project report on mutual funds

1

A PROJECT REPORT

ON

” KOTAK MAHINDRA MUTUAL FUND ”

SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENT FOR THE AWARD OF DEGREE OF

BACHELORS IN BUSINESS ADMINISTRATION

(Session: 2011 - 2014)

UNDER THE GUIDANCE OF: SUBMITTED BY:

Ms. Shilpee Aggarwal YATINDRA

KUMAR

(MAIMS) BBA (Gen) 3rd Year

Roll no.00561101711

Maharaja Agrasen Institute of Management StudiesAffiliated to Guru Gobind Singh Indraprastha University, Delhi

PSP Area, Plot No. 1, Sector 22, Rohini, Delhi 110086

2

STUDENT DECLARATION

This is to certify that I have completed the Project Report titled”KOTAK

MAHINDRA MUTUAL FUND” under the guidance of Ms. Shilpee

Aggarwal partial fulfilment of the requirement for the award of Degree

of Bachelor of Business Administration at Maharaja Agrasen Institute of

Management Studies, Delhi. This is an original piece of work & I have

not submitted it earlier elsewhere.

Name:Chintaharan singhEnrollment No.:01161101711

3

CERTIFICATE

This is to certify that the project report titled ”KOTAK

MAHINDRA MUTUAL FUND” is an academic work done by

Yatindra Kumar submitted in the partial fulfilment of the requirement for

the award of the degree of Bachelor of Business Administration at

Maharaja Agrasen Institute of Management Studies, Delhi, under my

guidance & direction. To the best of my knowledge and belief the data&

information presented by her in the project has not been submitted earlier.

Assi.Prof. MAIMS: Ms Shilpee AggarwalSignature:

4

ACKNOWLEDGEMENT

I owe my sincere thanks and gratitude to Mrs.Shilpee Aggarwal who

inspired me by her able guidance and was a constant guiding light during

the course of project study. The support and knowledge provided by her

has been a great value addition for me and will go a long way in building

a promising career.

First of all I would like to thank Dr. C.S. SHARMA (Director of

MAIMS) who gave me this golden opportunity to learn something new

about project writing.

The help provided to me by the entire division of ”KOTAK

MAHINDRA MUTUAL FUND ”. also obliges me in making this

project to.

Chintaharan singh BBA (GEN) 3rd

YEAREnrolment

No.:01161101711

1.1 GENERAL INTRODUCTION

5

Mutual fund is a pool of funds which is divided into units of equal value and sold to

investing public and the funds so collected are utilized for collective investments in

various capitals and money market instrument. In today’s market people invest money

to gain more. So when they take into account, they mostly look out for Investment

Company where they can get more income.

Investment companies can be classified into closed-end and open-end investment

companies. Closed-end is when it is readily transferable in the market. Open-end

funds sell their own shares to investors and ready to buy back their old shares. If we

talk about the investment options today, in India we have so many investment

companies like UTI, LIC etc, all have their own special ways of servicing the

customers. The investors also feel that they are worth to be the part of that company.

These days’ people mainly look for avoiding tax so normally they look out for some

investments which can help them in doing so. When it comes to this point of view,

people mainly look out for mutual fund.

Mutual fund is a trust at law; it is a special type of managed, pooled portfolio

financial company or financial service organization that sells shares/units/stocks in

itself, to the public to obtain its resources and it invests the savings so mobilized or

pooled in a large, diversified, & sound portfolio of equity shares, bonds, money

market instruments etc., Redeemable trust certificates are sold to investors at net asset

value (NAV) plus a small commission. All interest/dividend and principal repayments

are distributed to the holders of the certificates.

1.2 THEORETICAL BACKGROUND

6

Meaning of Mutual Funds

Mutual fund is a pool of funds which is divided into units of equal value and sold to

investing public and the funds so collected are utilized for collective investment in

various capital and money market instrument. Investment is a commitment of a

person’s funds to derive future income in the form of interest, dividends, rent,

premiums, pension benefits or the appreciation of the value of their principal capital.

Investments have a return but there can be no return without risk.

Definitions

Different persons in different words have defined mutual fund.

The SEBI (MF) Regulations, 1993 defines mutual fund as “A fund established in the

form of a trust by a sponsor to raise money by the trustees through the sale of units to

the public under one or more schemes for investing in securities in accordance with

these regulations.”

Investment is the allocation of monetary resources to assets that are expected

to yield some gain or positive return over a given period of time. These assets range

from safe investments to risky investments. Investments in this form are also called

‘Financial Investment.

Characteristics of MF

7

A mutual fund actually belongs to the investors who have pooled their funds.

The ownership of the MF is in the hands of the investors.

A MF is managed by investment professionals and other service providers,

who earn a fee for their services from the fund.

The pool of funds is invested in a portfolio of marketable investment. The

value of the portfolio is updated every day.

The investor’s share in the fund is denominated by units. The value of the

units changes with change in the portfolio’s value, every day. The value of one

unit of investment is called as the net assets value or NAV.

The investment portfolio of the Mutual fund is vested according to the stated

Investment objectives of the fund.

Investment Company

A company or trust that uses its capital to invest in other companies. There are two

principal types – closed-ended and the open-ended. Shares in closed-ended

investment companies, some of which are listed on the New York Stock Exchange are

readily transferable in the open market and are bought and sold like other shares.

Open-ended funds sell their own shares to investors, stand ready to buy back their old

shares and are not listed. These funds are so called because their capitalization is not

fixed; they issue more shares as people want them.

Fig.1.1 Concept of Mutual Fund Industry

8

When an investor subscribes for the units of a mutual fund, he becomes part

owner of the assets of the fund in the same proportion as his contribution amount put

up with the corpus (the total amount of the fund). Mutual Fund investor is also known

as a mutual fund shareholder or a unit holder. Any change in the value of the

investments made into capital market instruments (such as shares, debentures etc) is

reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market

value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is

calculated by dividing the market value of scheme's assets by the total number of

units issued to the investors.

CONSTITUENTS OF MUTUAL FUND

9

Ther

e are many entities involved and the diagram below illustrates the constitution of a

mutual fund:

Fig.1.2 Constituents of Mutual Fund Industry

Formation process starts from sponsor {the investment advisor or manager}. Sponsor

selects & appoints the Board of Trustees.

Trustees again hire or contract a separate AMC that is run by professional managers.

The AMC conducts the necessary research & based on it, manages the fund or

portfolio. It is responsible for floating, managing, redeeming the schemes; it also

handles the administrative chares. It receives the fees for the services rendered by it.

The custodian is responsible for co-ordination with brokers, the actual transfer &

storage of stocks, & handling the property of the trust.

Finally the unit holders are investors from who a pool of money is collected &

invested according to the stated investment objectives. Mutual fund investors are like

10

share holders & they own the fund. They are neither lenders nor the deposit holders in

the fund. Unlike a holder of stock of company, unit holders have no voting rights.

Organization of a Mutual Fund

All mutual funds comprise four constituents – Sponsors, Trustees, Asset Management

Company (AMC) and Custodians.

1. Sponsors:

The sponsors initiate the idea to set up a mutual fund. It could be a registered

company, scheduled bank or financial institution. A sponsor has to satisfy certain

conditions, such as capital, record (at least five years’ operation in financial services),

de-fault free dealings and general reputation of fairness. The sponsors appoint the

Trustee, AMC and Custodian. Once the AMC is formed, the sponsor is just a

stakeholder.

2. Trust/ Board of Trustees:

Trustees hold a fiduciary responsibility towards unit holders by protecting their

interests. Trustees float and market schemes, and secure necessary approvals. They

check if the AMC’s investments are within well-defined limits, whether the fund’s

assets are protected, and also ensure that unit holders get their due returns. They also

review any due diligence by the AMC. For major decisions concerning the fund, they

have to take the unit holders consent. They submit reports every six months to SEBI;

investors get an annual report. Trustees are paid annually out of the fund’s assets – 0.5

percent of the weekly net asset value.

3. Fund Managers/ AMC:

11

They are the ones who manage money of the investors. An AMC takes decisions,

compensates investors through dividends, maintains proper accounting and

information for pricing of units, calculates the NAV, and provides information on

listed schemes. It also exercises due diligence on investments, and submits quarterly

reports to the trustees. A fund’s AMC can neither act for any other fund nor undertake

any business other than asset management. Its net worth should not fall below Rs. 10

crore. And, its fee should not exceed 1.25 percent if collections are below Rs. 100

crore and 1 percent if collections are above Rs. 100 crore. SEBI can pull up an AMC

if it deviates from its prescribed role.

4. Custodian:

Often an independent organization, it takes custody of securities and other assets of

mutual fund. Its responsibilities include receipt and delivery of securities, collecting

income-distributing dividends, safekeeping of the units and segregating assets and

settlements between schemes. Their charges range between 0.15-0.20 percent of the

net value of the holding. Custodians can service more than one fund.

Investment Alternatives

12

I. Direct Investment Alternatives

A. Fixed Principal Investments

i. Cash

ii. Savings account

iii. Savings Certificate

iv. Government Bonds

v. Corporate Bonds and Debentures

B. Variable Principle Securities

i. Equity Shares

ii. Convertible Debentures or Preference Securities

C. Non-Security Investments

i. Real Estate

ii. Mortgages

iii. Commodities

iv. Business Ventures

v. Art, Antiques and Other Valuables

II. Indirect Investment Alternatives

A. Pension Fund

B. Provident Fund

C. Insurance

D. Investment Companies

E. Unit Trust of India and Other Trust Funds

F. Mutual Funds

13

1.3 A comparison of different investment options with respect to their

Performance is as shown in the following table.

Options Returns Safety Volatility Liquidity Convenience

Equity High Low High High/

Low

Moderate

FI Bond Moderate High Moderate Moderate High

Debentures Moderate Moderate Moderate Low Low

Company FD Moderate Low Low Low Moderate

PPF Moderate High Low Moderate High

LIC Low High Low Low Moderate

Gold Moderate High Moderate Moderate Low

Real Estate High Moderate High Low Low

Mutual Fund High High Moderate High High

Bank Deposit Low High Low High High

14

Financial Institutions:

Financial institutions are business organizations that act as mobilizes & depositors of

savings & purveyors of credit or finance. Financial Institutions are engaged in these

activities

Financing by way of loans, advances, and so on any activity except its own.

Acquisition of shares/ stocks/ bonds/ debentures/ securities

Hire- purchase

Any class of insurance, stock- broking, etc.

Chit funds and

Collection of money by way of subscription/ sale of units or other instruments/

any other manner and their disbursement.

Financial System

Financial Markets

Financial Instruments(Claims, assets,

Financial Services

Intermediaries

Banking

Others Non- intermediaries

Regulatory

Financial Institutions

15

Fig 1.4. Typical Financial System

Non-banking

Unorganized

Primary

Organized

Short term

Secondary

Secondary

Money Market

Capital Market

Long term

Medium term

Primary

16

LEGAL & REGULATORY FRAME WORK:

Mutual funds are regulated by the SEBI (Mutual Fund) Regulations 1996. SEBI is the

regulator of all funds except off share funds. Where as Bank-sponsored mutual funds

are jointly regulated jointly by SEBI & RBI.

RBI also regulates money market & Government. Securities Markets, in which

mutual funds invest. Since the AMC & Trustee Company is Companies, they are

regulated by the department of Company affairs. They have to send periodic reports to

the Registrar of the Company (ROC) & the Company Law Board (CLB).

Regulatory institutions:

These institutions regulate Indian financial system. The major regulatory arms of the

Government of India are —

Reserve Bank of India (RBI)

Securities Exchange Board of India (SEBI) and

Association of Mutual Fund Industry (AMFI)

17

Fig.1.5. The Structure of Mutual Fund Industry

AMFISEBI RBI

Sponsor AMC CustodianTrustee

Public Sector Funds Private Sector Funds

Investor

Mutual Funds

Bank Sponsored

Financial Institutions Sponsored

Domestic

Schemes

Offshore

Closed ended

UTI

Open ended

GrowthFunds

IncomeFunds

BalancedFunds

Sect oralFunds

Special purposeFunds

Tax savingFunds

Regulatory Bodies

18

THE RESERVE BANK OF INDIA ( RBI ):

The RBI as the central bank of the country is the center of the Indian financial and

monetary system. As the apex institution it has been guiding monitoring, regulating

controlling and promoting the destiny of the Indian Financial System since its

inception. It started functioning from April 1, 1935 on the terms of the reserve Bank

of India Act 1934. It was a shareholders’ institution till January 1949, after which it

become a state-owned institution under the reserve Bank (transfer to public

ownership) of India Act, 1948.

FUNCTIONS OF RBI

Central banking functions

Supervisory functions

Promotional functions

Monetary planning and control system

FUNCTIONS

19

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The SEBI was established on April.12.1982 through an administrative order, but it

became a statutory and really powerful organization only since 1992. SEBI was set up

on 21st February.1992 through an ordinance issued on 30th January.1992. The SEBI

Act on 4th April.1992 replaced the ordinance. The SEBI is under the overall control

of the ministry of Finance, and it has head office at Mumbai. It has now become a

very important constituent of the financial regulatory framework in India.

OBJECTIVES:

To regulate stock exchanges & securities industry to promote their orderly

functioning.

To protect the interest of investors so that there is a steady flow of savings in

to the capital market and educating individual investors.

To prevent trading malpractices and aims at achieving a balance between self-

regulation by securities industry and its statutory regulation.

20

ASSOCIATION OF MUTUAL FUND INDUSTRY (AMFI)

AMFI is an Industry Association. AMFI is not yet the Self Regulatory

Organization (SRO), though SEBI consults AMFI on a number of issues. AMFI can

only issue guidelines. The objectives of AMFI are-

To define and maintain high professional and ethical standards in all areas of

operation of mutual fund industry

To interact with the Securities and Exchange Board of India (SEBI) and to

represent to SEBI on all matters concerning the mutual fund industry.

To represent to the Government, Reserve Bank of India and other bodies on all

matters relating to the Mutual Fund Industry.

To undertake nation wide investor awareness programme so as to promote

proper understanding of the concept and working of mutual funds.

To disseminate information on Mutual Fund Industry and to undertake studies

and research directly and/or in association with other bodies.

21

INDIAN MUTUAL FUND INDUSTRY

Structure Of The Indian Mutual Fund Industry

Structure wise Mutual fund Industry can be classified in to three categories:

Unit Trust of India

The Indian Mutual Fund industry is dominated by the Unit Trust of India, which has a

total corpus of Rs.51,100 crore collected from over 20 million investors. The UTI has

many funds/ schemes in all categories i.e. Equity, Balanced, Debt, Money Market 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, it is the biggest scheme

with a corpus of about 10,000 crore.

Public Sector Mutual Funds

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

banks. Canbank asset management floated by Canara Bank and SBI Funds

Management floated by 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 the funds managed by

this category of AMC’s is around Rs. 8,300 crore.

Private Sector Mutual fund

The third largest categories of mutual funds are the ones floated by the Private Sector

Domestic Mutual funds and the Private Sector Foreign Mutual Funds. The largest of

these in Private Sector Domestic Mutual funds are Cholamandalam Asset

Management Co.Ltd., J.M Capital Management Co. Ltd., Escort Asset Management

Ltd., Birla Sun Life Asset Management Pvt.Ltd., and in Private Sector Foreign

Mutual Funds these are Alliance Capital Asset Management Pvt.Ltd., Prudential

ICICI Management Co. Ltd. The aggregate corpus of the assets managed by this

category of AMC’s is about Rs. 42,200 crore .

22

History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of

India, at the initiative of the Government of India and Reserve Bank the. The history

of mutual funds in India can be broadly divided into four distinct phases

First Phase – 1964-87

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by

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

control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and

the Industrial Development Bank of India (IDBI) took over the regulatory and

administrative control in place of RBI. The first scheme launched by UTI was Unit

Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under

management.

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

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

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

Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund

established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab

National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of

India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund

in June 1989 while GIC had set up its mutual fund in December 1990. At the end of

1993, the mutual fund industry had assets under management of Rs.47, 004 crores.

23

Amou

nt

Mobili

sed

199

2-

93

Assets

Under

Managem

ent

Mobilisati

on as %

of gross

Domestic

Savings

11,057 UTI 38,247 5.2%

1,964

Pub

lic

Sect

or

8,757 0.9%

13,021Tot

al47,004 6.1%

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual

fund industry, giving the Indian investors a wider choice of fund families. Also, 1993

was the year in which the first Mutual Fund Regulations came into being, under

which all mutual funds, except UTI were to be registered and governed. The erstwhile

Kothari Pioneer (now merged with Franklin Templeton) was the first private sector

mutual fund registered in July 1993.

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

comprehensive and revised Mutual Fund Regulations in 1996. The industry now

functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual

fund houses went on increasing, with many foreign mutual funds setting up funds in

India and also the industry has witnessed several mergers and acquisitions. As at the

end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805

24

crores. The Unit Trust of India with Rs.44, 541 crores of assets under management

was way ahead of other mutual funds.

Fourth Phase – since February 2003

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

bifurcated into two separate entities. One is the Specified Undertaking of the Unit

Trust of India with assets under management of Rs.29,835 crores as at the end of

January 2003, representing broadly, the assets of US 64 scheme, assured return and

certain other schemes. The Specified Undertaking of Unit Trust of India, functioning

under an administrator and under the rules framed by Government of India and does

not come under the purview of the Mutual Fund Regulations.

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

registered with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores

of assets under management and with the setting up of a UTI Mutual Fund,

conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking

place among different private sector funds, the mutual fund industry has entered its

current phase of consolidation and growth. As at the end of October 31, 2003, there

were 31 funds, which manage assets of Rs.126726 crores under 386 schemes.

25

The graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

26

Future of Mutual Funds in India

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.

Let us discuss with the following table: Table 1.6

Aggregate deposits of Scheduled Banks in India (Rs.Crore)

Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03Mar-

04Sep-04 4-Dec

Deposits 605410 851593 989141 1131188 1280853 - 1567251 1622579

Change in %

over last yr 15 14 13 12 - 18 3

Source – RBI

Mutual Fund AUM’s Growth

Month/Year Mar-98 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sep-04 4-Dec

MF AUM's 68984 93717 83131 94017 75306 137626 151141 149300

Change in % over last 26 13 12 25 45 9 1

27

yr

Source - AMFI

Some facts for the growth of mutual funds in India :

100% growth in the last 6 years.

Number of foreign AMC's are in the que 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 rurals like the Indian insurance industry

with simple and limited products.

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

Emphasis on better corporate governance.

Trying to curb the late trading practices.

Introduction of Financial Planners who can provide need based

advice.

28

Global Scenario Of Mutual Fund Industry

The money market mutual fund segment has a total corpus of $ 1.48

trillion in the U.S.

Out of the top 10 mutual funds worldwide, eight are bank- sponsored.

Only Fidelity and Capital are non-bank mutual funds in this group.

In the U.S. the total number of schemes is higher than that of the listed

companies.

Internationally, mutual funds are allowed to go short. In India fund

managers do not have such leeway.

In the U.S. about 9.7 million households will manage their assets on-

line by the year 2003, such a facility is not yet of avail in India.

On- line trading is a great idea to reduce management expenses from

the current 2 % of total assets to about 0.75 % of the total assets.

72% of the core customer base of mutual funds in the top 50-broking

firms in the U.S. is expected to trade on-line by 2003.

29

ADVANTAGES OF MUTUAL FUNDS: -

If mutual funds are emerging as the favorite investment vehicle, it is because of the

many advantages they have over other forms and avenues of investing, particularly

for the investor who has limited resources available in terms of capital and ability to

carry out detailed research and market monitoring. The following are the major

advantages offered by mutual funds to all investors:

Portfolio diversification:

Mutual Funds normally invest in a well-diversified portfolio or securities.

Each investor in a fund is a part owner of all of the fund’s assets. This enables

him to hold a diversified investment portfolio even with a small amount of

investment that would otherwise require big capital.

Professional Management:

Even if and investor has a big amount of capital available to him, he benefits

from the professional management skills brought in the management of the

investor’s portfolio. The investment management skills, along with the needed

research into available investment options, ensure a much better return than

what an investor can manage on his own. Few investors have the skills and

30

resources of their own to succeed in today’s fast moving, global and

sophisticated markets.

Reduction/Diversification of Risk:

An investor in a mutual fund acquires a diversified portfolio, no matter how

small his investment. Diversification reduces the risk of loss, as compared to

investing directly in one or two shares or debentures or other instruments.

When and investor invests directly, all in the pool of funds with other

investors, any loss on one or two securities is also shared with other investors.

This risk reduction is one of the most important benefits of a collective

investment vehicle like the mutual fund.

Reduction of transaction cost:

What is true of risk is also true of the transaction costs. A direct investor bears

all the costs of investing such as brokerage or custody of securities. When

going through a fund. He has the benefit of economies of scale; the funds pay

lesser costs because of larger volumes, a benefit passed on to its investors.

Liquidity:

Often, investors hold shares or bonds they cannot directly, easily and quickly

sell. Investment in a mutual fund, on the other hand, is more liquid. An

investor can liquidate the investment, by selling the units to the fund if open-

31

end or selling them in the market if the fund is closed-end, and collect funds at

the end of a period specified by the mutual fund or the stock market.

Convenience and Flexibility:

Mutual Fund management companies offer many investor services that a

direct market investor cannot get. Investors can easily transfer their holdings

from one scheme to the other; get updated market information, and so on.

RISK FACTORS ASSOCIATED WITH MUTUAL FUNDS

Mutual funds & securities investments are subject to market risks and

there is no assurance or guarantee that the objectives of the Scheme

will be achieved.

Past performance of the Sponsor or that of existing Schemes of the

Fund does not indicate the future performance of the Schemes.

As with any securities investment, the NAV of the Units issued under

the scheme can go up or down depending on the factors and forces

affecting the capital and money market.

Tax laws may change, affecting the return on investment in Units.

32

TYPES OF MUTUAL FUND SCHEMES

I. Schemes according to Maturity Period:

A mutual fund scheme can be classified into open-ended scheme or close-

ended scheme depending on its maturity period.

i. Open-ended Fund/ Scheme

An open-ended fund or scheme is one that is available for subscription and

repurchase on a continuous basis. These schemes do not have a fixed maturity

period. Investors can conveniently buy and sell units at Net Asset Value

(NAV) related prices which are declared on a daily basis. The key feature of

open-end schemes is liquidity.

ii. Close-ended Fund/ Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years.

The fund is open for subscription only during a specified period at the time of

launch of the scheme. Investors can invest in the scheme at the time of the

33

initial public issue and thereafter they can buy or sell the units of the scheme

on the stock exchanges where the units 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 funds NAV related prices. SEBI Regulations stipulate

that at least one of the two exit routes is provided to the investor i.e. either

repurchase facility or through listing on stock exchanges. These mutual funds

schemes disclose NAV generally on weekly basis.

II. Schemes according to Investment Objective:

A scheme can also be classified as growth scheme, income scheme, or

balanced scheme considering its investment objective. Such schemes may be

open-ended or close-ended schemes as described earlier. Such schemes may

be classified mainly as follows:

i. Growth / Equity Oriented Scheme

The aim of Growth funds is to provide capital appreciation over the medium to

long-term. Such schemes normally invest a major part of their corpus in

equities. Such funds have comparatively high risks. These schemes provide

different options to the investors like dividend option, capital appreciation, etc.

and the investors may choose an option depending on their preferences. The

investors must indicate the option in the application form. The mutual funds

also allow the investors to change the options at a later date. Growth schemes

are good for investors having a long-term outlook seeking appreciation over a

period of time.

ii. Income / Debt Oriented Scheme

34

The aim of the income funds is to provide regular and steady investors. Such

scheme generally invests in fixed income securities such as bonds, corporate

debentures, Government securities and money market instruments. Such funds

are less risky compared to equity schemes. These funds are not affected

because of fluctuations in equity markets. The NAVs of such funds are

affected because of change in interest rates in the country.

iii. Balance Fund

The aim of balance funds is to provide both growth and regular income as

such schemes invest both in equities and fixed income securities in the

proportion indicated in their offer documents. These are appropriate for

investors looking for moderate growth. They generally invest 40-60% in

equity and debt instruments. These funds are also affected because of

fluctuations in share prices in the stock markets. However, NAVs of such

funds are likely to be less volatile compared to pure equity funds.

iv. Gilt Fund

These funds invest exclusively in government securities. Government

securities have no default risk. NAVs of these schemes also fluctuate due to

change in interest rates and other economic factors as are the case with income

or debt oriented schemes.

v. Index Funds

Index Funds replicate the portfolio of a particular index such as the BSE

Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the

35

securities in the same weight age comprising of an index. NAVs of such

schemes would rise or fall in accordance with the rise or fall in the index,

though not exactly by the same percentage due to some factors known as

“tracking error” in technical terms.

vi. Money-Market Mutual Funds

These funds invest in highly liquid and safe securities like commercial paper,

banker’s acceptances, and certificates of deposits. Treasury bills… etc., which

are called money market instruments.

vii. 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 Saving

Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the

Income Tax Act 1961.

36

2.1 OBJECTIVES OF THE STUDY

1. To track investor’s attitude, performance and behavior with respect to

financial institutions and financial products.

2. To find new and more effective ways of ensuring investor satisfaction

and to find efficient ways of communicating it.

3. To conduct the study with references to Kotak Mahindra products and

the competitive scenario in which Kotak Mahindra operates.

4. To study the structure of investment opportunities.

2.2 SCOPE OF THE STUDY

The study includes investors, financial institutions, investors who are interested in

Kotak Mahindra Asset Management Company’s mutual fund and also the individuals

37

who are interested in the investment on the mutual fund. The individuals without

investment are also included in the scope of the study.

2.3 STATEMENT OF THE PROBLEM

The investment objective of Kotak Mahindra Asset Management Co is “to generate

capital appreciation from a diversified portfolio of predominantly equity and equity

related securities or securities issued by central and state government”. Despite this

objective, the reasons like mutual fund investments are subject to market risk, there is

no assurance or guarantee that the objective of the scheme can be achieved and also

the Net Asset Value (NAV) of the units can go up or down depending on factors

affecting the capital and money market, many of the investors tend not to invest in the

mutual fund investment.

2.4 OPERATIONAL DEFINITIONS OF CONCEPTS

NET ASSET VALUE (NAV): -

38

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

fund Mutual Funds invest he 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 market value of securities of scheme

divided by the total number of units of the scheme on any particular date.

Formula of the calculation of Net Asset Value:

Market Value of Investments - Liabilities

Net Asset Value = --------------------------------------------------------------

No. of units Outstanding

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

unit".

Asset Management Company (AMC)

Professional managers run an AMC. The AMC conducts the necessary research &

based on it, manages the fund or portfolio. It is responsible for floating, managing,

redeeming the schemes; it also handles the administrative chares. It receives the fees

for the services rendered by it.

39

Risk

Risk may relate to loss of capital, delay in repayment of capital, non-payment of

interest, or variability of returns.

2.5 RESEARCH METHODOLOGY

Primary Analytical Research Method was used for the study. Questionnaire was

prepared and used for collecting the data about individual investors’ preference

towards various investment avenues, their portfolio behaviors. The research required

primary and secondary source of data. The primary data is obtained through

structured questionnaires which were collected from Investors in Jayanagar Banks and

Brokerage Offices such as Axis Bank, Reliance Money, Bajaj Capital etc,. Secondary

Data’s are the one which is collected from web site of Kotak Mahindra, investors and

company records.

Sampling Design

The Sampling technique used in this research is Convenient Judgment Sampling

Method. Judgment Random Sampling, which by using the available information,

concerning the population, attempts to design a more efficient sample. The study

includes investors, financial institutions, investors who are interested in Kotak

Mahindra Asset Management Company’s mutual fund and also the individuals who

40

are interested in the investment on the mutual fund. The individuals without

investment are also included in the study.

Sample Size

A sample size of 100 people was selected for the study. The sample for data collection

was within the geographical boundaries of Bangalore City, Jayanagar.

Sources of Data

Primary data was collected by

Questionnaires

Question schedules

Interviews

Secondary data was collected from

Fact Sheets of the Company

Websites, newspapers and journals.

Period of Study

The study was made during 1st february to 31st february 2014.

41

2.6 LIMITATIONS OF THE STUDY

1. A descriptive research was undertaken for the purpose of project. But descriptive

research has its own limitations regarding the selection of sample size of sample unit.

2. Some of the data gathered from the mutual fund holders may not be reliable.

3. Time limit was also a constraint while conducting the study. So, the study does not

give a picture of the whole market.

4. Time factor, as a period of one month, for gathering data is inadequate as the

gamut of information needs to be synchronized to give much more comprehensive

view of the problems and prospects.

5. Detailed and depth research was not conducted due to financial factors.

6. The study curtails comparison as it was done only in one city i.e. Bangalore.

7. The information provided by the organizations was limited to a far extent due to

drawbacks like competition.

42

2.7 OVERVIEW OF THE REPORT

In Chapter 1 this report bring out the General Introduction and explains the

theoretical background of the organization

Chapter 2 includes the Design of the study. It covers the objectives, scope, statement

of the problem, Review of literature, operational definitions, Research Methodology,

statement of hypothesis, sampling methods, Data Analysis tool, overview of the

Report and the limitations.

Chapter 3 includes the profile of the organization, profile of the study unit,

organizational chart and functional department of the organization.

Chapter 4 includes the analysis. It covers the Analysis & Interpretation

43

Chapter 5 includes the summary, which covers findings, contribution of the study,

Suggestions, Conclusion, Questionnaire and Bibliography.

3.1 PROFILE OF THE ORGANISATION

Corporate Profile

Kotak Mahindra is one of India's leading financial institutions, offering complete

financial solutions 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 financial needs of individuals and corporates.

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 1998 and has over 4 Lac

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. KMMF has been

registered with SEBI vide registration number MF/038/98/1 dated 23rd June 1998.

44

The sponsor company, Kotak Mahindra Finance Limited (KMFL), was converted into

Kotak Mahindra Bank Limited (Kotak Bank) in March 2003 their being granted a

Banking License by Reserve Bank of India. KMFL promoted by Mr. Uday S Kotak,

Mr. S.A.A.Pinto and Kotak & Co., was incorporated on November 21, 1985, under

the name Kotak Capital Management Finance Limited.

In early 1986, the promoters were joined by Late Mr.Harish Mahindra and Mr. Anand

G Mahindra and the Company’s name was changed to Kotak Mahindra Finance

Limited. Kotak & Co is a highly respected trading company of Mumbai, with

international business. KMFL started with a capital base of Rs.30.88 lakhs. From

being a provider of a single financial product, KMFL grew substantially during the

seventeen years of its existence into a highly diversified financial services company

and has now converted into a Bank. As on September 30, 2005, the net worth of

Kotak Bank is around Rs. 800 crore and combined with its subsidiaries, the Group net

worth (before minority interest) is around Rs. 2,000 crore. There are over 47,000

shareholders of Kotak Bank.

The Sponsor and its subsidiaries / associates offer wide ranging financial services

such as loans, lease and hire purchase, consumer finance, home loans, commercial

vehicles and car finance, investment banking, stock broking, primary market

distribution of equity and debt products and life insurance. The group has offices in

over 88 Indian cities and also present internationally in Mauritius, London, Dubai and

New York. Kotak Mahindra (UK) Limited, an ultimate subsidiary of Kotak Bank, is

the first company owned from India to be registered with the Financial Services

Authority in UK. Kotak Mahindra Old Mutual Life Insurance Limited is a joint

45

venture between Kotak Bank and Old Mutual Plc based in the UK and with large

presence in the South African insurance market.

Some of the other subsidiaries of Kotak Bank are Kotak Mahindra Securities Limited,

Kotak Mahindra Prime Limited, Kotak Mahindra International Limited, Kotak

Mahindra Private-Equity Trustee Limited, Kotak Mahindra Investments Limited,

Kotak Mahindra Inc., and Kotak Forex Brokerage Limited.The Sponsor has been

consistently profitable and dividend paying company since inception. All group

companies are professionally run companies, employing over 5,000 professional staff

including CAs, MBAs and Engineers.

Credit recognitions and awards :

NDTV AWARDS, 2006

LIPPER FUND AWARDS, 2006

ICRA AWARDS, 2006

ICRA MFR 1 (December 2004 & December 2005)

OUTLOOK MONEY BEST WEALTH CREATOR DEBT 2003

CRISIL BEST FUND AWARD 2003

46

3.2 KOTAK MAHINDRA GROUP

Kotak Mahindra is one of India's leading financial conglomerates, offering complete

financial solutions 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 corporate.

The group has a net worth of over Rs. 5,609 crore, employs around 17,100 people in

its various businesses and has a distribution network of branches, franchisees,

representative offices and satellite offices across 344 cities and towns in India and

offices in New York, London, Dubai, Mauritius and Singapore. The Group services

around 3.6 million customer accounts.

The journey so far

47

Key group companies and their businesses

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.

48

Kotak Mahindra Capital Company Kotak Mahindra Capital Company Limited

(KMCC) is India's premier Investment Bank. KMCC's core business areas

include Equity Issuances, Mergers & Acquisitions, Structured Finance and

Advisory Services.

Kotak Securities Kotak Securities Ltd. is one of India's largest brokerage and

securities distribution houses. Over the years, Kotak Securities has been one of

the leading investment broking houses catering to the needs of both

institutional and non-institutional investor categories with presence all over

the country through franchisees and coordinators. Kotak Securities Ltd. offers

online (through www.kotaksecurities.com) and offline services based on well-

researched expertise and financial products to non-institutional investors.

Kotak Mahindra Prime Kotak Mahindra Prime Limited (KMP) (formerly

known as Kotak Mahindra Primus Limited) has been formed with the

objective of financing the retail and wholesale trade of passenger and multi

utility vehicles in India. KMP offers customers retail finance for both new as

well as used cars and wholesale finance to dealers in the automobile trade.

KMP continues to be among the leading car finance companies in India.

Kotak Mahindra Asset Management Company Kotak Mahindra Asset

Management Company Kotak Mahindra Asset Management Company

(KMAMC), a subsidiary of Kotak Mahindra Bank, is the asset manager for

Kotak Mahindra Mutual Fund (KMMF). KMMF manages funds in excess of

Rs 20,800 crore and offers schemes catering to investors with varying risk-

http://www.kotaksecurities.com/

49

return profiles. It was the first fund house in the country to launch a dedicated

gilt scheme investing only in government securities.

Kotak Mahindra Old Mutual Life Insurance Limited Kotak Mahindra Old

Mutual Life Insurance Limited is a joint venture between Kotak Mahindra

Bank Ltd. and Old Mutual plc. Kotak Life Insurance helps customers to take

important financial decisions at every stage in life by offering them a wide

range of innovative life insurance products, to make them financially

independent.

DIRECTORS TRUSTEE COMPANY

Uday S. Kotak B.Com, MMS has been an Executive Vice Chairman

and Managing Director of Kotak Mahindra Bank Limited (Formerly

known as Kotak Mahindra Finance Limited) since August 1, 2002.

Mr. Kotak is the principal founder and promoter of Kotak Mahindra

Finance Ltd. He is responsible for the growth of Kotak Mahindra from

a fledgling finance company in 1985 to a financial institution

providing the full basket of financial services today. He serves as

Chairman of the Board.

50

Mr. Amit Desai is a graduate in Commerce and Law from the

Bombay University. He is an advocate and has about 20 years of

experience in criminal, economic and revenue laws. Mr. Desai is

associated with the Sponsor.

Mr. Girish Sharedalal is a graduate in Commerce and Arts and also a

Fellow of the Institute of Chartered Accountants of India. Formerly a

Senior Partner of Messrs Dalal, Desai and Kumana, a firm of

Chartered Accountants, he has about 44 years of experience in the

field of audit, taxation and management consultancy.

Mr. Tushar Mavani is a graduate in Commerce and Law from the

Bombay University. He is a partner with Messrs Mulla & Mulla &

Craigie Blunt & Caroe and has about 14 years of experience in the

legal field.

Mr. Anirudha Barwe is a postgraduate in Mathematics and also a

Certified Associate of Indian Institute of Bankers,Mumbai. Mr. Barwe

has about 43 years of experience in the field of banking and financial

services. Mr. Barwe was actively associated with and responsible to a

great extent for the success of the Resurgent India Bond issue of SBI.

Mr. Barwe retired as the Managing Director of SBI Capital Markets

Limited in October 1998. After retirement, Mr. Barwe worked with

IDFC as Chief Financial Officer for 3 years.

51

Mr. Chandrashekhar Sathe is a graduate with B. Tech.(Chemical

Engineering) from IIT, Mumbai. He has over 27 years' experience in

Banking and Finance. He has been a part of the Senior Management

team of the Kotak Mahindra Group since 1992 and was responsible

for setting up the Fixed Income Securities capability of Kotak

Mahindra Capital Company. Mr. Sathe is a widely consulted expert on

Foreign Exchange and Money Markets in India and is a frequent

contributor to financial newspapers, magazines and TV News

channels. Mr. Sathe was the Chief Executive Officer of the AMC for

the period, 1st April, 1998 to 30th November, 2001 and currently

heads the Risk Management function at Kotak Mahindra Bank

Limited. Mr. Sathe is associated with the Sponsor.

3.3 SCHEME DETAILS OF KOTAK MAHINDRA

1. KOTAK 30

Objective: - The investment objective is to generate capital appreciation from a

portfolio of predominantly equity and equity related securities with investment in,

generally not more than 30 stock.

52

Structure :- Open Ended Equity Growth Scheme

Minimum investment:- Rs 5,000

2. KOTAK TECH


predominantly equity and equity related securities issued by multinational

companies.

Structure: - Open Ended Equity Growth Scheme.


3. KOTAK MNC


portfolio of predominantly equity and equity related securities issued by multinational

companies.

Structure: - Open Ended Equity Growth Scheme

Minimum investment: - Rs 5,000

53

4. KOTAK BALANCE

Objective: - The investment objective is to achieve growth by investing in Equity

and equity related instruments, balanced with income generation by Investing in debt

and money market instruments

Structure :- Open Ended Balanced Scheme.


5. KOTAK INCOME PLUS

Objective: - To enhance returns over a portfolio of debt instruments with a moderate

exposure in Equity & Equity related instruments

Structure:- Open Ended Income Scheme

Minimum Investment: - Rs 5,000

54

6. KOTAK GILT

Objective: - To generate risk free returns through investments in sovereign Securities

issued by the central government and / or a state government and / or reverse repos

in such securities

Structure: - Open Ended Dedicated Gilt Scheme

Minimum Investment: - Savings & investment Plan; Rs 5,000

Serial Plans; Rs 10 lakhs

7. KOTAK BOND

Objective: - To create a portfolio of debt and money market instruments of

different maturities so as to spread the risk across a wide maturity Horizon & different

kinds of issuers in the debt market

Kotak Bond Short Term Plan

55

To provide reasonable returns and high level of liquidity by investing

in debt & money market instruments of different maturities, So as to

spread the risk across different kinds of issuers in the debt market.

Structure: - Open Ended Debt Scheme

Minimum Investment: - Deposit Plan Rs 5,000

Wholesale Plan: Rs 1 lakh

Short Term Plan: Rs5, 000

Institutional Plan; Rs 1 crore

8. KOTAK LIQUID

Objective; - To provide reasonable returns and high level of liquidity by Investing in

debt and money market instruments of different Maturities so as to spread the risk

across different kinds of Issuers in the debt markets

Structure; - Open Ended Debt Scheme

56

Minimum Investment: - Rs 5,000

Institutional plan: Rs 1 crore

Institutional Premium Plan: Rs 20 crores

9. KOTAK FLOATER

Objective: - To reduce the interest rate risk associated with investments in fixed rate

instruments by investing predominantly in floating rate securities, money market

Instruments and using appropriate derivatives

Structure: Open Ended Debt Scheme

Minimum Investment: Rs 5,000.

10. KOTAK DYNAMIC INCOME

Objective: To maximize returns through an active management of a portfolio of debt

and securities.

Structure: Open Ended Debt Scheme

57

Minimum Investment: Rs 5,000

11. KOTAK GLOBAL INDIA

Objective: To generate capital appreciation from a diversified portfolio of

predominantly equity and equity related securities issued by globally competitive

Indian Companies.

Highlights

Investment in a diversified equity portfolio of Globally Competitive Indian

Companies.

Tax advantage

Recurring Investment Facility available during continuous offer.

Redemption on all Working days.

3.4 FACILITIES PROVIDED BY KOTAK MAHINDRA

1. Systematic Investment Plan (SIP):

Management of one's finances to attain a defined goal calls for a lot of

discipline, many a times self-imposed. Our Systematic Investment Plan is a tool,

which can help you, inject this discipline in your financial management efforts. Our

58

Systematic Investment Plan (SIP) provides you the facility to periodically invest a

fixed sum over any defined period of time (6 months or more) in a disciplined

manner. SIPs help in arresting uncertainties associated with trying to time the market

and thus, in the long term tends to iron out market fluctuations. It brings down your

average cost of acquisition of units. As you would allocate a fixed sum every month,

you would buy more units when the prices of our units are lower than when they are

higher.

2. Systematic Withdrawal Plan (SWP):

Our Systematic Withdrawal Plan (SWP) is designed receive a regular stream of

payouts in a defined frequency and to book profits periodically Through our SWP you

can redeem defined sums at a pre-defined frequency by giving a one-time instruction

to us. You may choose to regularly withdraw either a fixed sum or just the

appreciation on your investments.

This facility caters to two segments of investor needs:

1) Investors wanting defined, regular funds inflow from their investments.

2) Investors interested in booking gains at a regular interval.

3. Systematic Transfer Plan (STP):

Systematic Transfer Plan (SWP) caters a phased entry into the Equity markets

rather than putting in all your money at one trench and to book profits from your

equity holdings. Through our STP you can choose to switch your investments from

one Kotak Mutual scheme to another at a predefined frequency by giving a one-time

59

instruction to us. You also have a choice between switching a fixed sum or only the

appreciation on your investments.

You can choose to transfer either a fixed sum every defined period or only the

appreciation on your investments over that period from one scheme to another. The

later is helpful, where you do not want the transfer to disturb your capital

contribution.

4. Direct Credit Facility:

Our Direct Credit Facility comes automatically to you (unless you

choose otherwise) if you hold an account with any of the 12 banks listed below:

ABN AMRO Bank HSBC Indusind Bank

Citi Bank HDFC Kotak Mahindra Bank

Centurion Bank of Punjab ICICI Standard Chartered

Deutsche Bank IDBI Bank UTI Bank

Direct Credit is safer, faster and convenient compared to the conventional cheque

payout mechanism.

5. ECS of Dividends:

ECS (Electronic Clearing Service) is a Reserve Bank of India offering to facilitate,

among others, faster and seamless payout of dividends directly into your bank

account.

60

ECS as a mechanism for payout of Dividends is faster, convenient, cost-effective and

hassle-free. Besides, you don't run the risk of loss of dividend instruments in transit

and the associated delays in obtaining a duplicate instrument. This facility is currently

offered across all banks in over 48 locations.

6. Online Transactions Facility:

Our Online Transactions Facility allows you to have instant access to your

investments at any time from anywhere just at the click of a button.

Here's a list of all facilities you can avail by signing in for our Online Transactions

Facility:

-Redemption.

-Switch Over.

-Account Statement.

7. Email Communication:

The world over, e-mail has been revolutionizing communication. No more

need to have paper trails; e-mail makes communication real-time, easy to store and

retrieve and cost-effective.

You can now opt to receive all your communication from us over e-mail:

- Account Statement for your investments

-Transaction Confirmations

-Daily NAVs and Dividend Updates

-Market Reviews

-Information on product launches, service initiatives, dividends, etc.

-Annual Reports

-Other Statutory Communication

61

8. SMS Services:

With cell phones fast qualifying for an assured parking in every

pocket, we could not resist allowing you that extra convenience to be in touch with

your investments whenever you wish, wherever you are.

Try our SMS facility to :

-Access the latest NAVs and Dividends for our various schemes on SMS.

-Receive information on product launches, service initiatives, dividends, etc.

on SMS.

-Post your queries to our Dedicated Services Desk.

9. Updates from Markets:

Market Review-Weekly Market Review [ended 29th February 2008]

Performance-Monthly Performance Snapshot [as on 31/12/2007]

Half Yearly Accounts and Portfolio- March 2007&September 2007

Fact Sheet- Current Month, Yearly Fact Sheet

KMAMC Annual Report-2006 - 2007

4.1 ANALYSIS AND INTERPRETATION

TABLE NO 2.1 – TO SEE THE RESPONDENT IS AN INCOME TAX ASSESSEE.

62

Sl. No. Attributes No. of respondents Percentage

1 Yes 76 76

2 No 24 24

Total 100 100

Source: Primary Data

Interpretation:

It is clear from the table that out of 100 respondents, 76% of the respondents say that

they are income tax assesses and the rest 24% say that they are not.

This is illustrated in the following graph.

GRAPH NO.1 – TO SEE THE RESPONDENT IS AN INCOME TAX ASSESSEE.

63

Yes No0

1020304050607080 76

24

Attributes

Percentage

Source: - Table No: 2.1

TABLE NO 2.2. TO SEE WHETHER REPONDENTS INVEST FOR TAX

EXEMPTION OR TAX SAVINGS

64


1 Yes 70 70

2 No 30 30

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 70% of the respondents say that

they invest for tax exemption and the rest 30% say that they do not.


GRAPH NO 2. TO SEE WHETHER REPONDENTS INVEST FOR TAX

EXEMPTION OR TAX SAVINGS

65

Yes No0

1020304050607080

70

30

Attributes

Percentage

Source: Table No: 2.2

TABLE NO 2.3. INVESTMENT PREFERENCE OF RESPONDENTS


1 Fixed Deposits 33 33

2 Real Estate 27 27

3 Insurance 21 21

4 Mutual Fund 9 9

5 Gold 9 9

66

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 33% of the respondents invest in

fixed deposits, 27% invest in Real Estate, 21% in Insurance, 9% in Mutual Fund and

the rest 9% say that they invest in gold.


GRAPH NO 3. INVESTMENT PREFERENCE OF RESPONDENTS

67

Fixed D

epos

its

Real E

state

Insura

nce

Mutual

Fund

Gold05

101520253035 33

27

21

9 9

Attributes

Percentage


TABLE NO 2.4 REASONS OF INVESTMENT PREFERENCE OF

RESPONDENTS

68


1 Less Risk 28 28

2 Good Returns 21 21

3 Liquidity 12 12

4 Assured Returns 36 36

5 Other Reasons 3 3

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 28% of the respondents prefer

investment due to less risk, 21% due to good returns, 12% due to liquidity, 36% due

to assured returns and the rest 3% do it due to other reasons.


GRAPH NO 4. REASONS OF INVESTMENT PREFERENCE OF

RESPONDENTS

69

Less Risk Good Re-turns

Liquidity Assured Re-turns

Other Reasons

05

10152025303540

2821

12

36

3

Attribute

Percentage


TABLE NO 2.5. CURRENT INVESTMENT PORTFOLIO OF RESPONDENTS

70


1 Govt securities and bonds 61 61

2 Mutual funds & company FD’s 18 18

3 Equity Shares 21 21

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 61% of the respondents invest in

Govt securities and bonds, 18% in Mutual funds and company fixed deposits and the

rest 21% in equity shares.

This is illustrated in the following graph:

GRAPH NO 5. CURRENT INVESTMENT PORTFOLIO OF RESPONDENTS

71

Govt securities and bonds

Mutual funds & company FD’s

Equity Shares0

10

20

30

40

50

60

7061

18 21

Attributes

Percentage


TABLE NO 2.6. NATURE OF INVESTMENT THAT THE RESPONDENTS LIKE

72


1 Steadily 61 61

2 At average rate 27 27

3 Fast 12 12

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 61% of the respondents like their

investment to grow steadily, 27% in an average rate and the rest 12% in a fast rate.


GRAPH NO 6. NATURE OF INVESTMENT THAT THE RESPONDENTS LIKE

73

Steadily At average rate Fast0

20

40

60

8061

2712

Attributes

Percentage


TABLE NO 2.7 PERCENTAGE OF INCOME THAT THE RESPONDENTS

INVEST

74


1 5 % 24 24

2 5% - 10% 37 37

3 More than 10% 39 39

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 24% of the respondents invest

5% of their total income, 37% invests 5-10% and the rest 39% invest more than 10%.


GRAPH NO 7. PERCENTAGE OF INCOME THAT THE RESPONDENTS

INVEST

75

5% 5% - 10% More than 10%05

1015202530354045

24

37 39

Attribute

Percentage


TABLE NO 2.8 TO SEE WHETHER THE RESPONDENT IS AN INVESTOR OF

MUTUAL FUND

76


1 Yes 27 27

2 No 73 73

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, only 27% of the respondents are

investors of mutual funds and the rest 73% are not.


GRAPH NO 8. TO SEE WHETHER THE RESPONDENT IS AN INVESTOR OF

MUTUAL FUND

77

Yes No0

10

20

30

40

50

60

70

80

27

73

Attribute

Percentage

Source: Table: 2.8.

TABLE NO 2.9 REASONS FOR NOT INVESTING IN MUTUAL FUNDS

78


1 Awareness 15 15

2 Risky 58 58

3 Returns not assured 27 27

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 15% of the respondents do not

invest in mutual funds because of lack of awareness, 58% as it is risky and the rest

27% as the returns are not assured.


GRAPH NO 9. REASONS FOR NOT INVESTING IN MUTUAL FUNDS

79

Awareness Risky Returns not assured

0

10

20

30

40

50

60

70

15

58

27

Attribute

Percentage


TABLE NO 2.10 REASONS FOR INVESTING IN MUTUAL FUNDS

80


1 Less Risky 21 21

2 Liquidity 30 30

3 Professional Mgmt 24 24

4 Fast Appreciation 25 25

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 21% of the respondents feel that

investing in mutual funds are less risky and hence they invest, 30% invest due to

liquidity, 24% due to Professional management and the rest 25% due to fast

appreciation.


GRAPH NO 10. REASONS FOR INVESTING IN MUTUAL FUNDS

81

Less

Risk

y

Liquid

ity

Profes

siona

l Mgm

t

Fast A

pprec

iation

05

101520253035

21

3024 25

Attribute

Percentage


TABLE NO 2.11 KIND OF MUTUAL FUND THAT THE RESPONDENTS

PREFER

82


1 Open-ended 57 57

2 Closed-ended 43 43

Total 100 100


Interpretation:


open-ended mutual funds and the rest 43% closed-ended ones.


GRAPH NO 11. KIND OF MUTUAL FUND THAT THE RESPONDENTS

PREFER

83

Open-ended Closed-ended0

10

20

30

40

50

60 57

43

Attributes

Percentage


TABLE NO 2.12 TYPE OF SCHEME THE RESPONDENTS PREFER

84


1 Equity 49 49

2 Debit 42 42

3 Balance 9 9

Total 100 100


Interpretation:


equity type of scheme, 42% prefer debit type of scheme and the rest 9% due to

balance type of scheme.


GRAPH NO 12. TYPE OF SCHEME THE RESPONDENTS PREFER

85

Equity Debit Balance0

10

20

30

40

50

60

49

42

9

Attributes

Percentage


TABLE NO 2.13. THE PREFERENCE AMONG DIFFERENT MUTUAL FUNDS

86


1 UTI 25 25

2 Kotak 15 15

3 HDFC 23 23

4 Birla Sun Life 20 20

5 LIC 17 17

Total 100 100


Interpretation:


UTI mutual funds, 15% prefer Kotak, 30% prefer HDFC, 19% Templeton and the rest

21% prefer LIC.


GRAPH NO 13. THE PREFERENCE AMONG DIFFERENT MUTUAL FUNDS

87

UTI Kotak HDFC Birla Sun life

LIC0

5

10

15

20

25

3025

15

2320

17

Attributes

Percentage


88

TABLE NO 2.14 TO ANALYSE WHETHER THE RESPONDENT SEES THE

BRAND NAME WHILE INVESTING


1 Yes 94 94

2 No 06 06

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 94% of the respondents see

brand name while investing and the rest 6% are not.

This is illustrated in the following graph

89

GRAPH NO 14. TO ANALYSE WHETHER THE RESPONDENT SEES THE

BRAND NAME WHILE INVESTING

Yes No0

102030405060708090

100 94

6

Attribute

Percentage

Source: Table: 2.14

90

TABLE NO 2.15 IMMEDIATE REACTIONS IN CASE OF SUDDEN DIP IN

STOCK MARKET


1 Would withdraw the investment 39 39

2 Would wait and watch 55 55

3 Would invest more in it 6 6

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 39% of the respondents would

withdraw the investment, 55% would wait and watch the show and the rest 6% say

that they would invest more.

91


GRAPH NO 15. IMMEDIATE REACTION IN CASE OF SUDDEN DIP IN STOCK

MARKET

Would withdraw the investment

Would wait and watch

Would invest more in it

0

10

20

30

40

50

60

39

55

6

Attributes

Percentage


92

TABLE NO 2.16 TO KNOW THAT THE RESPONDENTS HAVE HEARD OF

KOTAK MUTUAL FUND


1 Yes 100 100

2 No 00 00

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, all 100 respondents have heard

of Kotak Mutual Fund.

93


GRAPH NO 16. TO KNOW THAT THE RESPONDENTS HAVE HEARD OF

KOTAK MUTUAL FUND

Yes No0

20

40

60

80

100

120100

0

Attribute

Percentage

100

Source: Table: 2.16

94

TABLE NO 2.17 VIEWS ON KOTAK MF AND ITS SCHEMES


1 Good 25 25

2 Moderate 49 49

3 Not aware 26 26

Total 100 100


Interpretation:

It is clear from the table that out of 100 respondents, 15% of the respondent’s view

that Kotak MF is good, 36% feel that it is moderate and the rest 49% say that they are

not aware.

95


GRAPH NO 17. VIEWS ON KOTAK MF AND ITS SCHEMES

Good Moderate Not aware0

10

20

30

40

50

60

25

49

26

Attributes

Percentage


96

5.1 FINDINGS

Majority of the respondents are income tax assesses and invest for

the purpose of Tax exemption or savings..

Most of the respondents prefer to invest in Fixed Deposits, Real

Estate and Insurance because of less risk and assured returns.

The investment portfolio of majority of the respondents is in govt

securities and bonds.

Though mutual funds exist in the market, the people who tend to

invest in it is very low compared to other investments. The reason

behind is the high risk factor involved with Mutual Funds.

Majority of the people prefer open-ended equity scheme.

Majority of Investors prefer brand name of the company and then

invest in their schemes so UTI as gained more investors as risk is

less and there is an assured return.

If there is a sudden dip in Stock Market majority of Investors

doesn’t withdraw their money instead wait for some time.

Among the surveyed Investors everyone has heard Kotak Mutual

Fund and majority of them have rated Kotak Mutual Fund schemes

as Moderate.

97

5.2 CONTRIBUTION OF THE STUDY

From this study the financial institutions/Banks can improve in some of the following

fields of services and communications: -

1. Help the financial institutions (KM) to provide goods and services in private

sector and convenience factor offered by the public sector.

2. Help local banks/small institutions to have big market share (i.e. banks or

institutions which are mot easily accessible gets more preference even if it is a local

bank with out much brand image.)

3. Helps the bank and institutions to provide E-banking facility more effective

and accurate towards investors or customers.

4. Help KM to find out, in Kotak Mahindra product perceived as being value for

money.

5. Help KM to find out, is KM users are considering KM as one stop shop most of

the time.

98

5.3 SUGGESTIONS

1. Proper care should be taken to give the correct guidance to the investors so

that they will invest more.

2. Good campaigns can be arranged so that people will know more about Mutual

Funds and will tend to invest in it.

3. Nice advertisements can be entertained so that people will get interest in

Mutual Funds.

4. Kotak can come up with good, attractive schemes for its investors.

5. Nowadays Indian Mutual fund Industry is attracting more and more retail

investors because of economic stability and increasing growth rate, it leads to gradual

increase in the stock market indices.

6. Interest rates are falling gradually and mutual fund industry is booming

because of this reason investors can move from Bank deposits to mutual funds so

mutual fund organizations should bring new schemes to satisfy the investors.

7. Mutual fund schemes have not gained importance as there is a lack of

awareness about Mutual fund schemes so the executives of the organization should

take certain steps to educate the investors.

99

5.4 CONCLUSION

The study “Investors preferences towards Mutual Funds” was carried out on behalf of

Mutual Funds of Kotak Mahindra Asset Management Company Ltd. The data was

collected from various sources and also through the tools like questionnaires and

relevant interactions with concerned persons. The needs were identified in the form of

findings and suitable suggestions were put forth in the form of recommendations to

the concerned authorities for further discussions. A few recommendations have been

considered for implementation.

Mutual fund schemes are subject to market risk.

On the basis of above statements it has proved higher the risk higher

the return and lower the risk lower the return.

Nowadays Mutual Fund schemes are increasing because of falling

interest rates so the organization can provide further new schemes and

attract the new customers.

Investment in Mutual fund schemes gives diversified portfolio to

investors.

Nowadays Indian Mutual Fund industry is attracting more and more

retail investors because of economic stability and increasing growth

rate, it leads to gradual increase in the stock market Indices.

100

QUESTIONNAIRE ON INVESTORS PREFERENCES TOWARDS

MUTUAL FUNDS WITH REFERENCE TO KOTAK MUTUAL FUND

Dear Sir/Madam,

I, Hemanth.S, student of R.V.I.M, would like your kind attention for a few

minutes to answer this questionnaire. This is part of a survey on ‘Investors

preference towards Mutual Funds with reference to Kotak (KMAMC)’ as a

partial fulfillment of BBM course. Therefore, I kindly request you to fill the following

questionnaire. The information provided by you will be used for academic purpose

only & will be kept confidential.

1. Name :

2. Age :

3. Gender : Male ( ) Female ( )

4. Occupation : Business ( ) Profession ( )

Housewife ( ) Students ( )

Service ( ) Others

( )

5. Annual Income : Below 100,000 ( ) 100,001 to 200,000 ( )

200,001 to 300,000 ( ) 300,001 to 500,000 ( )

500,001 & above ( )

6. Number of dependents:

101

Please put tick on your answers for the following questions

1. Are you an Income Tax Assesse?

Yes

No No

2. Are you investing for tax exemption or tax savings?

Yes

No

3. What kind of invest options you prefer?

Fixed Deposit

Real Estate

Insurance

Mutual Fund

Gold

4. Why you prefer the above option?

Less Risk

Good Returns

Liquidity

Assured Returns

Other Reasons

5. Your current investment portfolio includes majority of

Govt. securities and Bonds

Mutual funds & company fixed deposits

Equity shares

6. You would like your investment to grow

Steadily

At average rate

Fast

102

7. What percentage of your income do you invest?

Up to 5 %

5%--- 10%

More than 10%

8. Are you an investor in mutual fund?

Yes

No

9. If answer is No, why you are not investing in mutual fund?

Awareness

Risky

Returns not assured

10. If answer is Yes, why do you prefer mutual fund?

Less risky

Liquidity

Professional mgt.

Fast appreciation

11. What kind of mutual fund you prefer?

Open- ended

Closed-ended

12. What type of scheme do you prefer?

Equity

Debt

Balance

103

13. If you are an investor of MF, which Company you prefer?

UTI

Kotak

HDFC

Birla Sun Life

LIC

14. While buying a Mutual Fund scheme do you see brand name?

Yes

No

15. How would you react if the Stock Market immediately dips?

I would withdraw my money

I would wait & watch

I I would invest more in it.

16. Have you heard of Kotak mutual fund and its scheme?

Yes

No

17. Your views on Kotak mutual fund and its scheme?

Good

Moderate

Not aware

Thank you very much for your valuable time & co-operation.

104

BIBLIOGRAPHY

Books

Author Book

Ronald J Jordan Management

V K Bhalla Investment Management

By I.M. Pandey Financial Management 7th Edition

L M Bhole Financial Institutions and Markets

Preethi Singh Portfolio Management

Journals and Newspapers

Business World

Mint

Financial Express

Websites

www.kotakmutual.com

www.sebi.com

www.mutualfundsindia.com

www.amfiindia.com

http://www.amfiindia.com/

http://www.mutualfundsindia.com/

105

ATTENDANCE FOR PROJECT REPORT

Name of the student :Class :Roll No. :Name of the Supervisor :

S.No. Date Time Progress Report

Signature of the student

Signature of Supervisor

1

2

3

4

5

6

7

8

9

10

*Minimum (8out of 10) 80% attendance compulsory. Coordinator

Documents

project report on mutual funds