UNIT-1 INTRODUCTION Introduction of Mutual Funds

UNIT-1
INTRODUCTION
Introduction of Mutual Funds:
Mutual funds have been a significant source of investment in both government and corporate securities. Decades it has been the control of the state with UTI being the key player, with invested funds more than Rs.300 bn. The state-owned insurance company also hold a portfolio of stocks. Presently, many mutual funds exist, including private and foreign companies and mainly state-owned Banks. Foreign sharing in mutual funds and asset administration companies (AUM) is legal on a case-by-case source.

UTI, the government in 1964 set up the main mutual fund in the country, to encourage small investors in the equity market, currently having extensive marketing network of over 35, 000 agent spread over the country. The UTI scrip’s have performed reasonably well in the market, as compare to the Sensex trend. However, the same cannot be said of all mutual funds.

All MFs are allowed to apply for firm allotment in public issues. SEBI regulates the functioning of mutual funds, and it requires that all MFs should be established as trusts under the Indian Trusts Act. The actual fund organization activity shall be conducted from a break up asset administration company (AMC). The lowest amount net worth of an AMC or its affiliate must be Rs. 50 million to act as a manager in any other fund. MFs can be penalized for defaults including non-registration and failure to monitor rules set by their AMCs. MFs selling exclusively with money market instrument have to be registered with RBI. All other scheme floated by MFs are compulsory to be registered with SEBI.

In 1995, the RBI permitted private sector institution to set up Money Market Mutual Funds (MMMFs). They can invest in treasury bills, call and notice money, commercial paper, trade bills accepted co-accepted by bank, certificate of deposit and dated government securities having unexpired maturity up to one year.

MUTUAL FUND:
Mutual funds are being thought of as a vehicle for investors to pool their money in and have it jointly managed by an assumingly professional manager A fund is divided into units and holders are entitled to a proportionate fund share. A mutual fund is ready to buy back its shares at their current net asset value; in turn, the shareholders are only entitled to sell their shares back to the fund. The disclosure of information for the potential “unit holder” of the fund is ensured by the government and requires it to be provided in the fund prospectus. Funds invest in securities indicated in their prospectus and what are according to legal regulation varying from country to country.

There are several types of mutual funds traded at the Helsinki Stock Exchange, which differ by the assets they invest in:
Asset Allocation Funds apportion their investments across a mixture of asset classes, namely stocks, bonds, and cash and equivalents. The main purpose is to optimize the return given the associated level of risk by pursuing the finest mix of stocks, bonds, and cash and equivalents. Asset Allocation Funds are generally distinguished by the way they allot their investments among these asset classes. Conservative and aggressive asset allocation funds differ by the portion of their investments in asset classes with historically different risk/return potential (more risk/higher return for aggressive and less risk/lower return for conservative).
Bond Funds invest primarily in bonds. These funds diversify by investing in an array of  bonds. Bond Funds are usually classified by the types of bonds they invest in, e.g. government Bond Funds, corporate Bond Funds, international Bond Funds, and municipal Bond Funds. Similar to individual bonds, the share price of Bond Funds normally falls when interest rates go up, and rises when interest rates decline.
Equity Funds invest mainly in common stocks. Diversification is achieved by investments across a number of different companies or industries in compliance with the fund’s investment objectives stated in their prospectus. Equity funds are usually categorized by the types of stocks they invest in.

Hedge Funds are extremely flexible in their investment options because they use financial instruments generally beyond the reach of other mutual funds, due to stricter regulation and disclosure requirements. Hedge Funds are allowed to use short-selling, leverage, concentrated investments and derivatives. This flexibility, which includes use of hedging strategies to protect downside risk, gives hedge funds the ability to best manage investment risks.
Money Market Funds are composed of short-term debt instruments, including commercial paper, negotiable certificates of deposit, bankers’ acceptances, Treasury bills, and discount notes of various organizations. These funds seek to preserve capital while  providing income and liquidity.
Mutual funds are also classified by their investment strategies:
Yield Funds? objective is to achieve a high level of current income by buying government
and corporate bonds as well as high yielding common and preferred stocks. They are not designed to provide major capital gains.
Growth Funds? main investment objective is capital growth. Funds exploiting the growth
strategy commonly invest in companies whose earnings are expected to grow at a faster rate than the average earnings growth of the market index. Funds utilizing the value strategy generally invest in companies whose stock is either trading at a price that is relatively low compared to its historical trading range, or compared to prices of companies in similar industries.

We consider mutual funds? performance as the best proxy for professional investors? Skills, because lenders trust their money to mutual fund manager, who are thought of as able to make better investment decisions.
In sum, in this part we described what a mutual fund is and what the main differences between various kinds of mutual funds are. We also explained why we believe a mutual Funds performance is an appropriate proxy for professional investors? skills.

 
Mutual Fund investment Instrument:
Mutual funds are invested in 3 types of funds
a) Stocks
b) Bonds
c) Money market instrument
Stocks:-
Stocks represent ownership or equity in a company popularly known as shares.
Bonds:-
These represent debt from companies, financial institution or government agencies.
Money Market instrument:-
includes short term-debts such as treasury bills, certificate of deposits, and interbank call money
STRUCTURE OF MUTUAL FUND
 The structure of the mutual fund in India is governed by SEBI (MUTUAL FUND) Regulations,1996.This regulations make it mandatory for the mutual funds to have a three-tier structure of Sponsor-Trustee-Asset Management Company(AMC).
SEBI REGULATIONS
In India, the mutual fund industry is highly regulated with a view to imparting operational transparency and protecting the investor’s interest. The structure of a mutual fund is determined by SEBI regulations. These regulations require a fund to be established in the form of a trust under the Indian Trust Act, 1882. A mutual fund is typically externally managed. It is now an operating company with employees in the traditional sense.
Instead, a fund relies upon third parties that are either affiliated organizations or independent contractors to carry out its business activities such as investing in securities. A mutual fund operates through a four-tier structure. The four parties that are required to be involved are a sponsor, Board of Trustees, an asset management company and a custodian.

TYPES OF MUTUAL FUNDS Open
Open-ended schemes: The open ended schemes do don have a fixed maturity and are open for subscription the whole year. One can buy and sell units at the NAV related prices to the Mutual funds. These schemes are normally not listed on the stock changes and can be redeemed to the mutual fund.

 
Closed-ended Funds: A close end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investor can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the schemes on the stock exchanges where they are listed. In order to  provide an exit route to the investors, some close-ended funds give an option of selling  back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.
Interval Funds: Interval funds combine the features of open ended and close ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.
INVESTMENT OBJECTIVES
Equity Fund Dividend: The aim of equity fund dividend is to provide fund appreciation over the medium to long -term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investment held over the long term.
Equity Fund Growth: The aim of equity fund growth is to provide capital appreciation over the medium to long-term. Such schemes normally invest a majority of their corpus in equities. It has  been proven that from stocks, have outperformed most other kind of investment held over the long term.
Balanced Fund Dividend: The aim of balance funds dividend is to provide both dividend and regular income. Such schemes periodically distribute a part of their earnings and invest both in equities and fixed income securities in proportion indicated in their offer document
Balance Funds Growth: The aim of balance funds is to provide both growth and regular income. Such schemes  periodically distribute a part of their earning and invest both in equities and fixed income securities in proportion indicated in their offer document.
OTHER SCHEMES
Tax saving schemes: This schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax Laws as the Government offers tax incentives for investment in specified avenues. Investment made in equity Linked Savings Schemes (ELSS)and Pension Schemes are allowed as deduction u/s88 of the Income Tax act,1961.
SPECIAL SCHEMES:
Industry Specific Schemes: Industry Specific Schemes invest only in industries specified in the offer document. The investment of these funds is limited to specific industries like Info Tech, FMCG, and Pharmaceutical etc.
Index Schemes: Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50.
Spectral Schemes: Spectral Funds are those, which invest exclusive in a specified industry or a group of industries or various segments such as “A “Group shares or initial public offering.

 
TAX-BENEFITS
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 No tax on dividends in the hands of the investor (only a 12.61% dividend distribution tax paid by the fund before distribution of dividend.
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 No dividend distribution tax for equity mutual funds (completely tax free dividends)
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Tax liability when the investment is redeemed /withdrawn (not every year)
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Long term capital gains tax benefits
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Benefit for indexation for investments held over a year Opportunities of Mutual Funds are tremendous specially when investment is concerned. For any individual who intends to allocate his assets into proper forms of investment and want to diversify his Investment Portfolio as well as the risks, Mutual Funds can be  proved as the biggest opportunity. Investors get a lot of advantages with the Mutual Fund Investment. Firstly, they are not required to carry on intensive research and detailed analysis on Stock Market and Bond Market. This work is done by the Fund Mangers of the Investment Management Company on behalf of the investors. In fact, the professional Fund Managers who handle the mutual funds of any particular company are able to speculate the market trend more
MUTUAL FUND SET UP:

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).

STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY
The Indian mutual fund industry is dominated by the Unit Trust of India, which has a total corpus of Rs700bn collected from more than 20 million investors. The UTI has many funds/schemes in all categories i.e. equity, balanced, income etc. with some being open-ended and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of about Rs200bn. UTI was floated by financial institutions and is governed by a special act of Parliament. Most of its investors believe that the UTI is government owned and controlled, which, while legally incorrect, is true for all practical purposes.

The second largest categories of mutual funds are the ones floated by nationalized banks. Canara bank Asset Management floated by Canara Bank and SBI Funds Management floated by the State Bank of India are the largest of these. GIC AMC floated by General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones. The aggregate corpus of funds managed by this category of AMCs is about Rs150bn.

The third largest categories of mutual funds are the ones floated by the private sector and by foreign asset management companies. The largest of these are Prudential ICICI AMC and Birla Sun Life AMC. The aggregate corpus of assets managed by this category of AMCs is in excess of Rs250bn.

Some of the AMCs operating currently are
Name of the AMC Nature of ownership
Alliance Capital Asset Management (I) Private Limited Private foreign
Birla Sun Life Asset Management Company Limited Private Indian
Bank of Baroda Asset Management Company Limited Banks
Bank of India Asset Management Company Limited Banks
Canbank Investment Management Services Limited Banks
Cholamandalam Cazenove Asset ManagementCo Ltd Private foreign
Dundee Asset Management Company Limited Private foreign
DSP Merrill Lynch Asset Management Company Limited Private foreign
Escorts Asset Management Limited Private Indian
First India Asset Management Limited Private Indian
GIC Asset Management Company Limited Institutions
IDBI Investment Management Company Limited Institutions
Indfund Management Limited Banks
ING Investment Asset Management Company Private Limited Private foreign
J M Capital Management Limited Private Indian
Jardine Fleming (I) Asset Management Limited Private foreign
Kotak Mahindra Asset Management Company Limited Private Indian
Kothari Pioneer Asset Management Company Limited Private Indian
Jeevan Bima Sahayog Asset Management Company Limited Institutions
Morgan Stanley Asset Management Company Private Limited Private foreign
Punjab National Bank Asset Management Company Limited Banks
Reliance Capital Asset Management Company Limited Private Indian
State Bank of India Funds Management Limited Banks
Shriram Asset Management Company Limited Private Indian
Sun F and C Asset Management (I) Private Limited Private foreign
Sundaram Newton Asset Management Company Limited Private foreign
Tata Asset Management Company Limited Private Indian
Credit Capital Asset Management Company Limited Private Indian
Templeton Asset Management (India) Private Limited Private foreign
Unit Trust of India Institutions
Zurich Asset Management Company (I) Limited Private foreign
1.5 TYPES OF MUTUAL FUNDS

Mutual funds may be classified on the basis of its structure and its investment objective:
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By Structure
Open-ended Funds
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (“NAV”) related prices. The key feature of open-end schemes is liquidity.

Closed-ended Funds
A closed-end fund has a stipulated maturity period which generally ranging from 3- 15 years. It can be subscribed only during a specified period. Investors can invest in the scheme at the time of initial public issue and then they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route, it provides an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.

Interval Funds
Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective
Growth Funds
Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. It is ideal for investors with long-term outlook seeking growth over a period of time.

Income Funds
The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.

Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

Money Market Funds
The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as T-bills, C.D’s, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors to park their surplus funds for short periods.

Load Funds
A Load Fund is one that charges a commission for entry or exit for purchase or sale of units in the fund. It ranges from 1%- 2%, worth paying if the fund has a good performance history.

No-Load Funds
A No-Load Fund is one that does not charge a commission for entry or exit for the purchase or sale of units in the fund. The advantage is that the entire corpus is put to work. 
1.6 Other Schemes
Tax Saving Schemes
These schemes offer tax rebates under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Saving Schemes and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. It also provides opportunities to save capital gains u/s 54EA and 54EB provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

Special Schemes
Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in the offer document. The investment is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.

Index Schemes
Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50
Sect oral Schemes
Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as ‘A’ Group shares or initial public offerings.

BENEFITS OF MUTUAL FUND INVESTMENT
Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.

Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.

Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

Liquidity
In open-end schemes, the investor gets the money back promptly at NAV related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

Transparency
You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager’s investment strategy and outlook.

Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors.
Net Asset Value (NAV) of a scheme:
The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis – daily or weekly – depending on the type of scheme.

RECENT TRENDS IN MUTUAL FUND INDUSTRY
The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian companies was also very similar. They quickly realized that the AMC business is a business, which makes money in the long term and requires deep-pocketed support in the intermediate years. Some have sold out to foreign owned companies, some have merged with others and there is general restructuring going on.

The foreign owned companies have deep pockets and have come in here with the expectation of a long haul. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. In fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.

By December 2004, Indian mutual fund industry reached Rs 1, 50,537 crore. It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40, 90,000 crore. The annual composite rate of growth is expected 13.4% during the rest of the decade. In the last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010, mutual fund assets will be double.

Some facts for the growth of mutual funds in India
Numbers of foreign AMC’s are in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide.

Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required.

We have approximately 29 mutual funds, which is much less than US having more than 800. There is a big scope for expansion.

‘B’ and ‘C’ class cities are growing rapidly. Today most of the mutual funds are concentrating on the ‘A’ class cities. Soon they will find scope in the growing cities.

Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products.

SEBI allowing the MF’s to launch commodity mutual funds.

Trying to curb the late trading practices.

Introduction of Financial Planners who can provide need based advice.
COMPANY PROFILE
Kotak Mahindra is one of India’s leading banking and financial services organizations, offering a wide range of financial services that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the diverse financial needs of individuals and corpora
te sector.

The group has a net worth of over Rs. 100.6 billion and has a distribution network of branches, franchisees, representative offices and satellite offices across cities and towns in India, and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore servicing around 8 million customer accounts.

Kotak mahindra asset management company limited (KMAMC), a wholly owned subsidiary of KMBL, is the asset manager for kotak mahindra mutual fund (KMMF). KMAMC started operations in december 1988 and has over 10lakh investors in various schemes. KMMF offers schemes catering to investors with varying risk-return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities.

Banks like Kotak Mahindra, standard chartered, ICICI, HDFC, and Citibank now bring your Bank Account and Debit card to your fingertips. With Mobile commerce, we can perform a wide range of query-based transactions from your Mobile Phone, without even making a call.

Kotak Mahindra has international partnerships with Goldman Sachs (one of the world’s largest investment banks and brokerage firms) and Old Mutual (a large insurance, banking and asset management conglomerate).

The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited. This company was promoted by UdayKotak, Sidney A. Pinto and Kotak & Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that’s when the company changed its name to Kotak Mahindra Finance Limited. Since then it’s been a steady and confident journey to growth and success.

CORPORATE OVERVIEW:
Established in 1984, The Kotak Mahindra Group has long been one of India’s most reputed financial organizations. In Feb 2003, Kotak Mahindra Finance Ltd., the group’s flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI).This approval creates banking history since Kotak Mahindra Finance Ltd is the first company in India to convert to a bank as Kotak Mahindra Bank Ltd. The bank offers comprehensive business solutions that include trade services, cash management services and credit facilities, keeping in mind the needs of the business community. Kotak Mahindra has over 212 branches across 124 locations in the country offering both traditional banking products and investment advisory services. The bank has the products, the experience, the infrastructure and most importantly the commitment to deliver pragmatic, end to end solutions that really work.

Kotak mutual fund’s credentials are best supported with accolades received from highly respected ICRA mutual fund awards for the year 2009. On July 28 2006 kotak mutual fund was adjudged the business leader in the mutual fund category at the NDTV profit business excellence awards
The bank customers have access to entire VISA network of 4500 ATM’S in India and 800000ATM’S worldwide accepted in more than 56000 establishments across India and 10 million worldwide. The customer also has access to over 800 ATM’s with sharing arrangements with UTI BANK, of these 125 are in the NCR.

Kotak Mahindra Bank
The Kotak Mahindra Group’s flagship company, Kotak Mahindra Finance Ltd which was established in 1985, was converted into a bank- Kotak Mahindra Bank Ltd in March 2003 becoming the first Indian company to convert into a Bank. Its banking operations offer a central platform for customer relationships across the group’s various businesses. The bank has presence in Commercial Vehicles, Retail Finance, Corporate Banking, Treasury and Housing Finance.

Kotak Mahindra Bank Ltd is a one stop shop for all banking needs. The bank offers personal finance solutions of every kind from savings accounts to credit cards, distribution of mutual funds to life insurance products. Kotak Mahindra Bank offers transaction banking, operates lending verticals, manages IPOs and provides working capital loans. Kotak has one of the largest and most respected Wealth Management teams in India, providing the widest range of solutions to high net worth individuals, entrepreneurs, business families and employed professionals.

Awards:
ICRA Mutual Fund Awards 2009
Kotak Liquid (Regular Plan) – Ranked as a Seven Star Fund for its 1 year performance
Kotak Flexi Debt Fund – Ranked as a Five Star Fund for its 1 year performance
Kotak Flexi Debt Fund – Ranked as a Five Star Fund for its 3 year performance
Kotak 30 – Ranked as a Five Star Fund for its 3 year performance

Organization structure
Regional manager
Branch manager
National Head
Office Assistant
Relationship Manager
Customer Support

There is a national head at the top of the hierarchy of the organization under him there are four regional heads for 4 regions of India they look after the business of north zone west zone east zone and south zone respectively.

There are area managers, who will be in close touch with all the clients in their respective zonal areas.

The basic work and responsibility of the above mentioned people is making maximum sales contracting more and more prospective customers and continuing the same relationship with them.

Study of departments:
The major departments in the organization are retail department and corporate department. The retail channels consist of banks, national distributor’s public sector units and IFA. The corporate channel consists of all corporate in Bangalore. In mutual fund industry the major job of asset Management Company is to make the sales of the products which are shown as schemes of the mutual fund.

Following are the key positions in the Kotak asset management company, Bangalore to discharge the above mentioned functions.

Regional Manager:
His duty is to look after the sales throughout the region so that the target given by the head office, Mumbai is achieved.

Branch manager: he is the person who actually takes care of everything related to the branch. He is the top authority for entire state of Karnataka. He helps the regional manager to achieve the sales target. Also supervises the financial matters pertaining to the branch.

Relationship manager:
This is the key position in the organization. He does the job like meeting his client’s distributors and investors. The main duty of the relationship manager is to help the branch manager to get the business done.

Customer support:
The person in this department does the various in house jobs like attending the queries maintaining various databases etc. this department will take care of sending information to investors and advise them in filling up the forms correctly. This department will take care of investors query management also. Operations department will send the materials like fact sheets brochures to distributors at regular intervals.

Office assistant:
The office assistant is to help out the various day to day activities it includes various duties like replying to customer queries, maintaining records, redemption processes and contracting the CAMS, etc. he also performs jobs like attending the client’s queries making the pickups from clients etc.

The fund management and the investment process
The investment process: The fund management team in accordance with the strategies formulated by the investment committee, handles the day to day investment management and dealing. The focus of the investment committee is to ensure that the objectives of each scheme are kept foremost while taking decisions regarding asset allocation and selection.

There is daily meeting of the fund management team, which reviews the portfolio and plans the strategy for the day. This is a continuous process, which is impacted by market conditions, cash flows into or out of the mutual fund scheme and a whole range of external factors.

The fund management team relies extensively on research provided by external agencies that are used to formulate view on the likely trends and impact in the equity, debt, and money market. Supplemented by in house research
Registered Office Address
Kotak Mahindra asset management co ltd2nd Floor, Umiya Landmark, 10/7, Lavelle Road, BANGALORE- 560001 

MAJOR MILESTONES:
Year Milestone
1986 Kotak Mahindra Finance Limited starts the activity of Bill Discounting
1987 Kotak Mahindra Finance Limited enters the Lease and Hire Purchase market
1990 The Auto Finance division is started
1991 The Investment Banking Division is started. Takes over FICOM, one of India’s largest financial retail marketing networks
1992 Enters the Funds Syndication sector
1995 Brokerage and Distribution businesses incorporated into a separate company – Kotak Securities. Investment Banking division incorporated into a separate company – Kotak Mahindra Capital Company
1996 The Auto Finance Business is hived off into a separate company -Kotak Mahindra Prime Limited (formerly known as Kotak Mahindra Primus Limited). Kotak Mahindra takes a significant stake in Ford Credit Kotak Mahindra Limited, for financing Ford vehicles. The launch of Matrix Information Services Limited marks the Group’s entry into information distribution.

1998 Enters the mutual fund market with the launch of Kotak Mahindra Asset Management Company.

1999 Kotak Mahindra ties up with Old Mutual plc. For the Life Insurance business.

2000 Kotak Securities launches its on-line broking site (now www.kotaksecurities.com). Commencement of private equity activity through setting up of Kotak Mahindra Venture Capital Fund.

2001 Matrix sold to Friday Corporation
2002 Launches Insurance Services
2003 Kotak Mahindra Finance Ltd. converts to a commercial bank – the first Indian company to do so.

2004 Launches India Growth Fund, a private equity fund.

2006 Kotak Group realigns joint venture in Ford Credit; Buys Kotak Mahindra Prime (formerly known as Kotak Mahindra Primus Limited) and sells Ford credit Mahindra.

2008 Launches a real estate fund
2010 Bought the 25% stake held by Goldman Sachs in Kotak Mahindra Capital Company and Securities
20012 Launched a Pension Fund under the New Pension System
2014 Kotak Mahindra Bank Ltd. Opened a representative office in Dubai
Entered Ahmedabad Commodity Exchange as anchor investor
2015 Ahmedabad Derivatives and Commodities Exchange, a Kotak anchored enterprise, became operational as a national commodity exchange.

2016 Kotak Mahindra Bank Ltd entered into a Business Cooperation arrangement with CIMB Group Sdn Bhd, Malaysia.

Vision of the Kotak Mutual Fund:
The global Indian financial services brand:
The customers will enjoy the benefits of dealing with a global Indian brand that understand their needs and delivers customized pragmatic solution across multiple platforms. They will be a world class Indian financial services group. The technology and best practices will be benchmarked along international lines, while their understanding of customers will be uniquely Indian. They as a group will be a single window to every financial service in a customer’s universe.

The most preferred employer in financial services:
A culture of empowerment and a spirit of enterprise attract bright minds with an entrepreneurial streak to join us and stay with us. Working with a home group professionally managed company, which has partnership with international leaders, gives people a perspective that is universal as well as unique.

The most trusted financial service company:
They create ethos of trust across all constituents. Adhering to high standards of compliance and corporate governance is the integral part of building trust.

Value Creation:
Value creation rather than size alone will be our business driver.

Mission of the Kotak Mutual Fund:
To be a leading, preferred service provider to our customer, and to achieve this leadership position by building an innovative, enterprising, and technology driven organization which will set the highest standards of service and business ethics Kotak offers trading on a vast platform; National Stock Exchange, Bombay Stock Exchange and Hyderabad Stock Exchange. More importantly, Kotak makes trading safe to the maximum possible extent, by accounting for several risk factors and planning accordingly. Kotak is assisted in this task by their in-depth research, constant feedback and sound advisory facilities.

Products
Equity
Kotak 30 (Now Kotak 50)
Kotak Midcap
Kotak Opportunities
Kotak Lifestyle
Kotak Contra
Kotak Tax Saver
Kotak Equity Arbitrage Fund
Kotak Emerging Equity Scheme
Kotak Global Emerging Market
Kotak Indo World Infrastructure Fund
Kotak Select Focus Fund
Kotak Star kid Facility
Debt
Kotak Income plus
Kotak Bond
Kotak Bond Short Term
Kotak Liquid
Kotak Gilt Savings
Kotak Gilt Investment
Kotak Flexi Debt
Kotak Floater Long Term
Kotak Floater Short Term
Kotak Credit Opportunities Fund
Kotak Multi Asset Allocation Fund
Kotak Balance
Other products
Kotak Equity FOF
Kotak Gold Fund
Kotak Gold ETF
Kotak PSU Bank ETF
Kotak Sensex ETF
Kotak Nifty ETF
Services and facilities
Network of transaction acceptance points: transaction request can be submitted through 27 investors’ service centres and 177 transaction points of CAMS (computer aged management services)
Electronic credit of dividend and redemption proceeds: dividend pay outs and redemption proceeds are paid directly into investors’ bank account.

Internet transactions: switching across schemes, redeeming investments can be done electronically through internet transaction facility.

E mail communication: Value-added information through e mail regarding daily NAV and dividend updates, monthly updates, weekly and more.

Websites utilities: WWW.kotakmutual.com is the website for investors to plan and track their investments, measure earnings from Kotak mutual schemes etc.

COMPETITORS INFORMATION:
Reliance Mutual Fund
Reliance Mutual Funds (RMF) was established as trust under Indian Trust act, 1982.The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30,1995 as Reliance Capital Mutual Fund which was changed on March 11 2004.Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities. Reliance has earned an approximate net profit of INR276 crore while in 2011 the same figure had stood at INR261 crore.
UNIT TRUST OF INDIA MUTUAL FUND
UTI Asset Management Company private limited, established in Jan 14, 2003, and manages the UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTI Asset Management Company presently manages a cuprous of over Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of Baroda(BOB),Punjab  National Bank (PNP),State Bank of India(SBI)and Life Insurance Corporation of India(LIC).The schemes of UTI Mutual Fund are liquid Funds, Income Funds, Aseet Management Funds, Index Funds, equity Funds and Balance Funds.
HSBC MUTUAL FUND
 HSBC Mutual Fund was set up on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.
ING Vysya Mutual Fund
ING Vysya Mutual Fund was set up on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING investment Management (India) Pvt.Ltd was incorporated on April 6, 1998.
STATE BANK OF INDIA MURUAL FUND
State Bank of India Mutual Fund is the first bank sponsored Mutual Fund to launch offshore fund, the India Magnum Fund with a corpus of Rs.225 crore approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 35schemes out of which 15 have already yielded handsome returns to investors. State Bank of India has more than Rs.5500Crores as AUM. Now it has an investor base of over 8lakh spread over 18schemes.
HDFC MUTUAL FUND
HDFC Mutual Fund was set up on June 30, 2000 with two sponsors Housing Development Finance Corporation Limited and Standard life investments Limited. HDFC Mutual Fund has been the biggest performer in 2011-2012 fiscal, replacing Reliance Mutual Fund. In 2012, this represents a growth of 5.6 percent on a year-on-year basis. In the same period HDFC Mutual Fund, which is the biggest of its kind in India, has gone up from INR 242 crore to INR 269 crore However, Kotak mutual fund AMC (Asset Management Company) saw a 30percent dip in its  profits in 2017.

SWOT ANALYSIS:
STRENGTH:
Brand Reach
Brand Image
Efficient sale staff
Prompt services provider
Image of an ethical player
Good relationship with distributors
Fair understanding of market and competition.

Offers well rounded portfolio products
Well established distribution network
Offers large number of schemes
WEAKNESS:
Returns are less compared to other mutual funds
Can focus on sectorial funds
Untapped semi urban market
Business advice for small players
Educating customers about the funds
OPPORTUNITIES:
Unexplored/outstation market
Target export segment aggressively
THREATS:
Intense competition
New entrants
Substituted like fixed deposits, real estate, share market and insurance.

Mis-selling of Insurance as Mutual funds
The company is facing strong competition from since there is present of 34 mutual fund companies.

SWOT analysis is a strategic planning tool to evaluate the Strengths, Weaknesses, opportunities, and Threats involved in a project or in a business venture. It involves specifying the Objectives of the business Venture or project and identifying the internal and external factors that are favorable and unfavorable in achieving that objective. The aim of any SWOT analysis is to identify the key internal and external factors that are important in achieving the objective. SWOT analysis groups key pieces of information into two main categories.

? Internal Factors-The strengths and weaknesses internal to the organization.

?External factors-The opportunities and threats presented by the external environment.

FUTURE GROWH AND PROSPECTS :
The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few years as investor’s shift their assets from banks and other traditional avenues. Some of the older public and private sector players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge with stronger players in three to four years. In the private sector this trend has already started with two mergers and one takeover. Here too some of them will down their shutters in the near future to come. But this does not mean there is no room for other players. The market will witness a flurry of new players entering the arena. There will be a large number of offers from various asset management companies in the time to come. Some big names like Fidelity, Principal, and Old Mutual etc. are looking at Indian market seriously. One important reason for it is that most major players already have presence here and hence these big names would hardly like to get left behind.

According to report of Business maps of India, Important aspects related to the future of mutual funds in India are:-
•There is a huge scope in the future for the expansion of the mutual funds industry.

•A number of foreign based assets management companies are venturing into Indian market
•The Securities Exchange Board of India has allowed the introduction of commodity mutual funds.

•The emphasis is being given on the effective corporate governance of Mutual Funds.

•The Mutual funds in India has the scope of penetrating into the rural and semi urban areas.

•Financial planners are introduced into the market, which would provide the people with better financial planning.

FINANCIAL STATEMENT:
Statement of PROFIT AND LOSS
Particulars year ended 31st March,2015 year ended 31st March,2016 year ended 31st March2017
INCOME Revenue from Operations 10,462.90 11,171.33 11,268.18
Other income 364.50 258.47 340.26
Total Income 10,827.40 11,429.80 11,608.44
EXPENSES: Employee costs 3,839.14 3,840.33 3,142.49
Other expenses 5,267.90 5,342.51 5,993.65
Depreciation 253.84 234.79 274.56
Finance Cost 0.45 0.76 0.15
Total Expenses 9,361.33 9,418.39 9,410.85
Profit Before Tax 1,466.07 2,011.41 2,197.59
TAX EXPENSES: Current Tax -476.40 -615.43 -633.11
MAT Credit Entitlement 27.48
Deferred Tax 72.32 28.95 53.88
Income Tax Prior Year 10.24 3.87
Profit for the Year 1,061.99 1,435.17 1,649.71
BALANCE SHEET
  As on 31st March 2015 (Rs In Lacs) As on 31st March 2016 (Rs In Lacs) As on 31st March 2017 (Rs In Lacs)
I. EQUITY AND LIABILITIES 1. Shareholders Fund : Share Capital 2830 2830 2830
Reserves and Surplus 4320.24 5208.67 3857.46
2. Non-Current Liabilities Other Long Term Liabilities 10.5 16.57 Long Term Provisions 491.12 376.68 299.36
3. Current Liabilities Trade Payables 501.32 409.36 1892.69
Other current liabilities 590.9 146.98 106.95
Short term Provisions 629.37 621.84 964.64
Total 9373.45 9610.09 9951.1
II ASSETS 1. Non-Current assets Fixed Assets Tangible assets 437.59 917.21 474.1
Intangible assets 48.88 51.28 80.14
Non-Current investment 2680 3580 3580
Deferred tax assets(net) 303.85 249.96 221.02
Long term loan ; advances 99.38 62.12 82.05
Other non- current assets 2465.02 1411.12 856.83
2. Current assets Trade receivables 979.84 688.28 879.34
Cash; Bank Balance 2033.15 2828 3472.87
Short term loan ; advances 193.65 194.09 166.18
Other current assets 132.09 128.05 138.57
Total 9373.45 9610.09 9951.1
Analysis made on Profit ; Loss account of Kotak Mahindra Asset Management Company LTD for the year ending 2016, 2017, 2018.

The Total Income earned by the company in the year 2015 is Rs 10,827.40 which increased to Rs 11,429.80 in the year 2016 , whereas in the year 2017 Kotak able to improve its performance and achieved an higher income of Rs 11,608.44.

The total Expenses made by the Kotak in the year 2015 is Rs 9,361.33, whereas in the year 2016 it continued to spend at an higher cost which raised up to 9,418.39. but in the year 2017 kotak managed to reduce its expenses up to Rs 9,410.85 ( i.e.up to Rs 8)
In the year ending 2015 Kodak’s profit was Rs 1,061.99 and In 2015 Kodak’s profit increased to 1,435.17, whereas in the year 2017 Kotak made a tremendous improvement in its performance and could able increase its profit up to 1,649.71…

 
Analysis drawn on the Balance Sheet of Kotak Mahindra Asset Management Co LTD for the year ending 2015, 2016, 2017. (Inlakhs)
The share capital earned by Kotak in the year 2015 is Rs 2830, which remained constant for both the years i.e. 2016 and 2013 to Rs 2830.

The Reserves maintained by Kotak in the year 2015 is Rs 4320.24, which was raised to Rs 5208.67 in the year 2016, whereas in the year 2017 the maintenance of Reserves decreased to Rs 3857.46.

The total Current Assets of the company in the year 2015 is Rs 3,338.73, in the year 2016 it raised to Rs 3,838.42. Whereas in the year in the 2017 the total current assets drastically increased up to 4,656.96.

The total current Liabilities of Kotak in the year 2015 is Rs 1721.59 and in the year 2016 it reduced to 1177.69.Whereas in the year 2017 kotak liabilities increased at a higher cost to Rs 2964.28. Due to increase in liabilities, performance of kotak is in a bad condition.

CONCLUSION
After observing the above analysis of Profit ; Loss account and the Balance Sheet of Kotak Mahindra Asset Management co ltd, it can be concluded that, Kotak has managed to maintain its Income at a higher rate every year. Interestingly kotak has reduced its unwanted expenses year by year.

Kotak has maintained higher profit in the year 2017, when compared to other previous years (i.e. 2016 ;2015). But unfortunately in the year 2017 kotak holds more current liabilities, when compared to 2015 ; 2016.

From this conclusion it can be said that kotak as drastically improved in its performance every year by increasing its profit and by reducing its expenses.

CHAPTER 2
CONCEPTUAL BACKGROUND AND LITERATURE REVIEW
THEORETICAL BACKGROUND OF THE STUDY
In this section introduce the theoretical foundations of the analysis step by step. First, we introduce what a mutual fund is. A mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested in capital market instruments such as shares, debentures, and other securities. The income earned through these investments is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified,  professionally managed basket of securities at a relatively low cost. The objectives of mutual fund are to maximize the return to the investor who participates in equity indirectly through mutual fund.

Mutual Funds
Mutual funds are being thought of as a vehicle for investors to pool their money in and have it jointly managed by an assumingly professional manager A fund is divided into units and holders are entitled to a proportionate fund share. A mutual fund is ready to buy  back its shares at their current net asset value; in turn, the shareholders are only entitled to sell their shares back to the fund. The disclosure of information for the potential “unit holder” of the fund is ensured by the government and requires it to be provided in the fund prospectus. Funds invest in securities indicated in their prospectus and what are according to legal regulation varying from country to country.
There are several types of mutual funds traded at the Helsinki Stock Exchange, which differ by the assets they invest in:
Asset Allocation Funds apportion their investments across a mixture of asset classes, namely stocks, bonds, and cash and equivalents. The main purpose is to optimize the return given the associated level of risk by pursuing the finest mix of stocks, bonds, and cash and equivalents. Asset Allocation Funds are generally distinguished by the way they allot their investments among these asset classes. Conservative and aggressive asset allocation funds differ by the portion of their investments in asset classes with historically different risk/return potential (more risk/higher return for aggressive and less risk/lower return for conservative).

Bond Funds invest primarily in bonds. These funds diversify by investing in an array of bonds. Bond Funds are usually classified by the types of bonds they invest in, e.g. government Bond Funds, corporate Bond Funds, international Bond Funds, and municipal Bond Funds. Similar to individual bonds, the share price of Bond Funds normally falls when interest rates go up, and rises when interest rates decline.
Equity Funds invest mainly in common stocks. Diversification is achieved by investments across a number of different companies or industries in compliance with the fund’s investment objectives stated in their prospectus. Equity funds are usually categorized by the types of stocks they invest in.
Hedge Funds are extremely flexible in their investment options because they use financial instruments generally beyond the reach of other mutual funds, due to stricter regulation and disclosure requirements. Hedge Funds are allowed to use short-selling, leverage, concentrated investments and derivatives. This flexibility, which includes use of hedging strategies to protect downside risk, gives hedge funds the ability to best manage investment risks.

Money Market Funds are composed of short-term debt instruments, including commercial paper, negotiable certificates of deposit, bankers’ acceptances, Treasury bills, and discount notes of various organizations. These funds seek to preserve capital while  providing income and liquidity.
Mutual funds are also classified by their investment strategies:
Yield Funds? objective is to achieve a high level of current income by buying government and corporate bonds as well as high yielding common and preferred stocks. They are not designed to provide major capital gains.

Growth Funds? main investment objective is capital growth. Funds exploiting the growth strategy commonly invest in companies whose earnings are expected to grow at a faster rate than the average earnings growth of the market index. Funds utilizing the value strategy generally invest in companies whose stock is either trading at a price that is relatively low compared to its historical trading range, or compared to prices of companies in similar industries.

We consider mutual funds? performance as the best proxy for professional investors? skills, because lenders trust their money to mutual fund managers, who are thought of as able to make better investment decisions.
In sum, in this part we described what a mutual fund is and what the main differences between various kinds of mutual funds are. We also explained why we believe a mutual fund?s performance is an appropriate proxy for professional investors? skills.

LITERATURE REVIEW
Investment is the sacrifice of certain present value for the uncertain future reward. It entails arriving at numerous decisions such as type, mix, amount, timing, grade etc of investment and disinvestments. Further such decisions making has not only to be continuous but rational too. 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 Equity, Bonds, Insurance, and Bank Deposit etc. A Portfolio is a combination of different investment assets mixed and matched for the purpose of achieving an investoes goal. There are various factors which affects investors’ portfolio such as annual income, government policy, natural calamities, economical changes etc
Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensen’s alpha) that estimates how much a manager’s forecasting ability contributes to fund’s returns.

Sharpe, William F (1994) suggested the ‘Sharp- Ratio technique for the measurement for the performance measurement of the MF.

Michael K. Berkowitz et, (1997), supports the argument& states that, past fund performance influences individual investment decisions along with implying strong incentives for managers increase the performance of Mutual funds.

Mishra et, al (2000) measured MF performance using lower partial moment Risk from the lower partial moment is measured by taking into account only those states in which return is below a pre-specified “target rate” like risk-free rate.

Graciela L. Kaminsky, el,al,(2001), Due to large redemptions and injections, funds’ flows are not stable. Withdrawals from emerging markets during recent crises were large, which is consistent with the evidence on financial contagion.

Bala Ramasamy et,(2003), agreed that Three elements consistent past performance, size of funds ; cost of transaction effects the performance.

Prof. S.Rao, et,al evaluated performance in a bear market through Relative Performance Management index ; risk – return analysis.

Sharad Panwar et (2005). Uses Residual Variance (RV) as the measure of MF portfolio diversification. RV has a direct impact on shape fund performance measure.

Marcin T. Kacperczyk,et,al (2005)demonstrated that unabsorbed information create values for some funds. Return gap helps to predict future fund performance ; investors should use additional measures to evaluate the performance.

Bijan Roy, et,al used conditional performance evaluation on a sample of 89 Indian MF schemes measuring with both unconditional and conditional form of CAPM model. The results suggest that the use of conditioning lagged information variables improves the performance of mutual fund schemes, causing alphas to shift towards right and reducing the number of negative timing coefficients
CHAPTER 3
RESEARCH DESIGN
TOPIC CHOOSEN TO STUDY: A STUDY ON INVESTOR PREFERENCE TOWARDS MUTUAL FUND
The project deals with the customer preference in Mutual funds in India. The Indian mutual fund is in radical transformation in the industry over the years. The competition is intense in the current scenario as there are a variety of players in all types of fund schemes. The industry has witnesses? enormous growth in terms of size, operations, investor base and variety of schemes. It is further expanding to the needs of investors and market pressures. At this point, there is a need for mutual fund investors. Past performance is taken as reference by many investors though it may not be a true indicator of future performance. In this project, I made attempt to know the customers preference in mutual funds by using different measure. The result of various measures is given to get a comprehensive picture of the preference of selected mutual funds.

NEED FOR THE STUDY
The Indian Equity Market has grown significantly during the last three years; Mutual Funds are not left far behind. Both the avenues have created wealth for the investors. But for the creation of wealth through this avenue a proper understanding of the Mutual Funds is must.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them.

In general, investments in Funds are risky, because they are exposed to economic forces or factors, which the future is uncertain. By its very nature, risk concerns the uncertain future. If investors know what happened to a Fund’s returns in the past, they can predict the likely range of Fund’s returns in future. The greater is this range, the more risky are Fund’s prospects. Thus, investors and their advisors need more information to help them assess the risks and to analyses the performance of Mutual Fund in various schemes. Investors must ultimately be responsible for understanding or making predictions about the performance and risks associated with the major market sectors, as well as the extent to which sectors are likely to move with one another. Much of this information is common to many Funds and can be most efficiently provided to investors by third parties, such as financial planners and database providers. But, most of the investors are not aware of the investment opportunities in mutual funds in India. Hence, it is necessary to find out how the companies are providing information about the investments to the investors, whether that information is sufficient to educate the investors regarding the performance of mutual Funds, and how the investors are benefited.

OBJECTIVE OF THE STUDY
? To study about the mutual fund industry.

? To find out the Preferences of the investors.

?To measure the satisfaction level of investors regarding mutual funds
?To study the difference between various investment options offered Kotak Mutual Fund.

SCOPE OF THE STUDY
?In general it confines to measure the performance.

?It include comparative study on equity mutual funds
?It focuses on the preference in people about different investment opportunities in mutual fund.

RESEARCH METHODOLOGY
Definitions of the population
Since the study is mainly related to know the investment patterns of the investors on different products of company. Their potentiality of earning income and reducing risk of the investment community on the products, where each security in the market has to be analyzed through their earnings over the others.

Type of research
This is a descriptive research where survey method is adopted to collect primary information from the investors using different scales as required and the required secondary information for the analysis.

• Primary Data
A questionnaire schedule was prepared and the primary data was collected through survey method.

• Secondary Data
Company website Books Related information from net Customer database
• Sample Size
The population being large the survey was carried among the clients of Kotak . They will be considered adequate to represent the characteristics of the entire  population.

• Sampling ProcedureThe sampling procedure followed in this study is non-probability convenient sampling. Simple random procedures are used to select the respondent from the available database. The Investment pattern of Investors on different products research work will be carried on the basis of structured questionnaire. The study is restricted to the investors of Bangalore.

Techniques for data analysis
The analysis of data collection is completed and presented systematically with the use of Microsoft Excel and MS-Word. The various tools which were used for presentation are:
• Pie charts.

• Column graphs.

LIMITATIONS
• The investment pattern analysis has been limited to few investors.

• This study is conducted to analyze their pattern not all those factors that really matter while investing.

• It is conducted in Bangalore city.

• An interpretation of this study is based on the assumption that the respondents have given correct information.

• The economy and industry are so wide and comprehensive that it is difficult to encompass all the likely factors influencing the investors’ investment pattern in the given period of time.

• Besides the study has the limitation of time, place and resources.

Unit 4
DATA ANALYSIS ; INTERPRETATION
Table no 4.1-Table representing number of respondents on the basis of gender 
Sl .no Gender No of respondents Percentage
1 Male 41 68
2 Female 19 32
Total 60 100
Analysis: under the above table shows that 69% of the respondents are male and 31% of the respondents are female from the total population of 100
Graph no 4.1- Chart showing numbers of respondents on the basis of gender

Interpretation:
Table no 4.2-Table representing number of respondents on the basis of age group
Sl .no Age group No. of respondents Percentage (%)
1 18-30 28 47
2 31-45 27 45
3 46-65 4 6
4 Above 66 1 2
Total 60 100
Interpretation The table indicates that 50% of the respondents belong to the age group 31-45 and 20% of the respondents belong to the age group of above 66.

Graph no 4.2- Chart showing numbers of respondents on the basis of age group:

Table no 4.3-Table representing number of respondents on the basis of marital status:
Sl .no Marital Status No of respondents Percentage (%)
1 Married 46 77%
2 Unmarried 14 23%
Total 60 100
Graph no 4.3-Chart showing number of respondents on the basis of marital status:

Table no 4.4-Table representing number of respondents on the basis of occupation:
Sl .no Occupation
No of respondents Percentage(%)
1 Salaried 40 67
2 Non-Salaried 13 21
3 Others 7 12
Total 60 100
Graph no 4.4-Chart showing number of respondents on the basis of occupation:
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Table no 4.5- Table representing numbers of respondents on the basis of term of investment:
Sl .no Term of Investment No of respondents Percentage(%)
1 Under 2yrs 17 28
2 2-5yrs 15 25
3 6-10yrs 22 37
4 11-15yrs 6 10
Total 60 100
Graph no 4.5-Chart showing number of representing on the basis of term of investment

Table no 4.6-Table representing number of respondents on the basis of important factor consider before choosing an investment:
Sl .no Important factor No of respondents Percentage(%)
1 Quickly increase wealth 17 28
2 Steady growth 16 27
3 Monthly income 13 22
4 Safety of investment principle 14 23
Total 60 100
Graph no 4.6- Chart showing number of respondents on the basis of important factor consider before choosing an investment:

Table no.4.7-Table representing reason for most preferred form of investment:
Sl no Reasons No of respondents Percentage(%)
1 Tax savings 21 35
2 To create wealth 22 37
3 Other future emergencies 17 28
Total 60 100
Graph no.4.7- Chart showing reason for most preferred form of investment:

Table no.4.8 Table representing number of respondents on the basis of consults while making an investment choice:
Sl .no Choices No of respondents Percentage(%)
1 Every time 24 40
2 Often 8 13
3 Sometimes 28 47
4 Never 0 0
Total 60 100
Graph no.4.8- Graph showing number of respondents on the basis of consults while making an investment choice:

Table no.4.9: Table showing number of respondents on the basis of invests more in future:
Sl.no Option No of respondents Percentage(%)
1 Yes 32 53
2 No 28 47
Total 60 100
Graph no. 4.9: Table showing number of respondents on the basis of invests more in future:

Table no 4.10-Table representing number of respondents primary investment focus:
Sl.no Investment Focus No of respondents Percentage(%)
1 Retirement 7 12
2 Wealth generation 13 22
3 Capital preservation 24 40
4 Income generation 16 26
Total 60 100

Graph no 4.10- Graph showing number of respondents primary investment focus

Table no 4.11- Table representing approximate income status of the respondents:
Sl.no Income status No of respondents Percentage(%)
1 Up to 10000 3 5
2 10001-15000 13 22
3 150001-20000 22 37
4 20001-30000 17 28
5 30001 and above 5 8
Total 60 100
Graph no 4.11- Graph showing approximate income status of the respondents:

Interpretation: Among the respondents majority of them have their income levels in  between 20001 to 30000 i.e. 30% which is high when compared to other income level group which comes up to 27% in 15001 to 20000 and 25% in 30001 and above, This clearly states that we can expect more investment.

Table no 4.12-Table representing features of mutual funds that impressed the respondents:
Sl.no Features No. of respondents Percentage
1 Diversification 18 30
2 Better return and safety 10 17
3 Reduction in risk and
Transaction cost 17 28
4 Regular income 9 15
5 Tax benefit 6 10
Total 60 100
Graph no 4.12-Graph showing features of mutual funds that impressed the respondents:

Interpretation: The above graph states that the respondents liked the feature „better return and safety? than any other which was preferred by 47% of the respondents. It shows that majority of the respondents are not risk takers.

Table no 4.13- Table representing awareness of mutual fund to respondents:
Sl.no Channels No. of respondents Percentage
1 Advertisement 32 53
2 Peer group 9 15
3 Banks 9 15
4 Financial advisor 10 17
Total 60 100
Graph no 4.13-Graph showing awareness of mutual fund to respondents:

Interpretation: From the above inference it is clear that majority of the respondents know about mutual funds through financial advisors with 35% followed by advertising with 25%.

Table no 4.14-Table representing schemes preferred by the respondents:
SL .no Schemes No .of respondents Percentage
1 Open ended 13 22
2 Close ended 8 13
3 Liquid fund 11 18
4 Mid cap 6 10
5 Growth cap 6 10
6 Regular income Fund 7 12
7 Long Cap 4 7
8 Sector fund 5 8
Total 60 100
Graph no 4.14-Graph showing schemes preferred by the respondents:

Interpretation: from the above interference the majority of the respondents i.e. 40% prefer open ended scheme of mutual fund, it may be because there is no fixed maturity and are open for subscription the whole year. One can buy and sell units at the NAV related prices to the Mutual funds. No respondents prefer long cap,sector fund ,etc.

Table no 4.15- Table representing the need for investment by the respondents:
Sl .no Investment needs No of respondents Percentage
1 To build a corpus for retirement 12 20
2 To save for children education/marriage 12 20
3 To provide for medical emergency 11 18
4 To provide family financial security 13 22
5 To create wealth 6 10
6 All the above 6 10
Total 60 100
Graph no 4.15-Graph showing the need for investment by the respondents:

Interpretation: From the above chart we see that majority of the respondents having 29% prefer to invest to create wealth followed by to build corpus for retirement with 13% and more.

Table no 4.16-Table representing investors Investment on different mutual fund:
Sl. no Investment option No. of respondents Percentage
1 Kotak mutual fund 34 57
2 Tata mutual fund 4 7
3 ICICI prudential 3 5
4 SBI 3 5
5 Reliance 5 8
6 Birla sun life 5 8
7 Others 6 10
Total 60 100
Graph no 4.16- Graph showing investors Investment on different mutual fund:

Interpretation: Here the preference of the respondents towards different options which are available for the respondents it clearly shows that Kotak mutual funds is  preferred more with 46% of the respondents choosing it. We can also see that none of the respondents choose Franklin Templeton and Tata mutual fund.

Table no 4.17-Table representing satisfaction level of the respondents in the service offered by Kotak mutual funds:
Sl.no Satisfaction level No. of respondents Percentage
1 Extremely Satisfied 34 57
2 Satisfied to lesser extent 19 32
3 Dissatisfied to lesser extent 4 6
4 Extremely dissatisfied 3 5
Total 60 100
Graph no 4.17- Graph showing satisfaction level of the respondents in the service offered by Kotak mutual funds:

Interpretation: When it comes satisfaction of the services rendered by Kotak mutual funds, Most of the respondents choose to be extremely satisfied with 52% and 40% of the respondents choose to have been satisfied to the lesser extent and the remaining, that is 3 and 2 were dissatisfied to lesser extent and extremely dissatisfied respectively.

 
Table no 4.18-Table representing plans preferred by respondents:
Sl.no Plans No. of respondents Percentage
1 SIP(systematic investment plan) 31 52
2 Lump sum 19 32
3 Depends the upon Financial condition 10 16
Total 60 100
Graph no 4.18-Graph showing plans preferred by respondents:

Interpretation: Majority of the respondents with 42% of them have choose to invest in lump sum followed by SIP with 32%.the reason to invest lump sum may be because we have seen that the income level of the major respondents is between 20001 to 30000.

Table no 4.19-Table representing preference while investing by respondents:
SL .no Preference No. Of respondents Percentage
1 Low return 14 23
2 High risk 17 28
3 Liquidity 19 32
4 Trust 10 17
Total 60 100
Graph no 4.19-Graph showing preferable channels to invest in mutual fund:
lefttop
Interpretation: In the above chart it shows that majority of the respondents prefer to invest in banks as they think that banks are safer to invest and have a perception that banks are more trustworthy.

Table no 4.20-Table representing objective of investment by respondents:
Sl .no Perception about mutual funds No of respondents Percentage
1 Preservation 8 13
2 Current income 14 24
3 Conservative growth 23 38
4 Aggressive growth 15 25
Total 60 100

Graph no 4.20-Graph showing respondent’s perception towards mutual funds:

Interpretation: The perception of mutual funds by the respondents who preferred investing in mutual funds varied from one option to another but most of the respondents invested in mutual funds because it was a way to invest through mutually co operative group.

Table no 4.21-Table representing types of mutual chosen by the respondents:
Sl .no Types of funds No .of respondents Percentage
1 Having a debt portfolio 17 28
2 Having a debt and equity portfolio 23 39
3 Only equity portfolio 20 33
Total 60 100
Graph no 4.21-Graph showing types of mutual chosen by the respondents:

Interpretation: Most of the respondents showed interest in investing in „debt and equity portfolio?. When it comes to percentage debt and equity portfolio leads with 67%.the combination debt and equity fund is known to give a better profit with low risk.

Table no 4.22-Table representing preferred channel of returns every year:
Sl .no Returns No .of respondents Percentage
1 Dividend payout 21 35
2 Dividend re-investment 19 32
3 Growth in NAV 20 33
Total 60 100
Graph no 4.22-Graph showing preferred channel of returns every year:

Interpretation: the respondents results were very close when it came to deciding on how they wanted to receive their returns every year, the options chosen by the respondents came to 32% choose dividend payout, 35% choose dividend re-invest and 33% choose growth in NAV.

Table no 4.23-Table representing schemes opted by respondents in Kotak Mutual Funds:
Sl no. Kotak Mutual Funds scheme No .of respondents Percentage
1 Kotak frontline equity 30 50
2 Kotak banking and finance 18 30
3 Short term opportunity 12 20
Total 60 100
Graph no 4.23-Graph showing schemes opted by respondents in Kotak Mutual Funds:

Interpretation: The schemes opted by the respondents in Kotak mutual funds resulted in 62% in Kotak banking and finance, 23% in Kotak frontline equity and 15% in short term opportunity.

Table no 4.24-Table representation where respondents prefer to invest:
Sl no Sector No. of respondents Percentage
1 Savings 1 2
2 Fixed Deposit 6 10
3 Gold 11 18
4 Diversified equity 7 12
5 Insurance 1 2
6 Mutual fund 26 43
7 Shares 3 5
8 Real estate 5 8
Total 60 100
Graph no 4.24-Graph showing different sectors invested by respondents:

Interpretation: From the above chart we can see that major respondents have choose diversified equity fund than any other fund like gold fund and more, with a percentage of 27% .preference of diversified equity funds might be because the risk level is diversified and when it comes to gold there is a perception always that gold market never falls.

Table no 4.25-Table representing percentage of returns expected by the respondents:
Sl no. Expectation No. of respondents Percentage
1 5-10% 9 15
2 10-15% 21 35
3 15-20% 18 30
4 Above 20% 12 20
Total 60 100
Graph no 4.25-Graph showing percentage of returns expected by the respondents:

Interpretation: The return on investment chooses by the respondents seems to be average return, this shows that the respondents are not high risk takers instead they prefer having an average return with average investment.

UNIT-5
FINDINGS, SGGESTION AND CONCLUSITION
FINDINGS:
First and foremost we find out that the majority of the investors falls into the income bracket of Rs 20001 to 30000
By many investors mutual fund is preferred because of its „better return and safety?
 feature.
Financial advisors have played an important role in educating people about mutual funds when compared to any other channel.
Most of the people who have opted to invest have invested in the intension to create wealth.
It is found that investors in Bangalore have opted Kotak Mutual Funds.

The investors in Bangalore usually prefer investing at once i.e. lump sum than SIP.
Bangalorian feel that being safe is the right way and have chosen banks to be the safe place to invest.
The perception on mutual funds in the people of Bangalore is that it is investing in a mutually co operative group.
The perception on mutual funds in the people of Mysore is that it is investing in a mutually co operative group.
Investors are not into risk taking hence they have choose both debt and equity  portfolio.
We find out that when it comes to receiving the returns on investment everyone invested chooses to save or gain more money.
Diversified equity fund, gold fund, and more are preferred.
Mostly Respondents preferred High Return while investment, the second most  preferred Low Risk then liquidity and the least preferred Trust.
Suggestion:
Awareness on mutual funds is very much required in Bangalore.

Proper practice of viewing the market is needed to be shown to many of the new investors.

More attractive schemes introduced in the market to the people would be very beneficial.

The most vital problem spotted is of ignorance. Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing.

Mutual Fund Company needs to give the training of the Individual Financial Advisors about the Fund/Scheme and its objective, because they are the main source to influence the investors.

Younger people aged under 35 will be a key new customer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off.

Customers with graduate level education are easier to sell to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality.

Systematic Investment Plan (SIP) is one the innovative products launched by Assets Management companies very recently in the industry. SIP is easy for monthly salaried person as it provides the facility of do the investment in EMI. Though most of the prospects and potential investors are not aware about the SIP. There is a large scope for the companies to tap the salaried persons.
Conclusion:
Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behaviour of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, and Channels etc. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing.
“Brand” plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are many AMCs in Bangalore but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and their Assets Under Management is larger than others whose Brand name are not well known like Principle, Sunderam, etc.
BIBLIOGRAPHY
M Y Khan and P K Jain Financial Management Fourth Edition-2006, Tata McGrew Hill publishing company limited, New Delhi.

A.Murthy Management Accounting First Edition, S.Viswanathan (printers & publishers) private limited.

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