HDFC(CONSUMER BUYING BEHAVIOR TOWARDS MUTUAL FUNDS

A
SUMMER TRAINING PROJECT REPORT
ON

“CONSUMER BUYING BEHAVIOR TOWARDS MUTUAL FUNDS ”


SUBMITTED IN PARTIAL FULFILLMENT FOR THE AWARD OF DEGREE OF
MASTER OF BUSINESS ADMINISTRATION

(U.P.TECHNICAL UNIVERSITY, LUCKNOW)

ACADAMIC SESSION
(2007-09)


UNDER THE GUIDENCE OF

INDUSTRY GUIDE FACULTY GUIDE








SUBMITTED BY








ACKNOWLEDGEMENT
I would like to thank _______________________ who was always there with his advice which proved invaluable. Not to forget the names of ________________________________ who were always willing to help and more than willing in their attitude .
Lastly, I would like to thank our institute, IILM Management, who has given us the opportunity to work on a project to study and understand the working of Mutual Funds in India and to improve our skills and knowledge in the finance sector .
The rapid rise in stocks globally and in India during the March quarter of 2005 led to it becoming a time of excessive optimism and greed , however the ruthless downturn in the market during March quarter of 2005 has resulted in widespread fear and gloom around us . Take the recent example of US–64 which has been all over the news for its failure , not to mention the economic slow down in the US which led to recession and caused economic growth of Indian industry to take a backward step .




I as a MBA student , took this opportunity to gain an in-depth knowledge and the analyses of the recent trends happening in Mutual funds .With this in mind , I took HDFC as the principal focus for my study and have tried to come up with my reasoning of the current volatile situation .









FACULTY DECLARATION

This is certify that _______________________________ bonafied student of Department Of Business Administration, _______________________ and is presently pursuing MASTER OF BUSSINESS ADMINISTRATION
Under my guidance they have submitted their project report titled “MUTUAL FUNDS IN HDFC BANK “ in partial fulfillment of for the summer internship project during the MASTER OF BUSINESS ADMINISTRATION .
This report has not been previous submitted as a part of another of degree any other business school or university.





UNDERTAKING

I, _________________ , the undersigned, hereby declare that this project report entitled “ Mutual funds in HDFC BANK” has been written & submitted under the guidance of __________________ and is my original work. The empirical findings in this report are based on information collected by me.





_______________________________

PREFACE

As MBA program is final project oriented, it frequents to the pupil a lot of opportunities to gather first hand knowledge from industries of great repute through study of present working problems and its shuns, preventive measures and probable path of future prospects. In a nutshell project work gives the students the opportunities to gather practical knowledge from the market, besides bookish knowledge. Likewise that opportunity appeared before me and I had a through study of the mutual fund industry in India.
This project report has been painstakingly and thoroughly prepared to cover extensively the following objectives. The highlights of this project report are—
• Awareness of mutual funds in India market
• Consumer behavior while selecting a fund
• Consumer perception about mutual funds.
During this project work, my all possible efforts have been made to talk to various consumers of various regions and places and to incorporate the feedbacks received from them.
While preparing this final project report, my earnest efforts are directed towards discussing strategies that would, if adopted, be able to dominate the market with its products, to tender consumer’s full satisfaction and to establish a royal seat in the Business World

OBJECTIVE OF STUDY

Basically the objective of the study is of two sided. On the research side it was to gain a practical exposure of the management theories in the field of marketing with combined aim of getting the degree of two years – Master of Business Administration.
On the learning part, the objective is to know the mutual fund industry and to implement some of the strategies of mine to let the industry grow more and more.
It is widely accepted that theory broadens one’s thinking and helps in idea generation. But practical and practices give the insight into the feasibility of ideas and how far theories can be applied in a situation successfully.






CONTENTS
Chapter

Executive Summary
1. Organizational Profile

Background & Objectives
Promoter & Management
Capital Structure
Distribution Network
Technology
Business Profile
Rating
Product Range
Innovative Services
Loans
Awards & Accolades
Branch – Internal Divisions

2. Theoretical Perspective

About Mutual Funds
Types of Mutual funds
How Mutual Fund Operates
Benefits of investing in Mutual fund
About HDFC





3. Research Methodology

Objectives Marketing Research Process Study Description Sampling Contact Methods

4. Data Analysis and Interpretation

Data Representation
Charts & Comments

5. Conclusion, Recommendations & Limitations
5.1 Conclusions
5.2 Suggestions & Recommendations
5.3 Limitations

6. Annexure
Bibliography
Questionnaire








EXECUTIVE SUMMARY
The project is titled “Mutual fund in HDFC Bank ”. It was carried out in Two months period between 5th June to 25th July under the guidance of _______________________________. The project involved an in- depth study of the growth of the Mutual fund in India in relation to HDFC Mutual fund where although HDFC is one of the last of the large financial houses in the country to get into mutual fund business ,it has an advantage that the AMC will escape all the growing pangs of the earlier funds.
In the first part of the project I have highlighted the problems faced by the Mutual funds industry which also apply to HDFC Mutual fund . I found that the main problems faced by the mutual funds are market risks offering no guarantee or assurance , fluctuating NAV ,unpredictable performance of schemes .
I undertook an extensive research where we conducted interviews and used open ended questionnaire method to gather the information . I observed that people in general are skeptical about investing in mutual fund ,though this perception is changing now as the bank is coming up with safer schemes such as income fund scheme ,also certain tax benefits are being made available like 20% of the amount invested in specified mutual funds is deductible
from the tax payable by the investor in a particular year subject to maximum of rupees 2007 per investor .
In the second part I have done a detailed study of various schemes like liquid fund , growth fund, income fund etc, offered by HDFC . I have also given a brief of recent plans of HDFC such as children’s gift fund and launching of pension fund, gilt fund etc .
Finally in the end I have given a detailed study of risk involved and benefits offered by HDFC for its investors investing in the mutual funds and the analysis of the performance of the various mutual fund that gives the idea to the different sectors to invest in such mutual funds where there is stable growth .






Chapter 1
Organizational Profile
1.1 Background & Objectives
1.2 Promoter & Management
1.3 Capital Structure
1.4 Distribution Network
1.5 Technology
1.6 Business Profile
1.7 Rating
1.8 Product Range
1.9 Innovative Services
1.10 Loans
1.11 Awards & Accolades

1.1 Background & Objectives

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in-principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

HDFC Bank's mission is to be a World-Class Indian Bank. The Bank's aim is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services in the segments that the bank operates in and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity and regulatory compliance. HDFC Bank's business philosophy is based on four core values: Operational Excellence, Customer Focus, Product Leadership and People.



1.2 Promoter & Management

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain a market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

Mr. Jagdish Kapoor took over as the bank's Chairman in July 2003. Prior to this, Mr. Kapoor was a Deputy Governor of the Reserve Bank of India. The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.

The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board.

Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength.













1.3 Capital Structure

The authorized capital of HDFC Bank is Rs.450 crore (Rs.45 billion). The paid-up capital is Rs.282 crore (Rs.28.2 billion). The HDFC Group holds 24.2% of the bank's equity while about 13.1% of the equity is held by the depository in respect of the bank's issue of American Depository Shares (ADS/ADR Issue). The Indian Private Equity Fund, Mauritius (IPEF) and Indocean Financial Holdings Ltd., Mauritius (IFHL) (both funds advised by J P Morgan Partners, formerly Chase Capital Partners) together holds about 5.5% of the bank's equity. Roughly 27.5% of the equity is held by FIIs, NRIs/OCBs while the balance is widely held by about 214,000 shareholders. The shares are listed on The Stock Exchange, Mumbai and the National Stock Exchange. The bank's American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol "HDB".









1.4 Distribution Network

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 350 branches spread over 175 cities across the country. All branches are linked on an online real-time basis. Customers in 90 locations are also serviced through Phone-Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centers where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has a strong and active member base.

The Bank also has a network of over 900 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.







1.5 Technology

HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have connectivity which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology available internationally to build the infrastructure for a world-class bank. In terms of software, the Corporate Banking business is supported by Flexcube, while the Retail Banking business by Finware, both from i-flex Solutions Ltd. The systems are open, scaleable and web-enabled.

The Bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.



1.6 Business Profile

HDFC Bank caters to a wide range of banking services covering both commercial and investment banking on the wholesale side and transactional / branch banking on the retail side. The bank has three key business areas :-
 Wholesale Banking Services – The Bank's target market is primarily large, blue-chip manufacturing companies in the Indian corporate sector and to a lesser extent, emerging mid-sized corporates. For these corporates, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery / service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporates including multinationals, companies from the domestic business houses and prime Public Sector companies. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.

Retail Banking Services – The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to the customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone-Banking, Net-Banking and Mobile-Banking.
The HDFC Bank preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide
array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Services to retail customers, offering customers the facility to hold their investments in electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The debit card allows the user to directly debit his account at the point of purchase at a merchant establishment, in India and overseas. The Bank launched its credit card in association with VISA in November 2003. The Bank is also one of the leading players in the "merchant acquiring" business with over 25,000 Point-of-Sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net-based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.


 Treasury Operations – Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalization of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio.







1.7 Rating

HDFC Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research Limited (CARE) and Fitch Ratings India Pvt. Ltd. The Bank's Fixed Deposit program has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality, carrying negligible investment risk". CARE has also rated the Bank's Certificate of Deposit (CD) program "PR 1+" which represents "superior capacity for repayment of short term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "tAAA (ind)" rating to the Bank's deposit program, with the outlook on the rating as "stable". This rating indicates "highest credit quality" where "protection factors are very high". HDFC Bank also has its long-term unsecured, subordinated (Tier-II) Bonds rated by CARE and Fitch Ratings India Pvt. Ltd. CARE has assigned the rating of "CARE AAA" for the Tier-II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the outlook on the rating as "stable". In each case referred to above, the ratings awarded were the highest assigned by the rating agency for those instruments?





Corporate Governance Rating

The bank was one of the first four companies which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services of India Limited (CRISIL). The rating provides an independent assessment of an entity’s current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a ‘CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest.














1.8 Product Range

 Savings Account: Apart from the usual facilities, you get a free ATM Card, Inter branch banking, Net Banking, Bill Pay, Phone Banking, Debit Card and Mobile Banking, among others.

 HDFC Bank Preferred: A preferential Savings Account where you are assigned a dedicated Relationship Manager, who is your one-point contact. You also get privileges like fee waivers, enhanced ATM withdrawal limit, priority locker allotment, free Demat Account and lower interest rates on loans, to name a few.

 Sweep-In Account: A fixed deposit linked to your Savings Account. So, even if your Savings Account runs a bit short, you can issue a cheque (or use your ATM Card). The money is automatically swept in from your fixed deposit into your Savings Account.

 Super Saver Account: Gives you an overdraft facility up to 75% of your Fixed Deposit. In an emergency, you can access your funds while your Fixed Deposit continues to earn high interest.

 HDFC Bank Plus: Apart from Regular and Premium Current accounts we also have HDFC Bank Plus, a Current Account and then some more. You can transfer up to Rs. 50 lakh per month at no extra charge, between the four metros. You can also avail of cheque clearing between the four metros, get cash delivery/pickup upto Rs. 25,000/-, home delivery of Demand Drafts, at-par cheques, outstation cheque clearance facility, etc.

 Demat Account: Conduct hassle-free transactions on your shares. You can also access your Demat Account on the Internet.













1.9 Innovative Services

 Phone Banking: 24-hour automated banking services with 39 Phone Banking numbers available.

 ATM 24-hour banking: Apart from routine transactions, you can also pay your utility bills and transfer funds, at any of our ATMs across the country all year round.

 Inter-city/Inter-branch Banking: Access your account from any of our 350 branches in 175 cities.

 Net-Banking: Access your bank account from anywhere in the world, at anytime, at your own convenience. You can also view your Demat Account through Net-Banking.

 International Debit Card: An ATM card you can shop with all over the country and in over 140 countries with. You can spend in any currency, and pay in Rupees.

 Mobile-Banking: Access your account on your mobile phone screen at no airtime cost. Use SMS technology to conduct your banking transactions from your cell-phone.

 Bill-Pay: Pay your telephone, electricity and mobile-phone bills through our ATMs, Internet, phone or mobile phone. No more standing in long queues or writing cheques.















1.10 Loans

Now, our loans come to you in easy-to-pay monthly instalments, and are available with easy documentation and quick delivery.


 Personal Loans: Take a loan of up to Rs. 3 lakh for a wedding, education, purchase of a computer or an exciting holiday.

 New Car Loans and Used Car Loans: Finance up to 90% of the cost of a car, new or used! And the loans come to you with easy documentation and speedy processing at attractive interest rates.

 Loans against Shares: Get an overdraft up to Rs. 10 lakh at an attractive interest rate against physical shares, up to 50% of the market value of your shares. In case of Demat Shares, you can get loans against Shares of up to 65% of the market value of your shares, till Rs. 20 lakh.

 Commercial Vehicle Loans: HDFC offers loan for all types of commercial vehicle. We provide funding for all models of Telco, Ashok Leyland, Eicher, Swaraj Mazda, Volvo etc. HDFC spread over 22 locations across the country and expanding rapidly. If anybody have already taken a loan from elsewhere, at a higher rate can avail of HDFC’s Balance Transfer facility by exchange their old loan for a commercial vehicle loan from HDFC Bank at a much lower rate.

 Two Wheeler & Consumer Loans: To help you buy the best durables for your home.

 Demat Account: Protect your shares from damage, loss and theft, by maintaining your shares in electronic form. You can also access your demat account on the internet.

 Current Account: Get a personalised cheque book, monthly account statements, inter-branch banking and much more.


 Mutual Funds: Apart from a wide choice of mutual funds to suit your individual needs, you benefit from expert advice on choosing the right funds based on in-depth market analysis.



 International Credit Card: Get an option of Silver, Gold, or Health Plus Credit card, accepted worldwide from a world-class bank. If you have outstanding balance on your other credit card, you can transfer that balance to this card at a lower interest rate.

 NRI Services: A comprehensive range, backed by unmatched features and world-class service, ensures NRIs all the banking support they need.

 Forex Facilities: Avail of foreign currency, travellers cheques, foreign exchange demand drafts, to meet your travel needs.

 Insurance: HDFC Bank now brings you Life Insurance and Pension Solutions like Risk Cover Scheme, Savings Scheme, Children’s Plan and Personal Plan from HDFC Standard Life Insurance Co. Ltd.








1.11 Awards & Accolades

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian Bank". HDFC Bank realized that only a single-minded focus on product quality and service excellence would help us get there. Today, HDFC Bank is proud to say that it is well on its way towards that goal. It is extremely gratifying that our efforts towards providing customer convenience have been recognized both nationally and internationally.


 In 2007, HDFC Bank was named "Best Overall Local/Domestic Bank – India" in the Corporate Cash Management Poll conducted by the Hong Kong-based Asia money magazine.
 In 2006, Forbes Global again named us in its ranking of "Best Under a Billion, 200 Best Small Companies for 2006".
 Hong Kong-based Finance Asia Magazine rated us "Best Domestic Commercial Bank in India" in 2001, 2002 and 2003 respectively and "Best Local Bank in India" in 2005 and 2006.
 HDFC Bank has been named Best Domestic Bank in India Region in The Asset Triple A Country Awards 2006.
 Leading Indian business Magazine Business Today in a survey rated us "Best Private Sector Bank" in India in 2001 and "Best Bank in India" in 2006.
 NASSCOM and economictimes.com have named us the "Best IT User in Banking" at the IT Users Awards 2006.
 Leading Personal Finance magazine in India Outlook Money named HDFC Bank the "Best Bank in the Private Sector" for the year 2006.
 Leading business newspaper The Financial Express named HDFC Bank the "Best New Private Sector Bank 2006" in the FE-Ernst & Young Best Banks Survey 2006.
















There have been some other proud moments as well:

 London-based Euro money Magazine gave us the award for "Best Bank - India" in 2001, "Best Domestic Bank" in India in 2002, and "Best Bank in India" in 2003 and 2005.
 Asia money Magazine has named us "Best Commercial Bank in India 2005".
 The Economic Times has conferred on us The Economic Times Awards for Corporate Excellence as the Emerging Company of the Year 2002-01.
 For our use of information technology we have been recognized as a "Computerworld Honors Laureate" and awarded the 21st Century Achievement Award in 2005 for Finance, Insurance & Real Estate category by Computerworld, Inc., USA. Our technology initiative has been included as a case study in their online global archives.
 The Economic Times has conferred on us The Economic Times Awards for Corporate Excellence as the Emerging Company of the Year 2002-01.
 Leading Indian business magazine Business India named us "India's Best Bank" in 2002
 In the year 2002, leading financial magazine Forbes Global named us in its list of "The 300 Best Small Companies" in the world and as one of the "20 for 2003" best small companies in the world.
 We are aware that all these awards are mere milestones in the continuing, never-ending journey of providing excellent service to our customers. We are confident, however, that with your feedback and support, we will be able to maintain and improve our services.

















1.12 Branch – Internal Divisions

The Commercial Transportation Group functioning in ALLAHABAD Branch located at HDFC Bank Ltd, PLOT NO 54/01,SARDAR PATEL MARG, CIVIL LINES, ALLAHABAD-211003, U.P. has mainly seven divisions under Retail Asset Head. These are Commercial Vehicles, Channel Business, Construction Equipment, Working Capital, Credits, Collections, and Operations. This group’s main area of concentration is Jusi , Nani, Kourav, Kaushmbi up to Noida & Gaziabad also.

The Organizational Structure of four divisions Commercial Vehicles, Channel Business, Construction Equipment, & Working Capital is same.VIL The rest three i.e. Credits, Collections & Operations have the same Organization Structure in respect of the levels with only difference is in the name of designations.






Chapter 2



2.1 About Mutual Funds
2.2 Types of Mutual funds
2.3 How Mutual Fund Operates
2.4 Benefits of investing in Mutual fund
2.5 About HDFC





2.1 ABOUT MUTUAL FUNDS

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (pro rata). Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an invest able surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.




2.2 TYPES OF MUTUAL FUNDS

There are many types of mutual funds available to an investor. They can be classified in to different categories depending on various parameters. However we shall classify mutual funds by way of
a. Investment objective : Funds can be classified by way of their stated investment objective such as Growth Fund, Balanced Fund, Income Fund etc.
b. Constitution of the fund: Funds can be classified as Closed-ended or Open-ended depending upon whether they give the investor the option to redeem at any time (open-ended) or whether the investor have to wait till maturity of the fund.
By Investment By Constitution

Equity Debt Hybrid Open Ended Close Intervals
a) General purpose a) Bonds
b) Sector specific b) Money Market
c) Special schemes c) Gilt Funds
BY INVESTMENTS
Equity Based Schemes
These schemes, also commonly called Growth Schemes, seek to invest a majority of their funds in equities and a small portion in liquid money market securities. Such schemes have the potential to deliver superior returns over the long term. However, because they invest in equities, these schemes are exposed to sharp fluctuations in value especially in the short term.
Equity schemes are hence not for investors seeking regular income or needing their investments back in the short-term. They are ideal for investors who have a long-term investment horizon. The NAV prices of equity fund fluctuates with market value of the underlying stock which are influenced by external factors such as social, political as well as economic. HDFC Growth Fund is an example of an equity scheme.
I. General Purpose
The investment objectives of general-purpose equity schemes do not restrict them to invest in specific industries or sectors. They thus have a diversified portfolio of companies across a large spectrum of industries. While they are exposed to equity price risks, diversified general purpose equity funds seek to reduce the sector or stock specific risks through diversification. They mainly have market risk exposure.
HDFC Growth Fund is a general-purpose equity scheme
.II. Sector Specific
These schemes restrict their investing to one or more pre-defined sectors, i.e. technology sector. Since they depend upon the performance of select sectors only, these schemes are inherently more risky than general purpose schemes. They are suited for informed investors who wish to take a view and risk on the concerned sector.
III. Special Schemes
a. Index schemes: An Index fund tracks the performance of a specific stock market index. The objective is to match the performance of the stock market by tracking an index that represents the overall market. The funds invest in shares that constitutes the index and in the same portion as the index. The BSE Sensex and NSE Nifty are being increasingly used as benchmarks for index funds in India. Since these schemes mirror an index, there is no active management and hence they are called passive funds. Their performance is closely linked to that of the underlying index. Such schemes are best suited for investors who would like an equity exposure but are not comfortable with active management of their fund by a fund manager.
b. Tax Saving schemes: Generally, called as the Equity Linked Saving Schemes (ELSS). Investors have been given tax concessions to encourage them to participate in equity markets through special schemes
such as the ELSS. Investment in these schemes entitles the investor to claim an income tax rebate. This investment usually has a lock-in period before the end of which funds cannot be withdrawn. The maximum amount an investor can invest in fund to get the tax benefit is Rs.10000.
c. Real Estate Funds: Specialized real estate funds would invest in real estates directly, or may fund real estate developers or lend to them directly or buy shares of housing finance companies or may even buy their securities assets. They may be in form of growth fund or income fund.

Debt Based Schemes
These schemes, also commonly called Income Schemes, invest in fixed income securities such as corporate bonds and debentures and government securities. The prices of these schemes tend to be more stable compared with equity schemes and most of the returns to the investors are generated through dividends or steady capital appreciation. These schemes are ideal for conservative investors or those not in a position to take higher equity risks, such as retired individuals. However, as compared to the money market schemes they do have a higher price fluctuation risk and compared to a Gilt fund they have a higher credit risk.


I. Income Schemes
These schemes invest in money markets, bonds and debentures of corporate with medium and long term maturities. These schemes primarily target current income instead of capital appreciation. They therefore distribute a substantial part of their distributable surplus to the investor by way of dividend distribution. Such schemes usually declare annual/semi-annual dividend and are suitable for conservative investors who have medium to long term investment horizon and are looking for regular income through dividend or steady capital appreciation. HDFC Income Fund is an example of a bond scheme.
II. Money Market Schemes
These schemes invest in short term instruments such as commercial paper (CP), certificates of deposit (CD), treasury bills (T-Bill) and overnight money (Call). The schemes are the least volatile of all the types of schemes because of their investments in money market instrument with short-term maturities. These schemes have become popular with institutional investors and high net worth individuals having short-term surplus funds.



III. Gilt Funds:
Hybrid Schemes
These schemes are commonly called as The Balanced Funds. These funds invest in both equities as well as bonds. By investing in a mix of this nature , balanced funds seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative and long-term orientation. HDFC Balanced Fund is an example of a hybrid scheme.










BY CONSTITUTION

Open-ended Schemes
The units offered by these schemes are available for sale and repurchase on any business day at NAV based prices. Hence, the unit capital of the schemes keeps changing each day because the scheme itself buys and sells units from investors.
Such schemes thus offer very high liquidity to investors and are becoming increasingly popular in India. All the schemes offered are open-ended schemes. Please note that an open-ended fund is NOT obliged to keep selling/issuing new units at all times, and may stop issuing further subscription from new investors. On the other hand, an open-ended fund rarely denies to its investor the facility to redeem existing units.

Closed ended Schemes
The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed number of units. These schemes are launched with an initial public offer (IPO) with a stated maturity period after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy or

sale units on the stock exchanges where they are listed. Unlike open-ended schemes, the unit capital in closed-ended schemes usually remains unchanged. After an initial closed period, the scheme may offer direct repurchase facility to the investors. Closed-ended schemes are usually more illiquid as compared to open-ended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme.
Interval Schemes
These schemes combine the features of open-ended and closed-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV linked prices.








2.3 HOW MUTUAL FUND OPERATES

Putting a face to a name is a problem for many people in the case of a mutual fund. While the term mutual fund is extensively used, it can be a rather difficult task to physically locate an entity called a mutual fund. This happens because of the way in which mutual is constituted. A mutual fund is a collection of investments; it is a pool of money, the combined contribution of number of individuals or investors.
Thus mutual funds require some person or body to mobilize and manage these assets. This entity is an organization known as an ASSET MANAGEMENT COMPANY (AMC). It is the organization or a company that generates the collective investment from the public with a view to invest in securities and generate returns. By virtue of its mobilization function, the AMC has offices or branches in number of cities. These branches collect money from investors and are one of the visible faces of the mutual fund. As this money has to be invested and managed, the AMC has an investment. The head of the team, the FUND MANAGER or the CHIEF INVESTMENT OFFICER. He is the head of the decision making process which takes strategic and tactful decisions on where to invest.
The AMC is not the only part of the mutual fund game. The funds are established as a trust; there exists the TRUSTEES of the mutual fund. The trustee refers to a body of individuals or a company who hold the property of the mutual fund in trust for the benefit of the unit holders. Trustees are thus a board of trustees who have reposed faith/confidence to regulate the functioning of the AMC. They hold the assets of the mutual fund in trust for the benefit of unit holder in accordance with these regulations and the

Provisions of the TRUST DEED. Along with being accountable for the funds and the property of the respective schemes they are also the CUSTODIANS of the unit holder’s assets.
The trustees’ responsibilities are not limited to a single function. Besides serving as the “in house” regulators of the AMC, they link the AMC with the mutual fund through an INVESTMENT MANAGEMENT AGREEMENT. Though these trustees appoint AMC as the managers of assets of the unit holders. Their link with both the AMC and the mutual fund thus places them at the apex of the three-tier structure, which constitutes the mutual fund industry.
The trustees also serve to link the functioning of the AMC to that of the MARKET REGULATOR- SEBI. Through regular reports to SEBI, the trustee provides inputs on the functioning of the mutual fund. Any shortcomings in the functioning of the AMC are meant to be corrected and reported.
This structure ensures that the AMC, which administers the assets, is kept at a distance from the pool of collected investments. The trustees, while not managing the assets hold them in the name of the investor. As the body, which separates from the ASSET MANAGERS, the trustees are tasked with ensuring that the funds collected, are employed for the purpose stated. Through this structure a series of checks and balances are created, which is internal to the mutual fund.

2.4 BENEFITS OF INVESTING IN MUTUAL FUNDS

There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets of US and UK is the range of benefits it offers and that are unmatched by most other investment avenues. We have explained the key benefits in this section. The benefits have been broadly split into universal benefits, applicable to all schemes, and benefits applicable specifically to open-ended schemes. Just click on any of the benefits in the diagram below to view that section.
UNIVERSAL BENEFITS
Affordability
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be out of his reach. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.3000/-. This amount today would get you half an Infosys` share! Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.
Diversification
Diversification means not putting all your eggs in one basket. Mutual fund helps you achieve this objective by spreading the money in to various companies through its portfolio of investment. Thus if any one company gets affected the fear of the investor's capital eroding is minimized. Diversification takes place within the fund's stated objectives and is beneficial, because it lowers risk
Variety
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers a chance to an investor to invest sums across a variety of schemes, both debt and equity. For example, an investor can invest his money equally in a Growth Fund (equity scheme) and Income Fund (debt scheme) and thus create a balanced portfolio easily.
Professional Management
Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. When you buy in to a mutual fund, you are handing your money to an investment professional who has experience in making investment decisions. It is the Fund Manager's job to (a) find the best securities for the fund, given the fund's stated investment objectives; and (b) keep track of investments and changes in market

conditions and change the portfolio, as and when required.
Tax Benefits
Benefits are available on both types of return - dividends and capital gains. Dividends are tax free in the hands of the investors. (It may be noted here that on income distribution, if any, made by the Mutual Fund, income-tax will be payable under Section 115R of the Act, at 22% (inclusive of surcharge on income-tax), except, inter-alia, in the case of open-ended equity-oriented funds, (i.e. where the invest able funds are invested by the way of equity shares in domestic companies to the extent of more than 50% of the total proceeds of the funds), where no such tax will be levied for a period of three years commencing from April 1, 1999. For long-term capital gains, i.e. gains booked for units held for more than a year, tax is charged at a flat rate of just 10% or the indexation adjusted tax rate, whichever is lower. Since all income is by way of dividends or capital gains, there is no TDS applicable on any redemption for resident unit holders.




Regulations
SEBI, the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the investors from misuse of their money.

SPECIFIC BENEFITS
Liquidity
With open-ended mutual funds, you can redeem all or part of your units any time you wish.
Convenience
Each investor in open-ended schemes simply receives an account statement that gives the details of the transactions and the units held by him. Hence, he does not have to worry about theft of physical certificates or loss in transit. Also, when he wants to redeem his units, he just needs to fill in a simple redemption form, send it to the nearest service centre and receive his redemption normally within 3-5 days.


Transparency
Most open-ended mutual funds today disclose their NAV daily and full portfolio quarterly. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument. Thus the investor is in the know of the quality of the portfolio and can invest further or redeem depending on the kind of the portfolio that has been constructed by the Investment manager.

Flexibility
Mutual Funds offering multiple schemes allow investors to switch easily between various schemes. This flexibility gives the investor a convenient way to change the mix of his portfolio over time.



2.5 ABOUT HDFC
HDFC Asset Management Company limited was incorporated in 1977 as the first specialized housing finance institution in India. HDFC provides financial assistance to individuals, corporate and developers for the purchase or construction of residential housing. It also provides property related services (e.g. property identification, sales services and valuation), training and consultancy.
CONSTITUTION OF MUTUAL FUND
HDFC mutual fund (THE MUTUAL FUND) has been constituted as a Trust in accordance with the provision of the Indian trust act 1882 by the sponsor as per the terms of the trust deed dated June 8th 2006 . The trust deed has been registered under the Indian registration act ,1908 .The mutual fund has been registered with SEBI dated June 30th 2006 .
(AMC) was incorporated under the company’s act ,1956 ,on Dec10th 1999 ,and was approved to act as an asset management company for the mutual fund by SEBI on July 3rd 2006 . AMC is managing 5 open ended schemes launched by the MUTUAL fund viz. HDFC growth fund (HGF0 ,HDFC balanced fund (HBF) ,HDFC income fund (HIF), HDFC liquid fund (HLF), HDFC tax plan (HLF).

VISION
 To be a dominant player in the Indian mutual fund space
 To be recognize for its high levels of ethical and professional

 conduct
 Commitment towards enhancing investors interest

STRATEGIC ALLIANCE

HDFC has entered into a Joint Participation Agreement with Standard Life Investments Limited (SLI), U.K., for its mutual fund foray.
Standard Life was established in 1825 and has considerable experience in global financial markets. In 1998, Standard Life Investments was launched as the dedicated investment management company of the Standard Life Group. With global assets under management of approximately $115 billion, Standard Life Investments is one of the world’s major investment companies and is responsible for investing money on behalf of five million retail and institutional clients world-wide. In order to meet the different needs and risk profiles of its clients, SLI manages a diverse portfolio covering all of the major markets world-wide, which includes a range of private and public equities, government and company bonds, property investments and various derivative instruments. The company’s current holdings in UK equities account for over 2% of the market capitalization of the London Stock Exchange.
The Indian mutual fund industry has seen significant growth in the recent past, which provides significant opportunities to offer mutual fund products
to the retail as well as institutional investors. The proposed mutual fund plans to offer a wide range of investment products to the retail as well as institutional investors in India. It will leverage on HDFC's investment management expertise as well as its brand, distribution capability and existing client base. The proposed insurance joint venture would draw on SLI's global investment expertise, the investment management skills of the AMC and will have access to SLI's training facilities.








WORKING OF HDFC
HDFC SCHEMES:
HDFC LIQUID FUND (HLF)
HLF was launched on October 17th 2006 . The scheme will retain the flexibility to invest in the entire range of money market and debt instruments.Investment made from the corpus of the schemes would be in accordance with the investment objectives and the providences of the SEBI regulations. Every investment opportunity would be assessed with regards to credit risk, interest rate risk liquidity risk.
The AMC would manage the investment of the scheme on the dynamic basis to exploit emerging opportunities in the investment universe and manage risk at all points in time. The AMC will provide liquidity by maintaining a low average duration of the portfolio and by investing in securities that would result in a staggered maturity profile of the portfolio. Liquidity will also be managed by investing in the call money/ repo-market when call money/ repo-yields are attractive related to other money markets yields investments in debts instruments would generally be in securities that have reasonable secondary market activity.

HDFC INCOME FUNDS (HIF)
HIF was launched on July 20th 2006 the scheme will retain the flexibility to invest in the entire range of debt and money market instrument. The flexibility is being retained to ensure adequate adjustment to the portfolio in response to a change in the risk to return equation for asset classes under investment, with the view to maintain risk with manageable limits.
The AMC will attempt to reduce liquidity risk by investing in securities that would result in a staggered maturity profile of the portfolio, investment in structured securities that provide easy liquidity and securities that have reasonable secondary market activity.
HDFC BALANCE FUNDS (HBF)
HBF was launch on July 20th 2006 the HBF is positioned as lower risk alternative to a pure equity scheme, while retaining some of the upside potential from equity exposure. The scheme provides flexibility to shifts allocation in the event of a change in view regarding an asset class.
Asset allocation between equity and debts is a critical function in the balance fund. It is proposed to continuously monitor the potential for debt and equity to arrive at a dynamic allocation between the asset classes.
Equity Investment
Five basic principles would serve as the foundation for the equity investment. These are:
1. Focus on the long term.
2. Investments confer proportionate ownership of the business.
3. Maintain a margin of safety.
4. Maintain a balance outlook on the market.
5. Discipline approach to selling.
Debt Investments
Investments in debts securities will usually be in instruments, which have been accessed as “ high investment grade” by at least one credit rating agency. The maturity profile of the debt instruments will be selected in line with the outlook for market condition, interest rates and the stability of ratings. The over all portfolio structure would aim to maintain risk at a moderate level through sensible portfolio diversification and a conscious attempt to maintain adequate levels of liquidity.
HDFC GROWTH FUND (HGF)
HGF was launch on July 20th 2006 . The objective will be to identify businesses with superior growth prospects and good management, at a reasonable price. The investment approach will be based on a set of well established but flexible principles that emphasize the concept of sustainable economic earnings and cash return on investment as the means of valuation of the company. The investment strategy is expected to be function of extensive research and based on data and reasoning, rather then current fashion and emotion.
NET ASSET VALUE (NAV)
The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit".
CALCULATION OF NAV
The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below.
NAV (Per unit ) =Market value of scheme’s investment
+ Current assets (including accrued income )
less current liabilities and provision (including accrued expenses) no of units outstanding under this scheme .


RECENT PLANS
HDFC TO LAUNCH INDEX, PENSION AND GILT FUND.
HDFC Mutual Fund is planning the launch of an index fund, a gilt fund and a pension fund in the next financial year, for this the company would seek the approval of SEBI for the index fund and the gilt fund. These two would be launched in the first quarter of 2002-02.
The pension fund would be launched later and would be using the resources of Standard Life Investments with which the HDFC Asset Management Company has a tie up.
HDFC Mutual fund is not going to launch any high risk high gain fund as the general consensus is that Indian investors are not ready for such funds. The company has launched six funds so far since it started operating in October and has mobilized more than Rs.1, 400 crore as funds. The company plans to end the year with more than Rs.1, 700 crore as funds.
It is also looking at 50,000 members for the Children’s Gift Fund. The company is developing a very conservative image for itself and is refraining from launching funds like specific sector funds as these are high risk areas.


HDFC TO LAUNCH CHILDREN FUND
With a view to generate long term capital appreciation for investors, HDFC Mutual Fund has launched the HDFC Children’s Gift Fund, its sixth scheme since inception. An open ended balanced scheme, the offer opened on 25 January 2002 and closes on 2 February 2002. The fund has not set itself any target for mobilizing funds, but aims at garnering more account holders instead















Chapter 3

RESEARCH METHDOLOGY


3.1 Objectives
3.2 Marketing Research Process
3.3 Study Description
3.4 Sampling
3.5 Contact Methods











3.1 Objectives


• Current Scenario of mutual funds in Indian Market.
• Consumer behavior while investing in a Mutual fund.
• Consumer perception about mutual funds.
• To comprehend the various factors that satisfy consumers in Mutual Funds.

















3.2 Marketing Research Process


“Research may be defined as prose word. It means analysis of the subject based on borrowed materials with suitable acknowledgement and consultation in the main body of paper.”
“Marketing Research can be defined as the systematic design, collection, analysis, & reporting of data & findings relevant to a specific marketing situation facing the company.”



Fig – Marketing Research Process
3.3 Study Description

The type of research here is “Exploratory Research Design”. This kind of design is used for more precise investigation or of developing the working hypotheses from an operational point of view. It has inbuilt flexibility, which is needed because the research problem, broadly defined initially, is transformed into one with more precise meaning in exploratory studies, which in fact may necessitate changes in research procedure for gathering relevant data.

The characteristic features of research are as follows: –
 Flexible Design
 Non-Probability Sampling Design
 No pre-planned design for analysis
 Unstructured instruments for collection of data
 No fixed decisions about the operational procedures








Research method and Data description

Research methods are understood as all those methods and techniques that are used for conduction of research. Research methods or techniques refer to methods the researchers use in performing research operation. In other words, all those methods which are used by the researchers during the course of studying his research problems, are termed as research methods. Since the object of research, particularly the applied research, is to arrive at a solution for a given problem, the available data and the unknown aspects of the problem have to be related to each other to make a solution possible. Keeping this in view, research methods can be put into the following three categories-----

• Methods which are concerned with the collection of the data
• Statistical technique
• Methods which are used to evaluate the accuracy of the result obtained







Methods of data collection

1. Primary data
survey methods--- this method was adopted because it helps to procuring data and detail information from the respondents. Here I collected data by filling questionnaires, directly talking to the respondents.

2. Secondary data--- I have also used the secondary data which include various written documents and other related information about the mutual fund industry in India.
3. Sampling--- the sample comprised 120 respondents from the town Allahabad itself.

All the respondents were first surveyed, interviewed and asked various questions regarding the three broad objectives of my research work and then their feed backs were taken. Then the analysis of each and every question was done and finally incorporated into research result. As there is no such

Popular model or technique available for this kind of research, I have done the analysis part of my project on my own, without using any model or scientific technique.

Data Sources


The data gathering can be from secondary data, primary data or both. Secondary data are data that are collected for another purpose and already exist somewhere. Primary data are data freshly gathered for a specific purpose or for a specific research project.

The cost incurred in collecting primary data is more than secondary data. The secondary data available orally in this research, therefore whole data is collected primarily.


Research Instruments

There is a choice of mainly three instruments in collecting primary data: –

 Questionnaires
 Psychological Tools
 Mechanical Devices

Questionnaire consists of a set of questions presented to respondents. Because of its flexibility, the questionnaire is by far the most common instrument used to collect primary data. Questionnaires need to be carefully developed, tested & debugged before they are administered on a large scale.

Psychological Tools such as laddering techniques, depth interviews & Rorschach tests can probe a buyer’s deeper beliefs & feelings. Laddering involves the points set in ascending order, Depth Interview involves the questioning deeply, & rorschach involves some kind of pictures representation, graphs etc. to check the perception of respondent.

Mechanical Devises are occasionally used in marketing research. All kinds of scientific instruments & mechanics used to measure the respondents characteristics.


What is done here?
The Questionnaire is used as research instrument in this research. This technique is useful as the same type of questions asked to all the transporters. It is non-disguised structured questionnaire, which is used to pull out important information from the secret pockets of transporters because generally transporters refuse to give any kind of information.



3.4 Sampling


Sampling Plan

Sampling can be defined as the technique through which an idea can be generated out of whole market by taking just a small part of it. The sampling process has the following steps: –

 Define the population
 Establish the frame of population
 Choose method of sampling
 Determine the sample size
 Write instructions for identification of sample


Under this process, the sampling plan has to be designed. This plan deals with basically three decisions: –

 Sampling Unit – Who is to be surveyed?
 Sample Size – How many people should be surveyed?
 Sampling Procedure – How should the respondents be chosen?

Sampling Unit – By the sampling unit, the target market has to be defined that will be sampled. Once the sampling unit has been determined, a sampling frame must be developed so that everyone in the target population has an equal or known chance of being sampled.


Sample Size – Large Samples give more reliable results than small samples. However, it is not necessary to sample the entire target population or even a substantial portion to achieve the reliable results. Samples of less than 1 percent of a population can often provide a good reliability.

In this research of Commercial Transportation, the Sample Size is 100.

Sampling Procedure – To obtain a representative sample, a probability sample of the sample should be drawn. Probability Sampling allows the calculation of confidence limits for sampling error. Thus, one could conclude after the sample is taken that “the interval 5 to 7 trips per year has 95 chances in 100 of containing the true number of trips taken usually by 1st class passengers flying between Chicago & Tokyo. Even non probability samples are useful in many circumstances; even they do not allow sampling error to be measured. Probability Sampling is of many types z like Simple Random Sampling, Systematic Sampling, Stratified Sampling, Cluster Sampling, & Area Sampling etc.

The type of sampling in this research is Cluster Sampling under Probability Sampling. The common group here is of Fleet Owners, who run their fleets all over India. This group is extracted out of various transport areas, which are mentioned in the Sampling Unit.











3.5 Contact Methods

Once the sampling plan has been determined, the decision now is to taken regarding how the subject should be contacted: –

 Mail Questionnaire
 Telephone
 Personal
 Online Interview

Mail Questionnaire is the best way to reach people who would not give personal interviews or whose responses might be biased or distorted by the interviewers. Mail Questionnaires require simple & clearly worded questions.
Telephone interviewing is best method for gathering information quickly; the interviewer is also able to clarify questions if respondents don’t understand them.
Personal Interviewing is most versatile method. The interviewer can ask more questions and record additional observations about the respondent, such as dress & body language.
Online Interview is best suited for educated people or who can answer the questions through Internet. This is the economical method as at the same time, there is huge collection of responses.
 give more suggestions/comments
Chapter 4







4.1 Data Representation
4.2 Charts & Comments




ANALYSIS
On the basis of the study conducted by me I have come to the following observation :
PERFORMANCE : It is generally believed that Mutual fund has performed poorly but if one looks at Income funds ,they have come with reasonable returns. It is only the performance of Equity funds, which has been poor .
This is because the fall in the value is maximum for longer dated instruments(equity funds) and negligible for short dated instruments ( income funds ). Hence, the risk is higher in a fund that has an investment portfolio with a higher average maturity. This can again be checked from the investment portfolio, which is published by the funds. For example ,even if interest rates rise by 2-3%, the fall in NAV for most mutual funds is unlikely to exceed 5%. Similarly, a portfolio with as high as 10% of poor quality instruments will result in a fall in NAV by 10%. Regular interest income will take care of the losses in a few months. Thus, there is unlikely to be permanent erosion of capital in most reasonable circumstances. Hence, debt or income funds have a much lower risk than equity funds, which can have permanent erosion in value.

RISK
Again the general belief is that the risk involved is high in case of mutual fund because of the recent experience “ US 64 BONDS”
In this case, the main problem was that for a period of 2-3 years, the UTI distributed more dividends to the unit holders of US 64 than the return earned from the investments in the scheme. This reduced the value of the residual investments in the scheme. This problem was compounded by the persistent fall in the prices of shares , especially the shares of companies in basic commodity industries like cement, steel, manmade fibers etc. and shares of public sector units. Throughout this period, when the NAV of US 64 was going down, UTI kept increasing the sale and repurchase prices of US 64 units. The stock market collapse after the Pokhran II nuclear tests was the last straw, which resulted in the erosion of the scheme’s book reserves and a wide difference between the actual NAV and the sale/repurchase price.
When this became known, it set a panic amongst investors of US 64. Many people felt that if there were large-scale redemptions, UTI would not be able to meet them without support of outside bodies like the RBI. Further, theoretically, if all investors wanted to redeem their US 64 units on the same day, the US 64 simply did not have the money to meet the redemptions on its own (due to the difference between NAV and the repurchase price).
With such experience the people have become more cautious and banks such as HDFC are taking greater precautions by coming up with more lucrative and diversified schemes .
BENEFITS
On the basis of my research I found that the various benefits sought by investors in mutual fund are tax benefits , return potential ,diversification convenience, liquidity and well regulated investment .
According to the banking official the tax benefit for investing in mutual fund units offered are tax free dividend ,exemption from long term capital gain and 20% rebate on contribution up to Rs 10,000 under section 88 .
INCOME FUND
From the information brochure I analysed it became clear that the over all return of the debt funds are 10-14%. It is clearly visible from the graphgiven below that the CORPORATE SECTOR is investing more in the income fund because these funds


COMPOSITION OF ASSETS (INCOME FUND)


Source: Information brochure of the company-HDFC MUTUAL FUND

are flexible, as corporate sector likes to invest more in those funds which gives stable returns with less exit load as its only 0.5% of NAV if redeemed within 3 months. Also it is safer to invest in income fund as it involves low risk and the fund manager strives to earn steady returns in the fixed income market by actively managing the funds portfolios on interest rate movement and credit risks.

MONEY MARKETS
From the graph we can see that the corporate debt is as high as 55.7%. This is because every corporate sector would like to have liquid funds as it is for short-term period. Thus they invest in liquid funds as it can be transferred into cash whenever they are in need for further growth of the organization. The Fund Managers strive to provide optimum returns with prudent exposure to money market instruments while maintaining focus on capital preservation.
COMPOSITION OF ASSETS (LIQUID FUND)

Source: Information brochure of the company-HDFC MUTUAL FUND










Graphs and Charts









Chart No. 1













Chart No 2
















Chart No. 3













Chart No. 4















Chart No. 5
















Chart No. 6







Chapter 5








5.1 Conclusion
5.2 Suggestions & Recommendations
5.3 Limitations






CONCLUSION
We can infer from the analysis that the concept of mutual fund in the place like
is still in is nascent age. With the growing importance of mutual fund in other areas in the country, this place is not witnessing the same rate of growth in mutual funds. Apart from these facts the following are some other important facts which can easily be inferred from the paper---

 Huge opportunities of Mutual funds exist in the town of Allahabad. In short the market in this small town is almost virgin market.
 As because only few companies exist in this market, competition is next to nil.
 Mindsets of the investors are not towards mutual funds. They still think of investing in traditional investment alternatives. Customers are not properly educated about the mutual funds.
 Few private sectors banks like ICICI, HDFC, UTI sell mutual funds through their branches only.
 Specialized agents of mutual funds are rarely seen. Financial advisors are not seen there who can educate the investors.
 Posters, banners or other promotional activities are rarely seen in this market.
 Mutual fund companies do not have aggressive strategies.
 Insurance products are and can be the main competitors of mutual funds.
 Mutual fund investors are confined to the upper-middle and upper social class in this market.
 lower class and lower-upper class people are still
o untouched.
o More than half of the respondents have wrong perception about the mutual funds .They feel mutual funds are very risky investment alternative.
 Most of the respondents are satisfied with their current return from their investment. Most of the respondents neither do nor want to take risk in investing their money in mutual funds.











RECOMMENDATION & SUGGESTIONS

After a through study and analysis of the data and information, the following are the few recommendations and suggestions, if adopted, would definitely benefit the financial market in Bardhaman, which is almost untouched and virgin, in the short run and in the long run as well.
Recommendations and suggestions are normally given when there are some problems or difficulties lying in the market. Here in this research report my recommendations and suggestions are totally based on the facts, reactions, attitudes, perceptions, and many other thingnos of the respondents which I have received from them during my research work.
The recommendation part of this research work has two parts only, which I feel can push the mutual fund market in Bardhaman to a upper level.


The two parts are –
• Market Development
• Marketing activities






Market development

My consumer survey in Bardhaman has revealed the fact that the market for mutual fund is still almost a untouched and virgin market. Hence the companies have to do a lot of things and activities to develop the market for mutual fund in this small township. Because the market development is as important as STP of any marketing plan. Market development means doing anything and everything for the growth of the mutual fund industry. Hence in the following ways the market of mutual fund in Bardhaman can be developed.


Awareness
Awareness of mutual fund products must be increased in this township. The awareness can be enhanced in the following ways---
 Conference or seminars on “mutual funds” can be conducted on regular basis. This will no doubt increase the awareness of mutual fund in the minds of the investors.

 All the companies must join hands and work together for this.




Customer education
As the awareness of mutual funds is very poor in this market, companies should give focus on “ customer education”. For this purpose again the conference and seminars can be the best way towards educating the customers. Again free training program to the agents can be fruitful.

Govt. intermediation
Govt. must also work together with the mutual fund companies in promoting the concept of mutual fund in Allahabad.

Confidence building activities

People in this township are not confident in investing their money in mutual funds. Hence there is a need to do something which will build the confidence in the minds of the investors.


Hence the confidence building activities must be carried out the mutual fund companies. Because most of the people in Bardhaman think that investing in mutual funds is a very risky affair. In the following ways the confidence can be increased in the minds of the people in Bardhaman.



 As the common people has blind faith in all the govt. institutions, hence they have to come forward and convey the message that investing in mutual fund is not that risky.
 The present performance of the mutual funds is very good indeed. And the companies should cash in on this opportunity. The performance of the mutual funds can be published in the local and other newspapers and magazines, journals. This will no doubt induce the investors towards investing in mutual funds.
 Case study of the investors who have been benefited in investing in mutual funds can be published in the newspapers, magazines and journals.












Marketing techniques

While the Mutual Fund industry in India has seen dramatic improvements in quantity as well as quality of product and service offerings over the past decade (refer the graph on page number - 33). One of the primary reasons for this slow growth is the fact that mutual funds are a new concept in India, which needs to be still understood by large sections of Indian investors. In this scenario, the mutual fund companies have the onerous responsibility of not just selling mutual fund products, but ‘marketing’ them correctly.
Financial product like mutual fund does not need the extensive marketing plans for the selling of it as these are required for the physical products. Nevertheless the selling of mutual funds needs the same extensive marketing plans but these plans are completely different from those which are required for the products. Good marketing plans are the main mantra. The following are some of the marketing plans which will, in result, make the market for mutual funds grow.







Marketing plan

 Booklets on mutual funds can be distributed at free of cost to the common people with the newspapers, magazines, journals. This will help in attitude formation of the investors.
 Companies must focus on tailored made mutual fund schemes rather than on the traditional products/ schemes.
 Unlike the case of insurance where there is a restriction on certain age of the investors to invest on insurance, there is no such restriction on investing in mutual fund. An investor of any age bracket can invest in mutual fund. Hence the strong and efficient CRM can prove to be very fruitful.
 Selling of mutual funds only through agents and the branch will not serve the purpose. Distribution network
 should be increased. Here aggressive strategy must be
taken by a company in selling mutual funds.
 This will only be possible when the investors are well
familiar with the concept of mutual funds and its
advantages and benefits.
 As selling of financial products requires well trained people, the companies must provide proper training to the agents and financial planners. For this training institute must be opened in this township.
 Continuous brand building activities must be carried out by the companies. For this purpose companies should
o initiate some sort of promotional activities like—ads on
o newspapers, magazines, journals.
 Educational institutes must start some professional courses on mutual funds and other finance specialized courses. This will create some sort awareness about the mutual funds.
 Mutual fund companies must tie up with other financial institute like banks, post office for reaching to the mass people. Because these financial institutes have tremendous reach to the mass people in our country. As
 a result mutual fund companies can have easy access to
the common people. The companies must go in for this
kind of strategic alliance with other companies as well.
Because strategic alliance not only benefit the companies
but help in developing the market also.









Handsome incentive

Push selling of mutual funds products must be stressed on.
This push selling must be done through agents and
financial planners. Handsome incentives and commission
will no doubt motivatee them push sell the mutual funds.

Attractive schemes

As the maximum number of investors of mutual funds in
this township are confined to the business class and upper
social class category. Common people rarely invest in
mutual funds. Hence the different attractive schemes can be
launched to attract the common people towards mutual
fund investment. These schemes are for promotional
purpose only. The main purpose of these schemes are to

draw retail investors towards the mutual funds investment.
The following are some of the schemes :—

 For opening of new savings bank account, certain units of mutual funds of a company(strategic alliance company) can be given at free of cost to the account holder. This will no doubt make the people more familiar with the concept of mutual funds.
 On buying of one or some life insurance policies, again certain units of mutual fund can be given at free of cost
to the policy holders. This will ultimate lead to the
mutual fund buying habit of the common people.
 Again each car loan or other kind loan of a certain amount will get the loan taker certain units of mutual funds absolutely free of cost.



Sponsorship of management events
As we all know that management institutes and universities and other educational institutes are the production houses of the business managers. In the these institutes, several kind of

management activities go on throughout the year. The companies must cash in on this opportunities to make them know to the students and to the people who are associated with thess institutes. Companies can sponsor some of the management events of these institutes. This will again lead to the WoM communication of the products of the companies.





Limitations

Every research work can not be perfect. There is always some sort of limitations in almost all the research work, esp. when a research is completely based on consumer survey. As my research work is also based on consumer survey, I also faced some limitations, which are an integral part of any research work, during my consumer survey in Bardhaman.
There are some problems which could not be escaped. The limitations faced, felt and expressed by me are as follows---
• All the respondents were not surveyed in Bardhaman i.e. the place of my consumer survey.

• Some selected areas were surveyed due to limited time.

• Selection of the areas was made randomly.

• Respondents were also selected randomly.

• There might be some biases in the answers of the answers.

• All the data regarding my research paper was not available during my project work.


Chapter 6









6.1 Bibliography
6.2 Questionnaire










6.1 Bibliography


INTERNET SITES
• www.hdfcfund.com
• www.mutualfundindia.com
• www.amfi.com

REFERENCES
• HDFC Mutual funds (Asset Management Company Information Brochure)
• BOOKS
• M.Y.Khan, Indian financial System, Tata McGraw-Hill Publishing Company Limited, 2004.
• Is
• Haridwar.C.Dhingra, The Indian Economy– environment and policy, Sultan Chand and Sons, 2004.
• Russell.J.Fuller and James.L.Farell.Jr, Modern Investments and security analysis, McGraw-Hill International Editions, 1987
H.R.Machiraju, Indian financial System, Vikas Publishing House Pvt. Ltd., 2004























CONSUMER SURVEY

1. Name:
2. Age:
3. Sex: Male  Female 

4. Occupation:
Businessman  Service man  Professional  Others

5. Monthly income brackets:
Below 15000  15000- 20010  20010-30000  30000 and above 

6. % of your savings ------------------------

7. Do you invest? Yes  No 

8. If yes, then where do you invest your money?
Bank  Insurance  Share market  Others 

9. Why do you invest (investment objectives)?
Return  Risk hedging Tax benefits  Other reasons (specify)

10. Who influence your investment decision?
Relatives and friends  family members  Advisors/ experts you yourself 

11. If no then why?
Do not know where to invest 
Satisfied with your current investment return 
Don’t want take risk 
Other reasons-------
.
12. Do you know about MF? Yes  No 

a)If yes then from where u have come to know about an MF
Advertisements on newspapers 
Friends and relatives 
Agents/ experts 
Other source----

13. What do you think about MF?
It means investing only in share market 
Constant watch must be kept always 
Return is not satisfactory 
Other perception------

14. Can u recall any mutual fund company ? --------


15. Can you recall any MF scheme? ---------

16. Would u want to invest in MF? Yes  No

17. If yes then why? -----------------------------------------------------

18. If no then why? ---------------------------------------------------

19. Your recommendation and suggestions( if any)----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





THANK YOU