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Close ended mutual funds-The unit capital of closed-ended funds is fixed and they sell a
specific number of units. Unlike in open-ended funds, investors cannot buy the units of a closed-
ended fund after its NFO period is over. This means that new investors cannot enter, nor can
existing investors exit till the term of the scheme ends. However, to provide a platform for
investors to exit before the term, the fund houses list their closed-ended schemes on a stock
exchange.
Trading on a stock exchange enables investors to buy and sell units through a broker in the same
manner as transacting the shares of a company. The units may trade at a premium or discount to
the NAV depending on the investors' expectations of the fund's future performance and
prospects. The demand and supply of fund units and other market factors also affect their price.
The number of outstanding units of a closed-ended fund does not change as a result of trading on
the stock exchange. Apart from listing on an exchange, these funds sometimes offer to buy back
the units, thus offering another avenue for liquidity. Sebi regulations ensure that closed-ended
funds provide at least one of the two avenues to investors for entering or exiting.
The closed-ended funds are free from the worry of regular and sudden redemption and their fund
managers are not worried about the fund size. However, open-ended funds have outperformed
the closed-ended funds comprehensively. The latter have generated average annualized returns of
7.38%, 6.28% and 2.83% in the past one year, three years and five years, respectively. On the
other hand, open-ended funds have generated -6.54%, 8.86% and 3.36% annualized returns in
the same time periods, respectively
Unit Trust Investment- Unit Trust of India is a financial organization in India, which was
created by the UTI Act passed by the Parliament of India on December 30, 1963 under the
direction of Col. Akash Behl. He had fought very hard and intensely to get this organization
come into reality.[1]
For more than two decades it remained the sole vehicle for investment in the
capital market by the Indian citizens. In mid- 1980s public sector banks were allowed to open
mutual funds. The real vibrancy and competition in the MF industry came with the setting up of
the Regulator SEBI and its laying down the MF Regulations in 1993.UTI maintained its pre-
eminent place till 2001, when a massive decline in the market indices and negative investor
sentiments after the Ketan Parekh scam created doubts about the capacity of UTI to meet its
obligations to the investors. This was further compounded by two factors; namely, its flagship](https://image.slidesharecdn.com/mutualfunds-160725135302/85/Mutual-funds-13-320.jpg)
![14
and largest scheme US 64 was sold and re-purchased not at intrinsic NAV but at artificial price
and its Assured Return Schemes had promised returns as high as 18% over a period going up to
two decades.
As of 2010, UTI has 10 million investors.
Fearing a run on the institution and possible impact on the whole market Government came out
with a rescue package and change of management in 2001.Subsequently, the UTI Act was
repealed and the institution was bifurcated into two parts .UTI Mutual Fund was created as a
SEBI registered fund like any other mutual fund. The assets and liabilities of schemes where
Government had to come out with a bail-out package were taken over directly by the
Government in a new entity called Specified Undertaking of UTI, SUUTI. SUUTI still holds
around 11.66 percent stake in Axis Bank, 11.77 percent in ITC and 8.18 percent in L&T.[4]
UTI Mutual Fund is promoted by the four of the largest Public Sector Financial Institutions as
sponsors, viz., State Bank of India, Life Insurance Corporation of India, Bank of Baroda and
Punjab National Bank with each of them presently holding a 18.5% stake in the paid up capital
of UTI AMC. T Rowe Price Group Inc (TRP Group) through its wholly owned subsidiary Rowe
Price International Ltd. (TRP) has acquired a 26% stake in UTI Asset Management Company
Limited.
The Concept and Procedure of Mutual Funds
1. KYC application Form + Common Application Form- In order to comply with the
regulatory provisions under the prevention of Money Laundering Act 2002, rules issued
by SEBI , KYC formalities are required to be completed for all unit holders, for any
investment whether new or additional purchase in mutual funds . For the convenience
of investors in mutual funds, all mutual funds have made special arrangements with
CDSL Ventures Ltd. (CVL) , a wholly owned subsidiary of Central Depository
Services (India)
Ltd. KYC forms once acknowledged –online or from their points of services, can be used
to invest in multiple MF AMCs. Common Application forms are particulars for the
record of the MF houses and are different for all such AMCs. Information required for](https://image.slidesharecdn.com/mutualfunds-160725135302/85/Mutual-funds-14-320.jpg)
![13
Close ended mutual funds-The unit capital of closed-ended funds is fixed and they sell a
specific number of units. Unlike in open-ended funds, investors cannot buy the units of a closed-
ended fund after its NFO period is over. This means that new investors cannot enter, nor can
existing investors exit till the term of the scheme ends. However, to provide a platform for
investors to exit before the term, the fund houses list their closed-ended schemes on a stock
exchange.
Trading on a stock exchange enables investors to buy and sell units through a broker in the same
manner as transacting the shares of a company. The units may trade at a premium or discount to
the NAV depending on the investors' expectations of the fund's future performance and
prospects. The demand and supply of fund units and other market factors also affect their price.
The number of outstanding units of a closed-ended fund does not change as a result of trading on
the stock exchange. Apart from listing on an exchange, these funds sometimes offer to buy back
the units, thus offering another avenue for liquidity. Sebi regulations ensure that closed-ended
funds provide at least one of the two avenues to investors for entering or exiting.
The closed-ended funds are free from the worry of regular and sudden redemption and their fund
managers are not worried about the fund size. However, open-ended funds have outperformed
the closed-ended funds comprehensively. The latter have generated average annualized returns of
7.38%, 6.28% and 2.83% in the past one year, three years and five years, respectively. On the
other hand, open-ended funds have generated -6.54%, 8.86% and 3.36% annualized returns in
the same time periods, respectively
Unit Trust Investment- Unit Trust of India is a financial organization in India, which was
created by the UTI Act passed by the Parliament of India on December 30, 1963 under the
direction of Col. Akash Behl. He had fought very hard and intensely to get this organization
come into reality.[1]
For more than two decades it remained the sole vehicle for investment in the
capital market by the Indian citizens. In mid- 1980s public sector banks were allowed to open
mutual funds. The real vibrancy and competition in the MF industry came with the setting up of
the Regulator SEBI and its laying down the MF Regulations in 1993.UTI maintained its pre-
eminent place till 2001, when a massive decline in the market indices and negative investor
sentiments after the Ketan Parekh scam created doubts about the capacity of UTI to meet its
obligations to the investors. This was further compounded by two factors; namely, its flagship](https://image.slidesharecdn.com/mutualfunds-160725135302/75/Mutual-funds-13-2048.jpg)
![14
and largest scheme US 64 was sold and re-purchased not at intrinsic NAV but at artificial price
and its Assured Return Schemes had promised returns as high as 18% over a period going up to
two decades.
As of 2010, UTI has 10 million investors.
Fearing a run on the institution and possible impact on the whole market Government came out
with a rescue package and change of management in 2001.Subsequently, the UTI Act was
repealed and the institution was bifurcated into two parts .UTI Mutual Fund was created as a
SEBI registered fund like any other mutual fund. The assets and liabilities of schemes where
Government had to come out with a bail-out package were taken over directly by the
Government in a new entity called Specified Undertaking of UTI, SUUTI. SUUTI still holds
around 11.66 percent stake in Axis Bank, 11.77 percent in ITC and 8.18 percent in L&T.[4]
UTI Mutual Fund is promoted by the four of the largest Public Sector Financial Institutions as
sponsors, viz., State Bank of India, Life Insurance Corporation of India, Bank of Baroda and
Punjab National Bank with each of them presently holding a 18.5% stake in the paid up capital
of UTI AMC. T Rowe Price Group Inc (TRP Group) through its wholly owned subsidiary Rowe
Price International Ltd. (TRP) has acquired a 26% stake in UTI Asset Management Company
Limited.
The Concept and Procedure of Mutual Funds
1. KYC application Form + Common Application Form- In order to comply with the
regulatory provisions under the prevention of Money Laundering Act 2002, rules issued
by SEBI , KYC formalities are required to be completed for all unit holders, for any
investment whether new or additional purchase in mutual funds . For the convenience
of investors in mutual funds, all mutual funds have made special arrangements with
CDSL Ventures Ltd. (CVL) , a wholly owned subsidiary of Central Depository
Services (India)
Ltd. KYC forms once acknowledged –online or from their points of services, can be used
to invest in multiple MF AMCs. Common Application forms are particulars for the
record of the MF houses and are different for all such AMCs. Information required for](https://image.slidesharecdn.com/mutualfunds-160725135302/75/Mutual-funds-14-2048.jpg)
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Mutual funds
- 1. 1 Executive Summary It presentsan introduction to the mutual funds awareness and information about people enjoying the benefits of mutual funds. The research work is done in the field of finance with a particular reference to the investment of mutual funds. Further an overview of the ICICI Securities and the services it provides and also explains the research methodology adopted for carrying out the research work. The analysis and advice presented in the project report is based on market research on perception of investors towards investment in mutual funds. This report will help to know about the investor’s preference in mutual funds. Also all the constructs are exhibited below with their dimensions and show the overview of pattern of analysis which is adopted. Data collection method, sampling details, research instrument, construction of questionnaire etc. This also summarizes the main findings and conclusion of the study. Moreover in the light of these findings, appropriate suggestions have also been worked out.
- 2. 2 History of MutualFunds- 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 of India. The history of mutual funds in India can be broadly divided into four distinct phases First phase 1964-1987- Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under management Second Phase 1987-1993- 1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed by 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. 47,004 crores Third Phase - 1993-2003-With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
- 3. 3 The 1993 SEBI(Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996.The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds. Fourth Phase - since February 2003- In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. 29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.
- 4.
- 5. 5 Regulatory framework- Security andExchange Board of India- Securities and Exchange Board of India (SEBI) was first established in the year 1988 as a non-statutory body for regulating the securities market. It became an autonomous body in 1992 and more powers were given through an ordinance. Since then it regulates the market through its independent powers. Associations of Mutual Funds in India- Association of Mutual Funds in India (AMFI) was set up on 22nd August, 1995. The members of Asset Management Companies (AMC) have always carried out the responsibility of introducing new mutual fund schemes under the governance and guidelines of its Board of Directors. Association of Mutual Funds in India has played a significant role in creating a healthy and professional market for mutual funds. It has elevated the standard of the mutual fund investment patterns by introducing more beneficiary schemes to attract more investors. The Association of Mutual Funds is also the main governing body of all Asset Management Companies (AMC). The Association of Mutual Funds in India (AMFI) has been registered with the Securities and Exchange Board of India (SEBI). The main principle religiously followed by AMFI is to protect and promote the mutual funds along with the investors or shareholders Important Aspects of Association of Mutual Funds of India- 1. AMFI provides professionalism and a proper balance in the mutual fund industry 2. It promotes the highly-efficient business practices as well as the code of conduct in the mutual fund industry among its members and those who are involved in mutual fund investments 3. AMFI is registered with SEBI and follows its suggestions while executing its activities
- 6. 6 4. AMFI alsorepresents the Government of India, the Reserve Bank of India and other related higher authority bodies in the mutual fund operations 5. It also provides training programs to hone the skills of those who are involved in mutual fund investments and also develops a team of efficient and skilled agents 6. AMFI also carries out various campaigns and awareness programs to inform the individuals about the basic concept of mutual fund investments
- 7. 7 ICICI History The IndustrialCredit and Investment Corporation of India Limited (ICICI) incorporated at the initiative of the World Bank, the Government of India and representatives of Indian industry, with the objective of creating a development financial institution for providing medium-term and long-term project financing to Indian businesses. Mr.A.Ramaswami Mudaliar elected as the first Chairman of ICICI Limited. ICICI emerges as the major source of foreign currency loans to Indian industry. Besides funding from the World Bank and other multi-lateral agencies, ICICI was also among the first Indian companies to raise funds from international markets ICICI Prudential- ICICI Prudential Life was one of the first private sector life insurance companies to begin operations in December 2000, after receiving approval from the Insurance Regulatory Development Authority of India (IRDAI). For financial year 2015, the company garnered a total premium of ₹191.64 billion. As a result of your continued support over the years, ICICI Prudential Life has emerged as one of the leading* names in the life insurance industry. From plans designed for newly employed individuals, just-married couples, new parents, and parents with teenage children and those in their golden years, we offer products that cater to every life stage. ICICI Prudential Life Insurance Company Ltd. (ICICI Prudential Life) is a joint venture between ICICI Bank Ltd., one of India's largest private sector banks, and Prudential Corporation Holdings Limited. ICICI Prudential Life began its operations in December 2000 and has been one of the leading players in the Indian life insurance sector since the entry of private players. Our Assets Under Management* (AUM) crossed ₹1 Lakh Crore (as on February 19, 2015). For a life insurance company, it is a sign of trust reposed in us by policyholders. Our claims settlement ratio stood at 93.80% as per the IRDAI Annual Report FY 2014-15. This is a testimony of our commitment to protect the future of your loved ones. We have maintained a dominant^ position amongst private life insurers in the country.
- 8. 8 We offer anarray of products that match the different life stage requirements of our customers and enable them to achieve their long term financial goals. Customer centricity is the core philosophy we operate on. To further this we have developed and implemented various initiatives to provide cost-effective products, best-in-class services, consistent fund performance and a hassle-free claim settlement experience to you. ICICI Securities Primary Dealership Limited- ICICI Securities Primary Dealership Limited is an acknowledged leader in the Indian fixed income and money markets, with a strong franchise across the spectrum of interest rate products and services – institutional sales and trading, resource mobilization and research. One of the first entities to be granted Primary Dealership license by RBI, I-Sec PD has made pioneering contributions since inception to debt market development in India.The I-Sec PD desks trade actively in government securities, swaps and corporate bonds markets. In each of these markets, it enjoys dominant position, accounting for a significant share of trading turnover. Innovation and insight in rate markets drive I-Sec PD’s relationship with clients. We actively assist clients in providing interest rate structures to suit their objectives. I-Sec PD Sales team has developed a strong network of relationships covering institutional investors such as banks, mutual funds, insurance companies, provident funds and non-banking finance companies. These relationships are serviced by a wide distribution network with footprints across the country. The Capital Markets desks’ profound understanding of resource requirements of clients coupled with I-Sec PD’s client relationships make us ‘Arranger’ of choice. ICICI Lombard- ICICI Lombard GIC Ltd. is a joint venture between ICICI Bank Limited and Fairfax Financial Holdings Limited, a Canada based diversified financial services company engaged in general insurance, reinsurance, insurance claims management and investment management. ICICI Lombard GIC Ltd. is one of the leading private sector general insurance companies in India with
- 9. 9 a Gross WrittenPremium (GWP) of Rs 69.14 billion for the year ended March 31, 2015. The company issued over 13.87 million policies and settled over 3.41 million claims as on March 31, 2015. ICICI Lombard was conferred with the 'E-Business Leader' Award in the General Insurance Category at the 5th annual edition of the Indian Insurance Award 2015 for its performance, growth, product and market innovation, customer service and technology. The company also received the Golden Peacock Innovation Management Award 2015 for innovation across multiple functions of its business operations and promoting the 'culture of innovation', with specific acclaim for the company's approach in 'Mobility Solutions' and 'Customer Centric Initiatives'. ICICI Lombard was also named as the "Best Travel Insurance Company" by CNBC Awaaz Travel Awards 2015. More details are available on the website www.icicilombard.com ICICI Prudential Asset Management System- ICICI Prudential Asset Management Company Ltd. is a leading management company (AMC) in the country focused on bridging the gap between savings & investments and creating long term wealth for investors through a range of simple and relevant investment solutions. The AMC is a joint venture between ICICI Bank, a well-known and trusted name in financial services in India and Prudential Plc, one of UK’s largest players in the financial services sectors. Throughout these years of the joint venture, the company has forged a position of pre-eminence in the Indian Mutual Fund industry ICICI Bank-ICICI Bank is India's largest private sector bank with total assets of Rs. 6,461.29 billion (US$ 103 billion) at March 31, 2015 and profit after tax Rs. 111.75 billion (US$ 1,788 million) for the year ended March 31, 2015. ICICI Bank currently has a network of 4,450 Branches and 13,916 ATM's across India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management.
- 10. 10 The Bank currentlyhas subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).Prudential plc of the United Kingdom is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America. ICICI Venture- ICICI Venture is a specialist alternative assets manager based in India. The firm is a wholly owned subsidiary of ICICI Bank (www.icicibank.com), the largest private sector financial services group in India. ICICI Venture has been at the forefront of driving entrepreneurship in India for over two decades, both as a partner and capital provider for individuals with a clear common objective, the passion to pursue business ideas in the quest for creating value for all stakeholders and for the larger good of the nation. Till date, various funds managed by the firm have invested in over 500 companies. ICICI Venture continues to remain committed to this mission. ICICI Home Finance- ICICI Home Finance Company Limited ("ICICI Home Finance" or "ICICI HFC") is one of the leaders in the Indian mortgage finance and realty space. Part of the ICICI Group, we have been driving innovation and growth in this sector. ICICI Bank is India's second-largest bank with total assets of 4,736.47 billion (US$ 93 billion) at March 31, 2012 and profit after tax Rs. 64.65 billion (US$ 1,271 million) for the year ended March 31, 2012 The Bank has a network of 2,755 branches and 9,363 ATMs in India, and has a presence in 19 countries, including India.
- 11. 11 Their vision asa growing housing finance company is to make the dream of owning a new home come true, for millions of Indians. Their range of innovative products, from different type of home loans to property related services will help meet these dreams. ICICI Securities- ICICI Securities Ltd is an integrated securities firm offering a wide range of services including investment banking, institutional broking, retail broking, private wealth management, and financial product distribution. ICICI Securities sees its role as 'Creating Informed Access to the Wealth of the Nation' for its diversified set of client that include corporates, financial institutions, high net-worth individuals and retail investors. Headquartered in Mumbai, ICICI Securities operates out of 66 cities and towns in India and global offices in Singapore and New York. ICICI Securities Inc., the step down wholly owned US subsidiary of the company is a member of the Financial Industry Regulatory Authority (FINRA) / Securities Investors Protection Corporation (SIPC). ICICI Securities Inc. activities include Dealing in Securities and Corporate Advisory Services in the United States. ICICI Securities Inc. is also registered with the Monetary Authority of Singapore (MAS)and operates a branch office in Singapore.
- 12. 12 Mutual funds- A mutualfund is a professionally managed investment fund that pools money from many investors to purchase securities. While there is no legal definition of the term "mutual fund", it is most commonly applied to so-called open-end investment companies, which are collective investment vehicles that are regulated and sold to the general public on a daily basis. Mutual funds are generally classified by their principal investments. The four main categories of funds are money market funds, bond or fixed income funds, stock or equity funds, and hybrid funds. Funds may also be categorized as index (or passively managed) or actively managed. Investors in a mutual fund pay the fund’s expenses, which reduce the fund's returns and performance. There is controversy about the level of these expenses Types of Mutual Funds- Open Ended- Open-end fund (or open-ended fund) is a collective investment scheme which can issue and redeem shares at any time. An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders. It contrasts with a closed- end fund, which typically issues all the shares it will issue at the outset, with such shares usually being tradable between investors thereafter. Open-ended funds are available in most developed countries, though terminology and operating rules vary. U.S. mutual funds, UK unit trusts and OEICs, European SICAVs, and hedgefunds are all examples of open-ended funds. The price at which shares in an open-ended fund are issued or can be redeemed will vary in proportion to the net asset value of the fund, and therefore directly reflects the fund's performance.Most open-end funds are actively managed, meaning that a portfolio manager picks the securities to buy, although index funds are now growing in popularity. Index funds are open- end funds that attempt to replicate an index, such as the S&P 500, and therefore do not allow the manager to actively choose securities to buy.
- 13. 13 Close ended mutualfunds-The unit capital of closed-ended funds is fixed and they sell a specific number of units. Unlike in open-ended funds, investors cannot buy the units of a closed- ended fund after its NFO period is over. This means that new investors cannot enter, nor can existing investors exit till the term of the scheme ends. However, to provide a platform for investors to exit before the term, the fund houses list their closed-ended schemes on a stock exchange. Trading on a stock exchange enables investors to buy and sell units through a broker in the same manner as transacting the shares of a company. The units may trade at a premium or discount to the NAV depending on the investors' expectations of the fund's future performance and prospects. The demand and supply of fund units and other market factors also affect their price. The number of outstanding units of a closed-ended fund does not change as a result of trading on the stock exchange. Apart from listing on an exchange, these funds sometimes offer to buy back the units, thus offering another avenue for liquidity. Sebi regulations ensure that closed-ended funds provide at least one of the two avenues to investors for entering or exiting. The closed-ended funds are free from the worry of regular and sudden redemption and their fund managers are not worried about the fund size. However, open-ended funds have outperformed the closed-ended funds comprehensively. The latter have generated average annualized returns of 7.38%, 6.28% and 2.83% in the past one year, three years and five years, respectively. On the other hand, open-ended funds have generated -6.54%, 8.86% and 3.36% annualized returns in the same time periods, respectively Unit Trust Investment- Unit Trust of India is a financial organization in India, which was created by the UTI Act passed by the Parliament of India on December 30, 1963 under the direction of Col. Akash Behl. He had fought very hard and intensely to get this organization come into reality.[1] For more than two decades it remained the sole vehicle for investment in the capital market by the Indian citizens. In mid- 1980s public sector banks were allowed to open mutual funds. The real vibrancy and competition in the MF industry came with the setting up of the Regulator SEBI and its laying down the MF Regulations in 1993.UTI maintained its pre- eminent place till 2001, when a massive decline in the market indices and negative investor sentiments after the Ketan Parekh scam created doubts about the capacity of UTI to meet its obligations to the investors. This was further compounded by two factors; namely, its flagship
- 14. 14 and largest schemeUS 64 was sold and re-purchased not at intrinsic NAV but at artificial price and its Assured Return Schemes had promised returns as high as 18% over a period going up to two decades. As of 2010, UTI has 10 million investors. Fearing a run on the institution and possible impact on the whole market Government came out with a rescue package and change of management in 2001.Subsequently, the UTI Act was repealed and the institution was bifurcated into two parts .UTI Mutual Fund was created as a SEBI registered fund like any other mutual fund. The assets and liabilities of schemes where Government had to come out with a bail-out package were taken over directly by the Government in a new entity called Specified Undertaking of UTI, SUUTI. SUUTI still holds around 11.66 percent stake in Axis Bank, 11.77 percent in ITC and 8.18 percent in L&T.[4] UTI Mutual Fund is promoted by the four of the largest Public Sector Financial Institutions as sponsors, viz., State Bank of India, Life Insurance Corporation of India, Bank of Baroda and Punjab National Bank with each of them presently holding a 18.5% stake in the paid up capital of UTI AMC. T Rowe Price Group Inc (TRP Group) through its wholly owned subsidiary Rowe Price International Ltd. (TRP) has acquired a 26% stake in UTI Asset Management Company Limited. The Concept and Procedure of Mutual Funds 1. KYC application Form + Common Application Form- In order to comply with the regulatory provisions under the prevention of Money Laundering Act 2002, rules issued by SEBI , KYC formalities are required to be completed for all unit holders, for any investment whether new or additional purchase in mutual funds . For the convenience of investors in mutual funds, all mutual funds have made special arrangements with CDSL Ventures Ltd. (CVL) , a wholly owned subsidiary of Central Depository Services (India) Ltd. KYC forms once acknowledged –online or from their points of services, can be used to invest in multiple MF AMCs. Common Application forms are particulars for the record of the MF houses and are different for all such AMCs. Information required for
- 15. 15 individuals and Corporatesare different. PAN Cards are mandatory. For Corporate Identity Proofs for all directors, past financial performance of the corporates, Authorization from Directors and other company related documents are required for verification. a) Applicable and mandatory to all investors b) Verification of identity and address , providing financial status, occupation and others demographic information c) Followed by common application form of the MF house. Different document requirements for corporates and individuals 2. Initiation of a Purchase- Initial purchase requires investors to fill out their purchases, folio numbers, and other details and scheme names, amounts invested. Min. Investment In equity- Rs 10000 In debt – Rs 5000 3. Fund transfer- Fund transfer are accepted through standard online payments, cheques, RTGS and NEFT. A mail or Facsimile to the AMC from the investor clearly the above details are required by the AMCs 4. Time Stamping- To ensure that funds are received by the AMC on time, all incoming fax documents, whether online or hardcopies are time stamped. They can be done on the computer using special software or manually using time stamping machine. They are very important to ensure the receipt of funds and request from the investor is done before the permissible time. For liquid scheme- 2 pm and for debt and equity-3 pm 5. Transaction Processing- AMCs appoint registrars to maintain the back end of all transactions processing and recording investor’s account details. Entities such as CAMS services, KARVY services are some of the more popular services providing back end support to the AMCs.
- 16. 16 6. Unsighted Fundreport- It is prepared half an hour before and 10 minutes before the permissible time for investors to file their purchase request and fund transfers. Names on the unsighted funds report inform the AMC of all investors who have not done so and duly informed to comply. 7. Redemption Process (cut off time 3 pm for all scheme)-The permissible time for redemption process is 3 pm. All requests post 3 pm are usually responded to within a day and funds are duly transferred the next morning by 11 am Cheques waiting to be cleared may take more time depending on the issuing and investor’s account bank processing.
- 17. 17 How to Calculatethe Return- The return on any investment, measured over a given period of time, is simply the sum of its capital appreciation and any income generated divided by the original amount of the investment, which is expressed as a percentage. The term applied to this composite calculation is total return. However, there is a difference in this simple concept as applied to stocks and mutual funds. Unfortunately, a great many mutual fund investors do not seem to have a clear understanding of a fund's total return. The relationships between a fund's net asset value (NAV), yield (income) and capital gains distributions can be confusing. For stock investors, calculating and understanding their total return is relatively easy. By comparing how total return is derived for both stocks and mutual funds, you'll be able to better understand how this measure works for mutual funds Stock Total return- We begin our illustration with a share of XYZ Company that is bought for $30 at the beginning of the year. During the year, its price fluctuates, but it closes the year at $33, which represents a nice percentage return on the investment of 10% ($3/$30). But, things get even better because XYZ paid an annual dividend of $1 per share. This dividend equals an additional 3.3% return ($1/$30). Adding together the capital appreciation (price increase) of 10% and the income return (dividend) of 3.3% gives us a one-year total return for XYZ Company stock of 13.3%. However, remember that unless you sell XYZ stock, the price appreciation gain remains in the stock price, or is unrealized. Fund Total Return- With mutual funds, explaining total return is a bit more complicated. We begin with a share of the ABC Fund, which is purchased at its net asset value (price) of $16 per share. A fund's NAV is derived by dividing the value of its portfolio securities (the fund's assets),
- 18. 18 less any accruedfees and expenses (the fund's liabilities), by the number of fund shares outstanding. Here's an illustration of the computation of net asset value for the ABC Fund: The fund's cash and cash equivalents = $200,000 The fund's stock holdings at market prices: 10,000 shares of Company X @ $50 = $500,000 20,000 shares of Company Y @ $30 = $600,000 50,000 shares of Company Z @ $8 = $400,000 Total market value of stock holdings = $1,500,000 The fund's total assets = $1,700,000 Less the fund's liabilities = $100,000 The fund's tolal net assets = $1,600,000 The fund's total shares outstanding: 100,000 Remember that mutual funds are priced once a day, at the end of the day. Unlike stocks, where prices are moved by the supply and demand forces of the marketplace, fund prices are determined by the value of the underlying securities in the fund. In our example, ABC is a hybrid stock/bond fund with a growth-income orientation. Apart from capital gains, its individual portfolio holdings will generate dividends and interest. By law, mutual funds must distribute these to the fund's shareholders. ABC's income distribution (its dividends to shareholders) for the year amounted to $1 per share. In addition, the fund's trading activities (the buying and selling of securities) generated a realized capital gain of $3 per share, which ABC also distributed to its shareholders.
- 19. 19 The ABC Fundpassed along all the earnings and capital appreciation it generated - $4 ($1 in dividend distributions and $3 in a capital gains distribution) to its shareholders for a total return of 25% ($4/$16). Here again, unlike a stock, by paying out all its capital gains, the ABC Fund's price, or NAV, remains at or close to $16. In this scenario, if a fund investor only focused on the movement in ABC's NAV, the results would not look very good. It's even possible for a fund's NAV to decline, but still have good income/capital gain distributions, which will be reflected in a positive total return. Obviously, a fund's NAV does not tell the whole mutual fund performance story, but its total return does. It captures a fund's changes in NAV, its income distribution and capital gains distribution, which, as a whole, are the true test of fund's return on investment.
- 20. 20 Advantages of Investingin Mutual Funds- Professional expertise: Investing requires skill. It requires a constant study of the dynamics of the markets and of the various industries and companies within it. Anybody who has surplus capital to be parked as investments is an investor, but to be a successful investor, you need to have someone managing your money professionally. Just as people who have money but not have the requisite skills to run a company (and hence must be content as shareholders) hand over the running of the operations to a qualified CEO, similarly, investors who lack investing skills need to find a qualified fund manager. Mutual funds help investors by providing them with a qualified fund manager. Increasingly, in India, fund managers are acquiring global certifications like CFA and MBA which help them be at the cutting edge of the knowledge in the investing world. Diversification: There is an old saying: Don't put all your eggs in one basket. There is a mathematical and financial basis to this. If you invest most of your savings in a single security (typically happens if you have ESOPs (employees stock options) from your company, or one investment becomes very large in your portfolio due to tremendous gains) or a single type of security (like real estate or equity become disproportionately large due to large gains in the same), you are exposed to any risk that attaches to those investments. In order to reduce this risk, you need to invest in different types of securities such that they do not move in a similar fashion. Typically, when equity markets perform, debt markets do not yield good returns. Note the scenario of low yields on debt securities over the last three years while equities yielded handsome returns. Similarly, you need to invest in real estate, or gold, or international securities for you to provide the best diversification. If you want to do this on your own, it will take you immense amounts of money and research to do this. However, if you buy mutual funds -- and you can buy mutual funds of amounts as low as Rs 500 a month! -- You can diversify across asset classes at very low cost. Within the various asset classes also, mutual funds hold hundreds of different securities (a diversified equity mutual fund, for example, would typically have around hundred different shares).
- 21. 21 Low cost ofasset management: Since mutual funds collect money from millions of investors, they achieve economies of scale. The cost of running a mutual fund is divided between a larger Pools of money and hence mutual funds are able to offer you a lower cost alternative of managing your funds. Equity funds in India typically charge you around 2.25% of your initial money and around 1.5% to 2% of your money invested every year as charges. Investing in debt funds costs even less. If you had to invest smaller sums of money on your own, you would have to invest significantly more for the professional benefits and diversification. Liquidity: Mutual funds are typically very liquid investments. Unless they have a pre-specified lock-in, your money will be available to you anytime you want. Typically funds take a couple of days for returning your money to you. Since they are very well integrated with the banking system, most funds can send money directly to your banking account. Ease of process: If you have a bank account and a PAN card, you are ready to invest in a mutual fund: it is as simple as that! You need to fill in the application form, attach your PAN (typically for transactions of greater than Rs 50,000) and sign your cheque and you investment in a fund is made. In the top 8-10 cities, mutual funds have many distributors and collection points, which make it easy for them to collect and you to send your application to. Well regulated: India mutual funds are regulated by the Securities and Exchange Board of India, which helps provide comfort to the investors. Sebi forces transparency on the mutual funds, which helps the investor make an informed choice. Sebi requires the mutual funds to disclose their portfolios at least six monthly, which helps you keep track whether the fund is investing in line with its objectives or not.
- 22. 22 Disadvantages of MutualFund Investment- 1. No Insurance: Mutual funds, although regulated by the government, are not insured against losses. The Federal Deposit Insurance Corporation (FDIC) only insures against certain losses at banks, credit unions, and savings and loans, not mutual fundsthat means that despite the risk-reducing diversification benefits provided by mutual funds, losses can occur, and it is possible (although extremely unlikely) that you could even lose your entire investment. 2. Dilution: Although diversification reduces the amount of risk involved in investing in mutual funds, it can also be a disadvantage due to dilution. For example, if a single security held by a mutual fund doubles in value, the mutual fund itself would not double in value because that security is only one small part of the fund's holdings. By holding a large number of different investments, mutual funds tend to do neither exceptionally well nor exceptionally poorly. 3. Fees and Expenses: Most mutual funds charge management and operating feesthat pay for the fund's management expenses (usually around 1.0% to 1.5% per year for actively managed funds). In addition, some mutual funds charge high sales commissions, 12b-1 fees, and redemption fees. And some funds buy and trade shares so often that the transaction costs add up significantly. Some of these expenses are charged on an ongoing basis, unlike stock investments, for which a commission is paid only when you buy and sell. 4. Poor Performance: Returns on a mutual fund are by no means guaranteed. In fact, on average, around 75% of all mutual funds fail to beat the major market indexes, like the S&P 500, and a growing number of critics now question whether or not professional money managers have better stock-picking capabilities than the average investor. 5. Loss of Control: The managers of mutual funds make all of the decisions about which securities to buy and sell and when to do so. This can make it difficult for you when trying to manage your portfolio. For example, the tax consequences of a decision by the manager to buy or sell an asset at a certain time might not be optimal for you. You also should remember that you are trusting someone else with your money when you invest in a mutual fund.
- 23. 23 6. Trading Limitations:Although mutual funds are highly liquid in general, most mutual funds (called open-ended funds) cannot be bought or sold in the middle of the trading day. You can only buy and sell them at the end of the day, after they've calculated the current value of their holdings. 7. Size: Some mutual funds are too big to find enough good investments. This is especially true of funds that focus on small companies, given that there are strict rules about how much of a single company a fund may own. If a mutual fund has $5 billion to invest and is only able to invest an average of $50 million in each, then it needs to find at least 100 such companies to invest in; as a result, the fund might be forced to lower its standards when selecting companies to invest in. 8. Inefficiency of Cash Reserves: Mutual funds usually maintain large cash reserves as protection against a large number of simultaneous withdrawals. Although this provides investors with liquidity, it means that some of the fund's money is invested in cash instead of assets, which tends to lower the investor's potential return. 9. Too Many Choices: The advantages and disadvantages listed above apply to mutual funds in general. However, there are over 10,000 mutual funds in operation, and these funds vary greatly according to investment objective, size, strategy, and style. Mutual funds are available for virtually every investment strategy (e.g. value, growth), every sector (e.g. biotech, internet), and every country or region of the world. So even the process of selecting a fund can be tedious
- 24. 24 Overview of ExistingSchemes in Mutual Funds Category- 1. Open - Ended Schemes: An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. 2. Close - Ended Schemes: A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. 3. Interval Schemes: Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices. The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vise versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases in the same proportion.
- 25. 25 Thus investors choosemutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesn’t mean mutual fund investments risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives market which is considered very volatile Overview of existing schemes existed in mutual fund category: BY NATURE- 1. Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund manager’s outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows: Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS) Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix. 2. Debt funds: The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as: Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
- 26. 26 Government of Indiadebt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government. Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes. Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures. Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.
- 27. 27 By investment objective: Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation. Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50). Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Other schemes- Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate. Index Schemes: Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weightage. And hence, the returns from such schemes would be more or less equivalent to those
- 28. 28 of the Index. SectorSpecific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. Types of returns a)There are three ways, where the total returns provided by mutual funds can be enjoyed by investors: b) Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all Income it receives over the year to fund owners in the form of a distribution. c) If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. d) If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.
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- 32. 32 Advantage of UsingICICI Direct Website- Trading account allows you to invest in equity, segments and F&O. You need to approach share broker or authorized dealer in the market to perform the activity. The Demat account allows you to hold the shares that you purchased from the stock market. You can dematerialize and transact using the D-mat account only. The 3-in-1 Account is a combination of three separate accounts. It includes banking account, trading account, and a D-mat account. Banking account is the usual account where you save your money and use it for regular transactions such as dep1osits, money transfer, opening fixed deposits and recurring deposits. 3-in-1 Account = Savings accou1nt + Trading account + D-mat Account The important part of the 3-in-1 d-mat account is its seamless operation capability. It becomes easy for you to carry out all the transactions with a single account. You can avoid opening multiple accounts with different dealers and keep a track of each activity individually. With one account available in hand, from an authorized dealer, keeping track and monitoring the activity becomes easy. In addition to the operation ease, the 3in1 d-mat account gives a broad range of investment options. You can use the single account to buy/sell shares without opening an additional account. The money for the purchase of the shares debits automatically from the savings account. The acquired shares credit automatically to the D-mat account.
- 33. 33 The reverse processalso remains the same, where you can sell the shares using the D-mat- account and receive the money for the sold shares directly into the savings account It is to be noted that although trading cost is high for the 3-in-1 account, running all the three accounts impeccably gives unique benefits. The single window integrated solution makes it easy for you to have a better transaction ability and money management. It reduces the risk of transfers, mental hassles and is beneficial, especially if you choose a long- term investment plan. For this reason, the high brokerage and service charge may not be a constraint. Prefer peace of mind, so did not mind high brokerage. . The 3-in-1 account, with its enormous advantages, proves an eye-catching element for beginners. If you are a beginner and have no experience in handling the several accounts related to the equity, IPOs, funds, stocks and shares, choosing the 3 in1 account from a notable institution is beneficial. The account also gives you the ability to invest in equities, IPOs, online mutual funds, derivative trading, insurance, NPS, tax services and other financial services. Authorized participants offer 3-in-1 d-mat account and provide the banking facilities through their parent company. The leading members are ICICI Bank, HDFC Bank, Standard Chartered, IDBI Bank Ltd., HSBC Invest Direct, Kotak Securities, SBI and Axis Bank. The 3-in-1 D-mat and trading account is advantageous for beginners. However, it is essential to choose the leading provider in the market. The evaluation for the selection comprises of experience, service, brokerage charges and fees. Equity You can use a variety of options while trading in equity:
- 34. 34 Cash: Youcan buy and sell stocks on the Online Securities Platform with the conventional method of buying with 100% cash at the time of purchase SEP (Systematic Equity Plan): SEP helps you avoid timing the stock market and invest in a disciplined manner. It averages the cost of investments, with small investments happening at intervals. You can invest in Stocks, Gold and Index exchange traded funds via this route. VTC: You can place an order with a desired price level, which remains valid for 45 days. The order gets executed only when the stock reaches your desired price. Mutual Funds Invest in over 2,000 mutual fund schemes online with safety and convenience of our award winning online platform Get all transaction facilities such as lump sum/systematic investment, systematic transfers/withdrawals, switches, Target Investment Plan, redemptions etc. Get research views on over 200 mutual fund schemes Use our well-researched model portfolio Get your capital gains statement for investments at one click Derivatives Futures: Get higher exposure to hedge your cash and derivatives transactions Future Plus: Take intra-day buy/sell positions in futures contracts and square them off before the market closes Options: Trade in index and stock contracts while limiting your downside Shares as margin: Pledge your shares online and get additional limits to trade in F&O IPO Invest in IPOs with zero hassles and no paperwork, it was never so easy You don’t need to worry about refund if shares aren’t allotted with ASBA facility Savings Bank Account** Get access to 3,000+ ICICI Bank branches
- 35. 35 Use anyof the 10,000+ ATMs of ICICI Bank Withdraw or deposit cash of up to ₹50,000 Free Internet and Mobile Banking Others Benefit from our services in insurance, NPS and Tax and many other areas *Terms & Conditions Free for - Clients trading with other brokers - Clients who have any DP account with more than Zero holding value in their DP Account - ICICI Bank customers under Silver, Gold or Titanium category The 3-in-1 account is a joint offering by ICICI Bank Ltd. and I-Sec that integrates the Trading account (maintained with I-Sec), Bank account (maintained with ICICI Bank Ltd) and beneficiary d-mat account (maintained with ICICI Bank Ltd in its capacity as a Depository Participant) Savings Bank Account provided by ICICI Bank Ltd. Please note that by clicking on the above Submit button, you expressly agree and provide your consent to ICICI Bank Limited to share your contact details with ICICI Securities Limited Please note that by submitting the above mentioned details, you are authorizing us to call you even though you may be registered under DNC.
- 36. 36 Awards and Accolades- ICICI Securities won the Award for Outstanding Social Impacts at the Global Sustainability Leadership Awards 2014 These awards recognize institutions for their contribution to the society in their domain as well as businesses that deliver products and services in ways that takes full account of their responsibility towards the communities they touch MOST ADMIRED SERVICE PROVIDER IN FINANCIAL SECTOR? at the BANKING FINANCIAL SERVICES & INSURANCE AWARDS 2014 presented by ABP News ICICIdirect.com, won the Outlook Money ' Best e- Brokerage Award' ninth time in a row. Previously, the firm won the award in 2004, 2005, 2007, 2008, 2009, 2010, 2011, and 2012 ICICIdirect.com won the Mobbys award for the "Best Mobile application in Mobile Trading" ICICI Securities Business Partners has been conferred the Franchise India Awards 2013, for being the 'Franchisor of the year' in the Financial Services category ICICIdirect.com, won the award for Innovation at Banking Frontiers Finnoviti Awards 2013. The award was conferred on ICICIDirect' for its `Valid Till Cancel Order' (VTC ) facility, which was awarded amongst the top 3 innovations in BFSI industry by 'Peer Voting' ICICI Securities won the Outlook Smart use Technology eRetailer of the year 2013 conferred by FIHL in association with HomeShop18.com ICICIdirect.com won the 'Stock Broker of the Year' award at the Money Today FPCIL Awards 2012 ICICI Securities Business Partners (Sub Broker channel) won the 'Franchisor of the Year' at the Franchise Awards 2012 for the fourth time in a row
- 37. 37 ICICI Securitieswon the 'BSE IPF D&B Equity Broking Awards 2012' under two categories o Best Equity Broking House - Cash Segment o Largest E-Broking House ICICI Securities won the Chief Learning Officer Award from World HRD Congress for Innovation in Learning category ICICI Securities won the Grand Jury Award for 'Commendable performance by National Financial Advisor (Retail) - Online' at the CNBC TV 18 - Financial Advisor Awards 2011. The awards recognizes India's best Financial Advisors ICICI Securities Business Partners (Sub Broker channel) won the 'Franchisor of the Year at the Franchise Awards 2011', third time in a row ICICI Securities was the winner of the 'Smart use Technology eRetailer of the year' 2012 award conferred by Franchise India in association with UTV Bloomberg for the first time ICICIdirect.com, won the Outlook Money ' Best e- Brokerage Award' seventh time in a row. Previously, the firm won the award in 2004, 2005, 2007, 2008, 2009 and 2010 ICICI Securities' Business Partners (Sub Broker channel) won the 'Franchisor of the Year 2011' for the third consecutive year AnupBagchi, MD & CEO has been honored with the Zee Business 'Industry Newsmaker Award 2010' for his tremendous and unmatched contribution in the field of Finance Pankaj Pandey, Head- Research – ICICIdirect has won the Zee Business Best Market Analyst 2010 award in the Equities Fundamental Category CMO Asia Awards for Excellence in Branding and Marketing 2010 : o Brand Leadership Award (overall) o 'Campaign of the Year' for the Trade Racer Campaign o Brand Excellence in Banking and Financial Services for the store format o Award for Brand Excellence in the Internet Business Franchisor of the year award 2009 Retail concept of the year awards 2009 Frost and Sullivan 2009 Award for Customer Service Leadership
- 38. 38 ICICIdirect, theneighborhood financial superstore won the prestigious Franchise India `Service Retailer of the Year 2008 award ICICIdirect has also won the CNBC AWAAZ 2007 Consumer Award for the Most Preferred Brand of Financial Advisory Services Best Broker - Web 18 Genius of the Web Awards 2007 Institutional ICICI Securities awarded the Asiamoney 'Best Domestic Equity House' for 2012 VikashMantri tops The Wall Street Journal's Asia's Best Analysts survey in the media sector for 2010 ICICI Securities has awarded as the Best Investment Bank 2008 by Global Finance Magazine The Corporate Finance group also was awarded a runner-up Best Merchant Banker by Outlook Money in 2007 ICICI Securities topped the Prime Database League Tables 2007 for money raised through IPOs/FPOs The equities team was adjudged the 'Best Indian Brokerage House-2003' by Asiamoney Technology ICICI Securities recently won the Innovation Award for Oracle Fusion Middleware.ICICI Securities has consistently demonstrated the best usage of Oracle Tuxedo as an OLTP engine. These Asia-Pacific awards honor customers for their optimum and innovative solutions using Oracle Fusion Middleware Fairfax Business Media has recognized ICICI Securities as a recipient of CIO 100 Asia award in 2013 ICICI Securities has been awarded the NASSCOM IT Innovation Awards 2013 CIO Masters for Collaboration and Cloud was awarded by Biztech2 (Network 18) in 2013
- 39. 39 ICICI Securitieshas been conferred by Dataquest in 2012 o Business Technology Excellence award o Business Technology Innovation award IDG India has recognized ICICI Securities as a recipient of CIO 100 award in 2009, 2010, 2011 and 2012, four times in a row IDG India has conferred the CIO Hall of Fame award in 2012 EMC Transformers Award was presented for best use of IT to transform business in 2012 CIO Masters for Virtualization was awarded by Biztech2 (Network 18) in 2012 ICICI Securities was the Bloomberg UTV CXO Awards Finalist for Best Utilization of IT to Transform Business in 2011 ICICI Securities was conferred the Gold CIO award jointly by CIOL and Dataquest at the Enterprise Awards 2010 ICICI Securities was the NASSCOM CNBC IT User Awards Finalist in 2009 and 2010 Indian Bank's Association Business Technology Awards was presented for Best Online Trading Platform in 2006 and 2007
- 40. 40 Disadvantage of UsingICICI Direct Website- Brokerage – They have reduced it by 50% recently but yet it is highest and you cannot afford as a trader. At least I cannot. There is virtually no phone trading facility available. They still charge you fees for using web interface to buy mutual funds. One of the biggest disadvantages of ICICI Direct account is too many restrictions. There is no option for you to sell your cash based purchase the same day. At times you do not have the option of BTST (Buy Today, Sell tomorrow) and no one could answer me why? If you open an account with ICICI Direct the representative will recommend you an ICICI Bank zero balance account but suddenly after an year or so they will convert that zero balance account into a normal savings account where you need to maintain an average quarterly balance. So do not go with ICICIDirect.com unless you already maintain and ICICI Bank account and only prefer to do year+ investments and do not prefer to trade in Equity Market along with investment. I am planning to get my ICICI Direct account closed but the issue is I have some ELSS funds into my ICICI Direct account I may need to wait for 3 more years before I can withdraw my ELSS funds because transfer of those would take hell lot of effort from my end.
- 41. 41 Swot Analysis- Strengths -high growthrate -barriers of market entry -experienced business units -reduced labor costs Weaknesses -small business units -tax structure -future debt rating -investments in research and development -cost structure Opportunities -new markets -global markets -income level is at a constant increase -growth rates and profitability -new products and services Threats -rising cost of raw materials -increasing costs -growing competition and lower profitability -increase in labor costs
- 42. 42 Literature Review- Singhand Jha(2009)His research papers concluded an empirical study on Indian investors and observed the most of the respondents did not have much awareness about the various functions of mutual funds and they were a bit confused regarding investment in mutual funds. The study found that some demographic factors like gender, income, age had their significant level of impact over the attitude towards mutual funds. Cuthbertson, Keith, Nitzsche, Dirk and O’sullivan (2015) In their research paper theyinvestigatedthat due to the volatility in the market most of the funds had not performed better. Growth oriented mutual funds were expected to offer the advantage of diversification, market timing and selectivity. In the sample funds were not highly diversified moreover the fund managers were found to be poor in terms of their ability of market timing and selectivity Bollen(2006)Studied the dynamics ofinvestor fund flows in a sample of socially screened equity mutual funds and compared the relation between annual fund flow and lagged performance in SR Funds to the same relation in a matched sample of conventional funds the result revealed that the extra financial-SR attribute serves to dampen the rate at which SR investors trade mutual funds. The study noted that the differences between SR funds and their conventional counterparts are robust over time and persists as funds age the study found that the preferences of SR investors may be represented by conditional multi- attribute utility function. The study remarked that mutual fund companies can SR investors to be more loyal than investors in ordinary funds. Prajapati and Patel (2012)- Evaluated the performance of Indian mutual funds using relative performance index. Risk-return analysis. Treynor’s ratio, Sharp’s ratio , Sharp’s measure, Jensen’s measure and Fama’s measure the data used is daily closing NAVs from 1st January 2007 to 31st December, 2011 and concluded that most of the mutual funds have given positive return during the period of study.
- 43. 43 Inder andVohra (2012)The paper evaluated the long run performance of these funds on the basis of the risk return for the period of six years (January 2005 to December 2011). The results indicate that index funds are just the follower of market. They try to capture market sentiments, good as well as bad, and thus perform as the market performs.
- 44. 44 Objective and Hypothesisof the Study- To check the awareness level of investor’s regarding mutual funds. To find out the factors affecting the investment in mutual funds. To identify the reasons of non-investment in mutual funds.
- 45. 45 Research Methodology- Primary sourcefor data collection will be used for the study. On the basis of the information gathered, a well -designed pretested interview schedule will be drafted and used in the field survey to collect primary data, before undertaking the main survey a tentative. Primary source- Survey method approach Secondary Source-Internet, magazines, newspaper, reference books etc. Need for the Study- This study is to know the customer perception and the level of awareness about the mutual funds and how customers are investing their funds in different market and thereafter to know how the customer investing online or offline mode and what the reason for not investing in mutual funds by ICICI Direct. Data Set and Sample- The study suffers from certain limitations although the researcher will make every possible effort for comprehensive study of investment pattern degree of risk and returns to the investors. Yet non-availability of adequate information may be key limitations in few cases. The area of research is DEHLI NCR.
- 46. 46 Research Design- Type ofResearch designDescriptive Research Design Research EquipmentQuestionnaire Sample TechniqueNon- Probability Technique, Convenience Sampling Sample Size70 Area of ResearchDEHLI NCR
- 47. 47 Hypothesis of CrossTabulation Interpretation Here the sample size we have taken is 70 and all the respondents are valid H0- There is no relation exist between age and the choice of instruments to invest H1- There exist a relation between age and the choice of instruments to invest P value = .492 which is more than .005 so Ho is accepted Symmetric Measures Value Approx. Sig. Nominal by Nominal Phi .499 .492 Cramer's V .288 .492 Contingency Coefficient .447 .492 N of Valid Cases 70
- 48. 48 Hypothesis Testing- Age *Important factors to your consideration before choosing an investment in MF Interpretation Here the age group we have divided in four parts and sample size is 70 H0- There is no relationship exist in between age and important factor to the customer’s consideration before going for the investment H1- There exist a relationship in between the age and important factor to the customer’s consideration before going for the investment P value = .262 > .005 soHo is accepted Symmetric Measures Value Approx. Sig. Nominal by Nominal Phi .400 .262 Cramer's V .231 .262 Contingency Coefficient .372 .262 N of Valid Cases 70
- 49. 49 Hypothesis Testing- Occupation *Have you ever invested in any of the following instruments Interpretation 70 respondents have participated in the test and none of them were missing and have correlated their occupation with their investments H0- No relation exist in between the occupation and the decision to invest H1- There exist a relation in between the occupation and the decision to invest P value = .338 > .005 so Ho is accepted Occupation * Important factors to your consideration before choosing an investment in MF Symmetric Measures Value Approx. Sig. Nominal by Nominal Phi .533 .338 Cramer's V .308 .338 Contingency Coefficient .471 .338 N of Valid Cases 70
- 50. 50 Interpretation- H0- No relationexist in between occupation and the important factors to the customer’s consideration before the investments H1-There exist a relation between occupation and the important factors to the customer’s consideration before the investments P value = .582 > .005 so H0 is accepted Demographic Profile of the Respondents Symmetric Measures Value Approx. Sig. Nominal by Nominal Phi .328 .582 Cramer's V .189 .582 Contingency Coefficient .312 .582 N of Valid Cases 70
- 51. 51 Statistics Age Occupation N Valid70 70 Missing 0 0 Mean 2.66 Skewness -.489 Std. Error of Skewness .287 Kurtosis -.448 Std. Error of Kurtosis .566 Age
- 52. 52 Frequency Percent ValidPercent Cumulative Percent Valid 25-35 24 34.3 34.3 34.3 35-45 12 17.1 17.1 51.4 Less than 25 31 44.3 44.3 95.7 over 45 3 4.3 4.3 100.0 Total 70 100.0 100.0 Occupation Frequency Percent Valid Percent Cumulative Percent Valid 1 10 14.3 14.3 14.3 2 14 20.0 20.0 34.3 3 36 51.4 51.4 85.7 4 10 14.3 14.3 100.0 Total 70 100.0 100.0 Bar Chart
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- 55. 55 Interpretation of theFrequency Table- .According to the figure no 1 we can see that a majority of our respondents fall in the category of the age less than 25 years and when it came to the occupation a large majority of people were falling in the category of private job.
- 56. 56 Hypothesis Testing- OnewayAnnova Interpretation We haveapplied anova to check whether there exist a difference between the population divided in the group of three or more Ho- No difference exist in the preference towards the type of mutual fund and age H1- There exist a difference F cal =.945 α = .05 F calculated >α so Ho is accept ANOVA Preference towards the type of MF Sum of Squares df Mean Square F Sig. Between Groups 2.543 3 .848 .945 .424 Within Groups 59.229 66 .897 Total 61.771 69
- 57. 57 Findings- The mainreason for not investing in mutual funds through ICICI Direct is the brokerage rate which is higher than the companies who are in the same business Another reason says that not everyone is aware of the mutual funds and of their benefits so they don’t invest in mutual funds at all through any company The performance check of the instruments of the customer generally shows that mostly Customers go for the update investment details through third party website Last but not the least after the demo only around 34% clients became ready to invest in mutual funds who mostly were preferring equity for the investment.
- 58. 58 CONCLUSION From this studywe can say that the customers of ICICI Securities are aware of mutual funds but not investing in them. The reason is high brokerage charges and the age group that the company is targeting which is less than 25 years. Talking about the services of ICICI Securities that are very good, the response of the customer is positive about the services. ICICI is the no. 1 platform of investment For any new investor the site is user friendly so he/she can easily understand and invest properly and if the customer can’t predict the market then personalized research is also given in the site so ICICI DIRECT.COM is the best portal for online investment.
- 59. 59 Recommendations- The chargesin ICICI Direct are very high so instead of taking the help of the RM the customers invest in mutual funds by their own. That is something they need to sort out The website is without a shadow of doubt very user friendly but some customers find it annoying when they think of the limitations on the websites Mutual funds offer lots of benefits to the customer which no other option can provide but most of the people are not aware of their benefits. So the advisors should change the process of the way they promote them in fact the videos used for the demo were very boring for the customers so either the interns should be properly trained before initiating the awareness programme or the entire awareness programme should be changed Mutual funds companies needs to give the training of the Individual Financial Advisors about the fund/schemes and its objectives, because they are the main source to influence the investors.
- 60. 60 BIBLIOGRAPHY References- Singh andJha (2009),International Journal of Research in management, Issue2, Vol. 2 Cuthbertson, Keith, Nitzsche, Dirk and O’su)llivan (2015),International Review of Financial Analysis | Vol 44, Pgs 1-238 Bollen (2006), Journal of Financial and Quantitative Analysis, Vol. 14, No.2 Prajapati and Patel (2012), Comparative study on performance evaluation,Vol–III, Issue3(3) Inder and Vohra (2012), Comparative study of mutual funds of selected Indian companies, Vol-III, Issue 3, No.3 Websites- www.icicidirect.com www.icicisecurities.com www.sebi.gov.in www.investopedia.com www.moneycontrol.com www.indianmba.com
- 61. 61 Questionnaire- Name- Age- Occupation Are you aware of mutual funds a) Yes b) No Have you ever invested in any of the Instruments given below? a) Equity b) Mutual Funds c) Insurance d) Fixed Deposits e) Debentures f) PPF g) Others Which is your preferred mode of investment? a) Online b) Offline c) Both How do you prefer to make your transaction? a) Bank b) AMC c) Distribution Channel
- 62. 62 d) Broker e) Others Beforethe demo were you aware of the mutual funds? a) Yes b) No If yes then what were the reasons of not investing in MF? a) More knowledge was required b) Assistance was required c) Not interested d) Do not invest in mutual funds If no then why would you not like to invest in mutual funds? a) High risk b) High transaction charges c) Poor relationship Management d) Other reasons Now after watching the demo are you interested in MF? a) Yes b) No
- 63. 63 How do youcheck the performance of any instrument? a) By updating the details on third party website b) By asking the RM c) By the broker d) Others Which of the website’s features do you like the most? a) Capital Gain Statement b) Portfolio Management c) Ease of Purchase and Redemption d) Personalized Research e) Others Preference towards the type of instrument- a) Equity b) Debt c) Balance d) Others Important factors to the customers’ consideration before investment- a) Safety in investment principle
- 64. 64 b) Opportunity ofstudy growth c) Liquidity d) Wealth creation