Comparative Study of Mutual Fund with Other Investment Alternatives

A PROJECT REPORT ON COMPARATIVE STUDY OF MUTUAL FUNDS WITH OTHER INVESTMENT ALTERNATIVES Submitted To Kurukshetra University, Kurukshetra in partial fulfillment for the Degree of “Master of Business Administration” (Session 2008-10) Under the supervision of : Submitted by: Dr. Pawan KumarAnita Faculty MBA Deptt. Roll No. 8005 DIMT Dronacharya Institute of Management &Technology (Kurukshetra University, Kurukshetra) ACKNOWLEDGEMENT Any work of this magnitude requires the inputs, efforts and encouragement of people from all sides.

In this project report I have been fortunate in having got the active co-operation of many people, whom I would like to thank. It gives me a great pleasure to express my gratitude to D. I. M. T. faculty members or guiding me through his efforts at each and every step. I humbly submit that without is efforts this project would have not been conceptualized nor materialized. I am highly obliged to Dr . M . L. Bansal Director (DIMT) and Dr. Pawan who provided me necessary heip in the completion of the project. Their able guidance and support helped me a lot. (ANITA)

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DECLARATION I Anita, Roll No. 8005 student of MBA (final) 0f Dronacharya Institute of Management & Technology, Kurukshetra here by, declared that the entire project entitled “Comparative study of mutual funds and investment alternatives”. Also this is the original work under taken by me and though the application of the knowledge. I gain during my research period the entire study is authentic to the best of my knowledge and belief. (ANITA) INDEX PARTICULARS PAGE NO 66 1. Introduction of Mutual Funds…………. …………………………5 2. Investment alternatives……………………………………………24. 3.

Research Methodology………………………………………… 28 4. Data Analysis & Interpretation………………………………… 33 5. Findings…………………………………………………………. 54. 6. Recommendation & Suggestion…………………………………59 7. Bibliography………………………………………………………… 61 a) Questionnaire………………………………………………. b) Annexure………………………………………… INTRODUCTION Mutual Funds in India 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 history of mutual funds in India can be broadly divided into four distinct phase FIRST PHASE – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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) 987 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 Canbank 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. 7,004 crores. THIRD PHASE – 1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS) 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.

As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. 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 second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC.

It is registered with S

by dividing the market value of scheme’s assets by the total number of units issued to the investors. For example: A. If the market value of the assets of a fund is Rs. 100,000 B. The total number of units issued to the investors is equal to 10,000. C. Then the NAV of this scheme = (A)/(B), i. e. 100,000/10,000 or 10. 00 D. Now if an investor ‘X’ owns 5 units of this scheme E. Then his total contribution to the fund is Rs. 50 (i. e. Number of units held multiplied by the NAV of the scheme) Categories of mutual funds: Mutual funds can be classified as follow: ?Based on their structure: Open-ended funds: Investors can buy and sell the units from the fund, at any point of time. •Close-ended funds: These funds raise money from investors only once. Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E. g. , Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquid

It can be further classified as: i)Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition and individual stock weightages. ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks. iii) Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields. iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme. . g. -An infrastructure fund invests in power, construction, cements sectors etc. v) Sector funds- Invest 100% of the capital in a specific sector. e. g. – A banking sector fund will invest in banking stocks. vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors. Balanced fund: Their investment portfolio includes both

Following are balanced funds classes: i) Debt-oriented funds -Investment below 65% in equities. ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt. Debt fund: They invest only in debt instruments, and are a good option for investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), c

The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) 2.

ls. INVESTMENT ALTERNATIVES ?BANK DEPOSIT ?INSURANCE ?POST OFFICE SCHEME ?IVPs AND KVPs ?N. S. S. ?N. S. C ?PUBLIC PROVIDENT FUND SCHEME BANK DEPOSITS It is the simple investment avenue open for the investors. He has to open an account and deposit the money. Traditionally the banks offered current account, saving account & fixed deposit account. Current account does not offer any interest rate.

The saving account interest rate is regulated by the reserve bank of India and kept low because of the high cost of servicing them. The saving account is more liquid and convenient to handle. The fixed account carries high interest rate and the money is locked up for a fixed period. With increasing competition among the banks, the banks have bundled the plain saving account with the fixed account to carter to the needs of small savers. INSURANCE Life Insurance is a contract for the payment for the sum of money to the person assured on the happening of event insured against.

Usually the contract provides the payment of an amount on the rate of maturity or at specified dates at periodic intervals or if unfortunate death occurs. Among other things, the contract also provide for the payment of premium periodically to the corporation by the policy holders, Life Insurance eliminates risk. POST OFFICE DEPOSITS Like the banks, post office also offers fixed deposit facility and monthly income scheme. Post office monthly income scheme is a popular scheme for the retired. An interest rate of 13% is paid monthly. The term of the scheme is 6 years, at the end of which a bonus of 10% is paid.

The annualized yield to maturity works to be 15. 01% per annum. After three years, premature closure is allowed without any penalty. If the closure is after one year, a penalty of 5% is charged. I. V. P. AND K. V. P. persons who prefers cash transactions. No income tax concession is available for this type of These are saving certificates issued by the post office with the name Indra Vikas Patra (IVP) and Kisan Vikas Patra (KVP). The IVPs are in the face value of Rs 500,1000 and 5000. The KVPs are in the denominations of Rs. 500, 1,000, 5, 000, and 10,000. The capital is doubled in 5. years with the return of 13. 47%. IVPs are in the bearer bonds, transferable by hand delivery and therefore are attractive to the investments. National saving scheme (NSS) This scheme helps in deferring the tax payment. Individuals and HUF are eligible to open the NSS account in the designated post office. The NSS-87 gives 100% income tax rebate but the interest as well as the capital is fully taxable if withdrawn during their life time. Investments in NSS scheme, with a lock in period of 4 years qualify for a rebate of 20% under section 88 of the income tax act, subject to a maximum of Rs. 12000.

The investment also earns an interest rate of 11% per year covered by sec 80L. Compared to other tax savings’ instruments the return offered by this scheme is lower. NATIONAL SAVING CERTIFICATE (6 YRS. )-III This scheme is offered by the post office. These certificates come in the denominations of Rs. 500, 1,000, 5, 000, and 10,000. The contribution and the interest for the first five years are covered by sec 88. The interest is cumulative at the rate of 12% per annum and payable by annually is by sec 80L. PUBLIC PROVIDENT FUND SCHEME {PPF} PPF earns an interest rate of 12% per year, which is exempted from the income tax under sec 88.

The individuals and Hindu undivided families can participate in this scheme. The maximum limit pe

respondents are invest their money in open ended scheme, 27. 5% of the respondents choose equity fund , 32% respondents are invest in debt fund and 10%other respondents are invest in interval scheme. 9. Which types of benefits would you like to obtain from investment mutual fund? Table-IX Diversification 15% Expert supervision & mgt. 7. 5% Liquidity12. 5% Low risk20% Tax advantage10% Flexibility15%

High return20% From the above chart it is clear that 15% of the respondent wants diversification in their investment, 17. 5% of the respondent want expert supervision &mgt. , 12. 5% of respondent are invest because of liquidity 20% of the respondent wants the reduction in risk, 10:% of respondent are invest because of tax saving,15% of respondent are invest because of flexibility and 20% of the respondent are invest because of high return. 10. How much you want to invest money? Table-X OptionPercentage Below 50,00064. 3% 50,000 to 10000021. 4% 10,0000 to 15,000008. % Above 1500005. 7% On the basis of received data 64%of the respondent are invested less than Rs. 50000, 21% of the respondent are invest between Rs. 50000 to 100000, 8. 6% of the respondents are to invest between Rs. 100000 to Rs. 150000 and only 5. 7%of the respondents are willing to invest more than Rs. 150000. 11. What is frequency of your investment? Table-XI Frequency of respondentPercentage Once a month14. 2% Once in 3 month21. 4% Once in 6 month35. 7% Once in year 28. 7% People are very much conscious while investing their money in the mutual fund.

So on the basis of received data 14. 2% of the respondent are invest once a month , 21. 4% of the respondent are invest once in 3 month , 35. 7% of the respondents are invest once in 6 month and only 28% of the respondents invest 0nce in year. 12. What is expected rate of return from debt investment? Table-XII 4%-5%30. 7% 5%-6%23. 1% 6%-7%38. 5% Above 7%7. 7% This graph is show that 30. 7% respondents are expected rate of return from debt is 4%-5%, 23. 1% respondents are expected rate of return is 5%-6% , 38. 5% respondents are expected rate of return is 6%-7% , 7. % respondents are expected rate of return is above7% 13. What is expected rate of return from equity investment? Table-XIII 5%-10%18. 2% 10%-15%36. 4% 15%-20%27. 2% Above 20%18. 2% From this chart it is clear that 5%-10%are expected rate of return from equity fund respondent is 18. 2% , 10% -15% rate of return from equity fund respondent is 36. 4% ,15%-20% rate of return from equity fund respondent is 27. 2%, above 15% rate of return from equity fund respondent is 18%. 14. Do you feel that mutual fund offers steady return? Table-XIV Yes75% No25%

Most of the respondents are feel that the mutual fund offers steady return ,above this chart 75% respondent are feel that mutual fund offer steady return , only25% respondent are feel that mutual fund do not give steady return. 15. You invest in debt mutual fund because it offers? Table-XV Steady return30. 7% Liquidity15. 3% Less risk23. 1% Others30. 9% From the above chart it is clear that 30. 7% of the respondents are invest in debt because of steady return, 15. 3% of the respondents are invest in debt because of liquidity, 23. 1% the respondents are invest in debt because of lesser risk and 30. % of the respondents are invest in debt because of other reason. 16. You invest in equity mutual fund because it offers? Table-XVI High return 36. 4% Long term capital gain18. 2% Tax benefit27. 2% Others18. 2% From the above chart it is clear that 36. 4% of the respondents are invest in equity because of high return, 18. 2% of the respondents are invest in equity because of long term capital gain , 27. 2% the respondents are invest in equity because of tax saving and 30. 9% of the respondents are invest in debt because of other reason. 17. Which feature of mutual fund would you like?

Table-XVII Diversification20% Professional management17% Reduction in risk51% Helping in achieving in long term goal12% From the above chart it is clear that 20% of the respondent wants diversification in their investment, 17% of the respondent want professional management to be proficient enough to get the good return from the investment, 51% of the respondent wants the reduction in risk and 12%0f respondent want helping in achieving in long term 18. If mutual fund offers you steady return, diversification, lesser risk, would consider it as an investing option in future for you?

Table-XVIII Yes55% No45% This figure show that if above offers will give to customer 55% respondents will invest in mutual fund, 45 % respondents will not invest 19. Would you like to suggest your friend for mutual fund investing? Table-XIX Yes55% No45% Availing the services of personal advisor always differ according to the prevailing business environment and the market condition. So from the graph it is clear that 55% of the respondents are willing to suggest their friend and 45% don’t have any interest to suggest their friend 20.

study it is clear that 60% respondents have invested in mutual fund and 40% have not invested in mutual fund. ?This study shows54% of the respondents are willing to invest their money through mutual fund, 8% of the respondents want invest their money through Fixed deposit because they think this safe way to get some fixed return, 15% of the respondents are willing to invest their money in insurance and 13% of the respondents are willing to choose some other available opportunity in the market. From the analysis and interpretation, it is concluded that shows that 45%of the respondents are aware about the mutual fund scheme due to providing good return 2 years back and that time lot of people invested their money in the mutual fund and they created lot of awareness about the mutual fund And 55%of the respondents are not aware of the mutual fund. ?An analysis show that7. 5% of the respondents are invest their money in private sector mutual fund, 10% of the respondents invest their money through public sector mutual, 12. 5% of the respondents are invest their money in open ended scheme, 27. % of the respondents choose equity fund, 32. 5% respondents are invest in debt fund and some other respondents are invest in interval scheme. ?From the analysis it is clear that 15% of the respondent wants diversification in their investment, 17. 5% of the respondent want expert supervision &mgt. , 12. 5% of respondent are invest because of liquidity 20% of the respondent wants the reduction in risk, 10:% of respondent are invest because of tax saving, 15% of respondent are invest because of flexibility and 20% of the respondent are invest because of high return. On the basis of received data it is concluded that 64%of the respondent are invested less than Rs. 50000, 21% of the respondent are invest between Rs. 50000 to 100000, 8. 6% of the respondents are to invest between Rs. 100000 to Rs. 150000 and only 5. 7%of the respondents are willing to invest more than Rs. 150000. ?According to analysis and interpretation 14. 2% of the respondent are invest once a month , 21. 4% of the respondent are invest once in 3 month , 35. 7% of the respondents are invest once in 6 month and only 28% of the respondents invest 0nce in year. The study show that 30. 7% respondents are expected rate of return from debt is 4%-5%, 23. 1% respondents are expected rate of return is 5%-6% , 38. 5% respondents are expected rate of return is 6%-7% , 7. 7% respondents are expected rate of return is above7% . ?From this analysis it is clear that 5%-10%are expected rate of return from equity fund respondent is 18. 2%, 10% -15% rate of return from equity fund respondent is 36. 4%, 15%-20% rate of return from equity fund respondent is 27. 2%, and above 15% rate of return from equity fund respondent is 18%. According to study most of the respondents are feel that the mutual fund offers steady return ,above this chart 75% respondent are feel that mutual fund offer steady return , only25% respondent are feel that mutual fund do not give steady return. ?From this study it is clear that 36. 4% of the respondents are invest in equity because of high return, 18. 2% of the respondents are invest in equity because of long term capital gain , 27. 2% the respondents are invest in equity because of tax saving and 18. 2% of the respondents are invest in debt because of other reason. From the study we find that 20% of the respondent wants diversification in their investment, 17. % of the respondent want professional management to be proficient enough to get the good return from the investment, 51% of the respondent wants the reduction in risk and 12%0f respondent want helping in achieving in long term ?We can infer that if above offers will give to customer 55% respondents will invest in mutual fund, 45 % respondents will not invest ?On the basis of data it is received that 55% of the respondents are willing to suggest their friend and 45% don’t have any interest to suggest their friend ?

To study It is clear that 30. 7% of respondent are suggest their friend about mutual fund because of 23. 1% of respondent are suggest their friend about mutual fund because of Less risk, 10. 8% of respondent are suggest their friend about mutual fund because of tax saving,27. 7% of respondent are suggest their friend about mutual fund because of liquidity,7. 70 of respondent are suggest because of others reason RECOMMENDATION & SUGGESTION Recommendations and Suggestions ?Advertisement & publicity ?More interaction with customers ?Better return Division of targets according to official field of expertise ? Covering maximum nearby areas The media which influence the consumers the most are newspapers and magazines, so bank has to continue publicizing in these media channels of mutual fund as it can boost up invest in mutual fun. BIBLIOGRAPHY & ANNEXURE *BIBLIOGRAPHY* 1. DATA ?Data collected is primary and secondary so the data is taken through questionnaire, newspapers, magazines, and from the concerning sites. 2. BOOKS ?Marketing strategies and investment practices (By H. Sadhak) ?Association of Mutual funds in India By D. C. Anjaria) ?Portfolio Management 3. NEWSPAPERS ?The Economic Times ?The Hindustan Times REFRENCES: WEBSITES ?www. amfiindia. com ?www. moneycontrol. com ?www. valusearchonline. com ?www. mutualfundsindia. com ?www. reliancemoney. com Questionnaire Name __________________________________________________ Age __________________________________________________ Address __________________________________________________ __________________________________________________ 1. What is your occupation? (a)Businessmen (b) Employee(c) student (d) others 2. What is your annual income? a) Less than 200000 (b) 200000 to 400000 (c) 400000 to 600000 (d) above 600000 3. Have you invested money anywhere? (a)Yes (b) No 4. Did you know about mutual fund? (a)Yes (b) No 5. Have you invested in mutual funds? (a)Yes (b) No 6. In which market available alternative securities you have invested? (a)Saving a/c (b) Insurance (c) Mutual fund (d)Fixed deposit (e) Other. 7. Are you aware of the various schemes offered by mutual fund? (a)Yes (b) No 8. Which mutual fund schemes have been selected by you? a)Public sector mutual fund (b ) Open ended(c) interval (d)Private sector mutual fund (e) Debt fund (f) equity fund 9. Why you have preferred mutual fund than others investments? (a) Diversification (b) Expert supervision & mgt. (c) Liquidity (d) Low risk (e) Tax saving (f) Flexibility (g ) High return 10. How much you want to invest money? (a) Below 50000 (b) 50000-100000 (c) 100000-150000 (d) Above 150000 11. What is the frequency of your investment? (a)Once a month(b) once in 3 months (c) once in 6 months d)Once in year 12. What is expected rate of return from debt investment? (a)4% -5% (b)5%-6% (c)6%-7% (d) >7% 13. What is expected rate of return from equity investment? (a)5%-10% (b)10%-15% (c) 15%-20% (d) >20% 14. Do you feel that mutual fund offer steady returns? (a) Yes (b) No 15. You invest in debt mutual fund because it offers? (a) Steady return (b) Liquidity (c) Tax benefits (d) Less risk (e) Other 16. You invest in equity mutual fund because it offers? (a)High return (b) Long term capital gain (c)Tax benefits (d) other 7. Which feature of mutual fund would you want? (a) Diversification (b) Professional management (c) Reduction in risk (d) Helping in achieving in long term goals 18. If mutual fund offers you steady return, diversification, lesser risk, would consider it as an investing option in future for you? (a)Yes (b) No 19 Would you like to suggest your friend for mutual fund investment? (a) Yes (b) No 20. If yes why you suggest your friend for mutual fund investment because of? (a)Good return (b) Less risk (e) Tax saving (d) Liquidity (e) Other

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Comparative Study of Mutual Fund with Other Investment Alternatives. (2018, Aug 04). Retrieved from https://graduateway.com/comparative-study-of-mutual-fund-with-other-investment-alternatives/