sunil prjct report

8/2/2019 Sunil Prjct Report

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HDFC(CONSUMER BUYING BEHAVIOR TOWARDS MUTUAL FUNDS

A

SUMMER TRAINING PROJECT REPORT

ON

CONSUMER BUYING BEHAVIOR TOWARDS MUTUAL FUNDS

SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

(U.P.TECHNICAL UNIVERSITY, LUCKNOW)

ACADAMIC SESSION

(2007-09)

UNDER THE GUIDENCE OF

INDUSTRY GUIDE FACULTY GUIDE

SUBMITTED BY


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ACKNOWLEDGEMENT

I would like to thank _______________________ who was always there with his advice which

proved invaluable. Not to forget the names of ________________________________ who were

always willing to help and more than willing in their attitude .

Lastly, I would like to thank our institute, IILM Management, who has given us the opportunity

to work on a project to study and understand the working of Mutual Funds in India and to

improve our skills and knowledge in the finance sector .

The rapid rise in stocks globally and in India during the March quarter of 2005 led to it becoming

a time of excessive optimism and greed , however the ruthless downturn in the market during

March quarter of 2005 has resulted in widespread fear and gloom around us . Take the recent

example of US64 which has been all over the news for its failure , not to mention the economic

slow down in the US which led to recession and caused economic growth of Indian industry to

take a backward step .

I as a MBA student , took this opportunity to gain an in-depth knowledge and the analyses of the

recent trends happening in Mutual funds .With this in mind , I took HDFC as the principal focus

for my study and have tried to come up with my reasoning of the current volatile situation .


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FACULTY DECLARATION

This is certify that _______________________________ bonafied student of Department Of

Business Administration, _______________________ and is presently pursuing MASTER OF

BUSSINESS ADMINISTRATION

Under my guidance they have submitted their project report titled MUTUAL FUNDS IN HDFC

BANK in partial fulfillment of for the summer internship project during the MASTER OF

BUSINESS ADMINISTRATION .

This report has not been previous submitted as a part of another of degree any other business

school or university.

UNDERTAKING

I, _________________ , the undersigned, hereby declare that this project report entitled Mutual

funds in HDFC BANK has been written & submitted under the guidance of

__________________ and is my original work. The empirical findings in this report are based

on information collected by me.

_______________________________

PREFACE

As MBA program is final project oriented, it frequents to the pupil a lot of opportunities to

gather first hand knowledge from industries of great repute through study of present working

problems and its shuns, preventive measures and probable path of future prospects. In a nutshell


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project work gives the students the opportunities to gather practical knowledge from the market,

besides bookish knowledge. Likewise that opportunity appeared before me and I had a through

study of the mutual fund industry in India.

This project report has been painstakingly and thoroughly prepared to cover extensively the

following objectives. The highlights of this project report are

Awareness of mutual funds in India market

Consumer behavior while selecting a fund

Consumer perception about mutual funds.

During this project work, my all possible efforts have been made to talk to various consumers of

various regions and places and to incorporate the feedbacks received from them.

While preparing this final project report, my earnest efforts are directed towards discussing

strategies that would, if adopted, be able to dominate the market with its products, to tender

consumers full satisfaction and to establish a royal seat in the Business World

OBJECTIVE OF STUDY

Basically the objective of the study is of two sided. On the research side it was to gain a practical

exposure of the management theories in the field of marketing with combined aim of getting the

degree of two yearsMaster of Business Administration.

On the learning part, the objective is to know the mutual fund industry and to implement some of

the strategies of mine to let the industry grow more and more.

It is widely accepted that theory broadens ones thinking and helps in idea generation. But

practical and practices give the insight into the feasibility of ideas and how far theories can be

applied in a situation successfully.

CONTENTS

Chapter


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Executive Summary

1. Organizational Profile

Background & Objectives

Promoter & Management

Capital Structure

Distribution Network

Technology

Business Profile

Rating

Product Range

Innovative Services

Loans

Awards & Accolades

BranchInternal Divisions

2. Theoretical Perspective

About Mutual Funds

Types of Mutual funds

How Mutual Fund Operates

Benefits of investing in Mutual fund

About HDFC

3. Research Methodology

Objectives Marketing Research Process Study Description Sampling Contact Methods

4. Data Analysis and Interpretation


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Data Representation

Charts & Comments

5. Conclusion, Recommendations & Limitations

5.1 Conclusions

5.2 Suggestions & Recommendations

5.3 Limitations

6. Annexure

Bibliography

Questionnaire

EXECUTIVE SUMMARY

The project is titled Mutual fund in HDFC Bank . It was carried out in Two months period

between 5th June to 25th July under the guidance of _______________________________. The

project involved an in- depth study of the growth of the Mutual fund in India in relation to HDFC

Mutual fund where although HDFC is one of the last of the large financial houses in the country

to get into mutual fund business ,it has an advantage that the AMC will escape all the growing

pangs of the earlier funds.

In the first part of the project I have highlighted the problems faced by the Mutual funds industry

which also apply to HDFC Mutual fund . I found that the main problems faced by the mutual

funds are market risks offering no guarantee or assurance , fluctuating NAV ,unpredictable

performance of schemes .

I undertook an extensive research where we conducted interviews and used open ended

questionnaire method to gather the information . I observed that people in general are skeptical


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about investing in mutual fund ,though this perception is changing now as the bank is coming up

with safer schemes such as income fund scheme ,also certain tax benefits are being made

available like 20% of the amount invested in specified mutual funds is deductible

from the tax payable by the investor in a particular year subject to maximum of rupees 2007 per

investor .

In the second part I have done a detailed study of various schemes like liquid fund , growth fund,

income fund etc, offered by HDFC . I have also given a brief of recent plans of HDFC such as

childrens gift fund and launching of pension fund, gilt fund etc .

Finally in the end I have given a detailed study of risk involved and benefits offered by HDFC

for its investors investing in the mutual funds and the analysis of the performance of the various

mutual fund that gives the idea to the different sectors to invest in such mutual funds where there

is stable growth .

Chapter 1

Organizational Profile

1.1 Background & Objectives

1.2 Promoter & Management

1.3 Capital Structure

1.4 Distribution Network

1.5 Technology

1.6 Business Profile

1.7 Rating

1.8 Product Range

1.9 Innovative Services

1.10 Loans

1.11 Awards & Accolades

1.1 Background & Objectives


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The Housing Development Finance Corporation Limited (HDFC) was amongst the first to

receive an 'in-principle' approval from the Reserve Bank of India (RBI) to set up a bank in the

private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The

bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered

office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank

in January 1995.

HDFC Bank's mission is to be a World-Class Indian Bank. The Bank's aim is to build sound

customer franchises across distinct businesses so as to be the preferred provider of banking

services in the segments that the bank operates in and to achieve healthy growth in profitability,

consistent with the bank's risk appetite. The bank is committed to maintain the highest level of

ethical standards, professional integrity and regulatory compliance. HDFC Bank's business

philosophy is based on four core values: Operational Excellence, Customer Focus, Product

Leadership and People.

1.2 Promoter & Management

HDFC is India's premier housing finance company and enjoys an impeccable track record in

India as well as in international markets. Since its inception in 1977, the Corporation has

maintained a consistent and healthy growth in its operations to remain a market leader in

mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has

developed significant expertise in retail mortgage loans to different market segments and also

has a large corporate client base for its housing related credit facilities. With its experience in the

financial markets, a strong market reputation, large shareholder base and unique consumer

franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

Mr. Jagdish Kapoor took over as the bank's Chairman in July 2003. Prior to this, Mr. Kapoor was

a Deputy Governor of the Reserve Bank of India. The Managing Director, Mr. Aditya Puri, has

been a professional banker for over 25 years and before joining HDFC Bank in 1994 was

heading Citibank's operations in Malaysia.


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The Bank's Board of Directors is composed of eminent individuals with a wealth of experience

in public policy, administration, industry and commercial banking. Senior executives

representing HDFC are also on the Board.

Senior banking professionals with substantial experience in India and abroad head various

businesses and functions and report to the Managing Director. Given the professional expertise

of the management team and the overall focus on recruiting and retaining the best talent in the

industry, the bank believes that its people are a significant competitive strength.

1.3 Capital Structure

The authorized capital of HDFC Bank is Rs.450 crore (Rs.45 billion). The paid-up capital is

Rs.282 crore (Rs.28.2 billion). The HDFC Group holds 24.2% of the bank's equity while about

13.1% of the equity is held by the depository in respect of the bank's issue of American

Depository Shares (ADS/ADR Issue). The Indian Private Equity Fund, Mauritius (IPEF) and

Indocean Financial Holdings Ltd., Mauritius (IFHL) (both funds advised by J P Morgan Partners,

formerly Chase Capital Partners) together holds about 5.5% of the bank's equity. Roughly 27.5%

of the equity is held by FIIs, NRIs/OCBs while the balance is widely held by about 214,000

shareholders. The shares are listed on The Stock Exchange, Mumbai and the National Stock

Exchange. The bank's American Depository Shares are listed on the New York Stock Exchange


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(NYSE) under the symbol "HDB".

1.4 Distribution Network

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over

350 branches spread over 175 cities across the country. All branches are linked on an online real-

time basis. Customers in 90 locations are also serviced through Phone-Banking. The Bank's

expansion plans take into account the need to have a presence in all major industrial and

commercial centers where its corporate customers are located as well as the need to build a

strong retail customer base for both deposits and loan products. Being a clearing/settlement bank

to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has

a strong and active member base.

The Bank also has a network of over 900 networked ATMs across these cities. Moreover, HDFC

Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa

Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

1.5 Technology


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HDFC Bank operates in a highly automated environment in terms of information technology and

communication systems. All the bank's branches have connectivity which enables the bank to

offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to

retail customers through the branch network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology available

internationally to build the infrastructure for a world-class bank. In terms of software, the

Corporate Banking business is supported by Flexcube, while the Retail Banking business by

Finware, both from i-flex Solutions Ltd. The systems are open, scaleable and web-enabled.

The Bank has prioritized its engagement in technology and the internet as one of its key goals

and has already made significant progress in web-enabling its core businesses. In each of its

businesses, the Bank has succeeded in leveraging its market position, expertise and technology to

create a competitive advantage and build market share.

1.6 Business Profile

HDFC Bank caters to a wide range of banking services covering both commercial and

investment banking on the wholesale side and transactional / branch banking on the retail side.

The bank has three key business areas :-

Wholesale Banking ServicesThe Bank's target market is primarily large, blue-chip

manufacturing companies in the Indian corporate sector and to a lesser extent, emerging mid-

sized corporates. For these corporates, the Bank provides a wide range of commercial and

transactional banking services, including working capital finance, trade services, transactional

services, cash management, etc. The bank is also a leading provider of structured solutions which

combine cash management services with vendor and distributor finance for facilitating superior

supply chain management for its corporate customers. Based on its superior product delivery /

service levels and strong customer orientation, the Bank has made significant inroads into the

banking consortia of a number of leading Indian corporates including multinationals, companies

from the domestic business houses and prime Public Sector companies. It is recognised as a

leading provider of cash management and transactional banking solutions to corporate


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customers, mutual funds, stock exchange members and banks.

Retail Banking ServicesThe objective of the Retail Bank is to provide its target market

customers a full range of financial products and banking services, giving the customer a one-stop

window for all his/her banking requirements. The products are backed by world-class service and

delivered to the customers through the growing branch network, as well as through alternative

delivery channels like ATMs, Phone-Banking, Net-Banking and Mobile-Banking.

The HDFC Bank preferred program for high net worth individuals, the HDFC Bank Plus and the

Investment Advisory Services programs have been designed keeping in mind needs of customers

who seek distinct financial solutions, information and advice on various investment avenues. The

Bank also has a wide

array of retail loan products including Auto Loans, Loans against marketable securities, Personal

Loans and Loans for Two-wheelers. It is also a leading provider of Depository Services to retail

customers, offering customers the facility to hold their investments in electronic form.

HDFC Bank was the first bank in India to launch an International Debit Card in association with

VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The debit card

allows the user to directly debit his account at the point of purchase at a merchant establishment,

in India and overseas. The Bank launched its credit card in association with VISA in November

2003. The Bank is also one of the leading players in the "merchant acquiring" business with over

25,000 Point-of-Sale (POS) terminals for debit / credit cards acceptance at merchant

establishments. The Bank is well positioned as a leader in various net-based B2C opportunities

including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments,

etc.

Treasury OperationsWithin this business, the bank has three main product areas - Foreign

Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With

the liberalization of the financial markets in India, corporates need more sophisticated risk

management information, advice and product structures. These and fine pricing on various

treasury products are provided through the bank's Treasury team. To comply with statutory

reserve requirements, the bank is required to hold 25% of its deposits in government securities.

The Treasury business is responsible for managing the returns and market risk on this investment

portfolio.


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1.7 Rating

HDFC Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research

Limited (CARE) and Fitch Ratings India Pvt. Ltd. The Bank's Fixed Deposit program has been

rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of

the best quality, carrying negligible investment risk". CARE has also rated the Bank's Certificate

of Deposit (CD) program "PR 1+" which represents "superior capacity for repayment of short

term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has

assigned the "tAAA (ind)" rating to the Bank's deposit program, with the outlook on the rating as

"stable". This rating indicates "highest credit quality" where "protection factors are very high".

HDFC Bank also has its long-term unsecured, subordinated (Tier-II) Bonds rated by CARE and

Fitch Ratings India Pvt. Ltd. CARE has assigned the rating of "CARE AAA" for the Tier-II

Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the outlook

on the rating as "stable". In each case referred to above, the ratings awarded were the highest

assigned by the rating agency for those instruments?

Corporate Governance Rating

The bank was one of the first four companies which subjected itself to a Corporate Governance

and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services

of India Limited (CRISIL). The rating provides an independent assessment of an entitys current

performance and an expectation on its "balanced value creation and corporate governance


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practices" in future. The bank has been assigned a CRISIL GVC Level 1' rating which indicates

that the bank's capability with respect to wealth creation for all its stakeholders while adopting

sound corporate governance practices is the highest.

1.8 Product Range

Savings Account: Apart from the usual facilities, you get a free ATM Card, Inter branch

banking, Net Banking, Bill Pay, Phone Banking, Debit Card and Mobile Banking, among others.

HDFC Bank Preferred: A preferential Savings Account where you are assigned a dedicated

Relationship Manager, who is your one-point contact. You also get privileges like fee waivers,

enhanced ATM withdrawal limit, priority locker allotment, free Demat Account and lower

interest rates on loans, to name a few.

Sweep-In Account: A fixed deposit linked to your Savings Account. So, even if your Savings

Account runs a bit short, you can issue a cheque (or use your ATM Card). The money is

automatically swept in from your fixed deposit into your Savings Account.

Super Saver Account: Gives you an overdraft facility up to 75% of your Fixed Deposit. In an

emergency, you can access your funds while your Fixed Deposit continues to earn high interest.


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HDFC Bank Plus: Apart from Regular and Premium Current accounts we also have HDFC

Bank Plus, a Current Account and then some more. You can transfer up to Rs. 50 lakh per month

at no extra charge, between the four metros. You can also avail of cheque clearing between the

four metros, get cash delivery/pickup upto Rs. 25,000/-, home delivery of Demand Drafts, at-par

cheques, outstation cheque clearance facility, etc.

Demat Account: Conduct hassle-free transactions on your shares. You can also access your

Demat Account on the Internet.

1.9 Innovative Services

Phone Banking: 24-hour automated banking services with 39 Phone Banking numbers

available.

ATM 24-hour banking: Apart from routine transactions, you can also pay your utility bills and

transfer funds, at any of our ATMs across the country all year round.

Inter-city/Inter-branch Banking: Access your account from any of our 350 branches in 175

cities.


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Net-Banking: Access your bank account from anywhere in the world, at anytime, at your own

convenience. You can also view your Demat Account through Net-Banking.

International Debit Card: An ATM card you can shop with all over the country and in over

140 countries with. You can spend in any currency, and pay in Rupees.

Mobile-Banking: Access your account on your mobile phone screen at no airtime cost. Use

SMS technology to conduct your banking transactions from your cell-phone.

Bill-Pay: Pay your telephone, electricity and mobile-phone bills through our ATMs, Internet,

phone or mobile phone. No more standing in long queues or writing cheques.

1.10 Loans

Now, our loans come to you in easy-to-pay monthly instalments, and are available with easy

documentation and quick delivery.

Personal Loans: Take a loan of up to Rs. 3 lakh for a wedding, education, purchase of a


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computer or an exciting holiday.

New Car Loans and Used Car Loans: Finance up to 90% of the cost of a car, new or used! And

the loans come to you with easy documentation and speedy processing at attractive interest rates.

Loans against Shares: Get an overdraft up to Rs. 10 lakh at an attractive interest rate against

physical shares, up to 50% of the market value of your shares. In case of Demat Shares, you can

get loans against Shares of up to 65% of the market value of your shares, till Rs. 20 lakh.

Commercial Vehicle Loans: HDFC offers loan for all types of commercial vehicle. We

provide funding for all models of Telco, Ashok Leyland, Eicher, Swaraj Mazda, Volvo etc.

HDFC spread over 22 locations across the country and expanding rapidly. If anybody have

already taken a loan from elsewhere, at a higher rate can avail of HDFCs Balance Transfer

facility by exchange their old loan for a commercial vehicle loan from HDFC Bank at a much

lower rate.

Two Wheeler & Consumer Loans: To help you buy the best durables for your home.

Demat Account: Protect your shares from damage, loss and theft, by maintaining your shares

in electronic form. You can also access your demat account on the internet.

Current Account: Get a personalised cheque book, monthly account statements, inter-branch

banking and much more.

Mutual Funds: Apart from a wide choice of mutual funds to suit your individual needs, you

benefit from expert advice on choosing the right funds based on in-depth market analysis.

International Credit Card: Get an option of Silver, Gold, or Health Plus Credit card, accepted

worldwide from a world-class bank. If you have outstanding balance on your other credit card,

you can transfer that balance to this card at a lower interest rate.


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NRI Services: A comprehensive range, backed by unmatched features and world-class service,

ensures NRIs all the banking support they need.

Forex Facilities: Avail of foreign currency, travellers cheques, foreign exchange demand

drafts, to meet your travel needs.

Insurance: HDFC Bank now brings you Life Insurance and Pension Solutions like Risk Cover

Scheme, Savings Scheme, Childrens Plan and Personal Plan from HDFC Standard Life

Insurance Co. Ltd.

1.11 Awards & Accolades

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian Bank".

HDFC Bank realized that only a single-minded focus on product quality and service excellence

would help us get there. Today, HDFC Bank is proud to say that it is well on its way towards that

goal. It is extremely gratifying that our efforts towards providing customer convenience have

been recognized both nationally and internationally.

In 2007, HDFC Bank was named "Best Overall Local/Domestic BankIndia" in the

Corporate Cash Management Poll conducted by the Hong Kong-based Asia money magazine.

In 2006, Forbes Global again named us in its ranking of "Best Under a Billion, 200 Best Small

Companies for 2006".

Hong Kong-based Finance Asia Magazine rated us "Best Domestic Commercial Bank in

India" in 2001, 2002 and 2003 respectively and "Best Local Bank in India" in 2005 and 2006.


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HDFC Bank has been named Best Domestic Bank in India Region in The Asset Triple A

Country Awards 2006.

Leading Indian business Magazine Business Today in a survey rated us "Best Private Sector

Bank" in India in 2001 and "Best Bank in India" in 2006.

NASSCOM and economictimes.com have named us the "Best IT User in Banking" at the IT

Users Awards 2006.

Leading Personal Finance magazine in India Outlook Money named HDFC Bank the "Best

Bank in the Private Sector" for the year 2006.

Leading business newspaper The Financial Express named HDFC Bank the "Best New Private

Sector Bank 2006" in the FE-Ernst & Young Best Banks Survey 2006.

There have been some other proud moments as well:

London-based Euro money Magazine gave us the award for "Best Bank - India" in 2001, "Best

Domestic Bank" in India in 2002, and "Best Bank in India" in 2003 and 2005.

Asia money Magazine has named us "Best Commercial Bank in India 2005".

The Economic Times has conferred on us The Economic Times Awards for Corporate

Excellence as the Emerging Company of the Year 2002-01.


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For our use of information technology we have been recognized as a "Computerworld Honors

Laureate" and awarded the 21st Century Achievement Award in 2005 for Finance, Insurance &

Real Estate category by Computerworld, Inc., USA. Our technology initiative has been included

as a case study in their online global archives.

The Economic Times has conferred on us The Economic Times Awards for Corporate

Excellence as the Emerging Company of the Year 2002-01.

Leading Indian business magazine Business India named us "India's Best Bank" in 2002

In the year 2002, leading financial magazine Forbes Global named us in its list of "The 300

Best Small Companies" in the world and as one of the "20 for 2003" best small companies in the

world.

We are aware that all these awards are mere milestones in the continuing, never-ending

journey of providing excellent service to our customers. We are confident, however, that with

your feedback and support, we will be able to maintain and improve our services.

1.12 BranchInternal Divisions

The Commercial Transportation Group functioning in ALLAHABAD Branch located at HDFC


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Bank Ltd, PLOT NO 54/01,SARDAR PATEL MARG, CIVIL LINES, ALLAHABAD-211003,

U.P. has mainly seven divisions under Retail Asset Head. These are Commercial Vehicles,

Channel Business, Construction Equipment, Working Capital, Credits, Collections, and

Operations. This groups main area of concentration is Jusi , Nani, Kourav, Kaushmbi up to

Noida & Gaziabad also.

The Organizational Structure of four divisions Commercial Vehicles, Channel Business,

Construction Equipment, & Working Capital is same.VIL The rest three i.e. Credits, Collections

& Operations have the same Organization Structure in respect of the levels with only difference

is in the name of designations.

Chapter 2

2.1 About Mutual Funds

2.2 Types of Mutual funds

2.3 How Mutual Fund Operates

2.4 Benefits of investing in Mutual fund

2.5 About HDFC

2.1 ABOUT MUTUAL FUNDS

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


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financial goal. The money thus collected is invested by the fund manager in different types of

securities depending upon the objective of the scheme. These could range from shares to

debentures to money market instruments. The income earned through these investments and the

capital appreciation realized by the scheme are shared by its unit holders in proportion to the

number of units owned by them (pro rata). 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

portfolio at a relatively low cost. Anybody with an invest able surplus of as little as a few

thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment

objective and strategy.

2.2 TYPES OF MUTUAL FUNDS

There are many types of mutual funds available to an investor. They can be classified in to

different categories depending on various parameters. However we shall classify mutual funds

by way of

a. Investment objective : Funds can be classified by way of their stated investment objective such

as Growth Fund, Balanced Fund, Income Fund etc.

b. Constitution of the fund: Funds can be classified as Closed-ended or Open-ended depending

upon whether they give the investor the option to redeem at any time (open-ended) or whether

the investor have to wait till maturity of the fund.

By Investment By Constitution

Equity Debt Hybrid Open Ended Close Intervals

a) General purpose a) Bonds

b) Sector specific b) Money Market

c) Special schemes c) Gilt Funds

BY INVESTMENTS

Equity Based Schemes

These schemes, also commonly called Growth Schemes, seek to invest a majority of their funds

in equities and a small portion in liquid money market securities. Such schemes have the


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potential to deliver superior returns over the long term. However, because they invest in equities,

these schemes are exposed to sharp fluctuations in value especially in the short term.

Equity schemes are hence not for investors seeking regular income or needing their investments

back in the short-term. They are ideal for investors who have a long-term investment horizon.

The NAV prices of equity fund fluctuates with market value of the underlying stock which are

influenced by external factors such as social, political as well as economic. HDFC Growth Fund

is an example of an equity scheme.

I. General Purpose

The investment objectives of general-purpose equity schemes do not restrict them to invest in

specific industries or sectors. They thus have a diversified portfolio of companies across a large

spectrum of industries. While they are exposed to equity price risks, diversified general purpose

equity funds seek to reduce the sector or stock specific risks through diversification. They mainly

have market risk exposure.

HDFC Growth Fund is a general-purpose equity scheme

.II. Sector Specific

These schemes restrict their investing to one or more pre-defined sectors, i.e. technology sector.

Since they depend upon the performance of select sectors only, these schemes are inherently

more risky than general purpose schemes. They are suited for informed investors who wish to

take a view and risk on the concerned sector.

III. Special Schemes

a. Index schemes: An Index fund tracks the performance of a specific stock market index. The

objective is to match the performance of the stock market by tracking an index that represents the

overall market. The funds invest in shares that constitutes the index and in the same portion as

the index. The BSE Sensex and NSE Nifty are being increasingly used as benchmarks for index

funds in India. Since these schemes mirror an index, there is no active management and hence

they are called passive funds. Their performance is closely linked to that of the underlying index.

Such schemes are best suited for investors who would like an equity exposure but are not

comfortable with active management of their fund by a fund manager.

b. Tax Saving schemes: Generally, called as the Equity Linked Saving Schemes (ELSS).

Investors have been given tax concessions to encourage them to participate in equity markets

through special schemes

such as the ELSS. Investment in these schemes entitles the investor to claim an income tax

rebate. This investment usually has a lock-in period before the end of which funds cannot be


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withdrawn. The maximum amount an investor can invest in fund to get the tax benefit is

Rs.10000.

c. Real Estate Funds: Specialized real estate funds would invest in real estates directly, or may

fund real estate developers or lend to them directly or buy shares of housing finance companies

or may even buy their securities assets. They may be in form of growth fund or income fund.

Debt Based Schemes

These schemes, also commonly called Income Schemes, invest in fixed income securities such as

corporate bonds and debentures and government securities. The prices of these schemes tend to

be more stable compared with equity schemes and most of the returns to the investors are

generated through dividends or steady capital appreciation. These schemes are ideal for

conservative investors or those not in a position to take higher equity risks, such as retired

individuals. However, as compared to the money market schemes they do have a higher price

fluctuation risk and compared to a Gilt fund they have a higher credit risk.

I. Income Schemes

These schemes invest in money markets, bonds and debentures of corporate with medium and

long term maturities. These schemes primarily target current income instead of capital

appreciation. They therefore distribute a substantial part of their distributable surplus to the

investor by way of dividend distribution. Such schemes usually declare annual/semi-annual

dividend and are suitable for conservative investors who have medium to long term investment

horizon and are looking for regular income through dividend or steady capital appreciation.

HDFC Income Fund is an example of a bond scheme.

II. Money Market Schemes

These schemes invest in short term instruments such as commercial paper (CP), certificates of

deposit (CD), treasury bills (T-Bill) and overnight money (Call). The schemes are the least

volatile of all the types of schemes because of their investments in money market instrument

with short-term maturities. These schemes have become popular with institutional investors and

high net worth individuals having short-term surplus funds.


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III. Gilt Funds:

Hybrid Schemes

These schemes are commonly called as The Balanced Funds. These funds invest in both equities

as well as bonds. By investing in a mix of this nature , balanced funds seek to attain the objective

of income and moderate capital appreciation and are ideal for investors with a conservative and

long-term orientation. HDFC Balanced Fund is an example of a hybrid scheme.

BY CONSTITUTION

Open-ended Schemes

The units offered by these schemes are available for sale and repurchase on any business day at

NAV based prices. Hence, the unit capital of the schemes keeps changing each day because the

scheme itself buys and sells units from investors.

Such schemes thus offer very high liquidity to investors and are becoming increasingly popular

in India. All the schemes offered are open-ended schemes. Please note that an open-ended fund

is NOT obliged to keep selling/issuing new units at all times, and may stop issuing further

subscription from new investors. On the other hand, an open-ended fund rarely denies to its

investor the facility to redeem existing units.

Closed ended Schemes

The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed number of

units. These schemes are launched with an initial public offer (IPO) with a stated maturity period

after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy

or


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sale units on the stock exchanges where they are listed. Unlike open-ended schemes, the unit

capital in closed-ended schemes usually remains unchanged. After an initial closed period, the

scheme may offer direct repurchase facility to the investors. Closed-ended schemes are usually

more illiquid as compared to open-ended schemes and hence trade at a discount to the NAV.

This discount tends towards the NAV closer to the maturity date of the scheme.

Interval Schemes

These schemes combine the features of open-ended and closed-ended schemes. They may be

traded on the stock exchange or may be open for sale or redemption during pre-determined

intervals at NAV linked prices.

2.3 HOW MUTUAL FUND OPERATES

Putting a face to a name is a problem for many people in the case of a mutual fund. While the

term mutual fund is extensively used, it can be a rather difficult task to physically locate an entity

called a mutual fund. This happens because of the way in which mutual is constituted. A mutual

fund is a collection of investments; it is a pool of money, the combined contribution of number

of individuals or investors.

Thus mutual funds require some person or body to mobilize and manage these assets. This entity

is an organization known as an ASSET MANAGEMENT COMPANY (AMC). It is the

organization or a company that generates the collective investment from the public with a view

to invest in securities and generate returns. By virtue of its mobilization function, the AMC has

offices or branches in number of cities. These branches collect money from investors and are one

of the visible faces of the mutual fund. As this money has to be invested and managed, the AMC

has an investment. The head of the team, the FUND MANAGER or the CHIEF INVESTMENT

OFFICER. He is the head of the decision making process which takes strategic and tactful


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decisions on where to invest.

The AMC is not the only part of the mutual fund game. The funds are established as a trust; there

exists the TRUSTEES of the mutual fund. The trustee refers to a body of individuals or a

company who hold the property of the mutual fund in trust for the benefit of the unit holders.

Trustees are thus a board of trustees who have reposed faith/confidence to regulate the

functioning of the AMC. They hold the assets of the mutual fund in trust for the benefit of unit

holder in accordance with these regulations and the

Provisions of the TRUST DEED. Along with being accountable for the funds and the property of

the respective schemes they are also the CUSTODIANS of the unit holders assets.

The trustees responsibilities are not limited to a single function. Besides serving as the in

house regulators of the AMC, they link the AMC with the mutual fund through an

INVESTMENT MANAGEMENT AGREEMENT. Though these trustees appoint AMC as the

managers of assets of the unit holders. Their link with both the AMC and the mutual fund thus

places them at the apex of the three-tier structure, which constitutes the mutual fund industry.

The trustees also serve to link the functioning of the AMC to that of the MARKET

REGULATOR- SEBI. Through regular reports to SEBI, the trustee provides inputs on the

functioning of the mutual fund. Any shortcomings in the functioning of the AMC are meant to be

corrected and reported.

This structure ensures that the AMC, which administers the assets, is kept at a distance from the

pool of collected investments. The trustees, while not managing the assets hold them in the name

of the investor. As the body, which separates from the ASSET MANAGERS, the trustees are

tasked with ensuring that the funds collected, are employed for the purpose stated. Through this

structure a series of checks and balances are created, which is internal to the mutual fund.

2.4 BENEFITS OF INVESTING IN MUTUAL FUNDS

There are numerous benefits of investing in mutual funds and one of the key reasons for its

phenomenal success in the developed markets of US and UK is the range of benefits it offers and

that are unmatched by most other investment avenues. We have explained the key benefits in this

section. The benefits have been broadly split into universal benefits, applicable to all schemes,

and benefits applicable specifically to open-ended schemes. Just click on any of the benefits in

the diagram below to view that section.


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UNIVERSAL BENEFITS

Affordability

A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the

investment objective of the scheme. An investor can buy in to a portfolio of equities, which

would otherwise be out of his reach. Each unit holder thus gets an exposure to such portfolios

with an investment as modest as Rs.3000/-. This amount today would get you half an Infosys`

share! Thus it would be affordable for an investor to build a portfolio of investments through a

mutual fund rather than investing directly in the stock market.

Diversification

Diversification means not putting all your eggs in one basket. Mutual fund helps you achieve this

objective by spreading the money in to various companies through its portfolio of investment.

Thus if any one company gets affected the fear of the investor's capital eroding is minimized.

Diversification takes place within the fund's stated objectives and is beneficial, because it lowers

risk

Variety

Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first,

it offers different types of schemes to investors with different needs and risk appetites; secondly,

it offers a chance to an investor to invest sums across a variety of schemes, both debt and equity.

For example, an investor can invest his money equally in a Growth Fund (equity scheme) and

Income Fund (debt scheme) and thus create a balanced portfolio easily.

Professional Management

Qualified investment professionals who seek to maximize returns and minimize risk monitor

investor's money. When you buy in to a mutual fund, you are handing your money to an

investment professional who has experience in making investment decisions. It is the Fund

Manager's job to (a) find the best securities for the fund, given the fund's stated investment

objectives; and (b) keep track of investments and changes in market

conditions and change the portfolio, as and when required.

Tax Benefits

Benefits are available on both types of return - dividends and capital gains. Dividends are tax

free in the hands of the investors. (It may be noted here that on income distribution, if any, made

by the Mutual Fund, income-tax will be payable under Section 115R of the Act, at 22%

(inclusive of surcharge on income-tax), except, inter-alia, in the case of open-ended equity-


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oriented funds, (i.e. where the invest able funds are invested by the way of equity shares in

domestic companies to the extent of more than 50% of the total proceeds of the funds), where no

such tax will be levied for a period of three years commencing from April 1, 1999. For long-term

capital gains, i.e. gains booked for units held for more than a year, tax is charged at a flat rate of

just 10% or the indexation adjusted tax rate, whichever is lower. Since all income is by way of

dividends or capital gains, there is no TDS applicable on any redemption for resident unit

holders.

Regulations

SEBI, the mutual funds regulator has clearly defined rules, which govern mutual funds. These

rules relate to the formation, administration and management of mutual funds and also prescribe

disclosure and accounting requirements. Such a high level of regulation seeks to protect the

investors from misuse of their money.

SPECIFIC BENEFITS

Liquidity

With open-ended mutual funds, you can redeem all or part of your units any time you wish.

Convenience

Each investor in open-ended schemes simply receives an account statement that gives the details

of the transactions and the units held by him. Hence, he does not have to worry about theft of

physical certificates or loss in transit. Also, when he wants to redeem his units, he just needs to

fill in a simple redemption form, send it to the nearest service centre and receive his redemption

normally within 3-5 days.

Transparency

Most open-ended mutual funds today disclose their NAV daily and full portfolio quarterly. This

level of transparency, where the investor himself sees the underlying assets bought with his

money, is unmatched by any other financial instrument. Thus the investor is in the know of the

quality of the portfolio and can invest further or redeem depending on the kind of the portfolio


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that has been constructed by the Investment manager.

Flexibility

Mutual Funds offering multiple schemes allow investors to switch easily between various

schemes. This flexibility gives the investor a convenient way to change the mix of his portfolio

over time.

2.5 ABOUT HDFC

HDFC Asset Management Company limited was incorporated in 1977 as the first specialized

housing finance institution in India. HDFC provides financial assistance to individuals, corporate

and developers for the purchase or construction of residential housing. It also provides property

related services (e.g. property identification, sales services and valuation), training and

consultancy.

CONSTITUTION OF MUTUAL FUND

HDFC mutual fund (THE MUTUAL FUND) has been constituted as a Trust in accordance with

the provision of the Indian trust act 1882 by the sponsor as per the terms of the trust deed dated

June 8th 2006 . The trust deed has been registered under the Indian registration act ,1908 .The

mutual fund has been registered with SEBI dated June 30th 2006 .

(AMC) was incorporated under the companys act ,1956 ,on Dec10th 1999 ,and was approved to

act as an asset management company for the mutual fund by SEBI on July 3rd 2006 . AMC is

managing 5 open ended schemes launched by the MUTUAL fund viz. HDFC growth fund

(HGF0 ,HDFC balanced fund (HBF) ,HDFC income fund (HIF), HDFC liquid fund (HLF),

HDFC tax plan (HLF).

VISION

To be a dominant player in the Indian mutual fund space

To be recognize for its high levels of ethical and professional

conduct

Commitment towards enhancing investors interest


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STRATEGIC ALLIANCE

HDFC has entered into a Joint Participation Agreement with Standard Life Investments Limited

(SLI), U.K., for its mutual fund foray.

Standard Life was established in 1825 and has considerable experience in global financial

markets. In 1998, Standard Life Investments was launched as the dedicated investment

management company of the Standard Life Group. With global assets under management of

approximately $115 billion, Standard Life Investments is one of the worlds major investment

companies and is responsible for investing money on behalf of five million retail and

institutional clients world-wide. In order to meet the different needs and risk profiles of its

clients, SLI manages a diverse portfolio covering all of the major markets world-wide, which

includes a range of private and public equities, government and company bonds, property

investments and various derivative instruments. The companys current holdings in UK equities

account for over 2% of the market capitalization of the London Stock Exchange.

The Indian mutual fund industry has seen significant growth in the recent past, which provides

significant opportunities to offer mutual fund products

to the retail as well as institutional investors. The proposed mutual fund plans to offer a wide

range of investment products to the retail as well as institutional investors in India. It will

leverage on HDFC's investment management expertise as well as its brand, distribution

capability and existing client base. The proposed insurance joint venture would draw on SLI's

global investment expertise, the investment management skills of the AMC and will have access

to SLI's training facilities.

WORKING OF HDFC

HDFC SCHEMES:

HDFC LIQUID FUND (HLF)


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HLF was launched on October 17th 2006 . The scheme will retain the flexibility to invest in the

entire range of money market and debt instruments.Investment made from the corpus of the

schemes would be in accordance with the investment objectives and the providences of the SEBI

regulations. Every investment opportunity would be assessed with regards to credit risk, interest

rate risk liquidity risk.

The AMC would manage the investment of the scheme on the dynamic basis to exploit emerging

opportunities in the investment universe and manage risk at all points in time. The AMC will

provide liquidity by maintaining a low average duration of the portfolio and by investing in

securities that would result in a staggered maturity profile of the portfolio. Liquidity will also be

managed by investing in the call money/ repo-market when call money/ repo-yields are attractive

related to other money markets yields investments in debts instruments would generally be in

securities that have reasonable secondary market activity.

HDFC INCOME FUNDS (HIF)

HIF was launched on July 20th 2006 the scheme will retain the flexibility to invest in the entire

range of debt and money market instrument. The flexibility is being retained to ensure adequate

adjustment to the portfolio in response to a change in the risk to return equation for asset classes

under investment, with the view to maintain risk with manageable limits.

The AMC will attempt to reduce liquidity risk by investing in securities that would result in a

staggered maturity profile of the portfolio, investment in structured securities that provide easy

liquidity and securities that have reasonable secondary market activity.

HDFC BALANCE FUNDS (HBF)

HBF was launch on July 20th 2006 the HBF is positioned as lower risk alternative to a pure

equity scheme, while retaining some of the upside potential from equity exposure. The scheme

provides flexibility to shifts allocation in the event of a change in view regarding an asset class.

Asset allocation between equity and debts is a critical function in the balance fund. It is proposed

to continuously monitor the potential for debt and equity to arrive at a dynamic allocation

between the asset classes.

Equity Investment

Five basic principles would serve as the foundation for the equity investment. These are:

1. Focus on the long term.

2. Investments confer proportionate ownership of the business.

3. Maintain a margin of safety.


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4. Maintain a balance outlook on the market.

5. Discipline approach to selling.

Debt Investments

Investments in debts securities will usually be in instruments, which have been accessed as

high investment grade by at least one credit rating agency. The maturity profile of the debt

instruments will be selected in line with the outlook for market condition, interest rates and the

stability of ratings. The over all portfolio structure would aim to maintain risk at a moderate level

through sensible portfolio diversification and a conscious attempt to maintain adequate levels of

liquidity.

HDFC GROWTH FUND (HGF)

HGF was launch on July 20th 2006 . The objective will be to identify businesses with superior

growth prospects and good management, at a reasonable price. The investment approach will be

based on a set of well established but flexible principles that emphasize the concept of

sustainable economic earnings and cash return on investment as the means of valuation of the

company. The investment strategy is expected to be function of extensive research and based on

data and reasoning, rather then current fashion and emotion.

NET ASSET VALUE (NAV)

The net asset value of the fund is the cumulative market value of the assets fund net of its

liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the

fund, this is the amount that the shareholders would collectively own. This gives rise to the

concept of net asset value per unit, which is the value, represented by the ownership of one unit

in the fund. It is calculated simply by dividing the net asset value of the fund by the number of

units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit".

CALCULATION OF NAV

The most important part of the calculation is the valuation of the assets owned by the fund. Once

it is calculated, the NAV is simply the net value of assets divided by the number of units

outstanding. The detailed methodology for the calculation of the asset value is given below.

NAV (Per unit ) =Market value of schemes investment

+ Current assets (including accrued income )

less current liabilities and provision (including accrued expenses) no of units outstanding under

this scheme .


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RECENT PLANS

HDFC TO LAUNCH INDEX, PENSION AND GILT FUND.

HDFC Mutual Fund is planning the launch of an index fund, a gilt fund and a pension fund in the

next financial year, for this the company would seek the approval of SEBI for the index fund and

the gilt fund. These two would be launched in the first quarter of 2002-02.

The pension fund would be launched later and would be using the resources of Standard Life

Investments with which the HDFC Asset Management Company has a tie up.

HDFC Mutual fund is not going to launch any high risk high gain fund as the general consensus

is that Indian investors are not ready for such funds. The company has launched six funds so far

since it started operating in October and has mobilized more than Rs.1, 400 crore as funds. The

company plans to end the year with more than Rs.1, 700 crore as funds.

It is also looking at 50,000 members for the Childrens Gift Fund. The company is developing a

very conservative image for itself and is refraining from launching funds like specific sector

funds as these are high risk areas.

HDFC TO LAUNCH CHILDREN FUND

With a view to generate long term capital appreciation for investors, HDFC Mutual Fund has

launched the HDFC Childrens Gift Fund, its sixth scheme since inception. An open ended

balanced scheme, the offer opened on 25 January 2002 and closes on 2 February 2002. The fund

has not set itself any target for mobilizing funds, but aims at garnering more account holders

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Chapter 3

RESEARCH METHDOLOGY

3.1 Objectives

3.2 Marketing Research Process

3.3 Study Description

3.4 Sampling

3.5 Contact Methods

3.1 Objectives

Current Scenario of mutual funds in Indian Market.

Consumer behavior while investing in a Mutual fund.

Consumer perception about mutual funds.

To comprehend the various factors that satisfy consumers in Mutual Funds.


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3.2 Marketing Research Process

Research may be defined as prose word. It means analysis of the subject based on borrowed

materials with suitable acknowledgement and consultation in the main body of paper.

Marketing Research can be defined as the systematic design, collection, analysis, & reporting of

data & findings relevant to a specific marketing situation facing the company.

FigMarketing Research Process

3.3 Study Description

The type of research here is Exploratory Research Design. This kind of design is used for more

precise investigation or of developing the working hypotheses from an operational point of view.

It has inbuilt flexibility, which is needed because the research problem, broadly defined initially,

is transformed into one with more precise meaning in exploratory studies, which in fact may


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necessitate changes in research procedure for gathering relevant data.

The characteristic features of research are as follows:

Flexible Design

Non-Probability Sampling Design

No pre-planned design for analysis

Unstructured instruments for collection of data

No fixed decisions about the operational procedures

Research method and Data description

Research methods are understood as all those methods and techniques that are used for

conduction of research. Research methods or techniques refer to methods the researchers use in

performing research operation. In other words, all those methods which are used by the

researchers during the course of studying his research problems, are termed as research methods.

Since the object of research, particularly the applied research, is to arrive at a solution for a given

problem, the available data and the unknown aspects of the problem have to be related to each

other to make a solution possible. Keeping this in view, research methods can be put into the

following three categories-----

Methods which are concerned with the collection of the data

Statistical technique

Methods which are used to evaluate the accuracy of the result obtained


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Methods of data collection

1. Primary data

survey methods--- this method was adopted because it helps to procuring data and detail

information from the respondents. Here I collected data by filling questionnaires, directly talking

to the respondents.

2. Secondary data--- I have also used the secondary data which include various written

documents and other related information about the mutual fund industry in India.

3. Sampling--- the sample comprised 120 respondents from the town Allahabad itself.

All the respondents were first surveyed, interviewed and asked various questions regarding the

three broad objectives of my research work and then their feed backs were taken. Then the

analysis of each and every question was done and finally incorporated into research result. As

there is no such

Popular model or technique available for this kind of research, I have done the analysis part of

my project on my own, without using any model or scientific technique.

Data Sources

The data gathering can be from secondary data, primary data or both. Secondary data are data

that are collected for another purpose and already exist somewhere. Primary data are data freshly

gathered for a specific purpose or for a specific research project.

The cost incurred in collecting primary data is more than secondary data. The secondary data

available orally in this research, therefore whole data is collected primarily.


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Research Instruments

There is a choice of mainly three instruments in collecting primary data:

Questionnaires

Psychological Tools

Mechanical Devices

Questionnaire consists of a set of questions presented to respondents. Because of its flexibility,

the questionnaire is by far the most common instrument used to collect primary data.

Questionnaires need to be carefully developed, tested & debugged before they are administered

on a large scale.

Psychological Tools such as laddering techniques, depth interviews & Rorschach tests can probe

a buyers deeper beliefs & feelings. Laddering involves the points set in ascending order, Depth

Interview involves the questioning deeply, & rorschach involves some kind of pictures

representation, graphs etc. to check the perception of respondent.

Mechanical Devises are occasionally used in marketing research. All kinds of scientific

instruments & mechanics used to measure the respondents characteristics.

What is done here?

The Questionnaire is used as research instrument in this research. This technique is useful as the

same type of questions asked to all the transporters. It is non-disguised structured questionnaire,

which is used to pull out important information from the secret pockets of transporters because

generally transporters refuse to give any kind of information.

3.4 Sampling


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Sampling Plan

Sampling can be defined as the technique through which an idea can be generated out of whole

market by taking just a small part of it. The sampling process has the following steps:

Define the population

Establish the frame of population

Choose method of sampling

Determine the sample size

Write instructions for identification of sample

Under this process, the sampling plan has to be designed. This plan deals with basically three

decisions:

Sampling UnitWho is to be surveyed?

Sample SizeHow many people should be surveyed?

Sampling ProcedureHow should the respondents be chosen?

Sampling UnitBy the sampling unit, the target market has to be defined that will be sampled.

Once the sampling unit has been determined, a sampling frame must be developed so that

everyone in the target population has an equal or known chance of being sampled.

Sample SizeLarge Samples give more reliable results than small samples. However, it is not

necessary to sample the entire target population or even a substantial portion to achieve the

reliable results. Samples of less than 1 percent of a population can often provide a good

reliability.

In this research of Commercial Transportation, the Sample Size is 100.

Sampling ProcedureTo obtain a representative sample, a probability sample of the sample


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should be drawn. Probability Sampling allows the calculation of confidence limits for sampling

error. Thus, one could conclude after the sample is taken that the interval 5 to 7 trips per year

has 95 chances in 100 of containing the true number of trips taken usually by 1st class

passengers flying between Chicago & Tokyo. Even non probability samples are useful in many

circumstances; even they do not allow sampling error to be measured. Probability Sampling is of

many types z like Simple Random Sampling, Systematic Sampling, Stratified Sampling, Cluster

Sampling, & Area Sampling etc.

The type of sampling in this research is Cluster Sampling under Probability Sampling. The

common group here is of Fleet Owners, who run their fleets all over India. This group is

extracted out of various transport areas, which are mentioned in the Sampling Unit.

3.5 Contact Methods

Once the sampling plan has been determined, the decision now is to taken regarding how the

subject should be contacted:

Mail Questionnaire

Telephone

Personal

Online Interview

Mail Questionnaire is the best way to reach people who would not give personal interviews or


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whose responses might be biased or distorted by the interviewers. Mail Questionnaires require

simple & clearly worded questions.

Telephone interviewing is best method for gathering information quickly; the interviewer is also

able to clarify questions if respondents dont understand them.

Personal Interviewing is most versatile method. The interviewer can ask more questions and

record additional observations about the respondent, such as dress & body language.

Online Interview is best suited for educated people or who can answer the questions through

Internet. This is the economical method as at the same time, there is huge collection of

responses.

give more suggestions/comments

Chapter 4

4.1 Data Representation

4.2 Charts & Comments

ANALYSIS

On the basis of the study conducted by me I have come to the following observation :

PERFORMANCE : It is generally believed that Mutual fund has performed poorly but if one

looks at Income funds ,they have come with reasonable returns. It is only the performance of

Equity funds, which has been poor .

This is because the fall in the value is maximum for longer dated instruments(equity funds) and

negligible for short dated instruments ( income funds ). Hence, the risk is higher in a fund that

has an investment portfolio with a higher average maturity. This can again be checked from the

investment portfolio, which is published by the funds. For example ,even if interest rates rise by


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2-3%, the fall in NAV for most mutual funds is unlikely to exceed 5%. Similarly, a portfolio

with as high as 10% of poor quality instruments will result in a fall in NAV by 10%. Regular

interest income will take care of the losses in a few months. Thus, there is unlikely to be

permanent erosion of capital in most reasonable circumstances. Hence, debt or income funds

have a much lower risk than equity funds, which can have permanent erosion in value.

RISK

Again the general belief is that the risk involved is high in case of mutual fund because of the

recent experience US 64 BONDS

In this case, the main problem was that for a period of 2-3 years, the UTI distributed more

dividends to the unit holders of US 64 than the return earned from the investments in the scheme.

This reduced the value of the residual investments in the scheme. This problem was compounded

by the persistent fall in the prices of shares , especially the shares of companies in basic

commodity industries like cement, steel, manmade fibers etc. and shares of public sector units.

Throughout this period, when the NAV of US 64 was going down, UTI kept increasing the sale

and repurchase prices of US 64 units. The stock market collapse after the Pokhran II nuclear tests

was the last straw, which resulted in the erosion of the schemes book reserves and a wide

difference between the actual NAV and the sale/repurchase price.

When this became known, it set a panic amongst investors of US 64. Many people felt that if

there were large-scale redemptions, UTI would not be able to meet them without support of

outside bodies like the RBI. Further, theoretically, if all investors wanted to redeem their US 64

units on the same day, the US 64 simply did not have the money to meet the redemptions on its

own (due to the difference between NAV and the repurchase price).

With such experience the people have become more cautious and banks such as HDFC are

taking greater precautions by coming up with more lucrative and diversified schemes .

BENEFITS

On the basis of my research I found that the various benefits sought by investors in mutual fund

are tax benefits , return potential ,diversification convenience, liquidity and well regulated

investment .

According to the banking official the tax benefit for investing in mutual fund units offered are

tax free dividend ,exemption from long term capital gain and 20% rebate on contribution up to

Rs 10,000 under section 88 .

INCOME FUND


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From the information brochure I analysed it became clear that the over all return of the debt

funds are 10-14%. It is clearly visible from the graphgiven below that the CORPORATE

SECTOR is investing more in the income fund because these funds

COMPOSITION OF ASSETS (INCOME FUND)

Source: Information brochure of the company-HDFC MUTUAL FUND

are flexible, as corporate sector likes to invest more in those funds which gives stable returns

with less exit load as its only 0.5% of NAV if redeemed within 3 months. Also it is safer to

invest in income fund as it involves low risk and the fund manager strives to earn steady returns

in the fixed income market by actively managing the funds portfolios on interest rate movement

and credit risks.

MONEY MARKETS

From the graph we can see that the corporate debt is as high as 55.7%. This is because every

corporate sector would like to have liquid funds as it is for short-term period. Thus they invest in

liquid funds as it can be transferred into cash whenever they are in need for further growth of the

organization. The Fund Managers strive to provide optimum returns with prudent exposure to

money market instruments while maintaining focus on capital preservation.

COMPOSITION OF ASSETS (LIQUID FUND)

Source: Information brochure of the company-HDFC MUTUAL FUND


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Graphs and Charts

Chart No. 1

Chart No 2


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Chart No. 3

Chart No. 4


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Chart No. 5

Chart No. 6

Chapter 5


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5.1 Conclusion

5.2 Suggestions & Recommendations

5.3 Limitations

CONCLUSION

We can infer from the analysis that the concept of mutual fund in the place like

is still in is nascent age. With the growing importance of mutual fund in other areas in the

country, this place is not witnessing the same rate of growth in mutual funds. Apart from these

facts the following are some other important facts which can easily be inferred from the paper---

Huge opportunities of Mutual funds exist in the town of Allahabad. In short the market in this

small town is almost virgin market.

As because only few companies exist in this market, competition is next to nil.

Mindsets of the investors are not towards mutual funds. They still think of investing in

traditional investment alternatives. Customers are not properly educated about the mutual funds.

Few private sectors banks like ICICI, HDFC, UTI sell mutual funds through their branches

only.

Specialized agents of mutual funds are rarely seen. Financial advisors are not seen there who

can educate the investors.

Posters, banners or other promotional activities are rarely seen in this market.


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Mutual fund companies do not have aggressive strategies.

Insurance products are and can be the main competitors of mutual funds.

Mutual fund investors are confined to the upper-middle and upper social class in this market.

lower class and lower-upper class people are still

o untouched.

o More than half of the respondents have wrong perception about the mutual funds .They feel

mutual funds are very risky investment alternative.

Most of the respondents are satisfied with their current return from their investment. Most of

the respondents neither do nor want to take risk in investing their money in mutual funds.

RECOMMENDATION & SUGGESTIONS

After a through study and analysis of the data and information, the following are the few

recommendations and suggestions, if adopted, would definitely benefit the financial market in

Bardhaman, which is almost untouched and virgin, in the short run and in the long run as well.

Recommendations and suggestions are normally given when there are some problems or

difficulties lying in the market. Here in this research report my recommendations and

suggestions are totally based on the facts, reactions, attitudes, perceptions, and many other

thingnos of the respondents which I have received from them during my research work.

The recommendation part of this research work has two parts only, which I feel can push the

mutual fund market in Bardhaman to a upper level.


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The two parts are

Market Development

Marketing activities

Market development

My consumer survey in Bardhaman has revealed the fact that the market for mutual fund is still

almost a untouched and virgin market. Hence the companies have to do a lot of things and

activities to develop the market for mutual fund in this small township. Because the market

development is as important as STP of any marketing plan. Market development means doing

anything and everything for the growth of the mutual fund industry. Hence in the following ways

the market of mutual fund in Bardhaman can be developed.

Awareness

Awareness of mutual fund products must be increased in this township. The awareness can be

enhanced in the following ways---

Conference or seminars on mutual funds can be conducted on regular basis. This will no

doubt increase the awareness of mutual fund in the minds of the investors.

All the companies must join hands and work together for this.

Customer education

As the awareness of mutual funds is very poor in this market, companies should give focus on

customer education. For this purpose again the conference and seminars can be the best way


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towards educating the customers. Again free training program to the agents can be fruitful.

Govt. intermediation

Govt. must also work together with the mutual fund companies in promoting the concept of

mutual fund in Allahabad.

Confidence building activities

People in this township are not confident in investing their money in mutual funds. Hence there

is a need to do something which will build the confidence in the minds of the investors.

Hence the confidence building activities must be carried out the mutual fund companies. Because

most of the people in Bardhaman think that investing in mutual funds is a very risky affair. In the

following ways the confidence can be increased in the minds of the people in Bardhaman.

As the common people has blind faith in all the govt. institutions, hence they have to come

forward and convey the message that investing in mutual fund is not that risky.

The present performance of the mutual funds is very good indeed. And the companies should

cash in on this opportunity. The performance of the mutual funds can be published in the local

and other newspapers and magazines, journals. This will no doubt induce the investors towards

investing in mutual funds.

Case study of the investors who have been benefited in investing in mutual funds can be

published in the newspapers, magazines and journals.


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Marketing techniques

While the Mutual Fund industry in India has seen dramatic improvements in quantity as well as

quality of product and service offerings over the past decade (refer the graph on page number -

33). One of the primary reasons for this slow growth is the fact that mutual funds are a new

concept in India, which needs to be still understood by large sections of Indian investors. In this

scenario, the mutual fund companies have the onerous responsibility of not just selling mutual

fund products, but marketing them correctly.

Financial product like mutual fund does not need the extensive marketing plans for the selling of

it as these are required for the physical products. Nevertheless the selling of mutual funds needs

the same extensive marketing plans but these plans are completely different from those which are

required for the products. Good marketing plans are the main mantra. The following are some of

the marketing plans which will, in result, make the market for mutual funds grow.

Marketing plan

Booklets on mutual funds can be distributed at free of cost to the common people with the

newspapers, magazines, journals. This will help in attitude formation of the investors.

Companies must focus on tailored made mutual fund schemes rather than on the traditional

products/ schemes.

Unlike the case of insurance where there is a restriction on certain age of the investors to invest

on insurance, there is no such restriction on investing in mutual fund. An investor of any age


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bracket can invest in mutual fund. Hence the strong and efficient CRM can prove to be very

fruitful.

Selling of mutual funds only through agents and the branch will not serve the purpose.

Distribution network

should be increased. Here aggressive strategy must be

taken by a company in selling mutual funds.

This will only be possible when the investors are well

familiar with the concept of mutual funds and its

advantages and benefits.

As selling of financial products requires well trained people, the companies must provide

proper training to the agents and financial planners. For this training institute must be opened in

this township.

Continuous brand building activities must be carried out by the companies. For this purpose

companies should

o initiate some sort of promotional activities likeads on

o newspapers, magazines, journals.

Educational institutes must start some professional courses on mutual funds and other finance

specialized courses. This will create some sort awareness about the mutual funds.

Mutual fund companies must tie up with other financial institute like banks, post office for

reaching to the mass people. Because these financial institutes have tremendous reach to the

mass people in our country. As

a result mutual fund companies can have easy access to

the common people. The companies must go in for this

kind of strategic alliance with other companies as well.

Because strategic alliance not only benefit the companies

but help in developing the market also.


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Handsome incentive

Push selling of mutual funds products must be stressed on.

This push selling must be done through agents and

financial planners. Handsome incentives and commission

will no doubt motivatee them push sell the mutual funds.

Attractive schemes

As the maximum number of investors of mutual funds in

this township are confined to the business class and upper

social class category. Common people rarely invest in

mutual funds. Hence the different attractive schemes can be

launched to attract the common people towards mutual

fund investment. These schemes are for promotional

purpose only. The main purpose of these schemes are to

draw retail investors towards the mutual funds investment.

The following are some of the schemes :

For opening of new savings bank account, certain units of mutual funds of a company(strategic

alliance company) can be given at free of cost to the account holder. This will no doubt make the

people more familiar with the concept of mutual funds.

On buying of one or some life insurance policies, again certain units of mutual fund can be

given at free of cost

to the policy holders. This will ultimate lead to the

mutual fund buying habit of the common people.

Again each car loan or other kind loan of a certain amount will get the loan taker certain units

of mutual funds absolutely free of cost.


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Sponsorship of management events

As we all know that management institutes and universities and other educational institutes are

the production houses of the business managers. In the these institutes, several kind of

management activities go on throughout the year. The companies must cash in on this

opportunities to make them know to the students and to the people who are associated with thess

institutes. Companies can sponsor some of the management events of these institutes. This will

again lead to the WoM communication of the products of the companies.

Limitations

Every research work can not be perfect. There is always some sort of limitations in almost all the

research work, esp. when a research is completely based on consumer survey. As my research

work is also based on consumer survey, I also faced some limitations, which are an integral part

of any research work, during my consumer survey in Bardhaman.

There are some problems which could not be escaped. The limitations faced, felt and expressed

by me are as follows---

All the respondents were not surveyed in Bardhaman i.e. the place of my consumer survey.

Some selected areas were surveyed due to limited time.

Selection of the areas was made randomly.

Respondents were also selected randomly.

There might be some biases in the answers of the answers.

All the data regarding my research paper was not available during my project work.


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Chapter 6

6.1 Bibliography

6.2 Questionnaire

6.1 Bibliography

INTERNET SITES

www.hdfcfund.com

www.mutualfundindia.com

www.amfi.com

REFERENCES


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HDFC Mutual funds (Asset Management Company Information Brochure)

BOOKS

M.Y.Khan, Indian financial System, Tata McGraw-Hill Publishing Company Limited, 2004.

Is

Haridwar.C.Dhingra, The Indian Economyenvironment and policy, Sultan Chand and Sons,

2004.

Russell.J.Fuller and James.L.Farell.Jr, Modern Investments and security analysis, McGraw-Hill

International Editions, 1987

H.R.Machiraju, Indian financial System, Vikas Publishing House Pvt. Ltd., 2004

CONSUMER SURVEY


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1. Name:

2. Age:

3. Sex: Male Female

4. Occupation:

Businessman Service man Professional Others

5. Monthly income brackets:

Below 15000 15000- 20010 20010-30000 30000 and above

6. % of your savings ------------------------

7. Do you invest? Yes No

8. If yes, then where do you invest your money?Bank Insurance Share market Others

9. Why do you invest (investment objectives)?

Return Risk hedging Tax benefits Other reasons (specify)

10. Who influence your investment decision?

Relatives and friends family members Advisors/ experts you yourself

11. If no then why?

Do not know where to invest

Satisfied with your current investment return

Dont want take risk

Other reasons-------

.

12. Do you know about MF? Yes No

a)If yes then from where u have come to know about an MF

Advertisements on newspapers

Friends and relatives

Agents/ experts

Other source----

13. What do you think about MF?

It means investing only in share market


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Constant watch must be kept always

Return is not satisfactory

Other perception------

14. Can u recall any mutual fund company ? --------

15. Can you recall any MF scheme? ---------

16. Would u want to invest in MF? Yes No

17. If yes then why? -----------------------------------------------------

18. If no then why? ---------------------------------------------------

19. Your recommendation and suggestions( if any)-------------------------------------------------------

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sunil prjct report

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