SUMMER TRAINIG REPORT ON

ANALYSIS ON DIFFERENT TYPES OF INVESTMENT PLANS

FOR

SUNDARAM FINANCE PVT. LTD.

BY

KAPIL VISHWAKARMA

B-26

In Partial Fulfillment for the award of the degree

Post Graduation Diploma in Business Management

2009-11

NEW DELHI INSTITUTION OF MANAGEMENT

F-13, Okhla Phase-1, New Delhi, Pin- 110020

ANALYSIS ON DIFFERENT TYPES OF

1

INVESTMENT PLANS

For

SUNDARAM FINANCE PVT. LTD.

Under the supervision

Of

Kuldeep Kumar

Submitted By- Submitted to-

Kapil Vishwakarma Shweta Bhatnagar

B-26

ACKNOWLEDGEMENT

2

I would like to place on the record the tremendous help that I have received

from persons who contributed towards giving this report its present form.

I wish to express my deep gratitude to my faculty in-charge Ms. Shweta

Bhatnagar acting as a guide and providing me with continuous support and

guidance. This report could not materialialized without the inputs and the words

of advice from him for which I shall always remain grateful to him.

My sincere thanks to Mr. Kuldeep Yadav without his support this project cannot

be completed. He provide us all possible opportunities in enhancement our

knowledge. For the co-operation and inspiration which I get from him,I always

remain grateful to him.

In the last not least I express my profound gratitude to the staff of Sundaram for

their support and empathy.

Kapil Vishwakarma

DECLARATION

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I Kapil Vishwakarma, student of New Delhi Institution of Management Batch

(2009-11) declare that every part of the Project Report (Analysis on different

type of Mutual Funds) that I have submitted is original.

Date of Project submission: _______________

Signature_________________

Faculty’s comment:

________________________________________________________________

________________________________________________________________

________________________________________________________________

(Shweta Bhatnagar)

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INDEX

Content Pg.no.

1. Abstract 6

2. Executive summary 7

3. Companies Profile 8

4. History of the company 12

5. Introduction 24

5.1-purpose & objectives of the study 24

5.2- methodology 26

5.3- Value addition to the company 27

5.4- limitation of the study 29

6. Main text 30

6.1 Investment 30

6.2- Mutual fund 31

6.3- Equity 54

6.4- FD 57

6.5-Insurance 60

7. Data Analysis 68

8. Conclusion and recommendation 73

9. Questionnaire 77

10. Bibliography 80

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ABSTRACT

Savings form an important part of the economy of any nation. With the savings

invested in various options available to the people, the money acts as the driver

for growth of the country. Indian financial scene too presents a plethora of

avenues to the investors. Though certainly not the best or deepest of markets in

the world, it has reasonable options for an ordinary man to invest his savings.

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. This is called Investment.

One needs to invest to and earn return on your idle resources and generate a

specified sum of money for a specific goal in life and make a provision for an

uncertain future One of the important reasons why one needs to invest wisely is

to meet the cost of Inflation. Inflation is the rate at which the cost of living

increases. The cost of living is simply what it costs to buy the goods and

services you need to live. Inflation causes money to lose value because it will

not buy the same amount of a good or service in the future as it does now or did

in the past. The sooner one starts investing the better. By investing early you

allow your investments more time to grow, whereby the concept of

compounding increases your income, by accumulating the principal and the

interest or dividend earned on it, year after year. The three golden rules for all

investors are:

Invest early

Invest regularly

Invest for long term and not short term

This project will also help to understand the investors facet before investing in

any of the investment tools and thus to scrutinize the important aspects for the

investors before investing that further helped in analyzing the relation between

the features of the products and the investors’ requirements

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EXECUTIVE SUMMARY

The project titled “Analysis on different investment plans” being carried out

for SUNDARAM FINANCE. Today an investor is interested in tracking the

value of his investments, whether he invests directly in the market or indirectly

through Mutual Funds, Insurance, and Sip etc. This dynamic change has taken

place because of a number of reasons. With globalization and the growing

competition in the investments opportunity available he would have to make

guided and rational decisions on whether he gets an acceptable return on his

investments in the funds selected by him, or if he needs to switch to another

fund.

In order to achieve such an end the investor has to understand the basis of

appropriate preference measurement for the fund, and acquire the basic

knowledge of the different measures of evaluating the performance of the fund.

Only then would he be in a position to judge correctly whether his fund is

performing well or not, and make the right decision.

This project title is undertaken to help the investors in tracking the performance

of their investments in Mutual fund, insurance, equity market, commodity

market, Pms etc. and has been carried out with the objective of giving

performance analysis of different investment plans.

The methodology for carrying out the project was very simple that is through

primary data and secondary data obtained through various mediums like survey

through questionnaire ,fact sheet of the funds, the Internet, Business magazines,

Newspaper, etc. the analysis of Funds has been done with respect to its various

parameters.

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COMPANIES PROFILE

The Company was incorporated in 1954, with the object of financing the purchase

of commercial vehicles and passenger cars.

The company was started with a paid-up capital of Rs.2.00 Lakhs and later went

public in 1972.

The Company's shares were listed in the Madras Stock Exchange in 1972 and in

the National Stock Exchange in January 1998. 

Subsequently, the equity shares of the Company have been delisted from Madras

Stock Exchange Limited (MSE) with effect from January 27, 2004, in accordance

with SEBI (Delisting of Securities) Guidelines, 2003, for voluntary delisting

Sundaram Finance Limited is an India-based financial services company. The

activities of the Company include savings products like deposits and mutual funds,

car and commercial vehicle finance, insurance, home loans, software solutions,

business process outsourcing, tyre finance, fleet cards and logistics services. The

Company’s subsidiaries include Sundaram BNP Paribas Home Finance Limited,

Sundaram BNP Paribas Asset Management Company Limited, Sundaram BNP

Paribas Trustee Company Limited, Infreight Logistics Solutions Limited,

Sundaram Finance Distribution Limited, Sundaram Infotech Solutions Limited,

Sundaram Business Services Limited, Professional Management Consultants

Private Limited and Sundaram Securities Services Limited. 

8

LATE MR. T. V. SANTHANAM SUNDARAM

SOUL OF SUNDARAM FINANCE GROUP.

Born on November 8, 1912, Mr.Santhanam had his education in Madurai. In

1930, he joined his father in business, and thus began a life-time involvement

in automobile and finance.

He moved to Chennai in 1936, and served parent company T.V. Sundaram

Iyengar & Sons, in various capacities, gaining rich experience in road

transport, marketing of automobiles, manufacture of automobile components,

general insurance, banking and finance. In 1954, he founded Sundaram

Finance, which together with its subsidiaries, now has an asset base of about

Rs.6000 crore.

He played a crucial role in the establishment of several auto component units

in the TVS Group, prominent among which were Wheels India, Brakes India,

Sundaram Clayton and Lucas-TVS. He also promoted Madras Motor General

Insurance Company, which later merged into the United India Insurance

Company. He was Managing Director of the T.V.Sundaram Iyengar & Sons

for nearly a decade before becoming its vice-chairman, position he held till his

death.

He was not only deeply involved in negotiations with foreign collaborators for

the manufacture of quality auto components, but also in financial planning and

project financing. His financial acumen was always regarded highly, not just in

the TVS group, but outside as well. He served on the Government's Direct

Taxes Advisory Committee, and the study Group on Road Transport Financing

among others.

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For Mr.Santhanam, quality was paramount. He ensured that his auto

component distribution companies provided transport operators genuine and

quality products at fair prices.

He was also the founder chairman of trade associations such as the Federation

of Automobile Dealers' Association and the South India Hire Purchase

Association.

He was an ardent supporter of sports, especially football, cricket and tennis. In

the late 1940s he promoted TVS Greens, which had several leading national

football players. A keen tennis player himself, he sponsored several leading

players during the early stages of their career. He was often spotted at

Wimbledon during the tennis fortnight cheering on India's maestro,

Ramanathan Krishnan.

He championed educational, religious and charitable causes and was

instrumental in donating large sums of money from the companies with which

he was associated.

T S Surendran, Vice-Chairman of Sankara Nethralaya, said Mr.Santhanam had

contributed liberally to "the cause of our foundation." He was associated with

the foundation for over 25 years. The Sundaram Medical Foundation and the

hospital managed by it stand testimony of his keen interest in charitable

causes.

"Work was worship for him," according to officials in the TVS Group. "His

number sense was incredible," said a ranking official of Sundaram Finance,

who had worked with him closely. He knew his principal employees by name

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and qualification. He kept himself updated on the happenings in the group

companies and attended meetings of the Sundaram Finance Board.

Mr.Santhanam, according to T T Srinivasaraghavan, Managing Director of

Sundaram Finance, was a "visionary."

Even in early 1950s, he had understood the need for a good road infrastructure.

"He tirelessly worked for the uplift of transport operators,"

Mr.Srinivasaraghavan said, and pointed to the travels Mr.Santhanam had

undertaken across the country often sipping tea with the drivers.

Mr.Santhanam brought to bear such involvement in the non-banking finance

business, encouraging small players to become corporate entities. "He never

saw anyone as a competitor," he said.

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HISTORY OF SUNDARAM FINANCE GROUP

1954 - The Company was incorporated on 11th August, and converted into a

Public Limited in 1961. The main object of the company carries on

Hire Purchase business and equipment leasing.

1971- 19,958 shares issued as bonus shares.

1972- First finance company to be listed on the Madras Stock Exchange

1976- 5, 00,000 Bonus shares issued in prop. 1:2 to shareholders on 29th

September.

1978- 5, 00,000 Bonus shares issued in prop. 1:3 to shareholders on 20th

December.

1981- The Company started equipment leasing operations. Formation of Lakshmi

General Finance

1982 - 10, 00,000 Bonus shares issued in prop. 1:2 to shareholders on 9th

February.

1986- The Company started Marketing Allwyn Nissan Vehicles.

1986 - 30, 00,000 Bonus shares issued in prop. 1:1.

1989 - The Company proposed to extend financial services in a phased

Manner through a subsidiary.

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1990 - GIC and State Bank of Mysore agreed to participate in the equity

Capital of the subsidiary. Application is being made for the Approval

of the Central Government.

1990 - India Equipment Leasing Ltd., is a subsidiary of the Company.

This subsidiary was promoted jointly by the Company and International

Finance Corporation, Washington, U.S.A. Sundaram Finance Securities

Ltd. and Sundaram Finance Securities Ltd. became subsidiary of the

company.

1990 - 60, 00,000 Bonus shares issued in prop. 1:2.

1990- Sundaram Finance Ltd. has promoted Sundaram Home Finance Ltd. and

Fiat Sundaram Auto Finance Ltd.

1993 - The Company issued 18.50% Non-Convertible debentures for Rs.8

crore, on private placement basis to GIC Mutual Fund and LIC Mutual Fund.

1994 - CRISIL's top P1+ rating, denoting the highest degree of safety for

issue of CPs, was awarded to the Company.

1994- Receivables crossed Rs. 1000 crore (Rs. 10 billion)

1995- Deposits crossed Rs. 500 crore (Rs. 5 billion)

1996 - The Company has been awarded with the highest rating of AAA

(Triple A) by CRISIL for its debenture programme to the extent at Rs.50 cr.

1996 - The Company has been awarded a Certificate of Commendation by the

Government of India, Income-Tax Department under the scheme for

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honouring Good Tax Payers in recognition of its meritorious record

in the payment of taxes and discharge of all obligations under the

direct tax laws and is the only non-banking financial company in the South

to receive this award since it was instituted.

1996 - The company issued bonus shares in the ratio of 1:3 and thereafter

rights shares in the ratio of 1:4 at a premium of Rs.25/- per share.

1996 - The Company has entered into a joint venture agreement with Newton

Management Limited, U. K. and Stewart Newton Holdings (Mauritius)

Limited for setting up an Asset Management Company.

1996 - The Company signed a letter of intent with Winterthur Swiss

Insurance Company on October 29, to set up a joint working group to prepare a

business plan as a precursor to forming a joint venture company to apply for a

licence to start general insurance business when themarket is deregulated.

1996 - Sundaram Finance Training Centre was inagurated on 9th September.

1997- Sundaram Finance, Chennai has entered into a deal with Winterthur,

A leading Swiss insurance firm, to set up a general insurance company In India.

1997- Receivables crossed Rs. 2000 crore (RS. 20 billion)

1997- Received Best Tax Payer Award

1998- Promoted Fiat Sundaram Auto Finance Limited, a joint venture with Fidis

14

S.p.A., Italy

1999- Sundaram Finance had signed a memorandum of understanding with

Winterthur Swiss Insurance in October 1996 to enter the general

insurance business in India after the government would open up the

sector for the private sector

1999- The company issued Non-Convertible Debentures on private placement

basis to the tune of Rs. 123 cr. mainly to banks and institutions at

Competitive rates, for tenors ranging from 36 months to 60 months.

1999- Promoted Sundaram Home Finance Limited with equity participation from

International Finance Corporation (IFC), Washington, and FMO Netherlands

2000 - Sundaram Home Finance Ltd, (SHF) the newly-launched venture of

Sundaram Finance Ltd (SF), has entered into a strategic tie up with

United India Insurance to provide insurance cover for housing loans

At a low premium.

2000 - ICICI, ABN Amro and the company have emerged as the top three

Among automobile finance companies, the first of its kind for India.

2000 - India Equipment Leasing Ltd., Aparajita Finance Company Ltd.,

Balika Finance Co. Ltd. and Paramjyothi Finance Co. Ltd. have been

Amalgamated with the Company with effect from 01.04.1999.

2000- Promoted Royal Sundaram Alliance Insurance Company Limited, a joint venture

with Royal & Sun Alliance Plc, for Non-Life Insurance

2000- Promoted Sundaram Infotech Solutions - Infotech division of Sundaram Finance

15

2000 - The `AA' rating assigned to the non-convertible debenture Programme

and `FAA+' rating assigned to the fixed deposit programme of Sundaram

Finance Ltd. have been reaffirmed by Crisil.

2000 - Sundaram Finance will be launching Royal Sundaram Alliance Insurance

Company Ltd. by January.

2001- The Company has initiated moves to merge its wholly-owned

Subsidiary Sundaram Finance Services Ltd with itself.

2001- Promoted Sundaram Business Services - BPO arm of Sundaram Finance

2002-SBI signed Memorandum of Understanding with the company for

Marketing the Insurance products.

2002-International Finance Corporation extends Rs.50cr loan.

2002 -Company holds 40% equity stake in transport postal infrieght.com.

2002-Wheels India Ltd and Sundaram Fin make second and final offer to all

the balance public equity shareholders of Axles India Ltd.

2002-Slashes interest rates by 50 basis points on fixed deposits.

Accordingly the company will offer 8% for 1 year , 8.5% for 2 years and 9% for 3 years.

2003-SHFL acquires Fiat arm from Joint Venture.

2003-Uses Direct Selling Agents to increase its fleet card business.

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2003-The Madras High Court permits the sale by Sundaram Finance Ltd,

Chennai, of machinery of Coimbatore Pioneer Mills Ltd by suspending

the operation of the order dated February 21, 2003 of the single judge, who

made absolute the interim stay granted on January 2 and January 10.

The First Bench, comprising Chief Justice, Mr B. Subhashan Reddy, and

Mr Justice K. Govindarajan, while suspending the stay directed that

the sale process of the machinery of the mills shall go on, but only

confirmation of the sale shall be kept in abeyance.

2003-Mandates Ogilvy & Mather to carve distinct identity for its brand

'Sundaram'.

2003-Mr T T Srinivasaraghavan and Mr G K Raman appointed as MD and

Wholetime Director.

2003- Sundaram Fin join hands wih SBI Life

2003-Sundaram Business Services (SBS), the BPO division of Sundaram

Finance Ltd has forayed into the overseas market by signing a three-year

contract with Australia-based Total Super Pty Ltd, a self managed

superannuation specialist firm.

2004-Sundaram Finance Ltd. has informed that the equity shares of the

Company have been delisted from Madras Stock Exchange in accordance

with SEBI (Delisting of Securities) Guidelines, 2003 for voluntary

Delisting, with effect from January 27, 2004.

2005-IKF Finance Ltd has informed that M/s Sundaram Finance Ltd, Chennai

17

has tied up with the Company for purchase of HP/Lease Receivables

Portfolio

2005-Company's Chairman, Shri T S Santhanam expired on April 15, 2005.

2005- Merger with LGF making SF Billion dollar Balance sheet NBFC.

2006- BNP Paribas Asset Management Group, France acquires 49.90 % stake in Sundaram Asset

Management Company Ltd from SFL.

2008-Sundaram Finance Ltd. has informed that at the meeting of the Board

of Directors held on July 29, 2008, Sri S. Ravindran has been

appointed as an Independent Director on the Board.

2008 - Sundaram Finance Ltd has appointed Sri S. Prasad as an Independent

Director on the Board.

2008-The Company has issued Bonus Shares in the Ratio of 1:1.

2009- Sundaram Finance Ltd has informed BSE that the Board of Directors

of the Company at its meeting held on February 27, 2009, inter alia,

has appointed Sri Aroon Raman as an Independent Director on the Board.

SUNDARAM FINANCE GROUP

SUNDARAM FINANCE LIMITED.

Sundaram Finance Limited, which was incorporated in 1954 with the

object of financing the purchase of commercial vehicles and passenger

cars, has grown today into one of the most trusted financial services

18

groups in India. Today, the activities of the Sundaram Finance Group span

Commercial Vehicle Finance, Car Finance, Insurance, Asset Management,

Home Loans, Equipment Finance, Fleet Card, InfoTech Solutions,

Business Process Outsourcing, Tyre Finance and Logistics Services.

Sundaram Finance has a Nation-wide presence with over 400 branches,

0.65 million depositors and nearly 100,000 commercial vehicle and car

finance customers.

Products / Services Offered

Deposits

Car Finance

Commercial Vehicle Finance

Equipment Finance

Fleet Card

Tyre Finance

Corporate Office

Sundaram Finance Limited, 21, Patullos Road, Chennai - 600 002,

Phone : 91 44 2852 1181 , Fax     : 91 44 2852 0456

SUNDARAM BNP PRIBAS ASSET MANAGEMENT

Sundaram BNP Paribas Asset Management is one of the largest and well established

fund houses in the country. The fund house is sponsored by two giants of the

financial services industry – Sundaram Finance Group and BNP Paribas Asset

Management.

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Investment manager for Sundaram BNP Paribas Mutual Fund sponsored by

Sundaram Finance &Newton Group. Newton Group exited in 2002. The company iss

now a joint venture between Sundaram Finance (50.1% stake) and BNPP AM (49.9%

stake).

SUNDARAM BNP PARIBAS HOME FINANCE LIMITED

Sundaram Home Finance Limited was incorporated on July 2, 1999, under the

Companies Act 1956...

Sundaram Finance Limited (SFL) and Union de Credit pour le Batiment (UCB)

a wholly-owned subsidiary of BNP Paribas, France, had entered into an

agreement on 9th May 2007, regarding a strategic partnership in housing

finance in India whereby UCB will acquire a 49.9% stake in Sundaram Home

Finance Limited, a subsidiary of Sundaram Finance Limited. Consequent to the

completion of the regulatory approvals, the name of the Company has been

changed to Sundaram BNP Paribas Home Finance Limited effective 28 th

November 2007.

Sundaram BNP Paribas Home Finance Limited combines its expertise in Home

Finance with the service-orientation of its promoter Sundaram Finance. 

Products / Services Offered

Home Loans Improvement

Loans Extension Loans Land Loans

Loans to Professionals NRI Loans

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ROYAL SUNDARAM ALLIANCE INSURANCE COMPANY

LIMITED

Royal Sundaram brings to you the golden heritage and reliability of Sundaram

Finance (AAA), one of the most respected non-banking financial institution in

India, and RSA(formerly Royal & SunAlliance), one of the oldest and the

second largest general insurer in the UK.

The coming together of these two financial giants allows us to offer you the best

global practices in insurance industry, innovation in terms of products and

services, and unmatched, personalized customer service.

Products-

Select fund

Select midcap

Growth fund

S.M.I.L.E. fund

Tax saver fund

Balanced fund

Sundaram Infotech Solutions

Sundaram Finance Distribution Limited

Board of directors

Chairman

Sri S Viji

Directors

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Sri S Ram

Sri S Narayanan 

Sri T R Seshadri 

Sri S Ravindran 

Sri S Prasad 

Sri Aroon Raman

Sri Srinivas Acharya

Managing Director

Sri T T Srinivasaraghavan

Company Secretary

Sri S Venkatesan, CFO & Secretary

Compliance Officer

Sri P Viswanathan, Deputy Secretary & Compliance Officer

22

INTRODUCTION

OBJECTIVES OF THE PROJECT:

The purpose of the study was to determine the saving behavior and investment

preferences of customers. Customer perception will provide a way to accurately

measure how the customers think about the products and services provided by

the company. Today’s trying economic conditions have forced difficult

23

decisions for companies. Most are making conservative decisions that reflect a

survival mode in the business operations. During these difficult times,

understanding what customers on an ongoing basis is critical for survival.

Executives need a 3rd party understanding on where customer loyalties stand.

More than ever management needs ongoing feedback from the customers,

partners and employees in order to continue to innovate and grow. The main

objective of the project is to find out the needs of current and future customers.

For this report , customer perception and awareness level will be measured in

many important areas like:

To understand all about different investment plans available in India.

To find out how the investors get information about the various financial

instrument

To find out how the investor wants to invest i.e. on his own or through a broker.

To find out the saving habits of the different customers and the amount they

invest in various financial instruments.

In which type of financial instrument they like to invest.

How long they prefer to keep their money invested.

What is the return that they expect from the investment.

What are the various factors that they consider before investing.

To find out the risk profile of the investor.

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To give a recommendation to the investors that where they should invest.

To give a suggestion to my company where our fund lacks in the market & how

it should be rectified.

POPULATION AND THE SAMPLE-

The population that we have taken for our study was the people in Delhi. The

sample from the above population for our study had consisted of around 100

individuals

METHODOLOGY-

This methodology is based on Primary research which was carried out at Delhi.

The research involves:

1. Investor’s perception about the different investment solutions.

2. Finding out the awareness level of Investors.

3. Past investment patterns

4. Suggestion

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METHODS-

The information and the perception of the individuals will be collected by

meeting personally with the help of structured questionnaire.

Data analysis with the help of excels and graphs: the collected data of

individuals will be analyzed with the help of Graphs.

VALUE ADDITION TO THE COMPANY

This report will help the company to strengthen customer intimacy. The report

on various investment avenues available In India will help the company in many

areas like.

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It will help the company to understand the expectations the customer have about

their company from the perspective of financial performance and corporate

social responsibility.

It will provide fresh insights which can help their business continue to flourish.

The company can identify the particular service requirements of different types

of customers.

The company can understand the problem areas.

The company can evaluate new services initiatives.

The study will help in gaining a better understanding of what an investor looks

for in an investment option.

It can be used by the financial sector in designing better financial instrument

customized to suit the needs of the investor.

It will help agents and brokers in marketing the existing instruments.

It will provide knowledge to the customer about the various financial services

provided by the company to their customers.

It can help the company to understand what the requirement of the different

categories of customers is

This report will be developed in order to empower companies with

detailed primary market research needed to make well informed decisions and it

will provide independent measurement and validation of the health of

27

company’s relationship with their customers. These are the various advantages

which will give some value addition to the company in understanding the

awareness level of the customer about the various investment options and what

is the perception of the investors with regard to the investments they want to

make.

LIMITATIONS OF THE STUDY

The project is based upon various financial instrument that are available in India

and the perception level of the customer about these financial instruments. For

which there will be the need of information from the customers about their

knowledge of these financial products. The various limitations of the study are:

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Total number of financial instrument in the market is so large that it needs a lot

of resources to analyze them all. There are various companies providing these

financial instruments to the public. Handling and analyzing such a varied and

diversified data needs a lot of time and resources .

As the project is based on secondary data, possibility of unauthorized

information cannot be avoided.

Reluctance of the people to provide complete information about themselves can

affect the validity of responses.

Due to time and cost constraint study will be conducted in only selected area of

Delhi.

The lack of knowledge in customers about the financial instruments can be a

major limitation.

The information can be biased due to use of questionnaires

RESEARCH WORK

INVESTMENT-

The act of committing money or capital to an endeavor with the expectation of

obtaining an additional income or profit.

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It's actually pretty simple: investing means putting your money to work for you.

Essentially, it's a different way to think about how to make money. Growing up,

most of us were taught that you can earn an income only by getting a job and

working. And that's exactly what most of us do. There's one big problem with

this: if you want more money, you have to work more hours. However, there is

a limit to how many hours a day we can work, not to mention the fact that

having a bunch of money is no fun if we don't have the leisure time to enjoy it.

You can't create a duplicate of yourself to increase your working time, so

instead, you need to send an extension of yourself - your money - to work. That

way, while you are putting in hours for your employer, or even mowing your

lawn, sleeping, reading the paper or socializing with friends, you can also be

earning money elsewhere. Quite simply, making your money work for you

maximizes your earning potential whether or not you receive a raise, decide to

work overtime or look for a higher-paying job.

There are many different ways you can go about making an investment. This

includes putting money into stocks, bonds, mutual funds, or real estate (among

many other things), or starting your own business. Sometimes people refer to

these options as "investment vehicles," which is just another way of saying "a

way to invest." Each of these vehicles has positives and negatives, which we'll

discuss in a later section of this tutorial. The point is that it doesn't matter which

method you choose for investing your money, the goal is always to put your

money to work so it earns you an additional profit. Even though this is a simple

idea, it's the most important concept for you to understand.

Mutual Fund

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Mutual fund is a pool of money collected from investors and is invested

according to stated investment objectives Mutual fund investors are like

shareholders and they own the fund. Mutual fund investors are not lenders or

deposit holders in a mutual fund. Everybody else associated with a mutual fund

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

the investors and nobody else. Mutual funds invest in marketable securities

according to the investment objective. The value of the investments can go up

or down, changing the value of the investor’s holdings.NAV of a mutual fund

fluctuates with market price movements. The market value of the investors’

funds is also called as net assets. Investors hold a proportionate share of the

fund in the mutual fund. New investors come in and old investors can exit, at

prices related to net asset value per unit.

Emergence of Mutual Funds:-

Mutual Funds now represent perhaps the most appropriate

investment opportunity for most small investors. As financial markets become

more sophisticated and complex, investor need a financial intermediary who

provides the required knowledge and professional expertise on successful

investing. It is no wonder then that in the birthplace of mutual funds-the U.S.A.-

the fund industry has already overtaken the banking industry, with more money

under Mutual Fund management than deposited with banks.

The Indian Mutual Fund industry has already opened up many exciting

investment opportunities to Indian investors. Despite the expected continuing

growth in the industry, Mutual Fund is a still new financial intermediary in

India.

History of Mutual Funds:-

In the second half of 19th century, investor in UK

considered the stock market is good for the investment. But for small investor it

is not possible to operate in the market effectively. This led to establishment of

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an investment company which led to the small investor to invest in equity

market. The first investment company was the Scottish-American Investment

Company, set up in London in 1860.

Mutual Fund Industry in India:-

Mutual Fund is an instrument of investing money. Nowadays, bank

rates have fallen down and are generally below the inflation rate. Therefore,

keeping large amounts of money in bank is not a wise option, as in real terms

the value of money decreases over a period of time. One of the options is to

invest the money in stock market. But a common investor is not informed and

competent enough to understand the intricacies of stock market. This is where

mutual funds come to the rescue. A mutual fund is a group of investors

operating through a fund manager to purchase a diverse portfolio of stocks or

bonds. Mutual funds are highly cost efficient and very easy to invest in. By

pooling money together in a mutual fund, investors can purchase stocks or

bonds with much lower trading costs than if they tried to do it on their own.

Also, one doesn't have to figure out which stocks or bonds to buy. But the

biggest advantage of mutual funds is diversification.

Diversification means spreading out money across many

different types of investments. When one investment is down another might be

up. Diversification of investment holdings reduces the risk tremendously.

In 1963, the government of India took the initiative by passing the

UTI act, under which the Unit Trust of India (UTI) was set-up as a statutory

body. The designated role of UTI was to set up a Mutual Fund. UTI’s first

scheme, called. In 1987 the other public sector institutions set up their Mutual

Funds. In 1992, government allowed the private sector players to set-up their

funds. In 1994 the foreign Mutual Funds arrives in Indian market. In 2001 there

32

is a crisis in UTI and in 2003 UTI splits up into UTI 1and UTI 2. The history of

Indian Mutual Fund industry can be explained easily by various phases:-

Benefits of Investing in Mutual Funds

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.

33

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 net asset value 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

34

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.

Choice of Schemes: -

Mutual Funds offer a family of schemes to suit your varying needs

over a lifetime.

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. The operations of Mutual Funds are regularly monitored

by SEBI.

Disadvantages of Investing Mutual Funds

Professional Management: -

35

Some funds doesn’t perform in neither the market, as their management

is not dynamic enough to explore the available opportunity in the market, thus

many investors debate over whether or not the so-called professionals are any

better than mutual fund or investor himself, for picking up stocks.

Costs: –

The biggest source of AMC income is generally from the entry

& exit load which they charge from investors, at the time of purchase. The

mutual fund industries are thus charging extra cost under layers of jargon.

Dilution: –

Because funds have small holdings across different companies,

high returns from a few investments often don't make much difference on the

overall return. Dilution is also the result of a successful fund getting too big.

When money pours into funds that have had strong success, the manager often

has trouble finding a good investment for all the new money.

Taxes: -

When making decisions about your money, fund managers don't

consider your personal tax situation. For example, when a fund manager sells a

security, a capital-gain tax is triggered, which affects how profitable the

individual is from the sale. It might have been more advantageous for the

individual to defer the capital gains liability.

Types of Mutual Funds

36

Mutual fund schemes may be classified on the basis of its structure and its

objective:-

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 to 15 years. The fund is open for subscription

only during a specified period. Investors can invest in the scheme at the time of

the initial public issue and thereafter 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 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.

Money Market Funds:-

37

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 treasury bills, certificates of deposit,

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 as a means to park their surplus

funds for short periods.

Load Funds:-

A Load Fund is one that charges a commission for entry or

exit. That is, each time you buy or sell units in the fund, a commission will be

payable. Typically entry and exit loads range from 1% to 2%. It could be worth

paying the load, 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. That is, no commission is payable on purchase or sale of units in

the fund. The advantage of a no load fund is that the entire corpus is put to

work. 

Tax Saving Schemes:-

These 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. Investments made in Equity

Linked Savings Schemes (ELSS) and Pension Schemes are allowed as

deduction u/s 88 of the Income Tax Act, 1961. The Act also provides

opportunities to investors to save capital gains u/s 54EA and 54EB by investing

38

in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000

and the amount is invested before September 30, 2000.

Various types of Mutual Funds:

Equity Funds: -

Equity funds are considered to be the more risky funds as

compared to other fund types, but they also provide higher returns than other

funds. It is advisable that an investor looking to invest in an equity fund should

invest for long term i.e. for 3 years or more. There are different types of equity

funds each falling into different risk bracket. In the order of decreasing risk

level, there are following types of equity funds:-

AGGRESSIVE GROWTH FUNDS:-

In Aggressive Growth Funds, fund managers aspire for

maximum capital appreciation and invest in less researched shares of

speculative nature. Because of these speculative investments Aggressive

Growth Funds become more volatile and thus, are prone to higher risk than

other equity funds.

GROWTH FUNDS: -

Growth Funds also invest for capital appreciation (with time horizon of 3

to 5 years) but they are different from Aggressive Growth Funds in the sense

that they invest in companies that are expected to outperform the market in the

future. Without entirely adopting speculative strategies, Growth Funds invest in

those companies that are expected to post above average earnings in the future.

39

SPECIALTY FUNDS: -

Specialty Funds have stated criteria for investments and their

portfolio comprises of only those companies that meet their criteria. Criteria for

some specialty funds could be to invest/not to invest in particular

regions/companies. Specialty funds are concentrated and thus, are

comparatively riskier than diversified funds. There are following types of

specialty funds:

Sector Funds:-

Equity funds that invest in a particular sector/industry of the market are

known as Sector Funds. The exposure of these funds is limited to a particular

sector (say Information Technology, Auto, Banking, Pharmaceuticals or Fast

Moving Consumer Goods) which is why they are more risky than equity funds

that invest in multiple sectors.

Foreign Securities Funds:-

Foreign Securities Equity Funds have the option to invest in one or

more foreign companies. Foreign securities funds achieve international

diversification and hence they are less risky than sector funds. However, foreign

securities funds are exposed to foreign exchange rate risk and country risk.

Mid-Cap or Small-Cap Funds:-

Funds that invest in companies having lower market capitalization

than large capitalization companies are called Mid-Cap or Small-Cap Funds.

Market capitalization of Mid-Cap companies is less than that of big, blue chip

companies (less than Rs. 2500 crore but more than Rs. 500 crore) and Small-

Cap companies have market capitalization of less than Rs. 500 crore. Market

Capitalization of a company can be calculated by multiplying the market price

40

of the company's share by the total number of its outstanding shares in the

market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of

Large-Cap Companies which gives rise to volatility in share prices of these

companies and consequently, investment gets risky.

Option Income Funds:-

While not yet available in India, Option Income Funds write

options on a large fraction of their portfolio. Proper use of options can help to

reduce volatility, which is otherwise considered as a risky instrument. These

funds invest in big, high dividend yielding companies, and then sell options

against their stock positions, which generate stable income for investors.

DIVERSIFIED EQUITY FUNDS: -

Except for a small portion of investment in liquid money market,

diversified equity funds invest mainly in equities without any concentration on a

particular sector(s). These funds are well diversified and reduce sector-specific

or company-specific risk. However, like all other funds diversified equity funds

too are exposed to equity market risk. One prominent type of diversified equity

fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a

minimum of 90% of investments by ELSS should be in equities at all times.

ELSS investors are eligible to claim deduction from taxable income (up to Rs 1

lakh) at the time of filing the income tax return. ELSS usually has a lock-in

period and in case of any redemption by the investor before the expiry of the

lock-in period makes him liable to pay income tax on such income(s) for which

he may have received any tax exemption(s) in the past.

Equity Index Funds: -

41

Equity Index Funds have the objective to match the performance of

a specific stock market index. The portfolio of these funds comprises of the

same companies that form the index and is constituted in the same proportion as

the index. Equity index funds that follow broad indices (like S&P CNX Nifty,

Sensex) are less risky than equity index funds that follow narrow sectoral

indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are less

diversified and therefore, are more risky.

VALUE FUNDS:-

Value Funds invest in those companies that have sound

fundamentals and whose share prices are currently under-valued. The portfolio

of these funds comprises of shares that are trading at a low Price to Earnings

Ratio (Market Price per Share / Earning per Share) and a low Market to Book

Value (Fundamental Value) Ratio. Value Funds may select companies from

diversified sectors and are exposed to lower risk level as compared to growth

funds or specialty funds. Value stocks are generally from cyclical industries

(such as cement, steel, sugar etc.) which make them volatile in the short-term.

Therefore, it is advisable to invest in Value funds with a long-term time horizon

as risk in the long term, to a large extent, is reduced.

EQUITY INCOME OR DIVIDEND YIELD FUNDS: -

The objective of Equity Income or Dividend Yield Equity

Funds is to generate high recurring income and steady capital appreciation for

investors by investing in those companies which issue high dividends (such as

Power or Utility companies whose share prices fluctuate comparatively lesser

than other companies' share prices). Equity Income or Dividend Yield Equity

Funds are generally exposed to the lowest risk level as compared to other equity

funds.

DEBT / INCOME FUNDS:-

42

Funds that invest in medium to long-term debt instruments issued

by private companies, banks, financial institutions, governments and other

entities belonging to various sectors (like infrastructure companies etc.) are

known as Debt / Income Funds. Debt funds are low risk profile funds that seek

to generate fixed current income (and not capital appreciation) to investors. In

order to ensure regular income to investors, debt (or income) funds distribute

large fraction of their surplus to investors. Although debt securities are

generally less risky than equities, they are subject to credit risk (risk of default)

by the issuer at the time of interest or principal payment. To minimize the risk

of default, debt funds usually invest in securities from issuers who are rated by

credit rating agencies and are considered to be of "Investment Grade". Debt

funds that target high returns are more risky. Based on different investment

objectives, there can be following types of debt funds:-

Diversified Debt Funds: -

Debt funds that invest in all securities issued by entities belonging to

all sectors of the market are known as diversified debt funds. The best feature of

diversified debt funds is that investments are properly diversified into all sectors

which results in risk reduction. Any loss incurred, on account of default by a

debt issuer, is shared by all investors which further reduces risk for an

individual investor.

Focused Debt Funds: -

Unlike diversified debt funds, focused debt funds are narrow focus

funds that are confined to investments in selective debt securities, issued by

companies of a specific sector or industry or origin. Some examples of focused

debt funds are sector, specialized and offshore debt funds, funds that invest only

in Tax Free Infrastructure or Municipal Bonds. Because of their narrow

orientation, focused debt funds are more risky as compared to diversified debt

43

funds. Although not yet available in India, these funds are conceivable and may

be offered to investors very soon.

High Yield Debt funds: -

As we now understand that risk of default is present in all debt funds,

and therefore, debt funds generally try to minimize the risk of default by

investing in securities issued by only those borrowers who are considered to be

of "investment grade". But, High Yield Debt Funds adopt a different strategy

and prefer securities issued by those issuers who are considered to be of "below

investment grade". The motive behind adopting this sort of risky strategy is to

earn higher interest returns from these issuers. These funds are more volatile

and bear higher default risk, although they may earn at times higher returns for

investors.

Assured Return Funds: -

Although it is not necessary that a fund will meet its objectives or

provide assured returns to investors, but there can be funds that come with a

lock-in period and offer assurance of annual returns to investors during the lock-

in period. Any shortfall in returns is suffered by the sponsors or the Asset

Management Companies (AMCs). These funds are generally debt funds and

provide investors with a low-risk investment opportunity. However, the security

of investments depends upon the net worth of the guarantor (whose name is

specified in advance on the offer document). To safeguard the interests of

investors, SEBI permits only those funds to offer assured return schemes whose

sponsors have adequate net-worth to guarantee returns in the future. In the past,

UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI)

that assured specified returns to investors in the future. UTI was not able to

44

fulfill its promises and faced large shortfalls in returns. Eventually, government

had to intervene and took over UTI's payment obligations on itself. Currently,

Sundaram BNP Paribas AMC in India offers assured return schemes to

investors fund called million millionaires plan.

Fixed Term Plan Series: -

Fixed Term Plan Series usually are closed-end schemes having short

term maturity period (of less than one year) that offer a series of plans and issue

units to investors at regular intervals. Unlike closed-end funds, fixed term plans

are not listed on the exchanges. Fixed term plan series usually invest in debt /

income schemes and target short-term investors. The objective of fixed term

plan schemes is to gratify investors by generating some expected returns in a

short period.

GILT FUNDS:-

Also known as Government Securities in India, Gilt Funds invest in

government papers (named dated securities) having medium to long term

maturity period. Issued by the Government of India, these investments have

little credit risk (risk of default) and provide safety of principal to the investors.

However, like all debt funds, gilt funds too are exposed to interest rate risk.

Interest rates and prices of debt securities are inversely related and any change

in the interest rates results in a change in the NAV of debt/gilt funds in an

opposite direction.

MONEY MARKET / LIQUID FUNDS:-

Money market / liquid funds invest in short-term (maturing

within one year) interest bearing debt instruments. These securities are highly

liquid and provide safety of investment, thus making money market / liquid

funds the safest investment option when compared with other mutual fund

types. However, even money market / liquid funds are exposed to the interest

45

rate risk. The typical investment options for liquid funds include Treasury Bills

(issued by governments), Commercial papers (issued by companies) and

Certificates of Deposit (issued by banks).

HYBRID FUNDS:-

As the name suggests, hybrid funds are those funds whose

portfolio includes a blend of equities, debts and money market securities.

Hybrid funds have an equal proportion of debt and equity in their portfolio.

There are following types of hybrid funds in India:

Balanced Funds: -

The portfolio of balanced funds includes assets like debt

securities, convertible securities, and equity and preference shares held in a

relatively equal proportion. The objectives of balanced funds are to reward

investors with a regular income, moderate capital appreciation and at the same

time minimizing the risk of capital erosion. Balanced funds are appropriate for

conservative investors having a long term investment horizon.

Growth-and-Income Funds: -

Funds that combine features of growth funds and income funds are

known as Growth-and-Income Funds. These funds invest in companies having

potential for capital appreciation and those known for issuing high dividends.

The level of risks involved in these funds is lower than growth funds and higher

than income funds.

46

ASSET ALLOCATION FUNDS: -

Mutual funds may invest in financial assets like equity, debt, money

market or non-financial (physical) assets like real estate, commodities etc..

Asset allocation funds adopt a variable asset allocation strategy that allows fund

managers to switch over from one asset class to another at any time depending

upon their outlook for specific markets. In other words, fund managers may

switch over to equity if they expect equity market to provide good returns and

switch over to debt if they expect debt market to provide better returns. It

should be noted that switching over from one asset class to another is a decision

taken by the fund manager on the basis of his own judgment and understanding

of specific markets, and therefore, the success of these funds depends upon the

skill of a fund manager in anticipating market trends.

COMMODITY FUNDS:-

Those funds that focus on investing in different commodities (like

metals, food grains, crude oil etc.) or commodity companies or commodity

futures contracts are termed as Commodity Funds. A commodity fund that

invests in a single commodity or a group of commodities is a specialized

commodity fund and a commodity fund that invests in all available

commodities is a diversified commodity fund and bears less risk than a

specialized commodity fund. "Precious Metals Fund" and Gold Funds (that

invest in gold, gold futures or shares of gold mines) are common examples of

commodity funds.

REAL ESTATE FUNDS:-

Funds that invest directly in real estate or lend to real estate

developers or invest in shares/securitized assets of housing finance companies,

are known as Specialized Real Estate Funds. The objective of these funds may

be to generate regular income for investors or capital appreciation.

47

FUND OF FUNDS:-

Mutual funds that do not invest in financial or physical assets, but do

invest in other Mutual Fund schemes offered by different AMCs, are known as

Fund of Funds. Fund of Funds maintain a portfolio comprising of units of other

mutual fund schemes, just like conventional mutual funds maintain a portfolio

comprising of equity/debt/money market instruments or non financial assets.

Fund of Funds provide investors with an added advantage of diversifying into

different mutual fund schemes with even a small amount of investment, which

further helps in diversification of risks. However, the expenses of Fund of

Funds are quite high on account of compounding expenses of investments into

different mutual fund schemes.

Top 10 mutual fund providers

48

1. HDFC Mutual Fund 

Inception Date – June 30th 2000 

Trustee – HDFC Trustee Company Ltd. 

Top Performing Schemes – AUM as on 30th April 09 

+ HDFC Top 200 (2338 cr) 

+ HDFC Equity (2759.30 cr) 

+ HDFC MIP Long-term (887.90 cr) 

2. Tata Mutual Fund 

Inception Date – June 30th 1995 

Trustee – Tata Trustee Company Pvt. Ltd. 

Top Performing Schemes – AUM as on 30th April 09 

+ Tata Pure Equity (269.95 cr) 

+ Tata Index Nifty (6.77 cr) 

+ Tata Short-term Bond (292.08 cr) 

3. SBI Mutual Fund 

Inception Date – June 29th 1987 

Trustee – SBI Mutual Fund Trustee Company Pvt. Ltd. 

49

Top Performing Schemes – AUM as on 30th April 09 

+ Magnum Contra (1,958.50 cr) 

+ Magnum Balanced (333.11 cr) 

+ Magnum Multiplier Plus (687.15 cr) 

4. Reliance Mutual Fund 

Inception Date - June 30th 1995 

Trustee – Reliance Capital Trustee Company Ltd. 

Top Performing Schemes – AUM as on 30th April 09 

+ Reliance MIP (168.52 cr) 

+ Reliance Banking Retail (681.25 cr) 

+ Reliance Diversified Power Sector Fund (3809.57 cr) 

5. DSP BlackRock Mutual Fund 

Inception Date – December 16th 1996 

Trustee – DSP Merrill Lynch Trustee Company Pvt. Ltd. 

Top Performing Schemes – AUM as on 30th April 09 

+ DSPBR top 100 Equity (1167.08 cr) 

+ DSPBR Equity (919.77 cr) 

50

+ DSPBR GSF Longer Duration (425.67 cr) 

6. Kotak Mutual Fund 

Inception Date – June 23rd 1998 

Trustee – Kotak Mahindra Trustee Company Ltd. 

Top Performing Schemes – AUM as on 30th April 09 

+ Kotak Bond Reular (445.69 cr) 

+ Kotak 30 (688.14 cr) 

+ Kotak opportunities (658.50 cr) 

7. Principal Mutual Fund 

Inception Date – November 25th 1994 

Trustee – Principal Trustee Co. Pvt. Ltd 

Top Performing Schemes – AUM as on 30th April 09 

+ Principal Child Benefit (19.81 cr) 

+ Principal Index (21.88 cr) 

+ Principal Personal Tax Saver (332.53 cr) 

8. Sundaram BNP Paribas Mutual Fund 

Inception Date – August 24th 1996 

51

Trustee – Sundaram BNP Paribas Trustee Company Limited 

Top Performing Schemes – AUM as on 30th April 09 

+ Sundaram BNP Paribas taxsaver (703.54 cr) 

+ Sundaram BNP Paribas Select Focus Fund (880.78 cr) 

+ Sundaram BNP Paribas Bond Saver (59.12 cr) 

9. Franklin Templeton Mutual Fund 

Inception Date – February 19th 1996 

Trustee – Franklin Templeton Trustee Services Pvt. Ltd. 

Top Performing Schemes – AUM as on 30th April 09 

+ Franklin India Blue Chip Fund (1642.87 cr) 

+ Templeton IGSF PF (32.68 cr) 

+ Franklin India Prima Plus (1153.20 cr) 

10. Birla Sun Life Mutual Fund 

Inception Date - December 24th 1994 

Trustee – Birla Sun Life Trustee Co. Ltd. 

Top Performing Schemes – AUM as on 30th April 09 

52

+ Birla GSF Long Term (10.48 cr.) 

+ Birla Frontline Equity (481.14 cr) 

+ Birla'95 (127.12 cr) 

EQUITY SHARES

ABOUT SHARES:-

53

At the most basic level, stock (often referred to as shares) is ownership, or

equity, in a company. Investors buy stock in the form of shares, which represent

a portion of a company's assets (capital) and earnings (dividends).

As a shareholder, the extent of your ownership (your stake) in a company

depends on the number of shares you own in relation to the total number of

shares available For example, if you buy 1000 shares of stock in a company that

has issued a total of 100,000 shares, you own one per cent of the company.

While one per cent seems like a small holding, very few private investors are

able to accumulate a shareholding of that size in publicly quoted companies,

many of which have a market value running into billions of pounds. Your stake

may authorize you to vote at the company's annual general meeting, where

shareholders usually receive one vote per share.

In theory, every stockholder, no matter how small their stake, can exercise some

influence over company management at the annual general meeting. In reality,

however, most private investors' stakes are insignificant. Management policy is

far more likely to be influenced by the votes of large institutional investors such

as pension funds.

a) STOCKS SYMBOLS:-

A stock symbol, or 'Epic' symbol, is the standard abbreviation of a stock's name.

You can find stock symbols wherever stock performance information is

published - for example, newspaper stock listings and investment websites.

Company names also have abbreviations called ticker symbols. However, it's

worth remembering that these may vary at the different exchanges where the

company is quoted.

b) PERFORMANCE INDICATORS:-

Here is a list of the standard performance indicators

Performance Indicator Definition

54

Closing price The last price at which the stock was bought or

sold

High and low The highest and lowest price of the stock from the

previous trading day

52 week range The highest and lowest price over the previous 52

weeks

Volume The amount of shares traded during the previous

trading day High and low

Net change The difference between the closing price on the last

trading day and the closing price on the trading day

prior to the last

THE STOCK EXCHANGES:-

A marketplace in which to buy or sell something makes life a lot easier.

The same applies to stocks. A stock exchange is an organization that provides a

marketplace in which investors and borrowers trade stocks. Firstly, the stock

exchange is a market for issuers who want to raise equity capital by selling

shares to investors in an Initial Public Offering (IPO). The stock exchange is

also a market for investors who can buy and sell shares at any time.

a) Trading shares on the stock exchange:

As an investor in the INDIA, you can't buy or sell shares on a stock exchange

yourself. You need to place your order with a stock exchange member firm (a

stockbroker) who will then execute the order on your behalf. The NSE AND

BSE are the leading stock exchange in the INDIA. Trading is done through

computerized systems.

b) The trading process:-

55

If you decide to buy or sell your shares, you need to contact a stockbroker who

will buy or sell the shares on your behalf. After receiving your order, the

stockbroker will input the order on the SETS or SEAQ system to match your

order with that of another buyer or seller. Details of the trade are transmitted

electronically to the stockbroker who is responsible for settling the trade. You

will then receive confirmation of the deal.

c) Types of shares available on the stock exchange:-

You cannot trade all stocks on the stock exchange. To be listed on a stock

exchange, a stock must meet the listing requirements laid down by that

exchange in its approval process. Each exchange has its own listing

requirements, and some exchanges are more particular than others. It is possible

for a stock to be listed on more than one exchange. This is known as a dual

listing.

FIXED DEPOSITE

56

A fixed deposit is best suited for those investors who want to invest a lump sum

of money at a low risk and are comfortable committing it for a fixed period of

time, and earn a rate of interest on th same.

       Some of the salient features of a bank deposit are:

 Flexible Deposit Terms : The tenure of fixed deposits can vary from as

low as 7, 15, 30 or 45 days to 3, 6 months, 1 year, 1.5 years to 5 years.

The minimum deposit amount also varies with each bank. It can range

from as low as Rs. 100 to an unlimited amount with some banks. The

amounts can be in multiple of Rs. 100.

 Great Deals: The banks are free to offer varying rates of interest for

products of different maturities. If you are flexible in terms of deposit

tenures, you might find differential interest rates in odd tenures like 390

days or 200 days.

 Safe Investments: Bank deposits are generally safe investments because

they are insured under the Deposit Insurance & Credit Guarantee Scheme

of India.

 Flexible Interest Payment Terms : A Bank Fixed Deposit gives you the

option of taking the interest income, as a lump-sum amount on its

maturity as well as every quarter (quarterly interest payment) or every

month (monthly interest payment)

 Electronic Clearing: The Interest payable on Fixed Deposit can also be

transferred directly to Savings Bank or Current Account of the customer.

 Compounding: Compounding of fixed deposit interest rate is available

for all deposits more than 3 months.

Tax implications

57

The interest income earned on a deposit is taxable at the same tax slab as the

customer is in. It will be added to his income in the year under the head “Other

Income”.

 

Fees and Charges

Normally, there are no charges for a plain vanilla fixed deposit account.

Charges are usually levied on premature withdrawal of the deposit or taking

additional features like a debit card against it.

 

Alternatives to Fixed Deposit Accounts

 

FMP- Fixed Maturity Plans ( A type of mutual fund)

The similarity first: Both have fixed tenures.

The differences:

1. Returns: A fixed deposit in India gives assured returns. You know what

you are getting and when. An FMP will give an indicative, but not

assured, return.

2. Investment Amount: You will be expected to invest a minimum of Rs

5,000 in an FMP. Not so in the case of a bank deposit, which can be less.

3. Tax Treatment: An FMP gets preferential tax treatment making it a better

option then Fixed deposits for returns on a post tax basis. While fixed

deposits are taxed at the normal tax rate – FMP dividends are tax free in

the hands of the investor ( there is a 14.26% Dividend distribution tax

deducted at source). And in case the investor opts for the growth option

58

for tenures more than one year, his gains will be taxed as long term

capital gains on debt investments. The tax rate under which is 10%

without indexation and 20% with indexation benefit.

Insurance

59

People need insurance in the first place.An insurance policy is primarily meant

to protect the income of the family’s breadearners. The idea is if any one or both

die their dependents continue to live comfortably.The circle of life begins at

birth follower by education , marraige and eventually after a lifetime of work

we look forward to life of retirement . Our finances too tend to change as we go

through the various phases of life. In the first twenty of our life, we are

financially and emotionally dependents on our parents and their are no financial

committments to be met.In the next twenty years we gain financial

independence and provide financial independence to our families. This is also

the stage when our income may be unable to meet the growing expenses of a

young household. In the next twenty as we see our investments grow after our

children grow and become financially independent. Insurance is a provision for

the distribution of risks that is to say it is a financial provision against loss from

unavoidable disasters. The protection which it affords takes form of a gurantee

to indemnify the insured if certain specified losses occur. The principle of

insurance so far as the undertaking of the obligation is concerned is that for the

payment of a certain sum the gurantee will be given to reimburse the insured.

The insurer in accepting the risks so distributes them that the total of all the

amounts is paid for this insurance protection will be sufficient to meet the losses

that occur. Insurance then provide divided responsibilty. This principle is

introduced in most stores where a division is made between the sales clerk and

the cashiers department the arrangement dividing the risks of loss. The

insurance principle is similarly applied in any other cases of divided

responsibilty. As a business however insurance is usually recognized as some

form of securing a promise of indemnity by the payment of premium and the

fulfillment of certain other stipulations

Types of insurance

60

Term insurance plans

Term insurance is the cheapest form of life insurance available. Since a term

insurance contract only pays in the event of eventuality the life cover comes at

low premium rates . Term insurance is a usefu tool to purchase against risk of

early death and protection of an asset.

Endowment plans

Endowment plans are savins and protection plans that provide a dual benifit of

protection as well as savings. Endowment plans pay a death benifit in the event

of an eventuality should the customer survive the benifit period a maturity

benifit is paid to the life insured.

Whole of life plans

A whole of life plan provides life insurance cover to an individua upto a

specified age . A whole of life plan is suitable for an individual who is looking

for an extended life insurance cover and /or wants to pay premium over as long

as tenure as possible to reduce the amount of upfront premium payment.

Pension plans

Pension plans allow an individual to save in a tax deffered manner. An

individual can either contribute through regular premiums or make a single

premium investments. Savings accumulate over the deferment period. Once the

contract reaches the vesting age , the individual has the option of choosing an

annuity plan from a life insurance company. An annuity is paid till the life the

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lifetime of the insured or a pre-determined period depending upon the annuity

option chosen by the life insured.

Unit Linked Insurance Plans

Unit linked insurance plan (ULIP) is life insurance solution that provides for the

benefits of risk protection and flexibility in investment. The investment is

denoted as units and is represented by the value that it has attained called as Net

Asset Value (NAV). The policy value at any time varies according to the value

of the underlying assets at the time.

In a ULIP, the invested amount of the premiums after deducting for all the

charges and premium for risk cover under all policies in a particular fund as

chosen by the policy holders are pooled together to form a Unit fund. A Unit is

the component of the Fund in a Unit Linked Insurance Policy.

The returns in a ULIP depend upon the performance of the fund in the capital

market. ULIP investors have the option of investing across various schemes, i.e,

diversified equity funds, balanced funds, debt funds etc. It is important to

remember that in a ULIP, the investment risk is generally borne by the investor.

In a ULIP, investors have the choice of investing in a lump sum (single

premium) or making premium payments on an annual, half-yearly, quarterly or

monthly basis. Investors also have the flexibility to alter the premium amounts

during the policy's tenure. For example, if an individual has surplus funds, he

can enhance the contribution in ULIP. Conversely an individual faced with a

liquidity crunch has the option of paying a lower amount (the difference being

adjusted in the accumulated value of his ULIP). ULIP investors can shift their

investments across various plans/asset classes (diversified equity funds,

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balanced funds, debt funds) either at a nominal or no cost.

Expenses Charged in a ULIP

Premium Allocation Charge:

A percentage of the premium is appropriated towards charges initial and

renewal expenses apart from commission expenses before allocating the units

under the policy.

Mortality Charges:

These are charges for the cost of insurance coverage and depend on number of

factors such as age, amount of coverage, state of health etc.

Fund Management Fees:

Fees levied for management of the fund and is deducted before arriving at the

NAV.

Administration Charges:

This is the charge for administration of the plan and is levied by cancellation of

units.

Surrender Charges:

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Deducted for premature partial or full encashment of units.

Fund Switching Charge:

Usually a limited number of fund switches are allowed each year without

charge, with subsequent switches, subject to a charge.

Service Tax Deductions:

Service tax is deducted from the risk portion of the premium.

Top insurance companies

Life Insurance Corporation of India :

This leading Insurance company of India was established in the year 1956 by

the alliance of 16 non-Indian companies,154 Indian Insurance Companies and

75 provident. It has 100 divisional offices,2048 computerized branches,7 zonal

offices and the company's corporate office. It has introduced new strategies for

the facilitation of the customers like the IVRS,ECS,ATM Premium payment

facility and the company's Info centers in Mumbai, Delhi, Chennai, Kolkata and

many others cities.

Bajaj Allianz Life Insurance:

This Indian Insurance company is a joint venture of Alliance AG,which is one

among the largest Life Insurance companies and Bajaj Auto,one among the

biggest 2- & 3 wheeler producers in the world. The Company has various plans

for the customers like the Pension,Retirement,Life Time Care,Health Care,Life

64

Insurance Online,Life Insurance Saving Plans, and online services like the

Address change,Renewal Premium Payment etc.

Tata AIG Life :

This renowned life Insurance company in India offers a wide array of products

related to life insurance for associations,individuals and businesses. The

company offers high quality solutions to its corporate Indian clients. It renders

services like the AIG Health First,AIG Health Life Protector, Tata AIG Life

Hospi Cash Back, Tata AIG Life Maha Gold, Tata AIG Life Assure 10 Years

and many others. The company is a joint venture of America International

Group and TATA group.

Birla Sun Life Insurance:

It is one of the major insurance companies in India and a joint venture of Sun

Life Financials and Aditya Birla group. The company provides Life Insurance

Solutions to meet the needs of Protection, Retirement and Saving .It has

recently launched the Money back Plus Plan and offers Insurance programs like

the Children,NRI,Riders,Health etc. 

SBI Life :

This renders premium Insurance solutions like SBI Life-Smart ULIP,SBI Life-

Group Criti9, SBI Life-Unit Plus Child Plan etc. It also offers services like the

NRI services,Premium Payment Procedure,ECS Facility,RPI/RFI and many

others. SBI Life is a joint venture of BNP Paribas Assurance and SBI.

 

Max New York Life:

65

This Life Insurance company in India provides the best solutions related to life

insurance like children's plan, retirement solution, Investment, Protection,

Health,Savings etc. The company has 14 corporate agency tie ups, 33

bankassurance relationships and direct sales force at 14 locations. It is now

covering 36 products related to life and health insurance. 

Kotak Life Insurance:

This premier Insurance company in India offers insurance facilities related to

Savings,Investments,Child,Retirement,Protection, Kotak Long Life Secure

Plus,Kotak Long Life Health Plus etc. It opens up services like Insurance

Guide, NAV, Premium Payment Options and many others.

HDFC Standard Life:

This is one of the major market leaders in the insurance sector in India. The

company offers Insurance services like the Group Plans,Health Plans,Protection

Plans,Retirement Plans,Savings and Investment Plans etc. The customer base of

the company is about more than 7 million who depend on the company for

pension,investment,banking needs. 

Reliance Life :

The company based in India offers the best plans for Life Insurance in India.

Reliance Capital Limited's associate company is Reliance Life which is one of

the leading private sectors in India. The company provides the Protection

Plans,Child Plans,Retirement Plans and Investment plans and is also the

ultimate solver of solutions for Groups and Individuals. 

66

ICICI Prudential:

This major Insurance Company in India provides health Insurance,life

insurance,ULIPs,ULIP,Retirement Plans and many others. Life Insurance Plans

of the company covers Premium Guarantee Plans,Education Insurance Plans

etc. Pension Plans encompass LifeStage Pension,Forever Life. Health Insurance

Plans cover Hospital Care,MediAssure. 

ROYAL SUNDARAM :

Royal Sundaram brings to you the golden heritage and reliability of Sundaram

Finance (AAA), one of the most respected non-banking financial institution in

India, and RSA(formerly Royal & SunAlliance), one of the oldest and the

second largest general insurer in the UK.

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ANALYSYS

Do you know about the following Investment plans?

The sample size consists of 100 respondents and out of which almost all the

people are fully aware about investment avenues like gold and fixed deposits

and almost 95 are aware about equity shares and mutual funds

How do you get information about the following investment avenues?

INFORMATIONADVERTISEMENTEXECUTIVEFRIENDSMAGAZINES

Out of the 100 respondents about 50% of them get the information from

advertisements on the television and internet and the rest from the magazines ,

company sales executives and friends and relatives.

68

EQUITY SHARES MUTUAL FUNDS INSURANCE FIXED DEPOSIT0

20

40

60

80

100

120

YESNO

Rate the following according to your preference?

MUTUAL F

UND

INSURANCE

EQUITY

SHARES

FIXED

DEPOSIT

0102030405060708090

MORE PREFERREDMODERATELESS PREFERRED

Out of the 100 respondents asked the most preferred financial instrument is

fixed deposits and the then the rest like equity shares with 70 % and insurance.

What is your age?

AGE

20-3031-4041-5051-6060 ABOVE

Out of the respondents that were surveyed the maximum were of the age group

of 31-40.

69

What are the factors that you consider while investing in any financial

instrument?

RETURN TAX SAVING REGULAR INCOME

SAFETY0

10

20

30

40

50

60

Column1Column2Column3

Out of the respondents 50% were of the opinion that return and safety are the

main reasons behind their investment decisions .

What is your annual income?

INCOME

LESS THEN 1LAKH1-2.5LAKHS2.5-3.5LAKHS3.5-5LAKHABOVE 5LAKH

Out the total respondents around 40 %were in the income group of 2.5- 3.5lakhs

and 20% in the 3.5-5lakhs bracket

How much of your money you invest in financial instruments?

70

10%to20% 20%to30% 30%to50% MORE THAN 50%

0

10

20

30

40

50

60

Column1Column2Column3

Most of the respondents surveyed were mostly those people who invest 10 to 30

% of their money in these instruments.

How long do you prefer to keep your money invested?

LONG TERM SHORT TERM0

10203040506070

35

65 Column1

Out of the 100 respondents mostly were of the view that they invested there

money for short term

How much return do you expect from your investments?

71

10 TO 20% 20 TO 30% 30 TO 50% MORE THAN 50%

05

101520253035404550

Column1

Column1

CONCLUTION AND RECOMMENDATIONS

CONCLUTION

72

After completing the survey and watching the analysis I come to this

conclusiion that the before investment investors do have focus on Tax savings,

Income, Capiatal preservation etc. They also have a predetermination of the

time period of investment.

According to my view the age group of 21-30 can be a great potential investors

for the company as the has high risk profile, more disposible income, and the

time horizon is perfect 3-7 years ( short term).

Recommendation

73

company must follow up these high potential customers, they can be offered

Equity shares because this group of people have a high risk profile and they can

afford to takes risks which is usually associated with equity shares. This group of

customers can also be offerd Mutual funds because in that also the exposure is in

equities. ULIPS can also be offered to this group.The ULIP has a 20%-22% return

which good enough for investment. The main focus should be to reach to the

customer, these customers are aware of ULIPs and aware of other product.

Company should try to reach them and tap the investor.

Mutual Funds can also be offered as they have high risk profile. Company

should take initiative to get demat account of these customers.

The age group of 31-40 years, investors are with ‘Moderate’ risk profile, most

of the investors are from the 10,000-15,000 Rs per month disposible income.

Company will get a good investor with diluted risk profile. Company can offer

them ULIPs,and Fixed Deposits as investment instrument. Mutual funds can be

an option but that must be a

debt fund to invest.

The age group of 41-50 years, investors are from the 15,000-20,000 Rs

disposible income group. Investor in this group are invested in Insurance sector,

the primary focus of these investors are retirement and time horizon is likely to

be above 10years. This is also good potential group for the retirement plan in

ULIPs. Fixed deposits can be a good option for them.

For the age group of above 50 years, the rish profile would be low moderate,as

the term is not more than 3 years. Investors have invested in insurance sector but

in this age insurance would not be a good option for investor. Company should

try to minimise the risk tolerence by offering Fixed deposits.

74

In the survey there were lot of people who were in the age group of above 60. For

this group of people the company can target Fixed deposits which gives

continues return like monthly interests so that they can keep on getting returns.

OCCUPATION

If we see the survey data it will seen that respondents are majorly Service

peopole and Business Class. Depending upon the data I conclude that the srevice

class has a time horizon of 3-7 years and risk tolerence ‘Low- Moderate’. They

invested in FDs, Equity shares, Mutual Fund and ULIPs.

Recommendation company shoul tap these class by innovative marketing

strategies as they already invested, and offer FDs, ULIPs. Mutual fund can be a

lucrative offer if the Fund is any moderate fund or debt fund.

For the business class, the risk profile is high-very high. Most investor are with

negative return acceptability and time horizon is < 3 years. Company should

offer Mutual funds with risk profile High to very high thus investor can get a

high return. Apart from this company should offer to open demat account with

them.

Disposible Income

The disposible income bracket less than Rs.5000 per month are basically

safe investors and have not and do not prefer investing in mutual funds

and ULIP. Thus positioning of these products should be such that people

75

are attracted towards this scheme. Emphasis on marketing of the products

should be given.

Respondents under disposible income bracket Rs.5,000-Rs.10,000 have

mainly invested in insurance and real estate. But when survey was done

and their preferences was asked these respondents strongly preferred

investing in these strategies.

Disposible Income Bracket of Rs.15,000-Rs.20,000 are the strong

contenders for investing their money and these people have invested in

real estate, insurance and fixed deposits. Moreover there is mixed

preferences for their investments thus proper segmentation of the sample

should be done accordingly marketing strategies should be adopted.

Though there is a small percentage of respondents in disposible income

bracket above Rs.20,000 who least prefer investing in mutual fund. But

this is the segment which can be well targeted and their portfolio should

be such that gives them more returns. The case of ULIP is different as

people strongly prefer investing in this investment strategy. Thus

emphasis for selling ULIP in this income bracket.

Questionnaire

Research for different types of INVESTMENT PLANS in Market

Name : ______________________________________________________

Contact No :________________ Occupation_____________________

76

E mail !d:______________________________

Age : _____________________ Gender : ____________________ (M/F)

Add : ________________________________________________________

______________________________________________________________

Q1. Which type of investment mode you are willing to invest?

Long term investment plans

Short term investment plans

Q2. In which type of Investment Plan you have invested or interested to invest?

Mutual funds

Fixed deposit

Stocks/Shares

Insurance

Other _________________

Q3. Your purpose of investment?

Saving Taxes

Wealth maximization

Future security

Q4. Annual income index?

Less than Rs. 100000

Rs. 100000-250000

77

Rs. 250000-350000

Rs. 350000-500000

Rs. 500000 and above

Q5. Which Investment plan you think is more risky?

Mutual funds

Fixed deposit

Stocks/Shares

Insurance

Other ___________________

Q6. What factor you concentrating while investing?

Return

Risk

Both

Q7. Give rank to the investment plans according to risk and return factor

Mutual funds

Fixed deposit

Stocks/Shares

Insurance

Other ____________________

Q8. Are you aware with the Equity funds and Debt funds?

Yes No

78

Q9. Which plan is more precious for investment?

Mutual fund

Insurance

Stock/share

Q10. In which company, you are interested to invest your money?

LIC

HDFC

SUNDARAM

SBI

ICICI

KOTAK MAHINDRA

BAJAJ ALLIANCE

DATE: ____________________

Signature ___________________

BIBLIOGRAPHY

http://www.licindia.com/download_forms.htm

79

www.amfiindia.com

www.mutualfundsindia.com

www.mutualfundsindia.com

www.ask.com

www.faq.com

www.bseindia.com

www.amfiindia.com/mutual funds/nav/about funds/open ended schemes.com

www.investopedia/aboutus/html

sundaramfinance.com/companyinfo/sfl.asp

80