ACKNOWLEDGEMENT

An endeavor over a period can be successful only with the advice and support of
well-wishers. I take this opportunity to express my gratitude and appreciation to all those
who encouraged me to complete this project.

I am deeply indebted to Prof: L.R.S.MANI, Dean MATS School Of Business

Belgaum for my successful completion of the project.

I express my profound and sincere thanks to Dr. ESHWARN Dean who acted as a
mariner’s compass and steered me through out my project voyage through his excellent
guidance and constant inspiration.

I shall be failing in my duty if I don’t acknowledge my debt to Mr. Nagraj,

Relationship manager of IL&FS INVESTSMART, Belgaum for his valuable guidance
and support, which helped me in giving a shape to my study.

I extend my hearty thanks to Mr. Nithin Londe, Manager of IL&FS

INVESTSMART, Belgaum for giving me an opportunity to take up the project work and
providing all the facilities for the same.

I also extend my hearty thanks to all other faculty members of MATS School Of
Business Belgaum for their eternal support and guidance.

I acknowledge with profound gratitude and reverence the help and guidance of
one and all in my endeavor for gainful project work I undertook at IL&FS
INVESTSMART, Belgaum

Place: Belgaum Mahantesh c kolaki

STUDENT’S DECLARATION

I here by declare that Summer Training Report submitted as a

requirement of fulfillment of my PGDBM(IB) course is my original work and not
submitted for the award of any other degree, diploma, fellowship or other similar title or
prizes.

Mahantesh Kolaki
PGDBM(IB) 2ND SEM
Executive summary

The project titles “Analysis and Interpretation of Mutual Funds is undertaken in

IL&FS INVESTSMART LTD. The project is related to the study of the Technical
Analysis of Equity Diversified schemes in different Mutual Fund companies.

The project title “Analysis and Interpretation of Mutual Funds “is mainly divided
in to 5 phases:

 Study of Security Market.

 Company profile.
 Study of Mutual Funds.
 Methodology.
 Findings& suggestions.

In security market the study is on Primary market, Secondary Market, types of

investment alternatives. Mutual fund is one of the best investment alternatives as
compared to other alternatives.

IL&FS Investsmart Limited (IIL) is one of India’s leading financial services

organizations providing individuals and corporate with customized financial management
solutions.

Mutual Fund is an investment company or trust that pools the recourses from
through of it shareholders or unit holders, who share common investment goal. There are
vast varieties of schemes available each day for in nature in much respect. Basic
difference comes from the objective of each scheme. The schemes are classified on the
basis of Operational, Portfolio and Geographical.The Study with main objectives of
evaluate investment performance of Mutual Funds in the terms of risk and return and To
find out the financial performance of mutual fund schemes…
 PART - I

Introduction

1.1 Definition and Overview

1.2 Problem identification

1.3 Objective of the study

 1.1 Introduction:

The money you earn is partly spent and the rest saved for meeting future
expenses. Instead of keeping the savings idle you may like to use savings in order to get
return on it in the future, which is known as ‘investment’. There are various investment
avenues such as Mutual funds, Equity, Bonds, Insurance, Bank Deposit etc. The project is
related to the study of the Technical Analysis of Equity Diversified schemes in different
Mutual Fund companies.A there are various factors which affects investments such as
annual income, government policy, natural calamities, economical changes etc

1.2 Problem identification:

Analyzes and interpretation of mutual funds and to create awreness of mutual

fund and the company IL&FS INVESTSMART LTD, and the popularity of different
products provided by IL&FS INVESTSMART LTD for investment.

1.3 Objectives of Study

The research is undertaken with an objective to know the following aspects:

 To study the concept mutual funds.
 To Study individual saving patterns.
 To know the awareness level of mutual funds
 To know the parameters the people look in while investing in mutual fund.
 To study the investor perception towards mutual fund.
 To find whether investment in mutual fund is better than other investments.
 To create strategies to increase sales of mutual fund
 PART - II

Industry Profile

2.1 Introduction.
2.2.Retail broking.
2.2 securities
2.3 .SEBI
2.4.Mutual Funds.
2.4.1 .Charactristics of mutual fund.
2.4.2.Mutual fund industry.
2.4.3.Regulatory structure.
2.4.4.Concept and role of mutual fund.
2.4.5.Types of mutual fund.
2.4.6.Major mutual fund companies.
2.4.7.Five easy steps to invest in mutual fund.
2.4.8.Tax rules for mutual fund investers.
2.4.9.Advantages and disadvantages.
2.4.10.Who can invest in mutual fund.
Introduction
An investment means employment of funds on assets (i.e. securities or mutual
funds or any of the investment avenues) with the aim of earning of income as well as
capital appreciation. There are mainly two attributes while investing to any of the means,
i.e. time and risk. There are mainly four objectives, which the investments activities will
carry on those are:
• Return
• Risk
• Liquidity
• Hedge against inflation
• Safety

There are many alternatives which investment avenues are open to the investors
to suit their needs and nature .The selection of investment alternatives are depends up on
the required level of return and the risk tolerance level. These alternatives range from
financial securities to traditional non-securities investment.

Following are the various investment alternatives.

1) Negotiable and fixed income securities 2) Equity shares
3) Preference share 4) Debentures
5) Bonds 6) Indira vikas patra
7) Government securities 8) Money market securities

Non-negotiable securities
1) Bank deposit 2) Post office deposit
3) NBFC deposit 4) Tax saving schemes
5) Public provident fund scheme 6) National saving scheme
7) Life insurance 8) Mutual funds
9) Real estate
Retail broking in India.

• Retail broking, highly fragmented industry

Present Scenario
–Over 2000 brokers, 10000 sub brokers and 1
 The inevitable shake out..
crores investors
 Handful brokers and growing
–New aggressive players
investor base
–Falling brokerages
 Strong Competition Banks Vs
–Value added services
Securities firms
–Online trading and offline trading.

Securities

Companies raise funds to finance their projects through various methods. The
promoters can bring their own money or barrow from the financial institutions or
mobilizes capital by issuing securities. The funds may be raised through issue of fresh
share at per or premium. Preference shares debenture or global depository receipts. These
are mainly two markets which any company can raise their funds; those are primary
market and secondary market .the companies raise funds for the following purposes:

• To promote a new company.

• To expand an existing company.
• To diversify the production.
• To meet the regular working capital requirement.
• To capitalize the reserves.
Security and exchange board of India (SEBI):

Security and exchange board of India has started its operation with the objectives
of protect the interests of the investors insecurities and to promote the development and
regulate the security market. The main functions of security market are:
 Regulate the business in stock exchange and any other security market.
 Registering and regulating the work of stockbrokers, and sub-brokers and transfer
agent, brokers to the issue. Merchant bankers, underwriters, portfolio managers,
investment advisers and such others intermediaries who are associated with
security market.
 Registering and regulating the work of collective investment schemes including
Mutual Funds.
 Prohibiting insider trading in securities.
 Regulating substantial acquisition of shares and take-over of companies.

SEBI has legal and investigation departments. It has got separate committees
for primary and secondary market to assist the policy formulation. It has regulated:
• Primary market
• Secondary market
• Mutual Funds
• Foreign institutional investment.

Mutual funds:
A mutual fund is a form of collective investment that pools money from many
investors and invests their money in stocks, bonds, short-term money market instruments,
other securities etc. In a mutual fund, the fund manager trades the fund's underlying
securities, realizing capital gains or losses, and collects the the dividend or interest
income. The investment proceeds are then passed along to the individual investors.
 A mutual fund is created when investor put their money together. It is therefore a
pool of the investor’s funds.

The term mutual means that investors contribute to the pool and also benefit
from the pool. There are no other claimants to funds. The pool of funds help mutually by
investors is the mutual fund.

A mutual fund business is to invest the funds thus collected according to the
wishes of the investors who created the pool the invested appoints professional
investment mangers, to mange their funds.

IMPORTANT CHARACTERISTICS OF THE MUTUAL FUND

1. A mutual fund actually belongs to the investors who have pooled their funds.
The ownership of the mutual fund is in the hand of the investor

2. A mutual fund is managed by investment professional and other service

providers who earn a fee for their services from the fund

3. The pool of funds is invested in a portfolio of marketable investments. The

value of the portfolio is updated every day.

4. The investor’s share in the fund is denominated by “UNIT”. The value of the
unit changes with changes in the portfolio value every day the value of the
unit of investment is called as the Net Assets Value or NAV.

5. The investment portfolio of the fund is created according to the stated

investment objectives of the fund.
About Mutual Fund Industry

Mutual Funds are financial intermediaries which pool the savings of numerous
individuals and invest the money, thus related in a diversified portfolio of securities,
including equity, bonds debentures and other money market instruments, thus spreading
and reducing risk. The objective of mutual fund is to maximize the return to the investor
who participates in equity indirectly through mutual funds.

Even though the mutual fund industry grown in asset value from Rs.7000
Crores to 2,00,000/- Crores today, this is just the tip of the iceberg. According to most
Fund Managers, the real boom is yet to come.

The sum of Rs. 2,00,000/- Crores represents just 3% - 4%

of the total market capitalization of 25,00,000 Crore. This compares poorly with the US,
where the mutual funds have nearly $ 6.8 billion of market capitalization of roughly
Rs.70000 Crore, barely 3% - 4% of total market capitalization.

This is not expected, because mutual fund history in India, which dates back to
1964, when the first open-ended mutual fund scheme Unit-64 was launched by Unit Trust
of India, is still dominated by it. The focus initially was income earning securities, with
only 20 % of the Corpus going into equity. The early 80’s saw other schemes like the
growing income, fixed income, and monthly income being introduced by the UTI. But it
was only in 1986 that the first pure Growth equity scheme Master share was launched.
 The 1989-90 was another landmark year in the history of mutual funds. For the
fist time, the monopoly of UTI over the industry was broken. The government allowed
public sector banks and insurance companies to enter this sector to bring in some
competition. But it was only in 1993, when the private sector was given the green signal
to float mutual funds, that excitement and competition came. Not only did the
Government allowed Indian companies to float mutual funds, it even allowed foreign
funds to set in shop in India and float funds. Thus, in one stroke, this sector was truly
privatized.

Today there are about 12-14 private players in the market including foreign
funds such as Morgan Stanley, besides the nine public sector players and UTI. Together,
these funds have mobilized around Rs.6500 Crore from the market. The collections could
have been better, had not the public sector funds been busy complying with the SEBI
guidelines pertaining to the formation of asset management companies etc.

But the best is yet to come. A number of companies have plans to float mutual
funds at various stages of implementation. Some of the major names which are likely to
come to the market are Tata Sons in collaboration with Kleinwort Benson, ITC Classic
with Thread needle UR, Oppenheimer of US, plus a host of others. And according to
conservative guesstimates, mutual funds are set to collect over Rs.10000 Crore from the
market this year.

The reason for such confidence is that with SEBI firm about the small investor
taking the mutual fund route to investments in the stock market, and the regulatory
changes making it much more difficult to get allotments in primary markets, small
investors will not be left with many opportunities.
Regulatory Structure of Mutual Fund in India

The structure of mutual fund in India is governed by SEBI (MUTUAL FUND)

regulations 1996. These regulations make it mandatory for mutual funds to have a three-
tier structure of SPONSOR-TRUSTEE-ASSET MANAGEMENT COMPANY (AMC).

Concept and role of Mutual Fund

 A Mutual Fund is common pool of money into which Investor place their
contributions that are to be invested in accordance with a stated objective. The ownership
of the Fund is thus joint or “mutual”; the fund belongings to all investors.
A single investor’s ownership of the fund is in the same proportion as the
amount of the contribution made by him or her bears to the total amount of the fund.

A Mutual fund uses the money collected from investors to buy those assets,
which are specifically permitted by its stated investment objective. Thus, an Equity Fund
would buy mainly Equity assets-ordinary shares, preference shares, warrants etc. A bond
fund would mainly buy debt instruments such as debentures, bonds or government
securities. It is these assets, which are owned by the investors in the same proportions as
there contribution bears to the total contribution of all investors put together.
 When an investor subscribes to a mutual fund, he or she buys a part of these
assets or the pool of funds that are outstanding at that time. It’s no different from buying
“shares” of a joint stock company, in which case the purchase makes the investor a part
owner of the company and its assets. In fact, in the USA, a Mutual fund is constituted as
an investment company and an investor “buys into the fund”, meaning he buys the shares
of the fund. In India, a mutual fund is constituted as a Trust and the investor subscribes to
the “units “ issued by the fund, which is where the term unit Trust comes from.

Types of Mutual Funds Schemes

Schemes floated by the various mutual funds are essentially of two types,
namely open-ended and close-ended. The basic characteristics of these two types of
mutual fund schemes are given below:
OPEN ENDED SCHEMES:

Open-ended schemes are available for subscription all the year round
excluding the period of book-closing. They may or may not have a specified redemption
period. The sale and repurchase prices are fixed by the mutual fund concerned from time
to time. Repurchases are generally allowed al specified rated.

Each open-ended scheme must have a minimum corpus of Rs.50 crore. In case
the fund manager is not able to raise this amount at the time of issue, or 60 % of the
targeted amount whichever is higher, the entire subscription must be returned to the
investor.

CLOSE-ENDED SCHEMES
 These are open for subscription only during a specified period. Generally the
redemption dates are also specified when the investor can redeem their units. The
duration of this scheme varies: normally it is 5-7 years. Repurchase during the
intervening period may or may not be allowed. Some of the schemes though have a
repurchase facility after a certain period. Many of these schemes are listed in stock
exchanges, except for some of the close-ended income schemes .

Equity Oriented Schemes:

These schemes, also commonly called Growth Schemes, seek to invest a

majority of their funds in equities and a small portion in money market instruments. Such
schemes have the potential to deliver superior returns over the long term. However,
because they invest in equities, these schemes are exposed to fluctuations in value
especially in the short term.
Equity schemes are hence not suitable for investors seeking regular income
or needing to use their investments 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, HDFC Tax saver and HDFC
Index Fund are examples of equity schemes.

Debt Based Schemes:

These schemes, also commonly called Income Schemes, invest in debt

securities such as corporate bonds, 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.
  INCOME SCHEMES : These schemes provide returns in the form of
dividends. The returns may be cumulative or non-cumulative on a monthly,
quarterly, or yearly basis. Mutual Funds carry market risks and are prohibited
by SEBI from declaring any guaranteed rate of returns. The money under such
schemes are predominantly invested in fixed income securities like
debentures, bonds, Government securities etc.

 Liquid Income Schemes: Similar to the Income scheme but with a shorter
maturity than Income schemes. An example of this scheme is the HDFC
Liquid Fund.

 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.

Gilt Funds:
This scheme primarily invests in Government Debt. Hence the investor usually
does not have to worry about credit risk since Government Debt is generally credit risk
free. HDFC Gilt Fund is an example of such a scheme.

HYBRID SCHEMES :
 These schemes are commonly known as balanced schemes. These schemes
invest in both equities as well as debt. By investing in a mix of this nature, balanced
schemes seek to attain the objective of income and moderate capital appreciation and are
ideal for investors with a conservative, long-term orientation. HDFC Balanced Fund and
HDFC Children’s Gift Fund are examples of hybrid schemes.

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 based prices.

From the investments point of view the existing schemes can be further divided into 4
major categories :

1. GROWTH SCHEMES : These are usually close-ended schemes. The aim of

such schemes is to provide capital appreciation to their investors and accordingly
a substantial part of the Corpus is invested in equities an convertible debentures.
Such schemes are usually listed in the major stock exchanges and the capital
appreciation is reflected in their market value i.e. NAV. They may or may not
declare dividends even though the declaration of annual dividends represents the
health of a scheme.

2. EQUITY-LINKED SCHEMES (ELSS) : These are popularly known as tax-

planning schemes . They are essentially close-ended growth schemes in nature.
They are floated by almost all the public sector mutual funds in the last quarter of
each financial year, some of the essential characteristics are :
a. Investment up to a ceiling of Rs.1,00,000/ come under Section 80C of the
Income Tax Act.
b. Repurchase is allowed after a specified period- usually 3 years.
c. During the lock-in period of 3 years their units cannot be traded, pledged
or transferred.
 3. VALUE-ADDED SCHEMES : they are in addition to the growth/income
schemes. Some of the mutual funds schemes have provision for ‘value addition’.
This is usually in the nature of personal insurance cover for accidents, etc. GIC
Mutual Fund was the first to introduce this concept.

Major Mutual Fund Companies in India

1) ABN AMRO Mutual Fund. 2) Birla Sun Life Mutual Fund

3) Bank of Baroda Mutual Fund. 4) HDFC Mutual Fund

5) HSBC Mutual Fund. 6) ING Vysya Mutual Fund

7) Prudential ICICI Mutual Fund. 8) Sahara Mutual Fund

9) State Bank of India Mutual Fund. 10) TATA Mutual Fund

11) Kotak Mahindra Mutual Fund . 12) UTI Mutual Fund

13) Reliance Mutual Fund. 14) Standard Chartered Mutual Fund

15) Franklin Templeton India Mutual Fund. 16) Morgan Stanley Mutual Fund

17) Escorts Mutual Fund 18) Alliance Capital Mutual Fund

19) Benchmark Mutual Fund. 20) Canbank Mutual Fund

21) Chola Mutual Fund. 22) LIC Mutual Fund

5 Easy Steps to Invest in Mutual Funds
1) Search: “Where to look for if we want to invest in MF”
• Contacting an Investment advisor in a bank or a brokerage house or an
Independent Financial Advisor is the first step to gathering information.
• Mutual funds units can also be bought over the Internet.
• Mutual funds are much like any other product, in that there are manufacturers who
provide the product and there are dealers who sell them.

2) Evaluation: “Evaluation: choosing the right mutual fund for you

As an investor one may
• for the short term or long term want to invest
• want regular income or growth
• want to target lower risk or higher returns
• be convinced of a particular sector and want to invest in it
3) Purchase:
• Systematic Investment Plan (SIP): Allows you to save a part of your income
regularly. Also used to reduce risk when investing in schemes targeting aggressive
growth.
• Systematic Withdrawal Plan (SWP): Allows you to withdraw a part of your
investment regularly. Used when you want to withdraw your investment for a
specific regular payment, like insurance premium payments of monthly/quarterly
frequency.
• Automatic debit: Saves the hassle of writing a cheque when making an
investment. Your account is debited automatically for the amount invested.
• Dividend Plan :
 Dividend Payout: Under this plan investor can redeem his/her dividend at
specific times.
 Dividend Reinvestment: Under this plan investor’s dividend is reinvested
back to it’s principal amount which therefore increase the number of units
investor is holding.
  Growth: Under this plan income generated from investment will put back
to it’s invested amount which therefore increases the value of each unit
customer is holding.

4) Post Purchase Monitoring:

Once you have invested in an ongoing fund, expect a period of two to three days
before you receive an account statement on the address mentioned by you in your
application form.
• The Account Statement :Your account statement indicates your current holding
in the scheme that you have invested.
• The transaction slip: The transaction slip at the end of the account statement can
be used for additional purchases, redemptions or to intimate the mutual fund on
any change in bank mandates/address.
• NAV: The NAVs of all the open-ended schemes are published at the fund's
website, financial newspapers and AMFI (Association of Mutual Funds) web-site
www.amfiindia.com.

5) EXIT:
Every AMC advice that every investor should monitor the his/her units NAV
periodically but AMC also recommend their unit holders to not get swayed by short term
considerations in deciding their exit.

Redemption: In case of open ended funds investor can redeem his/her invested amount.
Most funds take 1-3 days to credit your account with your redemption proceeds.
5 Pointers to Measure Mutual Fund Performance
MEASURES DESCRIPTION IDEAL RANGE

STANDARD Standard Deviation allows to evaluate the Should be near to it’s mean
DEVIATION volatility of the fund. The standard deviation of a return.
fund measures this risk by measuring the degree
to which the fund fluctuates in relation to its mean
return.
BETA Beta > 1 = high risky
Beta is a fairly commonly used measure of risk. It Beta = 1 = Avg
basically indicates the level of volatility associated Beta <1 = Low Risky
with the fund as compared to the benchmark.

R-SQUARE R- square measures the correlation of a fund’s R-squared values range

movement to that of an index. R-squared between 0 and 1, where 0
describes the level of association between the represents no correlation and
fund's volatility and market risk. 1 represents full correlation.

ALPHA Alpha is the difference between the returns one Alpha is positive = returns
would expect from a fund, given its beta, and the of stock are better then
return it actually produces. It also measures the market returns.
unsystematic risk . Alpha is negative = returns
of stock are worst then
market.
Alpha is zero = returns are
same as market.
SHARPE
Sharpe Ratio= Fund return in excess of risk free The higher the Sharpe ratio,
RATIO
return/ Standard deviation of Fund. Sharpe ratios the better a funds returns
are ideal for comparing funds that have a mixed relative to the amount of risk
asset classes. taken.

Tax Rules For Mutual Fund Investors*

 ADVANTAGES OF MUTUAL FUNDS:

Equity schemes Other schemes Dividen Dividend distribution tax

d income
Short Long Short Long Term TDS All Equity Liquid Other
Term Term Term Capital Schemes Schem Schemes Schemes
Capita Capita Capital Gain es
l Gains l Gain Gains
Resident 10% NIL AS PER 10% NIL TAX NIL 28.32% 14.16%
Individua SLAB (20% with FREE (25%+10%s (12.5%+10%su
l indexation urcharge+ed rcharge+3%ed
/ HUF ) ucation cess) ucation cess)
Partners 10% NIL 30% 10% NIL TAX NIL 28.32% 22.66%
hip Firms (20% with FREE (25%+10%s (20%+10%
indexation urcharge+ed surcharge+3%
) ucation cess) education cess)
AOP/BOI 10% NIL AS PER 10% NIL TAX NIL 28.32% 22.66%
SLAB (20% with FREE (25%+10%s (20%+10%
indexation urcharge+ed surcharge+3%
) ucation cess) education cess)
Domestic 10% NIL 30% 10% NIL TAX NIL 28.32% 22.66%
Compani (20% with FREE (25%+10%s (20%+10%
es indexation urcharge+ed surcharge+3%
) ucation cess) education cess)
NRIs 10% NIL AS PER 10% STCG- TAX NIL 28.32% 14.16%
SLAB (20% with 30%LTCG- FREE (25%+10%s (12.5%+10%su
indexation 20% urcharge+ed rcharge+3%ed
) ucation cess) ucation cess)
POINTS:

 Portfolio Diversification – Mutual Funds normally invest in a well-diversified

portfolio or securities where the investor can hold a diversified investment
portfolio even with a small amount of investment.

 Professional Management – The investors does not have the skills and the
resources of their own to succeed in today’s fast moving, global and sophisticated
markets. Thereby they benefits from the professional management skills brought
in by the fund in the management of investor’s portfolio.

 Diversification of Risk- Since the investor acquires a diversified portfolio, it

reduces a risk of loss as compared to investing directly in one or two shares or
debentures or other instruments. While investing in a pool of funds with other
investors any loss, on one or two securities is also shared with other investors.
This risk reduction is one of the most important benefits of a collective investment
vehicle like the mutual fund.
  Reduction of Transaction Costs –When going through a fund the investor has
the benefit of economies of scale, funds pay lesser cost because of larger volumes,
and this benefit is passed onto its investors.

 Liquidity- Investment in a mutual fund is more liquid as an investor can liquidate

the investment, by selling the unit to the fund if open-end, or selling them in a
market if the fund is close-end and collect funds at the end of the period specified
by the mutual fund or the stock market.

 Convenience and Flexibility – Mutual Fund management companies offer many

investor services where in the investor can easily transfer their holdings from one
scheme to the other, get updated market information, and so on.

DISADVANTAGES OF MUTUAL FUNDS:

 No Control over cost – An investor in Mutual Funds has no control over the
overall cost investing as he pays investment management fees as long as he
remains with the fund. He also pays fund distribution costs, which he would not
incur in direct investing.

 No Tailor-made Portfolios –Investors who invest on their own can build their
own portfolios whereas investing through funds involves delegating this decision
to the fund managers.

 Managing portfolio of fund- Availability of the large number of funds can

actually mean too much choice for the investor wherein he needs an advice on
selecting a fund to achieve his objectives, to suit the situation when he selects
individual shares or bonds to invest in.
 Who Can Invest In Mutual Funds In India?

Mutual funds in India are open to investment by:

a) Residents including
1) Resident Indian Individuals
2) Indian Companies
3) Indian Trusts/Charitable Institutions
4) Banks
5) Non-Banking Finance Companies
6) Insurance Companies
7) Provident Funds

b) Non Residents including

1) Non-Resident Indians, and
2) Overseas Corporate Bodies (OCBs) and

c) Foreign entities, viz;

1) Foreign Institutional Investors (FIIs) registered with SEBI.

Foreign citizens/ entities are however not allowed to invest in Mutual funds in India.
 PART III

Company Profile

3.1 Basic facts about IL&FS

3.2 Service profile of IL&FS

3.3 Product profile of IL&FS

3.1 Basic facts about IL&FS

IL&FS INVESTSMART LTD.

• One of the leading financial services companies in India
– Focused on retail broking (including margin financing), distribution of
financial products and IPO financing
– Significant growing presence in Merchant Banking, & Institutional
Brokerage Businesses
• Pan India presence with a network of 259 outlets (including business associates)
spread across 124 major cities in India
• Total Income in FY 06 of Rs. 2170 mn. and net profit of Rs. 691 mn.

Shareholding Pattern
IL&FS
FIIs & Public
30%
33%

SAIF
E*TRADE 10%
27%

Promoter History -
IL&FS
 Promoted by Infrastructure Leasing and Financial Services Ltd.
 Shareholders of IL&FS include SBI, ORIX-Japan, IFC-Washington, Credit
Commercial de France, Indivest Pte Ltd (an Affiliate of Govt. of Singapore).
 Business operations of the promoter
 Infrastructure and Development Services: Sectors such as Surface
Transport and Transportation Systems, Water Supply, Hydro Power,
Special Economic Zone, Port and Environment & Social Management
Group.
  Investment Banking: Strategy, Asset Financing, Corporate Advisory,
Capital Markets, Project Financing.
 Made contributions to the following trusts: IL&FS Infrastructure Equity
Fund, IL&FS Investment Trust –I, II, IV.
 The Indian Innovation Award-2005: Awarded to IL&FS by President of India

VISION STATEMENT:
To become the preferred long term financial partner to a wide base of customers whilst
optimizing stakeholders value!

MISSION STATEMENT
To establish a base of 1 million satisfied customers by 2010. We will create this by being
a responsible and trustworthy partner

CORPORATE ACTION:
An Approach to Business that reflects Responsibility, Transparency and Ethical
Behaviour. Respect for Employees, Clients & Stakeholder groups.

3.2 Service profile of IL&FS

Product Portfolio
 Key Milestones Acquired Apeejay
Securities
Completed business
restructuring
Received the Best
ETM as Strategic Performing
Investor and National
SAIF as Financial Advisor
Commenced equity financial
Merchant Banking Award for 2006
broking on BSE partner
and Debt on Net by CNBC
ORIX & K Raheja Commenced
merges with IIL Crossed over 250
joined as new commodity
shareholders retail outlets
broking spanning 125
Indian cities

1998–99 2000- 2003–2004 2005-

2001 2006
1999- 2001-2002 2004- 2006-
2000 2005 2007
First full year of Acquired 4
equity broking on Commenced branches of Tata Completed IPO
NSE derivative broking TD Waterhouse Completed GDR
Commenced retail on NSE Acquired Insurance Strategic
operations at Launched investment Training investment in
Bangalore, advisory products Business ESOP Direct
Chennai & Kolkata Registered as
Portfolio Manager
3.3 Product profile of IL&FS

Retail broking;
Largest network of branded broking outlets in the country servicing 100,000
clients

Pioneers of online trading in India…

 Amongst the top online trading websites from India
 Winner of ‘Best Performing National Financing Advisor-Retail Segment At
Cnbc TV 18 National Financial Advisory Awards 2006.

The services of IL&FS

1) Research Based Investment Advice.
2) Investment and Trading Services.
3) Integrated Demat Facility
4)
 Technology Based Investment Tools
5) Training and Seminars

MANAGEMENT TEAM:

1. Mr.R.C.Bawa
Age : 52
Position: managing director and ceo
Brief profile:
  Severed as deputy MD since August 2003.
 Has more than 20 years of experience in Indian banking sector.
 Holds a master degree in arts and post graduate diploma in industrial
relationship.

2. Mr Sandeep Presswala
Age: 39
Position: chief operating officer.
Brief profile:
 Served as COO since October 1999
 Has over 14 years of experience in Capital Markets
 Holds a Bachelors Degree in Commerce from Bombay University and is
a Chartered Accountant.

3. Mr Sachin Joshi
Age: 40
Position: chief financial officer
Brief profile;
 Served as CFO since October 1999
 Has over 16 years of Financial Management experience
 Holds a Bachelors degree in Commerce and is a LLB(Gen),
Chartered Accountant and Cost and Works Accountants

4. Mr. Girish Nadkarni

Age :37
Position: chief operating officer
Brief profile:
 Has over 15 years of industry experience in financial services
 Holds a PGDM from IIM-A, Bachelors in Commerce from Mumbai
University and is a Cost and Works Accountant
 PART IV

Data Analysis and Interpretation

4.1 Methodology

4.2 Data Analysis

Methodology:
It was important to collect detailed information on various aspects for
effective analysis. As “Marketing today is becoming more of a battle based on
information than one based only on sales power”. In today’s information based society
companies with superior information enjoys a competitive advantage.

METHODOLOGY ADOPTED:
The information was collected through personal interview and interview was
conducted through the mode of questionnaire

DATA COLLECTION:
The data was collected through primary as well as secondary sources

Primary data:
Primary data was collected from 155 respondents using a schedule of
questions and a survey was conducted. The tabular and graphical data was Microsoft
Excel.

Secondary data:
Secondary data was collected mainly from the Internet, printed journals on
the capital markets of India, newspaper articles and books written on the Indian stock
markets.
SAMPLING
Judgmental , non-random sampling was used. Respondents were requested to
help with the schedules at their offices, homes or at the IL&FS office.

PROFILE OF RESPONDENTS
The respondents were asked to answer questions to a schedule. To get a
graphical idea of the respondents’ profile, please refer the tables and graphs.

AGE DISTRIBUTION OF CLIENTS

Age interval

Frequency Percent
<20 1 .6
20-30 46 29.3
30-40 48 30.6
40-50 38 24.2
50-60 14 8.9
60-70 10 6.4
Total 157 100.0
Total 157 100.0
 60-70 <20

50-60

20-30

40-50

30-40

30% of the respondents are in the age group of 30 to 40 years.

OCCUPATION DISTRIBUTION OF THE CLIENTS

Occupation

Frequency Percent
Business 102 65.0
Employees 33 21.0
Retired 13 8.3
Housewife 4 2.5
Student 5 3.2
Total 157 100.0
Total 157 100.0
 student
Housewife

Retired

employes

Business
man

Employees dominated the respondent profile with 65 percent, followed by

21 percent business men .

INVESTMENT DISTRIBUTION OF RESPONDENTS

inv e stme nt inte rv als

Frequency Percent
Valid <100000 43 27.4
100000-500000 69 43.9
500000-1000000 21 13.4
1000000-5000000 17 10.8
5000000-20000000 7 4.5
Total 157 100.0
Total 157 100.0
 5000000- 20000 000
1000000- 50000 00

500000-1 00000 0

<10000 0

100000-5 00000

69% percent of the respondents invest from 1 lakh to 5 lakhs . 43% percent
of them invest less than 1 lakh .

GENDER DISTRIBUTION OF RESPONDENTS

Gender

Frequency Percent
Male 147 93.6
Female 10 6.4
Total 157 100.0
Total 157 100.0
Female

Male

A massive 93%of the clients were men .

Respondents’ overall asset allocation

Assets Name % share in Portfolio

Saving Acc & Fixed
Deposits 7%
Bonds & Mutual Funds 30%
Equity & Equity Funds 26%
Real estate 15%
Insurance 18%
Others 4%
Total 100%
 Overall asset allocation

30 30
26
25
20 18
value (% ) 15 15
10 7
5 4
0
s F s te e s
FD M Ef a nc er
& & st ra th
c& s ty le su O
Ac o nd q ui ea In
B E R
ving
Sa

 It is evident from the chart that Mutual Fund has highest score of 30 percent share in
portfolio followed by Stocks (Equity and equity funds) i.e. 26 percent, whereas
Insurance, Saving accounts and Fixed deposits and Real Estate and other allocations
have more or less the same rating i.e. 18, 7, 15 and 4 percent respectively.

Top 3 income group asset allocation

 Assets Name % share in portfolio
Saving Acc & Fixed
Deposits 6
Bonds & Mutual Funds 27
Equity & Equity Funds 30
Real estate 19
Insurance 15
Others 3
Total 100

Asset allocation of top 3 income brackets

30 27 30
19
Value(%)

20 15
10 6 3
0
s s e s
FD M
F Ef stat an ce h er
& t
& s& y l e sur O
cc ond qu it Rea In
g A B E
v in
Sa
 Now if we calculate from the top three income brackets it is seen that 30 percent of
their portfolio comprise Equity and equity funds followed by 27 percent in bonds and
mutual funds, thereby 19 percent in real estate, 15 percent in insurance and a very
negligible portion in saving accounts and others.

Types of Investment:

Types of investment Frequency

Short Term Investment 21
Long Term Investment 44
Both 35
Types of investment

Short Term
Investment
Both 21%
35%

Long Term
Investment
44%

Interpretation:
Among the total sample size 44 per cent investors are prefer to investing
in long term and 21 percent are prefer to investment in short term. Where as 35
per cent of investors are preferred to invest in both long terms as well as in short
term investment avenues.
Investment pattern affected by market movement:

Options Frequency
Yes 53
No 27

Investment pattern affected by market

movement

No
34%

Yes
66%

Yes No

Interpretation:
From this we can come to know that 53 investors investment
pattern will affect if any market movement (BSE index, inflation rate etc). So
majority of the
Factors influence Percentage
investor’s Risk Involved 16
investment pattern Return they give 30
Past performance 20
will affect if any Future Growth 24
changes in the Other factor 10

market. Market movement is very important factor for changing in investment

pattern

8. Factors influence to choice various investment alternatives:

 Factors influence on investment
decision

Risk
Other factor Involved
Future 10% 16%
Growth
24%
Return they
give
Past 30%
performance
20%

Risk Involved Return they give Past performance

Future Growth Other factor

Interpretation:
By seeing this findings we can say 30% of investor investment decision is
depend on return on investment, second important factor is future growth and
past performance of the company. 16% of investor’s investment is based on risk
involved. Choice of factor is changing from investor to investor.
 PART V

Comparisions

5.1. Comparison of Investment products

5.2. Five most common mistakes

5.3 .swot analysis

5.4. Risk factors

Comparison of Investment products
Investor tends to constantly compare one form of investment with another Investors
certainly look for the best returns for different option. However, to determine which
option is better, the comparison should be made in terms of other benefits that the
investor ought to look for in any investment.

Investment Returns Risk Investment Liquidity

Objective Tolerance Horizon
Equity Capital High High Long term High
appreciation
FI Bonds Income Moderate Low Med-long Moderate

Corporate Income Moderate High Med Low

Debentures
Corporate Income Moderate High Med Low
FDs
Bank Income Low Generally Flexible High
Deposits low
PPF Income Moderate Low Long term Moderate

Life Risk cover Low Low Long term Low

Insurance
Gold Inflation Moderate Low Long term Moderate
hedge
Real Estate Inflation High Low Long term Low
hedge
Mutual Capital High High Flexible High
Funds growth &
Income
THE FIVE MOST COMMON MISTAKES MUTUAL FUND INVESTORS MAKE

 Failing to stay invested for a longer period

 Worrying about portfolio turnover or dividends it pays
 Being affected by new in the market when you’re supposed to be investing for the
long term
 Selling out during bad markets
 Being impatient and losing confidence too soon.
SWOT ANALYSIS
Strengths: Weakness:

⇒ Brand image. ⇒ Inability to fully cover the

⇒ Image of an Ethical player. outstation market

⇒ Brand Reach ⇒ Lack of manpower.

⇒ Prompt service provider.

⇒ Good relationship with
distributors
⇒ Efficient Sales Staff
⇒ Fair understanding of market
and competition.

Opportunity: Threats:

⇒ Unexplored/ outstation ⇒ Substitute products like bank

market. FDs, RDs etc.
⇒ Target export segment ⇒ New entrants
aggressively

RISK FACTORS

• Mutual Funds and Securities investment are subject to market risks and there can
be assurance or guarantee that the scheme objectives will be achieved.

• As with any investment in securities, the Net Asset Value of Unit issued under the
Scheme may go up or down depending on the various factors and farces affecting
the capital markets.
 • Past performance of the Sponsors and their affiliates / AMC / Mutual Fund and its
scheme do not indicate the future performance of the schemes of the Mutual Fund.

• The Sponsors are not responsible or liable for any loss or shortfall resulting from
the operations of the scheme beyond the contribution of Rs 1 lakh each made by
them towards the corpus of the Mutual Fund.

As per SEBI circular ref. SEBI/IMD/CIR No. 10/22701/03 dated December 12, 2003
read with circular ref SEBI/IMD/CIR NO. 1/42529/05 dared June 14, 2005, it is specified
inter alias that each portfolio under a scheme should have a minimum of 20 investors and
no single investor should account for more than 25% of the corpus of such portfolio.

Summary and Findings

6.1 Findings
PART VI
6.2 Suggestions

6.3 Limitation and scope for further research

6.1 Findings
After having met more than 100 individuals the views expressed by these respondents
have been vary significant. Some of views express by them about the Mutual Funds.

 From the respondents, 34% of the respondents lies in the income level of Rs.
150000 to Rs. 300000 and the majority of the respondents saving Rs. 1000 to
Rs.3000 regularly.
 Majority of the respondents of the sample are invested their money in Bank
Deposits and Insurance.

 From the respondents surveyed, 69% of the respondents are aware about the
concept of Mutual Fund and remaining are not aware of this. Friends and Print
Media create large part of this awareness of concept of Mutual Fund.

 Among the 69 aware respondents 53% are invested their money in Mutual Funds
Schemes and the remaining respondents are not invested because of risk factor
involved in it and lack of information about the various scheme of Mutual Funds.

While investing in Mutual Funds people look in for some attributes they are:

 Reputation of the Company: In this project I have found that the name of
Mutual Fund Company matters lot. If the company’s name is good then the people
will think that their money will be more secured in the reputed company.

 Service: I found that wanted good services from the AMC i.e. information of
Mutual Funds Schemes, details of NAV should be available on phone calls.

 Past performance of Funds: while investing in Mutual Fund majority of the

people will look for the past performance of the funds. If it is good people will
think that their money is safer and they can get good returns.

 Portfolio of the Scheme: it is the very important parameter that the clients
consider because the returns of the schemes depended upon the portfolio.

 Sector Portfolio: These portfolios consist of the company only one sector like
Auto sector, IT sector etc and they will invest in that sector funds, which is in
boom period.
  Flexibility: the clients wanted an exit option whenever they required. They also
wanted option of shifting from one scheme to another.

 The respondents those who are already invested in Mutual Funds gives mixed
opinion about investing there increased savings in Mutual Funds.

Those who are given positive opinion towards this are wanted some extra feature
like sufficient information about the various schemes and wanted agent’s service and
those who are not given the positive opinion are wanted to invest their money in bank
deposits and in Insurance (ULIP) because of the safety and the fluctuations in the stock
markets. And very few of investors are invested in the S.I.P (systematic investment
plans).

 In this project I found that respondents preferred debt fund to equity fund because
of regular returns, less risk, and high fluctuation in the stock markets. And they
are having vague information about the Mutual Funds

Suggestions:

 Client awareness program has to be conducted by IL&FS for Stock

Brokering Services and mutual fund, because most of the people in
Belgaum are unaware about it.

 Since the intent and web based communication is getting popular IL&FS
should update web site frequently and provide information up to date
 IL&FS can rethink on its Brokerage rate. Because the charges are
comparatively little higher than the service charged by its competitors and
also customers are expressing dissatisfaction towards its brokerage rate.

 As investors’ investment decision is based on the study of different

sources, IL&FS should start giving advertisement in business newspaper
and in business magazine.

 IL&FS should expand its business by setting up of new branches in

various places where they have lot of client for example Bijapure.

LIMITATIONS

While completing this study, there were some constraints. They were:
• Time: To undertake a project of this magnitude, eight weeks is a short time. To
collect more data from a much larger, varied sample would take additional
time.
• Sample size: Due to constraints on time, the sample size had to be limited at
155. This, by and large, may not represent the entire community of the Indian
investor.
• The study is restricted to Belgaum only.

Learning Outcomes

7.1 Data Interpretation of Investors

PART VII
Data Interpretation of Investors:

 From the given analysis we see that 75% of the investors do not deal in Mutual
funds but they still believe in the traditional mode of investment, which means
there still exists a high degree of Mutual Fund un-awareness among the people.
Therefore focus should be on Investors education.

 There is a great diversity in the pattern of investment, majority of people who are
mostly the business class people invest for long term as they look for the high
returns and long term capital appreciation. These people have great capacity to
take risk they are called as Risk Takers , while rest invest for short term which
mostly comprise of service class people who go for regular/Monthly income
plans i.e. short term benefits.

 Customers who are aware of the market situations perfectly find it futile to invest
through bank and generally had brokers who refund part of the commission to
them.
 PART VIII

References and Bibliography

7.1 Articles

7.2 Books

7.3 Websites

7.4 Questioner
References & Bibliography:

7.1 Article

 Capital Market Review 2003-04, Published by SHCIL

7.2 Books

 Financial Management, PRASANNA CHANDRA, 6th edition

 Financial Management, KHAN & JAIN, 3rd edition

 Security Analysis and Portfolio Management , FISCHER & JORDAN

 Research Methodology, David .R. Cooper and Schindler

7.3 Websites

 www.shcil.com

 www.icicidirect.com

 www.nseindia.com

 www.economictimes.com
 QUESTIONNAIRE

Kindly fill up the following questionnaire.

1. Name :
2. Educational level
 PUC  Graduation  Post-Graduation
 Professional  Others (Please Specify) …………..
3. Age
 Less than 20  20 – 30  31 – 40  41 – 60
 More than 60
4. Number of persons in the family
1 2 3 4  More than 4
5. Occupation
 Employed
 Private Sector
 Public Sector
 Self employed
 Business
 Profession (CA/Lawyer/Doctor/Others ……………)
 Not employed
 Retired
6. Annual income and savings
a. Annual income (in Rs.)
 Less than 1 lakh
 1 – 2 lakhs
 2 – 3.5 lakhs
 3.5 – 5 lakhs
 More than 5 lakhs
b. Annual savings (in Rs.)
  Less than 10,000
 10,000 – 20,000
 20,001 – 30,000
 30,001 – 40,000
 40,001 & above
7. Investment avenues that you like to choose
 Equity  FI Bonds  Corporate Debenture
 Company Fixed Deposits  Bank Deposits
 PPF  Life Insurance  Small / Post-office Savings
 Gold  Real Estate  Mutual Funds
 Others ………….
8. Average amount (in Rs.) invested in a year in the following avenues
 Equity  FI Bonds  Corporate Debenture
 Company Fixed Deposits  Bank Deposits
 PPF  Life Insurance  Small / Post-office Savings
 Gold  Real Estate  Mutual Funds
 Others ………….
9. Are you a short term or long term investor?
 Short term  Long term  Both
10. State reason behind choice of your investment options
 Self – Awareness  Financial Advisors  Broker’s Advice
 Friends’ or Relatives’ Advice  Media
11. What is your frequency of investments?
 Weekly  Monthly  Quarterly
 Half-yearly  Yearly