Day: August 26, 2017

Premier Inn

Premier Inn

CASE STUDY Premier Inn Benchmarks its Brand Reputation in Social Media Background • Premier Inn was aware, through industry research, that 70% of customers have either booked online or used online web sources in their selection of hotel. A significant proportion of customers have used the comments of fellow consumers on social media sites to guide their choice. Problem • Premier Inn objectives were to benchmark its brand reputation in the social media and to ascertain the patterns of choice in hotel bookings by consumer contributors.

It also sought to identify the online sources where discussion was most intense in order to focus its online communications and marketing programs and to spot consumer “brand ambassadors” with whom to engage. SWOT ANALYSIS Strength: -The company will be able to identify the sites that featured the brand most prominently and can set arrangements needed to these sites so that their brand will be close to the social market.

They can also monitor the evaluation and with that the company will know if their communication programs are still aligned with the issues that consumers see significant. Weakness: – Opportunities: -The persistent positive and negative messaging was isolated to identify the criteria used in making a choice of hotel and these criteria would be applied to the coverage to identify opportunities for Premier Inn to engage with the audience through press and promotional activities. Threats: Solution Due to the immense number of blogs, forums and other social media a two pronged strategy was developed by Durrants (supplier). 1. An online social media monitoring dashboard was developed to conduct an initial automated review of coverage and to identify topics of discussion around which user posts were clustering. 2. This work was supplemented by human analysis of coverage by Durrants to eliminate “noise” (filtering out the spurious and mundane topics) and apply human judgment to the topics that were substantive and significant. CONCLUSION: By the use of these media monitoring and planning service they will be able to understand what the consumer says about the company it also enables them to engage, inspire and influence the conversation for the benefit of their company RECOMMENDATION: • Other companies may also use this kind of device in order for them to have fast, accurate and reliable information and to be backed up by exceptional consumer support. The service is most effective solution available offering a combination of automated monitoring, human analysis and authored reporting.

Current Scenario of Mutual Fund Industry

Current Scenario of Mutual Fund Industry

Summer Training Report ASTUDY ON “AN INSIGHT INTO THE CURRENT SCENARIO OF THE INDIAN MUTUAL FUND INDUSTRY –MEASURING & ENHANCING ITS FUTURE IN DYNAMIC ENVIRONMENT” MADE BY: neha PREFACE “Give a man a fish, he will eat it. Train a man to fish, he will feed his family. ” The above saying highlights the importance of Practical knowledge. Practical training is an important 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 there by helping the students to bridge gap between the theories explained in the books and their practical implementations. Summer Training Project plays an important role in future building of a student so that he/she can better understand the real world in which he has to work in future. The theory greatly enhances our knowledge and provides opportunities to blend theoretical with the practical knowledge.

I have completed my Summer training In a very reputed company named – SPA CAPITALS LTD. Besides this I have also completed my summer training Project on “AN INSIGHT INTO THE CURRENT SCENARIO OF THE INDIAN MUTUAL FUND INDUSTRY- MEASURING & ENHANCING ITS FUTURE IN A DYNAMIC ENVT” I have tried to cover each and every aspect related to the topic with best of my capability. I hope Project would help ME in the future. AKNOWLDGEMENT I am grateful to Mr. Anubhav (Senior Manager), & Mr.

Shailesh (senior manager), SPA CAPITAL SERVICES LTD, JANAKPURI, for granting the permission for training in the organization. It is the matter of utmost pleasure to me to express my sincere thanks and deepest indebtedness to both of them, for helping me at each and every step during the training period. I am also thankful to Ms Yogita, & all staff members for their valuable cooperation and help. ABOUT THE COMPANY HISTORY OF THE COMPANY Mr. Sandeep Periwal established SPA Group in 1995.

It is a long standing and fast growing integrated financial services group, providing a large range of services to a varied set of customers that include large corporations, high net-worth individuals, financial institutions and retail investors. Our service offerings include merchant banking, securities broking, asset management, mutual funds, insurance, fixed deposits, government securities and bonds. Though each of these business entities exists independently, they reflect the group’s core ethos and values that are centered around creating value through customers centric approach.

SPA Group’s customer-centric approach, backed by strong research and passion to excel has helped us achieve a significant position in the Indian financial services sector. More than 1000 highly skilled professionals are continuously and consistently working towards enhancing the value and wealth of our customers, even as we continue to win many awards and accolades for our innovative services and solutions. ABOUT THE COMPANY SPA Group was promoted by a team of finance professionals in 1995 with an objective to provide value added financial services.

Initially, the Group focused as a niche financial solutions provider in corporate finance and wealth management to Indian companies and high net worth individuals. In January 2000, the Group expanded its operations and the range of services. Today, SPA provides services for: * Securities broking, * Merchant banking, * Wealth management, * Financial advisory, * Corporate finance, * Risk management and * Insurance broking. * SPA is being managed by its promoters along with a young and dynamic team of over 1000+ professionals with rich experience, in their respective fields.

The Group has established itself as one of India’s leading financial advisory house, offering various financial solutions to its Institutional, corporate and individual clients. Customer centric approach of SPA’s dedicated professional team has helped carve a niche for itself in financial services arena and won confidence of its clients. Clients of SPA are from a wide spectrum and comprise of Banks and other financial institutions, Mutual funds, Insurance companies, foreign institutional investors, public sector undertakings and government departments, private corporate, trusts and individuals.

VISION OF COMPANY SPA believes in attaining customer satisfaction, on continuing basis, by providing highest standard of financial services in India. The philosophy at SPA is to provide services to clients after assessment of their profile, needs and risk-appetite. The basic work theme at SPA is: – Dedicated, competent and honest team of professionals – Customer centric work environment – Insight of customers’ perspectives – Strong research base – Clear understanding of applicable laws – Consistency and passion to excel – Technology savvy MILESTONE OF THE COMPANY

Since 1994, with the coming into existence of the SPA Group, we have diversified into a complete financial solution providing house, catering varied needs of our clients ranging from investment advisory services to investment banking, corporate re-structuring, distribution and broking services, risk management and insurance advisory. Within a short span of time, the Group has made a place for itself in the midst of the top financial solutions provider in the country. FEATURES OF THE COMPANY * Accessibility: – SPA provides ADVICE, EDUCATION, services for investors. These services are accessible through the corporate offices. Knowledge: – In a business where the right information at the right time can translate into direct profits, customers can get access to a wide range of information through the team members. * Convenience: Customer can call to get investment advice and execute their transactions. * Service: – SPA customer service team assists customers for any help that they need relating to pan card ITR filing, and other queries. SPA’s customer service can be contacted, through email chat. * Investment Advice: – SPA has dedicated research team for fundamental and technical research.

Company’s analyst, constantly track the pulse of the market and provide timely investment advice to their customers in the form of daily research emails MANAGEMENT STRUCTURE OF SPA CAPITAL DIRECTOR * PRESIDENT * SENIOR VICE PRESIDENT * VICE PRESIDENT * ASSITANT VICE PRESIDENT * BRANCH MANAGERS * TERRITORY MANAGRE / SENIOR MANAGER * MANAGER * BUSINESS MANAGER * SENIOR RELATIONSHIP MANAGERS * RELATIONSHIP MANAGERS * RELATIONSHIP OFFICERS * RELATIONSHIP EXECUTIVES DIFFERENT VERTICALSOF SPA 1. SPA Capital Services Limited 2. SPA Merchant Bankers Limited 3. SPA Securities Limited 4. SPA Insurance Broking Limited 1. SPA CAPITAL SERVICES LTD

SPA is the flagship Company of the Group and is engaged in providing Wealth Management and Financial Advisory services to institutions, corporate, and individuals since 1995. The Company is a leading distributor of Mutual Funds in the country and presently has assets over Rs. 11,000 crore under its management. The Company has successfully positioned itself as a strategic advisor to its customers for wealth management with its customer centric approach and innovative solutions. The Company is registered with Reserve Bank of India as a Non Banking Financial Company. Presently the shares of the Company are listed on the Delhi Stock Exchange. . SPA MERCHANT BANKERS LTD It offers comprehensive investment banking solutions and highest quality independent financial advice to corporate sector and entrepreneurs. Our service offering covers private placement of debt instruments and debt syndication for both public and private sector corporate, Capital raising services through private placement of equity, managing capital issues (IPO, FPO and Right Issues). Besides we also cater to the entire spectrum of capital market needs through other services such as Corporate and Infrastructure advisory, Valuations, Managing Takeovers, Buy Back and Delisting.

We have team comprising of multi-disciplinary professionals with a vast financial advisory and investment banking experience, who structure various financial products as per the requirements of the clients. SPA Merchant Bankers Limited We has the Category –I Merchant Banking license from Securities and Exchange Board of India (SEBI), the Indian Securities Market Regulator. The Company has made notable and considerable progress in a short span in the debt merchant banking activities successful various debt primary issues.

This is also reflected through the ranking by Prime Database, which has ranked the Group amongst the top 10 service providers in this segment. The Company was able to achieve above ranks on the basis of its performance in just two financial years since it commenced investment & merchant banking activities. Since the commencement of merchant banking services, the Company has syndicated funds for various Public Sector Undertakings (PSUs), Designated Financial Institutions(DFIs), Banks and several State Level Undertakings (SLUs).

The Company for its Merchant & Investment Banking activities has found patronage as an Arranger with various central public sector undertakings like HUDCO, NTC, ITI, MECON, IISCO SAIL, REC, KRCL, public sector banks and financial institutions. Also the Company has had privilege to provide its services to various state level undertakings of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, West Bengal, Punjab, Haryana, Himachal Pradesh, Jammu & Kashmir, Maharashtra, Gujarat and Rajasthan.

In the private sector, the Company has provided its services to various domestic and MNC corporate. The achievements corroborate our untiring and sincere efforts towards building and preserving mutually rewarding and sustainable relationships with our clients and giving them our value added services with meaningful performance. We have started providing equity capital market related services in the beginning of 2007 and advise Corporate, Banks and Businesses which are seeking to mobilize capital from Investor.

We offer following opportunities to clients to raise funds through the following: * Private Equity Advisory * Initial Public Offering (IPOs) * Follow on Public Offering (FPOs) * Qualified Institutional Placements (QIPs) * Right Issues * Preferential Allotments and * Foreign Currency convertible bonds (FCCBs). Our team as Lead Manager/ BRLM has successfully managed/ are managing transactions for client across various industry sectors including * Information technology * Telecommunication * Infrastructure * Power equipments * Steel * Sugar * Textiles

We, for execution of a transaction, combine our various strengths including in depth knowledge of regulatory environment, understanding of industry and market dynamics, distribution capabilities and networking with institution investors of our associate concerns. We built our business on strong relationships, innovative ideas and ethical standards. 3. SPA SECURITIES LTD It is a SEBI registered securities broking Company. The Company is a member of Wholesale Debt Market, Capital Market and Futures and Options Segment of the National Stock Exchange of India Limited.

The Company is also a registered member of the Over the Counter Exchange of India. The Company is focused primarily on providing securities broking services to institutional clients and is empanelled as an approved securities broker with all the major Nationalized, Private and Co-operative banks, corporate houses, Insurance Companies, Financial Institutions, Asset Management Companies and Provident Fund Trusts. The Company had a turnover of Rs. 25000 cores at NSE-WDM for the financial year ended March 2005. Equity broking for institutions was commenced in 2004 end.

In its first full year of the operations, the Company achieved a turnover of over Rs. 1500 crores in calendar year 2005. 4. SPA INSURANCE BROKING LT It is the arm of the SPA Group providing entire range of insurance service in insurance right from meeting insurance need of clients to cover its risk spectrum, advisory, claim settlement and also meet requirement of clients if they wish to outsource entire gamut of insurances related functions. The Company is registered with Insurance Regulatory Development Authority as approved Broker.

The Company is empanelled with almost all the life and general insurance companies as a Direct Broker. The Company is functioning as life and general insurance direct broker and risk assessors Recently Commenced, SPA Com Trade Pvt. Ltd. caters to existing clients of the Group by providing research based commodity broking services. LOCATION OF DIFFERENT BRANCHES Company has its branches in 35 cities in India:- 1| Agra| 2| Ahmadabad| 3| Ajmer| 4| Bangalore| 5| Bhubaneswar| 6| Bikaner| 7| Chandigarh| 8| Chennai| 9| Cochin| 10| Coimbatore| 11| Ghaziabad| 12| Gurgaon| 13| Guwahati| 14| Hyderabad| 15| Jaipur| 6| Jalandhar| 17| Jameshedpur| 18| Jodhpur| 19| Kanpur| 20| Kolkata| 21| Kota| 22| Kurukshetra| 23| Lucknow| 24| Ludhiana| 25| Meerut| 26| Moradabad| 27| Mumbai| 28| New Delhi| 29| Noida| 30| Patiala| 31| Patna| 32| Pune| 33| Rajkot| 34| Sirsa| 35| Varanasi| PRODUCT RANGE OF THE COMPANY * LIFE INSURANCE (EVERY COMPANY) * GENERAL INSURANCE (EVERY COMPANY) * MUTUAL FUNDS (EVERY COMPANY) * FIXED DEPOSITS (ONLY PRIVATE COMPANIES) * SECURITIES * BONDS SERVICES OF THE COMPANY * FINANCIAL ADVISORY * INCOME TAX PLANNING * INCOME TAX FILING & ASSESSMENT * SERVICES FOR PERMANENT ACCOUNT NUMBER (PAN)

CONTENTS TOPICS Page No. Company Profile……. ……………………………………………………………………………… 4 Introduction….. …………………………………………………………………………………………… 15 PART –A Mutual funds operations flow chart…….. ………………………………………………………….. 16 Goal of mutual funds…………………………………………………………………………………………. 16 Organization of mutual funds……………………………………………………………………………. 17 background…………………………………………………………………………………………….. 8 budget highlights 2011 for mutual funds ………………………………………………………….. 20 mutual funds for whom? ……………………………………………………………………………………. 20 classification of mutual funds schemes………………………………………………………………21 risk vs return chart…………………………………………………………………………………… 26 Mutual funds in India……….. ………………………………………………………………………. 26 Current state of mutual funds industry…………………………………………………………….. 27 Industry adapting to changing regulations…………………………………………………………. 41 Challenges & issues faced by the industry………………………………………………………….. 43 Ways of enhancing its future…………….. ………………………………………………………….. 7 How proper marketing as a tool can enhance its future………………………………………………… 51 Steps that need to be taken……………………………………………………………………………68 PART-B FINANCIAL PLANING OF AN INDIVIDUAL WITH EMPHAIS ON MUTUAL FUNDS…….. 83 Future predictions for mutual funds industry……….. ………………………………………………….. 92 Conclusion……………………………………………………………………………………………… INTRODUCTION Mutual funds are financial intermediaries, which collect the savings of investors and invest them inalargeandwell-diversifiedportfolioofsecuritiessuchasmoneymarketinstruments , 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 conceived as institutions for providing small investors with avenues of investment sin the capital market. Since small investors generally do not have adequate time, knowledge, experience and resources for directly 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 d’etre of mutual funds is their ability to bring down the transaction costs.

The advantages for the investors are reduction in risk, expert professional management, diversified portfolios, and liquidity of investment and tax benefits. By pooling their assets through mutual funds, investors achieve economies of scale. The interests of the investors are protected by the SEBI, which acts as a watchdog. Mutual funds are governed by the SEBI (Mutual Funds) Regulations, 1993. PART –A 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 strategies and goals to chosen from. Choosing one can be over whelming, even though it need not be different mutual funds have different risks, which differ because of the fund’s goals 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 youngerinvestorsRetiresoftenseektheincomefromdividenddistrib tiontoaugmenttheirincomewithreinvestment 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 Therearemanyentitiesinvolvedandthediagrambelowillustratesthe organizational set up of a mutual fund: BACKGROUND 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 of the 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 Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under management. Second Phase – 1987-1993 (Entry of Public Sector Funds) 987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India(LIC) and General Insurance Corporation of India(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987followed 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, an awareness 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 erst while 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 Regulationsin1996.

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 cores. The Unit Trust of India with Rs. 44, 541 crores of assets under management was way ahead of other mutual funds. Fourth Phase – since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities.

One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. 29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.

With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs. 153108 crores under 421 schemes BUDGET- 2011 HIGHLIGHTS FOR MUTUAL FUNDS: * To create infra debt funds: FM * To create Rs 100cr equity fund for microfinance cos: FM Modified infra debt funds to be created to attract foreign funds for infra development: FM * To raise corpus of rural infra development fund to Rs 18000cr vs Rs 16000cr: FM * Will allow registered FII’s to participate in Indian MF industry: FM * SEBI registered MF can access foreign investors after fulfilling KYC norms: FM * SEBI registered mutual funds to accept subscription from foreign investors: FM * NRI’s are allowed to invest in mutual funds: FM *  MF can accept subscription foreign investors who meet KYC norms: FM * Foreign investors, other than FIIs, would be allowed to invest up to US$ 10 bn in domestic mutual funds.

No, this class of investors will not be called as FIIs. Instead, they would be referred to as the QFIs (Qualified Foreign Investors). MUTUAL FUNDS FOR WHOM? These funds can survive and thrive only if they can live up to the hopes and trusts of their individual members. These hopes and trusts echo the peculiarities which support the emergence and growth of such insecurity of such investors who come to the rescue of such investors who face following constraints while making direct investments: (a) Limited resources in the hands of investors quite often take them away from stock market Transactions. b) Lack of funds forbids investors to have a balanced and diversified portfolio. (c) Lack of professional knowledge associated with investment business unable investors to Operate gainfully in the market. Small investors can hardly afford to have ex-pensive investment Consultations. (d) To buy shares, investors have to engage share brokers who are the members of stock Exchange and have to pay their brokerage. (e) They hardly have access to price sensitive information in time. (f) Itisdifficultforthemtoknowthedevelopmenttakingplaceinsharema rketand Corporate sector. g) Firm allotments are not possible for small investors on when there is a trend of over subscription to public issues. CLASSIFICATION OF MUTUAL FUND SCHEMES: Any mutual fund has an objective of earning income for the investors and/ or getting increased value of their investments. To achieve these objectives mutual funds adopt different strategies andaccordinglyofferdifferentschemesofinvestments. Onthisbasisthesimplestwayto categorize schemes would be to group these into two broad classifications: OPERATIONAL CLASSIFICATION AND PORTFOLIO CLASSIFICATION.

Operational classification highlights the two main types of schemes, i. e. , open-ended and close-ended which are offered by the mutual funds. Portfolio classification projects the combination of investment 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: (A) Open Ended Schemes: As the name implies the size of the scheme (Fund) is open – i. e. , not specifiedorpre-determined. Entrytothefundisalwaysopentotheinvestor who 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 is constantly changing as investors sell or buy their shares. Further, the shares or units are normally not traded on the stock exchange but are repurchased by the fund at announced rates. Open-ended schemes have comparatively 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.

More over ,the realizable amount is certain sincere purchase 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 , which are actively trade din the market. Other wise, it will not be possible to calculateNAV. Thisisthereasonthatgenerallyopen-endedschemesareequitybased. Moreover, desiring frequently traded securities, open-ended schemes hardly have in their portfoliosharesofcomparativelynewandsmallercompaniessincethe searenotgenerally traded.

In such funds, option to reinvest its dividend is also available. Since there is always a possibility of withdrawals, the management of such funds becomes 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 liquid assets. Second, by virtue of this situation such funds may fail to grab favorable opportunities.

Further, to match quick cash payments, funds cannot have matching 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. (B) Close Ended Schemes: Such schemes have a definite period after which their shares/ units are redeemed. Unlike open-ended funds, these funds have fixed capitalization, i. e. , their corpus normally does not change throughout its life period.

Close ended fund units trade among the investors in the secondary market since these are to be quoted on the stock exchanges. Their price is determined on the basis of demand and supply in the market. Their liquidity depends on 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. . , cannot exceed the sum of the prices of the investments constituting the package. Whatever premium exists that may exist only on account of speculative activities. In India as per SEBI (MF) Regulations every mutual fund is free to launch any or both types of schemes. Portfolio Classification of Funds: Following are the portfolio classification of funds, which may be offered. This classification may be on the basis of (A) Return, (B) Investment Pattern, (C) Specialized sector of investment, (D) Leverage and (E) Others. A. Return based classification:

To meet the diversified needs of the investors, the mutual fund schemes are made to enjoy a good return. Returns expected are uniform of regular dividends or capital appreciation or a combination of these two. 1. Income Funds: For investors who are more curious for returns, Income funds are floated. Their objective is to maximize current income. Such funds distribute periodically the income earned by them. These funds can further be splitted up into categories: those that stress constant income 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: Such funds aim to achieve increase in the value of the underlying investments through capital appreciation. appreciate through the expansion production 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) , (ii) To protect the value of investment and, iii) To achieve capital appreciation consistent with the fulfillment of the first two objectives. Such funds which offer a blend of immediate average return and reasonable 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. (B) Investment Based Classification: Mutual funds may also be classified on the basis of securities in which they invest.

Basically, it is renaming the subcategories of return based classification. 1. Equity Fund: Such funds, as the name implies, invest most of their investible shares in equity shares of companies 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 equity. Equity funds again can be of different categories varying from those that invest exclusively in high quality„blue chip companies to those that invest solely in the new, unestablishedcompanies.

Thestrengthofthesefundsistheexpectedcapitalappreciation. Naturally, they have a higher degree of risk. 2. Bond Funds: Such funds have their portfolio consisted of bonds, debentures, etc. this type of fund is expected to be very secure with a steady income and little or no chance of capital appreciation. Obviously risk is low in such funds. In this category we may come across the funds called „Liquid Funds? which specialize in investing short-term money market instruments. The emphasis is on liquidity and is associated with lower risks and low returns. 3. Balanced Fund:

The funds, which have in their portfolio a reasonable mix of equity and bonds, are known as balanced funds . Such funds will put more emphasis on equity share investments when the outlook is bright and will tend to switch to debentures when the future is expected to be poor for shares. (C) Sector Based Funds: There are number of funds that invest in a specified sector of economy. While such funds do have the disadvantage of low diversification by putting all their all eggs in one basket, the policy of specializing has the advantage of developing in the fund managers an intensive knowledge of the specific sector in which they are investing.

Sector based funds are aggressive growth funds which make investments on the basis of assessed bright future for a particular sector. These funds are characterized by high viability, hence more risky. GROWTH RATE OF THESE FUNDS: SOURCE: AMFI DATA RISK VS RETURN CHART OF THESE FUNDS LIST OF MUTUAL FUNDS IN INDIA: CURRENT SCENARIO OF THE MUTUAL FUND INDUSTRY…… THE INDIAN MUTUAL FUND INDUSTRY – THE CURRENT STATE The Indian mutual fund industry has evolved from a single player monopoly in 1964 to a fast growing, competitive market on the back of and a strong regulatory framework.

The Indian mutual fund industry is undergoing a metamorphosis, which inadvertently marks a point of inflection for the market participants. However, even amidst volatile market conditions, average assets under management indicated vibrant growth levels posting a y-o-y growth of 47% in 2009-10. Aggregate funds mobilized during the year also grew 84%, supplemented by around 174 new schemes launched during April 2009 to March 2010. The Investor base has also steadily expanded and between November 2009 to March 2010, there was an addition of 60,834 investors. . INVESTORS: Out of a total population of 1. 15 billion, the total number of mutual fund investor accounts in India as of 31 March 2010 was 42 million (the actual number of investors is estimated to be lower as investors hold multiple folios)13. In the US, an estimated 92 million individual investors owned mutual funds out of a total population of 305 million14 in 2010 As per the Invest India Incomes and Savings Survey 2010of individual wage earners in the age group 18 to 59 years conducted by IIMS Data works, only 1. 6 percent invested in mutual funds.

Ninety percent of the savers interviewed were not aware of mutual funds or of investing in mutual funds through a Systematic Investment Plan (SIP). The mutual fund penetration among the paid Indian workforce with annual household income less than INR 90,000 was 0. 1 percent. . 2. Markets: While the mutual fund industry in India continues to be Metro and urban centric, the mutual funds are Beginning to tap Tier and Tier 3 towns as a vital component of their growth strategy. The contribution of the Top 10 cities to total AUM has gradually declined from approximately 92 percent in 2005 to approximately 80 percent currently. . Distribution channel : Source: CII MUTUAL FUND SUMMIT 2008 Distribution Channels: As of March 2010, the mutual fund industry had 92,499 registered distributors as compared to approximately 2. 5 million insurance agents. The Independent Financial Advisors (IFAs) or Individual distributors, corporate employees and corporate comprised 73, 21 and 6 percent respectively of the total distributor base. Banks in general, foreign banks and the leading new private sector banks in particular, dominate the mutual fund distribution with over 30 percent AUM share.

National and Regional Distributors (including broker dealers) Together with IFAs comprised 57 percent of the total AUM as of 2010. The public sector banks are gradually enhancing focus on mutual fund distribution to boost their fee income. 4. AMC’S IN INDIA: SOURCE: AMFI DATA The Indian mutual fund industry currently consists of 38 players that have been given regulatory approval by SEBI. The industry has witnessed a shift has changed Drastically in favour of private sector players, as the number of public sector players reduced from 11 in 2001 to 5 in 2009. 5. AUM GROWTH:

The asset under management has grown at rapid pace over the past few years, at a CAGR of 35 % for the 5 year period from 31 march 2005 to 2009. over the 10 year period, from 2000 to 2010 encompassing varied economic cycles, the industry grew at 22% CAGR (AMFI data). this growth was despite two falls in the AUM-the first being after the year 2001 due to the DOTCOM BUBBLE BURST ; the second in 2008 consequent to global economic crisis 6. AUM under the various segments (In Rs Billion): 7. MUTUAL FUND DATA FOR THE MONTH ENDED – May31, 2011 (source: amfi):  | (Rs. Crores)| Category| No. f new schemes launched during the month| Sales| Redemption| Assets Under Management| | | New schemes| Existing schemes| Total| Total| as on May 31 , 2011| as on Apr 30 , 2011| Inflow/ Outflow| B| Bank Sponsored| 0| 0| 103399| 103399| 107790| 0| 0| 0| C| Institutions | 0| 0| 3179| 3179| 6799| 0| 0| 0| D| Private Sector ; Joint Venture 😐 | I Indian | 24| 4247| 244559| 248806| 268759| 0| 0| 0| | II Predominantly Indian | 14| 3144| 219457| 222601| 241365| 0| 0| 0| | III Predominantly Foreign | 2| 424| 11373| 11797| 11554| 0| 0| 0| | Grand Total (A+B+C+D)| 40| 7815| 581967| 589782| 636267 | 0| 0| 0| . AUM base ; growth relative to global industry: India has been amongst the fastest growing markets for mutual funds since 2004; in the five-year period from 2004 to 2008 (as of December) the Indian mutual fund industry grew at 29 percent CAGR as against the global average of 4 percent3. Over this period, the mutual fund industry in mature markets like the US and France grew at 4 percent, while some of the emerging markets viz. China and Brazil exceeded the growth witnessed in the Indian market.

However, despite clocking growth rates that are amongst the highest in the world, the Indian mutual fund industry continues to be a very small market; comprising 0. 32 percent share of the global AUM of SD 18. 97 trillion as of December 2008. 9. AUM to GDP ratio: The ratio of AUM to India’s GDP gradually increased from 6 percent in 2005 to 13 percent in 2010. Despite this however, this continues to be significantly lower than the ratio in developed countries, where the AUM accounts for 20-70 percent of the GDP. 10. Share of Mutual Funds in Household Financial Savings: *MUTUAL FUNDS OTHER THAN UTI SOURCES: SEBI

Investment in mutual funds in India comprised 7. 7 percent of the gross household financial savings in FY 2010, a significant increase from 1. 3 percent in FY 2003. The households in India continue to hold 55 percent of their savings in fixed deposits with banks, 18 percent in insurance and 10 percent in currency as of FY 2008. 11. COMPOSITION OF HOUSEHOLD’S GROSS FINANCIAL SAVINGS IN 2010: SOURCE: RBI DATA 12. PROFITABILTY: SOURCE: KPMG ANALYSIS BASED ON PUBLISHED FINANCIALS OF AMC’S The increase in revenue and profitability in the Indian mutual fund industry has not been commensurate with the AUM growth in the last 5 years.

The AUM grew at 35 percent CAGR in the period from March 2006to2010, while the profitability of AMCs – which is defined as PBT as a percentage of the AUM – declined from 24 Bps in FY 2006 to 14 bps in FY 2010. 13. INDUSTRY INVESTOR MIX: The Indian mutual fund industry has significantly high ownership from the institutional investors. Retail investors comprising 96. 86 percent in number terms held approximately 37percen to the total industry AUM as at the end of March 2010, significantly lower than the retail participation in the US at 82 percent of AUM as at December 2010. 14.

NET RESOURCES MOBILISED BY MYTUAL FUNDS: The data reveals that the increase in revenue and profitability of the Mutual fund industry has not been commensurate with the AUM growth in past few years. The increased expenditure on marketing, distribution and administration exerted upward pressure on the operating expenses, thereby impacting AMC’s margins. The operating expenses as a percentage of AUM rose from 41 basis points in FY07 to 113 basis points in FY11. 15. RURAL –URBAN INVESTORS: 16. Sales during the month of May, 2011(source: amfi): Existing Schemes| Amount in Rs. Crores| | Open End| Close End| Total| No. of Schemes| Amount| No. of Schemes| Amount| No. of Schemes| Amount| Balanced| 31 | 516 | 1 | – | 32 | 516 | ELSS| 36 | 171 | 12 | – | 48 | 171 | FOF Investing Overseas| 16 | 91 | – | – | 16 | 91 | Gilt| 38 | 293 | – | – | 38 | 293 | GOLD ETF| 10 | 570 | – | – | 10 | 570 | Growth| 307 | 5683 | 7 | – | 314 | 5683 | Income| 213 | 68099 | 285 | 1784 | 498 | 69883 | Liquid/Money Market| 52 | 520947 | – | – | 52 | 520947 | Other ETF| 18 | 226 | – | – | 18 | 226 | Total| 721 | 596596 | 305 | 1784 | 1026 | 598380 | 17. Mutual Funds ; Assets Under Management(source: Amfi):|  | | Rs. in crores)| Mutual Fund Name| No. of Schemes*| Corpus Under management| | | As on| Corpus| As on| Corpus| Net inc/dec in corpus| | AIG Global Investment Group Mutual Fund | 43| May 31, 2011| 482. 57| Apr 30, 2011| 514. 88| -32. 31 | Axis Mutual Fund | 47| May 31, 2011| 7,780. 48| Apr 30, 2011| 7,419. 51| 360. 97 | Baroda Pioneer Mutual Fund | 40| May 31, 2011| 4,478. 67| Mar 31, 2011| 1,705. 92| 2772. 75 | Benchmark Mutual Fund | 18| May 31, 2011| 4,399. 33| Mar 31, 2011| 3,766. 32| 633. 01 | Bharti AXA Mutual Fund | 40| May 31, 2011| 209. 06| Apr 30, 2011| 224. 75| -15. 69 |

Birla Sun Life Mutual Fund | 251| Mar 31, 2011| 53,349. 93| Feb 28, 2009| 49,983. 17| 3366. 76 | BNP Paribas Mutual Fund | 136| May 31, 2011| 5,523. 75| Apr 30, 2011| 6,073. 74| -549. 99 | Canara Robeco Mutual Fund | 90| Mar 31, 2011| 5,546. 93| Nov 30, 2010| 7,235. 70| -1688. 77 | Daiwa Mutual Fund | 14| May 31, 2011| 743. 54| Apr 30, 2011| 725. 80| 17. 74 | Deutsche Mutual Fund | 145| May 31, 2011| 10,639. 90| Apr 29, 2011| 12,418. 71| -1778. 81 | DSP Blackrock Mutual Fund | 141| May 31, 2011| 28,183. 37| Apr 30, 2011| 29,477. 93| -1294. 56 | Edelweiss Mutual Fund | 41| Mar 31, 2011| 163. 3| Dec 31, 2010| 177. 02| -13. 69 | Escorts Mutual Fund | 32| Mar 31, 2011| 197. 22| Sep 30, 2010| 198. 23| -1. 01 | Fidelity Mutual Fund | 77| Mar 31, 2011| 9,073. 90| Feb 28, 2011| 8,960. 91| 112. 991 | Franklin Templeton Mutual Fund | 161| May 31, 2011| 34,997. 67| Apr 29, 2011| 35,326. 05| -328. 38 | HDFC Mutual Fund | 212| May 31, 2011| 91,511. 06| Apr 30, 2011| 95,335. 85| -3824. 79 | HSBC Mutual Fund | 84| May 31, 2011| 4,642. 51| Apr 30, 2011| 4,768. 03| -125. 52 | ICICI Prudential Mutual Fund | 420| Mar 31, 2011| 63,556. 63| Oct 31, 2010| 67,966. 92| -4410. 293 |

IDBI Mutual Fund | 40| Mar 31, 2011| 2,717. 19| Oct 31, 2010| 2,428. 46| 288. 73 | IDFC Mutual Fund | 216| Mar 31, 2011| 19,699. 01| Aug 31, 2009| 24,002. 59| -4303. 588 | ING Mutual Fund | 90| May 31, 2011| 870. 38| Mar 31, 2011| 763. 91| 106. 467 | JM Financial Mutual Fund | 81| Mar 31, 2011| 2,802. 76| Sep 30, 2010| 4,434. 96| -1632. 2 | JPMorgan Mutual Fund | 39| May 31, 2011| 3,767. 85| Mar 31, 2011| 2,963. 85| 804 | Kotak Mahindra Mutual Fund | 181| May 31, 2011| 32,023. 96| Apr 30, 2011| 36,560. 24| -4536. 28 | L;T Mutual Fund | 86| May 31, 2011| 5,269. 56| Apr 30, 2011| 6,132. 2| -862. 76 | LIC Nomura Mutual Fund | 62| May 31, 2011| 8,404. 19| Mar 31, 2011| 9,688. 34| -1284. 15 | Mirae Asset Mutual Fund | 34| Mar 31, 2011| 315. 93| Oct 29, 2010| 239. 17| 76. 76 | Morgan Stanley Mutual Fund | 12| May 31, 2011| 2,041. 62| Apr 30, 2011| 2,121. 62| -80 | Motilal Oswal Mutual Fund | 3| May 31, 2011| 341. 71| Apr 29, 2011| 357. 15| -15. 44 | Peerless Mutual Fund | 25| May 31, 2011| 5,519. 04| Mar 31, 2011| 1,440. 03| 4079. 01 | Pramerica Mutual Fund | 27| Mar 31, 2011| 781. 81| Nov 30, 2010| 1,397. 01| -615. 2 | PRINCIPAL Mutual Fund | 74| May 31, 2011| 5,578. 5| Apr 30, 2011| 5,276. 17| 302. 08 | Quantum Mutual Fund | 13| May 31, 2011| 142. 67| Apr 30, 2011| 136. 81| 5. 86 | Reliance Mutual Fund | 295| Mar 31, 2011| 87,290. 00| Sep 30, 2010| 108,148. 38| -20858. 38 | Religare Mutual Fund | 138| Mar 31, 2011| 8,819. 11| Mar 31, 2010| 9,418. 36| -599. 25 | Sahara Mutual Fund | 44| May 31, 2011| 337. 82| Apr 30, 2011| 160. 57| 177. 25 | SBI Mutual Fund | 177| Apr 30, 2011| 49,014. 35| Mar 31, 2011| 38,861. 51| 10152. 84 | Sundaram Mutual Fund | 202| May 31, 2011| 14,506. 31| Apr 30, 2011| 14,478. 60| 27. 71 |

Tata Mutual Fund | 201| Mar 31, 2011| 17,462. 08| Oct 31, 2010| 19,727. 01| -2264. 934 | Taurus Mutual Fund | 56| May 31, 2011| 5,175. 20| Mar 31, 2011| 2,223. 86| 2951. 34 | UTI Mutual Fund | 240| Mar 31, 2011| 53,000. 45| Sep 30, 2010| 61,790. 45| -8790 | * indicates currently in operation | FII investments indicated a steady growth between 2003-05, declining in the period between 2006-09 and then registering a slight recovery in 2010. Growth in FII investments post 2009 would indicate that India continues to be an attractive investment destination, borne out by such empirical facts.

The Indian mutual fund industry is undergoing a transformation, adapting to the various regulatory changes that are coming about. 1. Entry Load: In recent years, the industry regulator, Securities and Exchange Board of India (‘SEBI’) has focused more on investor protection, introducing a number of regulations To empower retail investors in Mutual Funds (‘MFs’). SEBI began by prohibiting the charging of initial issue expenses, which were permitted for closed-ended Schemes and mandating that such MF schemes shall recover sales and distribution expenses through entry load only.

Subsequently, w. e. f. August 1, 2009, SEBI banned the entry load that was deducted from the invested amount, and instead allowed customers the right to negotiate and decide commissions directly with distributors based on investor’s assessment of various factors and related services to be rendered. Further, higher distributor commission on Unit Linked Insurance Products (issued by Insurance companies) is giving tough competition to the business of mutual funds. 2. No Additional Management Fees on schemes launched on “no load” basis: SEBI has scrapped the additional management fee

Of 1% charged by AMCs on schemes launched on a no load basis leading to a further squeeze in margins earned by the AMC. 3. Direct Tax Code: With the Direct Tax Code (‘DTC’) on the anvil, taxability of income from mutual funds, at the hands of investors will also have a bearing on the growth of the mutual fund industry. Unlike the extant tax provisions, DTC does not provide for any benefit for investment in equity linked savings scheme, and also proposes to increase the compliance in the hands of MFs by widening the scope of deduction of tax to include payments made to residents.

The code has also created an anomaly on the taxability of the MF investors. It is unclear whether the income earned will be exempt or taxed in the hands Of the investors on accrual basis, as stated in the Discussion Paper on the DTC. 4. Documentation: In December 2009, SEBI had made it mandatory for all AMCs to maintain a copy of full investor documentation including Know Your Customer i. e. KYC details. Such documentation was earlier maintained by the respective MF distributors who have now been asked to give a copy of the same to the fund houses. 5.

Disclosure of Investor Complaints in the Annual Report: In order to improve the transparency in the ‘grievance redressed mechanism’, SEBI has recently issued a Circular that requires MFs to include details of investor Complaints in their Annual Report as part of the Report of the Trustees, beginning with the annual report for the year 2009-10. MFs provide abridged booklets of the Annual Reports to all the unit holders. 6. Fund of Fund Schemes: In the past, AMCs had been entering into revenue sharing arrangements with offshore funds in respect of investments made on behalf of Fund of Fund (‘FoF’) Schemes.

Recently, SEBI has issued directions stating that since these arrangements create conflict of interest, AMCs shall be prohibited from entering into any revenue Sharing arrangement with the underlying funds in any manner and they have been prohibited from receiving any revenue by whatever means/ head from the Underlying fund. Further, SEBI is also in discussions to raise the AMC Fees from the present cap of 0. 75% of the net assets in the case of off schemes. 7. Regulation of Distributors: In India, the distributors of the MF units are not separately regulated by SEBI or any other regulatory authority.

Currently, distributors are required to take A simple test. However, there have been instances of distributors rendering professional advice to investors without the requisite qualifications and information About the MF schemes. SEBI is in discussions to introduce a more stringent certification programme for all distributors of MF schemes. CHALLENGES ; ISSUES FACED BT THE INDIAN MUTUAL FUNDS INDUSTRY….. CHALLENGES ; ISSUES FACED BY MUTUAL FUND INDUSTRY: Issues 1. Low Levels of Customer Awareness: An impressive rate in

Low customer awareness levels a financial literacy pose the biggest challenge to channel is in household savings into mutual funds. IIMS Data works data released in 2007 establishes that low awareness levels among retail investors has a direct bearing on the low mutual fund off take in the retail segment. The general lack of understanding of mutual fund products amongst Indian investors is pervasive in metros and Tier 2 cities alike and majority of them draw little distinction in their approach to investing in mutual funds and direct stock market investments.

A large majority of retail investors lack an understanding of risk-return, asset allocation and Port folio diversification concepts. Low awareness of SIPs in India has resulted in a majority of the customers investing in a lump sum manner. 2. Limited Focus on Increasing Retail Penetration: Investor contribution remains skewed towards the corporate sector… In spite of India offering an exciting retail environment, with abundant growth opportunities, participation from the segment of retail investors continues to remain At deplorably low levels.

As of March 31, 2010, the participation from the retail segment was 26. 6%, a marginal increase from 21. 3% as on March 31, 2009. Dependence on the corporate sector is still pretty pronounced at 51%, which is not much of a change from last year. Volatile market conditions sound a note of caution for the industry, as high dependence on then corporate sector may result in the fund houses being prone to unexpected redemption pressures. Investor Contribution as of March 31, 2010

The rationale behind institutional sales claiming such a large chunk of the AUM pie is the benefit of tax arbitrage and lack of short term investment options. When compared with economies like US and China, investments channelized through corporate, Comprise only around 15% and 30% of the assets under management (AUM), respectively. Overall, the assets under management recorded an impressive growth of 47%, as of March 2010 which was predominantly driven by the corporate sector, Posting the same level of growth. In the same period, the retail sector also managed to report a trong growth of 84% in its assets under management, followed by the HNI segment growing 24%. It has been observed of late, that the HNI segment Especially in Tier 2 ;Tier 3 cities has expanded creating a pool of investible surplus at the disposal of the mutual fund industry. The Indian mutual fund industry had limited focus on building retail AUM and has only recently stepped up efforts to augment branch presence in Tier 2 and Tier 3 towns. Players have historically garnered AUM by targeting the institutional segment that comprises 63 percent AUM share as at March 2008.

Large ticket size, tax arbitrage available to corporate on investing in Money market mutual funds, easy accessibility to institutional customers concentrated in Tier 1 cities are the factors instrumental in mutual fund houses focusing on the institutional segment. Building retail AUM requires significant distribution capability and a wide footprint to be able to penetrate into Tier 2 and Tier 3 towns, which AMCs have recently started focusing on. Institutional AUM, however, makes the industry Vulnerable to the possibility of sudden redemption pressures that impact the fund performance. 3.

Limited Focus Beyond the Top 20 Cities: The mutual fund industry has continues to have limited penetration Beyond the top 20 cities. Cities beyond Top 20 only comprise approximately 10 percent of the industry AUM as per industry practitioners. The retail population residing in Tier 2 and Tier 3 towns, even if aware and willing, are unable to invest in mutual funds owing to limited access to suitable distribution channels and investor servicing. The distribution network of most mutual fund houses is largely focused on the Top 20 cities given the high cost associated with deeper penetration into Tier 2 and Tier 3 towns.

However, some of the mutual fund houses have begun focusing on cities beyond the Top 20 by building their branch presence and strengthening distribution reach through non-branch channels. 4. Limited Innovation in Product Offerings: The Indian mutual fund industry has largely been product-led and not sufficiently customer focused. The popularity of NFOs triggered a proliferation of schemes with a large number of non-differentiated products. The industry has had a limited focus on innovation and new product development, thereby catering to the limited needs of the Customer.

Products that cater specifically to customer life stage needs such as education, marriage, and housing are yet to find their way in the Indian market. Further, relatively nascent product categories viz. multi-manager funds that are among the most popular hybrid funds globally have not grown in India owing to the prevailing taxation structure. The Indian mutual fund industry offers limited investment options viz. capital guarantee products for the Indian investors, a large majority of whom are risk averse.

The Indian market is still to witness the launch of green funds, socially responsible investments, fund of hedge funds, enhanced money market funds, renewable and energy/ climate change funds. 5. Limited Flexibility in Fees and Pricing Structures: The fee structure in the Indian mutual fund industry enjoys little flexibility unlike developed markets where the level of management fees depend on a variety of factors such as the investment objective of the fund, fund assets, fund performance, the nature and number of services that a fund offers.

While the expenses have continuously risen, the management fee levels have remained stagnant. Distributors are compensated for their services through a fixed charge in The form of entry load and additional fees as considered appropriate by the AMC. Regardless of the quality of advice and service provided, the commission payable by the mutual fund customer to the distributors is fixed. 6. Limited Customer Engagement: Mutual fund distributors have been facing questions on their competence, degree of engagement with customer and the value provided to the customer.

In the absence of a framework to regulate distributors, both the distributors and the mutual fund houses have exhibited limited interest in continuously engaging with customers post closure of sale as the commissions and incentives had been largely in the form of upfront fees from product sales (although trail commissions have also been paid in limited instances regardless of the service rendered). As a result of the Limited engagement, there have been rising instances of miss-selling to customers. 7. Limited Focus of the Public Sector Network on Distribution of Mutual Funds:

Public sector banks with a large captive customer base, significant reach beyond the Top 20 cities in semi-urban and rural areas, and the potential to build the retail investor base, have so far played a very limited role in mutual funds distribution. The India Post network operating the largest postal network in the world majority of which is in rural areas, is stated to have 250 post offices selling mutual funds of five AMCs only; further most of the post offices selling mutual funds are located in Tier 1 and Tier 2 cities which are already been catered to, by national level and other distributors24.

India Post with its customer base of 170 million account holders and branch network of over 154,000 branches, doubling the size of all bank branches Put together is a formidable channel which has been under utilized to date for mutual fund distribution25. The postal network also serves as a means to facilitate inclusive and equitable growth to all regions and social groups by providing them with access to financial products such as mutual funds. Further the credibility enjoyed by the Nationalized Banks, Regional Rural Banks and Cooperative Banks in the rural hinterland has not been fully leveraged to target the retail segment. . Multiple Regulatory Frameworks Governing Financial Services Sector Verticals: The regulatory and compliance requirements vary across verticals within The financial services sector specifically mutual funds, insurance and Pension funds each of which are governed by an independent regulatory Frame work and are competing for the same share of the customer’s Wallet. The mutual fund industry lacks a level playing field in comparison with other verticals within the financial services sector.

The mandatory PAN card requirement for investing in mutual funds is perceived to restrict significant potential of the mutual fund industry in being able to tap small ticket investors from investing in mutual funds. On the other hand, ULIPs which are deemed to be competing products Do not have the mandatory PAN requirement. The recently introduced NPS regulations requiring the AMCs to create a separate legal entity for pension funds management has created an additional cost structure for the mutual fund players.

Outsourcing funds management in excess of INR 80 billion by insurance companies is not permitted and thus restricts an additional revenue opportunity for the mutual fund industry. 9. Equity participation lagging behind market expectations: Historically, it has been observed that an equity fund remains locked in for an average of 18 months. As per AMFI statistics, around 40 per cent of retail Investors exit from equity funds before they complete two years. Even in the HNI segment, only 48 per cent investors remain invested in equity funds for over two years.

Growth in the equity base has been particularly sluggish in the past year, burdened with huge outflow of funds. Mutual fund net investments in equity have plummeted sharply over the last year from Rs 6,983 cores in March 2009 to an outflow of Rs 4,082 crores in March 2010. At this point, it is interesting to make note of the movement of FII investments plotted against net mutual fund investments over the last decade. AN INITIATIVE TOWARDS ENHANCING THE FUTURE OF INDIAN MUTUAL FUND INDUSTRY WAYS OF ENHANCING THE FUTURE OF MUTUAL FUNDS: 1. MARKETING STRATEGIES ADOPTED TO ENHANCE THE GROWTH OF MUTUAL FUNDS INDUSTRY: 1

The Following are the marketing strategies adopted at basic level to boost up the growth of of mutual funds in India. These strategies can be divided into two main headings: 2 O Direct marketing O Selling through intermediaries. O 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 Selling: In this case the customer support officer or Relationship Manager of the fund at a particular branch takes 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 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 havetheirdatabaseofinvestorsandtheycrossselltheirotherproduc ts.

Sometimespeople belonging to a particular profession are also contacted through phone and are the informed about the 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 mutual funds. Addresses of people are picked at random 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 literature was mailed.

Answers their queries and is generally 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. 3 Advertisements in news papers and magazines: The funds regularly advertise in business news papers and magazines besides in leading national dailies. The purpose to keep investors aware about the schemes offered by the fund and their performance in recent past. Advertisement in TV/FM Channel: The funds 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 fund are put at important locations of the city where the movement of the people is very high. The hoarding and banner generally contains information either about one particular scheme or brief information about all schemes of fund 4 Selling through intermediaries: Intermediaries contribute towards 80% of the total sales of mutual funds. These are the people/ distributors who are indirect touch with the investors. They perform an important role in attracting new customers. Most o 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 after sale services offered by the Intermediary to 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 attracting 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 after sale services offered by the intermediary to 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. 5 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 other queries related to the market situation . Sometimes, special training programmes are also conducted for the new agents/ distributors.

Training involves giving details about the products of the fund, their present performance in the market, what the competitors are doing and what they can do to increase the sales of the fun 6 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 prospectandbriefhimaboutthefund. Theconversionrateisveryhighinthissituation, generally, around60%. Both the fund and the agent provide even after sale services in this particular case. 7

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. MARKETING AS TOOL TO ENHANCE THE GROWTH OF MUTUAL FUND INDUSTRY…. HOW PROPER MARKETING AS A TOOL CAN ENHANCE THE FUTURE OF THIS INDUSTRY: When we consider marketing, we have to see the issues in totality, because we cannot judge an elephant by its trunk or by its tail but we have to see it in its totality.

When we say marketing of mutual funds, it means, includes and encompasses the following aspects: ? Assessing of investors needs and market research; ?Responding to investors needs; ?Product designing; ?Studying the macro environment; Timing of the launch of the product; ?Choosing the distribution network; ?Finalizing strategies for publicity and advertisement; ?Preparing offer documents and other literature; ?Getting feedback about sales; ?Studying performance indicators about fund performance like NAV; ? Sending certificates in time and other after sales activiti