Professional Documents
Culture Documents
com
INTERNSHIP REPORT
SUBMITTED BY
VIKAS MAHESHWARI
05XQCM6112
2005-07
M.P. BIRLA INSTITUTE OF MANAGEMENT
Associate Bharatiya Vidya Bhavan
# 43, Race Course Road
Bangalore-560001
DECLARATION
The work was carried out in partial fulfillment of the requirement for the
award of M. B. A. course of Bangalore University.
The report or any part thereof has not been submitted to any University or
Institute for the award of any diploma or degree.
Bangalore
Certificate
Bangalore
September 29, 2006
( B.V. Rudramurthy)
M. P. Birla Institute of Management
ASSOCIATE BHARATIYA VIDYA BHAVAN
#43, RACE COURSE ROAD, BANGALORE -560001, INDIA
Certificate
Bangalore
October 29, 2006
(N. S. Malavalli)
ACKNOWLEDGEMENT
Vikas Maheshwari
CONTENTS
Chapter I
INDUSTRY/COMPANY PROFILE
Chapter II
ORGANISATION STRUCTURE
Chapter III
PRODUCT PORTFOLIO
Chapter IV
HUMAR RESOURCE OF ICICI BANK
Chapter V
SWOT ANALYSIS, VISION & GOALS
Chapter VI
RECOMMENDATIONS
BIBLIOGRAPHY
Part B
ICICI was formed in 1955 at the initiative of the World Bank, the
Government of India and representatives of Indian industry. The principal
objective was to create a development financial institution for providing
medium-term and long-term project financing to Indian businesses.
In the 1990s, ICICI transformed its business from a development
financial institution offering only project finance to a diversified financial
services group offering a wide variety of products and services, both directly
and through a number of subsidiaries and affiliates like ICICI Bank.
In 1999, ICICI become the first Indian company and the first bank or
financial institution from non-Japan Asia to be listed on the NYSE. After
consideration of various corporate structuring alternatives in the context of
the emerging competitive scenario in the Indian banking industry, and the
move towards universal banking, the managements of ICICI and ICICI Bank
formed the view that the merger of ICICI with ICICI Bank would be the
optimal strategic alternative for both entities, and would create the optimal
legal structure for the ICICI group's universal banking strategy. The merger
would enhance value for ICICI shareholders through the merged entity's
access to low-cost deposits, greater opportunities for earning fee-based
income and the ability to participate in the payments system and provide
transaction-banking services. The merger would enhance value for ICICI
Bank shareholders through a large capital base and scale of operations,
seamless access to ICICI's strong corporate relationships built up over five
decades, entry into new business segments, higher market share in various
business segments, particularly fee-based services, and access to the vast
talent pool of ICICI and its subsidiaries. With the growth of industries, the
financial services sector has assumed great momentum with unprecedented
investment and employment potential. ICICI is no exception to this global
phenomenon. Beginning with a modest commercial banking, the bank has
embarked upon a wide range of banking, financial and insurance services.
Being the first development bank registered under the Companies Act,
1956, the range of services offered by the bank has expanded considerably.
The following services assume a significant portion of the bank’s activities;
Commercial Banking
Development Banking
Trading in Securities
Merchant Banking
Insurance
Mutual Funds
Foreign Exchange Dealings
The bank has made significant inroads into the retail banking sector,
thereby, indicating growth in business and exploitation of consumer
potential integrated with the overall policy objective of mobilization of
savings into investments.
THE MOST COMPREHENSIVE ONLINE SHARE TRADING SITE
INDUSTRY PROFILE
The Indian middle class is large and growing; wages are low; many
workers are well educated and speak English; investors are optimistic and
local stocks are up. Despite political turmoil, the country presses on with
economic reforms. The only cause of worry that India could face is
Infrastructural hassles.
The rapid economic growth of the last few years has put heavy stress
on India's infrastructural facilities. The projections of further expansion in
key areas could snap the already strained lines of transportation unless
massive programs of expansion and modernization are put in place.
Problems include power demand shortfall, port traffic capacity mismatch,
poor road conditions (only half of the country's roads are surfaced), low
telephone penetration (1.4% of population).
Diverse Market
The Indian market is widely diverse. The country has 17 official
languages, 6 major religions, and ethnic diversity as wide as all of Europe.
Thus, tastes and preferences differ greatly among sections of consumers.
Therefore, it is advisable to develop a good understanding of the Indian
market and overall economy before taking the plunge. Research firms in
India can provide the information to determine how, when and where to
enter the market. There are also companies which can guide the foreign firm
through the entry process from beginning to end --performing the requisite
research, assisting with configuration of the project, helping develop Indian
partners and financing, finding the land or ready premises, and pushing
through the paperwork required.
Indian Stock Market Overview:
The Bombay Stock Exchange (BSE) and the National Stock Exchange
of India Ltd (NSE) are the two primary exchanges in India. In addition, there
are 22 Regional Stock Exchanges. However, the BSE and NSE have
established themselves as the two leading exchanges and account for about
80 per cent of the equity volume traded in India. The NSE and BSE are
equal in size in terms of daily traded volume. Most key stocks are traded on
both the exchanges and hence the investor could buy them on either
exchange.
The primary index of BSE is BSE Sensex comprising 30 stocks. NSE
has the S&P NSE 50 Index (Nifty) which consists of fifty stocks. The BSE
Sensex is the older and more widely followed index. Both these indices are
calculated on the basis of market capitalization and contain the heavily
traded shares from key sectors. The markets are closed on Saturdays and
Sundays.
Both the exchanges have switched over from the open outcry trading
system to a fully automated computerized mode of trading known as BOLT
(BSE Online Trading) and NEAT (National Exchange Automated Trading)
System. It facilitates more efficient processing, automatic order matching,
faster execution of trades and transparency. The key regulator governing
Stock Exchanges, Brokers, Depositories, Depository participants, Mutual
Funds, FIIs and other participants in Indian secondary and primary market is
the Securities and Exchange Board of India (SEBI) Ltd.
Working of a stock market:
A person desirous of buying/selling shares in the market has to first
place his order with a broker. When the buy order of the shares is
communicated to the broker he routes the order through his system to the
exchange. The order stays in the queue exchange's systems and gets
executed when the order logs on to the system within buy limit that has been
specified. The shares purchased will be sent to the purchaser by the broker
either in physical or demat format.
Emergence of ICICIdirect.com:
Due to the existing financial market scenario and the ever increasing
use of computers and its tools most predominantly the internet, ICICI in
2000 appointed Mckinsey to study the market potential for an online portal
dealing in trading with securities. Mckinsey in its report stated the market
potential to consist at around Twenty Five thousand people only. But
regardless of this fact, ICICI DIRECT.COM was started and now it has
grown to more than Four lakh Fifty thousand customers.
CHAPTER II
ORGANIZATION STRUCTURE
ORGANIZATION STRUCTURE
ICICI Bank believes that the structure of an organization needs to be
dynamic, constantly evolving and responsive to changes both in the external
and internal environments. The organizational structure is designed to
support our business goals, and is flexible while at the same time ensuring
effective control and supervision and consistency in standards across
business groups. The organizational structure is divided into five principal
groups – Retail Banking, Wholesale Banking, Project Finance, Special
Assets Management, International Business and Corporate Centre.
The Retail Banking Group comprises ICICI Bank's retail assets
business including various retail credit products, retail liabilities (including
our own deposit accounts as well as distribution of third part liability
products) and rural micro-banking.
The Wholesale Banking Group comprises ICICI Bank's corporate
banking business including credit products and banking services, with
separate dedicated groups for large corporates. Government and public
sector entities and emerging corporates. Treasury, structured finance and
credit portfolio management also form part of this group.
The Project Finance Group comprises our project finance operations
for infrastructure, oil and gas, manufacturing and shipping sectors. The
Special Assets Management Group is responsible for large non-performing
loans and accounts under watch.
The International Business Group is responsible for ICICI Bank's
international operations as well as coordinating the international strategies
and alliances of its subsidiaries and affiliates.
The Corporate Centre comprises all shared services and corporate
functions, including finance and secretarial, investor relations, risk
management, legal, human resources and corporate branding and
communications.
OPERATIONS SALES
PRODUCT
CO-ORDINATOR
CROSS HIGH NETWORTH EXIBITIONS / CORPORATE
SELLING INDIVIDUAL
REGIONAL STALLS RETAIL
PRODUCT
MANAGER
SEGMENT SEGMENT
MANAGER MANAGER
SEGMENT SEGMENT
MANAGER MANAGER
UNIT MANAGERS
PRODUCT
CO-ORDINATOR
REGIONAL PRODUCT
MANAGER
SEGMENT
MANAGER
UNIT
MANAGER
TRAINEES/
AGENTS
Sales consists of two products E-Invest and Wise Invest. For both
these products there are product co-ordinators.
Sales of both these products are regionally looked after by Mr.
Madhusudhan, Regional Product manager for South India.
These products are divided into four categories:-
Corporate Retail
Exhibitions/ stalls
HNI handled by
Cross Selling
Under these category heads, a team of segment managers’ work
at regional level to achieve the purposes set out by them. They
also have to report to the Regional Product manager.
The bank usually has many branches to look after which Unit
managers along with trainees/agents are appointed who report to the
Segment managers and the Regional product manager.
CHAPTER III
PRODUCT PORTFOLIO
THE PRODUCTS
1. E-Invest Account
--Online Share Trading A/c
E-Invest
Transfer In
DEMAT
ICICI Bank Demat Services boasts of an ever-growing customer base of
over 5 Lakh Account Holders. In its continuous endeavor to offer best of the
class services to its customers it offers the following features:
Online access to the customers demat account. Checks holdings, and
status of requests and much more.
Dedicated specially trained customer care executives at its call centre,
to handle all queries.
Holding and Transaction details available round the clock on IVR
(Interactive Voice Response) system.
With a countrywide network of over 614 branches, one is never far
from an ICICI Bank Demat Services outlet.
Customers can also avail online share trading services from
ICICIdirect.com and get a 3 in 1 account inclusive of a demat, ICICI
bank account and a online trading account.
EQUITY:
Trading shares - The past
Calling broker
Waiting for pick-up
Placing orders
Placing wrong orders
Waiting for order confirmation
Waiting for contract notes
Writing cheques/ TIFDs for pay-in
Chasing broker for monies/ shares after payout
Speed:
You can now get the latest quotes of scrip’s on ICICIdirect.com
and place an order almost instantly.
Control:
You can be assured that you have in fact placed an order at the
price you always wanted to, but may not have been able to do so till
now. Thereby giving you control over your own trades.
Independence:
Instead of transferring monies to a broker's pool or towards
deposits, you can manage your own demat and bank accounts when
you trade through ICICIdirect.com.
Trust:
ICICIdirect.com comes to you from ICICI, the organisation
trusted by millions of Indians.
Host of content features
Keep yourself updated
Weekly & monthly stock movers
News from CNBC and Reuters
Screen stocks
View P&L, financial ratio, background and balance sheet of over
5000 companies with our corporate info bank.
My research - a step-by-step guide to help you research a stock.
Latest NAV for mutual funds
Portfolio tracker to monitor the gains and losses on your
investments.
ICICIdirect University to guide you through concepts and on
how to trade
A new version of after sales service that has a dual benefit to both
bank and the customers. C2T is an approach in ICICI Bank, through which
the already existing customers who are not trading or who have not at all
activated or logged in their I-Direct A/c over a period, say 3 to 6 months are
tried to be converted into regular traders through this process or approach.
In this process, the feedback of the existing customers- those who
have not been traded yet or who have not been trading for a considerable
period of time is found out or unearthed form the Database of the customers,
with the help of computers and other tracking systems. Thus a list of such
customers is generated periodically and is distributed to some of the bank
branches in various regions to convert them into traders.
BENEFITS OF C2T:
IPO
Invest in IPO's Online:
One can invest in IPO’s online through www.ICICIdirect.com with
same convenience of investing in equities - hassle-free and with zero paper
work. Also, get in-depth analyses of new IPO’s issues (Initial Public
Offerings) which are about to hit the market. IPO calendar, recent IPO
listings, prospectus/offer documents and live prices will help customers to
keep on top of the IPO markets.
Products available on Wise Invest
WISE Invest
Switch In / Out
Transfer In
WISE Invest Account
Directing strengths-
Channeling thoughts
Creating value
Zeroing in on a goal
Concentrating efforts for effect
Activating ideas into enterprise
Delivery beyond expectations
STRENGTH:
4) AUTOMATIC TRADING :
ICICIdirect.com has a feature where in at a previously determined price fed
to the computer results in buy/sell of the desired security automatically
without any manual presence.
WEAKNESS:
2) CUSTOMER SERVICE
The customer service department is not efficient to handle the grievances of
the retail customers. Also there is no such relationship manager for retail
customer to handle the problems faced by them.
As per research India is adding millions of internet users every year. This
provides a huge opportunity to ICICIdirect.com to tap such users.
1) FEAR OF SAFETY:
People in India are very avert to giving out their credit card numbers or
buying and selling shares. This mentality possesses a significant trend
because ICICIdirect.com in its essence is a portal for online trading in
securities.
4) PROCESSING TIME:
It was noted that during the recent IPO’s other players like Karvy opened
demat accounts in one day where as the minimum required time for
ICICIdirect.com was four days. This led to the loss of many customers.
BIBLIOGRAPHY
WEBSITES:
www.ICICIdirect.com
www.ICICIbank.com
www.google.com
ANALYSIS BETWEEN
EQUITY AND MUTUAL FUNDS
RESEARCH EXTRACT
In the current economic scenario interest rates are falling and fluctuation in
the share market has put investors in confusion. One finds it difficult to take
decision on investment. This is primarily, because of investments are risky
in nature and investors have to consider various factors before investing in
investment avenues.
Historical data were taken for calculating risk, return, alpha and beta.
Analysis has done on percentage method for comparing equity shares with
mutual fund schemes. Compare to equities mutual funds are less risky with
stable returns and mutual funds gives the investor a diversified portfolio.
Those who have well knowledge in equity market they can go for equity
investments rather that investing in mutual funds because no control on the
expenses made by the fund manager.
The study will guide the new investor who wants to invest in equity
and mutual fund schemes by providing knowledge about how to measure the
risk
and return of particular scrip or mutual fund scheme. The study recommends
new investors to go for mutual funds rather than equities, because of high
risk and market instability.
Introduction to Equity Capital and Mutual Fund
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 Canbank 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.
It provided centre 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 equity-oriented 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 IPO’s 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 cam 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.
Concept of Equity Capital and Mutual Fund
The term Equity literally means the stock or ownership of a company. They
are also known as ordinary shares. The rate of dividend on equity shares
varies according to the amount of profit available and the intention of board
of directors. In the event of winding up of the company, equity shares can be
refunded only after all other claims, including those of preference shares for
the refund of their capital, have been met.
The Equity Capital Markets Group (ECM) oversees the Firm's activities in
the primary equity and equity-linked markets, as well as monetization
A mutual fund is a trust that pools the money of many investors -- its
shareholders -- to invest in a variety of different securities. Investments may
be in stocks, bonds, money market securities or some combination of these.
Those securities are professionally managed on behalf of the shareholders,
and each investor holds a pro rata share of the portfolio -- entitled to any
profits when the securities are sold, but subject to any losses in value as well.
For the individual investor, mutual funds provide the benefit of having
someone else manage your investments, take care of recordkeeping for your
account, and diversify your rupees over many different securities that may
not be available or affordable to you otherwise. Today, minimum investment
requirements on many funds are low enough that even the smallest investor
can get started in mutual funds.
A mutual fund, by its very nature, is diversified -- its assets are invested in
many different securities. Beyond that, there are many different types of
mutual funds with different objectives and levels of growth potential,
furthering your chances to diversify.
Many critics of mutual funds point out that scarcely over 20% of mutual
funds outperform the Standard and Poor's 500 Index. This means that nearly
80% of the time, an investor would have been more profitable by simply
buying equal shares in all 500 of the companies currently on the S&P 500.
Schemes of Mutual funds
Schemes according to Maturity Period:
A mutual fund scheme can be classified into open-ended scheme or close-
ended scheme depending on its maturity period.
Open-ended Scheme:
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 Scheme:
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.
Schemes according to Investment Objective:
A scheme can also be classified as growth scheme, income scheme, or
balanced scheme considering its investment objective. Such schemes may be
open-ended or close-ended schemes as described earlier. Such schemes may
be classified mainly as follows:
Balanced Scheme :
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.
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 is the case with
income or debt oriented schemes.
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 weightage comprising of an index. NAV’s 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.
Sector Specific Schemes:
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.
2. Voting rights:-
It is only the equity shareholders who enjoy voting rights on all the policy
matters of the company.
Equity shareholders enjoy many privileges and rights. For example, they can
vote at meetings, elect directors, control the directors to run the company
efficiently and profitably, look into the books and records of the company
and transfer or sell their shareholdings.
Advantages of Mutual Fund:
2. Diversification:-
3. Low Cost :-
If you tried to create your own diversified portfolio of 50 stocks, you'd need
at least Rs.1,00,000 and you'd pay thousands of rupees in commissions to
assemble your portfolio. A mutual fund lets you participate in a diversified
portfolio for as little as Rs.10,000, and sometimes less. And if you buy a no-
load fund, you pay or no sale charges to own them.
4. Convenience and Flexibility:-
You own just one security rather than many, yet enjoy the benefits of a
diversified portfolio and a wide range of services. Fund managers decide
what securities to trade, clip the bond coupons, collect the interest payments
and see that your dividends on portfolio securities are received and your
rights exercised.
Most funds now offer extensive websites with a host of shareholder services
for immediate access to information about your fund account. Or a phone
call puts you in touch with a trained investment specialist at a mutual fund
company who can provide information you can use to make your own
investment choices, assist you with buying and selling your fund shares.
6. Ease of Investing:-
You may open or add to your account and conduct transactions or business
with the fund by mail, telephone or bank wire. You can even arrange for
automatic monthly investments by authorizing electronic fund transfers from
your checking account in any amount and on a date you choose.
7. Total Liquidity, Easy Withdrawal:-
You can easily redeem your shares anytime you need cash by letter,
telephone, bank wire or check, depending on the fund. Your proceeds are
usually available within a day or two.
With no-load mutual funds, you can link your investment plans to future
individual and family needs -- and make changes as your life cycles change.
You can invest in growth funds for future college tuition needs, then move
to income funds for retirement, and adjust your investments as your needs
change throughout your life.
For investors who understand how to actively manage their portfolio, mutual
fund investments can be moved as market conditions change. You can place
your funds in equities when the market is on the upswing and move into
money market funds on the downswing or take any number of steps to
ensure that your investments are meeting your needs in changing market
climates.
10. Investor Information:-
If you want steady monthly income, many funds allow you to arrange for
monthly fixed checks to be sent to you, first by distributing some or all of
the income and then, if necessary, by dipping into your principal.
You can receive all dividend payments in cash. Or you can have them
reinvested in the fund free of charge, in which case the dividends are
automatically compounded. This can make a significant contribution to your
long-term investment results.
13. Automatic Direct Deposit:-
With your own portfolio of stocks and bonds, you would have to do your
own recordkeeping of purchases, sales, dividends, interest, short-term and
long-term gains and losses. Mutual funds provide confirmation of your
transactions and necessary tax forms to help you keep track of your
investments and tax reporting.
15. Safekeeping:-
When you own shares in a mutual fund, you own securities in many
companies without having to worry about keeping stock certificates in safe
deposit boxes or sending them by registered mail. You don't even have to
worry about handling the mutual fund stock certificates; the fund maintains
your account on its books and sends you periodic statements keeping track
of all your transactions.
16. Retirement and College Plans:-
Mutual funds are well suited to Individual Retirement Accounts and most
funds offer IRA-approved prototype and master plans for individual
retirement accounts (IRAs) and Keogh, 403(b), SEP-IRA and 401(k)
retirement plans.
The internet provides a fast, convenient way for investors to access financial
information. A host of services are available to the online investor including
direct access to no-load companies. Visit Company Links to access these
Companies.
With many funds, if you choose not to reinvest your stock or bond fund
dividends, you can arrange to have them swept into your money market fund
automatically. You get all the advantages of both accounts with no extra
effort.
These master accounts, available from many of the larger fund groups,
enable you to manage all your financial service needs under a single
umbrella from unlimited check writing and automatic bill paying to discount
brokerage and credit card accounts.
1. No refund of capital:-
Since equity shares cannot be refunded, excessive issue of such shares may
leads to overcapitalization, particularly when the earning capacity of the
company declining.
3. Manipulation of control:-
Since the equity shares have proportionate voting power, the company’s
management may be vitiated by manipulation of votes, clique-formation,
abuse of proxy rights etc.
4. High risk:-
Equity share holders cannot claim dividend as a matter of right, because the
decision to fit the rate of dividend on equity shares is vested in the Board of
Directors. Therefore investors as a class may find equity shares unsafe,
unattractive and unremunerative.
5. Unhealthy Speculation:-
During the period of boom, the market value of shares will go up, which
leads to unhealthy speculation in the stock market.
Disadvantages of Mutual Fund:
There are certainly some benefits to mutual fund investing, but you should
also be aware of the drawbacks associated with mutual funds.
1. No Insurance:-
Mutual funds, although regulated by the government, are not insured against
losses. The Federal Deposit Insurance Corporation (FDIC) only insures
against certain losses at banks, credit unions, and savings and loans, not
mutual funds. That means that despite the risk-reducing diversification
benefits provided by mutual funds, losses can occur, and it is possible
(although extremely unlikely) that you could even lose your entire
investment.
2. Dilution:-
Most mutual funds charge management and operating fees that pay for the
fund's management expenses (usually around 1.0% to 1.5% per year). In
addition, some mutual funds charge high sales commissions, 12b-1 fees, and
redemption fees. And some funds buy and trade shares so often that the
transaction costs add up significantly. Some of these expenses are charged
on an ongoing basis, unlike stock investments, for which a commission is
paid only when you buy and sell (see Investor Guide University: Fees and
Expenses).
4. Poor Performance:-
5. Loss of Control:-
The managers of mutual funds make all of the decisions about which
securities to buy and sell and when to do so. This can make it difficult for
you when trying to manage your portfolio. You also should remember that
you are trusting someone else with your money when you invest in a mutual
fund.
6. Trading Limitations:-
Although mutual funds are highly liquid in general, most mutual funds
(called open-ended funds) cannot be bought or sold in the middle of the
trading day. You can only buy and sell them at the end of the day, after
they've calculated the current value of their holdings.
7. Size:-
Some mutual funds are too big to find enough good investments. This is
especially true of funds that focus on small companies, given that there are
strict rules about how much of a single company a fund may own. If a
mutual fund has $5 billion to invest and is only able to invest an average of
$50 million in each, then it needs to find at least 100 such companies to
invest in; as a result, the fund might be forced to lower its standards when
selecting companies to invest in.
6. Are you aware of the risk and returns in Equity and Mutual funds?
Yes___
No___
Investors
Some 50 people were included in the survey.
14% of them had not invested in capital market but still they were aware
of the Equity market.
Type of investment
70% of the investors want an ideal investment of low risk and high
return.
20% of the investors are ready to take high risk if they are getting high
returns.
10% of the investors are there who don’t mind in low returns provided
risk is low.
90% of the investors are aware about mutual funds. The awareness is
maximum in service class people because of tax saving schemes in
mutual funds.
10% of the investors are still there who are really not aware about the
mutual funds. They have heard of it but don’t know what is it.
Which is better - Equity or Mutual Funds
48% of the investors were interested in Equity. The reasons given by the
people were high and good returns in the Equity, liberty to manage their
own portfolio, freedom in selecting the company in which they want to
invest in, no entry and exit load, etc.
30% of the investors were interested in Mutual Funds. The reasons given
by them were safer investment compared with Equity, low risk factor,
efficient fund manager who are handling Mutual funds, various user
friendly schemes to invest in Mutual Funds even if the amount is very
less, Tax exemption benefit by investing in Mutual Funds etc.
14% of the investors were there who don’t mint to invest either in equity
or mutual funds. They see profit in both.
8% of the investors were there who were not cleared about where to
invest in.
Risk and Return in Equity and Mutual Fund
62% of the investors were aware about the risk and returns in both
Equity and Mutual Funds.
38% were not aware about the risk and returns in Equity and Mutual
funds.
16% of the investors were aware of the various mutual funds schemes.
84% of the investors were not aware of the schemes. Though they have
heard about the Mutual Funds but knowledge about these Funds is not
there. People don’t even know the procedure of investment in the Mutual
Funds.
Mutual Funds
To name few of the Mutual Funds where in investors have invested their
money, they are as follows :
50% of the investors invest in tax savings funds. These are generally
service class people who are working in any service industry.
50% of the investors do not invest in tax savings funds. These are
generally business class or self employed people.
Investment in Equity