Professional Documents
Culture Documents
Strategies of UTI and HDFC Mutual Funds
Strategies of UTI and HDFC Mutual Funds
(This research topic has been conceptualized by me under the guidance of Prof.
S.Ramgopal, Senior Professor, MPBIM, Bangalore)
Place: Bangalore
(Dr. Nagesh. S Malavalli)
Date: May 2007 Principal
MPBIM,Bangalore
Place: Bangalore
Date:
Prof S.Ramgopal
(Professor)
I hereby declare that the project report titled “DETERMINATION AND EVALUATION OF
MARKETING OF UTI AND HDFC MUTUAL FUNDS” is a record of independent work
carried out by me towards the partial fulfillment of the requirements for the Masters Degree
in Business Administration course of Bangalore University, at M.P. Birla Institute of
Management, Associate Bharatiya Vidya Bhavan, Bangalore.
Place: Bangalore
(Saptarshi Banerjee)
Date: 05XQCM6079
The immense gratification this project work has given me does not lead to a
sense of fulfillment unless I express my boundless gratitude to all those who
made this work successful. I do recognize that mere thanksgiving does not
redeem me of my indebtedness for all the timely help, support and guidance
I received.
Finally, all the people who helped me complete this project by filling the
questionnaires.
Thank You.
Saptarshi Banerjee
1. EXECUTIVE SUMMARY
3. INDUSTRY PROFILE
4. COMPANY PROFILE
7. SUMMARY OF FINDINGS
9. BIBLIOGRAPHY
10. APPENDIX
Awareness level of Mutual fund was very high among the people but their attitude
towards mutual fund is that people consider mutual fund as risky mode so their
investment in mutual fund is very low. Mutual fund industry is waiting for the
introduction of derivatives in India as this would enable it to hedge its risk and this in
turn would be reflected in its Net Asset Value.
Over the last two years, the world of money has changed for Indians. Interest rates have
come down dramatically. Borrowers have become more powerful than ever before, with
plenty of lenders slugging it out for their attention.
Mutual funds provide a form of investment that is both relatively safe and lucrative.
Mutual funds offer investors the advantages of professional management of invested
money and diversification of that investment. Mutual fund managers assume the
responsibility of investigating and researching financial markets and selecting the
combination of stocks, bonds, and other investment vehicles to be bought and sold. Thus,
consumers purchase shares in a mutual fund and rely on the expertise of the mutual fund
manager, whose job is to provide them with the highest possible return on their
investments.
Investment options such as the 8% Reserve Bank of India (RBI) bond have died. Bank
fixed deposits, the most preferred investment for decades, have lost their sheen. Stock
market has boomed all right, but the risks have increased too .Most mutual funds pay
higher returns than competing banks and offer check-writing services that have grown to
compete in quality and quantity with those provided by banks and thrifts. And also
So, Mutual fund is like a middle way of investing money which is safer than investing in
Stock market and which can give someone good return than bank.
Comparative study and analysis of the marketing strategies of top 2 mutual funds in India
i.e. UTI and ICICI prudential mutual funds..
The scope of the study is restricted to analyze the marketing strategies of top two brands i.e.
UTI and ICICI Prudential mutual funds. The study intends to throw light on the success of
these two brands in the mutual funds market.
Research objectives
• Level of Awareness
• Perception about Mutual Fund
• Target Age Group
• Investment pattern of different professional group and different income group
people.
• How an individual can invest their money as per his/her requirement (such as
mutual funds which offer Tax Rebate) in different Mutual funds.
• Analysis of marketing strategies on UTI and ICICI Prudential mutual funds.
Research Design:
A research design is the specification of methods and procedures for acquiring the
information needed. It is overall operational pattern or framework of the project that
stipulates what information is to be collected from which source by what procedures.
The research adopted in this study is Descriptive and Analytical Research in order to
produce information so as to compare and contrast the marketing strategies adopted by
UTI and ICICI Prudential mutual funds and consumer investment pattern and their
attitude towards these two mutual funds.
Collection of data is the first step in statistics the goal of conclusion. The data collection
process follows the formulation of research design including the sample plan. Data,
which can be secondary or primary, can be collected using variety of tools.
The data collected during the research is primary in nature and in that Questionnaire
method has been taken because it is cost effective, free from the biasness of the
interviewer and respondents can give sufficient time to give well thought out answers.
SAMPLING
Method of Sampling:
1. Probability Sampling
LIMITATIONS
A Mutual Fund is a trust that pools the saving 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 appreciations realized are 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 diversified,
professionally managed basket of securities at a relatively low cost. The flow chart below
describes broadly the working of mutual fund:
The mutual funds normally come out with a number of schemes with different investment
objectives which are launched from time to time. A mutual fund is required to be
registered with Securities and Exchange Board of India (SEBI) which regulates securities
markets before it can collect funds from the public.
The origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated
from the year 1987 when non-UTI players entered the industry.
In the past decade, Indian mutual fund industry had seen dramatic improvements, both
quality wise as well as quantity wise. Before, the monopoly of the market had seen an
ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector
entry to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004;
it reached the height of 1,540 bn.
Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is
less than the deposits of SBI alone, constitute less than 11% of the total deposits held by
the Indian banking industry.
The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the concept.
Hence, it is the prime responsibility of all mutual fund companies, to market the product
correctly abreast of selling.
The mutual fund industry can be broadly put into four phases according to the
development of the sector. Each phase is briefly described as under.
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. 6700 crores of Assets under Management.
Entry of Non-UTI mutual funds, SBI Mutual Fund was the first followed by Canbank
Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
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 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 Rs. 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.
This phase had bitter experience for UTI. It was bifurcated into two separate entities. One
is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as
on January 2003). 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 Ltd, sponsored by SBI, PNB, BOB and LIC.
It is registered with SEBI and functions under the Mutual Fund Regulations. With the
Mutual Fund schemes may be classified on the basis of its Structure and its Investment
objective.
• By Structure
1. Open - Ended Schemes
2. Close - Ended Schemes
3. Interval Schemes
• By Investment Objective
1. Growth Schemes
2. Income Schemes
3. Balanced Schemes
4. Money Market Schemes
Structure
Open-Ended Funds:
An open-ended fund is one that is available for subscription all through the year. These
do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value (NAV) related prices. The key feature of open-ended schemes is liquidity.
Close-Ended Funds:
Interval Funds:
Interval Funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during pre-determined intervals at NAV related prices.
Investment Objective
Growth Funds:
The aim of growth fund is to provide capital appreciation over the medium to long-term.
Such schemes normally invest a majority of their corpus in equities. It has been proven
that return from the stock have outperformed most other kinds of investment held over
the long-term. Growth schemes are ideal for investors having a long term outlook seeking
growth over a period of time.
Income Funds:
The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate debentures
and government securities. Income funds are ideal for capital stability and regular
income.
Balanced Funds:
Undergoing summer training at the Investor Service Center (ISC), was a great learning
experience for us. During our stay at the ISC in the capacity of summer trainees we tried
to observe the functioning of a Mutual Fund from within and thus gain an inside
perceptive of the same.
For the purpose of explaining the detail of what we learnt during our stint with
HDFC MF, we would first like to explain the basic functions, which are carried out at a
mutual fund office on a day to day basis.
Investor
The flowchart indicates that the new investors investing in varied mutual fund schemes
route their investment through two channels:
(1) Selling agents and Distribution houses
(2) Direct marketing team at the ISC
Subsequently the applications are forwarded to the operations department at the ISC
which is in direct contact with the registrar, which in case of HDFC MF is cams,
Chennai.
The application are processed at the ISC, either manually or scanned to the
registrar, where records of the same are maintained. The investors are allotted folio
numbers and subsequently allotted the units as per the amount invested by them.
All further subsequent transaction initiated by investor like redemption and
switching using a transaction slip are routed through the ISC to the registrar who finally
execute the same.
• Liquidity: It’s easy to get your money out of a mutual fund. Write a check, make
a call, and you have got the cash.
• Convenience: You can usually buy mutual fund shares by mail, phone or over the
Internet.
• Low cost: Mutual fund expenses are often no more than 1.5 percent of your
investment. Expenses for Index Funds are less than that, because index funds are
not actively managed. Instead, they automatically buy stock in companies that are
listed on a specific index.
• Transparency
• Flexibility
• Choice of schemes
• Tax benefits
• Well regulated
Mutual funds have their drawbacks and may not be for everyone:
Mutual Funds have a unique structure not shared with other entities such as companies or
firms. It is important here to discuss the special nature of this structure because it
determines the rights and responsibilities of the fund’s constituent’s viz. Sponsors
Trustees, custodian, transfer agent and of course, the fund and the asset management
company (AMC). The legal structure also drives the inter-relationship between these
constituents.
Risk arises out of the fact that returns do not remain constant or unchanged.
Credit Risk:
Mutual funds face a credit risk when the counter party fails to meet the
contractual obligation or when there is a reduction in a portfolio value due to
deterioration in credit quality.
Market Risk:
Mutual funds face market risk when there are adverse changes in the market
variable like interest rates, prices of securities, equities and commodities.
Operational Risk:
Mutual funds face operational risk due to failure or inadequacy of internal
processes, people systems or due to external events.
Liquidity Risk:
It pertains to how saleable a security is in the market. If a particular doesn’t have
a market at the time of sale, and then the schemes may have to bear an impact depending
on its exposure to that particular security.
Reinvestment Risk:
This risk arises from the uncertainty in the rate at which cash flows from an investment
may be reinvested. This is because the bonds will pay coupons, which will have to be
reinvested. The rate at which the coupons will be reinvested will depend upon prevailing
market rates at the time the coupons are received.
BenchmarkMutual Fund
The role of an Asset Management Company (AMC) is to act as the investment manager
of the trust under the board of supervision and direction of the Trustees. The AMC is
required to be approved and registered with SEBI as an AMC.
The AMC of a Mutual Fund must have a net worth of at least Rs. 10 crores at all
times. Directors of the AMC, both independent and non-independent, should have
adequate professional experience in financial services and should be individuals of high
moral standing, a condition applicable to other key personnel of the AMC. The AMC
cannot act as a trustee of other Mutual Fund. Besides its role as fund manager, it may
undertake specified activities such as advisory services and financial consulting ,provided
these activities are run independently of one another and the AMC’s resources (such as
personnel, systems, etc.) are properly segregated by activity.
Bankers:
A fund’s activities involve dealing with money on a continuous basis primarily with
respect to buying and selling units, paying for investments made, receiving the proceeds
on sales of investments and discharging its obligation towards operating expenses. A
fund’s bankers therefore play crucial role with respect to its financial dealings by holding
its bank accounts and providing it with respect to its financial dealings by holding its
bank accounts and providing it with remittances services.
Transfer Agents:
Transfer agents are responsible for receiving and redeeming units of the Mutual fund and
provide other related services such as preparation of transfer documents and updating
investor’s records. A fund may choose to carry out this activity in – house and charge the
scheme for the service at a competitive market rate. where an outside transfer agent is
used, the fund investor will find the agent to be an important interface to deal with, since
all of the investor services that a fund provides ( besides the investment management) are
going to be dependent on the transfer agents.
Distributors:
Mutual Funds operate as collective vehicles on the principle of accumulating fund from a
large number of investors and then investing on a big scale. For a fund to sell units across
a wide retail base of individual investors and established network of distribution agents is
essential.
Individual Agents:
Uses of agents have been the most widely prevalent practice for distribution of funds over
the years. By definition, an agent acts on behalf of a principal – in this case, the mutual
fund. An agent is essentially a broker between a fund and the investor. In India, we also
have the unique system whereby a broker has a number of sub-brokers working under
Mutual fund agents are not exclusive but usually sell other financial products as well. The
system has the advantage that the distributor has a broader knowledge of financial
services available, and is therefore potentially in a position to act as investment advisors.
Investors expect the right kind of recommendations from the agents. From the
perspective of the mutual funds themselves, such multi product distributors mean loss of
exclusivity in the marketing of their particular products. However a drawback can be
converted into a benefit for the funds, if the agents are properly trained in their role and
responsibility as financial advisors to the investors.
In India, any investor who signs an assignment with a fund on non judicial stamp paper
can act as its agent. In India, too from November 1, 2001 SEBI has made it mandatory
for newly recruited distributors pass the AMFI Certification test and has recommended
the test for the existing distributors .As financial markets, investment options and the
variety of Mutual Funds get more and more sophisticated, distributors need more and
more information knowledge and skills. This is why distributors in India will find that
many mutual funds now will prescribe minimum qualification that a person must possess
to be its agent. These qualifications may be in terms of education, experience or even
registration on an exchange. For example U.T.I requires its agents to have at least passed
the level of matriculation and also to provide two references. Some private sector funds
like to deal with only stock brokers. Eventually some funds may even require their
distributors to pass the AMFI Testing programmed.
In case of U.T.I agents are provided with in-hose training and refresher courses. Agents
performance is monitored and they receive commission at a basic rate plus incentive
depending on the volume of business of generated by them U.T.I has evolved the concept
of a chief representative for each district, who is assigned a target and has several agents
Private Mutual Fund also rely on agents for distributing their schemes. However, many of
the relatively small funds, interaction with the large agent force is both costly and
difficult to administer. For this reason the recent trend has been, to shift to distribution
companies as opposed to individual agent.
Distribution companies:
Availing of the services of the established distribution companies is a practice accepted
by mutual fund internationally. This practice evolved with a view to support a large agent
force. Instead of having to deal with several agents a fund can interact with a distribution
company which has several employees or sub-broker under it. A distribution usually
manages distribution for several funds simultaneously and receives commissions for its
services. Many private funds have preferred to adopt this practice because of its
sophisticated nature and because they benefit from the specialist knowledge and
established client contacts of these marketing firms. In India, there are about 10 major
distribution companies in addition to a few hundred small ones.
Banks and NBFC’s:
In developed countries, banks are an important marketing vehicle for mutual funds, given
that banks themselves have a large depositor/client base of their own. We can see the
opening up of this new channel in India now. Several banks particularly private and
foreign banks are involved in the fund distribution by providing services similar to those
of distribution companies, on the commission basis. Some NBFC’s are also providing
such services. All funds do not yet use this channel, nor all banks have yet taken up the
fund distributor role, but increasing use of bank networks for mutual fund distribution is
almost a certain development.
Direct marketing by the funds themselves accounts for a very small percentage of mutual
fund sales. Many private sector funds require that investments into any of their schemes
be routed only through registered brokers and they do not accept direct subscription from
investors.
Mutual funds often use their employees to mobilize funds high net worth individuals and
institutional investors. In case of short /medium term investment in liquid and/or income
funds, targeted at companies funds often resort to direct marketing.
AMFI has published a code of ethics which lays down suggested practices for funds with
respect to overall fund operations including distribution and selling practices. At present,
the code is not mandatory and is in the form of recommended practices. The code
primarily covers the following broad prescriptions:
SEBI Regulations
Although SEBI does not prescribe the minimum amount of commissions payable by a
fund to agents, under SEBI (M.F) Regulations, 1996 all initial issue expenses including
brokerage paid to agents are limited to 6% of resources raised under the scheme. In
addition, SEBI regulated open-end funds are authorized to charge the investors “entry
and exit” loads to cover the fund distribution expenses. These loads should not exceed the
percentage specified in the scheme’s offer document. In case the agent’s commission
paid by the fund result in over all distribution expenses exceeding the rate specified in the
offer document, excess distribution expenses are to be born by the AMC i.e. the excess
cannot be passed on to the unit holders.
A no-load fund charging no entry or exit load, is authorized to charge the schemes
with the commissions paid to the agents as a part of the regular management and
marketing expenses allowed by SEBI, SEBI puts a cap on the total expenses( including
commissions) that can be charged to a scheme each year. Any excess over allowable
expenses is required to be borne by the AMC.
The asset base will continue to grow at an annual rate of about 30% to 35% over the next
few years as investor’s shift their assets from banks and other traditional avenues. Some
of the older public and private sector players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge with
stronger players in three to four years. In the private sector this trend has already started
with two mergers and one takeover. Here too some of them will down their shutters in the
near future to come.
But this does not mean there is no room for other players. The market will witness
a flurry of new players entering the arena. There will be a large number of offers from
various asset management companies in the time to come. Some big names like Fidelity,
Principal, Old Mutual etc. are looking at Indian market seriously. One important reason
for it is that most major players already have presence here and hence these big names
would hardly like to get left behind.
SEBI is working out the norms for enabling the existing mutual fund schemes to
trade in derivatives. Importantly, many market players have called on the Regulator to
initiate the process immediately, so that the mutual funds can implement the changes that
are required to trade in Derivatives.
INTRODUCTION
UTI Mutual Fund is managed by UTI Asset Management Company Private Limited
(Estb: Jan 14, 2003) who has been appointed by the UTI Trustee Company Private
Limited for managing the schemes of UTI Mutual Fund and the schemes transferred /
migrated from UTI Mutual Fund.
The UTI Asset Management Company has its registered office at : UTI Tower, Gn Block,
Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051 will provide professionally
managed back office support for all business services of UTI Mutual Fund (excluding
fund management) in accordance with the provisions of the Investment Management
Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the objectives of
the schemes. State-of-the-art systems and communications are in place to ensure a
seamless flow across the various activities undertaken by UTI AMC.
UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers)
Regulations, 1993 on February 3 2004, for undertaking portfolio management services
and also acts as the manager and marketer to offshore funds through its 100 % subsidiary,
UTI International Limited, registered in Guernsey, Channel Islands.
UTI Mutual Fund has come into existence with effect from 1st February 2003. UTI Asset
Management Company presently manages a corpus of over Rs. 34500 Crore.
UTI Mutual Fund has a track record of managing a variety of schemes catering to the
needs of every class of citizenry. It has a nationwide network consisting 70 UTI Financial
Centers (UFCs) and UTI International offices in London, Dubai and Bahrain. With a
view to reach to common investors at district level, 4 satellite offices have also been
opened in select towns and districts. It has a well-qualified, professional fund
It has reset and upgraded transparency standards for the mutual funds industry. All the
branches, UFCs and registrar offices are connected on a robust IT network to ensure cost-
effective quick and efficient service. All these have evolved UTI Mutual Fund to position
as a dynamic, responsive, restructured, efficient, and transparent and SEBI compliant
entity.
SPONSORS
Three leading public sector banks – Bank of Baroda (BOB), Punjab National Bank (PNB)
and State Bank of India (SBI) and Life Insurance Corporation of India (LIC), the largest
public financial investment institution and life insurer in India have entered into an
agreement with the Government of India as Sponsors of the UTI Mutual Fund.
Bank of Baroda
Bank of Baroda was established in July 1908 by Maharaja - Sir Sayajirao Gaikwad III.
During the period since inception, it has always maintained its practice of sound value
based banking to emerge as one of the premier public sector Banks of the country today.
It has a track record of uninterrupted profits since inception in 1908. The financial
strength of the Bank and its long tradition of efficient customer service are drawn
substantially from the extensive reach of its 2,715 strong branch network (as of
31.03.2003) covering almost every State and Union Territory in the Country. The Bank is
also one of the few Indian Banks with a formidable presence overseas with 38 branches.
Thus, the total branch network is 2,753 as at 31.03.2003.
Life Insurance Corporation of India (LIC) is amongst the largest insurance companies in
the world, serving over 10 crore policy holders and managing a Fund of over Rs.-186000
crores.
An act to provide for the acquisition and transfer of the undertaking of certain banking
companies, having regard to their size, resources coverage and organisation, in order to
further to control the heights of the economy, to meet progressively and serve better, the
needs of the development of the economy and to promote the welfare of the people, in
conformity with the policy of the State towards securing the principles laid down in
clause (b) and (c) of Article 39 of the Constitution of India and for matter connected
therewith or incidental therein.
Punjab National Bank has 4037 branches and 4 subsidiaries. The bank has a deposit size
of Rs.75813.49 crores as on 31.03.2003.
The State Bank of India is the largest public sector bank in India with 9033 branches in
India and 48 offices in 28 countries worldwide. In addition to this, SBI also has 17
subsidiaries.
SCHEMES
¾ LIQUID FUNDS
¾ INCOME FUNDS
¾ ASSET ALLOCATIONN FUNDS
¾ INDEX FUNDS
¾ EQUITY FUNDS BALANCED FUNDS
Vision:
To be a dominant player in the Indian MF industry recognized for its high levels of
ethical and professional conduct and a commitment towards enhancing investor interests.
Sponsor:
Standard Life Insurance Company of United Kingdom set up base in 1825. It is today the
largest pension fund in UK and the largest Mutual Life assurance company in Europe.
Standard Life Investment was set up as a dedicated Investment management company.
Management:
A company incorporated under Companies Act 1956, is the trustee to the Mutual Fund
vide the trust deed dated June 8, 2000 as amended from time to time. HDFC Trustee
Company Limited is a wholly owned subsidiary of HDFC Limited.
HDFC Asset management Company Limited (AMC) :
It was incorporated under the Companies Act 1956, on December 10, 1999 and was
approved to act as an asset management company for the MF by SEBI on July 3, 2000.
Pursuant to the joint participation agreement dated October 29, 1999, entered between
Housing Development Finance Corporation Limited(HDFC) and Standard Life
Investment Limited, 26% of the paid up share capital of AMC has been transferred by
HDFC to Standard Life Investment company on April 17, 2001.
HDFC 50.1%
The Standard Life Insurance Company 49.9%
.The investment approach will be based on a set of well established but flexible principles
that emphasize the concept of sustainable economic earnings and cash returns on
investment as the means of valuation of companies.
Five basic principles serve as the foundation for this investment approach. They are as
follows:
Five basic principles would serve as the foundation for this investment approach. They
are as follows:
• Focus on the long term.
• Investment confers proportionate ownership of the business.
• Maintain a margin of safety.
• Maintain a balanced outlook on the market.
• Disciplined approach to selling.
Debt Investments:
Debt securities (in the form of non-convertible debentures, bonds, deep discount bonds,
floating rate bonds, pass through certificates, asset backed securities, mortgage backed
securities etc.) include, but are not limited to-:
• Debt obligations of the government of India, state and local government,
Government agencies and statutory bodies (which may or may not carry a central/
state government guarantee).
• Securities that have been guaranteed by government of India and state
government.
• Securities issued by Public/private sector banks, developed financial institutions.
Money Market Instrument includes:
• Commercial Paper
• Commercial bills
• Treasury Bills
• Government securities having an unexpired maturity up to 1 year
• Call money
• Certificate of Deposit
The AMC retains the flexibility to invest across all the securities / instruments in Debt
and Money Market. Pending deployment of funds of the schemes in securities in terms of
the investment objective of the scheme, the AMC may invest the funds of the schemes in
short term deposits of the scheduled commercial banks.
Five basic principles would serve as the foundation for this investment approach. They
are as follows:
The scheme will purchase securities in the public offering as well as those traded in the
secondary market. On occasion if deemed appropriate, the scheme may also participate in
auction of govt. securities.
The scheme may also invest up to 25% of net assets of the scheme in derivatives such as
Futures & Options and such other derivative instruments as may be introduced from time
to time for the purpose of hedging and portfolio balancing and other uses as may be
permitted under the regulations.
The scheme may also invest in the part of its corpus, not exceeding 40% of its net asset,
in overseas markets in Global Depository Receipts (GDRs), ADRs, overseas equity,
bonds in mutual funds and such other instruments as may be allowed under the
regulations from time to time.
On June 19, 2003, the scheme migrated from Zurich India mutual fund. The investment
strategy of primarily restricting the equity portfolio to the BSE 200 Index scripts is
intended to reduce risk while maintaining the steady growth. Stocks specific risk will be
minimized by investing only in those companies/ industries that have been thoroughly
researched by investment manager’s research team.
Risk will also be reduced through the diversification of the portfolio. The scheme may
also invest a part of its net assets, not exceeding 40% of its net assets, in overseas market
GDRs, ADRs, overseas equity, bonds, mutual funds and such other instruments as may
be allowed under the regulations from time to time. If the investment in equities and
related instruments fall below 65% of the portfolio of the scheme at any point of time, it
would be endeavored to review and rebalance the composition
The scheme may also invest up to 25% of net assets of the schemes in derivatives from
time to time for the purpose of hedging and portfolio balancing and other uses as may be
permitted under the regulations and guidelines. If the investment in equities and related
instruments fall below 40% of the portfolio or rises above 60% of the portfolio of the
schemes at any point in time, it would be endeavored to review and rebalance the
composition
Aware of Mutual
70
Fund
No
60 Yes
Count
50
40
Cou
nt
30
20
10
0
Engineer Doctor Other Service Class
Profession
Inference:
Out of 200 respondents, 86% of them are aware of mutual finds. Among them it
is found out that Doctors and Engineers are most aware of mutual funds (In percentage
terms, 91% Doctors, 85% Engineers). The awareness level of other Service class people
is relatively low leaving those who are associated with financial Institution (LIC, Bajaj
Allianz, Standard Charted Insurance).
70 Aware of Mutual
Fund
No
60 Yes
Count
50
40
Cou
nt
30
20
10
0
0-1 Lac 1-2 Lac 2-3 Lac Above 3 Lac
Income Slab
Inference:
From the above graph, it can be interpreted that maximum people of various
income slab group are aware of mutual funds. More specifically people belonging to
income slab group of Above 3 Lac are much aware than other income slab group this can
be attributed to the fact that these people to some extent have invested some amount of
money in various fund (74% people of income slab group of 0-1 Lac, 78% people from
income slab group of 1-2 Lac, 90% people from income slab of 2-3 Lac and 94% people
from income slab group of Above 3 Lac are aware). Above 3 Lac income group should
be targeted.
30
Percentage Invest in
MF's from Saving
1-15
15 -30
25
30-45
45 and Above
20
Count
15
10
0
1-15 15-30 30-45 45 and Above
Saving Percentage Slab * Percentage Invest in MF's from Saving Cross tabulation
Percentage Invest in MF's from Saving
1-15 15 -30 30-45 45 and Above Total
Saving 1-15 24 2 0 0 26
Percentage 15-30 29 3 0 1 33
Slab
30-45 17 2 3 0 22
45 and Above 3 3 1 0 7
Total 73 10 4 1 88
Inference:
From the above graph, it can be interpreted that only 44% of people are
investing in mutual funds. Further it is found that people belonging to various income
slab group are mainly investing in slab of 1-15 % in mutual fund from their saving and
maximum investment in mutual fund is made by people of income slab group of Above 3
Lac.
No
Yes
Missing
Cumulative
Frequency Percent Valid Percent Percent
Valid No 45 22.5 24.1 24.1
Yes 142 71.0 75.9 100.0
Total 187 93.5 100.0
Missing System 13 6.5
Total 200 100.0
Inference:
On the basis of survey it is found that in sample of 200 people, 71% people
found that investing in mutual fund is beneficial and approximately 23% said against it
and 7% of people have no idea about this matter. One of the reasons of such a positive
opinion is continuous growth in economy and high returns from mutual funds.
Short Term
Long Term
Missing
Cumulative
Frequency Percent Valid Percent Percent
Valid Short Term 62 31.0 32.6 32.6
Long Term 128 64.0 67.4 100.0
Total 190 95.0 100.0
Missing System 10 5.0
Total 200 100.0
Inference:
In this study, it is found that maximum people in sample prefer to long term
investment because in their opinion in long term (period of more than 1 year) sudden
market fluctuations does not affect their capital. 31% people prefer to invest their money
in short term (period of less than 1 year) because they are the mainly those people who
like to invest in stock market to get quick return.
Tax Rebate
80
Information
No
Yes
60
40
Coun
t
20
0
Engineer Doctor Other Service Class
Profession
No Yes Total
Profession Engineer 13 60 73
Doctor 6 41 47
Other Service
3 77 80
Class
Total 22 178 200
Inference:
It is found that maximum people of target group are aware that mutual fund
investment offers tax rebate under section 80C (ELSS). It is found that other service class
peoples are much aware compare to Doctors and Engineers. Nearly 89% person is aware
of this information and is one of the major reasons to opt for mutual funds.
100
Professional Group
80
Others
60
Engineer
40
Doctor
20
0
FD LIC PO Gold Real Stock
Estate Market
Investment Options
Inference:
The above graph shows the investment pattern of different professional group.
From this can infer that, all groups prefer to invest in LIC’s and FD’s followed by post
office and for remaining options stock market has an edge, that is clearly showing that
people prefer safe options for their investment. People get tax rebate through investment
in LIC’s that’s why it is the most preferable option for them. The risk factor involved
with mutual funds is one of the major reasons for people not opt for mutual funds.
100 89
80 66
60
40 26
17 19
20 9
0
FD LIC PO Gold Real Stock
Estate Market
Investment Options
Inference:
From the above graph, it was found that the most preferable investment option
for Doctors is LIC followed by FD and then Post Office. After these options Doctor opts
for stock market as next preferable investment option because they are aware from the
market and they want fast returns. The amount spent on these options depends on amount
of risk involved.
90 82
Percentage of Engineers
80
70
60 47
50
36
40
30
20 12
10 4 3
0
FD LIC PO Gold Real Stock
Estate Market
Investment Options
Inference:
From the above graph, it was found that the most preferable investment option
for Engineers is LIC followed by FD and then post office. Stock market is next
preferable investment option for them because they are aware from the market and they
want fast returns. It was found that investment pattern of Engineers is very much similar
to that of Doctors as they are highly educated person in the society.
80 75
service class people
Percentage of Other
70
60
50 38
40 31
30 19
20 13 10
10
0
FD LIC PO Gold Real Stock
Estate Market
Investment Option
Inference:
Their investment pattern is similar to other professional groups. But in compare
of other two groups they are investing more in gold. Rise in percentage of investor of
Stock market and gold in this group is mainly due to those people who are working in
financial institution.
100%
90% 51 58 52
80% 69 73
70% 106
60% 147
Unaware
50%
40% Aware
149 142 148
30% 131 127
20% 94
10% 53
0%
F
F
F
F
F
F
IM
M
M
IM
M
FC
on
I
ta
IC
UT
SB
nc
Ta
IC
et
HD
ia
pl
l
m
Re
Te
n
kli
an
Fr
Inference:
From the above graph, it is found that people of sample are much aware of
ICICI MF, followed by HDFC MF; this is mainly due to the good performance of these
two mutual funds in the past. SBI mutual fund is also popular among the people as State
Bank of India has recognized name in India. Since UTI being the oldest mutual fund
launched in India so its awareness is quite common. Reliance, Tata and Franklin
Templeton mutual funds are new in the market but their awareness in market is also
good.
01-15%
36%
15-30%
30-45%
56% 45% and Above
5% Not Investing
2%
1%
Inference:
In this study, only 44% people are investing in mutual funds and 56% are not.
It is mainly because people don’t have proper information about mutual funds. Only 36%
of total group i.e. major part of investors are investing in 1-15% slab of their saving in
mutual fund.
Now, after paying the full value of the organisation to the Government of India, they are
the complete owners of the UTI Mutual Fund. This has had three implications. With
effect from the date of the deal, UTI Mutual Fund has become a completely privately
owned fund, with no government role.
Second, none of the employees, directors, sponsors will be on our Board, from now on.
This makes them a completely independent professionally-run mutual fund house.
In a summarize way it can be said that, maximum people are aware of various mutual
funds and they also know that they can get quick and high return from mutual funds in
compare of Bank FD’s and LIC’s. As the people don’t have full information about
mutual fund and they also don’t know about portfolio. So they think that it is a risky
mode, thereby they are not opting for mutual funds. One reason of less investment from
Government Employees is that they have already invested their money in PPF and GPF
which is not taken as risky investment, and the other reason for not considering mutual
funds as a investment option is because of past incidence related to mutual funds frauds
(UTI scam).
UTI had been in the limelight for all the wrong reasons. What went wrong with its
investment strategy?
In the wake of the freeze of US-64 scheme and certain developments that followed it, a
perception gained that the entire shortfall was due to something wrong that had happened.
It took about eight months for the company to go to the Government and convince
various layers of it about what the shortfall was about. The economic changes in the last
decade had an impact on the fund's performance.
Roughly 19 per cent of the shortfall was due to equity's underperformance. In the last
four years, the equity market has been rather flat.
When 20-30 per cent of the portfolio consisted of equities in plans like US-64 and when
that investment does not earn, it impacts the overall return.
Around 7-8 per cent of shortfall was due to the NPAs, which have crept into many of our
funds and high-risk investments accounted for 3-4 per cent.
Today, UTI is a world class organisation in terms of an AMC and have introduced a five-
layer approach in asset management business — advisory, decision making, dealing
rooms, NAV and back office compliance which is headed by an officer from the RBI.
And all the five layers report directly to the Chairman.
Learning Outcomes
• Level of Awareness : From the interaction with the people it was observed that
people do have general awareness about mutual funds, the risk involved and high
return but there is a lack of in depth product knowledge ,so, various promotional
programs so be undertaken to increase the knowledge of end customer.
• Perception about Mutual Fund: The general perception about mutual funds is that
they are risky. Risk involved with mutual funds scores more than the returns
which is providing hindrance to Mutual Fund Popularity. Past incidence such as
UTI Scam adds to negative perception about mutual funds. Mutual fund should be
marketed as High Return and Low risk Investment option.
•
Investment Information
1. In which Financial Instruments you are investing your money?
Yes No
8. Are you aware that Mutual Fund investment offers tax rebate under Section
80C(ELSS)
Yes No
9. Comment/Suggestions……………………………………………………….