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A STUDY ON THE CUSTOMER ATTITUDE, PREFERENCE ANDSATISFACTION LEVEL TOWARDS INVESTMENT IN MUTUAL
FUNDSWITH REFERENCE TO
SHAREKHANFINANCIAL SERVICES PVT LTD, THIRUPUR.
A project report submitted in partial fulfillment of the
requirements of the award of the degree ofMASTER OF BUSINESS ADMINISTRATION
Submitted by
K.R.SRI SUDHARSANAGIRI(Reg no: - 620911631087)
Under the esteemed guidance ofMR.PONMUTHURAMALINGAM
Asst. Prof
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DECLARATION
I hereby declare that the project report title A STUDYON THE CUSTOMER ATTITUDE, PREFERENCE AND
SATISFACTION LEVEL TOWARDS INVESTMENT IN MUTUALFUNDS
is done and submitted by me is a genuine work. And it is notsubmitted to any other university or published at any time before.The project work is partial fulfillment of the requirements for the
award ofM.B.A Degree by the GNANAMANI INSTITUTE OFMANAGEMENT STUDIES .
Place:-THIRUPURDate:- / Signatureof the student K.R.SRISUDHA
RSANAGIRI
(620911631087)
GNANAMANI Institutions of Management Studies,Anna University, Chennai
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CERTIFICATE
This is to certify that the project report entitled Analysis of the
customer attitude, preference and satisfaction level
towards investments in mutual funds with reference to
Share khan Financial Services Pvt Ltd, Tirupur, is a
bonafied, work carried out by K.R.Srisudharsanagiri under my
guidance in partial fulfillment for the award of degree of MASTER
OF BUSINESS ADMINISTRATION during the period 2009-2011.
Place: - Namakkal .Date:- / /2013
Mr.Ponmuthuramalingam
Asst. Prof.GNANAMANI
INSTITUTE OF MANAGEMENT STUDIESANNA UNIVERSITY, CHENNAI
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PREFACE
Give a man a fish, he will eat it. Train a man to fish,
He will feed his family.
The above saying highlights the importance of Practical
knowledge. Practical training is an important part of the
theoretical studies. It is of an immense importance in the field
of management. It offers the student to explore the valuable
treasure of experience and an exposure to real work culture
followed by the industries and thereby helping the students to
bridge gap between the theories explained in the books and
their practical implementations.
Project plays an important role in future building of an individual
so that he/she can better understand the real world in which he
has to work in future. The theory greatly enhances our
knowledge and provides opportunities to blend theoretical with
the practical knowledge.
I have done my Project on Customer attitude, preference
and satisfaction level towards investment in mutual
fund. I have tried to cover each and every aspect related to
the topic with best of my capability.
I hope this study would help many people in the future.
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ACKNOWLEDGEMENT
I am thankful to Prof. K. Shiva Ramakrishna, Principalof GITAM Institute of Management, Prof. P. Sheela, Vice
Principal of GITAM Institute of Management, and Associate
Prof K. Uma Devi, Program Co-ordinator, GITAM Institute of
Management, GITAM University, Visakhapatnam, for
providing me the opportunity to do my project.
I express my sincere thanks to Ms. S. Anjani Devi, whose
supervision, valuable guidance and help, enabled me to
complete this project work.
This project is a result of the hard work and sincere effort
put by my hands. And I am grateful to Mr. Shivaram Pandey
(Sales head Andhra Pradesh) for giving me this opportunity
to do my project work in Franklin Templeton Investments
India Pvt Ltd, Visakhapatnam.
I convey my sincere thanks to Mr. Suresh Kumar Sela,
Pavan Patnaik and Sumitha Nair for the constant advice and
encouragement.
I also wish to express my sincere thanks to all the
customers of Franklin Templeton Investments India Pvt
Ltd, Visakhapatnam, who have directly or indirectly help me
in completing my project work.
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CONTENTS
Chapter 1
Page No.
Meaning of Mutual Funds 02 - 07
Classification of Mutual Fund 08 - 12
Performance of Mutual Funds in India 13
- 15
Other Important Concepts 16
- 33
Chapter 2
Need of the study 34
Objectives of the study 35
Scope of the study 36 Methodology 37
Presentation of the study 38
Limitation 39
Chapter 3
Profile
Industry Profile 40
- 47
Organization Profile 48 - 62
Product Profile at Franklin Templeton 62
- 82
Chapter 4
Analysis of Study 83 -
107
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Chapter 5
Findings 108 -
110 Suggestions 111 -
113
Conclusion 114 -
115
Bibliography 116
Annexure
List of Tables
No. TitlePage No.
1.1 Savings Plan 83
1.2 Investment plans 85
1.3 Age consideration 87
1.4 Period of investment 89
1.5 Interested in Mutual Fund 91
1.6 Anticipation of Risk 93
1.7 Primary Goal 95
1.8 Risk with Return Expected 97
1.9 Age combination 99
1.10 Factors to consider 1021.11 Service providers 104
1.12 Satisfaction Level 106
List of Graphs
2.1 Savings Plan 83
2.2 Investment plans 852.3 Age consideration 87
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2.4 Period of investment 89
2.5 Interested in Mutual Fund 91
2.6 Anticipation of Risk 93
2.7 Primary Goal 952.8 Risk with Return Expected 97
2.9 Age combination 99
2.10 Factors to consider 102
2.11 Service providers 104
2.12 Satisfaction Level 106
INTRODUCTION
Mutual funds are basically financial intermediaries, which collect the
savings of investors and invest them in a large and well-diversified
portfolio of securities such as money market instruments, corporate
and government bonds and equity shares of joint stock companies. A
mutual fund is a pool of common funds invested by different
investors, who have no contact with each other. Mutual funds
are conceived as institutions for providing small investors with
avenues of investments in the capital market. Since small investors
generally do not have adequate time, knowledge, experience and
resources for directly accessing the capital market, they have to rely
on an intermediary, which undertakes informed investment decisions
and provides consequential benefits of professional expertise. The
raison of mutual funds is their ability to bring down the transaction
costs. The advantages for the investors are reduction in risk, expert
professional management, diversified portfolios, liquidity of
investment and tax benefits. By pooling their assets through mutual
funds, investors achieve economies of scale. The interests of the
investors are protected by the SEBI, which acts as a watchdog.
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Mutual funds are governed by the SEBI (Mutual Funds) Regulations,
1996.
MUTUAL FUND OPERATIONS FLOW CHART
The flow chart below describes broadly the working of a MutualFund:
THE GOAL
OF
MUTUAL FUND
The goal of a mutual fund is to provide an individual to make money.
There are several thousand mutual funds with different investments
strategies and goals to chosen from. Choosing one can be over
whelming, even though it need not be different mutual funds have
different risks, which differ because of the funds goals fund
manager, and investment style. The fund itself will still increase in
value, and in that way you may also make money therefore the
value of shares you hold in mutual fund will increase in value when
the holdings increases in value capital gains and income or dividend
payments are best reinvested for younger investors Retires often
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seek the income from dividend distribution to augment their income
with reinvestment of dividends and capital distribution your money
increase at an even greater rate. When you redeem your shares
what you receive is the value of the share.
ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below
illustrates the organizational set up of a mutual fund:
HISTORICAL VIEW:
History and Structure of Indian Mutual Fund Industry
The mutual fund industry in India started in 1963 with the formation
of Unit Trust of India, at the initiative of the Government of India and
Reserve Bank. The history of mutual funds in India can be broadly
divided into four distinct phases:
First Phase 1964-87:
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Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. It was set up by the Reserve Bank of India and
functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the RBI andthe Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first
scheme launched by UTI was Unit Scheme 1964. At the end of 1988
UTI had Rs.6, 700 crores of assets under management.
Second Phase 1987-1993 (Entry of Public Sector
Funds):
1987 marked the entry of non- UTI, public sector mutual funds set up
by public sector banks and Life Insurance Corporation of India (LIC)
and General Insurance Corporation of India (GIC). SBI Mutual Fund
was the first non- UTI Mutual Fund established in June 1987 followed
by Can-bank Mutual Fund (Dec 87), Punjab National Bank Mutual
Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun
90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutualfund in June 1989 while GIC had set up its mutual fund in December
1990. At the end of 1993, the mutual fund industry had assets under
management of Rs.47, 004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds):
With the entry of private sector funds in 1993, a new era started in
the Indian mutual fund industry, giving the Indian investors a wider
choice of fund families. Also, 1993 was the year in which the first
Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile
Kothari Pioneer (now merged with Franklin Templeton) was the first
private sector mutual fund registered in July 1993. The 1993 SEBI
(Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The
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industry now functions under the SEBI (Mutual Fund) Regulations
1996. The number of mutual fund houses went on increasing, with
many foreign mutual funds setting up funds in India and also the
industry has witnessed several mergers and acquisitions. As at theend of January 2003, there were 33 mutual funds with total assets of
Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541
crores of assets under management was way ahead of other mutual
funds.
Fourth Phase since February 2003:
In February 2003, following the repeal of the Unit Trust of India Act
1963 UTI was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under
management of Rs.29, 835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return
and certain other schemes. The Specified Undertaking of Unit Trust
of India, functioning under an administrator and under the rules
framed by Government of India and does not come under thepurview of the Mutual Fund Regulations. The second is the UTI
Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than
Rs.76, 000 crores of assets under management and with the setting
up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different
private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth. As at the end of
September, 2004, there were 29 funds, which manage assets of
Rs.1, 53, 108 crores under 421 schemes.
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CLASSIFICATION OF MUTUAL FUND SCHEMES:
Any mutual fund has an objective of earning income for the investors
and/ or getting increased value of their investments. To achieve
these objectives mutual funds adopt different strategies and
accordingly offer different schemes of investments. On this basis the
simplest way to categorize schemes would be to group these into
two broad classifications:
OPERATIONAL AND PORTFOLIO CLASSIFICATION:Operational classification highlights the two main types of
schemes, i.e., open-ended and close-ended which are offered by the
mutual funds.
Portfolio classification projects the combination of investment
instruments and investment avenues available to mutual funds to
manage their funds. Any portfolio scheme can be either open ended
or close ended.
Operational Classification:
Open Ended Schemes: As the name implies the size of the
scheme (Fund) is open i.e., not specified or pre-determined.
Entry to the fund is always open to the investor who can
subscribe at any time. Such fund stands ready to buy or sell its
securities at any time. It implies that the capitalization of thefund is constantly changing as investors sell or buy their
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shares. Further, the shares or units are normally not traded on
the stock exchange but are repurchased by the fund at
announced rates. Open-ended schemes have comparatively
better liquidity despite the fact that these are not listed. Thereason is that investors can any time approach mutual fund for
sale of such units. No intermediaries are required. Moreover,
the realizable amount is certain since repurchase is at a price
based on declared net asset value (NAV). No minute to minute
fluctuations in rates haunt the investors. The portfolio mix of
such schemes has to be investments, which are actively traded
in the market. Otherwise, it will not be possible to calculate
NAV. This is the reason that generally open-ended schemes are
equity based. Moreover, desiring frequently traded securities,
open-ended schemes hardly have in their portfolio shares of
comparatively new and smaller companies since these are not
generally traded. In such funds, option to reinvest its dividend
is also available. Since there is always a possibility ofwithdrawals, the management of such funds becomes more
tedious as managers have to work from crisis to crisis. Crisis
may be on two fronts, one is, that unexpected withdrawals
require funds to maintain a high level of cash available every
time implying thereby idle cash. Fund managers have to face
questions like what to sell. He could very well have to sell his
most liquid assets. Second, by virtue of this situation such
funds may fail to grab favorable opportunities. Further, to
match quick cash payments, funds cannot have matching
realization from their portfolio due to intricacies of the stock
market. Thus, success of the open-ended schemes to a great
extent depends on the efficiency of the capital market and the
selection and quality of the portfolio.
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Close Ended Schemes: Such schemes have a definite period
after which their shares/ units are redeemed. Unlike open-
ended funds, these funds have fixed capitalization, i.e., their
corpus normally does not change throughout its life period.Close ended fund units trade among the investors in the
secondary market since these are to be quoted on the stock
exchanges. Their price is determined on the basis of demand
and supply in the market. Their liquidity depends on the
efficiency and understanding of the engaged broker. Their price
is free to deviate from NAV, i.e., there is every possibility that
the market price may be above or below its NAV. If one takes
into account the issue expenses, conceptually close ended fund
units cannot be traded at a premium or over NAV because the
price of a package of investments, i.e., cannot exceed the sum
of the prices of the investments constituting the package.
Whatever premium exists that may exist only on account of
speculative activities. In India as per SEBI (MF) Regulationsevery mutual fund is free to launch any or both types of
schemes.
Portfolio Classification of Funds:
Following are the portfolio classification of funds, which may be
offered. This classification may be on the basis of (A) Return, (B)
Investment Pattern, (C) Specialized sector of investment, (D)Leverage and (E) Others.
Return based classification:
To meet the diversified needs of the investors, the mutual fund
schemes are made to enjoy a good return. Returns expected are in
form of regular dividends or capital appreciation or a combination of
these two.
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1. Income Funds: For investors who are more curious for
returns, Income funds are floated. Their objective is to
maximize current income. Such funds distribute periodically the
income earned by them. These funds can further be spitted upinto categories: those that stress constant income at relatively
low risk and those that attempt to achieve maximum income
possible, even with the use of leverage. Obviously, the higher
the expected returns, the higher the potential risk of the
investment.
2. Growth Funds: Such funds aim to achieve increase in thevalue of the underlying investments through capital
appreciation. Such funds invest in growth oriented securities
which can appreciate through the expansion production
facilities in long run. An investor who selects such funds should
be able to assume a higher than normal degree of risk.
3. Conservative Funds:The fund with a philosophy of all thingsto all issue offer document announcing objectives as: (i) To
provide a reasonable rate of return, (ii) To protect the value of
investment and, (iii) To achieve capital appreciation consistent
with the fulfillment of the first two objectives. Such funds which
offer a blend of immediate average return and reasonable
capital appreciation are known as middle of the road funds.
Such funds divide their portfolio in common stocks and bonds
in a way to achieve the desired objectives. Such funds have
been most popular and appeal to the investors who want both
growth and income.
Investment Based Classification:
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Mutual funds may also be classified on the basis of securities in
which they invest. Basically, it is renaming the subcategories of
return based classification.
1. Equity Fund: Such funds, as the name implies, invest most oftheir investible shares in equity shares of companies and
undertake the risk associated with the investment in equity
shares. Such funds are clearly expected to outdo other funds in
rising market, because these have almost all their capital in
equity. Equity funds again can be of different categories
varying from those that invest exclusively in high quality blue
chip companies to those that invest solely in the new,
unestablished companies. The strength of these funds is the
expected capital appreciation. Naturally, they have a higher
degree of risk.
2. Bond Funds: such funds have their portfolio consisted of
bonds, debentures, etc. this type of fund is expected to be very
secure with a steady income and little or no chance of capital
appreciation. Obviously risk is low in such funds. In this
category we may come across the funds called Liquid Funds
which specialize in investing short-term money market
instruments. The emphasis is on liquidity and is associated with
lower risks and low returns.
3. Balanced Fund: The funds, which have in their portfolio a
reasonable mix of equity and bonds, are known as balanced
funds. Such funds will put more emphasis on equity share
investments when the outlook is bright and will tend to switch
to debentures when the future is expected to be poor for
shares.
Sector Based Funds:
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There are number of funds that invest in a specified sector of
economy. While such funds do have the disadvantage of low
diversification by putting all their all eggs in one basket, the policy of
specializing has the advantage of developing in the fund managersan intensive knowledge of the specific sector in which they are
investing. Sector based funds are aggressive growth funds which
make investments on the basis of assessed bright future for a
particular sector. These funds are characterized by high viability,
hence more risky.
PERFORMANCE OF MUTUAL FUND IN INDIA
The performance of mutual funds in India from the day the concept
of mutual fund took birth in India. The year was 1963 Unit Trust of
India invited investors or rather to those who believed in savings, to
park their money in UTI Mutual Fund. For 30 years it ranked top
without a single second player. Though the 1988 year saw some new
mutual fund companies, but UTI remained in a monopoly position.
The performance of mutual funds in India in the initial phase was not
even closer to satisfactory level. People rarely understood, and of
course investing was out of question. But yes, some 24 million
shareholders was accustomed with guaranteed high returns by the
beginning of liberalization of the industry in 1992. This good record
of UTI became marketing tool for new entrants. The expectations ofinvestors touched the sky in profitability factor. However, people
were miles away from the preparedness of risks factor after the
liberalization.
The Assets under Management of UTI was Rs. 67bn. by the end of
1987. Let me concentrate about the performance of mutual funds in
India through figures. From Rs. 67bn. the Assets under Management
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rose to Rs. 470 bn. in March 1993 and the figure had a three times
higher performance by April 2004. It rose as high as Rs. 1,540bn.
The net asset value (NAV) of mutual funds in India declined when
stock prices started falling in the year 1992. Those days, the marketregulations did not allow portfolio shifts into alternative investments.
There were rather no choices apart from holding the cash or to
further continue investing in shares. One more thing to be noted,
since only closed-end funds were floated in market, the investors
disinvested by selling at a loss the in the secondary market.
The performance of mutual funds in India suffered qualitatively. The
1992 stock market scandal, the losses by disinvestments and of
course the lack of transparent rules in the whereabouts rocked
confidence among the investors. Partly owing to a relatively weak
stock market performance, mutual funds have not yet recovered,
with funds trading at an average discount of 1020 percent of their
net asset value.
The supervisory authority adopted a set of measures to create atransparent and competitive environment in mutual funds. Some of
them were like relaxing investment restrictions into the market,
introduction of open-ended funds, and paving the gateway for
mutual funds to launch pension schemes.
The measure was taken to make mutual funds the key instrument for
long-term saving. The more the variety offered, the quantitative will
be investors. At last to mention, as long as mutual fund companies
are performing with lower risks and higher profitability within a short
span of time, more and more people will be inclined to invest until
and unless they are fully educated with the dos and donts of mutual
funds
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MUTUAL FUNDS FOR WHOM?
These funds can survive and thrive only if they can live up to the
hopes and trusts of their individual members. These hopes and
trusts echo the peculiarities which support the emergence and
growth of such insecurity of such investors who come to the rescue
of such investors who face following constraints while making directinvestments:
Limited resources in the hands of investors quite often take
them away from stock market transactions.
Lack of funds forbids investors to have a balanced and
diversified portfolio.
Lack of professional knowledge associated with investment
business unable investors to operate gainfully in the market.
Small investors can hardly afford to have ex-pensive
investment consultations.
To buy shares, investors have to engage share brokers who are
the members of stock exchange and have to pay their
brokerage.
They hardly have access to price sensitive information in time.
It is difficult for them to know the development taking place in
share market and corporate sector.
Firm allotments are not possible for small investors on when
there is a trend of over subscription to public issues.
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WHY MUTUAL FUNDS?
Mutual Funds are becoming a very popular form of investment
characterized by many advantages that they share with other forms
of investments and what they possess uniquely themselves. The
primary objectives of an investment proposal would fit into one or
combination of the two broad categories, i.e., Income and Capital
gains. How mutual fund is expected to be over and above an
individual in achieving the two said objectives, is what attractsinvestors to opt for mutual funds. Mutual fund route offers several
important advantages.
Diversification: A proven principle of sound investment is
diversification, which is the idea of not putting all your eggs in one
basket. By investing in many companies the mutual funds can
protect themselves from unexpected drop in values of some shares.
The small investors can achieve wide diversification on his own
because of many reasons, mainly funds at his disposal. Mutual funds
on the other hand, pool funds of lakhs of investors and thus can
participate in a large basket of shares of many different companies.
Majority of people consider diversification as the major strength of
mutual funds.
Expertise Supervision: Making investments is not a full time
assignment of investors. So they hardly have a professional attitude
towards their investment. When investors buy mutual fund scheme,
an essential benefit one acquires is expert management of the
money he puts in the fund. The professional fund managers who
supervise funds portfolio take desirable decisions viz., what scrips
are to be bought, what investments are to be sold and more
appropriate decision as to timings of such buy and sell. They have
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extensive research facilities at their disposal, can spend full time to
investigate and can give the fund a constant supervision. The
performance of mutual fund schemes, of course, depends on the
quality of fund managers employed.Liquidity of Investment: A distinct advantage of a mutual fund
over other investments is that there is always a market for its unit/
shares. Moreover, Securities and Exchange Board of India (SEBI)
requires the mutual funds in India have to ensure liquidity. Mutual
funds units can either be sold in the share market as SEBI has made
it obligatory for closed-ended schemes to list themselves on stock
exchanges. For open-ended schemes investors can always approach
the fund for repurchase at net asset value (NAV) of the scheme.
Such repurchase price and NAV is advertised in newspaper for the
convenience of investors.
Reduced risks: Risk in investment is as to recovery of the principal
amount and as to return on it. Mutual fund investments on both
fronts provide a comfortable situation for investors. The expertsupervision, diversification and liquidity of units ensured in mutual
funds reduces the risks. Investors are no longer expected to come to
grief by falling prey to misleading and motivating headline leads
and tips, if they invest in mutual funds.
Safety of Investment: Besides depending on the expert
supervision of fund managers, the legislation in a country (like SEBI
in India) also provides for the safety of investments. Mutual funds
have to broadly follow the laid down provisions for their regulations,
SEBI acts as a watchdog and attempts whole heatedly to safeguard
investors interests.
Tax Shelter: Depending on the scheme of mutual funds, tax shelter
is also available. As per the Union Budget-2003, income earned
through dividends from mutual funds is 100% tax-free at the handsof the investors.
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Minimize Operating Costs: Mutual funds having large invisible
funds at their disposal avail economies of scale. The brokerage fee
or trading commission may be reduced substantially. The reduced
operating costs obviously increase the income available forinvestors.
Investing in securities through mutual funds has many advantages
like option to reinvest dividends, strong possibility of capital
appreciation, regular returns, etc. Mutual funds are also relevant in
national interest. The test of their economic efficiency as financial
intermediary lies in the extent to which they are able to mobilize
additional savings and channeling to more productive sectors of the
economy.
TYPES OF RETAIL INVESTORS
The Economic Times survey on retail equity investors in the
secondary market has identified different categories of investors
based on their characteristics. Many questions are raised about the
behavior of the small investor under different circumstances. The
answers to many of these questions and similar others is not difficult
to interpret once we identify the different types of retail investors in
the stock markets.
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The survey shows that there are five different kinds of retail
investors:
Intellectuals
Cavaliers
Reactivates
Opportunists
Gamblers
This classification is based on the attitudes of investors towards
secondary market investments. Lets explain each type of investor
and understand their investment psyche and behavioral patterns.
INTELLECTUALS:
This retail investor group forms around 17% of the total retail
investment class. They are the intelligent investors who follow an
intelligent, individualist approach to investment planning and a well-
defined and deliberate strategy for stock investment. These
investors are self reliant good stock pickers and try to monetize
market knowledge.
Giving proof of their intelligence, they consider low-risk; lowgain
guaranteed return avenues as pass. Also, they believe in and work
towards a well-planned. Asset allocation and seek the right mix of
stability and reliability of returns.The intellectuals are unaffected by shortterm fluctuations and
prefer longterm investments. Moreover, they are disciplined enough
to observe profit targets which they have set for themselves. And as
they invest for the long term, they are not concerned with short term
losses. They manager their money themselves and understand the
industry/sector before investing.
CAVALIERS:
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As high as 49% of the small retail equity investors are cavaliers.
They are those who have lost money in fly-by night schemes.
Therefore, much of their investments are driven by the desire to
recover past losses and make profits in the future. As such, theyinvest aggressively into equities, mostly in volatile sectors in order to
make big gains. However, they will also invest in FDs and insurance
as a precautionary measure. They get tempted to speculate in the
secondary market and once in a while, they actually speculate but
with smaller amounts. The cavaliers try to gather all available
information and compare it with opinions from experts in the media,
but will trust their own judgment before making decisions.
REACTIVISTS:
About 5% of the retail equity investors fall under this category.
These investors basically short-term investors, are impulsive info
addicts who are vulnerable to external influences and as such, they
have no specific investment patterns, They believe that dynamic and
ad hoc investments will result in better profits and are prompted toact on popular opinion rather than systematic planning. As they lack
in confidence, experience and expertise, they constantly rely on
advice from in the know people such as brokers and analysts. They
are extremely anxious about price fluctuations or short-term
declines. They are very skeptical and believe that small declines can
lead to larger losses if not reacted upon immediately. Therefore, the
reactivists constantly seek new information about stocks in which
they are currently invested in, to ensure a feeling of security.
Moreover, their investments apart from equities are solely for tax-
saving purposes.
OPPORTUNISTS:
This class of investors account for 10% of the retail equity investor
universe. This category is defensively pessimistic and prefers to takeonly familiar risks. As they have a low risk tolerance, they are wary
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of volatility in the equity market. They invest into equities by
imitating larger trends rather than with their individual analysis and
consider equity investment as a gamble. They want to be in the
black all the time and as such, prefer popular stocks with immediateprofit potential. Opportunists need positive price movements to
encourage their investments into equities and they will not hunt for
bargains of invest on price declines. But before investing into
equities. They prefer to build a critical mass of fixed income
instruments as they find fixed income options a reassuring way of
safe bets. The opportunistschoice of investments as they find fixed
income options a reassuring way of safe bets. The opportunists
choice of investment is biased towards well known and previously
owned securities, including equities. This investor class is wary of
investing into equities when the market has moved up too high too
soon. So, if you have not invested in the current market, you are
probably an opportunist.
GAMBLERS:19%the retail investor population is made up of not actual investors.
But gamblers. They are the typical thrill seeking traders who link
profitability to personal achievement. They experiment a lot, mostly
driven by instinct and self confidence; as such their stock selection is
more a random exercise that lacks rationale. This class perceives all
securities as tradable commodities to be bought and sold in the
short term. However, they know completely about the risk factors
and therefore, have a tendency to invest only as much as they are
willing to lose. As a part, of the game and this does not act as a
hindrance for future investments. They do not trust brokers, but will
secretly verify their suggestions for fear of missing an opportunity.
They ascertain fair value of stocks on gut feeling rather than any
financial analysis and use sudden downward fluctuations as buyingopportunities.
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MARKETING STRATEGIES ADOPTED BY THEMUTUAL FUNDS
The present marketing strategies of mutual funds can be divided into
two main headings:
Direct marketing
Selling through intermediaries.
Joint Calls
Direct Marketing:
This constitutes 20 percent of the total sales of mutual funds. Some
of the important tools used in this type of selling are:
Personal Selling: In this case the customer support officer or
Relationship Manager of the fund at a particular branch takes
appointment from the potential prospect. Once the appointment is
fixed, the branch officer also called Business Development Associate
(BDA) in some funds then meets the prospect and gives him all
details about the various schemes being offered by his fund. The
conversion rate in this mode of selling is in between 30% - 40%.
Telemarketing: In this case the emphasis is to inform the people
about the fund. The names and phone numbers of the people are
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picked at random from telephone directory. Some fund houses have
their database of investors and they cross sell their other products.
Sometimes people belonging to a particular profession are also
contacted through phone and are then informed about the fund.Generally the conversion rate in this form of marketing is 15% - 20%.
Direct mail: This one of the most common method followed by all
mutual funds. Addresses of people are picked at random from
telephone directory, business directory, professional directory etc.
The customer support officer (CSO) then mails the literature of the
schemes offered by the fund. The follow up starts after 3 4 days of
mailing the literature. The CSO calls on the people to whom the
literature was mailed. Answers their queries and is generally
successful in taking appointments with those people. It is then the
job of BDA to try his best to convert that prospect into a customer.
Advertisements in newspapers and magazines: The funds
regularly advertise in business newspapers and magazines besides
in leading national dailies. The purpose to keep investors awareabout the schemes offered by the fund and their performance in
recent past. Advertisement in TV/FM Channel: The funds are
aggressively giving their advertisements in TV and FM Channels to
promote their funds.
Hoardings and Banners: In this case the hoardings and banners of
the fund are put at important locations of the city where the
movement of the people is very high. The hoarding and banner
generally contains information either about one particular scheme or
brief information about all schemes of fund.
Selling through intermediaries:
Intermediaries contribute towards 80% of the total sales of mutual
funds. These are the people/ distributors who are in direct touch with
the investors. They perform an important role in attracting newcustomers. Most of these intermediaries are also involved in selling
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shares and other investment instruments. They do a commendable
job in convincing investors to invest in mutual funds. A lot depends
on the after sale services offered by the intermediary to the
customer. Customers prefer to work with those intermediaries whogive them right information about the fund and keep them abreast
with the latest changes taking place in the market especially if they
have any bearing on the fund in which they have invested.
Regular Meetings with distributors: Most of the funds conduct
monthly/bi-monthly meetings with their distributors. The objective is
to hear their complaints regarding service aspects from funds side
and other queries related to the market situation. Sometimes,
special training programs are also conducted for the new agents/
distributors. Training involves giving details about the products of
the fund, their present performance in the market, what the
competitors are doing and what they can do to increase the sales of
the fund.
Joint Calls:This is generally done when the prospect seems to be a high net
worth investor. The BDA and the agent (who is located close to the
HNIs residence or area of operation) together visit the prospect and
brief him about the fund. The conversion rate is very high in this
situation, generally, around 60%. Both the fund and the agent
provide even after sale services in this particular case.
Meetings with HNIs: This is a special feature of all the funds.
Whenever a top official visits a particular branch office, he devotes
at least one to two hours in meeting with the HNIs of that particular
area. This generally develops a faith among the HNIs towards the
fund.
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Advantages:Portfolio diversification: - Mutual Funds invest in a well-diversifiedportfolio of securities which enables investor to hold a diversifiedinvestment portfolio (whether the amount of investment is big orsmall)Professional management: - Fund manager undergoes throughvarious research works and has better investment managementskills which ensure higher returns to the investor than what he canmanage on his own.Less risk: - Investors acquire a diversified portfolio of securitieseven with a small investment in a Mutual Fund. The risk in adiversified portfolio is lesser than investing in merely 2 or 3securities.Low transaction cost: -Due to the economies of scale (benefits oflarger volumes), mutual funds pay lesser transaction costs. Thesebenefits are passed on to the investors.Liquidity: - An investor may not be able to sell some of the shares
held by him very easily and quickly, whereas units of a mutual fundare far more liquid.
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Choice of scheme: - Mutual funds provide investors with variousschemes with different investment objectives. Investors have theoption of investing in a scheme having a correlation between itsinvestment objectives and their own financial goals. These schemesfurther have different plans/optionsTransparency: -Funds provide investors with updated informationpertaining to the markets and the schemes. All material facts aredisclosed to investors as required by the regulator.Flexibility: - Investors also benefit from the convenience andflexibility offered by Mutual Funds. Investors can switch theirholdings from a debt scheme to an equity scheme and vice-versa.Option of systematic (at regular intervals) investment andwithdrawal is also offered to the investors in most open-endschemes.
Safety: - Mutual Fund industry is part of a well-regulated investmentenvironment where the interests of the investors are protected bythe regulator. All funds are registered with SEBI and completetransparency is forced.
Disadvantages:-Cost control not in the hands of Investors: -Investor has to payinvestment management fees and fund distribution costs as apercentage of the value of his investments (as long as he holds theunits), irrespective of the performance of the fund.
No customized portfolio: -The portfolio of securities in which afund invests is a decision taken by the fund manager. Investors haveno right to interfere in the decision making process of a fundmanager, which some investors find as a constraint in achievingtheir financial objectives.Difficulty in selecting a suitable fund scheme: - Many investorsfind it difficult to select one option from the plethora offunds/schemes/plans available. For this, they may have to takeadvice from financial planners in order to invest in the right fund toachieve their objectives.
Load structure:-Load FundsMutual Funds incur various expenses on marketing, distribution,advertising, portfolio churning, fund manager's salary etc. Manyfunds recover these expenses from the investors in the form of load.
These funds are known as Load Funds. A load fund may imposefollowing types of loads on the investors:
1. Entry Load -Also known as Front-end load, it refers to the loadcharged to an investor at the time of his entry into a scheme.
Entry load is deducted from the investor's contribution amountto the fund.
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2. Exit Load - Also known as Back-end load, these charges areimposed on an investor when he redeems his units (exits fromthe scheme). Exit load is deducted from the redemptionproceeds to an outgoing investor.
3. Deferred Load - Deferred load is charged to the scheme over aperiod of time.
4. Contingent Deferred Sales Charge (CDSC) - In some schemes,the percentage of exit load reduces as the investor stayslonger with the fund. This type of load is known as ContingentDeferred Sales Charge.
No-load FundsAll those funds that do not charge any of the above mentioned loadsare known as No-load Funds.
Tax exemption:Tax-exempt FundsFunds that invest in securities free from tax are known as Tax-exempt Funds. All open-end equity oriented funds are exempt from
distribution tax (tax for distributing income to investors). Long termcapital gains and dividend income in the hands of investors are tax-free.Non-Tax-exempt FundsFunds that invest in taxable securities are known as Non-Tax-exemptFunds. In India, all funds, except open-end equity oriented funds areliable to pay tax on distribution income. Profits arising out of sale ofunits by an investor within 12 months of purchase are categorized asshort-term capital gains, which are taxable. Sale of units of an equityoriented fund is subject to Securities Transaction Tax (STT). STT is
deducted from the redemption proceeds to an investor.
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Risk Hierarchy of Different Mutual Funds:-Thus, different mutual fund schemes are exposed to different levelsof risk and investors should know the level of risks associated withthese schemes before investing. The graphical representationhereunder provides a clearer picture of the relationship betweenmutual funds and levels of risk associated with these funds:
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LITERATURE REVIEW
Literature on mutual fund performance evaluation is enormous.
A few research studies that have influenced the preparation of
this paper substantially are discussed in this section.
Sharpe, William F. (1966) suggested a measure for the
evaluation of portfolio performance. Drawing on results
obtained in the field of portfolio analysis, economist Jack L.
Treynor has suggested a new predictor of mutual fund
performance, one that differs from virtually all those used
previously by incorporating the volatility of a fund's return in a
simple yet meaningful manner.
Michael C. Jensen (1967) derived a risk-adjusted measure of
portfolio performance (Jensens alpha) that estimates how mucha managers forecasting ability contributes to funds returns. As
indicated by Statman (2000), the e SDAR of a fund portfolio is
the excess return of the portfolio over the return of the
benchmark index, where the portfolio is leveraged to have the
benchmark indexs standard deviation.
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S.Narayan Rao, evaluated performance of Indian mutual funds
in a bear market through relative performance index, risk-
return analysis, Treynors ratio, Sharpes ratio, Sharpes
measure , Jensens measure, and Famas measure. The study
used 269 open-ended schemes (out of total schemes of 433) for
computing relative performance index. Then after excluding
funds whose returns are less than risk-free returns, 58 schemes
are finally used for further analysis. The results of performance
measures suggest that most of mutual fund schemes in the
sample of 58 were able to satisfy investors expectations by
giving excess returns over expected returns based on both
premium for systematic risk and total risk. Bijan Roy, et. al.,
conducted an empirical study on conditional performance of
Indian mutual funds. This paper uses a technique called
conditional performance evaluation on a sample of eighty-nine
Indian mutual fund schemes .This paper measures theperformance of various mutual funds with both unconditional
and conditional form of CAPM, Treynor- Mazuy model and
Henriksson-Merton model. The effect of incorporating lagged
information variables into the evaluation of mutual fund
managers performance is examined in the Indian context. The
results suggest that the use of conditioning lagged informationvariables improves the performance of mutual fund schemes,
causing alphas to shift towards right and reducing the number
of negative timing coefficients. Mishra, et al., (2002) measured
mutual fund performance using lower partial moment. In this
paper, measures of evaluating portfolio performance based on
lower partial moment are developed. Risk from the lower partial
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moment is measured by taking into account only those states in
which return is below a pre-specified target rate like risk-free
rate. Kshama Fernandes (2003) evaluated index fund
implementation in India. In this paper, tracking error of index
funds in India is measured .The consistency and level of
tracking errors obtained by some well-run index fund suggests
that it is possible to attain low levels of tracking error under
Indian conditions. At the same time, there do seem to be
periods where certain index funds appear to depart from the
discipline of indexation. K. Pendaraki et al. studied construction
of mutual fund portfolios, developed a multi-criteria
methodology and applied it to the Greek market of equity
mutual funds. The methodology is based on the combination of
discrete and continuous multi-criteria decision aid methods for
mutual fund selection and composition. UTADIS multi-criteria
decision aid method is employed in order to develop mutualfunds performance models. Goal programming model is
employed to determine proportion of selected mutual funds in
the final portfolios.
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NEED FOR THE STUDY
To study the investors intention with regard to the products in
mutual funds and their features.
To study awareness level of customers.
To study the preference and satisfaction level of investors.
To apprehend mutual funds movement in the market.
To analyze how it benefited to investors.
With the awareness that is increasing day by day regarding investing
in secondary market and speculation, the comfort and flexibility the
customers seeking, there is a definite requirement to study.
In the fast growing competitive market scenario it is always required
to have an idea of changes that are taking place in the market fromtime to time. Without which one cant serve their customers
properly.
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OBJECTIVES OF THE STUDY
1. To enhance our knowledge about the subject.
2. Evaluate Perception towards risk involved in mutual funds in
comparison to other financial avenues.3. How effectively investment houses are reaching their
customers.
4. To have a vivid picture of major players in Mutual Fund Industry
in India.
5. To study how the promotional activities of Mutual Fund
products in India.
6. To study the pattern of consumer behavior within the available
investment options and to test awareness among the consumer
about the various mutual fund houses.
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SCOPE OF THE STUDY
In today's complex financial environment, investors have unique
needs, which are derived from their risk appetite and financial goals.
Mutual funds (customized portfolios) recognize this, and
manage the investments professionally to achieve specific
investment objectives, and not to forget, relieving the investors from
the day-to-day hassles which investment require.
It is offers professional management of equity and debtdiversified investment of the investor with an aim to deliver
consistent return with an eye on risk.
Identify the key sectorial stocks in each portfolio.
To look out for new prospective customers who are willing to
invest in Mutual Funds of Franklin Templeton, Visakhapatnam.
To find out the Franklin Templeton Investments, Mutual Funds
effectiveness in the current market situation.
It also covers the scenario of the Investment Philosophy of a Fund
Manager.
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RESEARCH AND METHODOLOGY
COLLECTION OF DATA:
Primary data: - Employees and Customers of share khan financial
services Pvt Ltd, Tirupur, and other investor out of Share Khan
Limited (by personally in touch with them, and by asking queries to
them).
Methods: - Personal interaction.
Secondary data: - Web site of Share Khan Limited, brochures,
textbooks and other web sites etc..
Mainly the data was collected by interacting with people working atvarious levels in Share Khan Limited and outside investors and
websites.
RESEARCH METHODOLOGY:
Sample Method : Non-Probability Sampling
Sample Size : 100
Sources of Data
Primary Data : Structured Non-Disguised Questionnaire
Secondary Data : Reference from distributors.
The whole study is based upon primary and secondary data.
Therefore, information has been collected from interacting with
different investors and from various magazines, journals, websites,and bulletins.
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PRESENTATION OF THE STUDY:
The study has been presented in the organized structure or the
format which has been provided by the respective authority. In the
first chapter under the theoretical framework the concept of finance
has been described in detail with its meaning, definition, evolution
and the various modern and the traditional approaches in the field of
finance. In the column of topic related concepts there was a detailed
description about the topic of study, which is study oncustomer
attitude, preference and satisfaction level towards
investment in mutual fund. In its context it was detailed allot the
process and the importance of customer satisfaction in the
organization as well as industry. In the column of review of literature
the relation and the importance of the customer satisfaction with the
company, investors value, etc has been presented with the reviews
of the various scholars in the field of finance.
There was a clear description about the importance and the scope of
study and the main objectives for the purpose of conducting the
study were made clear. The research design adopted with different
methods and tables and there was clear presentation of the
limitations of the study.
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In chapter three the overview of the whole industry at global level
and also at the country level has been mentioned with actual facts
which were done same in the case of the company profile. Once the
topic profile in the organisation was made clear the study wassupported with clear analysis of data and the fair presentation of the
findings, suggestion and the conclusion at the end of the details
presented for the study.
LIMITATIONS
The study is limited to Thirupur city only.
The time constraint was one of the major problems.
The study is limited to the different schemes available under
the mutual funds selected.
All the customers are online so only a few customers were in
contact.
As all the information is given by the customers it may be
biased.
Most of the customers were not ready to reveal the data about
their investments.
Most of clients unaware of these options so that they didnt
responded well.
The lack of information sources for the analysis part.
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INDUSTRY PROFILE
The capital markets perform an important function in
mobilization of resources liquidity of the stock markets is an
important factor effecting growth. Many profitable projects
require long term finance; however investors do not relinquish
their savings for a long time. Capital market is a group of
interrelated markets in which capital is raised in financial form,
is lent and borrowed (or) raised in a varying time periods (such
as short term and long term). In a developing economy, the
business of capital market is the movement of capital to the
point of highest yield. A liquid stock market ensures a quick exit
without incurring heavy losses (or) costs. Stock market is a
vehicle through which long term finance is characterized for the
various needs of industry, commerce, government and local
authorities. Thus development of financial markets is necessary
for creating conductive climate for investment and economic
growth.
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The tone of capital market largely depends on the
economy of the country and therefore, depends on the
available savings and investments on one hand the
performances of the industry on the other. Among other factors
that would influence the tone of the capital and stock market
are the monsoon, the agriculture, the industry growth and in
particular the performance of the corporate sector, as they too
have a controlling effect on the economy of the country. In
particular the performance of the corporate sector, as they too
have a controlling effect on the economy of the country. In
particular the government policy, the psychological expectation
and host of other factors play a very prominent role in
influencing the capital markets.
The capital market in India can be categorized into
two types:
Organized
Unorganized
The funds for long term capital come from individual
investors, corporate savings, government savings, foreign
investments, banks, financial institutions, investments trusts,
Life Insurance Corporation and international financial agencies,
industry, government and semi government institutions are the
potential users in the organized sector itself. Since the supply of
funds for unorganized sector falls short of demand, the interest
rates are kept high.
The economic progress of a country is largely influenced
by the availability of savings for investment and hence there is
a need for the mobilization of the savings for investment and
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hence there is a need for the mobilization of savings for
investment and hence on a massive scale. Indigenous bankers
in town and money lenders in rural areas supply long term
finance in the UN organized sector. There is no link between the
organized and unorganized sector (or) within the unorganized
sector itself. There is a need for the mobilization savings on a
massive scale.
The economic progress of a country is largely influenced
by the availability of savings for investment and hence there is
need for the mobilization of savings for investment and hence
on a massive scale. Indigenous bankers in town and money
lenders in rural areas supply long term finance in the
unorganized sector. There is no link between the organized and
unorganized sector (or) within the unorganized sector itself.
There is a need for the mobilization savings on a massive scale.
In developing countries like India, there is a great set backin mobilization process due to various reasons. The attitude of
the public; their affiliation to traditional investment in land and
property, bullions and hoardings and above all the risk of
uncertainty are some of the reasons. The fiscal commission
(1949-50) recognized the fact that in India there is an acute of
long term capital for industrial ventures. But it was not until1954-55 that the central board of directors of the reserve bank
permitted established business house to raise their new capital
by issue of debentures at comparatively high rate of interest.
Since the capital market is a place where the private savings
are kept for a very long period, it is highly necessary to protect
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the interests of these investors, if the capital market has to
grow.
To safe guard the investors interest, government
has to enacted laws such as:
The securities act , 1938 ( together with the life
insurance corporation act 1956 )
The capital issues (control and regulation act, 1943).
The banking companies act, 1949.
The provident fund act and the rules, 1957.
The Indian companies act, 1956.
The deposit insurance scheme, 1960.
The monopolies and restrictive trade practices act,
1969.
A new era in the capital market in India was ushered inJuly, 1991 with the starting of a new process of financial and
economic deregulation. Beginning With the devaluation of
rupee by about 20% in July, 1991, industrial policy was totally
reshaped to dispense with licensing of all industries except 18
scheduled industrial groups. Further, removal MRPT limit on
assets of Companies, dilution of FERA (Foreign Exchange
Regulation Act). And foreign trade liberalization etc, were some
of the other reforms. Fiscal Policy was rationalized to reduce the
central budget deficit and public Sector under takings were
freed from government controls by professionalizing their
management , giving greater autonomy to them and by
disinvestment of their shares in favor of the public.
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ESTABLISHMENT OF SEBI
The Securities and Exchange Board of India was establishedon April 12, 1992 in accordance with the provisions ofthe Securities and Exchange Board of India Act, 1992.
PREAMBLE
The Preamble of the Securities and Exchange Board of Indiadescribes the basic functions of the Securities and ExchangeBoard of India as
..to protect the interests of investors insecurities and to promote the development of, and toregulate the securities market and for mattersconnected therewith or incidental thereto
BOMBAY STOCK EXCHANGES
The 'BSE SENSEX' is a value-weighted index composed of 30
stocks and was started on January 1, 1986. The Sensex is
regarded as the pulse of the domestic stock markets in India. It
consists of the 30 largest and most actively traded stocks,
representative of various sectors, on the Bombay Stock
Exchange. These companies account for around fifty per cent of
the market capitalization of the BSE. The base value of the
Sensex is 100 on April 1, 1979, and the base year of BSE-
SENSEX is 1978-79.
A governing board comprising of 9 elected directors, 2 SEBI
nominees, 7 public representatives and an executive director is
the apex body, which decides the policies and regulates the
affairs of the exchange.
http://www.sebi.gov.in/acts/act15ac.htmlhttp://en.wikipedia.org/wiki/Stock_market_indexhttp://www.sebi.gov.in/acts/act15ac.htmlhttp://en.wikipedia.org/wiki/Stock_market_index -
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The BSE SENSEX consists of the following companies:
Bajaj Auto Limited, Bharti Airtel Ltd., Bharat Heavy Electricals
Ltd., Cipla Ltd., DLF Ltd., HDFC, HDFC Bank Ltd., Hero Honda
Motors Ltd., Hindalco Industries Ltd., Hindustan Unilever Ltd.,
ICICI Bank Ltd., Infosys Technologies Ltd., ITC Ltd., Jaiprakash
Associates Ltd., Jindal Steel & Power Ltd., Larsen & Toubro Ltd.,
Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd., NTPC Ltd.,
ONGC Ltd., Reliance Industries Ltd., Reliance Communications
Ltd., Reliance Infrastructure Ltd., State Bank of India, Sterlite
Industries (India) Ltd., Tata Motors Ltd., Tata Power Company
Ltd., Tata Steel Ltd., Tata Consultancy Services Ltd., Wipro Ltd.
At regular intervals, the Bombay Stock Exchange (BSE)
authorities review and modify its composition to be sure it
reflects current market conditions. The index is calculated
based on a free float capitalization method; a variation of the
market cap method. Instead of using a company's outstanding
shares it uses its float, or shares that are readily available for
trading. The free-float method, therefore, does not include
restricted stocks, such as those held by promoters, government
and strategic investors.
Initially, the index was calculated based on the full market
capitalization method. However this was shifted to the free
float method with effect from September 1, 2003. Globally, the
free float market capitalization is regarded as the industry best
practice.
As per free float capitalization methodology, the level of index
at any point of time reflects the free float market value of 30
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component stocks relative to a base period. The Market
Capitalization of a company is determined by multiplying the
price of its stock by the number of shares issued by the
company. This Market capitalization is multiplied by a free float
factor to determine the free float market capitalization. Free
float factor is also referred as adjustment factor. Free float
factor represent the percentage of shares that are readily
available for trading.
The Calculation of Sensex involves dividing the free float
market capitalization of 30 companies in the index by a number
called Index divisor. The Divisor is the only link to original base
period value of the Sensex. It keeps the index comparable over
time and is the adjustment point for all Index adjustments
arising out of corporate actions, replacement of scrips, etc.
The index has increased by over ten times from June 1990 to
the present. Using information from April 1979 onwards, the
long-run rate of return on the BSE Sensex works out to be
18.6% per annum, which translates to roughly 9% per annum
after compensating for inflation.
NATIONAL STOCK EXCHANGE:The NSE was incorporated in Now 1992 with an equity capital of Rs
25 crore. The International securities consultancy (ISC) of Hong Kong
has helped in setting up NSE. ISE has prepared the detailed business
plans and installation of hardware and software systems. The
promotions for NSE were financial institutions, insurances
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companies, banks and SEBI capital market ltd, Infrastructure leasing
and financial services ltd and stock holding corporation ltd.
It has been set up to strengthen the move towards
professionalisation of the capital market as well as provide nationwide securities trading facilities to investors. NSE is not an exchange
in the traditional sense where brokers own and manage the
exchange. A two tier administrative set up involving a company
board and a governing aboard of the exchange is envisaged. NSE is
a national market for shares PSU bonds, debentures and government
securities since infrastructure and trading facilities are provided.
NSE-NIFTY:
The NSE on April 22, 1996 launched a new equity Index. The new
index, which replaces the existing NSE-100 index, is expected to
serve as an appropriate Index for the new segment of futures and
options.
Nifty means National Index for Fifty Stocks. The NSE-50 comprises50 companies that represent 20 broad Industry groups with an
aggregate market capitalization of around Rs. 1,70,000 crs. All
companies included in the Index have a market capitalization in
excess of Rs 500 crs each and should have traded for 85% of trading
days at an impact cost of less than 1.5%. The base period for the
index is the close of prices on Nov 3, 1995, which makes one year of
completion of operation of NSEs capital market segment. The base
value of the Index has been set at 1000.
ORGANIZATION PROFILE
Franklin Templeton Investments has grown from being
recognized as one of the best small companies in America to
being considered a premier global investment management
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organization. We offer clients a valuable perspective shaped by
our six decades of experience, investment expertise and
growing global reach.
Franklin Templeton GLOBAL
Franklin Resources, Inc. is a global investment management
organization known as Franklin Templeton Investments. We have an
extensive global presence, including offices in over 30 countries and
clients in more than 150. Our common stock is listed on the New
York Stock Exchange under the ticker symbol BEN and is included in
the Standard & Poor's 500
Index. As of December 31, 2010, wemanage over $670 billion in investment vehicles for individuals,
institutions, pension plans, trusts, partnerships and other clients.
A PREMIER GLOBAL INVESTMENT MANAGEMENTORGANIZATION
World-Class Investment Management
A pure investment management organization
Multi-manager structure encompassing well-known brands
across multiple asset classes
94% of U.S.-registered fund assets ranked in top two Lipper
quartiles for 10-year period ended December 31, 20101
Extensive Global Presence
A pioneer in global investing.
Clients in 150+ countries.
22 countries/regions with over U.S. $1 billion in AUM.
Largest cross-border fund manager.
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More than 500 investment professionals who speak over 25
languages.
Financial Strength
Diversified by investment objective, client type, and
geographical region
Strong balance sheet
Excellent credit ratings
Values-Based Culture
Put clients first
Build relationships
Work with integrity
Franklin Templeton INDIA
Franklin Templeton's association with India dates back to more t han
a decade as an investor. As part of the group's major thrust oninvesting in markets around the world, the India office was set up in
1996 as Templeton Asset Management India Pvt. Limited. It flagged
off the mutual fund business with the launch of Templeton India
Growth Fund in September 1996, and since then the business has
grown at a steady pace.
A Long term commitment:
Since starting its operations in India, Franklin Templeton has
invested a considerable amount of time, effort and resources
towards investor and distributor education, the belief being - to be
successful in the long term, the fundamentals need to be corrected,
at whatever cost! This has resulted in various advertising campaigns
aimed at educating investors, participation in seminars and
distributor training programs. Franklin Templeton has played a
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pivotal role in steering the industry to its current stage, and as long
term players, we continue to strive to achieve the objective of
'making mutual funds an investment of choice' for both individual
and institutional investors.
In July 2002, Franklin Templeton India acquired Pioneer ITI, another
leading fund house in India to create an organization with rich
investment experience over market cycles, one of the most
comprehensive product portfolios, footprint across the country and
an in-house shareholder servicing function. The huge synergies that
existed in the two organizations have helped the business grow at arapid pace, catapulting the company to among the top two fund
houses in India.
Our Vision
To be the premier global investment management organization by
offering high quality investment solutions, providing outstanding
service and attracting, motivating and retaining talented individuals.
Investment philosophy
Our investment philosophy that follows a disciplined approach to
investing with a strong focus towards process orientation is the
common thread running through all our schemes. The key guiding
principle to our investment philosophy is - maximize the risk-
adjusted returns for our investors in the respective asset classes,
and create wealth for them over the long-term. We have successfully
demonstrated the ability to achieve this in the past, and are
confident that our process-oriented investment approach will help us
sustain the same in the years to come.
Equity
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While broad economy and sector trends serve as a broad guideline,
Franklin Templeton portfolio managers are essentially 'bottom-up'
investors, focusing more on individual stocks and their potential to
deliver long term capital appreciation. While quantitative analysisusing proprietary research model serves as a first stage filter, the
research team and portfolio managers speak with key management
and observe operations onsite to get a meaningful insight into a
company's ability to translate vision into reality.
Debt
The overall objective is to minimize both liquidity and credit risk. Our
fixed income team looks to arrive at a general maturity/duration
range for the portfolio in relation to the market based on its interest
rate outlook, which is arrived after a rigorous and close monitoring of
various macro variables. The shifts within this range are thendetermined by short term cyclical trends in the economy. They look
to manage interest rate risk across different asset class and duration
buckets, in order to optimise risk-adjusted returns. All the
investment options are thoroughly analysed to ensure that credit risk
is kept at the minimum level. Any major shifts in portfolio strategy
are based on long-term trends, as opposed to short-term aberrations
in interest rates.
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ORGANIZATIN STRUCTURE
Name Designation
Charles B. Johnson Chairman of the Board
Rupert H. Johnson,Jr.
Vice Chairman
Gregory E.
Johnson
Chief Executive Officer President
Vijay C. Advani Executive Vice President - Global AdvisoryServices
Jennifer M.Johnson
Executive Vice President Chief OperatingOfficer
Kenneth A. Lewis Executive Vice President Chief FinancialOfficer
John M. Lusk Executive Vice President - InvestmentManagement
Craig S. Tyle Executive Vice President General Counsel
William Y. Yun Executive Vice President - AlternativeStrategies
Sharekhan Financial Services Pvt. Ltd
Name and addressShare Khan Financial Services India pvt ltd.
569,N no.342 opp canara bankThattan thottam, thirupur-641604
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Name and designation:Kathiresan.M (Business Partner)
No of Persons employed: Two
Name of the industry: Mutual FundsWhether seasonal: NoDate of Opening: 30th Aug 2002.Details of Head Offices/branches:Franklin Templeton Asset management India pvt ltdLevel 4, wockhardt towers, Bandra-Kurla complex,Bandra East, Mumbai 400051.No of employees: 424Person responsible to receive the notice on behalf of employees
under payment of gratuity act 1972 and the rules framed thereunder.Authorized personKaran KapadiaVP & Regional sales head.
HISTORY AND OVERVIEW OF FRANKLIN
TEMPLETON
In the year 1940:
The company was founded in 1947 in New York by Rupert H.
Johnson, Sr., who ran a successful retail brokerage firm from an
office on Wall Street. He named the company for U.S. founding
father Benjamin Franklin because Franklin epitomized the ideas of
frugality and prudence when it came to saving and investing. Thecompany's first line of mutual funds, Franklin Custodian Funds, was a
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series of conservatively managed equity and bond funds designed to
appeal to most investors.
In the year 1950:
After Rupert Sr. retired, his son, Charles B. Johnson (Charlie), tookover as president and chief executive officer in 1957 at age 24.
There were only a handful of employees at that time and the funds
had total assets under management of $2.5 million. Franklin was
swimming against the tide because insurance companies dominated
the middle class investing markets, but Charlie was convinced that
he had a good story to tell.
In the year 1960:
By the early 1960s Charlie and his team's persistence was paying off
and the company was growing albeit slowly. It was a struggle to
keep up with the day-to-day demands of the business and Charlie
continued to wear many hatsmutual fund manager, wholesaler
accountant. Rupert Johnson, Jr., Charlie's brother, joined the
company in 1965 and also took on multiple roles.
In the year 1970:
Franklin went public in 1971, which gave Charlie and team the
capital needed to grow the business and position it for the future. In
1973, the company acquired Winfield & Company, a San Mateo,
California-based investment firm, and moved Franklin's offices from
New York to California. The combined organization had close to $250
million in assets under management and approximately 60
employees. In 1979, Franklin Money Fund began a growth surge that
made it Franklin's first billion-dollar fund and launched the
company's tremendous asset growth in the 1980s.
In the year 1980:
Starting in 1980, the company's total assets under management
doubled (or nearly doubled) every year for the next six years. The
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company's stock began trading on the New York Stock Exchange in
1986 under the ticker symbol "BEN". In the same year, the company
opened its first office outside North America in Taiwan. In 1988,
Franklin acquired L.F. Rothschild Fund Management Company.Assets under management for Franklin grew from just over $2 billion
in 1982 to more than $40 billion in 1989 (the crash of 1987 had little
impact on Franklin's income and bond funds). Not one to rest on
their laurels, management was concerned about Franklin's heavy
emphasis on fixed income investments that had become the
company's bread and butter.
In the year 1990:
Strategic acquisitions in the 1990s helped Franklin diversify its
investment management capabilities beyond fixed income and also
expand its global footprint throughout Europe and Asia. In 1992,
after striking a deal with famed global investor Sir John Templeton
for acquisition of Templeton, Galbraith & Hansberger Ltd., Charlie
was named Fund Leader of the Year for spearheading what was then
the largest merger of an independent mutual fund company in
history. Templeton gave the company a strong portfolio of
international equity funds as well as the expertise of emerging
markets guru Dr. Mark Mobius, who currently leads a team of
emerging markets analysts and manages emerging markets
portfolios. Dr. Mobius has spent more than 30 years working in
emerging markets all over the world. Then in 1996, in an effort to
broaden its line of domestic equity products, Franklin Templeton
bought Heine Securities Corporation, investment advisor to Mutual
Series Fund, Inc., from Wall Street icon Michael Price.
In the year 2000:
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Several more key acquisitions solidified the company's position as a
premier global investment management organization: Bissett in
2000, Fiduciary Trust in 2001 and Darby in 2003. In 2005, Gregory E.
Johnson (Greg), Charlie's son, became chief executive officer,assuming overall responsibility for leading Franklin Templeton
Investments. Greg had grown up in the business and worked his way
through the organization beginning on the trading desk at age 24 in
1985.
Fundamental Approach
Our investment decisions are guided more by what we believe in,
less by what the market thinks. That is the reason once we buy into
a stock, or take a maturity position in a debt portfolio based on our
fundamental research and analysis, we stick to our position without
paying heed to market rumours and whisper estimates. We believe
that while technical can rule the roost in the short term, it is the
fundamentals that prove rewarding over time.
Long Term Orientation
Franklin Templeton's portfolio managers are strong believers in
consistently delivering good performance. The key word is
consistency. We believe that it is not important to be top performer
at any time and we attach more importance to being among the topquartile in the peer group consistently, and this requires taking a
long-term view, even at the cost of temporary underperformance.
Team Approach
While individual portfolio managers are the ultimate decision makers
for the scheme they manage, the belief is that working together can
achieve greater results than acting alone. That is why every stock
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that is researched by the analysts is discussed intensively at regular
investment team meetings, and the analysis is available to all
investment team members on a common platform. Moreover, the
high degree of interaction between investment team membersacross the globe helps share and learn from each other's experience
and expertise. The regular awards and top ratings accorded to
Franklin Templeton schemes are recognition of their consistently
superior performance across asset classes, and through market and
economic cycles. They also reflect Franklin Templeton's long
cherished values of choosing the long-term, disciplined and team
approach to managing its funds and business.
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Highlights of the Quarter
Record assets under management of $670.7 billion and long-
term sales of $54.9 billion.
Long-term net new flows of $3.4 billion, net of the previously
announced advisory account redemption of $12.0 billion.
Tax-free fixed-income funds experienced net outflows of $2.0
billion, but almost half of that was exchanged into other
Franklin Templeton funds.
Announced a new strategic relationship with Pelagos Capital
Management and the acquisition of Rensburg Fund
Management, a U.K. equity manager.
Earning per share
CORPORATE GOVERNANCE GUIDELINESThese Corporate Governance Guidelines (the Guidelines) havebeen adopted by the Board of Directors (the Board) of Franklin
Resources, Inc. (the Company or Corporation) in connection withits oversight of the Companys management and business affairs.
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Independence of Directors: A majority of directors must be
independent directors in accordance with the corporate
governance listing standards.
Director Qualifications and Selection: The CorporateGovernance Committee of the Board is responsible for
establishing a policy setting forth the specific, minimum
qualifications that the Corporate Governance Committee
believes must be met by a nominee recommended by the
Corporate Governance Committee for a position on the Board.
Term Limits: The Board does not believe that it should establish
term limits for its members. The Board recognizes the value of
continuity of directors who have experience with the Companyand who have gained over a period of time a level of
understanding about the Company and its operations
Meetings and Preparation: Directors are expected to regularly
attend Board meetings and meetings of committees on which
they serve, to spend the time needed in preparation for such
meetings and to meet as frequently as they deem necessary to
properly discharge their responsibilities.
Meeting Agendas: The Chairman of the Board and theCorporate Secretary will establish and disseminate the agenda
for each Board meeting. Each Board member is free to suggest
the inclusion of items on the agenda. Each Board member is
free to raise at any Board meeting subjects that are not on the
agenda for that meeting.
Annual Performance Evaluation: The Board, through its
delegation of oversight to the Corporate Governance
Committee, shall annually review its own performance in such
manner as it deems appropriate to determine whether the
Board and its committees are functioning effectively.
Review of Corporate Governance Guidelines: The Corporate
Governance Committee, as appropriate, shall periodically
review and reassess the adequacy of these Guidelines to
determine whether any changes are appropriate and
recommend to the Board any such changes for the Boards
approval.