A PROJECT REPORT

On

Comparative Study of Mutual Fund in India of two companies

To be submitted in partial fulfillment for the requirement of the degree of Master of Business Administration (MBA) Indira Gandhi National Open Universsity Session 2010-2011
Under the Guidance of :
Mr. Suboor Khan Asstt. Professor (M.B.A Deptt.)

Submitted by:
Paras Singhal Roll. No. 0900570050

F.M.C.A. Rajabalwant Singh College, Khandari Farm Campus, Agra

PREFACE

PREFACE

This Research report is made by me during the 4th semester in partially fulfillment of the for Master of Business Administration (M.B.A.)

Students are essentially required to

conduct a research project work on the topic provided by the related department of the institute. The idea behind it to test acquired knowledge through practical experience and to apply the rhetorical aspect of management in the practical field. This research report on the study Study of Mutual Fund and Comparison between

two companies

Paras Singhal MBA 4th Sem Roll. No. 0900570050

ACKNOWLEDGEMENT

ACKNOWLEDGEMENT

I am thankful to Mr. Suboor Khan Asstt. Professor FMCA , RBS College, Agra who provided me with the opportunity and guided me in successful completion of my project. I would also like to acknowledge my sincere thanks to various faculty members under their valuable guidance, constant interest and encouragement, who have devoted their ever-precious time from their busy schedule and helped me in completing the project. Special, continual assistance while collecting the data was provided by the respondents. I wish to acknowledge my special thanks to them for their help and cooperation in order to complete this project.

Paras Singhal MBA 4th Sem Roll. No. 0900570050

DECLARATION

DECLARATION
I Paras Singhal do hereby declare that the project report titled Study of

Mutual Fund and Comparison between two companies

is genuine research work under taken by me and it has not been published any where earlier.

Paras Singhal MBA 4th Sem Roll. No. 0900570050 Date :Place:Agra

Table of Contents
Page No.

Chapter-1
INTRODUCTION TO THE TOPIC

INTRODUCTION TO THE TOPIC

As the people like to invest their savings in such a manner that they could get a good return on it and these investments are also safe. This project will be helpful in identifying the best available Mutual Funds in the market.

Mutual Funds have over the time become one of the most popular investment avenues worldwide for both Institutional and Retail Investors. The increasing importance of mutual fund as a vehicle for investment has led to higher focus on its performance evaluation.

Under this Project a comparative study of top 5 Mutual Funds Companies in the market is done. These companies have been selected for comparison because of their good past performances, good responses of public and are considered as top 5 Mutual Fund Companies according to the rating company CRISIL.

INTRODUCTION
It is said, Necessity is the mother of invention. Innovation has been always the spirit of human nature. In the financial sector also, several new instruments had been innovated in tune with the market needs. The constraints of banks to provide growth with market yields for the investors section of society has already given birth to one more new institution the Mutual Fund. Therefore, emergence of mutual funds in the Indian scene is a product of necessity. The constraints on the banking sector to tap the fruits of the capital market and the reluctance of the investors to take a direct plunge in complex and erratic capital market operation required an intermediary. Mutual fund fills this gap admirably. The word mutual denotes something to be done collectively by a group of people with the common objective having mutual faith and understanding among them. The other part of the word, i.e. fund is used in monetary terms, to collect some money from the members of the mutual fund for a common objective of all the members of the group. Here the common objective of the members

of mutual fund can be well guessed as earning the profits from a huge collective fund with a joint effort. Mutual fund has been defined as it is a non-depository or non-banking financial intermediary which acts as important vehicle for bringing wealth holders and deficit units together indirectly. According to Dr. Vinayakam, N. a Mutual Fund is an indirect investment made by the public by pooling in sources. The fund per se comprises equal units/ shares/ certificates and the public invests its savings in them depending on the quantum of resources available with the individuals. The fund uses these savings for investment in equity shares and debentures of various companies. The resulting earnings are distributed among the fund owners. Mutual funds perform as per their portfolio, and better the portfolio management, it will give better returns. A mutual fund is a single; large professionally managed investment organization that combines the funds of many

individual investors having similar investment objectives. In rapidly changing stock markets, it is essential to respond positively and quickly to events, which tend to move share prices. The search for maximum returns has to be balanced against the need to control risk. A mutual fund is able to reduce such risk associated with

investments by investment in a large number of companies across different industries. An individual investor with limited financial resources may be unable to do so. The guiding factor behind investment decisions of a mutual fund is the fundamental strength of a share determined by the overall economic situation. The research dept. is the backbone of a mutual fund, which devises investment strategies based upon market knowledge, experience and the expertise. A mutual fund is a pool of co-mingled funds invested by different investors. Most mutual fund investors do not know each other and never have contact with each other. The investment management of such a pool of funds is usually performed by a professional money management firm for a fee of say 1% of the market value of all the assets managed each year. Such managers invest the funds in a diversified portfolio of securities they research and analyze and expect to perform well. The owners of shares in mutual funds may either invest more money or withdraw their money at time from the mutual fund scheme.

HISTORY OF MUTUAL FUNDS IN INDIA (1964 - 2003)

The end of millennium marks 36 years of existence of mutual funds in this 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. UTI commenced its operations from July 1964 .The impetus for establishing a formal institution came from the desire to increase the propensity of the middle and lower groups to save and to invest. UTI came into existence during a period marked by great political and economic uncertainty in India. With war on the borders and economic turmoil that depressed the financial market, entrepreneurs were hesitant to enter capital market. The already existing companies found it difficult to raise fresh capital, as investors did not respond adequately to new issues. Earnest efforts were required to canalize savings of the community into productive uses in order to speed up the process of industrial growth. The then Finance Minister, T.T. Krishnamachari set up the idea of a unit trust that would be "open to any person or institution to purchase the units offered by the trust. However, this institution as we see it, is intended to cater to the needs of individual investors, and even among them as far as possible, to those whose means are small." His ideas took the form of the Unit Trust of India, an intermediary that would help fulfill the twin objectives of mobilizing

retail savings and investing those savings in the capital market and passing on the benefits so accrued to the small investors. UTI commenced its operations from July 1964 " with a view to encouraging savings and investment and participation in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal of securities." Different provisions of the UTI Act laid down the structure of management, scope of business, powers and functions of the Trust as well as accounting, disclosures and regulatory requirements for the Trust. One thing is certain the fund industry is here to stay. The industry was one-entity show till 1986 when the UTI monopoly was broken when SBI and Can bank mutual fund entered the arena. This was followed by the entry of others like BOI, LIC, GIC, etc. sponsored by public sector banks. Starting with an asset base of Rs. 25 crore in 1964 the industry has grown at a compounded average growth rate of 27% to its current size of Rs.90000 crore. The period 1986-1993 can be termed as the period of public sector mutual funds (PMFs). From one player in 1985 the number increased to 8 in 1993. The party did not last long. When the private sector made its debut in 1993-94, the stock market was booming. The opening up of the asset management business to private sector in 1993 saw international players like Morgan Stanley, Jardine Fleming, JP Morgan, George Soros and Capital International along with the host of domestic players join the party. But for the equity funds, the period of 1994-96 was one of the worst in the history of Indian Mutual Funds.

First Phase 1964-87

An Act of Parliament established Unit Trust of India (UTI) on 1963. 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 Can 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. Mutual funds have been around for a long period of time to be precise for 36 yrs but the year 1999 saw immense future potential and developments in this sector. This year signaled the year of resurgence of mutual funds and the regaining of investor confidence in these MFs. This time around all the participants are involved in the revival of the funds ----- the AMCs, the unit holders, the other

related parties. However the sole factor that gave lifer to the revival of the funds was the Union Budget. The budget brought about a large number of changes in one stroke. An insight of the Union Budget on mutual funds taxation benefits is provided later. It provided center stage to the mutual funds, made them more attractive and provides acceptability among the investors. The Union Budget exempted mutual fund dividend given out by equityoriented schemes from tax, both at the hands of the investor as well as the mutual fund. No longer were the mutual funds interested in selling the concept of mutual funds they wanted to talk business, which would mean to increase asset base, and to get asset base, and investor base they had to be fully armed with a whole lot of schemes for every investor. So new schemes for new IPOs were inevitable. The quest to attract investors extended beyond just new schemes. The funds started to regulate themselves and were all out on winning the trust and confidence of the investors under the aegis of the Association of Mutual Funds of India (AMFI). One can say that the industry is moving from infancy to adolescence, the industry is maturing and the investors and funds are frankly and openly discussing difficulties opportunities and compulsions. 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 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.

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 Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation 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. As at the end of October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386 schemes.

ORGANIZATION OF A MUTUAL FUND

Essentially there are four parties to any mutual fund

organization. These are: The Sponsor The Asset Management Company (AMC) The Trustees The Custodians

THE SPONSOR
A mutual fund is set up b a company, which is called the sponsor. Sponsor must be has a sound track record, general reputation and fairness among the players in its business transactions {SEBI (Mutual Funds) regulations, 1993}. Now in India a sponsor can be financial institution like ICICI, a bank either in the public sector or in the private sector like state bank of India (SBI), life insurance corporation of India (LIC), General insurance corporation of India (GIC), Unit trust of India and a body corporate registered under the Indian companies Act, 1956 like HB portfolio leasing Ltd.

THE ASSET MANAGEMENT COMPANY Mutual funds are to be operated by a separate Asset Management Company (AMC). The asset management Company operates and manages the fund of the mutual fund schemes and mutual fund regulations issued from time to time by the Securities and Exchange Board of India (SEBI). It has to submit a quarterly report on the functioning of the funds to the trustees. The asset

Management Company employs professionals from various fields for conducting the research and taking investment decisions for the maximization of return on investments made by the mutual fund in the capital market. The general success of mutual fund lies in the quantum of return on investments to any scheme of the fund. To ensure efficient management, SEBI desires that existing Asset Management Company should have a sound track record (good net worth, dividend paying capacity and profitability, etc.) general reputation and fairness in transactions. The directors of AMC should be expert in relevant fields like portfolio management, investment analysis and financial administration.

TRUSTEES
The third essential of a mutual fund is the Trustee. A trustee is a person who holds the property of mutual fund in trust for the benefit of the unit holders. Trustees have the exclusive ownership of the Trust Fund and are also vested with the general power of superintendence, direction and management of the affairs of the Trust. The Trustees ensure that Asset Management Company fulfills the duties and functions assigned to it. The Trustees are the persons of very high repute and experts in their fields. Once a mutual fund trust is formed, virtually the role of the sponsor comes to an end, as it is mutual trust, which takes charge of the mutual fund, which takes charge of the mutual fund to interact with the SEBI. To ensure fair dealings, mutual fund regulations require that one cannot be a trustee or a director of a trustees company in more than one mutual fund. Further at least

50% of the trustees are bound to be independent of the sponsors. These independent trustees may enjoy multi-trusteeships. Asset Management Company or its directors or its employee shall not act as trustees of any mutual fund. The trustees appoint Asset Management Company (AMC) to float the mutual fund schemes in consultation with the sponsors. The trustees are to evolve investment management agreement to be entered into with Asset Management Company. It is the duty of the trustee to observe and ensure the Asset Management Company is managing the schemes in accordance with the trust deed. Trustees are vested with the power to dismiss Asset Management Company if they are not satisfied with the working of the AMC. For their services, trustees are paid their trusteeship fees, which are specified in the trust deed itself. Trustees are to present annual report to the investors of the mutual fund. Some of the main obligations of Asset Management Company are as under: 1. To appoint the custodians of the mutual fund. 2. To appoint registrar and share transfer agents. 3. To file a detail of the transactions in securities with the trustees. 4. To report the trustees about any investment made in a company, which has invested more than 5% of net asset value of any scheme of the mutual fund. 5. To ensure that investments of the mutual fund schemes are as per the provisions of regulations.

6. To file with the trustees the details of the transactions in securities made by its officials in their own name or on behalf of the asset Management Company. 7. To report the trustees any transaction in securities with any of its associates.

CUSTODIANS
SEBI requires that each mutual fund shall have an independent custodian. The custodian should be an agency, which is registered with SEBI under the SEBI (Custodian of Securities) regulations, 1996. In a mutual fund there is substantial work involved for managing the scrips bought from the capital market. Their safe custody and ready availability has to be ensured to execute the quick decisions to buy or sell the scrips. Custodians main function is safekeeping of securities and to participate in a clearing system on behalf of the mutual fund to effect deliveries of the securities. The main function of a custodian is to ensure delivery of scraps only in receipt of payment and to make payment only on receipt of scrip's.

Review of Literature

Review of Literature
CLASSIFICATION OF MUTUAL FUNDS
FUNCTIONAL CLASSIFICATION OPEN-ENDED FUND
An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices, which are declared on a daily basis. The key feature of open-end schemes is liquidity.

CLOSE-ENDED FUND
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

INVESTMENT OBJECTIVE CLASSIFICATION

A scheme can also be classified on the basis of the investment objectives that are they are designed to meet the objectives of different types of savers. This classification can also be name as portfolio classification. Such schemes may be open-ended or closeended schemes. Such schemes may be classified mainly as follows:

GROWTH / EQUITY ORIENTED SCHEME

The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

INCOME / DEBT ORIENTED SCHEME

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, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of

such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long-term investors may not bother about these fluctuations.

BALANCED FUND
The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.

MONEY MARKET OR LIQUID FUND

These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.

LEVERAGED FUNDS
Leveraged funds or borrowed funds are used in order to increase the size of the value of the portfolio and benefit the shareholders by gains exceeding the cost of the borrowed funds. Funds are used in speculative and risky investments like short sale to take advantage of declining market to realize gains in the portfolio. Short sales decrease loss of the portfolio in a declining market and vice versa in rising market.

DUAL PURPOSE FUNDS

Income and growth are two objectives, which are achieved by offering half of the amount of funds to those investors who wish regular income and half to those who wish growth. The funds thus received are pooled together and used for investment. Any income derived from the portfolio goes to the investors who hold income shares. The investors who hold capital shares receive no income. Instead they receive capital gains or losses that result from investments of total portfolio.

REAL ESTATE FUND

Real estate fund is of closed-end type. The fund is named so because of the primary investment in real estate ventures. Such funds are of various types depending upon real estate transactions.

PERFORMANCE FUNDS
The investment is made in buying equity shares of smallunseasoned companies with relatively high price earnings ratio and

higher price volatility. Such funds were set up in USA in 1960s to seek large profits in high-flying common stocks.

SPECIALITY FUNDS
The investment is made in good track record companies, which offer long-term capital growth and provide handsome dividend income.

INDEX FUNDS
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds, which are traded on the stock exchanges.

GILT FUND
These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as are the case with income or debt oriented schemes.

SPECIALIZED FUNDS
These are the funds/schemes, which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert.

TAX SAVING SCHEMES

These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.

LOAD OR NO-LOAD FUND

A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the

investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track record and service standards of the mutual fund, which are more important. Efficient funds may give higher returns in spite of loads. A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.

GEOGRAPHICAL CLASSIFICATION
Mutual funds can be classified from the angle of territorial jurisdiction of operations in two types:

DOMESTIC MUTUAL FUNDS (DMFS)

Domestic mutual funds launch schemes, which are operational within political territorial limits of a country for the residents or non-residents.

OFFSHORE MUTUAL FUNDS (OMFS)

Offshore mutual funds are cross border funds meant to attract foreign savings for investment in India.

CRITICAL REVIEW OF MUTUAL FUNDS Why mutual funds in India performed so poorly
Most investors associate mutual funds with Master gain, Monthly Equity Plans of SBI Mutual Fund, UTI and Canbank Mutual Fund and of course Morgan Stanley Growth Fund. This is so be Cause these funds truly had participation from masses, with a fund like Morgan Stanley having more than 1 million investors. Investors feel that after 5 years, Morgan Stanley Growth Fund units still trade below the original IPO price of Rs.10. It is incorrect to think that all mutual funds have performed poorly. If one looks at some income funds, they have come with reasonable returns. It is only the performance of equity funds, which has been poor. Their poor performance has been amplified by the closed end discounts i.e. units of these funds quoting at sharp discounts to their NAV resulting in an even poorer return to the investor. One must remember that a Mutual Fund does not provide assured returns and neither can it "manufacture" returns out of thin air. Returns provided by mutual funds are a function of the returns in the underlying asset class in which the fund invests. Good funds can beat returns in their asset class to some extent but thats all. E.g. take the case of a sector specific fund like a pharma fund, which invests only in shares of pharmaceutical companies. If the Govt. comes with new regulation that severely restricts the pricing freedom of these companies resulting in negative outlook for

the sector, the prices of all stocks in the sector could fall substantially resulting in severe erosion in the NAV of the fund. No one can do anything about it. A good fund manager would probably sell part of the fund before prices fall too much and wait for an opportune time to reinvest at lower levels once the dust has settled. In that case, the NAV of the fund would fall to a lesser extent but fall it will. If the investor in the fund has invested in some stocks in the sector on his own, in all probability, his personal investments may have depreciated to a larger extent. Let us extend this example to an analysis of the investment climate in the last 7 years. The stock markets have done very badly in the last seven years. The BSE Sensex crossed 3000 for the first time in early 1992. Since then it has gone up and come down several times but has remained in the same range. Effectively, for a seven-year investment period, the total return has been almost zero. The prices of many leading stocks of yesteryear have fallen by more than 50% in these seven years. If one considers the fact that the sensex has been changed several times, with all the weak stocks having been weeded out, the effective returns on the old sensex, existing in 1992, have been substantially negative. The following table gives some of the prices of stocks considered "blue chips" in 1992, in 1994 and the prices prevailing at present.

Price in Rs Name of the Company Tata Steel Grasim Industries Century Textiles Reliance Industries Raymond Arvind Mills ICICI 552 650 490 218 250 353 290 336 793 550 213 263 290 197 418.35 1212.85 219.40 567.05 312.85 115.75 398.10 1992 high 1994 high Current price

It is quite obvious that if a fund had invested in any of these shares in 1992 or subsequently in the 1994 boom, and if it remained invested in the share, then it would be confronting a huge fall in NAV. This is exactly what has happened. A similar table for prices of shares Price in Rs Name of the Company MTNL HPCL Indian Oil ONGC SAIL 1994 high 325 550 n/a n/a 83 Present price 117.40 310.75 431.60 860.95 64.65 of Public Sector Undertakings (PSUs) is given below.

Most mutual fund managers took some time to realize the changed circumstances wherein the open economy ushered in by

the liberalization took the full impact of the global deflation in commodity prices. This problem was compounded further by the Asian crisis after which cheap imports from Asia caused severe pressure on profits. To add to this, most funds had invested some part of their portfolio in medium sized "growth" companies. Many of these companies have performed even worse than bigger ones and quite a few have seen share prices dip more than 90% from their 1994 highs. More important, funds could not sell these shares because of complete lack of liquidity with, at best, few hundred shares being traded every day. Meanwhile, shares of companies in sectors like consumer goods (FMCG) and software were showing good growth and they went up rapidly in price. Most fund managers were unwilling to sell shares of erstwhile "blue chips" at low prices and buy shares of emerging "blue chips" at high prices. This resulted in poor performance and negative returns. One more issue is that the fund managers in many funds were not "professionally qualified and experienced". This is especially true of some of the funds floated by nationalized banks. Some of these individuals were transferred from the parent organization and did not really know much about investment management. Lastly, investors would do well to have a look at the investments, which they made on their own. In most cases, they would have done much worse than the mutual funds. We have received numerous requests for advice from individual investors on what to do about their own investments. If that were any indicator, investors would have done really badly.

Is

it

true

that

globally

mutual

funds

under

perform

benchmark indices? Why are smart money managers unable to do as well as the market? Or is it that they are not smart at all? What are the limitations of mutual funds? It is 100% true that globally; most mutual fund managers under perform the asset class that they are investing in. It is not true that the fund managers are dumb; this under performance is largely the result of limitations inherent in the concept of mutual funds. These limitations are as follows:

Entry and exit costs: Mutual funds are a victim of their own
success. When a large body like a fund invests in shares, the concentrated buying or selling often results in adverse price movements i.e. at the time of buying, the fund ends up paying a higher price and while selling it realizes a lower price. This problem is especially severe in emerging markets like India, where, excluding a few stocks, even the stocks in the Sensex are not liquid, let alone stocks in the NSE 50 or the CRISIL 500. So, there is simply no way that a fund can beat the Sensex or any other index, if it blindly invests in the same stocks as those in the Sensex and in the same proportion. For obvious reasons, this problem is even more severe for funds investing in small capitalization stocks. However, given the large size of the debt market, excluding UTI, most debt funds do not face this problem

Wait time before investment: It takes time for a mutual fund

to invest money. Unfortunately, most mutual funds receive money

when markets are in a boom phase and investors are willing to try out mutual funds. Since it is difficult to invest all funds in one day, there is some money waiting to be invested. Further, there may be a time lag before investment opportunities are identified. This ensures that the fund under performs the index. For open-ended funds, there is the added problem of perpetually keeping some money in liquid assets to meet redemptions.

Fund management costs: The costs of the fund management

process are deducted from the fund. This includes marketing and initial costs deducted at the time of entry itself, called "load". Then there is the annual asset management fee and expenses, together called the expense ratio. Usually, the former is not counted while measuring performance, while the latter is. A standard 2% expense ratio means that, everything else being equal, the fund manager under performs the benchmark index by an equal amount.

Cost of churn: The portfolio of a fund does not remain constant.

The extent to which the portfolio changes are a function of the style of the individual fund manager ie whether he is a buy and hold type of manager or one who aggressively churns the fund. It is also dependent on the volatility of the fund size i.e. whether the fund constantly receives fresh subscriptions and redemptions. Such portfolio changes have associated costs of brokerage, custody fees, registration fees etc. that lowers the portfolio return commensurately.

Change of index composition: World over, the indices keep

changing to reflect changing market conditions. There is an inherent survivorship bias in this process, with the bad stocks weeded out and replaced by emerging blue chips. This is a severe problem in India with the Sensex having been changed twice in the last 5 years, with each change being quite substantial. Another reason for change index composition is Mergers & Acquisitions. The weightage of the shares of a particular company in the index changes if it acquires a large company not a part of the index.

Tendency to take conformist decisions: From the above

points, it is quite clear that the only way a fund can beat the index is through investment of some part of its portfolio in some shares where it gets excellent returns, much more than the index. This will pull up the overall average return. In order to obtain such exceptional returns, the fund manager has to take a strong view and invest in some uncommon or unfancied investment options. Most people are unwilling to do that. They follow the principle "No fund manager ever got fired for investing in Hindustan Lever" i.e. if something goes wrong with an unusual investment, the fund manager will be questioned but if anything goes wrong with the blue chip, then you can always blame it on the "environment" or "uncontrollable factors" knowing fully well that there are many other fund managers who have made the same decision. Unfortunately, if the fund manager does the same thing as several others of his class, chances are that he will produce average results. This does not mean that if a fund manager takes "active" views and invests in heavily researched "uncommon" ideas, the

fund will necessarily outperform the index. If the idea does not work, it will result in poor fund performance. But if no such view is taken, there is absolutely no chance that the fund will outperform the index.

BENEFITS OF MUTUAL FUNDS

Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.

Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.

Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

Low Cost
Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

Transparency
We can get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

REGULATORY ASPECTS OF MUTUAL FUND

SCHEMES OF MUTUAL FUND:
The asset management company shall launch no scheme unless the trustees approve such scheme and a copy of the offer document has been filed with the Board. Every mutual fund shall along with the offer document of each scheme pay filing fees. The offer document shall contain disclosures which are adequate in order to enable the investors to make informed investment decision including the disclosure on maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor. No one shall issue any form of application for units of a mutual fund unless the form is accompanied by the memorandum containing such information as may be specified by the Board. Every close ended scheme shall be listed in a recognized stock exchange within six months from the closure of the subscription The asset management company may at its option repurchase or reissue the repurchased units of a closeended scheme. A close-ended scheme shall be fully redeemed at the end of the maturity period. "Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution". The mutual fund and asset management company shall be liable to refund the application money to the applicants, -

(i)

If

the

mutual

fund

fails

to

receive

the

minimum subscription amount referred to in clause (a) of sub-regulation (1); (ii) (ii) If the moneys received from the applicants for units are in excess of subscription as referred to in clause (b) of sub-regulation (1). The asset management company shall issue to the applicant whose application has been accepted, unit certificates or a statement of accounts specifying the number of units allotted to the applicant as soon as possible but not later than six weeks from the date of closure of the initial subscription list and or from the date of receipt of the request from the unit holders in any open ended scheme.

RULES REGARDING ADVERTISEMENT:

The advertisement for each scheme shall disclose investment objective for each scheme. An advertisement shall be truthful, fair and clear and shall not contain a statement, promise or forecast which is untrue or misleading. Advertisements shall not be so framed as to exploit the lack of experience or knowledge of the investors. All advertisements issued by a mutual fund or its sponsor or Asset Management Company shall state, "all investments in mutual funds and securities are subject to market risks and the NAV of the schemes may go up or down depending upon the factors and forces affecting the securities market".

 The advertisement shall not compare one fund with another, implicitly or explicitly, unless the comparison is fair and all information relevant to the comparison is included in the advertisement. The offer document and advertisement materials shall not be misleading or contain any statement or opinion, which are incorrect or false.

INVESTMENT OBJECTIVES AND VALUATION POLICIES:

The moneys collected under any scheme of a mutual fund shall be invested only in transferable securities in the money market or in the capital market or in privately placed debentures or securities debts. Provided that moneys collected under any money market scheme of a mutual fund shall be invested only in money market instruments in accordance with directions issued by the Reserve Bank of India; The mutual fund shall not borrow except to meet temporary liquidity needs of the mutual funds for the purpose of repurchase, redemption of units or payment of interest or dividend to the unit holders. The mutual fund shall not advance any loans for any purpose. Every mutual fund shall compute and carry out valuation of its investments in its portfolio and publish the same in accordance with the valuation norms specified in Eighth Schedule

 Every mutual fund shall compute the Net Asset Value of each scheme by dividing the net assets of the scheme by the number of units outstanding on the valuation date. The Net Asset Value of the scheme shall be calculated and published at least in two daily newspapers at intervals of not exceeding one week: The price at which the units may be subscribed or sold and the price at which such units may at any time be repurchased by the mutual fund shall be made available to the investors.

GENERAL OBLIGATIONS:
Every asset management company for each scheme shall keep and maintain proper books of accounts, records and documents, for each scheme so as to explain its transactions and to disclose at any point of time the financial position of each scheme and in particular give a true and fair view of the state of affairs of the fund and intimate to the Board the place where such books of accounts, records and documents are maintained. The financial year for all the schemes shall end as of March 31 of each year. Every mutual fund or the asset management company shall prepare in respect of each financial year an annual report and annual statement of accounts of the schemes and the fund as specified in Eleventh Schedule. Every mutual fund shall have the annual statement of accounts audited by an auditor who is not in any way

associated with the auditor of the asset management company.

PROCEDURE FOR ACTION IN CASE OF DEFAULT:

On and from the date of the suspension of the certificate or the approval, as the case may be, the mutual fund, trustees or asset management company, shall cease to carry on any activity as a mutual fund, trustee or asset management company, during the period of suspension, and shall be subject to the directions of the Board with regard to any records, documents, or securities that may be in its custody or control, relating to its activities as mutual fund, trustees or asset management company.

RESTRICTIONS ON INVESTMENTS:
A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of asset management company A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of Asset Management Company.

 No mutual fund under all its schemes should own more than ten per cent of any company's paid up capital carrying voting rights. Transfers of investments from one scheme to another scheme in the same mutual fund shall be allowed only if, 1. Such transfers are done at the prevailing market price for quoted instruments on spot basis. 2. The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made. A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate inter scheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund. The initial issue expenses in respect of any scheme may not exceed six per cent of the funds raised under that scheme. Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance.

 Every

mutual

fund

shall,

get

the

securities

purchased or transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature. Pending deployment of funds of a scheme in securities in terms of investment objectives of the scheme a mutual fund can invest the funds of the scheme in short term deposits of scheduled commercial banks. No mutual fund scheme shall make any investment in; Any unlisted security of an associate or group company of the sponsor; or Any security issued by way of private placement by an associate or group company of the sponsor; or The listed securities of group companies of the sponsor, which is in excess of 30% of the net assets [of all the schemes of a mutual fund] No mutual fund scheme shall invest more than 10 per cent of its NAV in the equity shares or equity related instruments of any company. Provided that, the limit of 10 per cent shall not be applicable for investments in index fund or sector or industry specific scheme.

 A mutual fund scheme shall not invest more than 5% of its NAV in the equity shares or equity related investments in case of open-ended scheme and 10% of its NAV in case of close-ended scheme.

CRITICAL REVIEW OF MUTUAL FUNDS Why mutual funds in India performed so poorly
Most investors associate mutual funds with Master gain, Monthly Equity Plans of SBI Mutual Fund, UTI and Canbank Mutual Fund and of course Morgan Stanley Growth Fund. This is so be Cause these funds truly had participation from masses, with a fund like Morgan Stanley having more than 1 million investors. Investors feel that after 5 years, Morgan Stanley Growth Fund units still trade below the original IPO price of Rs.10. It is incorrect to think that all mutual funds have performed poorly. If one looks at some income funds, they have come with reasonable returns. It is only the performance of equity funds, which has been poor. Their poor performance has been amplified by the closed end discounts i.e. units of these funds quoting at sharp discounts to their NAV resulting in an even poorer return to the investor. One must remember that a Mutual Fund does not provide assured returns and neither can it "manufacture" returns out of thin air. Returns provided by mutual funds are a function of the returns in the underlying asset class in which the fund invests.

Good funds can beat returns in their asset class to some extent but thats all. E.g. take the case of a sector specific fund like a pharma fund, which invests only in shares of pharmaceutical companies. If the Govt. comes with new regulation that severely restricts the pricing freedom of these companies resulting in negative outlook for the sector, the prices of all stocks in the sector could fall substantially resulting in severe erosion in the NAV of the fund. No one can do anything about it. A good fund manager would probably sell part of the fund before prices fall too much and wait for an opportune time to reinvest at lower levels once the dust has settled. In that case, the NAV of the fund would fall to a lesser extent but fall it will. If the investor in the fund has invested in some stocks in the sector on his own, in all probability, his personal investments may have depreciated to a larger extent. Let us extend this example to an analysis of the investment climate in the last 7 years. The stock markets have done very badly in the last seven years. The BSE Sensex crossed 3000 for the first time in early 1992. Since then it has gone up and come down several times but has remained in the same range. Effectively, for a seven-year investment period, the total return has been almost zero. The prices of many leading stocks of yesteryear have fallen by more than 50% in these seven years. If one considers the fact that the sensex has been changed several times, with all the weak stocks having been weeded out, the effective returns on the old sensex, existing in 1992, have been substantially negative. The following table gives some of the prices of stocks considered "blue chips" in 1992, in 1994 and the prices prevailing at present.

Price in Rs Name of the Company Tata Steel Grasim Industries Century Textiles Reliance Industries Raymond Arvind Mills ICICI 552 650 490 218 250 353 290 336 793 550 213 263 290 197 418.35 1212.85 219.40 567.05 312.85 115.75 398.10 1992 high 1994 high Current price

It is quite obvious that if a fund had invested in any of these shares in 1992 or subsequently in the 1994 boom, and if it remained invested in the share, then it would be confronting a huge fall in NAV. This is exactly what has happened. A similar table for prices of shares Price in Rs Name of the Company MTNL HPCL Indian Oil ONGC SAIL 1994 high 325 550 n/a n/a 83 Present price 117.40 310.75 431.60 860.95 64.65 of Public Sector Undertakings (PSUs) is given below.

Most mutual fund managers took some time to realize the changed circumstances wherein the open economy ushered in by the liberalization took the full impact of the global deflation in commodity prices. This problem was compounded further by the Asian crisis after which cheap imports from Asia caused severe pressure on profits. To add to this, most funds had invested some part of their portfolio in medium sized "growth" companies. Many of these companies have performed even worse than bigger ones and quite a few have seen share prices dip more than 90% from their 1994 highs. More important, funds could not sell these shares because of complete lack of liquidity with, at best, few hundred shares being traded every day. Meanwhile, shares of companies in sectors like consumer goods (FMCG) and software were showing good growth and they went up rapidly in price. Most fund managers were unwilling to sell shares of erstwhile "blue chips" at low prices and buy shares of emerging "blue chips" at high prices. This resulted in poor performance and negative returns. One more issue is that the fund managers in many funds were not "professionally qualified and experienced". This is especially true of some of the funds floated by nationalized banks. Some of these individuals were transferred from the parent organization and did not really know much about investment management. Lastly, investors would do well to have a look at the investments, which they made on their own. In most cases, they would have done much worse than the mutual funds. We have

received numerous requests for advice from individual investors on what to do about their own investments. If that were any indicator, investors would have done really badly. Is it true that globally mutual funds under perform benchmark indices? Why are smart money managers unable to do as well as the market? Or is it that they are not smart at all? What are the limitations of mutual funds? It is 100% true that globally; most mutual fund managers under perform the asset class that they are investing in. It is not true that the fund managers are dumb; this under performance is largely the result of limitations inherent in the concept of mutual funds. These limitations are as follows:

Entry and exit costs: Mutual funds are a victim of their own
success. When a large body like a fund invests in shares, the concentrated buying or selling often results in adverse price movements i.e. at the time of buying, the fund ends up paying a higher price and while selling it realizes a lower price. This problem is especially severe in emerging markets like India, where, excluding a few stocks, even the stocks in the Sensex are not liquid, let alone stocks in the NSE 50 or the CRISIL 500. So, there is simply no way that a fund can beat the Sensex or any other index, if it blindly invests in the same stocks as those in the Sensex and in the same proportion. For obvious reasons, this problem is even more severe for funds investing in small capitalization stocks. However, given the large size of the debt market, excluding UTI, most debt funds do not face this problem

Wait time before investment: It takes time for a mutual fund

to invest money. Unfortunately, most mutual funds receive money when markets are in a boom phase and investors are willing to try out mutual funds. Since it is difficult to invest all funds in one day, there is some money waiting to be invested. Further, there may be a time lag before investment opportunities are identified. This ensures that the fund under performs the index. For open-ended funds, there is the added problem of perpetually keeping some money in liquid assets to meet redemptions.

Fund management costs: The costs of the fund management

process are deducted from the fund. This includes marketing and initial costs deducted at the time of entry itself, called "load". Then there is the annual asset management fee and expenses, together called the expense ratio. Usually, the former is not counted while measuring performance, while the latter is. A standard 2% expense ratio means that, everything else being equal, the fund manager under performs the benchmark index by an equal amount.

Cost of churn: The portfolio of a fund does not remain constant.

The extent to which the portfolio changes are a function of the style of the individual fund manager ie whether he is a buy and hold type of manager or one who aggressively churns the fund. It is also dependent on the volatility of the fund size i.e. whether the fund constantly receives fresh subscriptions and redemptions. Such portfolio changes have associated costs of brokerage, custody fees,

registration

fees

etc.

that

lowers

the

portfolio

return

commensurately.

Change of index composition: World over, the indices keep

changing to reflect changing market conditions. There is an inherent survivorship bias in this process, with the bad stocks weeded out and replaced by emerging blue chips. This is a severe problem in India with the Sensex having been changed twice in the last 5 years, with each change being quite substantial. Another reason for change index composition is Mergers & Acquisitions. The weightage of the shares of a particular company in the index changes if it acquires a large company not a part of the index.

Tendency to take conformist decisions: From the above

points, it is quite clear that the only way a fund can beat the index is through investment of some part of its portfolio in some shares where it gets excellent returns, much more than the index. This will pull up the overall average return. In order to obtain such exceptional returns, the fund manager has to take a strong view and invest in some uncommon or unfancied investment options. Most people are unwilling to do that. They follow the principle "No fund manager ever got fired for investing in Hindustan Lever" i.e. if something goes wrong with an unusual investment, the fund manager will be questioned but if anything goes wrong with the blue chip, then you can always blame it on the "environment" or "uncontrollable factors" knowing fully well that there are many other fund managers who have made the same decision. Unfortunately, if the fund manager does the same thing as several

others of his class, chances are that he will produce average results. This does not mean that if a fund manager takes "active" views and invests in heavily researched "uncommon" ideas, the fund will necessarily outperform the index. If the idea does not work, it will result in poor fund performance. But if no such view is taken, there is absolutely no chance that the fund will outperform the index.

BENEFITS OF MUTUAL FUNDS

Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.

Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.

Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and

follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

Low Cost
Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

Transparency
We can get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

REGULATORY ASPECTS OF MUTUAL FUND

SCHEMES OF MUTUAL FUND:
The asset management company shall launch no scheme unless the trustees approve such scheme and a copy of the offer document has been filed with the Board.

 Every mutual fund shall along with the offer document of each scheme pay filing fees. The offer document shall contain disclosures which are adequate in order to enable the investors to make informed investment decision including the disclosure on maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor. No one shall issue any form of application for units of a mutual fund unless the form is accompanied by the memorandum containing such information as may be specified by the Board. Every close ended scheme shall be listed in a recognized stock exchange within six months from the closure of the subscription The asset management company may at its option repurchase or reissue the repurchased units of a closeended scheme. A close-ended scheme shall be fully redeemed at the end of the maturity period. "Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution". The mutual fund and asset management company shall be liable to refund the application money to the applicants, (iii) If the mutual fund fails to receive the minimum subscription amount referred to in clause (a) of sub-regulation (1); (iv) (ii) If the moneys received from the applicants for units are in excess of subscription as referred to in clause (b) of sub-regulation (1).

 The asset management company shall issue to the applicant whose application has been accepted, unit certificates or a statement of accounts specifying the number of units allotted to the applicant as soon as possible but not later than six weeks from the date of closure of the initial subscription list and or from the date of receipt of the request from the unit holders in any open ended scheme.

RULES REGARDING ADVERTISEMENT:

The advertisement for each scheme shall disclose investment objective for each scheme. An advertisement shall be truthful, fair and clear and shall not contain a statement, promise or forecast which is untrue or misleading. Advertisements shall not be so framed as to exploit the lack of experience or knowledge of the investors. All advertisements issued by a mutual fund or its sponsor or Asset Management Company shall state, "all investments in mutual funds and securities are subject to market risks and the NAV of the schemes may go up or down depending upon the factors and forces affecting the securities market". The advertisement shall not compare one fund with another, implicitly or explicitly, unless the comparison is fair and all information relevant to the comparison is included in the advertisement. The offer document and advertisement materials shall not be misleading or contain any statement or opinion, which are incorrect or false.

INVESTMENT OBJECTIVES AND VALUATION POLICIES:

The moneys collected under any scheme of a mutual fund shall be invested only in transferable securities in the money market or in the capital market or in privately placed debentures or securities debts. Provided that moneys collected under any money market scheme of a mutual fund shall be invested only in money market instruments in accordance with directions issued by the Reserve Bank of India; The mutual fund shall not borrow except to meet temporary liquidity needs of the mutual funds for the purpose of repurchase, redemption of units or payment of interest or dividend to the unit holders. The mutual fund shall not advance any loans for any purpose. Every mutual fund shall compute and carry out valuation of its investments in its portfolio and publish the same in accordance with the valuation norms specified in Eighth Schedule Every mutual fund shall compute the Net Asset Value of each scheme by dividing the net assets of the scheme by the number of units outstanding on the valuation date. The Net Asset Value of the scheme shall be calculated and published at least in two daily newspapers at intervals of not exceeding one week: The price at which the units may be subscribed or sold and the price at which such units may at any time be repurchased by the mutual fund shall be made available to the investors.

GENERAL OBLIGATIONS:
Every asset management company for each scheme shall keep and maintain proper books of accounts, records and documents, for each scheme so as to explain its transactions and to disclose at any point of time the financial position of each scheme and in particular give a true and fair view of the state of affairs of the fund and intimate to the Board the place where such books of accounts, records and documents are maintained. The financial year for all the schemes shall end as of March 31 of each year. Every mutual fund or the asset management company shall prepare in respect of each financial year an annual report and annual statement of accounts of the schemes and the fund as specified in Eleventh Schedule. Every mutual fund shall have the annual statement of accounts audited by an auditor who is not in any way associated with the auditor of the asset management company.

PROCEDURE FOR ACTION IN CASE OF DEFAULT:

On and from the date of the suspension of the certificate or the approval, as the case may be, the mutual fund, trustees or asset management company, shall cease to carry on any activity as a mutual fund, trustee or asset management company, during the period of suspension, and shall be subject to the directions of the Board with regard to any

records, documents, or securities that may be in its custody or control, relating to its activities as mutual fund, trustees or asset management company.

RESTRICTIONS ON INVESTMENTS:
A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of asset management company A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of Asset Management Company. No mutual fund under all its schemes should own more than ten per cent of any company's paid up capital carrying voting rights. Transfers of investments from one scheme to another scheme in the same mutual fund shall be allowed only if, 3. Such transfers are done at the prevailing market price for quoted instruments on spot basis. 4. The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made.

 A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate inter scheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund. The initial issue expenses in respect of any scheme may not exceed six per cent of the funds raised under that scheme. Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance. Every mutual fund shall, get the securities purchased or transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature. Pending deployment of funds of a scheme in securities in terms of investment objectives of the scheme a mutual fund can invest the funds of the scheme in short term deposits of scheduled commercial banks.

 No mutual fund scheme shall make any investment in; Any unlisted security of an associate or group company of the sponsor; or Any security issued by way of private placement by an associate or group company of the sponsor; or The listed securities of group companies of the sponsor, which is in excess of 30% of the net assets [of all the schemes of a mutual fund] No mutual fund scheme shall invest more than 10 per cent of its NAV in the equity shares or equity related instruments of any company. Provided that, the limit of 10 per cent shall not be applicable for investments in index fund or sector or industry specific scheme. A mutual fund scheme shall not invest more than 5% of its NAV in the equity shares or equity related investments in case of open-ended scheme and 10% of its NAV in case of close-ended scheme.

Chapter 2
Objectives of Study

Objectives of Study

Study various investment options in the market. Study various Asset Management Companies and funds offered by them. Analysis of various mutual funds. Conducting a survey to find out the perception of the public regarding the mutual funds. Identify the market performance of these funds. Analyze which one is better and most preferred by the customers.

Chapter-3
RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
Research methodology in which the data are collected for the research. Research Methodology is the attempt to validate the rationale behind the selected research design and provide justification of why it is appropriate in solving the selected research problem. It is the process by which we evaluate tools that produce knowledge. Research Design The Research Report is based on exploratory study based on Primary & Secondary Data. Exploratory research is concerned with identification of the real nature of research problem & perhaps of formulating relevant hypothesis for various tests. The major benefit is that it is less expensive & less time consuming. For assessing the tool used to deliver included Personal interview of respondent. Sources of Collecting Data Data collection methods are generally of two types: Primary Data Secondary Data

Primary data are those which are collected for the first time and thus happen to be original in character. The primary data is collected in the process of questionnaire and interview of the outlets. Secondary data are those which have already been collected by someone else and which have been already been passed through the statistical process. Primary data: 1. Questionnaire method Secondary data: 1. Book 2. News papers 3. Internet 4. Magazines

It is a way to systematically solve the research problem , when we talk of research methodology we not only talk about method but also consider the logic behind the method , we use in context of our research , while keeping all the objective of the project in mind following method of methodology are adopted. The methodology the project data be summarized as follows:

1. Choosing the Research Report topic:- the Research Report my guide Mr. Suboor Khan suggested the Research Report topic. 2.Literary study about choosing topic :- Study of Mutual Fund Industry and Comparative Analysis of Top Asset Management Companies: A Customer Perspective 3.The method used for the collection of data.

a) Questioner (subjective type): because to analyze the real view of surveyor.

Then the short listed Organization , who were extremely cooperative , helpful , who are interviewed and their responses were recorded.

b) Visualization : to find out the correctness of the data sample provided by the interviewer

c) Analyzing their response: their responses were analyzed , an effort was made to recognize hidden expectations and unvoiced demands .

Methodology Adopted
Methods used

Through Questionnaire. While preparing the Questionnaire certain dimensions are to be considered. These dimensions are come under following heads: Sources of data For the purpose of this Research report data has been collected from the following sources: Primary sources New Joiners in the organization Sample Size : 50 Secondary Sources Organizations Policy Manual Other relevant documents Company website Tools used for Analysis Bar Graphs Pie charts Management/Marketing

Chapter-4 Data Analysis

PRUDENTIAL ICICI

OVERVIEW
Prudential ICICI Asset Management Company, (55%: 45%) a joint venture between Prudential, UK's leading insurance company and ICICI Bank Ltd, India's premier financial institution. The joint venture was formed with the key objective of providing the Indian investor mutual fund products to suit a variety of investment needs. The AMC has already launched a range of products to suit different risk and maturity profiles. Prudential ICICI Asset Management Company Limited has a net worth of about Rs. 69.89 crore (1 crore = 10 million) as of March 31, 2002. Both Prudential and ICICI Bank Ltd have a strategic longterm commitment to the rapidly expanding financial services sector in India.

GUIDING PRINCIPLES
Prudential CICI will conduct its business with

Honesty and trustworthiness in all interactions. A pioneering spirit and excellence in action. Collaboration and teamwork. An understanding of customer needs and the desire to satisfy them. The highest service standards. A consistently above average performance.

GENERAL RISK AND ICICIS BANK DISCLAIMER

Investors are advice to read the risk factors carefully before taking an investment decision. Offer Document/s / Abridge Offer Document/s are available with Mutual Fund Companies/ ICICI Bank. For taking an investing decision, investors must rely on their own examination of the issuer and offer, including risk involved. It is to be distinctly understood that the mutual fund schemes, being offered for investment, have not been recommended by ICICI Bank and nor ICICI Bank has sponsored any scheme. ICICI Bank does not take any responsibility either for the financial soundness of any scheme or for the correctness of statement made or opinion expressed in the Offer Document / Abridge Offer Document of mutual funds. ICICI Bank does not guarantee any returns on investments made in mutual fund scheme/s by investors. Investment in mutual funds involves a degree of risks and investors should not invest any funds unless they can afford to take risk of losing their investment.

FUNDS OFFERED
Balanced Fund

Balanced funds are more evenly invested in equities and income securities. Balanced and equity-income funds are suitable for conservative investors who want high current yield with some growth. If you seek to generate long-term capital appreciation and current income, an investment in the balanced fund would be ideal. It gives you an exposure to the stock market without the entire risk of the stock market. The funds offered under this category are the

Prudential ICICI Balanced Fund and Prudential ICICI Child Care Plan. Investment Philosophy The AMC proposes to invest in a mix of equities and fixed income securities with the aim of generating capital appreciation, while at the same time minimizing the volatility inherent in pure equity schemes. With this aim, the AMC would allocate the assets between equity and fixed income instruments within the limits laid down for each scheme.

Debt funds The goal of fixed income funds is to provide high current income consistent with the preservation of capital. Growth of capital is of secondary importance. These funds invest in corporate bonds or government securities that have a fixed rate of return. The funds are suitable for investors who want to maximize current income and who do not wish to assume a high degree of capital risk in order to do so. Since bond prices fluctuate with changing interest rates, there is some principal risk involved despite the fund's conservative nature. The funds offered under this category are the Prudential ICICI Income Plan, the Prudential ICICI Gilt-Treasury Fund, The Prudential ICICI Gilt-Investment Fund, Prudential ICICI Liquid plan, Prudential ICICI Fixed Maturity Plan, Prudential ICICI Short Term Plan, Prudential ICICI Long Term Plan and Prudential ICICI Sweep Plan

Investment Philosophy The AMC aims to identify securities, which offer superior levels of yield at lower levels of risks. With the aim of controlling risks, the investment team of the AMC will carry out rigorous in-depth credit evaluation of the securities proposed to be invested in. The credit evaluation includes a study of the operating environment of the company, the past track record as well as the future prospects of the issuer, the short as well as longer-term financial health of the issuer. Rated debt instruments in which the Scheme invests will be of investment grade as rated by a credit rating agency. In case a debt instrument is not rated, specific approval of the Board of the AMC will be obtained for such an investment. In addition, the investment team of the AMC studies the macro economic conditions, including the politico-economic environment and factors affecting liquidity and interest rates. The AMC would use this analysis to attempt to predict the likely direction of interest rates and position the portfolio appropriately to take advantage of the same.

Equity Funds
Equity funds seek to provide maximum growth of capital with secondary emphasis on dividend or interest income. They invest in common stocks with a high potential for rapid growth and capital appreciation. An equity fund gives an exposure to the stock market. The fund would have long-term growth potential but provide low current income. They are not suitable for investors who are risk averse and are focused on maximizing current income or conserving principal. The funds are the Prudential ICICI Growth Plan,

Prudential ICICI FMCG Fund, Prudential ICICI Technology Fund, Prudential ICICI Tax Plan, Prudential ICICI Index Fund and Prudential ICICI Power. Investment Philosophy The overriding objective of the AMC in managing its investments is to produce a consistently above average long-term performance. The AMC believes in a bottom-up approach to stock picking. This means that the focus is on the fundamental quality of companies as opposed to a focus on favored sectors and market movements. The AMC will follow a structured investment process in order to identify the best stocks for inclusion in the portfolio. This would involve consistently examining all stocks under an internally developed research framework. A stock would be considered or inclusion in the portfolio when the valuation does not adequately capture its underlying fundamental value in the AMC's opinion based on the above factors. The AMC's portfolio management style is conducive to a low portfolio turnover rate. However, the AMC will take advantage of the opportunities that present themselves from time to time because of inefficiencies of the securities markets. The AMC will endeavor to balance the increased cost on account of higher portfolio turnover with the benefits derived there from.

KOTAK MAHINDRA
OVERVIEW
The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited. Uday Kotak, S.A.A. Pinto and Kotak & Company promoted this company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited (KMFL). With affect from March 22, 2003, the company KMFL has got converted into Kotak Mahindra Bank Limited (KMBL). Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the asset manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has over 1,15,000 investors in various schemes. KMMF offers schemes catering to investors with varying risk- return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. Kotak Mahindra Asset Management Company Ltd., a wholly owned subsidiary of Kotak Mahindra Bank Ltd, manages Kotak Mahindra Mutual Fund (KMMF). Kotak Mahindra Mutual Fund launched its Schemes in December 1998 and today manages assets close to Rs.3000 cr. contributed by over 115000 investors in various schemes. KMMF has to its credit the launching of innovative schemes and plans like K Gilt and Free Life Insurance with K Bond Deposit Plan.

Risk Factors:

Mutual Funds and securities investments are subject to market risks and there is no assurance or guarantee that the objectives of the Scheme will be achieved. As with any securities investment, the NAV of the Units issued under the Scheme can go up or down depending on the factors and forces affecting the capital market. Past performance of the Sponsor or that of existing schemes of the Fund does not indicate the future performance of the Scheme. K 30 is only the name of the Scheme and does not in any manner indicate the quality of the Scheme, future prospects or returns. Appreciation of the value of the Units issued under the Scheme can be restricted in the event of a high asset allocation to cash when stocks appreciate. The NAV of the Units issued under the Scheme may be affected, inter-alia, by changes in the market interest rates, trading volumes, settlement periods and transfer procedures. Tax laws may change, affecting the return on investment in Units. In the event of receipt of a very large number of redemption

requests

or very

large

value

redemption

requests or of

restructuring of the Schemes portfolio, there may be delays in the redemption of Units. Please refer to the paragraph on "Right to limit Redemption" in the Combined Offer Document.

Statutory: Kotak Mahindra Mutual Fund has been established as a trust under the Indian Trusts Act, 1882, by Kotak Mahindra Finance Limited (liability Rs. NIL) with Kotak Mahindra Trustee Company Limited as the Trustee and with Kotak Mahindra Asset Management Company Limited as the Investment Manager.

Data Analysis
INVESTMENT PATTERN OF GILT PLAN MUTUAL FUND

ICICI
ICICI GILT FUND

100%

GOVT.SEC.

KOTAK MAHINDRA
2.10% K GILT 9.53%

GOVT.SECT .

88.37%

INTERPRETATION Gilt fund refers to those funds in which invest only in Govt. securities including call money, treasury bill and repos of varying maturities with a view to generating credit risk free return. . According to the graph study we can see that companies has different investment pattern. UTI has allotted 100% investment in Sovereign debt. Where as Kotak Mahindra has 89% in Govt. Sect., 10% in Repo and 2% in Other Rec. Can Bank has invested 29% in money market funds and 71 % in debt. ICICI has 100% in Gilt securities (treasury bills). Zurich has invested 94% in Govt. securities, 6% in MMF.

INVESTMENT PATTERN OF SECTOR PLAN MUTUAL FUND

ICICI
ICICI FMCG PLAN
10% 0 0 DEBT 90% MMF

KOTAK MAHINDRA

K 30
4.37% 0

34.23% 61.40%

EQUITY MMF OTHER REC.

INTERPRETATION As from the graph we can see that different company has adopted different pattern of investment. ICICI FMCG PLAN has invested 90% in debt and 10% in MMF. UTI Growth Sector has invested in100 % equity of the specific sector. Zurich has invested 88% in equity and 12% in debt. CanBank has also invested in similar portion as Zurich. KOTAK has invested 61% in equity, 34% in MMF and 5% in other Rec.

INVESTMENT PATTERN OF LIQUID PLAN MUTUAL FUND

ICICI
ICICI LIQUID PLAN
0 0 20% 80%

MMI DEBT

KOTAK MAHINDRA

K LIQUID

12.88%

41.42%

OTHER DEBT
45.70%

MMI

INTERPRETATION As from the graph we can see that different company has adopted different pattern of investment. ICICI LIQUID PLAN has invested 20% in debt and 80% in MMF. UTI MMF has invested 100 % in debt. Zurich has invested 62% in debt and 38% in Money Market Funds.

Canara Bank has invested 70% in MMF and 30% in debt. KOTAK has invested 46% in debt, 41% in MMF and 12.88% in other assets.

INVESTMENT PATTERN OF BALANCE PLAN MUTUAL FUND

ICICI
ICICI BALANCED FUND
0 0 40% 60%

EQUITY DEBT

KOTAK MAHINDRA
K BALANCE
8.09%

EQUITY
40.20% 51.71%

DEBT MMI

INTERPRETATION
Balanced fund refers to those fund in which there is a good mix of equity and debt. According to the graph study we can see some company has equal ratio of equity and debt, but some do follows equal portion pattern. UTI has allotted 60:40 ratios for asset investment pattern in equity and debt. Where as Kotak Mahindra has 40% in debt, 52% in equity and 9% in money market fund. CanBank has invested 63% funds in equity, 17% in money market funds and 20 % in debt. ICICI has same portion allotment as UTI. Zurich has invested 60%in equity, 8% in MMF and 32% in debt.

INVESTMENT PATTERN OF TAX PLAN MUTUAL FUND

ICICI
ICICI Tax Plan
10% 0 0

equity
90%

debt

INTERPRETATION As from the graph we can see that different company has adopted different pattern of investment. As ICICI TAX PLAN has somewhat similar pattern of investment as UTI ETSP has that is near about 90% funds in Equity sector and 10% indebt. Zurich has also followed a similar pattern. But CanBank has invested 53%in equity and 47 % in Money Market Fund.

DIVERSIFIED EQUITIES FUND

Franklin Prima Bonanzo Exclence Growth Reliance Vision

Automobiles 23.26% Construction 16.76% Automobiles 13.89%

Diversified 12.76% Technology 11.05% Engineering 11.99% Financial Service 15.32% Financial Service 30.94%

Chemical 12.1%

HDFC

Energy 19.05%

Alliance Basic Industries

Automobiles 31.97%

Metals & Metal Product 11.06%

Chapter 5
Suggestions Conclusion

SUGGESTIONS
In order to render the existing mutual funds more effective and purposeful the following steps should be taken:

There should be comprehensive legislation to control the operations of the mutual funds including the UTI. At present, mutual funds are subject to guidelines laid down by the RBI, Government of India and the SEBI and some of the guidelines are contradictory leading to confusion among the mutual fund managers. Further, the guidelines governing the UTI are not the same. It is, therefore, necessary that the Government should come out with single set of comprehensive legislation, which will uniformly be applicable to public sector and private sector mutual funds and the UTI. So far mutual funds in India confined themselves to urban areas; leaving vast saving potentials in rural hinterlands untapped. By penetrating in rural areas and introducing saving schemes tailored to the diverse preferences of rural community and by educating them about the benefits of the schemes, mutual funds can raise burgeoning resources which can be gainfully employed for the national development. Investors' confidence in mutual funds can be restored by rendering their operations more transparent and providing better services. While it is fine to advertise good performance of a particular scheme by a fund in order to attract more investment, the times are fast approaching when an honest view based

approach would compel a mutual fund to advise investors on "sell" or "switch" between schemes, as emphatically as it would advise on the purchase. So as to attract investors, it is, therefore, advisable to mutual funds to offer this sort of counseling which will certainly make a mutual fund different from other institutions.

CONCLUSION
Mutual funds are financial intermediaries concerned with mobilizing savings of those who have surplus and canalization of these savings in those avenues where there is demand of funds. These institutions employ their resources in such a manner as to afford for their investors the combined benefits of low risk, steady return, high liquidity and capital appreciation through

diversification and expert management. The performance of a mutual fund is dependent on the prudence of the management in selection of scrips, the diversity of investment in scrips and the extent to which risks are minimized during investment. The future prospects of an ongoing

manufacturing company could be judged and predicted with a fair degree of confidence, and investment strategies could be worked out accordingly. Whereas, investment in a mutual fund is judged purely from the point of returns given to the investor, management's expertise and the types of schemes offered to the public, prediction of any scheme performing better than those of any other mutual funds is generally not possible specially for a growth scheme. This is purely because the investor is investing his money in mutual

funds to enable the latter to further re-invest in scrips, which provide both short-term and long-term gains. Therefore, this intermediary (MF) is a decision-maker for public money investment. Since mutual fund is a pool of public money, maximum care and caution is taken to invest in the right scrip for capital appreciation and returns on investment for its distribution to the investors. Therefore, the business of mutual fund is to re-invest in any scrip in the market, and prove their performance through returns to investors. Therefore, each mutual fund is a reinvestment agency. For a mutual fund, its environment is the environment of all industries put together. Its management's function is highly specialized, as they have to have the knowledge or individual companies, their economic and commercial environment as well as the government laws that regulate and promote that industry. In the absence of this information, the mutual fund will not be in a position to meaningfully diversify its investment in various scrips to maximize profit and minimize risks.

Annexure Questionnaire

BIBLOGRAPHY

BOOK NAME Mutual Funds in India Manual of SEBI Financial Sector Reforms Manual of Merchant Banking Mutual fund Management of Indian Financial Institution Research methodology WEBSITES www.canbankmutual.com www.unittrustofindia.com www.zurichindia.com www.sebi.com www.pruiciciamc.com www.kmutual.com www.google.com MAGAZINE OUTLOOK INVESTMENT MONITOR ANALYST ANALYST THE FINANCIAL EXPRESS

AUTHOR NAME S. Krishnamurti Nabhi Publications B.B Tandon and A.K. Vashisht Dr. J.C. Verma K.G Sahadevan R.M. Srivastava C.R. Kothari

Questionnaire
Thi s s urve y i s cond uct ed t o st ud y t he st ock broki n g m odel l aunched b y R el i ance Mone y. Al l i nform at i on provi ded b y you wi l l be ke pt confi dent i al and us ed for rese arc h purposes onl y. I c oul d gre at l y appr eci at e your t i m e i n hel pi ng wi t h t hi s re search R es ear ch R ep ort . 1. Nam e: 2. (a) M obi l e no. (b) Em ai l addr ess: 3. You consi der you rsel f as bel on gi n g t o whi ch annual i nco m e. Group Les s t h an R s 1 l ac R s 1 l ac t o R s 5 l ac R s 5 l ac t o R s 10 l ac Above 10 l a c P refer not t o c om m ent

4. P l eas e speci f y t h e broker a ge r at e (p e r 100) you ar e pa yi n g t o brok er s for Int r ada y _________ __ Del i ver y ________ ___ 5.(a) Do you Tr a de i n shares? Yes (b) A re you_____ Da y Trade r Inv est or Bot h If yes, f rom whi ch broker a ge ho use or houses a re yo u t radi ng wi t h R E LIA NC E MONEY IC IC ID IR EC T R E LIG AR E S HAR EKHAN
M O T I LA L O S WA L S E C U R IT IE S LT D

No

IND IA B U LLS A NY OTHER S P EC IF Y ..

6. Based upon you r own ex peri ence, pl e ase rank t h e fol l owi ng param et e r whi ch you ke ep i n m i nd whi l e avai l i ng st ock broki ng se rvi ces from a brok era ge h ouse. Margi n Fundi n g Int r ada y Ex posur e Broke ra ge rat e Brand n am e of a C om pan y o r B roke r Onl i ne Fa ci l i t y Offl i ne Faci l i t y

7. Have you he ard a bout R el i ance Mone y? YES NO

If yes, how di d you fi rst h ear about R el i ance Mone y? Fri ends or R el at i ves Our S al es Ex ec ut i ve Medi a C a m pai gn An y ot her

7. P l ease speci f y t h e broker a ge r at e (p e r 100) you ar e pa yi n g t o bro kers for Int r ada y _________ __ Del i ver y ________ ___ 8. Are you avai l i ng st ock broki n g s er vi ces of R el i anc e M one y? YES If yes.. i. NO

W hi ch of t he fol l owi ng at t ri but es en t i c e d you t o t r y our s er vi ces? R el i ance as a b rand Zero brokera ge m odel Val ue added servi ces prov i des b y us l i ke onl i n e purc hase of Insu ranc e, Mut ual Funds et c. Onl i ne as wel l as offl i ne t r adi ng f aci l i t y Ki osk Machi ne S ecur i t y Token

ii.

W hat are som e aspe ct s of R el i ance Mon e ys st ock b roki ng s ervi ces yo u w ant us t o revi e w ? M argi n fundi ng Int r ada y Ex posure

 iii.

Onl i ne servi ces Offl i ne s ervi ces C al l cent re Offl i ne per t ransa ct i on cost P rocessi ng spe ed of Appl i ca t i on form Trai n er t o gi ve d em o t o cust om ers about soft wa r e Eas y & Inst a t rade soft w are

Is R el i an ce Mone ys Dem at servi c es ch eapest i n t he m ark et ? YES NO

i v.

S houl d R el i ance Mone y l aunch ne w sc he m es for sm al l t rade r s havi ng t urnover l ess t han R s.500,000. YES NO

v.

How l i kel y are you t o recom m end our s e rvi ces t o your f ri en ds. LIK E LY UN LIK E LY W hi ch i s t he m ost COS T EFF EC T IVE sc hem e as pe r you 500 1350 2500 500 (1cror e + 2 mont hs ) (3 cror e + 6 mont hs) (6 cror e + 12 mon ths ) (5 lac + 12 m ont hs )

vi .

vi i .

Based on you r ex per i ence, how i s (R el i a nce Mone ys Dem at servi ces) com par e t o ot hers? Our servi ces a re b et t er Abo ut t he sam e Our servi ces a re wo rst Not sur e

Questionnaire
Thi s s urve y i s cond uct ed t o st ud y t he st ock broki n g m odel l aunched b y R el i ance Mone y. Al l i nform at i on provi ded b y you wi l l be ke pt confi dent i al

and us ed for rese arc h purposes onl y. I c oul d gre at l y appr eci at e your t i m e i n hel pi ng wi t h t hi s re search R es ear ch R ep ort . 1. Nam e: 2. (a) M obi l e no. (b) Em ai l addr ess: 3. You consi der you rsel f as bel on gi n g t o whi ch annual i nco m e. Group Les s t h an R s 1 l ac R s 1 l ac t o R s 5 l ac R s 5 l ac t o R s 10 l ac Above 10 l a c P refer not t o c om m ent

4. P l eas e speci f y t h e broker a ge r at e (p e r 100) you ar e pa yi n g t o brok er s for Int r ada y _________ __ Del i ver y ________ ___ 5.(a) Do you Tr a de i n shares? Yes (b) A re you_____ Da y Trade r Inv est or Bot h If yes, f rom whi ch broker a ge ho use or houses a re yo u t radi ng wi t h R E LIA NC E MONEY IC IC ID IR EC T R E LIG AR E S HAR EKHAN
M O T I LA L O S WA L S E C U R IT IE S LT D

No

IND IA B U LLS A NY OTHER S P EC IF Y ..

6. Based upon you r own ex peri ence, pl e ase rank t h e fol l owi ng param et e r whi ch you ke ep i n m i nd whi l e avai l i ng st ock broki ng se rvi ces from a brok era ge h ouse. Margi n Fundi n g Int r ada y Ex posure

Broke ra ge rat e Brand n am e of a C om pan y o r B roke r Onl i ne Fa ci l i t y Offl i ne Faci l i t y

7. Have you he ard a bout R el i ance Mone y? YES NO

If yes, how di d you fi rst h ear about R el i ance Mone y? Fri ends or R el at i ves Our S al es Ex ec ut i ve Medi a C a m pai gn An y ot her

7. P l eas e speci f y t h e broker a ge r at e (p e r 100) you ar e pa yi n g t o bro kers for Int r ada y _________ __ Del i ver y ________ ___ 8. Are you avai l i ng st ock broki n g s er vi ces of R el i anc e M one y? YES If yes.. vi i i . NO

W hi ch of t he fol l owi ng at t ri but es ent i c e d you t o t r y our s er vi ces? R el i ance as a b rand Zero brokera ge m odel Val ue added servi ces prov i des b y us l i ke onl i n e purc hase of Insu ranc e, Mut ual Funds et c. Onl i ne as wel l as offl i ne t r adi ng f aci l i t y Ki osk Machi ne S ecur i t y Tok en

ix.

W hat are som e aspe ct s of R el i ance Mon e ys st ock b roki ng s ervi ces yo u w ant us t o revi e w ? M argi n fundi ng Int r ada y Ex posure Onl i ne servi ces Offl i ne s ervi ces C al l cent re Offl i ne per t ransa ct i on cost P rocessi ng spe ed of Appl i ca t i on form Trai n er t o gi ve d em o t o cust om ers about soft wa r e

 Eas y & Inst a t rade soft w are x. Is R el i an ce Mone ys Dem at servi c es ch eapest i n t he m ark et ? YES xi. NO

S houl d R el i ance Mone y l aunch ne w sche m es for sm al l t rade r s havi ng t urnover l ess t han R s.500,000. YES NO

xii.

How l i kel y are you t o recom m end our s e rvi ces t o your f ri en ds. LIK E LY UN LIK E LY W hi ch i s t he m ost COS T EFF EC T IVE sc hem e as pe r you 500 1350 2500 500 (1cror e + 2 mont hs ) (3 cror e + 6 mont hs) (6 cror e + 12 mon ths ) (5 lac + 1 2 mont hs )

x i ii .

x i v.

Based on you r ex per i ence, how i s (R el i a nce Mone ys Dem at servi ces) com par e t o ot hers? Our servi ces a re b et t er Abo ut t he sam e Our servi ces a re wo rst Not sure