0 the acknowledgements we recei2ed 0or our customer 0riendly and competent ser2ices.

2.

kar2y stock broking ltd. Ionsists o0 0i2e units namely stock

broking ser2ics, depository participant, ad2isory ser2ices, distribution o0 0inancial products, ad2isory ser2ices and pri2ate client goups.

3.

it is registered with #*$I as a category 3 merchant banker. Its

clientele includesinclude leading corporates, #tate 1o2ernments, 0oreign institutional in2estors, public and pri2ate sector companies and banks, in Indian and global markets.

%.

kar2y insurance broking ltd is also a part o0 kar2y stock broking

ltd. "t ,ar2y Insurance $roking <imited both li0e and nonEli0e insurance products are pro2ided to retail indi2iduals, high netEworth clients and corporates.

7.

/he company pro2ides in2estment, ad2isory and brokerage

ser2ices in Indian Iommodities Markets. "nd most importantly, it o00er a wide reach through our branch network o0 o2er 227 branches located across 354 cities.

9.

,ar2y 1lobal is a leading business and knowledge process

outsourcing #er2ices Iompany o00ering creative business solutions to clients globally. It operates in banking and 0inancial ser2ices, inurance, healthcare and pharmaceuticals,
3%

media , telecom and technology. It has its sales and business de2elopment o00ice in :ew .ork, F#" and the o00shore global deli2ery center in &yderabad, India

;. ,ar2y -ealty 'India) <imited is engaged in the business o0 real estate and property ser2ices o00ering

$uyingM sellingM renting o0 properties Identi0ying 2aluable in2estments opportunities in the real estate sector (acilitating 0inancial support 0or real estate and in2estments in properties -eal estate port0olio ad2isory ser2ices

8.

it is a joint 2enture between Iomputershare, "ustralia and ,ar2y

Ionsultants <imited, India in the registry management ser2ices industry.

Or4a.i6atio. str)0t)r o# (arvy1 talking about the organi+ation structure o0 kar2y, we ha2e the board o0 directors as the supreme go2erning body , the chairman being Mr. I parthasarthy, mr. m yugandhar as the managing director, mr m s ramakrishna andmr. !rasad 2. potluri as directors. /he board o0 diretors head the kar2y group, kar2y computershares limited, kar2y in2estors ser2ices ltd., kar2y comtrade, kar2y stock broking ltd., and kar2y global ser2ices ltd. ,ar2y group being the 0lagship company looks a0ter the 0unctional departments such as corporate a00airs, group human resources, 0inance C accounting, training C de2elopment, technology ser2ices and corporate 8uality. ,ar2y computershare pri2ate limited 0acilitates mutual 0und ser2ices, share registry and issue registry whereas merchant banking is looked a0ter by kar2y in2estor ser2ices ltd. ,ar2y stock broking ltd heads its another branch too ie. ,ar2y insurance broking ltd. /he ser2ices o00ered by ,#$< are stock broking, depository, research, distribution, personal client group and 37

institutional desk. "nd 0inally the $!? ser2ices are managed by kar2y global ser2ices ltd. #ummari+ing it in a diagram, it can be presented as

S$ 0tr)! o# s rvi0 s o## r * 7y (arvy1 ,ar2y being the top registrar and trans0er agent, 0unctions as registrar in most o0 the issues in the country. /alking about the mutual 0und ser2ices o00ered by kar2y, we can get the products o0 33 "MIs o2er here. it deals in both closed ended 0unds as well as open ended too. :ow one must be thinking why to get the mutual 0unds 0rom kar2y instead o0 getting it directly 0rom "MIs@@@we ha2e great reasons 0or it the 0irst one being = i0 we a2ail the ser2ices o0 kar2y then we can get the in0ormation about all the "MIs and their products at a single place along with e>pert recommendations whereas at an "MI we can get in0ormation about the products o0 that speci0ic "MI only. "nd the second being wide network o0 kar2yH.nowadays we can 0ind kar2y o00ices at remote areas too.

39

"long with these, kar2y is 2ery well handling the role o0 depository participant. $eing registered with both the depositories i.e.= :#D< 'national securities depository ltd) and ID#< 'central depository ser2ices ltd), kar2y can ha2e access to both. Its wide network also 0acilitates it in distribution o0 retail 0inancial products. ,ar2y belie2es in being updated always. #o it is always ready to use latest technologies so that its clients always be in touch with the latest happenings along with kar2y. It o00ers eEbusiness through internet through its website www.kar2y.com . ?ther than it, it also pro2ides its 2arious ser2ices through #M#es. ,ar2yAs ser2ices are not limited to its in2estors only rather its o00erings are 0or its corporate clients and distributors too. it is 2ery well aware o0 the 0act that in this era o0 neck to neck competition, we cant ignore any o0 the aspects o0 our businessH.so thereAs a o00ering 0or e2erybodyHe2eryoneAs welcome at kar2y. Why sho)'* i.v stors 0hoos #or (arvy8 *>cellence is ne>t to nothingH.and here at kar2y e2erybody tries their best to o00er e>cellent ser2ices to its clientele through its o00erings maintaining the kar2y culture which includes 3. Iontrolled and low cost ser2ice culture kar2y is there to ser2e its client at the minimum possible cost. it controls cost by its 2arious costE cutting techni8ues and minimi+ation o0 a2oidable costs. 2. <arge 2olume processing capability being the largest 0inancial ser2ice pro2ider in the country, it has the uni8ue distinction o0 operating its acti2ities on a large scale which bene0its all the parties cordially. 3. "dherence to strict time schedule kar2y knows that time is money and tries it best to 0inish the task within the stipulated time schedule. %. *>pertise in coordinating multiElocation responses kar2y has got a wide network and hence one can 0ind its branches at most o0 the places in India. /hus it enjoys its presence e2erywhere and coordinates among itsel0 in sol2ing the 8ueries and in responding to any situation. 7.*>pertise in managing independent entities such as banks, postEo00ice etc. the work culture o0 kar2y and the ethics 0ollowed inside kar2y makes its work0orce compatible with e2erybody, so the kar2y people establishes good coordination with independent entities too.

3;

9. !ooling o0 group resources kar2y group consists o0 eight subsidiaries, so it can easily pool up its resources 0or accomplishment o0 its goals, whene2er needed. /he groups can help each other whene2er there are peaks and lows, and e2en in the case when they ha2e huge targets just as we saw 0ew years back, /ata group pooling its resources to ac8uire Iorus. Ho, (arvy a0hi v * it8 /he core competency o0 kar2y lies in the 0ollowing points due to which it enjoys a competiti2e edge o2er its competitors. /he 0ollowing culture adopted by kar2y makes it all time 0a2orite among its clientele 3. !ro0essionally managed by 8uali0ied and trained manpower. 2. Fni8uely structured inEhouse so0tware and hardware department 3. Nuery handling within %5 hrs. %. #trong secretarial, accounting and audit systems. 7. Fni8ue work culture o0 working ; days a week in 3 shi0ts. 9. Fnmatched network spreading all o2er India. Ho, A0hi v ! .ts so).*s sy.o.y!o)s to (arvy1

/he landmarks achie2ed by kar2y 2ery well de0ine its success story. In the pre2ious pages, we learnt how a company started by 0i2e chartered accountants, named as kar2y and company turned into todayAs kar2y group, the largest 0inancial intermediary o0 India. $ut success didnAt came to kar2y at a 0low, the hard work and dedication o0 its work0orce made it what it is todayHgradually it achie2ed the 0ollowing landmarks and now it has became what we call the kar2y group, now it is
3.largest independent distributor 0or 0inancial products. 2.amongst the top 7 stock broker. 3.among the top 3 depository participants. %.largest network o0 branches C business associates. 7.I#? B442 certi0ied operations by D:V. 9."mongst top 34 in2estment bankers. ;.adjudged as one o0 the top 74 I/ users in India by MI# south "sia. 35

5.0ullE 0ledged I/ dri2en operation.

B.IndiaAs no.3 registrar C securities trans0er agent. C'i .t ' o# (arvy1 ,ar2yAs culture has helped kar2y in achie2ing such a distinct position in the market where it can boast o0 its huge client base. $e it a retail in2estor in2esting -s. 744 in a #I! in -eliance mutual 0und or be it the largest corporate house o0 the country -eliance industriesE e2erybody is heading towards kar2y 0or their wealth ma>imi+ation, lets ha2e a look at the clientele o0 kar2y

"ccording to the datas published in year 244;, kar2y stock broking ltd. ?perates through more than 32444 terminals, more than 2B4444 accounts are maintained and commands o2er 3.3%K market share o0 :#*. /he distribution ser2ices has access to more than -s. %4 billion "ssets Fnder Management. ,ar2y being a depository participant with both :#D< and ID#<, manages more than ;44444 accounts 0rom more than 354 locations. /alking about the registry ser2ices, it manages o2er ;74 publicM right issues.at the same time, it is managing o2er 39 million port0olios as registrar.
I0 we took a look at some o0 the top corporate houses a2ailing the ser2ices o0 kar2y then we ha2e -eliance, I?I, ID$I,<II, &industan Fnile2er, !rincipal Mutual (und, Duetsche Mutual (und, .ogokawa, Marico Industries, !atni Iomputers, Morgan #tanley, 1lenmark, I-I#I<, 3M, ,otak Mahindra $ank, $harti /ele2enture, In0osys /echnologies, Jipro, In0otech, I!I<,/"/" consultancy ser2ices, F/I mutual 0und etc. /hus in total kar2y ser2es o2er 39 million in2estors and 344 corporates.

ow, as the project was carried on in !olkata, so there is a special reference to working of karvy at eastern zone and mutual funds in particular. 2ARV3 at ast r. 6o. 1
,ar2y stock $roking <td was started 33 yrs ago i.e.= during the year 3BB9 at Jatin Das road which was later on established as the regional head o00ice. !resently Mr. "lok Ihatur2edi is heading the eastern +one. /alking about the +onal o00ices, ,ar2y has +onal o00ices at ,olkata, 3B

south $engal, north $engal, :orth east, Jharkhand, $ihar, ?rissa and Ihhattisgarh. *ach +onal o00ice has got its own +onal heads. ,ar2y is a member o0 three stock e>changes o0 India :ational #tock *>change ':#*), $ombay #tock *>change '$#*) and &yderabad #tock *>change '&#*).

Hi rar0hi0a' Str)0t)r i. *ia4ra!1

/he abo2e diagram shows the hierarchy o0 ,ar2y stock broking ltd. It can be easily depicted 0rom the diagram that the regional head 'presently Mr. "lok Ihatur2edi) is the supreme in the eastern region, under whom the 2arious +onal heads operate and under these +onal heads, the branch heads operate. $etween each le2el o the hierarchy, there e>ists a coordinator, who acts as the 0acilitator between the di00erent heads. 24

2arvy at 2o'(ata1 :ow i0 we look at kar2yAs branch o00ices at ,olkata, then there e>ist ten branches o0 kar2y at ,olkata, which are as 0ollow 3. <ake /own. 2. $urra ba+aar. 3. #hyam ba+aar. %. Dalhousie. 7. :ew "lipore. 9. $ehala. ;. Jatin Das -oad. 5. !hoolbagan. B. #alt <ake. 34. &owrah. Str)0t)r a00or*i.4 to th "ro*)0ts o## r * 7y 2arvy1

REGIONAL HEADS

PRODUC T HEADS -ealty &*"

Debt di2isio n

Mutua l 0unds

23

Insura nce brokin g

comm odities

#tock brokin g

Deposi tory partici pant

Merch ant C in2.ba nking

!M#

KA

KARVY Mutual Fund Services:

Mutual 0unds ha2e ser2ings 0or e2erybody. Jhiche2er type o0 in2estor you are, you will surely get a mutual 0und meeting your re8uirements. $ut in2esting in mutual 0unds is no childAs play there0ore kar2y mutual 0und ad2isory ser2ices is there to guide in each and e2ery step o0 in2estment in mutual 0unds so that the dream o0 wealth creation doesnAt turns into nightmares. Its o00erings includes products o0 all the 33 major "MIs, research report about all the e>isting 0unds as well as :(?s, customi+ed mutual 0und port0olios designed 0or indi2idual as well as institutional customers, it not only design the port0olios rather it o00ers continuous port0olio re2ision too depending on changing market outlook and e2ol2ing trends, it 0urther gi2es access to its online consolidated port0olio statement. /hus kar2y with its 2arious o00erings makes the in2estor 0eel sa0e in this dynamic en2ironment o0 the Indian 0inancial market.

,ar2y Iomputershare mutual 0und ser2ices o00ers in2estors ser2ices, distributor ser2ices and client ser2ices. It can be said that kar2y is dedicated towards pro2iding 8uality ser2ice to all these three 0acets o0 the in2estment process. ,ar2y being an intermediary is well registered with the "ssociation o0 Mutual (unds o0 India '"M(I). ,"-V. has got the registration no O"-: 4435P 0or mutual 0unds, which is mentioned on e2ery 0orm. "0ter the procurement o0 0orms 0rom 2arious "MIs, the 0orms are passed on to its 2arious +onal and branch o00ices 'as per their re8uirements) and then 0urther processing is done either directly or through subEbrokers. ,ar2y operates through its subE brokers, associates and its e>cellent pool o0 own direct employees. /he employees are o00ered salary by kar2y whereas the subE brokers and associates get certain commission. ,ar2y has ;4 branches and 3 0ranchisees in the eastern region. "ll the work o0 mutual 0unds is regulated 0rom -ashbehari a2enue branch, an e>tension o0 the JDbranch. 22

/he main source o0 earning 0or ,"-V. is the brokerage o00ered by the 2arious "MIs known as payEin. /he amount o00ered may 2ary 0rom "MI to "MI. "lso, the 0ranchisees ha2e to pay a certain amount e2ery month. :ow kar2y also pay a certain amount to the sub brokers and associates known as payEout. /he payout is decided according to the procurement done by them. R 0r)it! .t1 ,ar2y has an en2iable pool o0 dynamic employees. Its people power has a great contribution in making it the :o. 3 0inancial intermediary. "ll the employees o0 kar2y dealing in mutual 0unds ha2e to go through "M(I test. /he recruitment process is at par with the industry standards, it is mostly done through campus recruitment 0rom reputed $E schools. ?ther than that, it also recruits through direct inter2iews and 1Ds as per their re8uirement. ,ar2y ne2er compromises with 8uality thatAs the reason it is e>celling by pro2iding 8uality ser2ices to all the in2estors, clients, "MIs etc. associated with it.

23

Mutual funds

2%

it9s a'' a7o)t !)t)a' #).*s1

Mutual 0unds " mutual 0und is a pro0essionallyEmanaged 0irm o0 collecti2e in2estments that
pools money 0rom many in2estors and in2ests it in stocks, bonds, shortEterm money market instruments, andMor other securities.in other words we can say that " Mutual (und is a trust registered with the #ecurities and *>change $oard o0 India '#*$I), which pools up the money 0rom indi2idual M corporate in2estors and in2ests the same on behal0 o0 the in2estors Munit holders, in e8uity shares, 1o2ernment securities, $onds, Iall money markets etc., and distributes the pro0its. /he 2alue o0 each unit o0 the mutual 0und, known as the net asset 2alue ':"V), is mostly calculated daily based on the total 2alue o0 the 0und di2ided by the number o0 shares currently issued and outstanding. /he 2alue o0 all the securities in the port0olio in calculated daily. (rom this, all e>penses are deducted and the resultant 2alue di2ided by the number o0 units in the 0und is the 0undAs :"V.

NAV :

Tota' va') o# th #).*;;;;;;. No. o# shar s 0)rr .t'y iss) * a.* o)tsta.*i.4

A*va.ta4 s o# a MF Q Q Q Q Mutual (unds pro2ide the bene0it o0 cheap access to e>pensi2e stocks Mutual 0unds di2ersi0y the risk o0 the in2estor by in2esting in a basket o0 assets " team o0 pro0essional 0und managers manages them with inEdepth research inputs 0rom in2estment analysts. $eing institutions with good bargaining power in markets, mutual 0unds ha2e access to crucial corporate in0ormation, which indi2idual in2estors cannot access.

History o# th I.*ia. !)t)a' #).* i.*)stry1

/he mutual 0und industry in India started in 3B93 with the 0ormation o0 Fnit /rust o0 India, at the initiati2e o0 the 1o2ernment o0 India and -eser2e $ank. /he history o0 mutual 0unds in India can be broadly di2ided into 0our distinct phases. First "has < =>?@A5B Fnit /rust o0 India 'F/I) was established on 3B93 by an "ct o0 !arliament by the -eser2e $ank o0 India and 0unctioned under the -egulatory and administrati2e control o0 the -eser2e $ank o0 27

India. In 3B;5 F/I was deElinked 0rom the -$I and the Industrial De2elopment $ank o0 India 'ID$I) took o2er the regulatory and administrati2e control in place o0 -$I. /he 0irst scheme launched by F/I was Fnit #cheme 3B9%. "t the end o0 3B55 F/I had -s.9,;44 crores o0 assets under management. S 0o.* "has < =>5BA=>>C DE.try o# ")7'i0 S 0tor F).*sE 3B5; marked the entry o0 nonE F/I, public sector mutual 0unds set up by public sector banks and <i0e Insurance Iorporation o0 India '<II) and 1eneral Insurance Iorporation o0 India '1II). #$I Mutual (und was the 0irst nonE F/I Mutual (und established in June 3B5; 0ollowed by Ianbank Mutual (und 'Dec 5;), !unjab :ational $ank Mutual (und '"ug 5B), Indian $ank Mutual (und ':o2 5B), $ank o0 India 'Jun B4), $ank o0 $aroda Mutual (und '?ct B2). <II established its mutual 0und in June 3B5B while 1II had set up its mutual 0und in December 3BB4."t the end o0 3BB3, the mutual 0und industry had assets under management o0 -s.%;,44% crores. Thir* "has < =>>CAFGGC DE.try o# "rivat S 0tor F).*sE 3BB3 was the year in which the 0irst Mutual (und -egulations came into being, under which all mutual 0unds, e>cept F/I were to be registered and go2erned. /he erstwhile ,othari !ioneer 'now merged with (ranklin /empleton) was the 0irst pri2ate sector mutual 0und registered in July 3BB3. /he 3BB3 #*$I 'Mutual (und) -egulations were substituted by a more comprehensi2e and re2ised Mutual (und -egulations in 3BB9. /he industry now 0unctions under the #*$I 'Mutual (und) -egulations 3BB9. "s at the end o0 January 2443, there were 33 mutual 0unds with total assets o0 -s. 3,23,547 crores. Fo)rth "has < si.0 F 7r)ary FGGC In (ebruary 2443, 0ollowing the repeal o0 the Fnit /rust o0 India "ct 3B93 F/I was bi0urcated into two separate entities. ?ne is the #peci0ied Fndertaking o0 the Fnit /rust o0 India with assets under management o0 -s.2B,537 crores as at the end o0 January 2443, representing broadly, the assets o0 F# 9% scheme, assured return and certain other schemes /he second is the F/I Mutual (und <td, sponsored by #$I, !:$, $?$ and <II. It is registered with #*$I and 0unctions under the Mutual (und -egulations. consolidation and growth. "s at

29

the end o0 #eptember, 244%, there were 2B 0unds, which manage assets o0 -s.373345 crores under %23 schemes.

Cat 4ori s o# !)t)a' #).*s1

Mutual 0unds can be classi0ied as 0ollow Bas * o. th ir str)0t)r 1

?penEended 0unds In2estors can buy and sell the units 0rom the 0und, at any point o0 time. IloseEended 0unds /hese 0unds raise money 0rom in2estors only once. /here0ore, a0ter the o00er period, 0resh in2estments can not be made into the 0und. I0 the 0und is listed on 2;

a stocks e>change the units can be traded like stocks '*.g., Morgan #tanley 1rowth (und). -ecently, most o0 the :ew (und ?00ers o0 closeEended 0unds pro2ided li8uidity window on a periodic basis such as monthly or weekly. -edemption o0 units can be made during speci0ied inter2als. /here0ore, such 0unds ha2e relati2ely low li8uidity. Bas * o. th ir i.v st! .t o7- 0tiv 1 *8uity 0unds /hese 0unds in2est in e8uities and e8uity related instruments. Jith 0luctuating share prices, such 0unds show 2olatile per0ormance, e2en losses. &owe2er, short term 0luctuations in the market, generally smoothens out in the long term, thereby o00ering higher returns at relati2ely lower 2olatility. "t the same time, such 0unds can yield great capital appreciation as, historically, e8uities ha2e outper0ormed all asset classes in the long term. &ence, in2estment in e8uity 0unds should be considered 0or a period o0 at least 3E7 years. It can be 0urther classi0ied as i) Inde> 0undsE In this case a key stock market inde>, like $#* #ense> or :i0ty is tracked. /heir port0olio mirrors the benchmark inde> both in terms o0 composition and indi2idual stock weightages. ii) *8uity di2ersi0ied 0undsE 344K o0 the capital is in2ested in e8uities spreading across di00erent sectors and stocks. iiiR) Di2idend yield 0undsE it is similar to the e8uity di2ersi0ied 0unds e>cept that they in2est in companies o00ering high di2idend yields. i2) /hematic 0undsE In2est 344K o0 the assets in sectors which are related through some theme. e.g. E"n in0rastructure 0und in2ests in power, construction, cements sectors etc. 2) #ector 0undsE In2est 344K o0 the capital in a speci0ic sector. e.g. E " banking sector 0und will in2est in banking stocks. 2i) *<##E *8uity <inked #a2ing #cheme pro2ides ta> bene0it to the in2estors.

Ba'a.0 * #).*1 /heir in2estment port0olio includes both debt and e8uity. "s a result, on the
riskEreturn ladder, they 0all between e8uity and debt 0unds. $alanced 0unds are the ideal mutual 0unds 2ehicle 0or in2estors who pre0er spreading their risk across 2arious instruments. (ollowing are balanced 0unds classes i) DebtEoriented 0unds EIn2estment below 97K in e8uities. ii) *8uityEoriented 0unds -In2est at least 97K in e8uities, remaining in debt. 25

+ 7t #).*1 /hey in2est only in debt instruments, and are a good option 0or in2estors a2erse to idea o0 taking risk associated with e8uities. /here0ore, they in2est e>clusi2ely in 0i>edEincome instruments like bonds, debentures, 1o2ernment o0 India securities= and money market instruments such as certi0icates o0 deposit 'ID), commercial paper 'I!) and call money. !ut your money into any o0 these debt 0unds depending on your in2estment hori+on and needs. i) <i8uid 0undsE /hese 0unds in2est 344K in money market instruments, a large portion being in2ested in call money market. ii)1ilt 0unds #/E /hey in2est 344K o0 their port0olio in go2ernment securities o0 and /Ebills. iii)(loating rate 0unds E In2est in shortEterm debt papers. (loaters in2est in debt instruments which ha2e 2ariable coupon rate. i2)"rbitrage 0undE /hey generate income through arbitrage opportunities due to misEpricing between cash market and deri2ati2es market. (unds are allocated to e8uities, deri2ati2es and money markets. &igher proportion 'around ;7K) is put in money markets, in the absence o0 arbitrage opportunities. 2)1ilt 0unds </E /hey in2est 344K o0 their port0olio in longEterm go2ernment securities. 2i) Income 0unds </E /ypically, such 0unds in2est a major portion o0 the port0olio in longEterm debt papers. 2ii) MI!sE Monthly Income !lans ha2e an e>posure o0 ;4KEB4K to debt and an e>posure o0 34KE34K to e8uities. 2iii)(M!sE 0i>ed monthly plans in2est in debt papers whose maturity is in line with that o0 the 0und. I.v st! .t strat 4i s1 =. Syst !ati0 I.v st! .t "'a.1 under this a 0i>ed sum is in2ested each month on a 0i>ed date o0 a month. !ayment is made through post dated che8ues or direct debit 0acilities. /he in2estor gets 0ewer units when the :"V is high and more units when the :"V is low. /his is called as the bene0it o0 -upee Iost "2eraging '-I") F. Syst !ati0 Tra.s# r "'a.1 under this an in2estor in2est in debt oriented 0und and gi2e instructions to trans0er a 0i>ed sum, at a 0i>ed inter2al, to an e8uity scheme o0 the same mutual 0und.

2B

C. Syst !ati0 With*ra,a' "'a.1 i0 someone wishes to withdraw 0rom a mutual 0und then he can withdraw a 0i>ed amount each month.

Risk v/s. return:

34

Wor(i.4 o# a M)t)a' #).*1

33

/he entire mutual 0und industry operates in a 2ery organi+ed way. /he in2estors, known as unit holders,hando2er their sa2ings to the "MIs under 2arious schemes. /he objecti2e o0 the in2estment should match with the objecti2e o0 the 0und to best suit the in2estorsA needs. /he "MIs 0urther in2est the 0unds into 2arious securities according to the in2estment objecti2e. /he return generated 0rom the in2estments is passed on to the in2estors or rein2ested as mentioned in the o00er document. R 4)'atory A)thoriti s1

32

/o protect the interest o0 the in2estors, #*$I 0ormulates policies and regulates the mutual 0unds. It noti0ied regulations in 3BB3 '0ully re2ised in 3BB9) and issues guidelines 0rom time to time. #*$I appro2ed "sset Management Iompany '"MI) manages the 0unds by making in2estments in 2arious types o0 securities. Iustodian, registered with #*$I, holds the securities o0 2arious schemes o0 the 0und in its custody. "ccording to #*$I -egulations, two thirds o0 the directors o0 /rustee Iompany or board o0 trustees must be independent. /he "ssociation o0 Mutual (unds in India '"M(I) reassures the in2estors in units o0 mutual 0unds that the mutual 0unds 0unction within the strict regulatory 0ramework. Its objecti2e is to increase public awareness o0 the mutual 0und industry. "M(I also is engaged in upgrading pro0essional standards and in promoting best industry practices in di2erse areas such as 2aluation, disclosure, transparency etc.

Documents re8uired '!": mandatory) !roo0 o0 identity 3.photo !": card 2. In case o0 nonEphoto !": card in addition to copy o0 !": card any one o0 the 0ollowing dri2ing licenseMpassport copyM 2oter idM bank photo pass book. !roo0 o0 address 'any o0 the 0ollowing ) latest telephone bill, latest electricity bill, !assport, latest bank passbookMbank account statement, latest Demat account statement, 2oter id, dri2ing license, ration card, rent agreement. O## r *o0)! .t1 an o00er document is issued when the "MIs make :ew (und ?00er':(?). Its ad2isable to e2ery in2estor to ask 0or the o00er document and read it be0ore in2esting. "n o00er document consists o0 the 0ollowing #tandard ?00er Document 0or Mutual (unds '#*$I (ormat) #ummary In0ormation 1lossary o0 De0ined /erms -isk Disclosures <egal and -egulatory Iompliance *>penses Iondensed (inancial In0ormation o0 #chemes Ionstitution o0 the Mutual (und In2estment ?bjecti2es and !olicies Management o0 the (und ?00er -elated In0ormation. 2 y I.#or!atio. M !ora.*)!1 a key in0ormation memorandum, popularly known as ,IM, is 33

 Whi0h # at)r o# th !)t)a' #).*s a'')r yo) !ost8

+iv rsi#i0atio. "ro# ssio.a' !a.a4 ! .t R *)0tio. i. ris( a.* tra.sa0tio. 0ost H '$s i. a0hi vi.4 'o.4 t r! 4oa' @F 2B 3% 34

"ccording to you which is the most suitable stage to in2est in mutual 0unds@

3o).4 ).!arri * sta4 3o).4 Marri * ,ith 0hi'*r . sta4

3%

HH 32

Marri * ,ith o'* r 0hi'*r . sta4 "r r tir ! .t sta4

23 2;

"re you a2ailing the ser2ices o0 personal 0inancial ad2isors@

3 s No

5B %5

37

 Jhich e>pertise o0 the personal 0inancial ad2isor is demanded most@

"ort#o'io r vi , I i.v st! .t r 0o!! .*atio. "'a..i.4 to a0hi v s$ 0i#i0 #i.a.0ia' 4oa's Ma.a4i.4 ass ts i. r tir ! .t A00 ss to s$ 0ia'ists i. ar as s)0h as ta/ $'a..i.4

@C 37 34 2;

39

 Jhat is the major reason 0or using 0inancial ad2isors@

Wa.t h '$ ,ith ass t a''o0atio. +o.9t hav .o)4h ti! to !a( o,. * 0isio. To /$'ai. vario)s i.v st! .t o$tio.s Wa.t to hav s)r ty a7o)t #i.a.0ia' 4oa's

@F 23 3; 33

Jhat is the major reason 0or not using 0inancial ad2isor@

Have access to all resources needed Believe advisors are too expensive Unsure how to find a trustworthy advisor Want to be in control of own investments

18 73 23 %3

3;

-esearch 0indings and conclusions "t the sur2ey conducted upon 244 people, 337 are already mutual 0und in2estors or are interested to in2est in 0uture and the remaining 97 are not interested in it. #o there is enough scope 0or the ad2isors to con2ert those 97 participants into in2estors through their con2incing power and great communication skills. :ow, when those 97 people were asked about the reason o0 not in2esting in mutual 0unds, then most o0 the people held their ignorance responsible 0or that. /hey lacked knowledge and in0ormation about the mutual 0unds. Jhereas just 34 people enjoyed in2esting in other option. (or 35 people, the bene0its arousing 0rom these in2estments were not enough to dri2e them 0or in2estment in M(s and 32 people e>pressed no trust o2er the 0und managersA decision. "gain the 0inancial ad2isors can tap upon these people by educating them about mutual 0unds. ?ut o0 the 337 persons who already ha2e in2ested in mutual 0undsM are interested to in2est, only 35K ha2e sound knowledge o0 M(s, 3%K people are aware o0 only the schemes in which they ha2e in2ested. 2;K possess partial knowledge whereas 23K stands nowhere in knowledge about M(s. 33 participants buy 0orms directly 0rom the "MIs, 25 0rom brokers only, 77 0rom brokers and subEbrokers e2en then 37 people buy 0rom other sources. /he brokers and

35

sub brokers ha2e the ma>imum reach so they should try to make those in2estors aware 0 the happenings, e2en the "MIs should 0ollow it. Jhen asked about the most alluring 0eature o0 M(s, most o0 them opted 0or di2ersi0ication, 0ollowed by reduction in risk, helps in achie2ing long term goals and helps in achie2ing long term goals respecti2ely. Most o0 the in2estor pre0erred to in2est at a young unmarried stage. *2en 32 persons were ready to in2est at a stage o0 young married with children but person with older children a2oid in2esting due to increased e>penses. $ut again the number rose to 2; at preEretirement stage. ?ut o0 them 5; were already a2ailing the ser2ices o0 0inancial ad2isors whereas %5 didnAt. Jhen asked about the e>pertise o0 0inancial ad2isors which they liked most@ %3 o0 them 0a2ored port0olio re2iew and in2estment recommendation, 0ollowed by planning to achie2e long term goals, managing assets in retirement and access to specialists in area such as ta> planning. %2 participants regarded asset allocation as the major reason 0or going 0or 0inancial ad2isors. 3; o0 them needed them to e>plain them the 2arious in2estment options a2ailable.33 o0 them wanted to make sure that they were sa2ing enough to meet their 0inancial goals. Jhile just 23 ga2e the reasonE lack o0 time.

Jhen asked about one reason 0or not a2ailing the ser2ices o0 0inancial ad2isors, about 73 o0 them pointed the ad2isors as e>pensi2e. %3 o0 them wished to be in control o0 their own assets.23 o0 them said that they 0ind it di00icult to get trustworthy ad2isors. Jhereas 35 o0 them said they ha2e access to all the necessary resources re8uired.

R 0o!! .*atio.s1 /he most 2ital problem spotted is o0 ignorance. In2estors should be made aware o0 the bene0its. :obody will in2est until and unless he is 0ully con2inced. In2estors should be made to reali+e that ignorance is no longer bliss and what they are losing by not in2esting.

3B

Mutual 0unds o00er a lot o0 bene0it which no other single option could o00er. $ut most o0 the people are not e2en aware o0 what actually a mutual 0und is@ /hey only see it as just another in2estment option. #o the ad2isors should try to change their mindsets. /he ad2isors should target 0or more and more young in2estors. .oung in2estors as well as persons at the height o0 their career would like to go 0or ad2isors due to lack o0 e>pertise and time. /he ad2isors may try to highlight some o0 the 2alue added bene0its o0 M(s such as ta> bene0it, rupee cost a2eraging, and systematic trans0er plan, rebalancing etc. these bene0its are not o00ered by other options singlehandedly. #o these are enough to dri2e the in2estors towards mutual 0unds. In2estors could also try to increase the spectrum o0 ser2ices o00ered. :ow the most important reason 0or not a2ailing the ser2ices o0 ad2isors was spotted was being e>pensi2e. /he ad2isors should try to charge a nominal 0ee at the beginning. $ut i0 not possible then they could go 0or o00ering more ser2ices and bene0its at the e>isting rate. /hey should also maintain their decency and 0ollow the code o0 ethics so that the in2estors could trust upon them. /hus the ad2isors should try to attract more and more persons and turn them into in2estors and 0inally their clients.

Exhibit 1 -uestionnaire. /%ave you invested 0are you interested to invest in mutual funds' 1es 2 3 4o 2 3 +plz. attempt the next question)

/w%at is t%e most im ortant reason for not investing in mutual funds' 5ack of knowledge about mutual funds 6n7oys investing in ot%er o tions
%4

2 3 2 3

)ts benefits are not enoug% to drive you for investment 2 3 4o trust over t%e fund managers 2 3

/w%ere do you find yourself as a mutual fund investor' 8otally ignorant *artial knowledge of mutual funds 2 3 2 3

Aware only of any s ecific sc%eme in w%ic% you invested 2 3 9ully aware 2 3

/w%ere from you

urc%ase mutual funds'

:irectly from t%e A;<s 2 3 =rokers only =rokers0 sub$brokers >t%er sources 2 3 2 3 2 3

/w%ic% feature of t%e mutual funds allure you most' :iversification *rofessional management 2 3 2 3

?eduction in risk and transaction cost 2 3 @el s in ac%ieving long term goals 2 3

/ According to you w%ic% is t%e most suitable stage to invest in mutual funds' 1oung unmarried stage 2 3

1oung ;arried wit% c%ildren stage 2 3 ;arried wit% older c%ildren stage 2 3
%3

*re$retirement stage

2 3

/ are you availing t%e services of ersonal financial advisors' 16( 2 3 4> 2 3

/w%ic% ex ertise of t%e ersonal financial advisor is demanded most' *ortfolio review A investment recommendation 2 3 *lanning to ac%ieve s ecific financial goals ;anaging assets in retirement 2 3 2 3 2 3

Access to s ecialist in areas suc% as tax lanning

/w%at is t%e ma7or reason for using financial advisors' Bant %el wit% asset allocation :onCt %ave time to make my own investment decision 8o ex lain various investment o tions 2 3 2 3 2 3

Bant to make sure ) am investing enoug% to meet my financial goals 2 3

/w%at is t%e ma7or reason for not using financial advisor' @ave access to all resources needed to invest on own 2 3 =elieve advisors are too ex ensive Dnsure %ow to find a trustwort%y advisor Bant to be in control of own investment 2 3 2 3 2 3

Bibliography: Websites:
www.the-finapolis.com
%2

www.karvy.com www.mutualfundsindia.com www.valueresearchonline.com www.moneycontrol.com www.morningstar.com www.yahoofinance.com www.theeconomictimes.com www.rediffmoney.com www.bseindia.com www.nseindia.com www.investopedia.com

journals & other references:

2arvy <th #i.a$o'is 2arvyA 7)si. ss asso0iat s !a.)a' Th E0o.o!i0 Ti! s B)si. ss Sta.*ar* Th T ' 4ra$h B)si. ss I.*ia Fa0t sh t a.* stat ! .ts o# vario)s #).* ho)s s.

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