ANALYSIS OF THE CUSTOMER ATTITUDE, PREFERENCE AND SATISFACTION LEVEL TOWARDS MUTUAL FUND INVESTMENT WITH REFERENCE TO FRANKLIN TEMPLETON INDIA PVT LTD, VISAKHAPATNAM.
A project report submitted in partial fulfillment of the requirements of the award of the degree of MASTER OF BUSINESS ADMINISTRATION
Submitted by
M. LALIT KUMAR (Reg no: - 1225109417) Under the esteemed guidance of
MS. S. ANJANI DEVI Asst. Prof
GITAM INSTITUTE OF MANAGEMENT (NAAC Accredited ‘A’ Grade institution) (GITAM University, Visakhapatnam.) (2009-2011)
DECLARATION
I hereby declare that the project report title “ Analysis of the customer attitude, preference and satisfaction level lev el towards towards mutual mutual funds funds invest inv estmen ments ts” ” is done and
submitted by me is a genuine work. And it is not submitted to any other university or published at any time before. The project work is part partia iall fulf fulfil illm lmen entt of the the requ requir irem emen ents ts for for the the awar award d of M.B.A Degree by the GITAM INSTITUTION OF MANAGEMENT, GITAM UNIVERSITY , VISAKHAPATNAM.
Place:-Visakhapatnam. Date:/ /2011 Signature of the student M. Lalit Kumar (12251 09417)
GITAM Institutions of Management, GITAM University, Visakhapatnam.
CERTIFICATE
Analysis of the This is to certify that the project report entitled “ Analysis custom customer er attitu att itude, de, preferen preference ce and satisfa satisfacti ction on level level t ow o w ar ar d s
m ut u t ua ua l
Franklin
f un u n ds ds
Templeton
i nv n v es e s tm t m en e n ts t s ” with refe referrence nce to
Investments
India
Pvt
Ltd,
Visakhapatnam, is a bonafied, work carried out by M. Lalit Kumar
under my guidance in partial fulfillment for the award of degree of MASTER OF BUSINESS BUSINESS ADMINIS ADMINISTRA TRATION TION” duri “MASTER during ng the the peri period od 2009-2011.
Place: - Visakhapatnam. Date:/ /2011 MS. S. ANJANI DEVI
Asst. Prof. GITAM INSTITUTE OF MANAGEMENT GITAM UNIVERSITY, VISAKHAPATNAM VISAKHAPATNAM
PREFACE “Give a man a fish, he will eat it. Train a man to fish, He will feed his family.” The The above bove sayi saying ng hig highlig hlight hts s the the impo import rtan ance ce of Prac Practi tica call know knowle ledg dge. e. Pract ractic ical al train rainiing is an impo import rtan antt part part of the theoretical studies. It is of an immense importance in the field of management. It offers the student to explore the valuable treasure of experience and an exposure to real work culture followed by the industries and thereby helping the students to bridge gap between the theories explained in the books and their practical implementations. Project plays an important role in future building of an individual so that he/she can better understand the real world in which he has to work in future. The theor eory gre greatly enhanc ances our knowledge knowledge and provides provides opportuniti opportunities es to blend theoretical theoretical with the practical knowledge. I have done my Project on “Customer attitude, preference and and sati satisf sfac actio tion n leve levell to towa ward rds s inves investm tmen entt of mutu mutual al fund”. I have tried to cover each and every aspect related to
the topic with best of my capability. I hope this study would help many people in the future. (Lalit Kumar)
(1225109417)
ACKNOWLEDGEMENT I am thankful to Prof. K. Shiva Ramakrishna, Principal Sheela la,, Vice of GI GITA TAM M Inst Instit itut ute e of Manag Manageme ement nt,, Prof . P. Shee
Prin Princi cipa pall of GI GITA TAM M Insti Institu tute te of Mana Managem gement ent,, and Associate Prof K. Uma Devi, Program Co-ordinator, GITAM Institute of
Management,
GITA GITAM M
Univ Univer ersi sity ty,,
Visak Visakha hapa patn tnam am,
for
providing me the opportunity to do my project.
I express my sincere thanks to Ms. S. Anjani Devi, whose super uperv visi ision, on, val valuabl uable e gui guidanc dance e and and hel help, enab enable led d me to complete this project work. This project is a result of the hard work and sincere effort put by my hands. And I am grateful to Mr. Shivaram Pandey (Sales head Andhra Pradesh) for giving me this opportunity
to do my project work in Franklin Templeton Investments India Pvt Ltd, Visakhapatnam.
I convey my sincere thanks to Mr. Suresh Kumar Sela, Pavan Patnaik and Sumitha Nair for the constant advice and
encouragement. I also wis wish to express my sinc since ere than hanks to all the Franklin in Temple Templeton ton Invest Investmen ments ts India India Pvt custom customers ers of Frankl
Ltd, Visakhapatnam, who have directly or indirectly help me
in completing my project work.
CONTENTS Chapter 1 Page No. •
• •
•
Meaning of Mutual Funds Classification of Mutual Fund Performance of Mutual Funds in India - 15 Other Important Concepts - 33
02 - 07 08 - 12 13 16
Chapter 2 •
•
•
•
• •
Need of the study Objectives of the study Scope of the study Methodology Presentation of the study Limitation
34 35 36 37 38 39
Chapter 3 Profile •
•
•
Industry Profile - 47 Organization Profile Product Profile at Franklin Templeton - 82
Chapter 4
40 48 - 62 62
Analysis of Study
83
-
108
-
111
-
114
-
107 Chapter 5 •
•
•
Findings 110 Sugge ggestions 113 Concl nclusion 115
116
Bibliography Annexure
List of Tables
No.
Title Page No.
1.1
Savings Plan
83
1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 1.10 1.10 1.11 1.12
Investment plans Age consideration Period of investment Interested in Mutual Fund Anticipation of Risk Primary Goal Risk with Return Expected Age combination Fact Factor ors s to consi conside derr Service providers Satisfaction Level
85 87 89 91 93 95 97 99 102 102 104 106
List of Graphs 2.1
Savings Plan
83
2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.10 2.11 2.12
Investment plans Age consideration Period of investment Interested in Mutual Fund Anticipation of Risk Primary Goal Risk with Return Expected Age combination Fact Factor ors s to consi conside derr Service providers Satisfaction Level
85 87 89 91 93 95 97 99 102 102 104 106
INTRODUCTION Mutual funds are basically financial intermediaries, which collect the savings of investors and invest them in a large and well-diversified portfolio of securities such as money market instruments, corporate and government bonds and equity shares of joint stock companies. A mutual fund is a pool of common funds invested by different investors, who have no contact with each other. Mutual funds
are conc conceiv eived ed as insti institu tutio tions ns for for provi providin ding g small small invest investor ors s with with avenues of investments in the capital market. Since small investors generally do not have adequate time, knowledge, experience and resources resources for directly accessing accessing the capital market, they have to rely on an intermediary, which undertakes informed investment decisions and provides consequential benefits of professional expertise. The raison of mutual funds is their ability to bring down the transaction costs. The advantages for the investors are reduction in risk, expert prof profes essi sion onal al
man managem agemen ent, t,
dive divers rsif ifie ied d
port portfo foli lios os,,
liqu liquid idit ity y
of
investment and tax benefits. By pooling their assets through mutual
funds, investors achieve economies of scale. The interests of the inve invest stor ors s are are prot protec ecte ted d by the the SEBI SEBI,, wh whic ich h acts acts as a watc watchd hdog og.. Mutual funds are governed by the SEBI (Mutual Funds) Regulations, 1996.
MUTUAL FUND OPERATIONS FLOW CHART The flow chart below describes broadly the working of a Mutual Fund:
THE
GOAL
OF MUTUAL FUND The goal of a mutual fund is to provide an individual to make money. There are several thousand mutual funds with different investments strate strategie gies s and and goals goals to chose chosen n from. from. Choos Choosin ing g one one can can be over over whelming, even though it need not be different mutual funds have diff differ eren entt risk risks, s, wh whic ich h diff differ er beca becaus use e of the the fund fund’s ’s goal goals s fund fund manager, and investment style. The fund itself will still increase in value, and in that way you may also make money therefore the value of shares you hold in mutual fund will increase in value when
the holdings increases in value capital gains and income or dividend payments are best reinvested for younger investors Retires often seek the income from dividend distribution to augment their income with reinvestment of dividends and capital distribution your money increase at an even greater rate. When you redeem your shares what you receive is the value of the share.
ORGANISATION OF A MUTUAL FUND There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:
HISTORICAL VIEW: History and Structure of Indian Mutual Fund Industry The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative initiative of the Government Government of India and Reserve Bank. The history of mutual funds in India can be broadly divided into four distinct phases:
First Phase – 1964-87: Unit Un it Trus Trustt of Indi India a (UTI (UTI)) was was esta establ blis ishe hed d on 1963 1963 by an Ac Actt of Parl arliamen ament. t. It was was set up by the the Reser eserve ve Bank Bank of Indi India a and 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 the Indu Indust stri rial al Deve Develo lopm pmen entt Bank Bank of Indi India a (IDB (IDBI) I) took took over over the the regu regula lato tory ry and and admi admini nist stra rati tive ve cont contro roll in plac place e of RBI. RBI. The The firs firstt 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 – 1987-19 -1993 (Entry of Public Sector Funds): 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can-bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs. 47, 004 crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds): With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual
Fund)
Regulations
were
substituted
by
a
more
comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs.
1, 21,805 crores. The Unit Trust of India with Rs. 44, 44, 541 541
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 1963 UTI UTI was was bifu bifurc rcat ated ed into into two two sepa separa rate te enti entiti ties es.. One One is the 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, India, funct function ionin ing g under under an admin administ istrat rator or and under under the rules rules fram framed ed by Gove Govern rnme ment nt of Indi India a and and does does not not come come unde underr the the purv purvie iew w of the the Mu Mutu tual al Fund Fund Regu Regula lati tion ons. s. The The seco second nd is the the UTI UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI UTI Mu Mutu tual al Fund Fund,, conf confor ormi ming ng to the the SEBI SEBI Mu Mutu tual al Fund Fund Regulations, and with recent mergers taking place among different priv privat ate e sect sector or fund funds, s, the the mutu mutual al fund fund indu indust stry ry has has ente entere red d its its current ent pha phase of cons onsoli olidati dation on and and grow growth th.. As at the the end end of September, 2004, there were 29 funds, which manage assets of Rs.1, 53, 108 crores under 421 schemes.
CLASSIFICATION OF MUTUAL FUND SCHEMES: Any mutual fund has an objective of earning income for the investors and/ and/ or gettin getting g incr increas eased ed value value of their their inves investm tment ents. s. To achi achieve eve thes these e obje object ctiv ives es mutu mutual al fund funds s adopt dopt diff differ eren entt stra strate tegi gies es and and accordingly accordingly offer different schemes of investments. On this basis the simplest way to categorize schemes would be to group these into two broad classifications:
OPERATIONAL AND PORTFOLIO CLASSIFICATION: Operatio Operational nal classific classificatio ation n highl ghligh ights the the two mai main type ypes of
schemes, i.e., open-ended and close-ended which are offered by the mutual funds. Portfolio classification classification projec projects ts the combi combinat natio ion n of invest investmen mentt
instruments and investment avenues available to mutual funds to manage their funds. Any portfolio scheme can be either open ended or close ended.
Operational Classification:
Open Ended Schemes: As the name implies the size of the
scheme (Fund) is open – i.e., not specified or pre-determined. Entr Entry y to the the fund fund is alwa always ys open open to the the inve invest stor or wh who o can can subscribe at any time. Such fund stands ready to buy or sell its
securities at any time. It implies that the capitalization of the fund fund is cons consta tant ntly ly chan changi ging ng as inve invest stor ors s sell sell or buy buy thei theirr shares. Further, the shares or units are normally not traded on the the stoc stock k exch exchan ange ge but but are are repu repurc rcha hase sed d by the the fund fund at announc announced ed rates. rates. Open-ende Open-ended d schemes schemes have compara comparative tively ly better liquidity despite the fact that these are not listed. The reason is that investors can any time approach mutual fund for sale of such units. No intermediaries are required. Moreover, the realizable amount is certain since repurchase is at a price based on declared net asset value (NAV). No minute to minute fluctuations in rates haunt the investors. The portfolio mix of such schemes has to be investments, investments, which are actively traded in the market. Otherwise, it will not be possible to calculate NAV. This is the reason that generally open-ende open-ended d schemes are equity based. Moreover, desiring frequently traded securities, open-ended schemes hardly have in their portfolio shares of comparatively new and smaller companies since these are not generally traded. In such funds, option to reinvest its dividend is also avai availlable. ble. Since nce the there is alwa lways a possibi sibillity ity of withd withdraw rawals als,, the the manage managemen mentt of such such funds funds becom becomes es more more tedious as managers have to work from crisis to crisis. Crisis may be on two fronts, one is, that unexpected withdrawals require funds to maintain a high level of cash available every time implying thereby idle cash. Fund managers have to face questions like ‘what to sell’. He could very well have to sell his most most liquid liquid asset assets. s. Second Second,, by virtu virtue e of this this situa situati tion on such such fund funds s may may fail fail to grab grab favo favora rabl ble e oppo opport rtun unit itie ies. s. Furt Furthe her, r, to matc match h quic quick k cash cash paym paymen ents ts,, fund funds s cann cannot ot have have matc matchi hing ng realization from their portfolio due to intricacies of the stock market. Thus, success of the open-ended schemes to a great
extent depends on the efficiency of the capital market and the selection and quality of the portfolio.
Close Ended Schemes: Schemes: Such schemes have a definite period
after after wh which ich their their share shares/ s/ units units are redeem redeemed. ed. Un Unli like ke openopenended funds, these funds have fixed capitalization, i.e., their corpus normally does not change throughout its life period. Clos Close e ende ended d fund fund unit units s trad trade e amon among g the the inve invest stor ors s in the the secondary market since these are to be quoted on the stock exchanges. Their price is determined on the basis of demand and and supp supply ly in the the marke arket. t. Thei Theirr liqu liquid idit ity y depe depend nds s on the the efficiency and understanding of the engaged broker. Their price is free to deviate from NAV, i.e., there is every possibility that the market price may be above or below its NAV. If one takes into account the issue expenses, conceptually close ended fund units cannot be traded at a premium or over NAV because the price of a package of investments, i.e., cannot exceed the sum of the the prices prices of the invest investmen ments ts consti constitut tutin ing g the packa package. ge. Whatever premium exists that may exist only on account of specu speculat lativ ive e activ activiti ities. es. In India India as per SEBI SEBI (MF) (MF) Regul Regulati ations ons ever every y mutu mutual al fund fund is free free to laun launch ch any any or both both type types s of schemes.
Portfolio Classification of Funds: Follow Following ing are the portfo portfolio lio class classifi ifica catio tion n of funds, funds, wh which ich may may be offered. This classification may be on the basis of (A) Return, (B) Inve Invest stme ment nt Patt Patter ern, n, (C) (C) Spec Specia iali lize zed d sect sector or of inve invest stme ment nt,, (D) (D) Leverage and (E) Others.
Return based classification: To meet meet the divers diversifi ified ed needs needs of the invest investors ors,, the the mutual mutual fund fund schemes are made to enjoy a good return. Returns expected are in
form of regular dividends or capital appreciation or a combination of these two. Income e 1. Incom
Funds Funds:: For For inve invest stor ors s wh who o are are more more curi curiou ous s for for
retu eturns rns, Inc Income fun funds are are flo floate ated. Their eir obj objecti ective ve is to maximiz maximize e current current income. income. Such Such funds funds distribu distribute te periodic periodically ally the income earned by them. These funds can further be spitted up into into cate catego gori ries es:: thos those e that that stre stress ss const onstan antt inco income me at relatively low risk and those that attempt to achieve maximum income possible, even with the use of leverage. Obviously, the higher the expected returns, the higher the potential risk of the investment. 2. Growth Funds:
value
of
the
Such funds aim to achieve increase in the underlying
investments
through
capital
appreciation. Such funds invest in growth oriented securities whic wh ich h can can appr apprec ecia iate te thro throug ugh h the the expa expans nsio ion n prod produc ucti tion on facilities facilities in long run. An investor who selects such funds should be able to assume a higher than normal degree of risk. 3. Conservative Funds: The
fund with a philosophy of “all things
to all” issue offer document announcing objectives as: (i) To provide a reasonable rate of return, (ii) To protect the value of investment and, (iii) To achieve capital appreciation consistent with the fulfillment of the first two objectives. objectives. Such funds which offer offer a blend blend of immed immediat iate e averag average e return return and reaso reasona nable ble capital appreciation are known as “middle of the road” funds. Such funds divide their portfolio in common stocks and bonds in a way to achieve the desired objectives. Such funds have been most popular and appeal to the investors who want both growth and income. Investment Based Classification:
Mutual funds may also be classified on the basis of securities in whic wh ich h they they inves invest. t. Basic Basicall ally, y, it is renami renaming ng the subca subcateg tegori ories es of return based classification. 1. Equity Fund:
Such funds, as the name implies, invest most of
thei theirr inve invest stib ible le shar shares es in equi equity ty shar shares es of comp compan anie ies s and and undertake the risk associated with the investment in equity shares. Such funds are clearly expected to outdo other funds in rising market, because these have almost all their capital in equi equity ty.. Equi Equity ty fund funds s agai again n can can be of diff differ eren entt cate catego gori ries es varying from those that invest exclusively in high quality ‘blue chip compani anies to thos those e that that invest vest solel olely y in the the new, ew, unestablished companies. The strength of these funds is the expected expected capital capital appreciatio appreciation. n. Naturall Naturally, y, they have a higher higher degree of risk. Funds: 2. Bond Funds:
such such funds funds have have their their portf portfoli olio o consis consisted ted of
bonds, debentures, debentures, etc. this type of fund is expected to be very secure with a steady income and little or no chance of capital appr apprec ecia iati tion on.. Obvi Obviou ousl sly y risk risk is low low in such such fund funds. s. In this this category we may come across the funds called ‘Liquid Funds’ whic wh ich h
spec specia iali lize ze in inve invest stin ing g
shor shortt-te term rm mone money y
marke arkett
instruments. The emphasis is on liquidity and is associated with lower risks and low returns. Balanced Fund: Fund: 3. Balanced
The funds, which have in their portfolio a
reasonable mix of equity and bonds, are known as balanced fund funds. s. Such Such fund funds s will will put put more more emph emphas asis is on equi equity ty shar share e investments when the outlook is bright and will tend to switch to debe debent ntur ures es wh when en the the futu future re is expe expect cted ed to be poor poor for for shares. Sector Based Funds:
The There re are are numb number er of fund funds s that that inve invest st in a spec specif ifie ied d sect sector or of econ econom omy. y. Wh Whil ile e suc such fund funds s do have have the the disa disadv dvan anta tage ge of low low diversification diversification by putting all their all eggs in one basket, the policy of specializing has the advantage of developing in the fund managers an inte intens nsiv ive e know knowle ledg dge e of the the spec specif ific ic sect sector or in wh whic ich h they they are are investing. Sector based funds are aggressive growth funds which make make inve invest stme ment nts s on the the basi basis s of asse assess ssed ed brig bright ht futu future re for for a particu particular lar sector. sector. These These funds funds are characte characterize rized d by high viability, viability, hence more risky.
PERFORMANCE OF MUTUAL FUND IN INDIA The performance of mutual funds in India from the day the concept of mutual fund took birth in India. The year was 1963 Unit Trust of India invited investors or rather to those who believed in savings, to park their money in UTI Mutual Fund. For 30 years it ranked top without a single second player. Though the 1988 year saw some new mutual fund companies, but UTI remained in a monopoly position. The performance performance of mutual funds in India in the initial phase was not even closer to satisfactory level. People rarely understood, and of cour course se inve invest stin ing g was was out out of ques questi tion on.. Bu Butt yes, yes, some some 24 mill millio ion n shareholders was accustomed with guaranteed high returns by the beginning of liberalization of the industry in 1992. This good record of UTI became marketing tool for new entrants. The expectations of investor investors s touched touched the sky in profitab profitabilit ility y factor. factor. However However,, people people were miles away from the preparedness of risks factor after the liberalization. The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets under Management
rose to Rs. 470 bn. in March 1993 and the figure had a three times higher performance by April 2004. It rose as high as Rs. 1,540bn. The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. Those days, the market regulations regulations did not allow portfolio shifts into alternative investments. There were rather no choices apart from holding the cash or to further continue investing in shares. One more thing to be noted, since only closed-end funds were floated in market, the investors disinvested by selling at a loss the in the secondary market. The performance of mutual funds in India suffered qualitatively. The 1992 1992 stock stock mark market et scand scandal, al, the the losses losses by disinv disinvest estmen ments ts and of cour course se the the lack lack of tran transp spar aren entt rule rules s in the the wh wher erea eabo bout uts s rock rocked ed confidence among the investors. Partly owing to a relatively weak stock market performance, mutual funds have not yet recovered, with funds trading at an average discount of 1020 percent of their net asset value. The supervisory authority adopted a set of measures to create a transparent and competitive environment in mutual funds. Some of them them were were like like relax relaxin ing g inves investme tment nt restri restricti ctions ons into into the marke market, t, intr introd oduc ucti tion on of open open-e -end nded ed fund funds, s, and and pavi paving ng the the gate gatewa way y for for mutual
funds
to
launch
pension
schemes.
The measure was taken to make mutual funds the key instrument for long-term saving. The more the variety offered, the quantitative will be investors. At last to mention, as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time, more and more people will be inclined to invest until and unless they are fully educated with the dos and don’ts of mutual funds
MUTUAL FUNDS FOR WHOM? These funds can survive and thrive only if they can live up to the hopes hopes and and trusts trusts of their their indiv individu idual al membe members. rs. These These hopes hopes and trus trusts ts echo echo the the pecu peculi liar arit itie ies s wh whic ich h supp suppor ortt the the emer emerge genc nce e and and growth of such insecurity of such investors who come to the rescue of such investors who face following constraints while making direct investments:
Limited resources in the hands of investors quite often take them away from stock market transactions.
Lack Lack of fund funds s forb forbid ids s inve invest stor ors s to have have a bala balanc nced ed and and diversified portfolio.
Lack Lack of profe professi ssion onal al knowl knowledg edge e associ associate ated d with with invest investmen mentt business unable investors to operate gainfully in the market. Small
investors
can
hardly
afford
to
have
ex-pensive
investment consultations. To
buy shares, investors have to engage share brokers who are
the member bers of stoc tock exc exchange ange and and have ave to pay pay thei heir brokerage. They
hardly have access to price sensitive information in time.
It is difficult for them to know the development taking place in share market and corporate sector.
Firm allotments are not possible for small investors on when there is a trend of over subscription to public issues.
WHY MUTUAL FUNDS? Mutu Mu tual al Fund Funds s are are beco becomi ming ng a very very popu popula larr form form of inve invest stme ment nt characterized by many advantages that they share with other forms of invest investmen ments ts and and what what they they posses possess s unique uniquely ly thems themselv elves. es. The The primary objectives of an investment proposal would fit into one or combination of the two broad categories, i.e., Income and Capital gain gains. s. How How mutu mutual al fund fund is expe expect cted ed to be over over and and abov above e an indiv individ idual ual in achie achievin ving g the two said said object objective ives, s, is what what attra attract cts s investors to opt for mutual funds. Mutual fund route offers several important advantages. Diversification:
A proven principle
of sound
investment
is
diversification, which is the idea of not putting all your eggs in one bask basket et.. By inve invest stin ing g in many many comp compan anie ies s the the mutu mutual al fund funds s can can protect themselves from unexpected drop in values of some shares. The The smal smalll inves investo tors rs can can achiev achieve e wide wide diver diversif sific icati ation on on his own because of many reasons, mainly funds at his disposal. Mutual funds on the other hand, pool funds of lakhs of investors and thus can participate in a large basket of shares of many different companies. Majority of people consider diversification as the major strength of mutual funds. Expertis Expertise e Supervis Supervision: ion: Maki Making ng inve invest stme ment nts s is not not a full full time time
assignment of investors. So they hardly have a professional attitude towards their investment. When investors buy mutual fund scheme, an esse essent ntia iall bene benefi fitt one one acqu acquir ires es is expe expert rt mana manage geme ment nt of the the money he puts in the fund. The professional fund managers who supervise fund’s portfolio take desirable decisions viz., what scrip’s are are to be boug bought ht,, wh what at inve invest stme ment nts s are are to be sold sold and and more more appropriate decision as to timings of such buy and sell. They have
extensive research facilities at their disposal, can spend full time to inve invest stig igat ate e and and can can give give the the fund fund a cons consta tant nt supe superv rvis isio ion. n. The The performance of mutual fund schemes, of course, depends on the quality of fund managers employed. Liquidity of Investment: A distinct advantage of a mutual fund
over other investments is that there is always a market for its unit/ shares shares.. Moreo Moreover ver,, Secur Securiti ities es and and Excha Exchange nge Board Board of India India (SEBI) (SEBI) requires the mutual funds in India have to ensure liquidity. Mutual funds units can either be sold in the share market as SEBI has made it obligatory for closed-ended schemes to list themselves on stock exchanges. For open-ended schemes investors can always approach the fund for repurchase at net asset value (NAV) of the scheme. Such repurchase price and NAV is advertised in newspaper for the convenience of investors. Reduced risks: Risk in investment is as to recovery of the principal
amount and as to return on it. Mutual fund investments on both front fronts s provi provide de a comfor comfortab table le situa situatio tion n for inves investor tors. s. The The exper expertt supervision, diversification and liquidity of units ensured in mutual funds reduces the risks. Investors are no longer expected to come to grief by falling prey to misleading and motivating ‘headline’ leads and tips, if they invest in mutual funds. Safet afety y
of
Inve Invest stme ment nt::
Besides
depending
on
the
expert
supervision of fund managers, the legislation in a country (like SEBI in India) also provides for the safety of investments. Mutual funds have to broadly follow the laid down provisions for their regulations, SEBI acts as a watchdog and attempts whole heatedly to safeguard investor’s interests. Tax Shelter: Depending on the scheme of mutual funds, tax shelter
is also also avail availabl able. e. As per the Un Union ion Bu Budge dget-2 t-2003 003,, inco income me earned earned through dividends from mutual funds is 100% tax-free at the hands of the investors.
Minimize Minimize Operatin Operating g Costs: Costs: Mutual Mutual funds funds having having large large invisi invisible ble
funds at their disposal avail economies of scale. The brokerage fee or trading commission may be reduced substantially. The reduced oper operat atin ing g cost costs s obvi obviou ousl sly y incr increa ease se the the inc income ome avai availa labl ble e for for investors. Investing in securities through mutual funds has many advantages like like – opti option on to rein reinve vest st divi divide dend nds, s, stro strong ng poss possib ibil ilit ity y of capi capita tall appreciation, regular returns, etc. Mutual funds are also relevant in national interest. The test of their economic efficiency as financial intermediary lies in the extent to which they are able to mobilize additional savings and channeling to more productive sectors of the economy.
TYPES OF RETAIL INVESTORS The The Econ Econom omic ic Time Times s surv survey ey on reta retail il equi equity ty inve invest stor ors s in the the secon secondar dary y mark market et has has identi identifie fied d differ different ent categ categori ories es of invest investors ors based on their characteristics. Many questions are raised about the behavior of the small investor under different circumstances. The answers to many of these questions and similar others is not difficult to interpret once we identify the different types of retail investors in the stock markets.
The The surv survey ey show shows s that that ther there e are are five five diff differ eren entt kind kinds s of reta retail il investors:
Intellectuals
Cavaliers
Reactivates
Opportunists
Gamblers
This This class classifi ificat cation ion is based based on the attitu attitudes des of inves investor tors s towar towards ds secondary market investments. Let’s explain each type of investor and understand their investment psyche and behavioral patterns.
INTELLECTUALS: Thi This s reta retail il inve invest stor or grou group p form forms s arou around nd 17% 17% of the the tota totall reta retail il investment class. They are the intelligent investors who follow an intelligent, individualist approach to investment planning and a welldefi define ned d and and deli delibe bera rate te stra strate tegy gy for for stoc stock k inve invest stme ment nt.. Thes These e investors are self reliant good stock pickers and try to monetize market knowledge. Giving proof of their intelligence, they consider low-risk; low–gain guaranteed return avenues as passé. Also, they believe in and work towards a well-planned. Asset allocation and seek the right mix of stability and reliability of returns. The The ‘inte ‘intell llect ectual uals’ s’ are unaffe unaffect cted ed by short short–te –term rm fluct fluctuat uation ions s and prefer long–term investments. Moreover, they are disciplined enough to observe profit targets which they have set for themselves. And as they invest for the long term, they are not concerned with short term losses. They manager their money themselves and understand the industry/sector before investing.
CAVALIERS:
As high as 49% of the small retail equity investors are ‘cavaliers’. They are those who have lost money in ‘fly-by –night ‘schemes. Therefore, much of their investments are driven by the desire to recover past losses and make profits in the future. As such, they invest aggressively into equities, mostly in volatile sectors in order to make big gains. However, they will also invest in FDs and insurance as a precautionary measure. They get tempted to speculate in the secondary market and once in a while, they actually speculate but with with smal smalle lerr amou amount nts. s. The The cava cavali lier ers s try try to gath gather er all all avai availa labl ble e information and compare it with opinions from experts in the media, but will trust their own judgment before making decisions.
REACTIVISTS: About Ab out 5% of the retail retail equit equity y inves investor tors s fall fall under under this this catego category ry.. These These investor investors s basicall basically y short-te short-term rm investor investors, s, are impulsiv impulsive e info info addicts who are vulnerable to external influences and as such, they have no specific investment patterns, They believe that dynamic and ad hoc investments will result in better profits and are prompted to act on popular opinion rather than systematic planning. As they lack in confi confiden dence, ce, exper experien ience ce and and exper experti tise, se, they they const constant antly ly rely rely on advice from in the know people such as brokers and analysts. They are are extr extrem emel ely y anxi anxiou ous s abou aboutt pric price e fluc fluctu tuat atio ions ns or shor shortt-te term rm declines. declines. They are very skeptical and believe that small declines can lead to larger losses if not reacted upon immediately. Therefore, the reactivists constantly seek new information about stocks in which they they are are curr curren entl tly y inve invest sted ed in, in, to ensu ensure re a feel feelin ing g of secu securi rity ty.. Moreover, their investments apart from equities are solely for taxsaving purposes.
OPPORTUNISTS: This class of investors account for 10% of the retail equity investor universe. This category is defensively pessimistic and prefers to take only familiar familiar risks. risks. As they have a low risk tolerance, tolerance, they they are wary
of vola volati tili lity ty in the the equi equity ty mark market et.. They They inve invest st into into equi equiti ties es by imitating larger trends rather than with their individual analysis and consider equity investment as a gamble. They want to be in the black all the time and as such, prefer popular stocks with immediate profi profitt potent potential ial.. Oppor Opportun tunist ists s need need posit positive ive price price move movemen ments ts to encourage their investments into equities and they will not hunt for barg bargai ains ns of inve invest st on pric price e decl declin ines es.. Bu Butt befo before re inve invest stin ing g into into equi equiti ties es.. They They pref prefer er to buil build d a crit critic ical al mass mass of fixe fixed d inco income me instruments as they find fixed income options a reassuring way of safe bets. The opportunists‘choice of investments as they find fixed incom income e option options s a reassu reassurin ring g way of safe safe bets. bets. The The opport opportun unist ist’s ’s choice of investment is biased towards well known and previously owned securities, including equities. This investor class is wary of investing into equities when the market has moved up too high too soon. So, if you have not invested in the current market, you are probably an ‘opportunist’.
GAMBLERS: 19% the retail investor population is made up of not actual investors. But gamblers.’ They are the typical thrill seeking traders who link profitability to personal achievement. They experiment a lot, mostly driven by instinct and self confidence; as such their stock selection is more a random exercise that lacks rationale. This class perceives all securities as tradable commodities to be bought and sold in the short term. However, they know completely about the risk factors and therefore, have a tendency to invest only as much as they are willing to lose. As a part, of the game and this does not act as a hindrance for future investments. They do not trust brokers, but will secretly verify their suggestions for fear of missing an opportunity. They ascertain fair value of stocks on gut feeling rather than any financial analysis and use sudden downward fluctuations as buying opportunities.
MARKETING STRATEGIES ADOPTED BY THE MUTUAL FUNDS The present marketing strategies of mutual funds can be divided into two main headings:
Direct marketing
Selling through intermediaries.
Joint
Calls
Direct Marketing: This constitutes 20 percent of the total sales of mutual funds. Some of the important tools used in this type of selling are: Personal Personal Selling: Selling: In this this case case the the cust custom omer er supp suppor ortt offi office cerr or
Rela Relati tion onsh ship ip Mana Manage gerr of the the fund fund at a part partic icul ular ar bran branch ch take takes s appointment from the potential prospect. Once the appointment is fixed, the branch officer also called Business Development Associate (BDA) in some funds then meets the prospect and gives him all details about the various schemes being offered by his fund. The conversion conversion rate in this mode of selling is in between 30% - 40%. Telemarketing: In this case the emphasis is to inform the people
about the fund. The names and phone numbers of the people are
picked at random from telephone directory. Some fund houses have their database of investors and they cross sell their other products. Someti Sometimes mes people people belong belongin ing g to a partic particula ularr profes professio sion n are also also conta contact cted ed throug through h phone phone and are then then infor informe med d about about the the fund. fund. Generally the conversion rate in this form of marketing is 15% - 20%. Direct mail : This one of the most common method followed by all
mutu mutual al fund funds. s. Ad Addr dres esse ses s of peop people le are are pick picked ed at rand random om from from telephone directory, business directory, professional directory etc. The customer support officer (CSO) then mails the literature of the schemes offered by the fund. The follow up starts after 3 – 4 days of mailing the literature. The CSO calls on the people to whom the lite litera ratu ture re was was mail mailed ed.. An Answ swer ers s thei theirr quer querie ies s and and is gene genera rall lly y successful in taking appointments with those people. It is then the job of BDA to try his best to convert that prospect into a customer. Adver Advertis tisem ement ents s in newspa newspaper pers s and magaz magazine ines s: The The fund funds s
regularly advertise in business newspapers and magazines besides in leadi leading ng nation national al daili dailies. es. The The purpo purpose se to keep keep invest investors ors aware aware about the schemes offered by the fund and their performance in rece recent nt past past.. Ad Adve vert rtis isem emen entt in TV/F TV/FM M Chan Channe nel: l: The The fund funds s are are aggressively giving their advertisements in TV and FM Channels to promote their funds. Hoardings and Banners: In this case the hoardings and banners of
the the fund fund are are put put at impo import rtan antt loca locati tion ons s of the the city ity wh wher ere e the the movem movement ent of the people people is very very high. high.
The The hoardin hoarding g and banner banner
generally contains information information either about one particular particular scheme or brief information about all schemes of fund.
Selling through intermediaries: Intermediaries contribute towards 80% of the total sales of mutual funds. These are the people/ distributors distributors who are in direct touch with the inves investor tors. s. They They perfor perform m an impor importan tantt role role in attrac attractin ting g new customers. Most of these intermediaries are also involved in selling
shares and other investment instruments. They do a commendable job in convincing investors to invest in mutual funds. A lot depends on the the afte afterr sale sale serv servic ices es offe offere red d by the the inte interm rmed edia iary ry to the the customer. Customers prefer to work with those intermediaries who give them right information about the fund and keep them abreast with the latest changes taking place in the market especially if they have any bearing on the fund in which they have invested. Regular Meetings with distributors : Most of the funds conduct
monthly/bi-monthly meetings with their distributors. The objective is to hear their complaints regarding service aspects from funds side and and othe otherr quer querie ies s rela relate ted d to the the mark market et situ situat atio ion. n. Some Someti time mes, s, special training programs are also conducted for the new agents/ distributors. Training involves giving details about the products of the the fund fund,, thei theirr pres presen entt perf perfor orma manc nce e in the the mark market et,, wh what at the the competitors are doing and what they can do to increase the sales of the fund.
Joint Calls: This is generally done when the prospect seems to be a high net worth investor. The BDA and the agent (who is located close to the HNI’s residence or area of operation) together visit the prospect and brief him about the fund. The conversion rate is very high in this situ situat atio ion, n, gene genera rall lly, y, arou around nd 60%. 60%. Both Both the the fund fund and and the the agen agentt provide even after sale services in this particular case. Meetings with HNI’s: This is a special feature of all the funds.
Whenever a top official visits a particular branch office, he devotes at least one to two hours in meeting with the HNI’s of that particular area. This generally develops a faith among the HNI’s towards the fund.
Advantages: Portfolio diversification: - Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small) Professio Professional nal managem management: ent: - Fund manager undergoes through vario va rious us res resear earch ch wor works ks and has bet better ter inv invest estmen mentt ma manag nageme ement nt skills which ensure higher returns to the investor than what he can manage on his own. Less risk: - Investors acquire a diversified portfolio of securities even ev en wi with th a sm smal alll in inve vest stme ment nt in a Mu Mutu tual al Fu Fund nd.. Th The e ri risk sk in a dive di vers rsif ifie ied d po port rtfo foli lio o is le less sser er th than an in inve vest stin ing g in mer erel ely y 2 or 3 securities. Low transaction cost: - Due to the economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors. Liquidity: - An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid.
Choice of scheme: - Mutual funds provide investors with various
schemes with diff schemes differen erentt inve investme stment nt obje objectiv ctives. es. Inve Investor stors s have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/option plans/options s Transparency: - Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the regulator. Flexibili Flexibility: ty: - In Inve vest stor ors s al also so be bene nefi fitt fr from om th the e co conv nven enie ienc nce e an and d flex fl exib ibil ilit ity y of offe fere red d by Mu Mutu tual al Fu Fund nds. s. In Inve vest stor ors s ca can n sw swit itch ch th thei eirr holdings from a debt scheme to an equity scheme and vice-versa. Opt ptiion of syst ste emati tic c (at reg egul ular ar int nter erv val als) s) inve vest stme men nt and with wi thdr draw awal al is al also so off ffer ered ed to th the e in inve vest stor ors s in mos ostt op open en-e -end nd schemes. Safety: - Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the th e re regu gula lato tor. r. Al Alll fu fund nds s ar are e re regi gist ster ered ed wi with th SE SEBI BI an and d co comp mple lete te transparency is forced.
Disadvantages:Cost control not in the hands of Investors: - Investor has to pay
invest inve stme ment nt ma mana nage geme ment nt fe fees es an and d fu fund nd di dist stri ribu buti tion on co cost sts s as a percentage of the value of his investments (as long as he holds the units), irrespective irrespective of the performanc performance e of the fund. No customized portfolio: - The portfolio of securities in which a fund invests is a decision taken by the fund manager. Investors have no ri righ ghtt to in inte terf rfer ere e in th the e de deci cisi sion on mak akin ing g pr proc oces ess s of a fu fund nd manag ma nager er,, whi which ch so some me in inves vesto tors rs fin find d as a con constr strain aintt in ac achie hievin ving g their financial objectives. Difficulty in selecting a suitable fund scheme: - Many investors find it difficult to select one option from the plethora of funds/ fun ds/sc schem hemes/ es/pla plans ns av avail ailabl able. e. For thi this, s, the they y may hav have e to ta take ke advice from financial planners in order to invest in the right fund to achieve their objectives.
Load structure:Load Funds Mutua Mu tuall Fun Funds ds in incu curr var variou ious s exp expens enses es on ma mark rketi eting, ng, dis distri tribut bution ion,, advert adv ertisi ising, ng, por portfo tfoli lio o ch churn urning ing,, fun fund d ma manag nager' er's s sal salary ary etc etc.. Ma Many ny funds recover these expenses from the investors in the form of load. These funds are known as Load Funds. A load fund may impose following types of loads on the investors: 1.
Entry Load - Also known as Front-end load, it refers to the load charged to an investor at the time of his entry into a scheme. Entry load is deducted from the investor's contribution amount to the fund.
Exit Load - Also known as Back-end load, these charges are imposed on an investor when he redeems his units (exits from the th e sc sche heme me). ). Ex Exit it loa oad d is de dedu duct cted ed fr from om th the e re rede demp mpti tion on proceeds to an outgoing investor. 3. Deferred Load - Deferred load is charged to the scheme over a period of time. 4. Contingent Deferred Sales Charge (CDSC) - In some schemes, the th e pe perc rcen enta tage ge of ex exit it lo load ad re redu duce ces s as th the e in inve vest stor or st stay ays s longer with the fund. This type of load is known as Contingent Deferred Sales Charge. 2.
No-load Funds
All those funds that do not charge any of the above mentioned loads are known as No-load Funds.
Tax exemption: Tax-exempt Funds
Fund Funds s that that inve invest st in secu securi riti ties es free free from from tax tax are are know known n as TaxTaxexempt Funds. All open-end equity oriented funds are exempt from distribution tax (tax for distributing income to investors). Long term capital gains and dividend income in the hands of investors are taxfree. Non-Tax-exempt Funds
Funds that invest in taxable securities securities are known as Non-Tax-exempt Funds. In India, all funds, except open-end equity oriented funds are liable to pay tax on distribution income. Profits arising out of sale of units by an investor within 12 months of purchase purchase are categorized as short-term capital gains, gains, which are taxable. Sale of units of an equity oriented fund is subject to Securities Transaction Tax (STT). STT is deducted from the redemption proceeds to an investor.
Risk Hierarchy of Different Mutual Funds: Thus, different mutual fund schemes are exposed to different levels of risk and investors should know the level of risks associated with thes these e sche scheme mes s befo before re inve invest stin ing. g. The The grap graphi hica call repr repres esen enta tati tion on hereun hereunder der provi provides des a clear clearer er pictur picture e of the relati relation onshi ship p betwe between en mutual funds and levels of risk associated with these funds:
LITERATURE REVIEW Literature on mutual fund performance evaluation is enormous. A few research studies that have influenced the preparation of this paper substantially are discussed in this section. sugges este ted d a meas measur ure e for for the the Shar Sharpe pe,, Willi William am F. (196 (1966) 6) sugg eval evalua uattion ion
of port portfo follio perf perfor orma manc nce e.
Dra Drawing wing on
resu result lts s
obta obtain ined ed in the the fiel field d of port portfo foli lio o anal analys ysis is,, econo economi mist st Jack Jack L. Treynor has has sugg sugge ested sted a new pre predictor of mutual fund und perf perfor orma mance nce,, one one that that diff differ ers s from from virt virtua uall lly y all all those those used used previously by incorporating the volatility of a fund's return in a simple yet meaningful manner. Michael C. Jensen (1967) derived derived a risk-adjuste risk-adjusted d measure of
portfolio performance (Jensen’s alpha) that estimates how much a manager’s forecasting ability contributes to fund’s returns. As indicated by Statman (2000), the e SDAR of a fund portfolio is the exce excess ss retur eturn n of the the port portfo follio over over the the ret return urn of the the benchmark index, where the portfolio is leveraged to have the benchmark index’s standard deviation.
S.Narayan Rao, evaluated performance of Indian mutual funds
in a bear bear mark market et thro through ugh rela relati tive ve perfo perform rmanc ance e index index,, riskriskretu return rn anal analys ysis is,, Trey Treyno nor’ r’s s rati ratio, o, Shar Sharpe pe’s ’s rati ratio, o, Shar Sharpe pe’s ’s measure , Jensen’s measure, and Fama’s measure. The study used 269 open-ended schemes (out of total schemes of 433) for comput computing ing relati relative ve perfor performanc mance e index. index. Then after after excludin excluding g funds whose returns are less than risk-free returns, 58 schemes are finally used for further analysis. The results of performance measures suggest that most of mutual fund schemes in the sample of 58 were able to satisfy investor’s expectations by givi giving ng exces excess s retu return rns s over over expec expecte ted d retu return rns s based based on both both premium for systematic risk and total risk. Bijan Roy, et. al., conduct conducted ed an empiri empirical cal study study on condit condition ional al perfor performanc mance e of Indi Indian an mut mutual ual fund funds. s. Thi This pape paperr uses ses a tech techni niqu que e cal called led conditional performance evaluation on a sample of eighty-nine India dian
mutu utual fund fund scheme emes
.This
paper per measur sures
the
performance of various mutual funds with both unconditional and and cond condit itio iona nall form form of CAPM CAPM,, Trey Treyno norr- Mazu Mazuy y mode modell and and Henrik Henriksson sson-Me -Merto rton n model. model. The effect effect of incorp incorpora oratin ting g lagged lagged infor nforma mattion ion vari variab ablles into into the eval evalua uati tion on of mut mutual ual fund fund managers’ performance is examined in the Indian context. The results suggest that the use of conditioning lagged information variables improves the performance of mutual fund schemes, causing alphas to shift towards right and reducing the number of negative timing coefficients. Mishra, et al., (2002) measured mutual fund performance using lower partial moment. In this paper, measures of evaluating portfolio performance based on lower partial moment are developed. Risk from the lower partial
moment is measured by taking into account only those states in which return is below a pre-specified “target rate” like risk-free rate.
Kshama
Fernandes
(2003)
evaluated
index
fun d
implementation in India. In this paper, tracking error of index fun funds in Indi India a is meas measur ured ed .The .The cons consis iste tenc ncy y and leve levell of tracking errors obtained by some well-run index fund suggests that it is possible to attain low levels of tracking error under Indi Indian an cond condit itio ions ns.. At the the same same time time,, there here do seem seem to be periods where certain index funds appear to depart from the discipline of indexation. K. Pendaraki et al. studied construction of
mutual
fun d
portfolios,
developed
a
multi-criteria
meth method odol olog ogy y and and appl applie ied d it to the the Gree Greek k mark market et of equi equity ty mutual funds. The methodology is based on the combination of discrete and continuous multi-criteria decision aid methods for mutual mutual fund select selection ion and compos compositi ition. on. UTADIS UTADIS multimulti-cri criter teria ia decision aid method is employed in order to develop mutual fun fund’s d’s perf perfor orma manc nce e mode models ls.. Goal Goal prog progra ramm mmiing mode modell is employed to determine proportion of selected mutual funds in the final portfolios.
NEED FOR THE STUDY
To study the investors intention with regard to the products in mutual funds and their features.
To study awareness level of customers.
To study the preference and satisfaction level of investors.
To apprehend mutual funds movement in the market.
To analyze how it benefited to investors.
With the awareness that is increasing day by day regarding investing in secondary market and speculation, the comfort and flexibility the customers seeking, there is a definite requirement to study. In the fast growing competitive competitive market scenario it is always required to have an idea of changes that are taking place in the market from time time to time time.. With Withou outt wh whic ich h one one can’ can’tt serv serve e thei theirr cust custom omer ers s properly.
OBJECTIVES OF THE STUDY
1.
To enha enhanc nce e our our know knowle ledg dge e abou aboutt the the subj subjec ect. t.
2.
Eval Evalua uate te Perc Percep epti tion on towa toward rds s risk risk invo involv lved ed in mut mutua uall funds funds in comparison to other financial avenues.
3.
How
effectively
investment
houses
are
reaching
their
customers. 4.
To have have a viv vivid id pict pictur ure e of majo majorr pla playe yers rs in Mu Mutu tual al Fun Fund d Indu Indust stry ry in India.
5.
To study how the promotional activities of Mutual Fund products in India.
6.
To stu study dy the the pat patte tern rn of of cons consum umer er beh behav avio iorr with within in the the ava avail ilab able le investment options and to test awareness among the consumer about the various mutual fund houses.
SCOPE OF THE STUDY
In today today's 's compl complex ex financ financial ial envir environm onment ent,, inves investo tors rs have have unique unique needs, which are derived from their risk appetite and financial goals. Mutu Mutual al
manag anage e
fund funds s
the
(cus (custo tomi mize zed d
inv investm estmen entts
port portfo foli lios os))
pro profes fession sional allly
reco recogn gniz ize e this this,, and and to
achieve ieve
spec pecific ific
investment objectives, objectives, and not to forget, relieving the investors from the day-to-day hassles which investment require.
It is offe offers rs prof profes essi sion onal al manag anagem emen entt of equi equity ty and and debt debt diversified investment of the investor with an aim to deliver consistent return with an eye on risk.
Identify the key sectorial stocks in each portfolio. To look out for new prospective customers who are willing to invest in Mutual Funds of Franklin Templeton, Visakhapatnam.
To find out the Franklin Templeton Investments’, Mutual Funds effectiveness in the current market situation.
It also covers the scenario of the Investment Philosophy of a Fund Manager.
RESEARCH AND METHODOLOGY COLLECTION OF DATA: Primary data: - Employees of Franklin Templeton India Pvt Ltd,
Visa Visakh khap apat atna nam, m, & cust custom omer ers s of Fran Frankl klin in Temp Temple leto ton, n, and and othe otherr investor out of Franklin Templeton (by personally in touch with them, and by asking queries to them). Methods: - Personal interaction. Secon econd dary ary
data: ata:
-
Web Web site of Fran Frank klin Temp empleto leton n India ndia,,
brochures, textbooks and other web sites etc….. Mainly the data was collected by interacting with people working at vari variou ous s leve levels ls in Fran Frankl klin in Temp Temple leto ton n and and outs outsid ide e inve invest stor ors s and and websites.
RESEARCH METHODOLOGY: METHODOLOGY: Sample Method
:
Non-Probability Sampling
Sample Size
:
100
Primary Data
:
Structured Non-Disguised Questionnaire
Secondary Data
:
Reference from distributors.
Sources of Data
The The wh whol ole e stud study y is base based d upon upon pri primary mary and and seco second ndar ary y data data.. There Therefor fore, e, infor informa matio tion n has been been colle collect cted ed from from inter interac actin ting g with with different investors and from various magazines, journals, websites, and bulletins.
PRESENTATION OF THE STUDY: The The study study has been been presen presented ted in the the organ organize ized d struc structur ture e or the format which has been provided by the respective authority. In the first chapter under the theoretical framework the concept of finance has been described in detail with its meaning, definition, evolution and the various modern and the traditional approaches in the field of finance. In the column of topic related concepts there was a detailed description about the topic of study, which is “ study on customer attitud attitude, e, preferenc preference e and satisfac satisfaction tion level towards towards mutual mutual fund investment ”. In its context it was detailed allot the process
and the importance of customer satisfaction in the organization as well as industry. In the column of review of literature the relation and the impor importan tance ce of the custo customer mer satis satisfac factio tion n with with the comp company any,, investor’s value, etc has been presented with the reviews of the various scholars in the field of finance. There was a clear description about the importance importance and the scope of study and the main objectives for the purpose of conducting the study were made clear. The research design adopted with different metho ethods ds and and tabl tables es and and ther there e was was clea clearr pres presen enta tati tion on of the the limitations of the study.
In chapter three the overview of the whole industry at global level and also at the country level has been mentioned with actual facts which were done same in the case of the company profile. Once the topi topic c prof profil ile e in the the orga organi nisa sati tion on was was made made clea clearr the the stud study y was was supported with clear analysis of data and the fair presentation of the findings, suggestion and the conclusion at the end of the details presented for the study.
LIMITATIONS
The study is limited to Visakhapatnam city only.
The time constraint was one of the major problems.
The study is limited to the different schemes available under the mutual funds selected.
All the customers are online so only a few customers were in contact.
As all the information is given by the customers it may be biased.
Most of the customers were not ready to reveal the data about their investments.
Most of clients unaware of these options so that they didn’t responded well.
The lack of information sources for the analysis part.
INDUSTRY PROFILE The The capi capita tall mark market ets s perf perfor orm m an impo import rtan antt func functi tion on in mobilization of resources liquidity of the stock markets is an impo import rtant ant fact factor or effec effecti ting ng growt growth. h. Many Many prof profit itabl able e proj project ects s require long term finance; however investors do not relinquish thei theirr savi saving ngs s for for a long long time time.. Capi Capita tall mark market et is a grou group p of interrelated markets in which capital is raised in financial form, is lent and borrowed (or) raised in a varying time periods (such economy, the as short term and long term). In a developing economy, business of capital market is the movement of capital to the point of highest yield. A liquid stock market ensures a quick exit without incurring heavy losses (or) costs. Stock market is a vehicle through which long term finance is characterized for the variou various s needs needs of indust industry, ry, commerc commerce, e, governm government ent and local local authorities. Thus development of financial markets is necessary for creating conductive climate for investment and economic growth. The tone of capital market largely depe depen nds on the economy of the count untry and there erefore, dep depends on the
available
savings
and
investments
on
one
hand
the
performances of the industry on the other. Among other factors that would influence the tone of the capital and stock market are the monsoon, the agriculture, the industry growth and in particular the performance of the corporate sector, as they too have a controlling effect on the economy of the country. In particular the performance of the corporate sector, as they too have a controlling effect on the economy of the country. In particular the government policy, the psychological expectation and host of other fact actors pla play a very prominent nent role in influencing the capital markets.
The capital market in India can be categorized into two types:
Organized
Unorganized The The fund funds s for for long long term term capi capita tall come come from from indi indivi vidu dual al
inve invest stor ors, s, corpo corpora rate te savi savings ngs,, gove govern rnmen mentt savi savings ngs,, fore foreig ign n investments, investments, banks, financial financial institutio institutions, ns, investments investments trusts, trusts, Life Insurance Insurance Corporation Corporation and internatio international nal financial financial agencies, agencies, industry, government and semi government institutions are the potential users in the organized sector itself. Since the supply of funds for unorganized unorganized sector falls short of demand, the interest rates are kept high. The economic progress of a country is largely influenced by the availability of savings for investment and hence there is a need for the mobilization of the savings for investment and henc hence e there here is a need need for for the the mobi mobili liz zati ation of savi saving ngs s for for investment and hence on a massive scale. Indigenous bankers
in town and money lenders in rural areas supply long term finance in the UN organized sector. There is no link between the organized and unorganized sector (or) within the unorganized sector itself. There is a need for the mobilization savings on a massive scale. The economic progress of a country is largely influenced by the availability of savings for investment and hence there is need for the mobilization of savings for investment and hence on a massive scale. Indigenous bankers in town and money lenders in rural areas supply long term finance in the unorganized sector. There is no link between the organized and unorga unorganiz nized ed sector sector (or) (or) within within the unorgan unorganize ized d sector sector itself itself.. There is a need for the mobilization mo bilization savings on a massive scale. In developing countries like India, there is a great set back in mobilization process due to various reasons. The attitude of the public; their affiliation to traditional investment in land and prop proper erty ty,, bull bullio ions ns and and hoar hoardi ding ngs s and and abov above e all all the the risk risk of uncer uncerta tain inty ty are are some some of the reas reasons ons.. The The fisc fiscal al comm commis issi sion on (1949-50) recognized the fact that in India there is an acute of long term capital for industrial ventures. But it was not until 1954-55 that the central board of directors of the reserve bank permitted established business house to raise their new capital by issue of debentures at comparatively high rate of interest. Since the capital market is a place where the private savings are kept for a very long period, period, it is highly necessary to protect the interests of these investors, if the capital market has to grow.
To safe safe guar guard d the the inve invest stor or’s ’s inte interes rest, t, gove govern rnmen mentt has to enacted laws such as:
The secu ecurities act , 1938 ( toge ogether with the life insurance corporation act 1956 )
The
capital issues (control and regulation act, 1943).
The
banking companies act, 1949.
The
provident fund act and the rules, 1957.
The
Indian companies act, 1956.
The
deposit insurance scheme, 1960.
The The mono monopo poli lies es and and restr restric icti tive ve trade trade prac practi tices ces act, act, 1969.
A new era in the capital market in India was ushered in July, 1991 with the starting of a new process of financial and econ economi omic c dere deregul gulat atio ion. n. Begi Beginni nning ng With With the the deva devalu luat atio ion n of rupee by about 20% in July, 1991, industrial policy was totally reshaped to dispense with licensing of all industries except 18 schedul scheduled ed indust industria riall groups. groups. Furthe Further, r, remova removall MRPT MRPT limit limit on asse assets ts of Comp Compan anie ies, s, dilu diluti tion on of FERA FERA (For (Forei eign gn Exch Exchan ange ge Regulation Act). And foreign trade liberalization etc, were some of the other reforms. Fiscal Policy was rationalized to reduce the cent centra rall budge budgett defic deficit it and and publi public c Secto Sectorr under under taki takings ngs were were free freed d from from gove govern rnme ment nt cont contro rols ls by prof profes essi sion onal aliz izin ing g thei theirr manage nagem ment , giv giving greater ater autonomy to them and and by disinvestment of their shares in favor of the public.
ESTABLISHMENT OF SEBI
The Securities and Exchange Board of India was established on April 12, 1992 in acc accordance with the provision sions s of the Securities and Exchange Board of India Act, Act, 1992. PREAMBLE
The Preamble of the Securities and Exchange Board of India describes the basic functions of the Securities and Exchange Board of India as “…..to protect the interests of investors in securities and to promote the development of, and to regulate the securities market and for matters connected therewith or incidental thereto”
BOMBAY STOCK EXCHANGES The 'BSE SENSEX' is a value-weighted index composed of 30 stoc stocks ks and and was was star starte ted d on Janu Januar ary y 1, 1986 1986.. The The Sens Sensex ex is regarded regarded as the pulse of the domestic stock markets in India. It cons consis ists ts of the the 30 large largest st and and most most acti active vely ly trade traded d stock stocks, s, repr repres esen enttati ative of var various ous sect sector ors, s, on the Bomba ombay y Stoc Stock k Exchange. These companies account for around fifty per cent of the market capitalization of the BSE. The base value of the Sensex Sensex is 100 on Ap Apri rill 1, 1979, 979, and and the the base base year year of BS BSEESENSEX is 1978-79. A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public representatives and an executive director is the apex body, which decides the policies and regulates the affairs of the exchange.
The BSE SENSEX consists of the following companies:
Bajaj Auto Limited, Bharti Airtel Ltd., Bharat Heavy Electricals Ltd., Cipla Ltd., DLF Ltd., HDFC, HDFC Bank Ltd., Hero Honda Motors Ltd., Hindalco Industries Ltd., Hindustan Unilever Ltd., ICICI Bank Ltd., Infosys Technologies Ltd., ITC Ltd., Jaiprakash Associates Ltd., Jindal Steel & Power Ltd., Larsen & Toubro Ltd., Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd., NTPC Ltd., ONGC Ltd., Reliance Industries Ltd., Reliance Communications Ltd., Reliance Infrastructure Ltd., State Bank of India, Sterlite Industries (India) Ltd., Tata Motors Ltd., Tata Power Company Ltd., Tata Steel Ltd., Tata Consultancy Services Ltd., Wipro Ltd. At regular inte ntervals, the Bombay bay Stock Exchang hange e (BSE) SE) auth author orit itie ies s revi review ew and modi modify fy its its compo composi siti tion on to be sure sure it refl reflec ects ts curr curren entt mark market et condi conditi tion ons. s. The The inde index x is calc calcul ulat ated ed based on a free float capitalization method; a variation of the market cap method. Instead of using a company's outstanding shares it uses its float, or shares that are readily available for trad tradin ing. g. The free free-fl -floa oatt meth method od,, ther therefo efore re,, does does not incl include ude restricted stocks, such as those held by promoters, government and strategic investors. Init Initia iall lly, y, the the index index was was calc calcul ulat ated ed based based on the the ‘full ‘full marke markett capita capitaliz lizati ation’ on’ method. method. Howeve Howeverr this this was shifte shifted d to the free free float method with effect from September 1, 2003. Globally, the free float market capitalization is regarded as the industry best practice. As per free float capitalization methodology, the level of index at any point of time reflects the free float market value of 30 comp compon onen entt stoc stocks ks rela relattive ive to a base base per period. iod. The The Marke arkett Capitalization of a company is determined by multiplying the
price of its stock by the numb umber of shar hares issu ssued by the company. This Market capitalization is multiplied by a free float factor to determine the free float market capitalization. Free floa floatt facto factorr is also also refe referr rred ed as adju adjust stme ment nt facto factor. r. Free Free floa floatt fact factor or repr repres esen entt the the perc percen enta tage ge of shar shares es that that are are read readil ily y available for trading. The The Calc Calcul ulat atio ion n of Sens Sensex ex invo involv lves es divi dividi ding ng the the free free floa floatt market capitalization of 30 companies in the index by a number called Index divisor. The Divisor is the only link to original base period value of the Sensex. It keeps the index comparable comparable over time time and and is the the adju adjust stme ment nt poin pointt for for all all Inde Index x adju adjust stme ment nts s arising out of corporate actions, replacement of scrips, etc. The index has increased by over ten times from June 1990 to the present. Using information from April 1979 onwards, the long-run rate of return on the BSE Sensex works out to be 18.6% per annum, which translates to roughly 9% per annum after compensating for inflation inflation..
NATIONAL STOCK EXCHANGE: The NSE was incorporated in Now 1992 with an equity capital of Rs 25 crore. The International securities consultancy consultancy (ISC) of Hong Kong has helped in setting up NSE. ISE has prepared the detailed business business plan plans s and and inst instal alla lati tion on of hard hardwa ware re and and soft softwa ware re syst system ems. s. The The prom promot otiions
for
NSE
were ere
fina finan ncial ial
ins institu tituti tio ons, ns,
insur suranc ances
companies, banks and SEBI capital market ltd, Infrastructure leasing and financial services ltd and stock holding corporation ltd.
It
has
been
set
up
to
strengthen
the
move
towards
professionalisation of the capital market as well as provide nation wide securities trading facilities to investors. NSE is not an exchange in the the tradi adition tiona al sense ense wh whe ere bro brokers ers own and and manage the excha exchange nge.. A two tier tier admin administ istrat rative ive set set up invol involvin ving g a compa company ny board and a governing aboard of the exchange is envisaged. NSE is a national market for shares PSU bonds, debentures and government securiti securities es since since infrastr infrastructu ucture re and trading trading faciliti facilities es are provided provided.. NSE-NIFTY:
The NSE on April 22, 1996 launched a new equity Index. The new index, which replaces the existing NSE-100 index, is expected to serve as an appropriate Index for the new segment of futures and options. “Nifty” means National Index for Fifty Stocks. The NSE-50 comprises 50 comp compan anie ies s that that repr repres esen entt 20 broa broad d Indu Indust stry ry grou groups ps with with an aggr aggreg egat ate e mark market et capi capita tali liza zati tion on of arou around nd Rs. Rs. 1,70 1,70,0 ,000 00 crs. crs. All All compa companie nies s inclu included ded in the Index Index have have a market market capit capitali alizat zation ion in excess of Rs 500 crs each and should have traded for 85% of trading days at an impact cost of less than 1.5%. The base period for the index is the close of prices on Nov 3, 1995, which makes one year of completion of operation of NSE’s capital market segment. The base value
of
the
Index
has
been
set
at
1000.
from
being
ORGANIZATION PROFILE Frankli klin
Templet pleton on
Investments nts
has has
grown
recognized as one of the best small companies in America to being being consi conside dered red a prem premie ierr globa globall inves investm tmen entt manage manageme ment nt organizatio organization. n. We offer clients a valuable valuable perspective shaped by
our our six six deca decade des s of expe experi rien ence ce,, inve invest stme ment nt expe expert rtis ise e and and growing global reach. Franklin Templeton GLOBAL Fran Frankl klin in Reso Resour urce ces, s, Inc. Inc. is a glob global al inve invest stme ment nt mana manage geme ment nt organization known as Franklin Templeton Investments. We have an extensive global presence, including offices in over 30 countries and clients in more than 150. Our common stock is listed on the New York Stock Exchange under the ticker symbol BEN and is included in the Standard & Poor's 500 ®Index. As of December 31, 2010, we manag manage e over over $670 $670 billi billion on in invest investmen mentt vehic vehicles les for for indiv individu iduals als,, institutions, pension plans, trusts, partnerships and other clients.
A PREMIER GLOBAL INVESTMENT MANAGEMENT ORGANIZATION World-Class Investment Management
A pure investment management organization
Multi-manager structure encompassing well-known brands across multiple asset classes
94% of U.S.-registered fund assets ranked in top two Lipper quartiles for 10-year period ended December 31, 2010
Extensive Global Presence
A pioneer in global investing.
Clients in 150+ countries.
22 countries/regions with over U.S. $1 billion in AUM.
Largest cross-border fund manager.
1
More than 500 investment professionals who speak over 25 languages.
Financial Strength
Diversified by investment objective, client type, and geographical region
Strong balance sheet
Excellent credit ratings
Values-Based Culture
Put clients first
Build relationships
Work with integrity
Franklin Templeton INDIA Franklin Templeton's Templeton's association with India dates back to more t han a decade as an investor. As part of the group's major thrust on investing in markets around the world, the India office was set up in 1996 as Templeton Asset Management India Pvt. Limited. It flagged off the mutual fund business with the launch of Templeton India Growth Fund in September 1996, and since then the business has grown at a steady pace.
A Long term commitment: Sinc Since e star starti ting ng its its oper operat atio ions ns in Indi India, a, Fran Frankl klin in Temp Temple leto ton n has has inve invest sted ed a cons consid ider erab able le amou amount nt of time time,, effo effort rt and and reso resour urce ces s towards investor and distributor education, the belief being - to be successful in the long term, the fundamentals need to be corrected, at whatever cost! This has resulted in various advertising campaigns aime aimed d at educ educat atin ing g inve invest stor ors, s, part partic icip ipat atio ion n in semi semina nars rs and and dist distri ribu buto torr trai traini ning ng prog progra rams ms.. Fran Frankl klin in Temp Temple leto ton n has has play played ed a
pivotal role in steering the industry to its current stage, and as long term term play player ers, s, we cont contin inue ue to stri strive ve to achi achiev eve e the the obje object ctiv ive e of 'making mutual funds an investment of choice' for both individual and institutional investors. In July 2002, Franklin Templeton India acquired Pioneer ITI, another lead leadin ing g fund fund hous house e in Indi India a to crea create te an orga organi niza zati tion on with with rich rich inve invest stme ment nt expe experi rien enc ce over over mark market et cycl cycles es,, one one of the the most most comprehensive product portfolios, footprint across the country and an in-house shareholder servicing function. The huge synergies that existed in the two organizations have helped the business grow at a rapid pace, catapulting the company to among the top two fund houses in India.
Our Vision To be the premier global investment management organization by offering offering high quality quality investme investment nt solution solutions, s, providin providing g outstandi outstanding ng service and attracting, motivating and retaining talented individuals.
Investment philosophy Our investment philosophy that follows a disciplined approach to inves investin ting g with with a strong strong focus focus toward towards s proce process ss orient orientati ation on is the common thread running through all our schemes. The key guiding prin princi cipl ple e to our our inve invest stme ment nt phil philos osop ophy hy is - maxi maximi mize ze the the risk risk-adjusted returns for our investors in the respective asset classes, and create wealth for them over the long-term. We have successfully dem demonst onstra rate ted d the the abil abilit ity y to achi achiev eve e this this in the the past past,, and and are are confident that our process-oriented process-oriented investment approach will help us sustain the same in the years to come.
Equity
While broad economy and sector trends serve as a broad guideline, Frankli Franklin n Templeto Templeton n portfoli portfolio o manager managers s are essentia essentially lly 'bottom'bottom-up' up' investors, focusing more on individual stocks and their potential to deliver long term capital appreciation. While quantitative analysis using proprietary research model serves as a first stage filter, the research team and portfolio managers speak with key management and observe operations onsite to get a meaningful insight into a company's ability to translate vision into reality.
Debt The overall objective is to minimize both liquidity and credit risk. Our fixed income team looks to arrive at a general maturity/duration range for the portfolio in relation to the market based on its interest rate outlook, which is arrived after a rigorous and close monitoring of vari variou ous s macr macro o vari variab able les. s. The The shif shifts ts with within in this this rang range e are are then then determined by short term cyclical trends in the economy. They look to manage interest rate risk across different asset class and duration buc buckets, ts,
in
orde orderr to
optim timise risksk-adj adjuste usted d
retu eturns. All All
the the
investment options are thoroughly analysed to ensure that credit risk is kept at the minimum level. Any major shifts in portfolio strategy are based on long-term trends, as opposed to short-term aberrations in interest rates.
ORGANIZATIN STRUCTURE Name Charles B. Johnson Rupert H. Johnson, Jr. Gregory E. Johnson Vijay C. Advani Jennifer Johnson Kenneth A. Lewis John M. Lusk Craig S. Tyle William Y. Yun
Designation
Chairman of the Board Vice Chairman Chief Executive Officer President Executive Vice President - Global Advisory Services M . utive Executiv Exec e Vice Presiden Presidentt Chief Chief Operatin Operating g Officer Execu Executiv tive e Vice Vice Presid President ent Chief Chief Financ Financia iall Officer Exec Execut utiv ive e Vice Vice Pres Presid iden entt - Inve Invest stme ment nt Management Executive Vice President General Counsel Exec Execut utiv ive e Vice Vice Pres Presid iden entt - Alte Altern rnat ativ ive e Strategies
FRANKLIN TEMPLETON ASSET MANAGEMENT INDIA VISAKHAPATNAM
PVT LTD,
Name and address
Franklin Templeton Asset management India pvt ltd. 204, First floor, Eswar plaza, Dwarakanagar. Bata Showroom Visakhapatnam. -16. Name and designation:
Suresh Kumar Sela (Branch Manager)
No of Persons employed: Two Name of the industry: Mutual Funds Whether seasonal: No Date of Opening: 30th Aug 2002. Details of Head Offices/branches:
Franklin Templeton Asset management India Ind ia pvt ltd Level 4, wockhardt towers, Bandra-Kurla complex, Bandra East, Mumbai 400051. No of employees: 424 Person responsible to receive the notice on behalf of employees under payment of gratuity act 1972 and the rules framed there under. Authorized person
Karan Kapadia VP & Regional sales head.
HISTORY AND OVERVIEW OF FRANKLIN TEMPLETON In the year 1940: The The comp compan any y was was foun founde ded d in 1947 1947 in New New York York by Rupe Rupert rt H. Johns Johnson, on, Sr., Sr., wh who o ran ran a succes successfu sfull retail retail broker brokerage age firm firm from from an offi office ce on Wall Wall Stre Street et.. He name named d the the comp compan any y for for U.S. U.S. foun foundi ding ng father Benjamin Franklin because Franklin epitomized the ideas of frugality and prudence when it came to saving and investing. The company's first line of mutual funds, Franklin Custodian Funds, was a series of conservatively managed managed equity and bond funds designed to appeal to most investors.
In the year 1950: After Rupert Sr. retired, his son, Charles B. Johnson (Charlie), took over as president and chief executive officer in 1957 at age 24. There were only a handful of employees at that time and the funds had total assets under management of $2.5 million. Franklin was swimming against the tide because insurance companies dominated the middle class investing markets, but Charlie was convinced that he had a good story to tell.
In the year 1960: By the early 1960s Charlie and his team's persistence was paying off and the company was growing albeit slowly. It was a struggle to keep up with the day-to-day demands of the business and Charlie conti continue nued d to wear wear many many hats—m hats—mutu utual al fund fund manag manager, er, wholes wholesal aler er acco accoun unta tant nt.. Rupe Rupert rt John Johnso son, n, Jr., Jr., Char Charli lie' e's s brot brothe her, r, join joined ed the the company in 1965 and also took on multiple roles.
In the year 1970: Fran Frankl klin in went went publ public ic in 1971 1971,, wh whic ich h gave gave Char Charli lie e and and team team the the capital needed to grow the business and position it for the future. In 1973, 1973, the compa company ny acquir acquired ed Winfie Winfield ld & Compa Company, ny, a San Mateo Mateo,, California-based investment firm, and moved Franklin's offices from New York to California. The combined organization had close to $250 milli llion
in
asset ssets s
under der
mana anagem gement and
appr approx oxiimately tely 60
employees. employees. In 1979, Franklin Money Fund began a growth surge that made ade it Fran Frank klin's n's firs irst bill illion-d on-do ollar fun fund and laun aunched the the company's tremendous asset growth in the 1980s. In the year 1980:
Starti Starting ng in 1980, 1980, the comp company any's 's total total assets assets under under mana managem gemen entt doubled (or nearly doubled) every year for the next six years. The company's stock began trading on the New York Stock Exchange in 1986 under the ticker symbol "BEN". In the same year, the company
opened its first office outside North America in Taiwan. In 1988, Fran Frankl klin in acqu acquir ired ed L.F. L.F. Roth Rothsc schi hild ld Fund Fund Mana Manage geme ment nt Comp Compan any. y. Assets under management for Franklin grew from just over $2 billion in 1982 to more than $40 billion in 1989 (the crash of 1987 had little impact on Franklin's income and bond funds). Not one to rest on their their laurels, laurels, manageme management nt was concerne concerned d about about Franklin Franklin's 's heavy heavy emph emphas asis is on fixe fixed d inco income me inve invest stme ment nts s that that had had beco become me the the company's bread and butter.
In the year 1990: Stra Strate tegi gic c acqu acquis isit itio ions ns in the the 1990 1990s s help helped ed Fran Frankl klin in dive divers rsif ify y its its investment management capabilities beyond fixed income and also expand its global footprint throughout Europe and Asia. In 1992, after striking a deal with famed global investor Sir John Templeton for acquisition of Templeton, Galbraith & Hansberger Ltd., Charlie was named Fund Leader of the Year for spearheading what was then the the larg larges estt merg merger er of an inde indepe pend nden entt mutu mutual al fund fund comp compan any y in histo story. Temple mpletton gav gave the the company any a stro stron ng por portfol tfoliio of inte intern rnat atio iona nall equi equity ty fund funds s as well well as the the expe expert rtis ise e of emer emergi ging ng marke arkets ts guru guru Dr. Dr. Mark Mark Mobi Mobius us,, wh who o curr curren entl tly y lead leads s a team team of emer emergi ging ng mark market ets s
anal analy ysts sts
and and
mana manage ges s
emer emergi ging ng mark market ets s
port portfo foli lios os.. Dr. Dr. Mobi Mobius us has has spen spentt more more than than 30 year years s work workin ing g in emerging markets all over the world. Then in 1996, in an effort to broad broaden en its its line line of domest domestic ic equit equity y produc products, ts, Frank Franklin lin Temple Templeto ton n bought Heine Securities Corporation, investment advisor to Mutual Series Fund, Inc., from Wall Street icon Michael Price.
In the year 2000: Several more key acquisitions solidified the company's position as a premi premier er globa globall inves investme tment nt manag manageme ement nt organ organiza izatio tion: n: Bisset Bissettt in
2000, Fiduciary Trust Trust in 2001 and Darby in 2003. In 2005, Gregory E. Joh Johns nson on (Gre (Greg) g),, Char Charli lie' e's s son, son, beca became me chie chieff exec execut utiv ive e offi office cer, r, assu assumi ming ng over overal alll resp respon onsi sibi bili lity ty for for lead leadin ing g Fran Frankl klin in Temp Temple leto ton n Investments. Investments. Greg had grown up in the business and worked his way through the organization beginning on the trading desk at age 24 in 1985.
Fundamental Approach Our investment decisions are guided more by what we believe in, less by what the market thinks. That is the reason once we buy into a stock, stock, or take a maturity maturity position position in a debt portfolio portfolio based on our fundamental research and analysis, we stick to our position without paying heed to market rumours and whisper estimates. We believe that while technical can rule the roost in the short term, it is the fundamentals that prove rewarding over time.
Long Term Orientation Frank Frankli lin n Temp Templet leton' on's s portfo portfolio lio manag managers ers are are stron strong g believ believers ers in consist sisten entl tly y
del deliver iveriing
goo good
perfo erforrmanc ance.
The
key word ord
is
consistency . We believe that it is not important to be top performer
at any time and we attach more importance to being among the top quartile in the peer group consistently, and this requires taking a long-term view, even at the cost of temporary underperformance.
Team Approach While individual portfolio managers are the ultimate decision makers for the scheme they manage, the belief is that working together can achieve greater results than acting alone. That is why every stock that is researched by the analysts is discussed intensively at regular inve invest stme ment nt team team meet meetin ings gs,, and and the the anal analys ysis is is avai availa labl ble e to all all
investment team members on a common platform. Moreover, the high high degr degree ee of inte intera ract ctio ion n betw betwee een n inve invest stme ment nt team team memb member ers s across the globe helps share and learn from each other's experience and and expe expert rtis ise. e. The The regu regula larr awar awards ds and and top top rati rating ngs s acco accord rded ed to Frankli Franklin n Templeto Templeton n schemes schemes are recogni recognition tion of their their consiste consistently ntly superior performance across asset classes, and through market and econ econom omic ic cyc cycles. les. They They also also refl reflec ectt Fran Frankl klin in Tem Templet pleton on's 's long long cherished values of choosing the long-term, disciplined and team approach to managing its funds and business.
Highlights of the Quarter
Record assets under management of $670.7 billion and longterm sales of $54.9 billion.
Long-term net new flows of $3.4 billion, net of the previously announced advisory account redemption of $12.0 billion.
Tax-free fixed-income funds experienced net outflows of $2.0 bill billio ion, n, but but alm almost ost half half of that that was was exch exchan ange ged d into into othe otherr Franklin Templeton funds.
Announced a new strategic relationship with Pelagos Capital Management
and
the
acquisition
of
Rensburg
Fund
Management, a U.K. equity manager.
Earning per share
CORPORATE GOVERNANCE GUIDELINES These These Corpor Corporate ate Gover Governan nance ce Guidel Guideline ines s (the (the “Gu “Guide ideli lines nes”) ”) have have been adopted by the Board of Directors (the “Board”) of Franklin Resources, Resources, Inc. (the “Company” or “Corporation”) in connection with its oversight of the Company’s management and business affairs. Independ ndenc ence e of Direc Director tors: s: A majori majority ty of direc director tors s must must be Indepe “ind “indep epen ende dent nt” ” dire direct ctor ors s in acco accord rdan ance ce with with the the corp corpor orat ate e governance listing standards.
Director Qualifications and Selection: The Corporate Govern ernanc ance Com Committe ttee of the the Boa Board is respo espon nsibl sible e for esta establ blis ishi hing ng a poli policy cy sett settin ing g fort forth h the the spec specif ific ic,, mini minimu mum m qual qualif ific icat atio ions ns that that the the Corp Corpor orat ate e Gove Govern rnan ance ce Comm Commit itte tee e beli believ eves es must must be met met by a nomi nomine nee e reco recomm mmen ende ded d by the the Corporate Governance Committee for a position on the Board.
Term Limits: The Board does not believe that it should establish term limits limits for its members. members. The Board recognizes recognizes the value value of continuity of directors who have experience with the Company and who have gained over a period of time a level of understanding about the Company and its operations
Meetings and Preparation: Directors are expected to regularly attend Board meetings and meetings of committees on which they serve, to spend the time needed in preparation for such meetings and to meet as frequently as they deem necessary to properly discharge their responsibilities.
Meeting Agendas: The Chairman of the Board and the Corporate Secretary will establish and disseminate the agenda for each Board meeting. Each Board member is free to suggest the inclusi inclusion on of items on the the agenda. agenda. Each Board Board member member is free to raise at any Board meeting subjects that are not on the agenda for that meeting.
Annual Annu al Perf Perfor orm mance ance Eval Evalua uati tion on:: The The Boar Board, d, thro throug ugh h its its delegation of oversight to the Corporate Governance Committee, shall annually review its own performance in such mann manner er as it deems deems appro appropri priate ate to deter determi mine ne whethe whetherr the Board and its committees are functioning effectively.
Review Review of Corpor Corporate ate Gover Governan nance ce Guidel Guidelin ines: es: The The Corpo Corporat rate e Gove Govern rnan ance ce Comm Commit itte tee, e, as appr approp opri riat ate, e, shal shalll peri period odic ical ally ly revi review ew and and reas reasse sess ss the the adeq adequa uacy cy of thes these e Gu Guid idel elin ines es to determine whether any changes are appropriate and recommend to the Board any such changes for the Board’s approval.
TOPIC PROFILE IN THE ORGANIZATION
Equity Funds
•
Open-end diversified
•
Open-end sector
Fixed Income Funds •
Open-end income/liquid
•
Closed-end
Hybrid Funds •
Open-end balanced
•
Open-end fund of funds
•
Closed-end
Investment Styles •
What are growth and value styles?
EQUITY FUNDS Open-end diversified Fund FIOP
FIHGCF
FISCF FIPF FBIF
Product Positioning
Takes concentrated stock/sector exposure based on four themes. Invests in companies/ sectors with high growth rate. Invests in small and mid cap companies Invests in mid and small cap stocks Invests in companies benefiting from the building blocks of the economy
Style
Investment horizon
Blend, bottom up
3-5 years or more
Growth combination of top down and bottom up. (Micro and macro analysis) Blend, bottom up Blend, bottom up Blend, bottom up with a top down overlay
3-5 years or more
3-5 years or more 3-5 years or more 3-5 years or more
FIFCF
FIT
FIPP
FIIF FIBCF TIGF
TIEIF
FAEF
Invests in companies across the market cap range Invests in companies across sectors and market cap range, offering tax benefits under Sec 80 C. Primarily a large cap fund with some allocation to small/mid cap stocks that have high long-term potential. Passively managed index fund Invest in large cap stocks Invests predominantly predominantly in large cap stocks – a value fund Focuses on Indian and emerging market stocks – a value fund taking into account dividend yield of stocks Invests in Asian Companies/ sectors with long term potential across the market cap range.
Blend, bottom up
3-5 years or more
Blend, bottom up
3-5 years or more
Blend, bottom up
3-5 years or more
Passive, indexing Blend, bottom up Value, bottom up
3-5 years or more
Value, bottom up
3-5 years or more
Growth combination top down and bottom up. Micro and macro within countries stock.
3-5 years or more
Blend, bottom up
3-5 years or more
3-5 years or more 3-5 years or more
Open-end Sector Invests in companies in the information technology sector. Equity funds
FIF
Templeton Templeton India Growth Growth Fund (TIGF) Franklin India Prima plus (FIPP) Franklin Franklin India Prima fund (FIPF) (FIPF) Franklin Franklin India Flexi Cap Fund (FIFCF) Franklin India High Growth Companies Fund (FIHGCH). Franklin Asian Equity Fund (FAEF) Franklin India Opportunity Fund (FIOF) Templeton India Equity Income Fund (TIEIF) Franklin Build India Fund (FBIF) Franklin India Tax-shield (FIT) Franklin India Index Fund (FIIF) Franklin InfoTech Fund (FIF)
FIXED INCOME FUNDS Open-end income/liquid Fund
Product Positioning
TGSF
Invests primarily in Indian govt securities with different plans.
TIIBA
A long bond fund investing in quality fixed income instruments across segments Primarily a corporate bond fund with medium term portfolio duration Focused on high accrual paper towards the short end of the curve including PTCs Invests in short term corporate bonds including PTCs Invests in a mix of money market and short term debt instrument Invest in a mix of floating and fixed income securities Invests in short term debt and money market securities Invests in money market and short term investments Invests in money market securities
TIIF
TIIOF
TISTIP
TILDF
TFIF-LT
TIUBF
TICMA
TITMA
Style
Investment horizon
Composite Composite plan/ PF plan/ PF Plans/ Plans/ LT Plan high LT Plan Treasury plans: Low Treasury 3 to 6 to moderate months 1 to 2 years Moderate to high
1 to 2 years
Moderate
18 months and above
Moderate
9 to to 18 18 mo months
Moderate
3 to 6 months
Moderate
1 to 6 months
Moderate
Upto 3 months
Low
3 days to 3 months
Low
1 month
Low
Closed-end TFHF
Invests in high 3 months to 5 quality fixed income years securities in line with the portfolio
Varies/low due to buy-hold strategy.
duration.
Income & Liquid Templeton India Income Fund (TIIF) Templeton India Income Builder Account (TIIBA) Templeton India India Income Income Opportun Opportunity ity Fund Fund (TIIOF) (TIIOF) FT India India Monthly Monthly Income Income Plan (FTIMIP) (FTIMIP) Templet Templeton on India India Government Securities Fund (TGSF) Templeton Floating Rate Income Fund (TFIF) Templeton India Short Term Income Plan (TISTIP) Templeton India Ultra-Short Bond Fund (TIUBF) Templeton India Treasury Management Management Account (TITMA) Templeton Templeton India Low Duration Fund (TILDF)
HYBRID FUNDS Open-end balanced Fund FTIBF
TICAP
TIPP
FTIMIP
Product Positioning
Invests both in stocks and fixed income instruments offering a balanced exposure to the asset classes Ideal avenue for investing for children’s future Education Plan: Invests in equities and in debt securities Invests in equities (Upto 40%) and the balance in high quality fixed income instruments – a retirement product offering tax benefits with a lock-in An MIP investing predominantly predominantly in debt instrument with a marginal exposure to equities. (Equity exposure: upto 20%)
Style
Balanced Equity: Blend and bottom up Fixed Income: Similar to long bond fund Balanced Equity: Blend and bottom up Fixed Income: Similar to long bond fund Balanced Equity: Blend and bottom up Fixed Income: Similar to long bond fund Balanced Equity: Blend and bottom up Fixed Income: Similar to short bond fund
Investment horizon
3 to 5 years or more
At least 4 years and until the child turns 18 years of age/ Gift plan: Moderate to high. Education plan: Low to moderate At least 3 years and until the age of 58 years/ Moderate to High
1 to 3 years/ Moderate
Open-end fund of funds Fund FTDPEF
FTLF
Product Positioning
A Fund of fund offering tactical allocation between an equity and debt fund, based on (PE Ratio) A fund of fund offering life stage solutions with different plans of varying asset allocation.
Style
Tactical Allocation
Investment horizon
3 to 5 years/ High
Strategic/Tactica Varies as per the l Allocation plan/ Moderate to high
Closed-end Fund FTFTF
FTCPOF
Product Positioning
Invests in high quality fixed income sec in line with the portfolio duration and provides marginal equity exposure upto 30% Invests in mix of debt and equity
Style
Investment horizon
Balanced, bottom up approach
Varies/ Moderate to low
Balanced, bottom up approach
Varies/ Moderate to low
Hybrid FT India Dynamic PE Ratio Fund of Funds (FTDPEF) FT India Life Stage Fund of Funds (FTLF) FT India Balanced Fund (FTIBF) Templeton India Pension Plan (TIPP)
INVESTMENT STYLES What are Growth and Value styles? As per MSCI, CI, the the grow growth th inv investm estmen entt sty style has the the fol followin wing characteristics Long-term forward earnings per share (EPS) growth rate •
•
Short-term forward EPS growth rate
•
Current Internal growth rate
•
Long-term historical EPS growth trend
•
Long-term historical sales per share growth trend
In other other words words,, compa companie nies s with with above above avera average ge revenu revenue e growth growth// potential and ROE The value investment style has the following characteristicsBook value to price ratio •
•
12-month forward earnings to price ratio
•
Dividend yield
In other words, out-of-favor stocks/sectors with good fundamentals, turn-around opportunities and undervalued.
Risk factors: All investments in mutual funds and securities are subjective to market risks and the NAV of the scheme may go up or down depending upon the factors and forces affecting the securities market including the fluctuations in the interest rates. There can be no assu assura ranc nce e that that the the sche scheme me’s ’s inve invest stme ment nt obje object ctiv ives es will will be achieved.
PRODUCT FEATURES What is Franklin India Bluechip Fund (FIBCF)?
FIBCF is an open-end diversified equity fund that seeks to achieve capital appreciation through investments in large-cap companies. It was laun aunched in 1993 993 as a 3 years close losed d end end fun fund and was converted into an open end fund from January 1997, with declaration of a 20% dividend. In the 90's it used to have a graded load structure going upto 6%. The name Bluechip has its origin in poker from US blue chips typically had the highest value in the game poker and have come to represent stocks f companies that are large/mature and dominate their respective industries. Thus the term blue chip refe refers rs to stoc stocks ks with with larg large e mark market et capi capita tali liza zati tion on (est (estab abli lish shed ed companies).
What are large cap companies and how have the stocks performed?
The The phrase phrase "large "large cap" cap" is in refere referenc nce e to the S&P CNX 500 index. index. This provides a dynamic and realistic picture of the capitalization ranges, given the growing Indian markets. Any stock whose market cap is higher than the 100th stock in S&P CNX 500 will be considered a
large cap stock and the latest break up is given below. Large cap companies have a relatively stable business model and scale of operations and ability to attract best of talents helps them sustain their growth. Stock of such companies are well researched, constantly in demand and highly liquid. Typically, the scale and size of these these comp compani anies es makes makes them them less less prone prone to extern external al shoc shocks ks,, usually demonstrating demonstrating better resilience resilience during volatile periods. Some well known names in the large cap space in India include Reliance Industries, Hindustan Hindustan Lever, SBI and Infosys. History suggests that large cap stocks provides stable and consistent returns and typically do relatively well during down turns or volatile environment.
What is the investment strategy of FIBCF?
The fund follows a bottom-up approach to stock selection based on fundamental research with a medium to long term perspective and ignores momentum stocks .
Th The compa ompan nies
tha that
the the
seeks to invest in (A) are well managed: (B) generate high ROCE and (C) demonstrate the ability to deliver sustainable growth in earnings. Our approach has been to construct a well diversified portfolio of large cap stocks with a medium to long term perspective. We adopt a buy-hold strategy and our average holding period tends to be arou aroun nd 24 month onths s, but but we can als also take ake shor shortt term erm view view on opportunities. We continue to hold on to stocks that fall out of favor if we believe that the fundamentals are still strong. Though growth stocks from a large components components of our portfolio, we have also tried to capitalize on emer emergi ging ng oppo opport rtun unit itie ies s in valu value e / cycl cyclic ical al stoc stocks ks.. The The sche scheme me generally invests in around 40 stocks thereby maintaining adequate diversification.
Does in invest only in large cap stocks?
fun fund
Depending on fundamental views we might sometimes look at mid cap companies with a market capitalization close to that of the large cap ones, but the primary exposure is towards large cap stocks. Sinc Since e ince incept ptio ion, n, it has has alwa always ys rema remain ined ed true true to its its mand mandat ate e of investing in large cap stocks irrespective of the market conditions. This sets the fund apart from other funds, which may have changed their investment strategies to adopt market conditions.
Such
a
style
cons consis iste tenc ncy y help helps s the the inve invest stor ors s unde unders rsta tand nd the the risk risks s they they are are under undertak takin ing g and and the possib possible le perfor performan mance ce chara charact cteri eristi stics cs of the the fund. If a fund doesn’t stay true to its investment style, investors will not have an idea of the type of risks they are undertaking.
How has the fund performed over the years?
As one of the oldest equity funds in the country, it has exhibited a consistent track record over the past 17 years. FIBCF has
consistently out-performed its benchmark BSE SENSEX across time horizons. Since inception, FIBCF has successfully weathered various market cycles. The table shows its performance against its benchmark BSE SENSEX in various bull and bear phases.
What was its
stra strate tegy gy duri during ng the the shar sharp p rall rally y upto upto 2008 2008 and and ensu ensuri ring ng global financial crisis?
Stri String ngen entt scre screen enin ing g on vari variou ous s quan quanti tita tati tive ve and and qual qualit itat ativ ive e para parame mete ters rs had had led led us to limi limitt expo exposu sure re to mome moment ntum um base based d stoc stocks ks / sect sector or (cha (chara ract cter eriz ized ed by high high vola volati tili lity ty,, valu valuat atio ion n and and governance risks). We had largely stayed away from metals, power and real estate stocks, despite the momentum building up in many stocks in these sectors. This impacted the relative performance in 2007. We howe howeve verr maint aintai aine ned d expo exposu sure re to grow growth th stoc stocks ks thro throug ugh h compa companie nies s in sector sectors s such such as teleco telecom, m, financ financial ial servic services, es, capit capital al goods etc. On the other hand, we were cognizant of the strong
domestic drivers for the Indian economy and hence had exposure to defe defens nsiv ive e such such as FMCG FMCG,, wh whic ich h were were unde underv rval alue ued. d. This This mix mix of growt growth/v h/val alue ue expos exposur ure e and avoidi avoiding ng overhe overhead ad stock stocks s helpe helped d our funds deliver a relatively good performance during 2008/09. We took advantage of the sharp decline in valuations of our picks in the capi capita tall good goods s and and bank bankin ing g sect sector ors s and and ther thereb eby y incr increa ease sed d our our exposure to this space. This also added to out performance in 2009. What is the current portfolio strategy?
Our str strate ategy remai mains focus ocused ed on the medium dium to long ong ter term opportunities and while this might impact relative performance over the near term, the fund’s track record over market cycles points towards the benefits of the approach. Companies that can piggyback piggyback on the dome domesti stic c consu consump mptio tion n and invest investmen mentt themes themes are good good opport opportuni unitie ties s from from a mediu medium m to long-t long-term erm perspe perspect ctive ive.. They They will will take advantage of the structural transition underway in India, with growing income levels and increased infrastructure/capex spending by the government Banks (17.91%), Software (9.64%), and Industrial Capital goods (8.38%). India remains underserved in terms of financial services, but the strong growth in personal incomes has led to increased demand. Given the low penetration of banking and financial services in India, we believe companies in this sector have huge growth potential. •
•
•
Infrastructure companies would be the key beneficiaries of a stable stable govt govt as it provi provides des conti continui nuity ty in imple implemen mentat tation ion of projects and a renewed focus on private sector participation in infrastructure development. Government’s focus on spending in the the infr infras astr truc uctu ture re spac space e and and corp corpor orat ate e Indi India’ a’s s focu focus s on capi capita tall expa expans nsio ion n make makes s the the Capi Capita tall Good Goods s Sect Sector or a key key beneficiary of this story. Leading players in the Indian IT sector have emerged stronger through the financial crisis and have benefited from the up tick in global IT spending in recent quarters. We continue to focus on companies which have been adopted multiple strategies incl includ udin ing g cost cost rati ration onal aliz izat atio ion, n, movi moving ng up the the valu value e chai chain n (consulting), and increasing focus on strong economies in the emerging markets space to protect margins.
Why should investors consider investment in FIBCF?
Stability: The focus on large cap companies lends the portfolio stability and at the same time helps investors take advantage of the India growth story.
•
Strong performance track record: Has delivered consistent and superior performance for over 17 years!
•
Resili Resilienc ence e throu through gh mark market et cycle cycles: s: Has Has tackle tackled d the the bull bull and bear market phases by focusing on long term opportunities rather than short term stories.
•
•
True to its label: Remains focused on large cap stock – unlike othe otherr fund funds s that that migh mightt have have adop adopte ted d a flex flexib ible le appr approa oach ch,, based on market conditions.
•
•
Consistent payout: The fund has a long history of consistently paying rich dividends. It has paid out dividends every year since 1999. Experienced investment team.
What is the risk-return profile of FIBCF?
The The blen blend d inve invest stme ment nt stra strate tegy gy plac places es it abov above e the the valu value e fund funds s amongst our actively managed equity funds.
What
type of investors fund suitable
is the for?
Given cap has
its large focus, it the potential to deliver steady returns with relative lower volatility over the medium to long run. Hence, it can form the core of all types of investors’ investors’ core equity portfolio with an investment horizon of 3-5 years or more.
OTHER PRODUCTS
FT INDIA DYNAMIC PE RATIO FUND OF FUNDS
Why PE?
Price to Earning ratio (PE) reflects the price one pays for every rupee of earning and a high PE ratio reflects an expensive stock/market as one would be paying more for the same level of earning and vice versa. The The ratio rational nal for choo choosin sing g Nifty Nifty PE (calc (calcula ulated ted taking taking weight weightage age aver averag age e PE rati ratio o of inde index x cons consti titu tuen ents ts)) is beca becaus use e the the inde index x comprises of highly liquid stocks that are constantly monitored by market players and hence is a good barometer of market sentiment. Historical, the PE ratio of the index and the market have moved in tandem. Investment objective: An open end fund which seeks to provide long term capital appreciation appreciation with relatively lower volatility through a dynamically balanced portfolio of equity and income funds. Asset allocation would be Franklin India Bluechip fund 30% and Templeton India Income fund 70%. •
FRANKLIN BUILD INDIA FUND
Indi India a is one one of the the fast fastes estt grow growin ing g econ econom omie ies s in the the worl world d and and expected to become one of the top global economies in the coming decade decades. s. The The reali realize ze this this potent potential ial,, substa substanti ntial al inves investm tment ent and effo effort rts s will will have have to be made ade in the the key key buil buildi ding ng bloc blocks ks of our our economy like infrastructure, Financial services, Social development, Agri Ag ricu cult ltur ure e and and Reso Resour urce ces. s. FBIF FBIF is an open open ende ended d equi equity ty fund fund design designed ed to tap invest investmen mentt opport opportuni unity ty in comp compani anies es benefi benefitin ting g from the growth in these sectors. FRANKLIN INDIA TAXSHIELD Fran Frankl klin in Indi India a TaxTax-sh shie ield ld is an open open-e -end nd,, equi equity ty link linked ed savi saving ng scheme, which invests predominantly in equity and equity related instrument and seeks to achieve long term growth of capital while providing tax benefit under section 80C of the income tax Act. Key Key fact factor ors s basi basica call lly y are are it’s it’s an open open ende ended d sche scheme me (ELSS) with an allocation of at least 80% to equities to enable growth over the long term. •
Inve Invest stme ment nts s upto upto 1 lak lakh elig eligib ible le for for dedu deduc ction tion from from taxable income under section 80C.
•
•
No entry loads on your investment amount.
Dividends and long term capital gains you earn are fully exempt from tax, as per current tax laws.
•
•
Short lock in periods for three years.
TEMPLETON TEMPLETON
INDIA PENSION PLAN
Templ Templeto eton n India India Pensio Pension n Plan Plan is a centr central al govt govt noti notifie fied d pensio pension n scheme from the private sector. The fund which invests upto 40% of its assets in equities and the remaining in fixed income instruments can help you build a sizeable retirement corpus. Investments in the funds are eligible for tax benefits under Section 80C. Key aspects are: •
•
An open-end tax saving scheme with a lock in periods of 3 financial years that gives you the flexible to invest whenever you have have a surp surplu lus s unli unlike ke som some of the the othe otherr reti retire reme ment nt products. While debt components of the portfolio can provide stability.
TEMPLETON INDIA LOW DURATION FUND
Templeton India low duration fund is an open end income fund that aims to provides steady returns by investing in a mix of money marke arkett and and shor shortt term term debt debt inst instru rume ment nts. s. Form Formal ally ly know known n as Tem Templ plet eton on Month onthly ly Inco Income me Plan Plan)) (TMI (TMIP) P),, the the name name has has been been changed to Templeton India Low Duration Fund. Investment Investment obejective: An open-end income scheme having an objective to earn regular income for investors through investments primarily in highly rated debt securities.
Key •
•
aspects
An open fund fund that that steady investin investing g in market and instruments.
are:
end income aims aims to prov provid ide e returns by a mix of money money short term debt
Aims Aims to keep keep the the dura durati tion on the the port portfo foli lio o low low to redu reduce ce the the interest-rate sensitivity of the portfolio.
•
Ideal Ideal for inves investo tors rs having having conser conservat vative ive risk risk profi profile le with with an investment horizon of 3 to 6 months.
TEMPLETON INDIA EQUITY INCOME
Templeton India Equity Income Fund with a mandate to invest upto 50% 50% of its its corp corpus us in fore foreig ign n secu securi riti ties es can can help help inve invest stor ors s take take adva advant ntag age e of inve invest stme ment nt oppo opport rtun unit itie ies s acro across ss othe otherr emer emergi ging ng markets and participate in their growth. More Moreov over er,, TIEI TIEIF F leve levera rage ges s the the inte intern rnat atio iona nall expe experi rien ence ce of the the Templeton emerging market team headed by Dr. J. Mark Mobius, emerging market guru who has been managing emerging markets for more than 30 years. The team follows the value style of investing and compromise analysts and portfolio allocators, supported by a team of assistants, economists and statisticians who work across geographies to uncover the best opportunities available.
Investment
open end which seeks combination incom income e and and appr ppreciati ation prim primar aril ily y in a curr current ent or attractive dividend yield.
An equity fund to provide a of regular long-t long-ter erm m capita capitall by invest esting stoc stocks ks that that have have poten potentia tially lly
objective:
Why Franklin Templeton Investments? FRANKLIN TEMPLETON WORLDWIDE •
•
Premier global investment management organization with over 60 years of global investment experience. Head Head quar quarte tere red d in San San Mate Mateo, o, Cali Califo forn rnia ia with with offi office ces s in 30 countries worldwide.
•
•
Over 459 investment professionals professionals managing USD 664.3 billion in assets for 22 million investors accounts. Global research expertise of over 100 investment professionals.
FRANKLIN TEMPLETON IN INDIA •
•
•
Established office in 1996 Largest foreign fund house in India management INR 42,142 crore of average Assets Under Management for over 20 Lakh investor accounts. Extensive experience in both equity and debt across market cycles: 9 of our funds have a performance track record of over 10 years
OUR INVESTMENT PHILOSOPHY •
•
•
Follow disciplined approach to investing with a strong focus towards process orientation. Maxi Maximiz mize e the riskrisk-adj adjust usted ed return returns s for our invest investors ors in the the respective asset classes. Creative wealth for our investors over the long term.
OUR CORE VALUES: WHAT WE STAND FOR
ANALYSIS OF THE STUDY 1. Are you planni planning ng to save? save? Respondents Entrepreneurs Employees Advisors and others
Yes
25 42 22
No
3 2 6
Total
28 44 28
100
Table 1.1: Savings Plan
Chart 2.1:
Savings Plan Interpretation: For the Sample of 100 investors a question was raised about saving as, sho should uld people ple go for for savin vings? gs? For whic hich Alm Almost ost 90% of respon responden dents ts mentio mentione ned d yes, yes, where where as only only 10% of respon responden dents ts mentioned no. Tough their profession differ their opinion matches.
The sample of 100 has 28% Entrepreneurs, 28% Individual Finance Advi Ad viso sors rs and and reta retail il inve invest stor ors s and and rema remain inin ing g abou aboutt 44% 44% of our our employees from many private sector organizations.
Analysis: From the individual point of view out of 100, 90% of them responded that they have saving plans and rest 10% told no to this question, because they already have alternative adjustments and don’t want to bother about savings. Some of them don’t want to reveal the data. And some do have savings with different financial institutions. From From this this segm segmen entt it can can be anal analyz yzed ed that that peop people le are are look lookin ing g forward for new financial instruments for saving. As a wh whol ole e if we see see from from all all the the avai availa labl ble e angl angles es,, alm almost ost all all respondents agree to this question, only reason is our economy is enc encoura ouragi ging ng us to save ave more more,, wh whic ich h agai again n can can be util utiliz ized ed for for individuals benefit.
2. Do you have any investmen investments ts plans? Respondents Entrepreneurs Employees Advisors and others
Yes 21 36 23
No 7 8 5
Total 28 44 28
Table 1.2: Investment Plan
100
Chart 2.2:
Investment Plan Interpretation: From From the the Samp Sample le of 100 100 inve invest stor ors s a ques questi tion on was was rais raised ed abou aboutt savin ving as, shou shoulld peo people ple go for for invest estment? ent? Alm Almost ost 80% of respondents mention that they have their investment plans. And rests ests 20% 20% don don’t have ave prop prope er inv investm estmen ents ts plans lans whic hich they they mentioned. Here from this sample of 100, which 28% of them are Entrepreneurs, 28% of them are Individual Individual Finance Advisors and retail investors and remaining
about
44%
of
them
are
employees
from
many
organizations of private sectors.
Analysis: From the individual point of view out of 100, 80% of them responded that they have investment plans and rest 20%of them responded as no to this this ques questi tion on;; beca becaus use e they they feel feel that that inve invest stme ment nt in own own business leads to more profitable than any other investment, so they don’t want to invest in other area. Investment in other areas like in secondary market, they feel that there will not be fixed returns from investment. Employees feel more
comfo comforta rtable ble in savin savings gs rather rather than than other other instru instrumen ments; ts; even even they they would like to go for fix deposit where they will get at-least minimum returns from their investment, this we can easily understand from given table. Hence it is identified that people looking forward for extra new more areas to pool their investments at a fixed rate of returns. In their opinion secondary market investment is riskier than any other investment. So people are very comfortable opting for inves investme tments nts like like Fix deposi deposits, ts, savin saving g certif certific icate ates, s, Provi Providen dentt fund fund schemes etc. Hence, it is clear indication that every one seems to have their investment plans. Few of them don’t want to invest at this stage, only due to lack of market knowledge, and their personal reasons. Peop People le foun found d very very caut cautio ious us and and look lookin ing g for for new new sche scheme mes s to be introduced which can really provide them good guaranteed returns from an investment. 3.
Age group:-
Respondents Entrepreneurs Employees Advisors and others
20 - 25
25 - 35
35 – 55
2 3 5
17 26 6
7 11 12
Above 55 2 4 5
100
Table 1.3: Age Group
Chart 2.3: Age Group
Interpretation: Sample of 100 investors from which if we identify the age group, almost 10% are the age group of 20-25, almost 49% are the age grou group p of 25-3 25-35, 5, the the grou group p belo elongs to empl employ oyer ers s and and youn oung entrepreneurs, almost 30% are the age group of 35-55, and about 11% are belonging to the group of above 55, the group consists of advisors and few retired employees. Here from this sample of 100, which 28% are Entrepreneurs, 28% are Individual Finance Advisors and retail investors and remaining about 44% of are Employees from many organizations of private sectors.
Analysis: From the individual’s point of view out of 100 respondents, almost 10% are the age of 20-25, and can be analysed that they would like to take the risk at this moment. Almost 49% are the age group of 2535, from which it can be analysed that they feel more cautious about their investment investment plans. plans. About 30% are the age group of 35-55, they are looking for a products like which must able to generate fixed returns, and future plans. And about 11% of them are above the age of 55 are responded that they purely looking from the perspective of debt debt fund funds, s, and and sugg sugges este ted d well well in term terms s of othe otherr inve invest stme ment nt avenues. Hence it is identified that depends upon their age they are opting for schemes like debt, equity or combination of both as their preference. So it can assume that almost investors are very cautious about their investment plans and schemes that are available in the market.
4. Preferable Preferable period period of investment? investment? Respondents Entrepreneurs Employees Advisors and others
Short term 7 12 7
Long term 21 32 21
Total 28 44 28
100
Table 1.4: Period of Investment
Chart 2.4:
Period of investment Interpretation: Sample of 100 investors and common question was raised about preferable period of investment. Almost 74% of respondents opting for long term and only 26% respondents are going for short term. Here from this sample of 100, which 28% are Entrepreneurs, 28% are Individual Finance Advisors and retail investors and remaining about 44% of are employees from many organizations of private sectors.
Analysis: From From the Indiv ndiviidual dual’’s poi point of view iew out out of 100, 00, 26% of them hem responded short term as their preference; they don’t want to spend much time because they want quick returns even though they are
small in number. And rest 74% of them mentioned as long term, because people believe that long term plans will give decent returns as compare with others. Many of they suggested that when you are waiting for long term obviously it will fetch and able to provide a decent profit. Some of them mentioned only long term, because they want to use those returns after some time, let’s say after few years, and when they made this statement this is quiet clear that people expecti expecting ng some long term objective objective to be done. From this it can be identified that people looking forward for extra new more areas to pool their investments at a fixed rate of returns for a longer period. And some of them suggested that if people looking for long term that’s good, because at one particular stage risk would be zero and hence can enjoy real benefit of an investment. Hence it is identified that short term perspective will give returns but risk will be high, because market conditions are volatile and it can not be predict, predict, it only only can be anticipated. anticipated. It is clear indication that ever every y one one seem seems s to have have bett better er unde unders rsta tand ndin ing g of mark market ets s with with reference to their terms.
5. Are you interested interested in mutual mutual fund investment? investment? Respondents Entrepreneurs Employees Advisors and others
Yes 25 33 18
No 3 11 10
Total 28 44 28
100
Table 1.5: Interested in Mutual Funds
Chart 2.5:
Interested in Mutual Funds Interpretation: Sample of 100 investors and common question was raised about mutual fund investment whether they are interested or not. Almost 76% of respondents are interested in mutual fund investment. And onl only 26% of respo espon nden dents are not not intere terest sted ed in mutual tual fun fund investment. Here from this sample of 100, which 28% are Entrepreneurs, 28% are Individual Finance Advisors and retail investors and remaining about 44% of are employees from many organizations of private sectors.
Analysis: From From the indivi dividu dua al’s l’s poin oint of view out of 100, 100, 76% of them them responded that they are interested in mutual fund investment. They believe that comparative with equity shares, mutual funds are best options to invest. And rest only 24% of them mentioned no to this, because people under this category are willing to take risk, so they would like to go for other options like equity and other trading areas. People opting for this only due to reason that they believe steady income will be available under dividend and growth option, so as
long ong it perf perfor orm m retu return rns s will will be dec decent. ent. An And d rest rest 24% 24% of them them mentioned that they have other investment option which they feel more more comf comfor orta tabl ble e than than mutu mutual al fund fund inve invest stme ment nt.. From From this this it is identified that people they have different opinion and people are well aware of options that are available in the market and some are looking for new schemes of investments to be introduced. Many of respondents respondents ignored this. Reason as they specifically specifically mentioned that they would like to go for other options like fixed deposits, LIC etc. Hence, it is identified that mutual funds are the best options. Others there are many but respondents feel quite comfortable with mutual funds. Some of investors had bad experience with the industry, so they don’t want to invest in it. It is clear indication that almost people are satisfied with this option and looking for extra new funds to be introduced in it.
6. Anticipatio Anticipation n of risk? risk? Respondents Entrepreneurs Employees Advisors and others
Minimu m 14 26 10
Moderat e 8 14 14
Maximum 6 4 4
Table 1.6: Anticipation of Risk
100
Chart 2.6: Anticipation of Risk Interpretation: Sample of 100 investors and common question was raised about anticipation of risk that one can bare. Almost 50% of respondents are choosing for minimum risk, most of the employees are under this category. Remaining Remaining 36% are going for moderate and rest opting for high risk. If we compare only entrepreneurs are willing to take high risk as concerned. Here from this sample of 100, which 28% are Entrepreneurs, 28% are Individual Finance Advisors and retail investors and remaining about 44% of are employees from many organizations of private sectors.
Analysis: From From the indivi dividu dua al’s l’s poin oint of view out of 100, 100, 50% of them them resp respon onde ded d as mini minimu mum m risk risk expo exposu sure re that that they they can can bear bear.. They They beli believ eve e that that expe expect ct litt little le with with less less effo effort rt is enou enough gh for for them them to survi survive ve from their their invest investmen ment. t.
About Ab out 36% of them are going going for
moderate as such, and people are quite satisfied with moderate risk, as they are not looking for maximum returns from investment. And about 14% of them are ready to take maximum risk compare with thei theirr expe expect ctat atio ions ns from from an inve invest stme ment nt.. As they they are are opti opting ng for for maximum risk exposure obviously they will look for high returns. One thing need to concentrate is risk factor, where entrepreneurs can take risk compare with others like employees and retail investors. From From this this stud study y it can can be iden identi tifi fied ed that that peop people le are are very very much much cautious to take much risk as such. It can be stated that individuals are are
feeli eelin ng
comf omforta ortabl ble e
opti pting minimum mum
risk and and
som somehow ehow
moderate. One thing is very clearly indicating that no advisors are opting for high risk as of information given by them. Hence, more number of respondents opting for minimum risk and moderate, as they are not looking for high returns but they believe
steady steady returns returns from an invest investment ment..
Only few respon respondent dents s about
14% of them are exposed themselves to take high risk and they are very much aggressive in the market and looking for high returns from an investment option.
7. Primary Primary goal of your investment investment? ? Respondents Entrepreneurs Employees Advisors and others
Educatio n 11 12 4
House 9 14 9
Retireme nt 8 18 15 100
Table 1.7: Primary Goal
Chart 2.7:
Primary Goal Interpretation: Sample of 100 investors and common question was raised about primary aim of their investment. 27% of respondents mentioned that thei theirr prim primar ary y aim aim as Educ Educat atio ion n of thei theirr chil childr dren en,, and and 32% 32% have have clearly mentioned that they will be looking at the perspective of housing benefit. And about 41% of respondents looking from the perspective of retirement benefit.
Here from this sample of 100, which 28% are Entrepreneurs, 28% are Individual Finance Advisors and retail investors and remaining about 44% of are employees from many organizations of private sectors.
Analysis: From the individual’s individual’s point of view out of 100, 27% of them opted for educ educat atio ion n as thei theirr prim primar ary y goal goal.. Many Many resp respon onde dent nts s have have thei theirr individual opinion to this; hence it has found that mutual funds are best possible way to invest. About 32% of them are looking forward for a housing benefit; they set their target as fulfill their desire with hous ouse fro from an invest estment. ent. 41% 41% of them them are are consi onside deri rin ng as retirement benefit, where they can enjoy the benefit of returns after their retirement. It can be identified that most number of respon responden dents ts are look looking ing for retire retiremen mentt benefi benefit, t, and for liqui liquidit dity. y. People have view that going for retirement benefit is a better option, where they would like to enjoy the benefit of regular income from mutual fund scheme. Most of advisors also do consider this because they mentioned that they are looking for regular returns for longer period. Hence, it is identified that more respondents are going for retirement benefit as primary goal; from this it can conclude that mutual funds are better investment for long term investors. And mutual funds are the best avenues to pool their investments.
8. % of return that you are are expecting with desired anticipation of risk? Respondents Entrepreneurs Employees Advisors and
10 – 15%
15 – 20%
9 10 5
14 16 9
Above 20% 5 18 14
100
others
Table 1.8: Risk Return Expectancy
Chart 2.8: Risk Return Expectancy Interpretation: Sample of 100 investors and common question was raised about expec expected ted return return from from their their invest investmen ment. t. Their Their opini opinion on goes goes very very similar upto some extent and then slight variation. Quite number of respo espon nses ses say says abov bove 20% is what hat they hey are expe expec cting, ing, and remaining respondents like to go for in between 10-20%. Here from this sample of 100, which 28% are Entrepreneurs, 28% are Individual Finance Advisors and retail investors and remaining about 44% of are employees from many organizations of private sectors.
Analysis: From the investor’s point of view out of 100, 24% of them responded that
they
are
expecting
in
between
10-15%,
very
limited
respondents are expecting low returns as such. About 39% of them are ready to take benefit of 15-20% of return from their investment as they they ment mentio ione ned d that that wh when en they they are are taki taking ng slig slight ht high high risk risk,, obviously will have to look at good return. And almost 37% of them
are looking at 20% or more return that they are expecting from return. Co-relate with previous question of terms (Short and long) entrepreneurs entrepreneurs are looking for short term, except them remaining are look lookin ing g for for long long term term.. Wh When en I aske asked d wh why? y? One One of inve invest stor ors s has has mentioned, as long as investment period goes investors will be in a position to earn decent returns from his investment. As long it goes risk will be at zero level and investor will enjoy actual benefit of an investment. investment. It is identified that when people are opting for opting for 20% or more return definitely has to wait for longer period. From this it can be analysed that investors following same strategy when they are going for more % of returns. Hence, it is identified that whenever there is an option for high retu return rn defi defini nite tely ly one one shou should ld have have to wait wait for for long longer er the the peri period od,, irrespective of market performance. From this it can be stated that, wait till maturity of a fund to enhance maximum return.
9. Where would you like to invest in mutual mutual fund? Respondents Equity Debt Balanced ELSS(Tax shield)
20-25 9 0 3 4
25-35 12 2 6 16
35-55 4 8 7 10
55 and above 0 12 5 2
Table 1.9: Age with combined investment
100
Chart 2.9: Age with combined investment Interpretation: Sample of 100 investors and common question was raised about inve invest stme ment nt area area.. Thei Theirr opin opinio ion n goes goes very very simi simila larr even even thou though gh diff differ eren ence ce in thei theirr prof profes essi sion on.. Quit Quite e numb number er of resp respon onse ses s says says balanced and ELSS (Tax Shield).
Equity: From an equity investment point of view, it is identified that most numb number er of inve invest stor ors s opti opting ng for for an equi equity ty inve invest stme ment nt is aged aged in between 20-35; almost 84% of people are opting for equity as their preference. With the help of this study it is identified that aged below 35 almost respondents are going for equity as their option, which is proved to be best option for them.
Debt: From debt point of view, age in between 20-35, almost no one is opting for debt as investment option. Many of them believe that debt instrument instrument is for those who are not willing to take any risk. And if we see this from other angle almost 36% of people from the above age of 35 are opting for debt. And almost 60% of people from the age group of above 55 are going for debt as their preference.
Balanced: From the above concept of balanced where combination of debt and equity is concerned. Almost people have positive response towards balanced fund; almost 22% of overall respondents mentioned their preferences as balanced fund, and specifically mentioned that risk will be low from this particular scheme. From the above graph we can easily understand that how investors are cautious about their investment plans.
ELSS (Tax shield): From From this this it can can be anal analys ysed ed that that more more numb number er of resp respon onde dent nts s opting for (ELSS) only to reduce tax burden. Most of responded are under the age of 25-55 and people working different organization, if we see the variation, it is identified that more number of people belongs to private sector, where they are getting healthy income, so as to minimize their taxes people prefer this schemes.
Analysis: Over Overal alll if we look look at it, it, maxi maximu mum m numb number er of resp respon onse ses s for for tax tax schemes, almost 40% of them are opting for this scheme specifically, and 22% of respondents going for balanced fund, and where as 25% of them are going for an equity option, and rest only 13% are looking at debt schemes. With the help of this we can summarizes that respondents are well aware of schemes with prior to their respective age. This could help them in a better way.
10. Important factors do choosing an investment? Respondents Entrepreneurs Employees Advisors and others
Safety 4 7 3
you
Steady growth 15 31 21
consider
before
Liquidity 9 6 4
Table 1.10: Factors to consider
100
Chart 2.10: Factors to
consider Interpretation: Sample of 100 investors and common question was raised about factors do they consider before investment. Almost 70% are looking from from the perspe perspecti ctive ve of steady steady growth growth,, wh where ere as only only 10% with with safety, and almost 20% are looking from the point of liquidity. Here from this sample of 100, which 28% are Entrepreneurs, 28% are Individual Finance Advisors and retail investors and remaining about 44% of are employees from many organizations of private sectors.
Analysis: From From the indi indiv vidu idual’s l’s poi point of vie view out out of 100, 00, 14% 14% of they respo espon nded ded that that they they are looki oking for for safet fety retu returrns fro from an inve invest stme ment nt,, wh wher ere e inve invest stor ors s very very much much caut cautio ious us about bout thei theirr individual plans. Almost 67% of them would like to go for steady growth. They mentioned that when an individual looking at steady grow growth th obvi obviou ousl sly y will will wait wait for for long longer er the the peri period od,, and and henc hence e an investment will be done for long term. term. And one of the respondents respondents has has sugg sugges este ted d that that once once inve invest stme ment nt has has been been done done,, next next step step
ultimately need to look for steady returns. And about 19% of them are
looking
for
liquidity,
as
some
respondents
are
from
entrepreneurs, so they require liquidity at any moment, and rest almo almost st resp respon onde dent nts s will will be opti opting ng for for stea steady dy retu return rns s from from an investment. From this study it is identified that people are very cauti cautious ous regard regardin ing g their their invest investmen mentt plans plans.. Most Most of advis advisors ors also also suggest that better to look at steady returns rather that anything else. Hence, investors feel that steady returns can beat further inflation, and if we look at risk factor, at certain point of time risk of an individual investment will be zero, and will have a decent returns from an investment.
11.
Interested fund houses to invest.
Responden ts
Franklin
HDFC
Reliance
Others
28
22
18
32
Table 1.11: Service Providers
Chart 2.11:
Service Providers Interpretation: Sample of 100 respondents where similar question was raised about interested fund houses to invest. There were many options for them,
based based upon upon their their servic services es people people prefer preferred red one or anothe anotherr fund fund house.
Analysis: From this table it can be analysed that there are many number of players who are performing in the market. But if we see their ratings as per respondent’s respondent’s preference almost 28% says Franklin Templeton provides better facilities comparative with others. And at the same time time investo investors rs do conside considerr brand brand value value too. too.
Some Some of the other other
respondents about 22% say that HDFC mutual fund is doing well in the market. There are respondents from other than Andhra Pradesh who responded as HDFC doing well in the market. Where as 18% of respon responden dents ts says says Relian Reliance ce Mu Mutua tuall fund fund is doing doing well well in terms terms of rende enderi rin ng thei heir ser services as well well as custom stomer er serv ervice. ice. Other ther respondents respondents abut 32% responded as other players such as Birla, DSP Black rock, Fidility, ICICI, Sundaram etc. If we see as a whole almost player ayers s are are perfo rformin ming well well in the market rket,, because ause of huge competition from others. So they are competitors of each other. Hence it is identified that always customer’s preference would be better service provider, because they expect something in return. Basi Basica call lly y fro from thes these e fund fund hous houses es peop people le are are expe expect ctin ing g good good comm communi unica catio tion n of every every activ activity ity,, resear research ch based based data, data, proble problem m solving etc, depends upon which rating has been done.
12. 12.
Are you you sa satisf tisfie ied d wit with h your your inve invest stme ment nt opti option ons s?
Respondents Entrepreneurs Employees Advisors and others
Yes 27 41 26
No 1 3 2
Total 28 44 28
100
Table 1.12: Satisfaction Level
Chart 2.12:
Satisfaction Level Interpretation: Sample of 100 investors and common question was raised about sati satisf sfac acti tion on leve levell from from mutu mutual al fund fund inve invest stme ment nt.. Almo Almost st 95% 95% of respondents respondents are satisfied with mutual fund investment and where as onl only 5% respo espon nden dents are are not satis atisfi fie ed wit with the mutu utual fun fund investment. This is only due to their personal experience as they mentioned. Here from this sample of 100, which 28% are Entrepreneurs, 28% are Individual Finance Advisors and retail investors and remaining about 44% of are Employees from many organizations of private sectors.
Analysis: From From the indivi dividu dua al’s l’s poin oint of view out of 100, 100, 94% of them them resp respon onde ded d that that they they are are very very much much sati satisf sfie ied d with with mutu mutual al fund fund inves investme tment. nt. And they they are are quiet quiet comfo comforta rtable ble with with kind kind of facili facility ty
prov provid ided ed by AM AMC’ C’s. s. Most Most of resp respon onde dent nts s have have ment mentio ione ned d that that indu indust stry ry doin doing g well well,, and and fund fund hous houses es also also reac reachi hing ng indi indivi vidu dual al expe expect ctat atio ions ns in term terms s of serv servic ices es.. Only Only few few resp respon onde dent nts s were were unhap unhappy py with with mutua mutuall fund fund inves investm tment ent becaus because e of their their person personal al reasons. And only few told that they had bad experience with the investment. Almost advisors are satisfied with it and many of them suggesting others to invest in mutual funds. Hence, it is identified that, almost all respondents quite satisfied with services
offered
by
various
fund
houses,
and
mutual
fund
performance. performance. So this made made a clear clear statement statement that all investors are very much satisfied with mutual funds.
Findings
Criteria to follow an investment strategy, which can be one of the most important factors to consider.
For growth oriented funds “Focus must be on medium and long capital stock” which can able to provide good return.
5(five) Important things to know in mutual fund calculation, so that one can analyze in a better means. Are Alpha, SD, RSquare, Beta, Sharpe Ratio.
In Visakhapatnam more number of respondents are the age of 35-55, and respondents from other private organization are the age of 25-35, with that it can be easily analyze in a better way.
In my study most of the Investors were Graduate and some are post graduates and they do have good market knowledge.
In Occu Occupa pati tion on grou group p most most of the the Inve Invest stor ors s were were priv privat ate e employees, the second most Investors were business persons and the leas leastt wer were ass associa ociate ted d with adv advisor sors and retai tail investors.
It is observed that more number of respondents almost 50% of them are opting for minimum risk, and most of them they belonging to employees category, and rest about 36% of them are going to moderate, most of retail and others are in this category, and rests about 14% of them are entrepreneurs are opting for maximum risk exposure.
Mostly respondents preferred High Return from an investment option, and the second most respondents preferred Low Risk, even returns are low, and rest few are looking for liquidity and the least they preferred Trust.
Most number of respondents they would like to for retirement benefit as their primary goal. And rest of them opting for other such as education and house.
65% of them preferred one time investment and 35% of them preferred SIP.
The most preferred Portfolio was Equity, the second most was Bal Balance ance (mix (mixtu ture re of both both equi equity ty and and debt debt), ), and and the the leas leastt preferred Portfolio was Debt portfolio.
Maximum Number of respondents preferred Growth Option for health healthy y return returns, s, and and the second second most most prefer preferen ence ce given given for Dividend Payout and then least for Dividend Reinvestment.
Almo Almost st 25% 25% of the the resp respon onde dent nts s are are expe expect ctin ing g retu return rns s in between 10 – 15% from their mutual fund investment, and
about 40% of them are expecting in between 15 – 20% of return, and rest about 35% are expecting more than of 20% from an investment.
About bout 14% 14% of the the resp respon onde dent nts s expe expect ctin ing g safe safety ty from from an inve invest stme ment nt,, wh wher erea eas s 67% 67% of them them are are look lookin ing g for for stea steady dy growth and rests only few are looking for liquidity at any point of time.
It has has been been obse observ rved ed that that almo almost st 94% 94% of resp respon onde dent nts s are are satisfied with investment options, and only 6% of them are not.
It has been identified that investors showing more interested towards SIP (systematic investment plans) rather than anything else.
It has been identified that some of investors are looking for safe returns along with low risk.
Respondents are looking for more visibility from an individual AMC’s. In terms of transparency, and facts.
Inve Invest stor ors s look lookin ing g for for more more adva advant ntag ageo eous us prod produc ucts ts wh whic ich h should able to cover retirement benefit in a better way.
Suggestions
Investors’ looking looking for more benefits from investment, investment, so advice is to introduce more tailor made plans so that it would be helpful for those needy investors.
As investor responded that they have their individual plans, so try to come up with more innovative investment plans.
Should focus on introduce more long term plans, as people demanding for more diversified long term plans.
Shoul Should d focus focus on intro introduc ductio tion n of ELSS ELSS (Equi (Equity ty linke linked d savin saving g scheme) tax exemption plans under sec 80’C, so that it would really helpful for common employee.
Need to focus on YTM, where investors should have maximum yield.
Exit load should be minimized in case of withdrawal in one year, so that more investors can participate.
Invest in mutual funds when markets are low, will gives you better returns.
Short term investments should be introduced where investors should have at least 10 to 15% returns from an investment.
Equity diversified mutual funds can able to deliver 15 to 20% returns over long term, so these kind of funds to be introduced for aged below 35, where they can have maximum advantage.
Investment through SIP (Systematic investment plans) is the best options available in the market, so better to go with it.
Usually high returns funds to be introduced, which can have better advantages.
Funds with low risk and steady returns will be introduced so that it would be helpful for investors.
Spec Specia iall fund funds s like like wh whic ich h woul would d be bene benefi fite ted d for for corp corpor orat ate e employees, needs to be introduced.
Some more students plans to be introduced, so that people under this category can also be in a track.
HDFC plans have quiet good features, so advisable to come up with such features and promote themselves in the market.
Reti Retire reme ment nt sche scheme mes s to be intr introd oduc uced ed,, wh whic ich h woul would d have have regular high returns along with some value added benefits.
Dynamic mutual funds to be introduced, which basically will be focusing upon value, power and focus. Means they will not use clients money directly.
Exchange traded funds to be introduced, introduced, which are special kind of financial investment tools to replicate the market indexes.
There should not be any load on mutual funds, where there will not be any charges like entry and exit load as such, only sales commission can be charged based on its NAV.
Conclusion Since, from last 60 years mutual funds are there in this country. The ride through these 60 years is not been smooth. Investor’s Investor’s opinion is still divided, while some are for the mutual funds others are against it. Mutual Funds (MF) have become one of the most attractive ways for the the aver averag age e pers person on to inve invest st his his mone money. y. It is said said that that Bank Bank investment is the first priority of people to invest their savings and the the seco second nd plac place e is for for inve invest stme ment nt in Mu Mutu tual al Fund Funds s and and othe otherr avenues. A Mutual Fund pools resources from thousands of investors and then diversifies its investment into many different holdings such as stocks, bonds, or Government securities in order to provide high relative safety and returns. . Also generate leads of the prospective investors in Mutual Funds for the Asset Management Company (AMC) There are many improvements pending in the field and it has to happen as soon as possible so as to call the MF industry as an Organized and well-developed well-developed sector. On the the basi basis s of the the stud study y it is foun found d that that Fran Frankl klin in Temp Temple leto ton n Investments pvt ltd, Visakhapatnam is better services provider than any any othe otherr AM AMC C in city, ty, beca ecause of the their timel imely y rese esearc arch and pers person onal aliz ized ed advi advice ce.. Fran Frankl klin in Temp Temple leto ton n Inve Invest stme ment nts s pvt pvt ltd, ltd,
Visakhapatnam
provides
the
facility
of
customer
care
for
encouragement and protects the interest of the investors.
Most of investors are not aware of market properly, since Franklin Tem Templ plet eton on Inve Invest stme ment nts s pvt pvt ltd, ltd, Visa Visakh khap apat atna nam m cust custom omer er care care department and other advisors is able to provide them necessary info inform rmat atio ion n rela relate tes s to mark market et move moveme ment nts. s. Fran Frankl klin in Temp Temple leto ton n Invest Investmen ments ts pvt ltd is provid providin ing g resear research ch-ba -based sed team team to solvin solving g inve invest stor or's 's prob proble lems ms,, and and they they coul could d able able to main mainta tain in fair fair and and transparent details. Mutual funds also charge management fees. The major advantages of mutual funds are diversification, professional management, and own owners ership hip of a varie ariety ty of securiti ritie es with ith a minima imal capit pital investment.
Mutual
funds
are
also
convenient
because
recordkeeping is done by the fund. There are several drawbacks, however. Mutual funds may be costly to acquire because of sizable commissions and professional management fees. The sale price is known as the NAV or net asset value. Most ost importa ortan nt rol role by a fun fund manage nagerr where ere the per person son is res respons ponsib ible le for for impl implem emen enti ting ng a fund fund's 's inve invest stin ing g stra strate tegy gy and and managing its portfolio trading activities. A fund can be managed by one person, by two people as co-managers and by a team of three or more people. Fund managers are paid a fee for their work, which is a perc percen enta tage ge of the the fund fund's 's aver averag age e asse assets ts unde underr mana manage geme ment nt.. Another term for a fund manager is an investment manager.
Hence mutual funds are the best means of investment, where one indiv individ idual ual can maxi maximiz mizes es his his wealth wealth.. Mu Mutua tuall funds funds provi provides des well well returns if an investor willing to wait for longer the period. So by this means investors can enjoy the real benefit of mutual fund.
BIBLIOGRAPHY Books and Journals: Mutual al fund funds, s, an in intr trodu oduct ctio ion n to core core Mark Mark Mobi Mobius us,, 2008 2008,, “ Mutu concepts” Asia, John Wiley & Sons, Asia Pvt Ltd. Invest stme ment nt anal analys ysis is and and Port Portfo foli lio o Pras Prasann annac achan handr dra, a, 2007 2007,, “Inve management ” New Delhi, Tata McGraw-Hill.
V.K.Bhalla, 2000, “ Investment management ” New Delhi, S. Chand. Finance insight, 2009, “ Systematic investment planning” New Delhi, CNBC TV 18, Prabhat Kiran, Rajendra Palace. Financial advisor advisor ” New Delhi, Deepa Venkataragavan, 2008, “Financial
CNBC TV 18, Personal finance editor, wealth. “Ethical Flavour in Mutual Funds” 2001, Kolkata, article by S. Suma, IIAM Prof. Broachers and books by Franklin Templeton Investments house. Websites: www.moneycontrol.com www.equitymaster.com www.nseindia.com www.bseindia.com www.mutualfundindia.com www.franklintempletonindia.com
Annexure
Questionnaire on Analysis of attitude, preference and satisfaction level of customers towards mutual funds investment.
Name:Age: Occupation: Are you planning to save?
Yes No Do you have any investment plans?
Yes No Preferable period of investment?
Short term Long term Are you interested in mutual fund investment?
Yes No Anticipation of risk.
Min Moderate Primary goal of your investment? Education
House
Maximum Retirement
benefit Interested fund houses to invest? (
)
(
)
(
)
Which investment do you feel more profitable? Fix Fix depo deposi sits ts
Mutu Mu tual al Funds Funds Equi Equiti ties es
% of return that you are expecting?
5-10% 10-15% Where would you like to invest? Debt
Equity
savings) % of savings towards investment?
15-20%
Othe Others rs
above 20%
ELSS (Tax
10-25% 30-50% 55-80% 100% Important factors to you consider before choosing an investment? Safety of investment principle Opportunity for steady growth Liquidity How do you intend to use the income earned from investment?
Reinvest between 20-80% of earnings from investment Reinvest total earnings Receive 80% and remaining reinvest. Are you satisfied with your investment options? Yes
No
Any suggestions: ________________________________________________________________ ________________________________________________________________ ____________________________________________________ Thanks for your cooperation.
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