Mutual Fund
Content
1. INTRODUCTION
Normally investment is nothing but the saving done by the people for their future needs and wants. The invest in • • Physical Assets or Financial Assets.
Physical Assets
It constitutes Gold and Real Estate
Gold
It has essentially ornamental value; It comes really handy only when currencies crash; It requires high emotional detachment to sell.
Real Estate
It is having highly variable growth prospects; It requires high investment; In it patterns of booms and slumps are tough to figure out; It has too many documentation hassles.
Financial Assets
It constitutes the shares, government bonds, PPF, Bank FD’s or saving bank accounts, mutual fund. All these are dependent on risk, return and the liquidity they offer to the customers. A lot of thought can be made on mutual funds. Under this study I can have best knowledge of mutual fund sector.
1
OBJECTIVES
• To understand the need of customers
This is the main aim of my project that I have to study the need analysis adopted by Sharekhan Ltd. to attract more number of customers. The need is the main thing while investing in any kind of investment. So I have to consider various factors of investment like Age, Income, and Preference towards any specific scheme.
• To make awareness about mutual funds
In the process of completing the project I have to make the awareness amongst the people about the mutual fund schemes i.e. Equity, Balanced or Debt schemes.
• To analyze the customer’s preference towards investment i.e. equity, debt or balanced funds
While studying the need analysis adopted by Sharekhan Ltd. I also have to study the customer’s preference towards any specific scheme i.e. he is interested in which scheme to invest his money.
2
LIMITATIONS
While completing this project I suffer from some limitations.
Wrong mind set about Mutual Funds: The people in the Nanded city have a
wrong Mind set about the Mutual Funds as the money of it is invested in Share market so that they may face losses in investing mutual funds as the Share market is having negative impact on their mind. So that they do not want to invest their money in the mutual funds.
Lack of awareness: There is a lack of awareness as well as lack of proper knowledge
about mutual funds in people of Nanded city They are not ready to invest their money in mutual funds due to improper knowledge.
Lack of Money: This is one of the biggest limitations for investing in mutual funds
from a customer because some customers always gave the reasons of not having sufficient money to invest in the mutual funds. Because they invest their money in Insurance, bank deposits etc.
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1.2 RESEARCH METHODOLOGY
This thesis is a Descriptive type of the thesis. In this thesis I considered only the part of need analysis, and I also studied the topic of my Management Thesis from angle of 360 degree. This project comes under the Formal Research in which objectives are clearly defined and where researcher gathers whole information about all aspects of the project. There is a formal procedure to conduct research; I followed following steps of methodology to conduct the research. I used following methodology & data sources for my thesis
1)
Identify the Problem: While completing my thesis I find out the topic of my thesis.
Then I find out that what are the problems are there to complete it.
2)
Planning the research design: After identifying the problems of my thesis I
planned my all work properly and from that I made my way to complete my Management Thesis.
3)
Selecting the research Method: Once I made planning, I select my research
method i.e. my project is of descriptive type. In this I have to study the need analysis done by Sharekhan i.e. how Sharekhan is doing all the work while giving any scheme to the customer.
4)
Selecting the Sampling procedure: As I have to study the need analysis and its
impact on the sale of Sharekhan’s mutual fund products I have to interviewed some people related to Sharekhan, so it is not possible for me to interviewed all people in the Nanded city. So, I decided to choose the Simple Random Method for my thesis.
5)
Data Collection: As my thesis is a descriptive one for completing the thesis, I have to
interview some people and have to collect the data from those persons. So, for that purpose I have collected the data from near about 200 people in the Nanded city.
6)
Evaluating the Data: After collecting the data I have to evaluate the data and to
draw the conclusions for getting the specific answers.
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7)
Preparing the research report: At last after all the above steps and evaluating the
collected data and getting the specific answers I prepared the Research report and submit it to my Faculty Supervisor.
I made the objectives for my Management thesis that, what I have to learn from that project and what I have to find out. After preparing the objectives I prepared the relevant questionnaire suitable for my topic and from which I am able to collect the primary data. After preparing the questionnaire which is suitable for collecting the primary data I tried to collect the data from the Secondary data also, by using the Internet, Research Papers, pamphlets and the broachers of the company information. I analyze the collected data by using the MS-Excel Sheet and MS-Word. I also used the various tools and the techniques to complete my project report. After collecting the data and using the various tools and the techniques I drawn the conclusion and prepare the final report of my Management Thesis and submitted it to my Faculty Supervisor Dr. U. B. Dubey.
Sources of Information
While collecting the data for my thesis I used two types of Sources:
Primary sources
The Primary data means that the data is collected by the person by himself. In this, data is collected directly from respondents using questionnaire, direct observation & interview techniques. So for this purpose I visited 200 people in the Nanded city. I interviewed them and asked them various questions related to my thesis and try to find out the actual result.
Secondary sources
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The secondary data is that type of data that is not collected by the actual person. This type of the data is already existed in the form of Internet, Research report, Journals, websites, books and also the pamphlets, and the broachers made by the company for their advertisement, etc.
2. MUTUAL FUND
Definition of mutual funds
A mutual fund is a pool of money, collected from investors, and is invested according to certain investment objectives. OR Mutual Funds are a large pool of resources which are invested by professionals (fund managers) in a portfolio, to optimize the returns for a given level of risk.
Important Phases of Mutual Funds in India
The history of mutual funds in India can be divided into 5 important phases:
a. 1963-1987: The Unit Trust of India was the sole player in the industry. Created by an
Act of Parliament in 1963, UTI launches its first product, the Unit Scheme 1964, which is even today the single largest mutual fund scheme. UTI created a number of products such as monthly income plans, children’s plans, equity-oriented schemes and offshore funds during this period. UTI managed assets of Rs.6700 Crore at the end of this phase.
b. 1987-1993: In 1987 public sector banks and financial institutions entered in the mutual
fund industry. SBI mutual fund was the first non-UTI fund to be set up in 1987. Significant shift of investors from deposits to mutual fund industry happened during this period. Most funds were growth-oriented closed-ended funds. By the end of this period, assets under UTI’s management grow to Rs.38, 247 Crore and public sector funds managed Rs.8750 Crore.
c. 1993-1996: In 1993, the mutual fund industry was open to private sector players, both
Indian and foreign. SEBI’s first set of regulations for the industry were formulated in 1993, and substantially revised in 1996. Significant innovations in serving, product
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design and information disclosure happened in this phase, mostly initiated by private sector players.
d. 1996-1999: The implementation of new SEBI regulations and the restructuring of the
mutual fund industry led to rapid asset growth, Bank mutual funds were re-cast according to the SEBI recommended structure, and UTI came under voluntary SEBI supervision.
e. 1999-2002: This phase was marked by very rapid growth in the industry, and
significant increase in market shares of private sector players. Assets crossed Rs.1, 00,000 Crores. The tax break offered to mutual funds in 1999 created arbitrage opportunities for a number of institutional players. Bond funds and liquid funds registered the highest growth in this period, accounting for nearly 60% of the assets. UTI’s share of the industry dropped to nearly 50%.
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2.1 ADVANTAGES AND DISADVANTAGES
Advantages 1. Professional management:
You avail of the services of experienced and skilled professionals who are backed by a dedicated research team which analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. 2. 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 less money than you can do on your own.
3. Convenient Administration:
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and unnecessary follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
4. 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. 5. Low costs: 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. 6. Liquidity: In open-ended schemes, you can get your money back promptly at Net Asset Value (NAV) related prices from the Mutual Fund itself. With close-ended schemes, you can sell your
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units on a stock exchange at the prevailing market price or avail of the facility of repurchase through Mutual Funds at NAV related prices which some close-ended and interval schemes offer you periodically.
7. Transparency:
You 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. 8. Flexibility: Through features such as Systematic Investment Plan (SIP), Systematic Withdrawal Plan (SWP) and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.
9. Choice of Schemes:
Mutual Fund offer a variety of schemes to suit your varying needs over a lifetime. 10. Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of the investors. The operations of Mutual Funds are regularly monitored by SEBI.
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Disadvantages
1. No control over costs: Since investors do not directly monitor the fund’s operations
they cannot control the costs effectively. Regulators therefore usually limit the expenses of mutual funds.
2. No tailor-made portfolios: Mutual fund portfolios are created and marketed by
AMCs, into which investors invest. They cannot create tailor made portfolios.
3. Managing a portfolio of funds: As the number of mutual funds increases, in order
to tailor a portfolio for him, an investor may be holding a portfolio of funds, with the costs of monitoring them and using them, being incurred by him.
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2.2 TYPES OF MUTUAL FUNDS
Mutual funds can be open ended or closed end, • • • • • In an open-ended fund, sale and repurchase of units happen on a continuous basis, at NAV related prices, from the fund itself. The corpus of open-ended funds, therefore, changes every day. A closed-end fund offers units for sale only in the NFO. It is then listed in the market. Investors wanting to buy or sell the units have to do so in the stock markets. Usually closed-end funds sell at a discount to NAV. The corpus of a closed-end fund remains unchanged.
There are also sub-types of mutual funds like
1. Equity Funds
Total amount of money is invested in share market. Long term investment High risk ,High return
2. Balance Funds
Total amount of money is invested in Equity and debt market Ratio will be 50-50 or 60-40 (depend upon type of fund) Medium risk , Medium returns
3. Debt Funds
Total amount of money invested in Govt. securities like FD, CP.
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Suitable for senior citizen. Low risk, Low return
3. INDUSTRY PROFILE
Worldwide Mutual Fund or Unit Trust as it is referred to in some parts of the world, has a long and successful history. The popularity of mutual funds has increased manifold in developed financial markets, like the United States. As at the end of March 2008, in the US alone there were 8064 mutual funds with total assets of about US$11.734 trillion (Rs. 470 lakh crores). In India the mutual fund industry started with the setting up of the erstwhile Unit Trust of India in 1963.Public sector banks and financial institutions were allowed to to establish mutual funds in 1987. Since 1993, private sector and foreign institutions were permitted to set up mutual funds. In February 2003, following the repeal of the Unit trust of India Act 1963 the erstwhile UTI was bifurcated into two separate entities viz. The specified Undertaking of the Unit Trust of India, representing broadly, the assets of US 64 scheme, schemes with assured returns and certain other schemes and UTI mutual fund conforming to SEBI Mutual Fund Regulations. As at the end of March 2008, there were 33 mutual funds, which managed assets of Rs. 5, 05,152 crores (US $ 126 Billion) under 956 schemes. The fast growing industry is regulated by the Securities and Exchange Board of India (SEBI). Growth of Assets (Rs. in Crores)
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60 0 000 50 0 000
32 63 88 50 51 52
40 0 000
23 18 62
30 0 000
13 96 16 14 95 54
20 0 000
13 45 5 61 02 8 68 47 2
10 0 000 0 1 9 98
199 4
1 9 99
20 04
20 05
20 06
2 7 00
2 8 00
Number of Schemes
1000 956 900 800 756 700 592 600 500 451 403 400 300 277 200 167 100 0 21 1989 1994 1999 2004 2005 2006 2007 2008
Annual Data April 2007 – March 2008
•
612 new schemes were launched during the year as against 414 in the previous year. The amount mobilized was Rs.1, 60, 773 Crores against Rs.1, 40,298 Crores in the previous year.
•
Total Funds mobilized during the year stood at Rs.44, 64,376 Crores as against Rs.19, 38, 592 Crores in the last year representing an increase of 130%.
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• • •
Redemptions at Rs.43, 10,575 Crores were 134% higher than the redemptions of Rs.18, 44,512 Crores in the previous year. On a net basis, there was an inflow of Rs.1, 53,801 Crores as compared to Rs.94, 080 Crores in the last year registering increase of 63%. The Assets Under Management as on March 31, 2008 stood at Rs.5, 05,152 Crores as against Rs.3, 26, 388 Crores as at the end of the previous year, registering an increase of 55 % over the year.
Source: www.amfiindia.com
3.1 COMPANY PROFILE
Sharekhan is a firm, which is working under SSKI (S. S. Kantilal Ishwarlal Securities Ltd.). SSKI was founded in 1922. SSKI is One of India’s Oldest Brokerage Houses Having Eight Decades of Experience into: • • • Institutional Broking Investment Banking Retail Broking
It is one of the Founding members of the Stock Exchange, Mumbai and Pioneer Institutional Broker. SSKI Entered into Retail Broking in 1985. Share khan is the Retail Broking Arm of the BIG 80 Years old organization i.e. of SSKI and “Sharekhan” is the Brand Name given to its Retail Business. SSKI carries out its Retail Broking Activities under “Sharekhan” Brand Name. Sharekhan Outlets act as Full Service Investment Solutions Provider, providing you wide range of services like – • • Equity & Derivatives Trading on NSE and BSE Online Trading
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• • • • •
•
Commodities Trading on MCX & NCDEX Portfolio Management Services Depository Services IPO Services Wide Range of Customized Research Products Uniform Service Standards Mutual Funds
•
Offerings of the Sharekhan:
Sharekhan offers both Offline and online mutual funds. But now a days it mostly concentrates on online mutual funds through which a customer can buy it at instant from any part of the globe trough website. It does not take into account any type of physical restriction of going to the broker for carrying out a transaction or any type of settlement of payment. It facilitates the customer a speedy and hassle free transaction.
Products and services offered by Sharekhan:
Sharekhan offers 2 types of mutual funds according to the requirements of the investors that are as follows: 1) 2) Online Selling : Through website Offline Selling: Through broker or agent.
Bank Connection
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Sharekhan has affiliation with 8 banks, which allows its customers to enjoy the facility of instant buying of mutual funds and also online trading of share market. • • • • • • • • HDFC BANK UTI BANK CITI BANK ICICI BANK OBC BANK UNION BANK INDUSAND BANK IDBI BANK
Dial-N-Trade
It is also an exclusive service available to all Sharekhan customers for trading in shares via the telephone. On dialing the toll free number 1800-22-7500 the customer will be directed to a tele broker who will buy or sell shares for him.
After hour orders
Sharekhan customers also enjoy the facility of placing orders even after the trading hours, and the orders are executed as soon as the market opens.
Trade in commodity
Sharekhan also trade in commodities like Bullion: Gold / Silver and Agricultural commodities through Sharekhan Commodity Pvt. Ltd. which are a wholly owned subsidiary of its parent SSKI.
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Research team of Sharekhan
Research and in-depth knowledge of markets provide better than speculations or reacting to rumors. Research team provides knowledge to their customers about market condition.
•
In morning they provide “Eagle Eye” which tells about how the market will be In afternoon they provide “High Noon” which tells that up to that time how was
in whole day.
•
the market and what about the remaining time what will be the condition of the market.
•
After the market they analyze the market summery of the whole day and give
idea about next day market.
Mobile-N-Trade facility
Now Sharekhan is providing the facility that their customers can do trading with the help of their mobile handset. For that purpose they have to pay some extra charge to activate that facility.
Importance of the research to the organization
1) The organization gets the competitive information about the pricing strategy of their competitor’s. 2) Through that they can establish their new pricing strategy to gain competitive advantage. 3) They came to know the effects of using the pricing strategy in the market.
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3.2 SBI MUTUAL FUND
SBI Funds Management Ltd. is the investment manager of SBI Mutual Fund. SBI Mutual Fund has been constituted as a trust, sponsored by State Bank India. Today the Fund has an investor base of over 2.8 million spread over 23 schemes. With a large network of collecting branches and investor service centers, SBI Mutual Fund constantly endeavors to get closer to its growing family of investors. SBI is the largest public sector Bank in India with 8,836 branches all over India. SBI is the leader in providing loans to trade & industry. It also provides related services, which generate significant fee-based income. It has also identified project finance and consumer banking as key areas.
No. of schemes No. of schemes including options Equity Schemes
55 159 34
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Debt Schemes Short term debt Schemes Equity & Debt Money Market Gilt Fund
97 11 5 0 12
Source: www.mutualfundsindia.com
3.3 UTI MUTUAL FUND
UTI Mutual Fund is managed by UTI Asset Management Company Private Limited (Established: Jan 14, 2003) who has been appointed by the UTI Trustee Company Private Limited for managing the schemes of UTI Mutual Fund and the schemes transferred / migrated from UTI Mutual Fund.
No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes Equity & Debt Money Market
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108 328 59 238 10 9 0
Gilt Fund
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Source: www.mutualfundsindia.com
3.4 HDFC Mutual Fund
HDFC Asset Management Company Limited (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the Mutual Fund by SEBI on June 30, 2000. The sponsor HDFC was incorporated in 1977 as first specialized housing finance institution in India. HDFC provides financial assistance to individuals, corporate and developers for the purchase and construction of residential housing. It also provides property-related services, training and consultancy. In the mutual fund venture, HDFC has tied up with Standard Life, one of the leading Insurance companies in the United Kingdom, having vast experience in management of funds. HDFC has developed a strong and dedicated team of agents that market its fixed deposit products. These key partners would constitute the backbone of the marketing and distribution network of Mutual Fund and will remain a central theme of the organizational framework in times to come.
No. of schemes No. of schemes including options Equity Schemes
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89 363 34
Debt Schemes Short term debt Schemes Equity & Debt Money Market Gilt Fund
305 14 6 0 4
Source: www.mutualfundsindia.com
3.5 ICICI Mutual Fund
ICICI Prudential Asset Management Company Ltd. is a 51:49 joint venture between ICICI Bank, a well-known and trusted name in financial services in India and Prudential Plc, one of UK’s largest players in the financial services sectors. ICICI Prudential Asset Management Company Limited, in a span of just over nine years, has forged a position of preeminence in the Indian Mutual Fund industry as one of the largest asset management companies in the country with average assets under management of around Rs. 54321.87 Crores (as on March 31,2008)(Source: www.amfiindia.com). The Company manages a comprehensive range of schemes to meet the varying investment needs of its investors spread in around 265 cities in the country.
No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes
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137 459 50 351 25
Equity & Debt Money Market Gilt Fund
10 0 7
Source: www.mutualfundsindia.com
EMPIRICAL ANALYSIS
On the basis of raw data which I have collected for my thesis that I analyzed that most of salaried persons are invested money in various skims like salaried employees followed by others like college students, businessmen and house wife respectively. Most of the people of Nanded invest money more and more in banks like F.D. then after insurance mutual fund, share market and gold etc. Due to minimization in gold rates nowadays only of the population is investing their money in Gold. Most of the people prefer some fund for investment like Equity funds are the main funds who are giving tough competition compared to balanced and debt funds in Nanded city, Share khan is one of the fastest growing broking firms in India. They are using various strategies to capture the market. Debt funds are also doing well in these conditions because of continuous negative trend in the market. Balanced funds are having fewer shares in the market According to preferences it is observed that younger customers prefer equity funds the age of 21 to 30 and also it is found that balanced funds and debt funds are less the persons prefer those who having age 31 to 40as compared to equity funds. The middle aged customers are risk averse one so they are less interested towards the balanced and debt funds rather than equity funds.
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FINDINGS AND SUGGESTIONS
Findings: Analysis of customers:
32 % 46%
S alariedEm p B usinessm en H ouseWife Others
10% 12 %
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For the analysis I selected simple random sampling so in that I have selected more salaried employees (46%) followed by others (32%) like college students, businessmen and house wife respectively.
Choice of preference for Investment of customers:
1) People in Nanded city are not aware about the mutual funds (38%) and share market,
they also not aware about the advantages of investing money in mutual funds and share market. So overall only 17% of the population invests their money in mutual funds and share market also.
2) 37% of the people in the Nanded city are interested to invest their money in Bank
deposits, due to increasing rates and it is also very safe instrument.
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3) The 23% people in Nanded invest their money in Insurance, because they are not ready
to take the risk. They want the safety to their life.
4) Due to minimization in gold rates nowadays only 7% of the population is investing their
money in Gold.
Preference of mutual fund schemes by customers:
1) Equity funds (49%) are the main funds who are giving tough competition compared to
balanced and debt funds in Nanded city,
2) Sharekhan is one of the fastest growing broking firms in India. They are using various
strategies to capture the market.
3) They are selling various types of mutual funds like SBI, UTI, ICICI, HDFC etc.
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4) Debt funds (40%) are also doing well in these conditions because of continuous negative trend in the market.
5) Balanced funds (11%) are having fewer shares in the market.
Preference of customers according to age:
14 14 12 10 8 6 4 2 0 21-30 31-40 > 40 3 2 0 0 0 3 Equity Balance 4 Debt
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1) According to preferences it is observed that younger customers prefer equity funds and also it is found that balanced funds and debt funds are less as compared to equity funds. 2) The middle aged customers are risk averse one so they are less interested towards the balanced and debt funds rather than equity funds.
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SUGGESTIONS
From this Project I find out that the most of the customers in the Nanded city are not investing their money in the Mutual funds due to the lack of the Knowledge and the Awareness about the Mutual funds. But those who have knowledge about the mutual funds some of them are investing their money in the Share Market rather than investing it in mutual funds The people are giving more preference to safe instruments of investments like bank FD’s and Insurance rather than mutual funds. After that most of the customers are selecting equity mutual funds rather than balanced and debt funds in the negative trend of the market. Then I also find out that Nanded is having most of the customers of middle class so that the investment pattern of them are the safe instruments like bank FD’s and Insurance rather than share market and mutual funds. So I suggest that Sharekhan should give their preference to spread the knowledge about mutual funds to most of the customers and tackle the situation of non investors.
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RECOMMENDATIONS
• •
As all we know that Sharekhan is one of the Stock Broking Firm. Most of the people in the Nanded city are unaware about mutual funds so, I think that Sharekhan should organize some knowledge based programs to attract those types of customers.
•
Sharekhan should have to provide more facilities and services for convenience of the customers so that they remain loyal with Sharekhan and be able to give more number of the customers through references.
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CONCLUSIONS
•
I understood the need analysis of customers
This is the main aim of my thesis, in that I have studied the need analysis adopted by Sharekhan Ltd. to attract more number of customers. The need is the main thing while investing in any kind of investment. So I have to understand various factors of investment like Age, Income, and Preference towards any specific scheme.
• I made awareness about mutual funds
In the process of completing the thesis I made the awareness amongst the people about the mutual fund schemes i.e. Equity, Balanced or Debt schemes.
• I analyze the customer’s preference towards investment i.e. equity, debt or balanced funds
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While studying the need analysis adopted by Sharekhan Ltd. I also have to study the customer’s preference towards any specific scheme i.e. he is interested in which scheme to invest his money. So I come to know that most customers prefers Equity funds rather than balanced or debt funds.
30
Normally investment is nothing but the saving done by the people for their future needs and wants. The invest in • • Physical Assets or Financial Assets.
Physical Assets
It constitutes Gold and Real Estate
Gold
It has essentially ornamental value; It comes really handy only when currencies crash; It requires high emotional detachment to sell.
Real Estate
It is having highly variable growth prospects; It requires high investment; In it patterns of booms and slumps are tough to figure out; It has too many documentation hassles.
Financial Assets
It constitutes the shares, government bonds, PPF, Bank FD’s or saving bank accounts, mutual fund. All these are dependent on risk, return and the liquidity they offer to the customers. A lot of thought can be made on mutual funds. Under this study I can have best knowledge of mutual fund sector.
1
OBJECTIVES
• To understand the need of customers
This is the main aim of my project that I have to study the need analysis adopted by Sharekhan Ltd. to attract more number of customers. The need is the main thing while investing in any kind of investment. So I have to consider various factors of investment like Age, Income, and Preference towards any specific scheme.
• To make awareness about mutual funds
In the process of completing the project I have to make the awareness amongst the people about the mutual fund schemes i.e. Equity, Balanced or Debt schemes.
• To analyze the customer’s preference towards investment i.e. equity, debt or balanced funds
While studying the need analysis adopted by Sharekhan Ltd. I also have to study the customer’s preference towards any specific scheme i.e. he is interested in which scheme to invest his money.
2
LIMITATIONS
While completing this project I suffer from some limitations.
Wrong mind set about Mutual Funds: The people in the Nanded city have a
wrong Mind set about the Mutual Funds as the money of it is invested in Share market so that they may face losses in investing mutual funds as the Share market is having negative impact on their mind. So that they do not want to invest their money in the mutual funds.
Lack of awareness: There is a lack of awareness as well as lack of proper knowledge
about mutual funds in people of Nanded city They are not ready to invest their money in mutual funds due to improper knowledge.
Lack of Money: This is one of the biggest limitations for investing in mutual funds
from a customer because some customers always gave the reasons of not having sufficient money to invest in the mutual funds. Because they invest their money in Insurance, bank deposits etc.
3
1.2 RESEARCH METHODOLOGY
This thesis is a Descriptive type of the thesis. In this thesis I considered only the part of need analysis, and I also studied the topic of my Management Thesis from angle of 360 degree. This project comes under the Formal Research in which objectives are clearly defined and where researcher gathers whole information about all aspects of the project. There is a formal procedure to conduct research; I followed following steps of methodology to conduct the research. I used following methodology & data sources for my thesis
1)
Identify the Problem: While completing my thesis I find out the topic of my thesis.
Then I find out that what are the problems are there to complete it.
2)
Planning the research design: After identifying the problems of my thesis I
planned my all work properly and from that I made my way to complete my Management Thesis.
3)
Selecting the research Method: Once I made planning, I select my research
method i.e. my project is of descriptive type. In this I have to study the need analysis done by Sharekhan i.e. how Sharekhan is doing all the work while giving any scheme to the customer.
4)
Selecting the Sampling procedure: As I have to study the need analysis and its
impact on the sale of Sharekhan’s mutual fund products I have to interviewed some people related to Sharekhan, so it is not possible for me to interviewed all people in the Nanded city. So, I decided to choose the Simple Random Method for my thesis.
5)
Data Collection: As my thesis is a descriptive one for completing the thesis, I have to
interview some people and have to collect the data from those persons. So, for that purpose I have collected the data from near about 200 people in the Nanded city.
6)
Evaluating the Data: After collecting the data I have to evaluate the data and to
draw the conclusions for getting the specific answers.
4
7)
Preparing the research report: At last after all the above steps and evaluating the
collected data and getting the specific answers I prepared the Research report and submit it to my Faculty Supervisor.
I made the objectives for my Management thesis that, what I have to learn from that project and what I have to find out. After preparing the objectives I prepared the relevant questionnaire suitable for my topic and from which I am able to collect the primary data. After preparing the questionnaire which is suitable for collecting the primary data I tried to collect the data from the Secondary data also, by using the Internet, Research Papers, pamphlets and the broachers of the company information. I analyze the collected data by using the MS-Excel Sheet and MS-Word. I also used the various tools and the techniques to complete my project report. After collecting the data and using the various tools and the techniques I drawn the conclusion and prepare the final report of my Management Thesis and submitted it to my Faculty Supervisor Dr. U. B. Dubey.
Sources of Information
While collecting the data for my thesis I used two types of Sources:
Primary sources
The Primary data means that the data is collected by the person by himself. In this, data is collected directly from respondents using questionnaire, direct observation & interview techniques. So for this purpose I visited 200 people in the Nanded city. I interviewed them and asked them various questions related to my thesis and try to find out the actual result.
Secondary sources
5
The secondary data is that type of data that is not collected by the actual person. This type of the data is already existed in the form of Internet, Research report, Journals, websites, books and also the pamphlets, and the broachers made by the company for their advertisement, etc.
2. MUTUAL FUND
Definition of mutual funds
A mutual fund is a pool of money, collected from investors, and is invested according to certain investment objectives. OR Mutual Funds are a large pool of resources which are invested by professionals (fund managers) in a portfolio, to optimize the returns for a given level of risk.
Important Phases of Mutual Funds in India
The history of mutual funds in India can be divided into 5 important phases:
a. 1963-1987: The Unit Trust of India was the sole player in the industry. Created by an
Act of Parliament in 1963, UTI launches its first product, the Unit Scheme 1964, which is even today the single largest mutual fund scheme. UTI created a number of products such as monthly income plans, children’s plans, equity-oriented schemes and offshore funds during this period. UTI managed assets of Rs.6700 Crore at the end of this phase.
b. 1987-1993: In 1987 public sector banks and financial institutions entered in the mutual
fund industry. SBI mutual fund was the first non-UTI fund to be set up in 1987. Significant shift of investors from deposits to mutual fund industry happened during this period. Most funds were growth-oriented closed-ended funds. By the end of this period, assets under UTI’s management grow to Rs.38, 247 Crore and public sector funds managed Rs.8750 Crore.
c. 1993-1996: In 1993, the mutual fund industry was open to private sector players, both
Indian and foreign. SEBI’s first set of regulations for the industry were formulated in 1993, and substantially revised in 1996. Significant innovations in serving, product
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design and information disclosure happened in this phase, mostly initiated by private sector players.
d. 1996-1999: The implementation of new SEBI regulations and the restructuring of the
mutual fund industry led to rapid asset growth, Bank mutual funds were re-cast according to the SEBI recommended structure, and UTI came under voluntary SEBI supervision.
e. 1999-2002: This phase was marked by very rapid growth in the industry, and
significant increase in market shares of private sector players. Assets crossed Rs.1, 00,000 Crores. The tax break offered to mutual funds in 1999 created arbitrage opportunities for a number of institutional players. Bond funds and liquid funds registered the highest growth in this period, accounting for nearly 60% of the assets. UTI’s share of the industry dropped to nearly 50%.
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2.1 ADVANTAGES AND DISADVANTAGES
Advantages 1. Professional management:
You avail of the services of experienced and skilled professionals who are backed by a dedicated research team which analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. 2. 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 less money than you can do on your own.
3. Convenient Administration:
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and unnecessary follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.
4. 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. 5. Low costs: 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. 6. Liquidity: In open-ended schemes, you can get your money back promptly at Net Asset Value (NAV) related prices from the Mutual Fund itself. With close-ended schemes, you can sell your
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units on a stock exchange at the prevailing market price or avail of the facility of repurchase through Mutual Funds at NAV related prices which some close-ended and interval schemes offer you periodically.
7. Transparency:
You 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. 8. Flexibility: Through features such as Systematic Investment Plan (SIP), Systematic Withdrawal Plan (SWP) and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.
9. Choice of Schemes:
Mutual Fund offer a variety of schemes to suit your varying needs over a lifetime. 10. Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of the investors. The operations of Mutual Funds are regularly monitored by SEBI.
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Disadvantages
1. No control over costs: Since investors do not directly monitor the fund’s operations
they cannot control the costs effectively. Regulators therefore usually limit the expenses of mutual funds.
2. No tailor-made portfolios: Mutual fund portfolios are created and marketed by
AMCs, into which investors invest. They cannot create tailor made portfolios.
3. Managing a portfolio of funds: As the number of mutual funds increases, in order
to tailor a portfolio for him, an investor may be holding a portfolio of funds, with the costs of monitoring them and using them, being incurred by him.
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2.2 TYPES OF MUTUAL FUNDS
Mutual funds can be open ended or closed end, • • • • • In an open-ended fund, sale and repurchase of units happen on a continuous basis, at NAV related prices, from the fund itself. The corpus of open-ended funds, therefore, changes every day. A closed-end fund offers units for sale only in the NFO. It is then listed in the market. Investors wanting to buy or sell the units have to do so in the stock markets. Usually closed-end funds sell at a discount to NAV. The corpus of a closed-end fund remains unchanged.
There are also sub-types of mutual funds like
1. Equity Funds
Total amount of money is invested in share market. Long term investment High risk ,High return
2. Balance Funds
Total amount of money is invested in Equity and debt market Ratio will be 50-50 or 60-40 (depend upon type of fund) Medium risk , Medium returns
3. Debt Funds
Total amount of money invested in Govt. securities like FD, CP.
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Suitable for senior citizen. Low risk, Low return
3. INDUSTRY PROFILE
Worldwide Mutual Fund or Unit Trust as it is referred to in some parts of the world, has a long and successful history. The popularity of mutual funds has increased manifold in developed financial markets, like the United States. As at the end of March 2008, in the US alone there were 8064 mutual funds with total assets of about US$11.734 trillion (Rs. 470 lakh crores). In India the mutual fund industry started with the setting up of the erstwhile Unit Trust of India in 1963.Public sector banks and financial institutions were allowed to to establish mutual funds in 1987. Since 1993, private sector and foreign institutions were permitted to set up mutual funds. In February 2003, following the repeal of the Unit trust of India Act 1963 the erstwhile UTI was bifurcated into two separate entities viz. The specified Undertaking of the Unit Trust of India, representing broadly, the assets of US 64 scheme, schemes with assured returns and certain other schemes and UTI mutual fund conforming to SEBI Mutual Fund Regulations. As at the end of March 2008, there were 33 mutual funds, which managed assets of Rs. 5, 05,152 crores (US $ 126 Billion) under 956 schemes. The fast growing industry is regulated by the Securities and Exchange Board of India (SEBI). Growth of Assets (Rs. in Crores)
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60 0 000 50 0 000
32 63 88 50 51 52
40 0 000
23 18 62
30 0 000
13 96 16 14 95 54
20 0 000
13 45 5 61 02 8 68 47 2
10 0 000 0 1 9 98
199 4
1 9 99
20 04
20 05
20 06
2 7 00
2 8 00
Number of Schemes
1000 956 900 800 756 700 592 600 500 451 403 400 300 277 200 167 100 0 21 1989 1994 1999 2004 2005 2006 2007 2008
Annual Data April 2007 – March 2008
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612 new schemes were launched during the year as against 414 in the previous year. The amount mobilized was Rs.1, 60, 773 Crores against Rs.1, 40,298 Crores in the previous year.
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Total Funds mobilized during the year stood at Rs.44, 64,376 Crores as against Rs.19, 38, 592 Crores in the last year representing an increase of 130%.
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• • •
Redemptions at Rs.43, 10,575 Crores were 134% higher than the redemptions of Rs.18, 44,512 Crores in the previous year. On a net basis, there was an inflow of Rs.1, 53,801 Crores as compared to Rs.94, 080 Crores in the last year registering increase of 63%. The Assets Under Management as on March 31, 2008 stood at Rs.5, 05,152 Crores as against Rs.3, 26, 388 Crores as at the end of the previous year, registering an increase of 55 % over the year.
Source: www.amfiindia.com
3.1 COMPANY PROFILE
Sharekhan is a firm, which is working under SSKI (S. S. Kantilal Ishwarlal Securities Ltd.). SSKI was founded in 1922. SSKI is One of India’s Oldest Brokerage Houses Having Eight Decades of Experience into: • • • Institutional Broking Investment Banking Retail Broking
It is one of the Founding members of the Stock Exchange, Mumbai and Pioneer Institutional Broker. SSKI Entered into Retail Broking in 1985. Share khan is the Retail Broking Arm of the BIG 80 Years old organization i.e. of SSKI and “Sharekhan” is the Brand Name given to its Retail Business. SSKI carries out its Retail Broking Activities under “Sharekhan” Brand Name. Sharekhan Outlets act as Full Service Investment Solutions Provider, providing you wide range of services like – • • Equity & Derivatives Trading on NSE and BSE Online Trading
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• • • • •
•
Commodities Trading on MCX & NCDEX Portfolio Management Services Depository Services IPO Services Wide Range of Customized Research Products Uniform Service Standards Mutual Funds
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Offerings of the Sharekhan:
Sharekhan offers both Offline and online mutual funds. But now a days it mostly concentrates on online mutual funds through which a customer can buy it at instant from any part of the globe trough website. It does not take into account any type of physical restriction of going to the broker for carrying out a transaction or any type of settlement of payment. It facilitates the customer a speedy and hassle free transaction.
Products and services offered by Sharekhan:
Sharekhan offers 2 types of mutual funds according to the requirements of the investors that are as follows: 1) 2) Online Selling : Through website Offline Selling: Through broker or agent.
Bank Connection
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Sharekhan has affiliation with 8 banks, which allows its customers to enjoy the facility of instant buying of mutual funds and also online trading of share market. • • • • • • • • HDFC BANK UTI BANK CITI BANK ICICI BANK OBC BANK UNION BANK INDUSAND BANK IDBI BANK
Dial-N-Trade
It is also an exclusive service available to all Sharekhan customers for trading in shares via the telephone. On dialing the toll free number 1800-22-7500 the customer will be directed to a tele broker who will buy or sell shares for him.
After hour orders
Sharekhan customers also enjoy the facility of placing orders even after the trading hours, and the orders are executed as soon as the market opens.
Trade in commodity
Sharekhan also trade in commodities like Bullion: Gold / Silver and Agricultural commodities through Sharekhan Commodity Pvt. Ltd. which are a wholly owned subsidiary of its parent SSKI.
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Research team of Sharekhan
Research and in-depth knowledge of markets provide better than speculations or reacting to rumors. Research team provides knowledge to their customers about market condition.
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In morning they provide “Eagle Eye” which tells about how the market will be In afternoon they provide “High Noon” which tells that up to that time how was
in whole day.
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the market and what about the remaining time what will be the condition of the market.
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After the market they analyze the market summery of the whole day and give
idea about next day market.
Mobile-N-Trade facility
Now Sharekhan is providing the facility that their customers can do trading with the help of their mobile handset. For that purpose they have to pay some extra charge to activate that facility.
Importance of the research to the organization
1) The organization gets the competitive information about the pricing strategy of their competitor’s. 2) Through that they can establish their new pricing strategy to gain competitive advantage. 3) They came to know the effects of using the pricing strategy in the market.
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3.2 SBI MUTUAL FUND
SBI Funds Management Ltd. is the investment manager of SBI Mutual Fund. SBI Mutual Fund has been constituted as a trust, sponsored by State Bank India. Today the Fund has an investor base of over 2.8 million spread over 23 schemes. With a large network of collecting branches and investor service centers, SBI Mutual Fund constantly endeavors to get closer to its growing family of investors. SBI is the largest public sector Bank in India with 8,836 branches all over India. SBI is the leader in providing loans to trade & industry. It also provides related services, which generate significant fee-based income. It has also identified project finance and consumer banking as key areas.
No. of schemes No. of schemes including options Equity Schemes
55 159 34
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Debt Schemes Short term debt Schemes Equity & Debt Money Market Gilt Fund
97 11 5 0 12
Source: www.mutualfundsindia.com
3.3 UTI MUTUAL FUND
UTI Mutual Fund is managed by UTI Asset Management Company Private Limited (Established: Jan 14, 2003) who has been appointed by the UTI Trustee Company Private Limited for managing the schemes of UTI Mutual Fund and the schemes transferred / migrated from UTI Mutual Fund.
No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes Equity & Debt Money Market
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108 328 59 238 10 9 0
Gilt Fund
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Source: www.mutualfundsindia.com
3.4 HDFC Mutual Fund
HDFC Asset Management Company Limited (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the Mutual Fund by SEBI on June 30, 2000. The sponsor HDFC was incorporated in 1977 as first specialized housing finance institution in India. HDFC provides financial assistance to individuals, corporate and developers for the purchase and construction of residential housing. It also provides property-related services, training and consultancy. In the mutual fund venture, HDFC has tied up with Standard Life, one of the leading Insurance companies in the United Kingdom, having vast experience in management of funds. HDFC has developed a strong and dedicated team of agents that market its fixed deposit products. These key partners would constitute the backbone of the marketing and distribution network of Mutual Fund and will remain a central theme of the organizational framework in times to come.
No. of schemes No. of schemes including options Equity Schemes
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89 363 34
Debt Schemes Short term debt Schemes Equity & Debt Money Market Gilt Fund
305 14 6 0 4
Source: www.mutualfundsindia.com
3.5 ICICI Mutual Fund
ICICI Prudential Asset Management Company Ltd. is a 51:49 joint venture between ICICI Bank, a well-known and trusted name in financial services in India and Prudential Plc, one of UK’s largest players in the financial services sectors. ICICI Prudential Asset Management Company Limited, in a span of just over nine years, has forged a position of preeminence in the Indian Mutual Fund industry as one of the largest asset management companies in the country with average assets under management of around Rs. 54321.87 Crores (as on March 31,2008)(Source: www.amfiindia.com). The Company manages a comprehensive range of schemes to meet the varying investment needs of its investors spread in around 265 cities in the country.
No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes
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137 459 50 351 25
Equity & Debt Money Market Gilt Fund
10 0 7
Source: www.mutualfundsindia.com
EMPIRICAL ANALYSIS
On the basis of raw data which I have collected for my thesis that I analyzed that most of salaried persons are invested money in various skims like salaried employees followed by others like college students, businessmen and house wife respectively. Most of the people of Nanded invest money more and more in banks like F.D. then after insurance mutual fund, share market and gold etc. Due to minimization in gold rates nowadays only of the population is investing their money in Gold. Most of the people prefer some fund for investment like Equity funds are the main funds who are giving tough competition compared to balanced and debt funds in Nanded city, Share khan is one of the fastest growing broking firms in India. They are using various strategies to capture the market. Debt funds are also doing well in these conditions because of continuous negative trend in the market. Balanced funds are having fewer shares in the market According to preferences it is observed that younger customers prefer equity funds the age of 21 to 30 and also it is found that balanced funds and debt funds are less the persons prefer those who having age 31 to 40as compared to equity funds. The middle aged customers are risk averse one so they are less interested towards the balanced and debt funds rather than equity funds.
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FINDINGS AND SUGGESTIONS
Findings: Analysis of customers:
32 % 46%
S alariedEm p B usinessm en H ouseWife Others
10% 12 %
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For the analysis I selected simple random sampling so in that I have selected more salaried employees (46%) followed by others (32%) like college students, businessmen and house wife respectively.
Choice of preference for Investment of customers:
1) People in Nanded city are not aware about the mutual funds (38%) and share market,
they also not aware about the advantages of investing money in mutual funds and share market. So overall only 17% of the population invests their money in mutual funds and share market also.
2) 37% of the people in the Nanded city are interested to invest their money in Bank
deposits, due to increasing rates and it is also very safe instrument.
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3) The 23% people in Nanded invest their money in Insurance, because they are not ready
to take the risk. They want the safety to their life.
4) Due to minimization in gold rates nowadays only 7% of the population is investing their
money in Gold.
Preference of mutual fund schemes by customers:
1) Equity funds (49%) are the main funds who are giving tough competition compared to
balanced and debt funds in Nanded city,
2) Sharekhan is one of the fastest growing broking firms in India. They are using various
strategies to capture the market.
3) They are selling various types of mutual funds like SBI, UTI, ICICI, HDFC etc.
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4) Debt funds (40%) are also doing well in these conditions because of continuous negative trend in the market.
5) Balanced funds (11%) are having fewer shares in the market.
Preference of customers according to age:
14 14 12 10 8 6 4 2 0 21-30 31-40 > 40 3 2 0 0 0 3 Equity Balance 4 Debt
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1) According to preferences it is observed that younger customers prefer equity funds and also it is found that balanced funds and debt funds are less as compared to equity funds. 2) The middle aged customers are risk averse one so they are less interested towards the balanced and debt funds rather than equity funds.
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SUGGESTIONS
From this Project I find out that the most of the customers in the Nanded city are not investing their money in the Mutual funds due to the lack of the Knowledge and the Awareness about the Mutual funds. But those who have knowledge about the mutual funds some of them are investing their money in the Share Market rather than investing it in mutual funds The people are giving more preference to safe instruments of investments like bank FD’s and Insurance rather than mutual funds. After that most of the customers are selecting equity mutual funds rather than balanced and debt funds in the negative trend of the market. Then I also find out that Nanded is having most of the customers of middle class so that the investment pattern of them are the safe instruments like bank FD’s and Insurance rather than share market and mutual funds. So I suggest that Sharekhan should give their preference to spread the knowledge about mutual funds to most of the customers and tackle the situation of non investors.
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RECOMMENDATIONS
• •
As all we know that Sharekhan is one of the Stock Broking Firm. Most of the people in the Nanded city are unaware about mutual funds so, I think that Sharekhan should organize some knowledge based programs to attract those types of customers.
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Sharekhan should have to provide more facilities and services for convenience of the customers so that they remain loyal with Sharekhan and be able to give more number of the customers through references.
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CONCLUSIONS
•
I understood the need analysis of customers
This is the main aim of my thesis, in that I have studied the need analysis adopted by Sharekhan Ltd. to attract more number of customers. The need is the main thing while investing in any kind of investment. So I have to understand various factors of investment like Age, Income, and Preference towards any specific scheme.
• I made awareness about mutual funds
In the process of completing the thesis I made the awareness amongst the people about the mutual fund schemes i.e. Equity, Balanced or Debt schemes.
• I analyze the customer’s preference towards investment i.e. equity, debt or balanced funds
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While studying the need analysis adopted by Sharekhan Ltd. I also have to study the customer’s preference towards any specific scheme i.e. he is interested in which scheme to invest his money. So I come to know that most customers prefers Equity funds rather than balanced or debt funds.
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