SUMMER TRAINING REPORTOn

NEED OF FINANCIAL ADVISORS FOR MUTUAL FUND IN-VESTORS

AT

KARVY STOCK BROKING LIMITED

SUBMITTED IN THE PARTIAL FULFILMENT OF THE

REQUIREMENT FOR AWARD OF THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION (MBA)

TO

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

Submitted to:- Submitted by:

Ms. Vasudha Dhingra Parul Ghai

Faculty, Roll No: - 2829

AMITY BUSINESS SCHOOL MBA (3rd Semester)

MANESAR

DECLARATION

AMITY BUSINESS SCHOOL, MANESAR

(2008-10)

DECLARATION

I, Parul Ghai, Roll No. 2829 Class MBA(3rd Semester) of the AMITY BUSINESS

SCHOOL, MANESAR, here by declare that Summer Training Report entitled 'Need of

Financial Advisors For Mutual Fund Investors - (With Special Reference to KARVY) ´ is

an original work and the same has not been submitted to any other institute for the award of

any other degree. A seminar presentation of the Training Report was made on………………

……………….. and the suggestions by the faculty were duly incorporated.

Ms. Vasudha Dhingra Signature of the Candidate

Faculty

(Presentation In charge)

Countersigned

Director of the Institute

[Dr. (Prof.) R.C.Sharma]

ACKNOWLEDGEMENT

2

Sometimes words fall short to show gratitude, the same happened with me during this

project. The immense help and support received from KARVY stock broking limited over-

whelmed me during the project.

My sincere gratitude to Mr.Ashutosh Chaturvedi (Branch Head , NCR Region, KARVY)

and Dr. (Prof.)R.C.Sharma (Director, ABSM), for providing me with an opportunity to

work with KARVY STOCK BROKING LIMITED.

I am highly indebted to Mr. Rajat Khare., Product Head ( MF), Sector 14, KARVY,

Gurgaon Branch and Company Project Guide, who has provided me with the necessary

information and his valuable suggestion and comments on bringing out this report in the best

possible way.

I also thank Ms. Vasudha Dhingra, (Faculty Guide), ABSM, who has sincerely supported

me with the valuable insights into the completion of this project.

I cannot forget the contribution of the staff of KARVY. As I troubled them through my

queries at every stage of their work and I really appreciate the patience with which they re-

solved my doubts amidst their busy schedule, I express my sincere thanks to all of them.

Last but not the least; my heartfelt love for my parents, whose constant support and blessings

helped me throughout this project.

CONTENTS

3

Serial

No Topic Page No

CHAPTER 1

1. Introduction

2. Significance Of The Study

3. Conceptualization

4. Focus of the study

5. Objectives

6. Limitations

CHAPTER 2

1. Industry Profile

2. Company Profile

CHAPTER 3

1. Review of Existing Literature

2. Research Methodology

CHAPTER 4

1. Analysis and Interpretation

CHAPTER 5

1. Findings

2. Recommendations

3. Conclusion

Bibliography

Appendix

4

INTRODUCTION

5

INTRODUCTION TO MUTUALFUND

Mutual funds are financial intermediaries which pool the savings of numerous individuals

and invest the money thus raised in a diversified portfolio of securities, including equity,

bonds, debentures and other instruments, thus spreading and reducing risk. The object is to

maximize the return to the investor who participates in equity indirectly through mutual

funds.

Actually, it is a pool of money collected from investors and is invested according to stated

investment objectives. Mutual Fund investors are like shareholders and they own the fund.

They are not lenders or deposit holders in a mutual fund. Everybody else associated with a

mutual fund is a service provider, who earns a fee. The money in the mutual fund belongs to

the investors and nobody else.

Mutual funds invest in marketable securities according to the investment objective. The

value of the investments can go up or down, changing the value of the investor’s holdings.

NAV of a mutual fund fluctuates with market price movements. The market value of the in-

vestors fund is also called as net assets. Investor’s hold a proportionate share of the fund in

the mutual fund. New investors come in and old investors can exit, at prices related to net

asset value per unit.

A mutual fund is the ideal investment vehicle for today’s complex and modern financial sce-

nario. Markets for equity shares, bonds and other fixed income instruments, real estate, de-

rivatives and other assets have become mature and information driven. Prices changes in

these assets are driven by global events occurring in faraway places. A typical individual is

unlikely to have the knowledge, skills, inclination and time to keep track of events, under-

stand their implications and act speedily. An individual also finds it difficult to keep track of

ownership of his assets, investments, brokerage dues and bank transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified and

experienced staff that manages each of these functions on a full time basis. The large pool of

money collected in the fund allows it to hire such staff at a very low cost to each investor. In

effect, the mutual fund vehicle exploits economies of scale in all three areas- researches, in-

vestments and transaction processing. While the concept of individuals coming together to

invest money collectively is not new, the mutual fund in its present form is a 20th century

phenomenon. In fact, mutual funds gained popularity only after the Second World War.

6

Globally, there are thousands of firms offering tens of thousands of mutual funds with differ-

ent investment objectives. Today, mutual funds collectively manage almost as much as or

more money as compared to banks.

A draft offer document is to be prepared at the time of launching the fund.

Typically, it pre specifies the investments objectives of the fund, the risk associated, the costs

involved in the process and the broad rules for entry into and exit from the fund and other ar -

eas of operation. In India, as in most countries, these sponsors need approval from a regula-

tor, SEBI in our case. SEBI looks at track records of the sponsor and its financial strength in

granting approval to the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according to the in-

vestment objective. It also hires another entity to be the custodian of the assets of the funds

and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management Company also, in which

it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset Man-

agement Company (AMC).

This project has been a great learning experience for me; at the same time it gave me enough

scope to implement my analytical ability. This project as a whole can be divided into two

parts:

The first part gives an insight about the mutual funds and its various aspects. It is

purely based on whatever I learned at KARVY. One can have a brief knowledge

about mutual funds and all its basics through the project. Other than that the real serv-

ings come when one moves ahead. Some of the most interesting questions regarding

mutual funds have been covered. Some of them are: Why has it become one of the

largest financial intermediaries? How investors do chose between funds? Most popu-

lar stocks among fund managers, most lucrative sectors for fund managers, a special

report on Systematic Investment Plan, does fund performance persists and the top-

ping of all the servings in the form of portfolio analysis tool and its application.

All the topics have been covered in a very systematic way. The language has been

kept simple so that even a layman could understand. All the datas have been well an-

alyzed with the help of charts and graphs.

7

The second part consists of datas and their analysis, collected through a survey done

on 200 people. It covers the topic” Need of Financial Advisors for Mutual Fund In-

vestors”. The data collected has been well organized and presented. Hope the re-

search findings and conclusions will be of use. It has also covered why people don’t

want to go for financial advisors? The advisors can take further steps to approach

more and more people and indulge them for taking their advices.

SIGNIFICANCE OF THE STUDY

8

This research work has an applied basis in nature, which can be used for further analysis and

study. It has great practical implications in investment decisions. According to this study, an

investment portfolio can be suggested by the financial advisors. Persons interested in invest-

ing in capital market can use the result of this study to make a comparison between invest-

ments with the advise of the financial advisors and that of without the advisors regarding

risks and returns offered by various mutual funds and to find out suitable avenues for invest-

ments in capital market.

Mutual fund industry is increasing day by day so aspect of risk & return concerned to various

schemes of mutual fund become so important. There are various schemes available in mar-

ket. There is big problem that what scheme should be chosen and which not. This study give

proper attention on the advise of the financial advisors about risk & return of various

schemes.

This study has great significance because there are many type of investors. Some investors

have risky attitude whereas some want to play safe game .On the basis of standard deviation

& beta, these advisors can find out the risky situation of various schemes and accordingly

give advise to the investors.. This study is highly concerned to risk & return of various fund

which will be helpful in establish overview in relation to various mutual funds schemes as

per the advise of the financial advisors.

The company would be, with the help of this study, able to know about its strong points be-

cause of which the investors are availing their services as well as points in which it is lacking

in satisfying the needs of the investors.

CONCEPTUALIZATION

9

A Mutual Fund is a trust that pools the savings of a number of investors who share a com-

mon financial goal. The money thus collected is then invested in capital market instruments

such as shares, debentures and other securities. The income earned through these investments

and

The capital appreciation realized is shared by its unit holders in proportion to the number of

units owned by them. Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. The flow chart below describes broadly the working of a

mutual fund

WORKING OF MUTUAL FUND:

The flow chart below describes broadly the working of a mutual fund:

10

Fund Managers:

Fund Managers are the people who perform the role of managing investments under an orga-nization.

Money in Trust:

Mutual Funds are for the benefit of its investors. Each scheme has the following:

o The Investment portfolio (Portfolio Statement)

o Account of income and expenditure

o Account of assets and liabilities (Balance Sheet)

The gains and losses have to be borne by investors. Thus, the Mutual Fund manages the

scheme’s money in trust for the benefit of investors. SEBI regulates the expenditure by the

organization (AMC) whether as charge for management fees or as other expenses.

Who all are involved in Mutual Fund?

1 . Investors

Investors are the people who put their money or invest in the Mutual Fund. Every investor,

given his/her financial position and personal disposition, has a certain inclination to take risk.

The more risk one is capable of taking, the more return one can expect to get, and vice versa.

However, most people have neither the time nor the knowledge to directly invest in the mar-

ket. Mutual Fund is a solution for investors who lack either the time or the inclination or the

necessary skills to actively manage their investments in individual securities. In the scheme

of a Mutual Fund, the investor may have invested in a bank or any other safe option, thus de-

priving them of the possibility of getting a better return.

11

2 . Trustees :

Trustees are the people who are responsible for ensuring the proper care of the investor’s in-

terest in a scheme. In return, they are paid the trustee’s fees.

3 . Asset Management Company (AMC):

Asset Management Companies are those companies who manage the investment portfolios

of the schemes such as SCMF, FI, BMF, SMF, LICMF, etc.

Its income comes from the management fee that it charges for its services. The management

fee is calculated as a percentage of the net asset that is managed. In some countries, the man-

agement fee is based on performance.

An AMC has to employ people in order to bear all the establishment costs related to its activ-

ities such as premises, furniture, etc. These costs are paid from the management fee earned

by it.

Expenses such as trustee fees, marketing costs, etc are borne by the Mutual Fund scheme.

Sometimes, due to competition, the AMC is forced to bear these costs. As long as the income

is more than the expenditure, the AMC is viable. All AMCs have certain Asset Under Man-

agement (AUM), below which it is not viable. In Indian context, it is difficult for an AMC to

achieve Break-Even if its AUM is below Rs. 2,000 crores.

Within an AMC, the fund manager ensures that the scheme’s funds are invested in such a

way that the objectives of the scheme in the interest of its investors are achieved. The CEO,

in turn, sees that the fund manager performs his duty in a correct way.

4 . Distributors :

Distributors are the people who attract or bring in the investors into the schemes of a mutual

fund. They earn a commission for this. The commission is an expense for the AMC and it

may choose to bear the cost wholly or partially.

Depending upon the financial and physical resources at their disposal, the distributors can be

classified into 3 tiers:

12

Tier-1 Distributor:

These distributors have their own or franchise network reaching out to investors all across

the country.

Tier-2 Distributor:

These distributors are mostly regional players.

Tier-3 Distributor:

These are the small distributors – marginal players and have limited reach.

Distributors bring in investors for the AMC, for which they earn commission from them. But

they also safeguard the financial health of the investors who don’t pay them in return.

In recognition of this anomaly in the distribution structure, a body of financial planner is ex-pected to emerge in the Indian financial market. They will safeguard the investor’s interests in return for a fee from the investors.

5. Registrars :

Registrars and Transfer Agents (R&T) keeps track of the Mutual Fund scheme on account of

the investors’ investments and disinvestments from the scheme. The R&T of the Mutual

Fund maintains the database of investors. As a result, interest based transactions of the exist-

ing investors in the schemes of an AMC are affected through its database server.

Request to invest more money into the scheme, or to redeem money against existing invest-

ment in a scheme, are procured by R&T.

6 . Custodial Depository :

The Custodial Depository maintains custody of the securities in which the scheme invests.

This ensures an ongoing independent record of the investment of the scheme. It also follows

various corporate actions such as bonus and dividends declared by the invested companies.

Its importance is growing as securities are increasingly being dematerialized.

13

ORGANISATION OF MUTUAL FUND

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Manage-

ment Company (AMC) and custodian. The trust is established by a sponsor or more than one

sponsor who is like promoter of a company. The trustees of the mutual fund hold its property

for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI

manages the funds by making investments in various types of securities. Custodian, who is

registered with SEBI, holds the securities of various schemes of the fund in its custody. The

trustees are vested with the general power of superintendence and direction over AMC. They

monitor the performance and compliance of SEBI regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directors of trustee company or board

of trustees must be independent i.e. they should not be associated with the sponsors. Also,

50% of the directors of AMC must be independent. All mutual funds are required to be regis-

tered with SEBI before they launch any scheme. :

14

Organizational set up of a mutual fund

MUTUAL FUND TERMINOLOGY

1. Net Asset Value (NAV)

Net Asset Value (NAV) denotes the performance of a particular scheme of a mutual fund.

Mutual funds invest the money collected from the investors in securities markets. In simple

words, Net Asset Value is the market value of the securities held by the scheme. Since mar-

ket value of securities changes every day, NAV of a scheme also varies on day-to-day basis.

The NAV per unit is the market value of securities of a scheme divided by the total number

of units of the scheme on any particular date.

2. Loads or No Load Fund

A load fund is one that charges a percentage of NAV of entry or exit. That is, each time one

buys or sells units in the fund, a charge will be payable. That is, each time one buys or sells

units in the fund, a charge will be payable. This charge is used by the mutual fund for mar-

keting and distribution expenses. Suppose the NAV per unit is Rs. 10. If the entry as well as

exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and

those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit.

The investors should take the loads into consideration while making investment as these their

yields/ returns. However, the investors should also consider the performance track record and

service standard of the mutual fund, which are more important. Efficient funds may give

higher returns in spite of loads.

A no- load fund is one that does not charge for entry or exit. It means the investors can enter

the fund/scheme at NAV and no additional charges are payable on purchase on purchase or

sale of units.

3. Sale or Repurchase/ Redemption Price

The price or NAV a unit holder is charged while investing in an open-ended scheme is called

15

sales price. It may include sales load, if applicable.

Repurchase or redemption price is the price or NAV at which an open-ended scheme pur-

chases or redeems its units from the unit holders. It may include exit load, if applicable.

Concept of benchmarking for performance evaluation:

Every fund sets its benchmark according to its investment objective. The funds performance

is measured in comparison with the benchmark. If the fund generates a greater return than

the benchmark then it is said that the fund has outperformed benchmark , if it is equal to

benchmark then the correlation between them is exactly 1. And if in case the return is lower

than the benchmark then the fund is said to be underperformed.

To measure the fund’s performance, the comparisons are usually done with:

i) with a market index.

ii) Funds from the same peer group.

iii) Other similar products in which investors invest their funds.

Financial planning for investors( ref. to mutual funds):

Investors are required to go for financial planning before making investments in any mutual

fund. The objective of financial planning is to ensure that the right amount of money is avail-

able at the right time to the investor to be able to meet his financial goals. It is more than

mere tax planning. Steps in financial planning are:

Asset allocation.

Selection of fund.

Studying the features of a scheme.

16

In case of mutual funds, financial planning is concerned only with broad asset allocation,

leaving the actual allocation of securities and their management to fund managers. A fund

manager has to closely follow the objectives stated in the offer document, because financial

plans of users are chosen using these objectives.

17

FOCUS OF THE STUDY

The present study focuses on the need of the financial advisors for the mutual funds investors

about various mutual funds schemes of different AMC’s, paying special consideration to the

services provided by the KARVY. The study focuses on:

o Finding out the need felt by the investors for the financial advisors for the mutual

funds investments and finding out the major reasons for availing and not availing

the services of the financial advisors.

Due to a large number of Mutual Fund schemes in existence, it was not feasible to invest in

any of the scheme without analyzing the various schemes in the market and moreover with-

out the advise of any professional advisor. Therefore, the analysis of investment opportuni-

ties is very important and for this the need for the financial advisor is felt.

18

OBJECTIVES OF THE STUDY

To find whether the investors? need the services of the financial advisors for invest-

ing their hard core money in mutual funds or not.

To know why or why not investors? are availing the services of financial advisors.

To find out whether the investors are satisfied with the services provided by the

KARVY.

To explore the concept general opinion about mutual funds.

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LIMITATIONS OF THE STUDY

Due to shortage of time I was not able to approach all the clients of KARVY as these

are thousands in number.

Study has been done in Gurgaon only but there are around 15 branches of KARVY in

NCR region. So it contains the responses and experiences of the clients of Gurgaon

branch only.

Some of the persons were not so responsive as they did not show much interest in

filling the questionnaires and giving answers to my questions.

Possibility of error in analysis of data due to small sample size as one cannot ap-

proach to a correct conclusion with the help of such a small sample.

20

21

INDUSTRY PROFILE

History of the 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

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve

Bank of India and functioned under the Regulatory and administrative control of the Reserve

Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development

Bank of India (IDBI) took over the regulatory and administrative control in place of RBI.

The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had

Rs.6,700 crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks

and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India

(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 fol-

lowed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), In-

dian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct

92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in

December 1990.At the end of 1993, the mutual fund industry had assets under management

of Rs.47,004 crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

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 Pio-

neer (now merged with Franklin Templeton) was the first private sector mutual fund regis-

tered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mu-

22

tual Fund) Regulations 1996. As at the end of January 2003, there were 33 mutual funds with

total assets of Rs. 1,21,805 crores.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifur-

cated 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, represent-

ing broadly, the assets of US 64 scheme, assured return and certain other schemes

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is regis-

tered with SEBI and functions under the Mutual Fund Regulations. consolidation and

growth. As at the end of September, 2004, there were 29 funds, which manage assets of

Rs.153108 crores under 421 schemes.

Structure of the Indian Mutual Fund industry

The largest categories of Mutual Funds are the ones floated by the private sector and by For-

eign Asset Management Companies. The largest of these are Prudential ICICI AMC and

Birla Sun Life AMC. The aggregate corpus of assets managed by this category of AMCs is

in excess of Rs.350 bn.

Earlier the Indian Mutual Fund industry was dominated by the Unit Trust of India which has

a total corpus of Rs.700 bn collected from more than 20 million investors. The UTI has many

funds/schemes in all categories i.e. equity, balanced, income etc. with some being open-

ended and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64,

which is a balanced fund, is the biggest scheme with a corpus of about Rs.200 bn. UTI was

floated by financial institutions and is governed by a special Act of Parliament. Most of its

investors believe that the UTI is government owned and controlled, which, while legally in-

correct, is true for all practical purposes.

The second largest categories of mutual funds are the ones floated by nationalized banks.

Canbank Asset Management floated by Canara Bank and SBI Funds Management floated by

the State Bank of India are the largest of these. GIC AMC floated by the General Insurance

Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other promi-

23

nent ones. The aggregate corpus of funds managed by this category of AMCs is about Rs.200

bn.

About Mutual Funds

A Mutual Fund is a trust that pools the savings of a number of investors who share a com-

mon financial goal. The money thus collected is then invested in capital market instruments

such as shares, debentures and other securities. The income earned through these investments

and the capital appreciation realized is shared by its unit holders in proportion to the number

of units owned by them. Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. The flow chart below describes broadly the working of a

mutual fund

The structure of Mutual Funds in India is governed by SEBI (Mutual Fund) Regula-

tions, 1996.

24

SEBI

AMC

Unit holders

Savings

Units

Trust

Investments

Returns

Trust

AMC Custodian

Registrar

It is mandatory to have a three tier structure of Sponsor – Trustee – Asset Manage-

ment Company.

The trust is established by a Sponsor or more than one sponsor who is like a promoter

of a company. He appoints the Trustees who are responsible to the investors of the

fund.

The Trustees of the mutual fund hold its property for the benefit of the unit holders.

Asset Management Company (AMC) approved by SEBI is the business face of the

mutual fund as it manages all the affairs of the fund by making investments in various

types of securities.

Custodian, who is registered with SEBI, holds the securities of various schemes

of the funds in its custody.

WHY MUTUAL FUNDS?

An investor normally prioritizes his investment needs before undertaking an investment. So

different goals will be allocated different proportions of the total disposable amount. Invest-

ments for specific goals normally find their way into the debt market as risk reduction is of

prime importance. This is the area for the risk-averse investors and here, mutual funds are

generally the best option. The reasons are not difficult to see.

One can avail of the benefits of better returns with added benefits of anytime liquidity by in-

vesting in open-ended debt funds at lower risk. Many people have burnt their fingers by in-

vesting in fixed deposits of companies who were assuring high returns but have gone bust in

course of time leading to distraught investors as well as pending cases in the Company Law

Board.

This risk of default by any company that one has chosen to invest in, can be minimized by

investing in mutual funds as the fund managers analyze the companies’ financials more

minutely than an individual can do as they have the expertise to do so. They can manage the

maturity of their portfolio by investing in instruments of varied maturity profiles. Since there

is no penalty on pre-mature withdrawal, as in the cases of fixed deposits, debt funds provide

enough liquidity. Moreover, mutual funds are better placed to absorb the fluctuations in the

25

prices of the securities as a result of interest rate variation and one can benefits from any

such price movement.

Apart from liquidity, these funds have also provided very good post-tax returns on year to

year basis. Even historically, we find that some of the debt funds have generated superior re-

turns at relatively low level of risks. On an average debt funds have posted returns over 10

percent over one-year horizon. The best performing funds have given returns of around 14

percent in the last one-year period. In nutshell we can say that these funds have delivered

more than what one expects of debt avenues such as post office schemes or bank fixed de-

posits. Though they are charged with a dividend distribution tax on dividend payout at 10

percent (plus a surcharge of 10 percent), the net income received is still tax free in the hands

of investor and is generally much more than all other avenues, on a post tax basis.

Moving up in the risk spectrum, we have people who would like to take some risk and invest

in equity funds/capital market. However, since their appetite for risk is also limited, they

would rather have some exposure to debt as well. For these investors, balanced funds provide

an easy route of investment. Armed with the expertise of investment techniques, they can in-

vest in equity as well as good quality debt thereby reducing risks and providing the investor

with better returns than he could otherwise manage. Since they can reshuffle their portfolio

as per market conditions, they are likely to generate moderate returns even in pessimistic

market conditions.

This risk of default by any company that one has chosen to invest in, can be minimized by

investing in mutual funds as the fund managers analyze the companies’ financials more

minutely than an individual can do as they have the expertise to do so. They can manage the

maturity of their portfolio by investing in instruments of varied maturity profiles. Since there

is no penalty on pre-mature withdrawal, as in the cases of fixed deposits, debt funds provide

enough liquidity. Moreover, mutual funds are better placed to absorb the fluctuations in the

prices of the securities as a result of interest rate variation and one can benefits from any

such price movement.

Next come the risk takers. Risk takers by their very nature, would not be averse to investing

in high-risk avenues. Capital markets find their fancy more often than not, because they have

historically generated better returns than any other avenue, provided, the money was judi-

26

ciously invested. Though the risk associated is generally on the higher side of the spectrum,

the return-potential compensates for the risk attached.

Capital markets interest people, albeit not all for there are several problems associated. First

issue is that of expertise. While investing directly into capital market one has to be analytical

enough to judge the valuation of the stock and understand the complex undertones of the

stock. One needs to judge the right valuation for exiting the stock too. It is very difficult for a

small investor to keep track of the movements of the market. Entrusting the job to experts,

who watch the trends of the market and analyze the valuations of the stocks will solve this

problem for an investor. Mutual funds specialize in identification of stocks through dedicated

experts in the field and this enables them to pick stocks at the right moment. Sector funds

provide an edge and generate good returns if the particular sector is doing well.

Next problem is that of funds/money. A single person can’t invest in multiple high-priced

stocks for the sole reason that his pockets are not likely to be deep enough. This limits him

from diversifying his portfolio as well as benefiting from multiple investments.

Here again, investing through MF route enables an investor to invest in many good stocks

and reap benefits even through a small investment. This not only diversifies the portfolio and

helps in generating returns from a number of sectors but reduces the risk as well. Though

identification of the right fund might not be an easy task, availability of good investment

consultants and counselors will help investors take informed decision.

27

COMPANY PROFILE

OVERVIEW ABOUT COMPANY

KARVY, is a premier integrated financial services provider, and ranked among the top five

in the country in all its business segments, services over 16 million individual investors in

various capacities, and provides investor services to over 300 corporate, comprising the who

is who of Corporate India. KARVY covers the entire spectrum of financial services such as

Stock broking, Depository Participants, Distribution of financial products – mutual funds,

bonds, fixed deposit, equalities, Insurance Broking, Commodities Broking, Personal Finance

Advisory Services, Merchant Banking & Corporate Finance, placement of equity, IPO’s,

among others. KARVY has a professional management team and ranks among the best in

technology, operations and research of various industrial segments.

Banking & Corporate Finance, Insurance Broking, Commodities Broking, Personal Finance

Advisory Services, placement of equity, IPOs, among others. KARVY has a professional

management team and ranks among the best in technology, operations, and more impor-

tantly, in research of various industrial segments.

History of KARVY

The birth of KARVY was on a modest scale in 1981. It began with the vision and enterprise

of a small group of practicing Chartered Accountants who founded the flagship company …

KARVY Consultants Limited. We started with consulting and financial accounting automa-

tion, and carved inroads into the field of registry and share accounting by 1985. Since then,

we have utilized our experience and superlative expertise to go from strength to strength …

to better our services, to provide new ones, to innovate, diversity and in the process, evolved

KARVY as one of India’s premier integrated financial service enterprise.

Thus over the last 20 years KARVY has traveled the success route, towards building a repu-

tation as an integrated financial services provider, offering a wide spectrum of services. And

we have made this journey by taking the route of quality service, path breaking innovations

in service, versatility in service and finally…totality in service.

Our highly qualified manpower, cutting-edge technology, comprehensive infrastructure and

total customer-focus has secured for us the position of an emerging financial services giant

28

enjoying the confidence and support of an enviable clientele across diverse fields in the fi-

nancial world.

Our values and vision of attaining total competence in our servicing has served as the build-

ing block for creating a great financial enterprise, which stands solid on our fortresses of fi-

nancial strength-our various companies.

With the experience of years of holistic financial servicing behind us and years of complete

expertise in the industry to look forward to, we have now emerged as a premier integrated fi -

nancial services provider.

And today, we can look with pride at the fruits of our mastery and experience – comprehen-

sive financial services that are competently segregated to service and manage a diverse range

of customer requirements.

MANAGEMENT TEAM

BOARD MEMBERS

C Parthasarathy, Chairman & Managing Director

Mr. C Parthasarathy, a leader in the financial services industry in

India is responsible for building KARVY as one of India's truly in-

tegrated Financial Services Provider; he is a fellow member of the

Institute of Company Secretaries of India, a Fellow Member of the

Institute of Chartered Accountants of India and a graduate in law.

As Chairman and Managing Director, he oversees the group's operations and renders vision

and business direction.

M Yugandhar, Managing Director

Mr. M Yugandhar, Managing Director, founder member of

KARVY Consultants Limited, has varied experience in the field of

financial services spanning over 20 years. He is a Fellow Member

of the Institute of Chartered Accountants of India and was involved

in the statutory and branch audit of banks for 26 years.

29

.

M S Ramakrishna, Executive Director

Mr. M S Ramakrishna, Director, founder member of KARVY Con-

sultants Limited is the orchestrator of technology initiatives such as

the call center in the service of the customer.

OTHER MEMBERS

K Sridhar

V Mahesh

V Ganesh

S Gopichand

J Ramaswamy

M S Manohar

S Ganapathy Subramanian

KARVY Group Co’s

KARVY Depository Participant Services (NSDL & CDSL)

KARVY the Finapolis

KARVY Consultants Ltd.

KARVY Stock Broking Ltd. (NSE & BSE)

30

KARVY Investor Services Ltd.

KARVY Computer Share Pvt. Ltd.

KARVY Global Services Ltd.

KARVY Commodities Broking Pvt. Ltd.

KARVY Insurance Broking Pvt. Ltd.

KARVY E-TDS Returns & PAN Application Process

KARVY Reality Services

Karvy Consultants Ltd.

As the flagship company of the KARVY Group, KARVY Consultants Limited has always

remained at the helm of organizational affairs, pioneering business policies, work ethic and

channels of progress.

Having emerged as a leader in the registry business, the first of the businesses that we ven-

tured into, we have now transferred this business into a joint venture with Computershare

Limited of Australia, the world’s largest registrar. With the advent of depositories in the In-

dian capital market and the relationships that we have created in the registry business, we be-

lieve that we were best positioned to venture into this activity as a Depository Participant.

We were one of the early entrants registered as Depository Participant with NSDL (National

Securities Depository Limited), the first Depository in the country and then with CDSL

(Central Depository Services Limited). Today, we service over 6 lakhs customer accounts in

this business spread across over 250 cities/towns in India and are ranked amongst the largest

Depository Participants in the country. With a growing secondary market presence, we have

transferred this business to KARVY Stock Broking Limited (KSBL), our associate and a

member of NSE, BSE and HSE.

31

Karvy Stock Broking Ltd

Member - National Stock Exchange (NSE), The Bombay Stock Exchange (BSE), and The

Hyderabad Stock Exchange (HSE).

KARVY Stock Broking Limited, one of the cornerstones of the KARVY edifice, flows

freely towards attaining diverse goals of the customer through varied services. Creating a

plethora of opportunities for the customer by opening up investment vistas backed by re-

search-based advisory services. Here, growth knows no limits and success recognizes no

boundaries. Helping the customer create waves in his portfolio and empowering the investor

completely is the ultimate goal.

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high success

rate as a wealth management and wealth accumulation option. The difference between unpre-

dictability and a safety anchor in the market is provided by in-depth knowledge of market

functioning and changing trends, planning with foresight and choosing one’s options

with care. This is what we provide in our Stock Broking services.

KARVY the Finapolis

The paradigm shift from pure selling to knowledge based selling drives the business today.

With our wide portfolio offerings, we occupy all segments in the retail financial services in-

dustry. A 1600 team of highly qualified and dedicated professionals drawn from the best of

academic and professional backgrounds are committed to maintaining high levels of client

service delivery. This has propelled us to a position among the top distributors for equity and

debt issues with an estimated market share of 15% in terms of applications mobilized, be-

sides being established as the leading procurer in all public issues.

To further tap the immense growth potential in the capital markets we enhanced the scope of

our retail brand, KARVY – the Finapolis , thereby providing planning and advisory services

to the mass affluent. Here we understand the customer needs and lifestyle in the context of

present earnings and provide adequate advisory services that will necessarily help in creating

wealth. Judicious planning that is customized to meet the future needs of the customer de-

liver a service that is exemplary. The market-savvy and the ignorant investors, both find this

32

service very satisfactory. The edge that we have over competition is our portfolio of offer-

ings and our professional expertise. The investment planning for each customer is done with

an unbiased attitude so that the service is truly customized.

Our monthly magazine, Finapolis, provides up-dated market information on market trends,

investment options, opinions etc. Thus empowering the investor to base every financial move

on rational thought and prudent analysis and embark on the path to wealth creation.

Karvy Investor Service Limited

Recognized as a leading merchant banker in the country, we are registered with SEBI as a

Category I merchant banker. This reputation was built by capitalizing on opportunities in

corporate consolidations, mergers and acquisitions and corporate restructuring, which have

earned us the reputation of a merchant banker. Raising resources for corporate or Govern-

ment Undertaking successfully over the past two decades have given us the confidence to re-

new our focus in this sector.

:KARVY Computershare Pvt. Ltd.

We have traversed wide spaces to tie up with the world’s largest transfer agent, the leading

Australian company, Computershare Limited. The company that services more than 75 mil-

lion shareholders across 7000 corporate clients and makes its presence felt in over 12 coun-

tries across 5 continents has entered into a 50-50 joint venture with us.

With our management team completely transferred to this new entity, we will aim to enrich

the financial services industry than before. The future holds new arenas of client servicing

and contemporary and relevant technologies as we are geared to deliver better value and fos-

ter bigger investments in the business. The worldwide network of Computershare will hold

us in good stead as we expect to adopt international standards in addition to leveraging the

best of technologies from around the world.

33

Excellence has to be the order of the day when two companies with such similar ideologies

of growth, vision and competence, get together.

KARVY Global Services Ltd.

The specialist Business Process Outsourcing unit of the KARVY Group. The legacy of ex-

pertise and experience in financial services of the KARVY Group serves us well as we enter

the global arena with the confidence of being able to deliver and deliver well.

Here we offer several delivery models on the understanding that business needs are unique

and therefore only a customized service could possibly fit the bill. Our service matrix has

permutations and combinations that create several options to choose from.

Be it in re-engineering and managing processes or delivering new efficiencies, our service

meets up to the most stringent of international standards. Our outsourcing models are de-

signed for the global customer and are backed by sound corporate and operations philoso-

phies, and domain expertise. Providing productivity improvements, operational cost control,

cost savings, improved accountability and a whole gamut of other advantages. .

KARVY Comtrade Ltd.

At KARVY Commodities, we are focused on taking commodities trading to new dimensions

of reliability and profitability. We have made commodities trading, an essentially age-old

practice, into a sophisticated and scientific investment option.

Here we enable trade in all goods and products of agricultural and mineral origin that include

lucrative commodities like gold and silver and popular items like oil, pulses and cotton

through a well-systematized trading platform. Our technological and infrastructural strengths

and especially our street-smart skills make us an ideal broker. Our service matrix is holistic

34

with a gamut of advantages, the first and foremost being our legacy of human resources,

technology and infrastructure that comes from being part of the KARVY Group.

KARVY Insurance Broking Pvt. Ltd.

At KARVY Insurance Broking Limited., we provide both life and non-life insurance prod-

ucts to retail individuals, high net-worth clients and corporates. With the opening up of the

insurance sector and with a large number of private players in the business, we are in a posi-

tion to provide tailor made policies for different segments of customers. In our journey to

emerge as a personal finance advisor, we will be better positioned to leverage our relation-

ships with the product providers and place the requirements of our customers appropriately

with the product providers. With Indian markets seeing a sea change, both in terms of invest-

ment pattern and attitude of investors, insurance is no more seen as only a tax saving product

but also as an investment product. By setting up a separate entity, we would be positioned to

provide the best of the products available in this business to our customers.

Karvy Reality & Service (India) Ltd.

KARVY Realty & Services (India) Limited (KRSIL) is engaged in the business of real estate

and property services offering value added property services and offers individuals and es-

tablishments a myriad of options across investments, financing and advisory services in the

realtysector.

KARVY Realty & Services (India) Limited …………………………………………Take a

Realty Byte !!!

Promoted by the KARVY Group of companies, India’s largest integrated financial services

company. KARVY Realty & Services India Limited carries forward its legacy of trust and

excellence in investor and customer services delivered with a passion for services and the

highest level of quality that align with global standards.

35

KARVY Realty & Services (India) Limited welcomes you to take a reality check on realty

options that you can be rest assured of and of course profit from.

Organization structure of KARVY:

Talking about the organization structure of karvy, we have the board of directors as the

supreme governing body , the chairman being Mr. C parthasarthy, mr. m yugandhar as the

managing director, mr m s ramakrishna andmr. Prasad v. potluri as directors.

The board of diretors head the karvy group, karvy computershares limited, karvy investors

services ltd., karvy comtrade, karvy stock broking ltd., and karvy global services ltd.

Karvy group being the flagship company looks after the functional departments such as cor-

porate affairs, group human resources, finance & accounting, training & development, tech-

nology services and corporate quality.

Karvy computershare private limited facilitates mutual fund services, share registry and is-

sue registry whereas merchant banking is looked after by karvy investor services ltd. Karvy

stock broking ltd heads its another branch too ie. Karvy insurance broking ltd. The services

offered by KSBL are: stock broking, depository, research, distribution, personal client group

and institutional desk. And finally the BPO services are managed by karvy global services

ltd. Summarizing it in a diagram, it can be presented as:

36

The success ladder:

37

OUR ALLIANCE

KARVY Computer share Private Limited is a 50:50 joint venture of KARVY Consultants

Limited and Computershare Limited, Australia. Computereshare Limited is world's largest --

and only global -- share registry, and a leading financial market services provider to the

global securities industry.

The joint venture with Computershare, reckoned as the largest registrar in the world, servic-

ing over 60 million shareholder accounts for over 7,000 corporations across eleven countries

spread across five continents. Computershare manages more than 70 million shareholder ac-

counts for over 13,000 corporations around the world.

KARVY Computershare Private Limited, today, is India's largest Registrar and Share Trans-

fer Agent servicing over 300 corporates and mutual funds and 16 million investors.

Spectrum of services offered by KARVY:

KARVY being the top registrar and transfer agent, functions as registrar in most of the issues

in the country. Talking about the mutual fund services offered by KARVY, we can get the

products of 33 AMCs over here. it deals in both closed ended funds as well as open ended

too. Now one must be thinking why to get the mutual funds from KARVY instead of getting

it directly from AMCs???we have great reasons for it: the first one being ; if we avail the ser-

vices of KARVY then we can get the information about all the AMCs and their products at a

single place along with expert recommendations whereas at an AMC we can get information

about the products of that specific AMC only. And the second being wide network of

KARVY….nowadays we can find KARVY offices at remote areas too.

Along with these, KARVY is very well handling the role of depository participant. Being

registered with both the depositories i.e.; NSDL (national securities depository ltd) and

CDSL (central depository services ltd), KARVY can have access to both. Its wide network

also facilitates it in distribution of retail financial products.

38

KARVY believes in being updated always. So it is always ready to use latest technologies

so that its clients always be in touch with the latest happenings along with KARVY. It offers

e-business through internet through its website: www.karvy.com . Other than it, it also pro-

vides its various services through SMSes.

Karvy’s services are not limited to its investors only rather its offerings are for its corporate

clients and distributors too. it is very well aware of the fact that in this era of neck to neck

competition, we cant ignore any of the aspects of our business….so there’s a offering for ev-

erybody…everyone’s welcome at KARVY.

Why should investors choose for KARVY?

Excellence is next to nothing….and here at KARVY everybody tries their best to offer excel-

lent services to its clientele through its offerings maintaining the KARVY culture which in-

cludes:

1. Controlled and low cost service culture: KARVY is there to serve its client at the mini-

mum possible cost. it controls cost by its various cost- cutting techniques and minimization

of avoidable costs.

2. Large volume processing capability: being the largest financial service provider in the

country, it has the unique distinction of operating its activities on a large scale which benefits

all the parties cordially.

3. Adherence to strict time schedule: Karvy knows that time is money and tries it best to fin-ish the task within the stipulated time schedule.

4. Expertise in coordinating multi-location responses: Karvy has got a wide network and

hence one can find its branches at most of the places in India. Thus it enjoys its presence ev-

erywhere and coordinates among itself in solving the queries and in responding to any situa-

tion.

5.Expertise in managing independent entities such as banks, post-office etc.: the work cul-

ture of Karvy and the ethics followed inside Karvy makes its workforce compatible with ev-

erybody, so the Karvy people establishes good coordination with independent entities too.

39

6. Pooling of group resources: Karvy group consists of eight subsidiaries, so it can easily

pool up its resources for accomplishment of its goals, whenever needed. The groups can help

each other whenever there are peaks and lows, and even in the case when they have huge tar-

gets just as we saw few years back, Tata group pooling its resources to acquire Corus.

How KARVY achieved it?

The core competency of KARVY lies in the following points due to which it enjoys a com-

petitive edge over its competitors. The following culture adopted by KARVY makes it all

time favorite among its clientele:

1. Professionally managed by qualified and trained manpower

2. Uniquely structured in-house software and hardware department

3. Query handling within 48 hrs.

4. Strong secretarial, accounting and audit systems.

5. Unique work culture of working 7 days a week in 3 shifts.

6. Unmatched network spreading all over India.

How Achievements sounds synonymous to KARVY:

The landmarks achieved by KARVY very well define its success story. In the previous

pages, we learnt how a company started by five chartered accountants, named as KARVY

and company turned into today’s KARVY group, the largest financial intermediary of India.

But success didn’t came to KARVY at a flow, the hard work and dedication of its workforce

made it what it is today…gradually it achieved the following landmarks and now it has be-

came what we call the KARVY group, now it is:

1. largest independent distributor for financial products.

2. amongst the top 5 stock broker.

3. among the top 3 depository participants.

4. largest network of branches & business associates.

5. ISO 9002 certified operations by DNV.

6. Amongst top 10 investment bankers.

7. adjudged as one of the top 50 IT users in India by MIS south Asia.

40

8. full- fledged IT driven operation.

9. India’s no.1 registrar & securities transfer agent.

Clientele of KARVY:

KARVY’s culture has helped KARVY in achieving such a distinct position in the market

where it can boast of its huge client base. Be it a retail investor investing Rs. 500 in a SIP in

Reliance mutual fund or be it the largest corporate house of the country: Reliance industries-

everybody is heading towards KARVY for their wealth maximization, lets have a look at the

clientele of KARVY :

According to the data published , KARVY stock broking ltd. operates through more than

12000 terminals, more than 290000 accounts are maintained and commands over 3.14%

market share of NSE. The distribution services have access to more than Rs. 40 billion As-

sets Under Management. KARVY being a depository participant with both NSDL and CDSL

manages more than 700000 accounts from more than 380 locations. Talking about the reg-

istry services, it manages over 750 public/ right issues. at the same time, it is managing over

16 million portfolios as registrar.

If we took a look at some of the top corporate houses availing the services of Karvy then we

have: Reliance, IOC, IDBI,LIC, Hindustan Unilever, Principal Mutual Fund, Duetsche Mu-

tual Fund, Yogokawa, Marico Industries, Patni Computers, Morgan Stanley, Glenmark,

CRISIL, 3M, Kotak Mahindra Bank, Bharti Televenture, Infosys Technologies, Wipro, In-

fotech, IPCL,TATA consultancy services, UTI mutual fund etc. Thus in total karvy serves

over 16 million investors and 300 corporates.

KARVY Mutual Fund Services

Mutual funds have servings for everybody. Whichever type of investor you are, you will

surely get a mutual fund meeting your requirements. But investing in mutual funds is no

child’s play therefore karvy mutual fund advisory services is there to guide in each and ev-

ery step of investment in mutual funds so that the dream of wealth creation doesn’t turns into

nightmares. Its offerings includes: products of all the 33 major AMCs, research report about

all the existing funds as well as NFOs, customized mutual fund portfolios designed for indi-

vidual as well as institutional customers, it not only design the portfolios rather it offers con-

41

tinuous portfolio revision too depending on changing market outlook and evolving trends, it

further gives access to its online consolidated portfolio statement. Thus karvy with its vari-

ous offerings makes the investor feel safe in this dynamic environment of the Indian finan-

cial market.

Karvy Computershare mutual fund services offers investors services, distributor services and

client services. It can be said that karvy is dedicated towards providing quality service to all

these three facets of the investment process.

Karvy being an intermediary is well registered with the Association of Mutual Funds of India

(AMFI). KARVY has got the registration no [ARN 0018] for mutual funds, which is men-

tioned on every form. After the procurement of forms from various AMCs, the forms are

passed on to its various zonal and branch offices (as per their requirements) and then further

processing is done either directly or through sub-brokers.

Karvy operates through its sub- brokers, associates and its excellent pool of own direct em-

ployees. The employees are offered salary by karvy whereas the sub- brokers and associates

get certain commission. Karvy has 70 branches and 3 franchisees in the eastern region. All

the work of mutual funds is regulated from Rashbehari avenue branch, an extension of the

JDR branch.

The main source of earning for KARVY is the brokerage offered by the various AMCs

known as pay-in. The amount offered may vary from AMC to AMC. Also, the franchisees

have to pay a certain amount every month. Now karvy also pay a certain amount to the sub

brokers and associates known as pay-out. The payout is decided according to the procure-

ment done by them.

QUALITY POLICY

To achieve and retain leadership, KARVY shall aim for complete customer satisfaction, by

combining its human and technological resources, to provide superior quality financial ser-

vices. In the process, KARVY will strive to exceed Customer's expectations. 

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43

LITERATURE REVIEW

Why has it become one of the largest financial instruments?

If we take a look at the recent scenario in the Indian financial market then we can find the

market flooded with a variety of investment options which includes mutual funds, equities,

fixed income bonds, corporate debentures, company fixed deposits, bank deposits, PPF, life

insurance, gold, real estate etc. all these investment options could be judged on the basis of

various parameters such as- return, safety convenience, volatility and liquidity. measuring

these investment options on the basis of the mentioned parameters, we get this in a tabular

form

Return  Safety  Volatility  Liquidity  Convenience 

Equity  High  Low  High  High  Moderate 

Bonds  Moderate  High  Moderate  Moderate  High 

Co. Deben-

tures 

Moderate  Moderate  Moderate  Low  Low 

Co. FDs  Moderate  Low  Low  Low  Moderate 

Bank De-

posits 

Low  High  Low  High  High 

PPF  Moderate  High  Low  Moderate  High 

Life Insur-

ance 

Low  High  Low  Low  Moderate 

Gold  Moderate  High  Moderate  Moderate  Gold 

Real Estate  High  Moderate  High  Low  Low 

Mutual

Funds 

High  High  Moderate  High  High 

We can very well see that mutual funds outperform every other investment option. On three

parameters it scores high whereas it’s moderate at one. comparing it with the other options,

we find that equities gives us high returns with high liquidity but its volatility too is high

44

with low safety which doesn’t makes it favourite among persons who have low risk- appetite.

Even the convenience involved with investing in equities is just moderate.

Now looking at bank deposits, it scores better than equities at all fronts but lags badly in the

parameter of utmost important ie; it scores low on return , so it’s not an happening option for

person who can afford to take risks for higher return. The other option offering high return is

real estate but that even comes with high volatility and moderate safety level, even the liq-

uidity and convenience involved are too low. Gold have always been a favourite among Indi-

ans but when we look at it as an investment option then it definitely doesn’t gives a very

bright picture. Although it ensures high safety but the returns generated and liquidity are

moderate. Similarly the other investment options are not at par with mutual funds and serve

the needs of only a specific customer group. Straightforward, we can say that mutual fund

emerges as a clear winner among all the options available.

The reasons for this being:

Mutual funds combine the advantage of each of the investment products: Mutual

fund is one such option which can invest in all other investment options. Its principle

of diversification allows the investors to taste all the fruits in one plate. just by invest-

ing in it, the investor can enjoy the best investment option as per the investment ob-

jective.

Dispense the shortcomings of the other options: every other investment option has

more or les some shortcomings. Such as if some are good at return then they are not

safe, if some are safe then either they have low liquidity or low safety or both….like-

wise, there exists no single option which can fit to the need of everybody. But mutual

funds have definitely sorted out this problem. Now everybody can choose their fund

according to their investment objectives.

Returns get adjusted for the market movements: as the mutual funds are managed

by experts so they are ready to switch to the profitable option along with the market

movement. Suppose they predict that market is going to fall then they can sell some

of their shares and book profit and can reinvest the amount again in money market in-

struments.

45

Flexibility of invested amount: Other then the above mentioned reasons, there exists

one more reason which has established mutual funds as one of the largest financial

intermediary and that is the flexibility that mutual funds offer regarding the invest-

ment amount. One can start investing in mutual funds with amount as low as Rs. 500

through SIPs and even Rs. 100 in some cases.

How do investors choose between funds?

When the market is flooded with mutual funds, it’s a very tough job for the investors to

choose the best fund for them. Whenever an investor thinks of investing in mutual funds, he

must look at the investment objective of the fund. Then the investors sort out the funds

whose investment objective matches with that of the investor’s. Now the tough task for in-

vestors start, they may carry on the further process themselves or can go for advisors like

KARVY. Of course the investors can save their money by going the direct route i.e. through

the AMCs directly but it will only save 1-2.25% (entry load) but could cost the investors in

terms of returns if the investor is not an expert. So it is always advisable to go for MF advi-

sors. The mf advisors’ thoughts go beyond just investment objectives and rate of return.

Some of the basic tools which an investor may ignore but an mf advisor will always look for

are as follow:

1. Rupee cost averaging: the investors going for Systematic Investment Plans(SIP) and Sys-

tematic Transfer Plans(STP) may enjoy the benefits of RCA (Rupee Cost Averaging). Rupee

cost averaging allows an investor to bring down the average cost of buying a scheme by

making a fixed investment periodically, like Rs 5,000 a month and nowadays even as low as

Rs. 500 or Rs. 100. In this case, the investor is always at a profit, even if the market falls. In

case if the NAV of fund falls, the investors can get more number of units and vice-versa.

This results in the average cost per unit for the investor being lower than the average price

per unit over time.

The investor needs to decide on the investment amount and the frequency. More frequent the

investment interval, greater the chances of benefiting from lower prices. Investors can also

benefit by increasing the SIP amount during market downturns, which will result in reducing

the average cost and enhancing returns. Whereas STP allows investors who have lump sums

to park the funds in a low-risk fund like liquid funds and make periodic transfers to another

fund to take advantage of rupee cost averaging. 

46

2. Rebalancing: Rebalancing involves booking profit in the fund class that has gone up and

investing in the asset class that is down. Trigger and switching are tools that can be used to

rebalance a portfolio. Trigger facilities allow automatic redemption or switch if a specified

event occurs. The trigger could be the value of the investment, the net asset value of the

scheme, level of capital appreciation, level of the market indices or even a date. The funds re-

deemed can be switched to other specified schemes within the same fund house. Some fund

houses allow such switches without charging an entry load. 

To use the trigger and switch facility, the investor needs to specify the event, the amount or

the number of units to be redeemed and the scheme into which the switch has to be made.

This ensures that the investor books some profits and maintains the asset allocation in the

portfolio. 

3. Diversification: Diversification involves investing the amount into different options. In

case of mutual funds, the investor may enjoy it afterwards also through dividend transfer op-

tion. Under this, the dividend is reinvested not into the same scheme but into another scheme

of the investor's choice.

For example, the dividends from debt funds may be transferred to equity schemes. This

gives the investor a small exposure to a new asset class without risk to the principal amount.

Such transfers may be done with or without entry loads, depending on the MF's policy. 

4. Tax efficiency: tax factor acts as the “x-factor” for mutual funds. Tax efficiency affects

the final decision of any investor before investing. The investors gain through either divi-

dends or capital appreciation but if they haven’t considered the tax factor then they may end

loosing.

Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and edu-

cation cess) on dividends paid out. Investors who need a regular stream of income have to

choose between the dividend option and a systematic withdrawal plan that allows them to re-

deem units periodically. SWP implies capital gains for the investor.

If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax bracket.

Investors in higher tax brackets will end up paying a higher rate as short-term capital gains

and should choose the dividend option. 

47

If the capital gain is long-term (where the investment has been held for more than one year),

the growth option is more tax efficient for all investors. This is because investors can redeem

units using the SWP where they will have to pay 10 per cent as long-term capital gains tax

against the 12.50 per cent DDT paid by the MF on dividends.

All the tools discussed over here are used by all the advisors and have helped investors in re-

ducing risk, simplicity and affordability. Even then an investor needs to examine costs, tax

implications and minimum applicable investment amounts before committing to a service.

48

RESEARCH DESIGN

A Research Design is the framework or plan for a study, which is used as a guide in collect-

ing and analyzing the data collected. It is the blue print that is followed in completing the

study. The basic objective of research cannot be attained without a proper research design. It

specifies the methods and procedures for acquiring the information needed to conduct the re-

search effectively. It is the overall operational pattern of the project that stipulates what in-

formation needs to be collected, from which sources and by what methods.

This chapter also includes the sub sections which are we can also say as the sub parts. This

has been done in order to enhance the comfortability while understanding and reading the

methodology of research.

PRESENT STUDY

A mutual fund is an investment company or trust that pools the resources of thousands of its

shareholders or unit holders and invest on behalf of these diversified securities and a cross

section of companies to attain the objective of the investors, which in turn achieve income or

growth or both long with low risk (depending upon the securities). The present study is done

to found out the need of financial advisors for tha investment in the mutual funds and also

the services provided by KARVY and the satisfaction level of the investors availing these

services .

Nature of the Study:

The study is both descriptive and exploratory in nature. It is descriptive as it describes the

need felt by the mutual fund investors about the services provided by the financial advisors

and exploratory as it explores and study the satisfaction level of the investors after availing

the services of the financial advisors.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the reference.

Research has been done by primary data collection, and primary data has been collected by

49

interacting with various people through personal interview, telephonic interview, question-

naire, etc. The secondary data has been collected through various journals and websites and

some special publications of KARVY.

Sampling:

Sampling procedure:

The sample is selected in a random way, irrespective of them being investor or not or

availing the services or not. It was collected through mails and personal visits to the

known persons, by formal and informal talks and through filling up the questionnaire

prepared. The data has been analyzed by using the measures of central tendencies like

mean, median, mode. The group has been selected and the analysis has been done on

the basis statistical tools available.

Universe:

People who used to come to the office of KARVY whether for Mutual Funds Ser-

vices or for any other service.

Sample size:

The sample size of my project is limited to 200 only. Out of which only 135 people

attempted all the questions. Other 65 not investing in MFs attempted only 2 ques-

tions.

Sample design:

Data has been presented with the help of bar graph, pie charts, line graphs etc.-

50

51

ANALYSIS AND INTERPRETATION

Data analysis:

Q1. Have you ever invested/are you interested in investing in mutual funds?

YES 135

NO 65

52

Q2. What is the reason for not investing in mutual funds?

Lack of knowledge about mutual funds 25

Enjoys investing in other options 10

Its benefits are not enough to drive you for in-

vestment

18

No trust over the fund managers 12

53

Q3. Where do you find yourself as a mutual fund investor?

Totally ignorant 28

Partial knowledge of MFs 37

Aware of only scheme in which invested 46

Good knowledge of MFs/ Fully aware 24

54

Q4. From where you have purchased the mutual funds?

Directly from the AMCs 33

Brokers only ( large intermediaries) 28

Broker/ sub-brokers 59

Other sources 15

55

Q5. Which feature of the mutual funds allure you most?

Diversification 42

Professional management 29

Reduction in risk and transaction cost 34

Helps in achieving long term goal 30

56

Q6. According to you which is the most suitable stage to invest in mutual funds?

Young unmarried stage 55

Young Married with children stage 32

Married with older children stage 21

Pre retirement stage 27

57

Q7. Are you availing the services of personal financial advisors?

Yes 87

No 48

58

Q8. Which expertise of the personal financial advisor is demanded most?

Portfolio review & investment recommenda-

tion

43

Planning to achieve specific financial goals 35

Managing assets in retirement 30

Access to specialists in areas such as tax plan-

ning

27

59

Q9. What is the major reason for using financial advisors?

Want help with asset allocation 42

Don’t have enough time to make own deci-

sion

23

To explain various investment options 37

Want to have surety about financial goals 33

60

Q10. What is the major reason for not using financial advisor?

Have access to all resources needed 18

Believe advisors are too expensive 53

Unsure how to find a trustworthy advisor 21

Want to be in control of own investments 43

61

62

Findings and Conclusions

At the survey conducted upon 200 people, 135 are already mutual fund investors or are inter-

ested to invest in future and the remaining 65 are not interested in it. So there is enough

scope for the advisors to convert those 65 participants into investors through their convincing

power and great communication skills.

Now, when those 65 people were asked about the reason of not investing in mutual funds,

then most of the people held their ignorance responsible for that. They lacked knowledge and

information about the mutual funds. Whereas just 10 people enjoyed investing in other op-

tion. For 18 people, the benefits arousing from these investments were not enough to drive

them for investment in MFs and 12 people expressed no trust over the fund managers’ deci-

sion. Again the financial advisors can trap upon these people by educating them about mutual

funds.

Out of the 135 persons who already have invested in mutual funds/ are interested to invest,

only 18% have sound knowledge of MFs, 34% people are aware of only the schemes in

which they have invested. 27% possess partial knowledge whereas 21% stands nowhere in

knowledge about MFs.

33 participants buy forms directly from the AMCs, 28 from brokers only, 55 from brokers

and sub-brokers even then 15 people buy from other sources. The brokers and sub brokers

have the maximum reach so they should try to make those investors aware of the happenings,

even the AMCs should follow it.

When asked about the most alluring feature of MFs, most of them opted for diversification,

followed by reduction in risk, helps in achieving long term goals and professional manage-

ment respectively.

Most of the investor preferred to invest at a young unmarried stage. Even 32 persons were

ready to invest at a stage of young married with children but person with older children avoid

investing due to increased expenses. But again the number rose to 27 at pre-retirement stage.

Out of them 87 were already availing the services of financial advisors whereas 48 didn’t.

When asked about the expertise of financial advisors which they liked most? 43 of them fa-

vored portfolio review and investment recommendation, followed by planning to achieve

long term goals, managing assets in retirement and access to specialists in area such as tax

planning.

42 participants regarded asset allocation as the major reason for going for financial advisors.

37 of them needed them to explain them the various investment options available.33 of them

63

wanted to make sure that they were saving enough to meet their financial goals. While just 23

gave the reason- lack of time.

When asked about one reason for not availing the services of financial advisors, about 53 of

them pointed the advisors as expensive. 43 of them wished to be in control of their own as-

sets.21 of them said that they find it difficult to get trustworthy advisors. Whereas 18 of them

said they have access to all the necessary resources required.

Recommendations

The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. No-

body will invest until and unless he is fully convinced. Investors should be made to realize that igno-

rance is no longer bliss and what they are losing by not investing.

Mutual funds offer a lot of benefit which no other single option could offer. But most of the people

are not even aware of what actually a mutual fund is? They only see it as just another investment op-

tion. So the advisors should try to change their mindsets. The advisors should target for more and

more young investors. Young investors as well as persons at the height of their career would like to

go for advisors due to lack of expertise and time.

The advisors may try to highlight some of the value added benefits of MFs such as tax benefit, rupee

cost averaging, and systematic transfer plan, rebalancing etc. these benefits are not offered by other

options singlehandedly. So these are enough to drive the investors towards mutual funds. Investors

could also try to increase the spectrum of services offered.

Now the most important reason for not availing the services of advisors was spotted was being ex-

pensive. The advisors should try to charge a nominal fee at the beginning. But if not possible then

they could go for offering more services and benefits at the existing rate. They should also maintain

their decency and follow the code of ethics so that the investors could trust upon them. Thus the advi-

sors should try to attract more and more persons and turn them into investors and finally their clients.

64

BIBLIOGRAPHY

Websites

www.the-finapolis.com

www.karvy.com

www.mutualfundsindia.com

www.valueresearchonline.com

www.moneycontrol.com

www.morningstar.com

www.yahoofinance.com

www.theeconomictimes.com

www.rediffmoney.com

www.bseindia.com

www.nseindia.com

www.investopedia.com

Journals & Other References

KARVY –The Finapolis

KARVY- Business Associates Manual

The Economic Times

Business Standard

Business India

65

APPENDIX

Questionnaire

Q1. Have you ever invested /are you interested in investing in mutual funds?

a) Yes [ ]

b) No [ ] (plz. attempt the next question)

Q2. What is the reason for not investing in mutual funds?

a) Lack of knowledge about mutual funds [ ]

b) Enjoys investing in other options [ ]

c) Its benefits are not enough to drive you for investment [ ]

d) No trust over the fund managers [ ]

Q3. Where do you find yourself as a mutual fund investor?

a) Totally ignorant [ ]

b) Partial knowledge of mutual funds [ ]

c) Aware only of any specific scheme in which you have invested [ ]

d) Fully aware [ ]

Q4. From where you have purchased the mutual funds?

a) Directly from the AMCs [ ]

b) Brokers only [ ]

c) Brokers/ sub-brokers [ ]

d) Other sources [ ]

Q5.Which feature of the mutual funds allure you most?

a) Diversification [ ]

b) Professional management [ ]

c) Reduction in risk and transaction cost [ ]

66

d) Helps in achieving long term goals [ ]

Q6. According to you which is the most suitable stage to invest in mutual funds?

a) Young unmarried stage [ ]

b) Young Married with children stage [ ]

c) Married with older children stage [ ]

d) Pre-retirement stage [ ]

Q7. Are you availing the services of personal financial advisors?

a) Yes [ ]

b) No [ ]

Q8. Which expertise of the personal financial advisor is demanded most?

a) Portfolio review & investment recommendation [ ]

b) Planning to achieve specific financial goals [ ]

c) Managing assets in retirement [ ]

d) Access to specialist in areas such as tax planning [ ]

Q9. What is the major reason for using financial advisors?

a) Want help with asset allocation [ ]

b) Don’t have time to make my own investment decision [ ]

c) To explain various investment options [ ]

d) Want to make sure I am investing enough to meet my financial goals. [ ]

Q10. What is the major reason for not using financial advisor?

a) Have access to all resources needed to invest on own [ ]

b) Believe advisors are too expensive [ ]

c) Unsure how to find a trustworthy advisor [ ]

d) Want to be in control of own investment [ ]

67