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Disha School of Management and Education1

CHAPTER I

INTRODUCTION


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Salaried Class People

In 2009, Over half the world's population now belongs to the middle class, as a result of rapid

growth in emerging countries. It characterized the middle class as having a reasonable amount

of discretionary income, so that they do not live from hand to mouth as the poor do, and

defined it as beginning at the point where people have roughly a third of their income left for

discretionary spending after paying for basic food and shelter. This allows people to buy

consumer goods, improve their health care, and provide for their childrens education. Most

of the emerging middle class consists of people who are middle-class by the standards of the

developing world but not the rich one, since their money incomes do not match developed

country levels, but the percentage of it which is discretionary does. India is also an emerging

country, so how long we call our Indian salaried class- as an investing class or saving class.

The Indian salaried class people are cash-rich, thanks to their ever-increasing salaries. They

do not park their hard-earned in money in traditional avenues. They look for higher returns

and tax sops; their risk appetite is more; they patronize the mutual funds.

THE ECONOMY is prospering, the job market is booming and salaries are touching a new

high. The new breed of Indian youth has its pockets full and is intelligent enough not to let its

money rust in bank accounts. Investment is on their mind and an option that has the potential

to multiply their savings and provide maxi-mum tax rebate is the one they crave.


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Investment choices for the salaried class

y Traditional saving options like post office schemes and fixed deposits are now pass.Options like post office schemes and fixed deposits are not very popular with the

youth as the rate of interest on them is lower as compared to other in-vestment options

available, says Mr Vishal Sawhney, Manager, Citibank.

y Safety and security are no longer the major criteria that determine the choice ofinvestment. With money in hand and age on their side, the young investors are not

hesitant in taking risk, say experts. Fixed deposits are not a very attractive investment

option for youngsters these days. Most of our clients who opt for fixed deposits are

senior citizens, says Manoj Mishra, Financial Advisor, Sansad Marg Head Post

Office.

ySaving tax is one of the major reasons behind investment by the Indian family.Traditional saving schemes do not provide any tax benefits and are, therefore, keeping

the youngsters away from them. Why should I invest in fixed deposits and post office

schemes when they provide no tax rebates and the rate of return on them is fixed and

also lower than other investment options, is what Reitesh, 30, a businessmanhas to

say.

y Mutual fund is the most favoured option of the salaried people today. The stockmarket is doing so well. I am a little apprehensive about investing directly in the stock

market but at the same time I want to avail of the benefits of the rapidly rising stockmarket. So, mutual funds are the best option for me, says Yash Chabra, 29,

Executive, TCS.

y The reason why mutual funds are such a big hit with salaried people is because of theconvenience factor. Investing in mutual funds does not require an in-depth

knowledge of the market. Moreover, no personal monitoring is required. This makes a

very popular investment option even for youngsters, points Amit Singh, Assistant

Manager, HDFC.

y With a hectic job schedule, not many have the time to study the market and personallymonitor their investments. I would love to invest directly in the stock market but a

thorough knowledge of the market is needed for a judicious investment decision. My

job leaves no time for this and thats why I chose mutual funds, states Vikas Sahani,

28, Branch Manager, Standard Chartered.


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y Investment in mutual funds through the Systematic Investment Plan (SIP) is afavoured investment option for the salaried class. This is especially true of the young

salaried class which has just started earning and does not have a fat bank balance as

yet. In case of Systematic Investment Plans, instead of bulk payment, a small amount

is to be paid every month. This makes them very popular with the salaried class who

find it difficult to shell out a large amount at one go, says Rishi Das, Manager,

HDFC.

y One thing that the working men do not prefer is locking in their money for a long timein the same instrument. Its true that people these days dont prefer options like fixed

deposits as they view them as something which tends to lock their money in and also

the returns are lower as compared to other options, says Devendra Singh, Officer,

Canara Bank. It is because of these reasons that fixed deposits have lost their sheen

from the point of view of the youngsters. I have age by my side and, therefore, can

afford to take risks. Fixed deposits can happen later in life, says Neha, 26, an

employee with Reliance.

y Similarly, insurance is also an option which according to our youngsters locks in theirmoney. So insurance is something that youngsters go in for, a little later in life. A

majority of our clients are those who are married and into families, Shivani Singh,

Branch Manager, Bharati AXA, says.

y In insurance, it is the Unit Linked Insurance Plan (ULIP) that is very popular with thesalaried youth. ULIP which provides market exposure along with the benefits of

insurance is extremely popular with young investors, says Bhawana, Relationship

Manager, Bajaj Capital.

y Stock market is another hot investment option for the youth. Still, there are many whohesitate to risk their hard-earned money in the stock market. I once lost around Rs 2

lakhs in the stock market and since then I stay away from it, is what Sumit, 33, a

petrol pump owner, has to say.

y But not all are so sceptical about the stock market. The rising Sensex is attractingmany job holders to the market. Youngsters as well as old age people, these days

have a very good understanding of the stock market and they are entering the market

in large numbers, says an officer at Kotak Securities. But the risk in the stock market


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is very high. It is always recommended that only serious investors with an in-depth

knowledge of the market venture into it, he adds.

SALARIED CLASS PEOPLE OF RAIPUR

Approximately half of the population of Raipur is working class people. Every house have at

least one salaried man or woman. The salaried people are either in the Governmental service

or in any other corporate service. With the rise in the salary package the salaried class people

are able to save more and are expending for their own as well as for their family. But with rise

of inflation the expenditure has been shortened. The requirement are not been fulfilled. The

rising prices have affected the saving as well as the investment pattern of the salaried class.

INVESTMENT PATTERN

The salaried people have the common attitude towards the usage of the income. They firstly

try to expend the money and then try to save them and finally look towards investing the

saved money. In this way they have shortage of money for the investment purpose.

INCOME EXPEND

AVEINVE T


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The ideal pattern is just opposite of it. The people should try to invest first and then look for

expenditure and finally saving.

Nowadays with the rise of standard of living and awareness about securing future through

investment many salaried class people undertake many schemes as investments to either

secure future or to raise the value of their wealth. Investing in PPF, Post Office deposit, FD,

and purchasing NSC are some of the traditional plans. The plans such as investment in Gold,

Mutual Fund, Real Estate, and Stock Market are something which the salaried people are not

well aware of. Though many individuals of Raipur have started investing in Mutual Fund,

many of them try to avoid investing in Mutual Funds as they find it a bit risky to place there

money. Lack of awareness among the salaried class people is also leading them to be away

from such a good and helpful investment plan.

The salaried class people of Raipur can use Mutual Fund as a way to save money plus growth

of the value of the money. After being aware of the working of the Mutual fund they will

definitely try to invest in it as it has many advantages and also it is beneficial than the

traditional plans of investment.

INCOME INVEST EXPEND SAVE


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MUTUAL FUND

A Mutual Fund is a trust that pools the savings of a number of investors who share a common

financial goal. The money thus collected is then invested in capital market instruments such

as shares, debentures and other securities. The income earned through these investments and

the capital appreciation realised are shared by its unit holders in proportion to the number of

units owned by them. Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. The flow chart below describes broadly the working ofa

mutual fund:

Mutual Fund Operation Flow Chart

A mutual fund is just the connecting bridge or a financial intermediary that allows a group of

investors to pool their money together with a predetermined investment objective. The mutual

fund will have a fund manager who is responsible for investing the gathered money into

specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units

or portions of the mutual fund and thus on investing becomes a shareholder or unit holderof

the fund.Mutual funds are considered as one of the best available investments as compare to

others they are very cost efficient and also easy to invest in, thus by pooling money together

in a mutual fund, investors can purchase stocks or bonds with muchlower trading costs than if

they tried to do it on their own. But the biggest advantage to mutual funds is diversification,

by minimizing risk & maximizing returns.


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Mutual Fund Indusrty in India

The mutual fund industry in India started in 1963 with theformation of Unit Trust of India, at

the initiative of the Government of India and Reserve Bank of India. The history of mutua

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 o

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 i

place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 198

UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry ofPublicSectorFunds)

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 Indi

(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987

followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89)

Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fun

(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.47,00

crores.

Third Phase 1993-2003 (Entry ofPrivateSector 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 yeain 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 merge

with Franklin Templeton) was the first private sector mutual fund registered in July 1993.


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The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive an

revised Mutual Fund Regulations in 1996. The industry now functions under the SEB

(Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual fund

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. 1,21,80

crores. The Unit Trust of India with Rs.44,541 crores of assets under management was wa

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 bifurcate

into two separate entities. One is the Specified Undertaking of the Unit Trust of India wit

assets under management of Rs.29,835 crores as at the end of January 2003, representin

broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specifie

Undertaking of Unit Trust of India, functioning under an administrator and under the rule

framed by Government of India and does not come under the purview of the Mutual Fun

Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered

with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of th

erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets unde

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.


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The graph indicates the growth of assets over the years.


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Regulatory Authorities

To protect the interest of the investors, SEBI formulates policies and regulates the mutual

funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines fro

time to time. MF either promoted by public or by private sector entities including on

promoted by foreign entities is governed by these Regulations.

SEBI approved Asset Management Company (AMC) manages the funds by makin

investments in various types of securities. Custodian, registered with SEBI, holds th

securities of various schemes of the fund in its custody

According to SEBI Regulations, two thirds of the directors of Trustee Company or boar

of trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units o

mutual funds that the mutual funds function within the strict regulatory framework. Its

objective is to increase public awareness of the mutual fund industry.AMFI also i

engaged in upgrading professional standards and in promoting best industry practices i

diverse areas such as valuation, disclosure, transparency etc.

Diversification

Diversification is nothing but spreading out your money across available or different type

of investments. By choosing to diversify respective investment holdings reduces ris

tremendously up to certain extent. The most basic level of diversification is to buy

multiple stocks rather than just one stock. Mutual funds are set up to buy many stocks

Beyond that, you can diversify even more by purchasing different kinds of stocks, the

adding bonds, then international, and so on. It could take you weeks to buy all thes

investments, but if you purchased a few mutual funds you could be done in a few hour

because mutual funds automatically diversify in a predetermined category of investment

(i.e. - growth companies, emerging or mid size companies, low-grade corporate bonds,

etc).


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TypesofMutual FundsSchemesin India

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financia

position, risk tolerance and return expectations etc. thus mutual funds has Variety o

flavors, Being a collection of many stocks, an investors can go for picking a mutual fun

might be easy. There are over hundreds of mutual funds scheme to choose from. It i

easier to think of mutual funds in categories, mentioned below.

Overview of existing schemes existed in mutual fund category: BY STRUCTURE

1. Open - Ended Schemes:

An open-end fund is one that is available for subscription all through the year. These d

not have a fixed maturity. Investors can conveniently buy and sell units at Net Ass

Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

2. Close - Ended Schemes:

These schemes have a pre-specified maturity period. One can invest directly in the schem

at the time of the initial issue. Depending on the structure of the scheme there are two exit

options available to an investor after the initial offer period closes. Investors can transac

(buy or sell) the units of the scheme on the stock exchanges where they are listed. Th

market price at the stock exchanges could vary from the net asset value (NAV) of th

scheme on account of demand and supply situation, expectations of unitholder and othe

market factors. Alternatively some close-ended schemes provide an additional option o

selling the units directly to the Mutual Fund through periodic repurchase at the scheme

NAV; however one cannot buy units and can only sell units during the liquidity window

SEBI Regulations ensure that at least one of the two exit routes is provided to the investor

3. Interval Schemes:

Interval Schemes are that scheme, which combines the features of open-ended and close-

ended schemes. The units may be traded on the stock exchange or may be open for sale o

redemption during pre-determined intervals at NAV related prices.


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The risk return trade-off indicates that if investor is willing to take higher risk the

correspondingly he can expect higher returns and vise versa if he pertains to lower ris

instruments, which would be satisfied by lower returns. For example, if an investors opt

for bank FD, which provide moderate return with minimal risk. But as he moves ahead t

invest in capital protected funds and the profit-bonds that give out more return which i

slightly higher as compared to the bank deposits but the risk involved alsoincreases in the

same proportion.

Thus investors choose mutual funds as their primary means of investing, as Mutual fund

provide professional management, diversification, convenience and liquidity. That doesn

mean mutual fund investments risk free. This is because the money that is pooled in ar

not invested only in debts funds which are less riskier but are also invested in the stoc

markets which involves a higher risk but can expect higher returns. Hedge fund involves

very high risk since it is mostly traded in the derivatives market which is considered ver

volatile.

Overview of existing schemes existed in mutual fund category: BY NATURE

1. Equity fund:

These funds invest a maximum part of their corpus into equities holdings. The structure o


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the fund may vary different for different schemes and the fund managers outlook o

different stocks. The Equity Funds are sub-classified depending upon their investmen

objective, as follows:

y Diversified Equity Fundsy Mid-Cap Fundsy Sector Specific Fundsy Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high o

the risk-return matrix.

2. Debt funds:

The objective of these Funds is to invest in debt papers. Government authorities, privat

companies, banks and financial institutions are some of the major issuers of debt papers

By investing in debt instruments, these funds ensure low risk and provide stable income t

the investors. Debt funds are further classified as:

y Gilt Funds: Invest their corpus in securities issued by Government, popularlknown as Government of India debt papers. These Funds carry zero Default ris

but are associated with Interest Rate risk. These schemes are safer as they invest i

papers backed by Government.

y Income Funds: Invest a major portion into various debt instruments such as bondscorporate debentures and Government securities.

y MIPs: Invests maximum of their total corpus in debt instruments while they takminimum exposure in equities. It gets benefit of both equity and debt market.

These scheme ranks slightly high on the risk-return matrix when compared with

other debt schemes.

yShort Term Plans (STPs): Meant for investment horizon for three to six monthsThese funds primarily invest in short term papers like Certificate of Deposits

(CDs) and Commercial Papers (CPs). Some portion of the corpus is also investe

in corporate debentures.


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y Liquid Funds: Also known as Money Market Schemes, These funds provides easliquidity and preservation of capital. These schemes invest in short-term

instruments like Treasury Bills, inter-bank call money market, CPs and CDs

These funds are meant for short-term cash management of corporate houses an

are meant for an investment horizon of 1day to 3 months. These schemes rank lo

on risk-return matrix and are considered to be the safest amongst all categories o

mutual funds.

3. Balanced funds:

As the name suggest they, are a mix of both equity and debt funds. They invest in bot

equities and fixed income securities, which are in line with pre-defined investment

objective of the scheme. These schemes aim to provide investors with the best of both th

worlds. Equity part provides growth and the debt part provides stability in returnsFurther the mutual funds can be broadly classified on the basis of investment parameter

viz,

Each category of funds is backed by an investment philosophy, which is pre-defined in the

objectives of the fund. The investor can align his own investment needs with the fund

objective and invest accordingly.

By investment objective:

y Growth Schemes: Growth Schemes are also known as equity schemes. The aim othese schemes is to provide capital appreciation over medium to long term. Thes

schemes normally invest a major part of their fund in equities and are willing to

bear short-term decline in value for possible future appreciation.

y Income Schemes:Income Schemes are also known as debt schemes. The aim othese schemes is to provide regular and steady income to investors. These scheme

generally invest in fixed income securities such as bonds and corporate debentures

Capital appreciation in such schemes may be limited.

y Balanced Schemes: Balanced Schemes aim to provide both growth and income bperiodically distributing a part of the income and capital gains they earn. These

schemes invest in both shares and fixed income securities, in the proportio


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indicated in their offer documents (normally 50:50).

y Money Market Schemes: Money Market Schemes aim to provide easy liquiditypreservation of capital and moderate income. These schemes generally invest i

safer, short-term instruments, such as treasury bills, certificates of deposit

commercial paper and inter-bank call money.

Other schemes

y Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time

to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linke

Savings Scheme (ELSS) are eligible for rebate.

y Index Schemes:Index schemes attempt to replicate the performance of a particular index such as the BSE

Sensex or the NSE 50. The portfolio of these schemes will consist of only those stock

that constitute the index. The percentage of each stock to the total holding will be identica

to the stocks index weightage. And hence, the returns from such schemes would be mor

or less equivalent to those of the Index.

y Sector Specific Schemes:

Typesofreturns

There are three ways, where the total returns provided by mutual funds can be enjoyed b

investors:

y Income is earned from dividends on stocks and interest on bonds. A fund pays ounearly all income it receives over the year to fund owners in the form of

distribution.

y If the fund sells securities that have increased in price, the fund has a capital gainMost funds also pass on these gains to investors in a distribution.

y If fund holdings increase in price but are not sold by the fund manager, the fund'


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shares increase in price. You can then sell your mutual fund shares for a profit

Funds will also usually give you a choice either to receive a check for distributions

or to reinvest the earnings and get more shares.

Selecting The Right Mutual Fund

There are over 750 different mutual funds in India today and about 35 different companies

that run these funds. So, how will you choose which fund to invest in?Firstly, know your

own needs. Are you investing to fulfill a short-term or a long-term goal? Or, are you

investing just because you heard in your office cafeteria that you shouldinvest in a certain

fund? Not all mutual funds serve the same purpose, so you should know why you ar

investing. If you want capital appreciation for your son's education 20 years from no

you should not invest in a bond fund. However, if you want to save and protect you

capital for funding your son's education in 2 years time, then you should consider

conservative fund like a bond ormoney market fund, which will also give you som

income

Secondly, this brings us to time horizon. What period are you ready to invest in th

market for? Equity funds should be held for at least 3-5 years because equities are long-

term investment vehicles. Debt or money market funds, however, can be invested in fo

shorter periods of time.

Thirdly, how comfortable are you with thepromoterofthefund? Many new companies

are starting fund houses. Many of them will not be as successful as the ones that already

have a successful track record that they have built over the past 5-10 years. So,invest in

mutual funds that have been launched by companies that have a track record and are not

new into the Indian market.

Finally, many investors look at past performance and assume that the fund will continu

to return the same in the future. This is not always true and can often be wrong. Any fun

can do well over a short-term because luck and other factors can come into play. So, d


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not choose a fund to invest in just because it has done well in the recent past. You shoul

be interested in the long term performance of the fund. Invest in funds that have done wel

across market cycles and investment cycles.

Investing in Mutual Funds

1. Where can you purchase mutual funds - banks, brokerage houses, third partdistributors

2. Fill out form - you will need your PAN number for that3. Get receipt/acknowledgment as proof that you have invested in the fund4. Fund House will send you regular statements on your status and NAV of you

units

5. You can choose to invest through a SIP scheme - Systematic Investment Plan.Allows you to invest small amounts of money at regular intervals. Helps you avoid

market timing and you can enter the market with a small amount of capital rathe

than a lump sum. You can also set up an electronic transfer directly from you

bank through the ECS transfer facility, so you don't have to write a cheque every

month

6. How can you educate yourself about MF's - read personal finance magazines likOutlook Money or Money Today or the personal finance sections of busines

newspapers; may newspapers like Hindu or Business Standard also carry weekl

reports on the mutual funds.


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Pros & consofinvestingin mutualfunds:

For investments in mutual fund, one must keep in mind about the Pros and cons o

investments in mutual fund.

AdvantagesofInvesting Mutual Funds:

1. Professional Management - The basic advantage of funds is that, they are professiona

managed, by well qualified professional. Investors purchase funds because they do no

have the time or the expertise to manage their own portfolio. A mutual fund is considere

to be relatively less expensive way to make and monitor their investments.

2. Diversification - Purchasing units in a mutual fund instead of buying individual stock

or bonds, the investors risk is spread out and minimized up to certain extent. The ide

behind diversification is to invest in a large number of assets so that a loss in an

particular investment is minimized by gains in others.

3. EconomiesofScale - Mutual fund buy and sell large amounts of securities at a time

thus help to reducing transaction costs, and help to bring down the average cost of the uni

for their investors.

4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidat

their holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to othe

available instruments in the market, and the minimum investment is small. Most AM

also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with jus

Rs.50 per month basis.

DisadvantagesofInvesting Mutual Funds:

1. Professional Management- Some funds doesnt perform in neither the market, as thei

management is not dynamic enough to explore the available opportunity in the marke

thus many investors debate over whether or not the so-called professionals are any better


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than mutual fund or investor him self, for picking up stocks.

2. Costs The biggest source of AMC income, is generally from the entry & exit loa

which they charge from an investors, at the time of purchase. The mutual fund industries

are thus charging extra cost under layers of jargon.

3. Dilution - Because funds have small holdings across different companies, high return

from a few investments often don't make much difference on the overall return. Dilution is

also the result of a successful fund getting too big. When money pours into funds tha

have had strong success, the manager often has trouble finding a good investment for al

the new money.

4. Taxes - when making decisions about your money, fund managers don't consider your

personal tax situation. For example, when a fund manager sells a security, a capital-gain

tax is triggered, which affects how profitable the individual is from the sale. It might hav

been more advantageous for the individual todefer the capital gains liability.


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SEBI

In 1988 the Securities and Exchange Board of India (SEBI) was established by the

Government of India through an executive resolution, and was subsequently upgraded as a

fully autonomous body (a statutory Board) in the year 1992 with the passing of the Securities

and Exchange Board of India Act (SEBI Act) on 30th January 1992. In place of Government

Control, a statutory and autonomous regulatory board with defined responsibilities, to cover

both development & regulation of the market, and independent powers have been set up.

Paradoxically this is a positive outcome of the Securities Scam of 1990-91.

The basicobjectivesofthe Boardwereidentifiedas:

yto protect the interests of investors in securities;

y to promote the development of Securities Market;y to regulate the securities market andy for matters connected therewith or incidental thereto.

Since its inception SEBI has been working targetting the securities and is attending to the

fulfillment of its objectives with commendable zeal and dexterity. The improvements in the

securities markets like capitalization requirements, margining, establishment of clearing

corporations etc. reduced the risk of credit and also reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed registration norms,

the eligibility criteria, the code of obligations and the code of conduct for different

intermediaries like, bankers to issue, merchant bankers, brokers and sub-brokers, registrars,

portfolio managers, credit rating agencies, underwriters and others. It has framed bye-laws,

risk identification and risk management systems for Clearing houses of stock exchanges,

surveillance system etc. which has made dealing in securities both safe and transparent to theend investor.

Another significant event is the approval of trading in stock indices (like S&P CNX Nifty &


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Sensex) in 2000. A market Index is a convenient and effective product because of the

following reasons:

y It acts as a barometer for market behavior;y It is used to benchmark portfolio performance;y It is used in derivative instruments like index futures and index options;y It can be used for passive fund management as in case of Index Funds.

Two broad approaches of SEBI is to integrate the securities market at the national level, and

also to diversify the trading products, so that there is an increase in number of traders

including banks, financial institutions, insurance companies, mutual funds, primary dealers

etc. to transact through the Exchanges. In this context the introduction of derivatives trading

through Indian Stock Exchanges permitted by SEBI in 2000 AD is a real landmark.


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Bank

A bankis a financial intermediary that accepts deposits and channels those deposits

into lending activities, either directly or through capital markets. A bank connects customers

with capital deficits to customers with capital surpluses.

The definition of a bank varies from country to country. See the relevant country page

(below) for more information.

Under English common law, a banker is defined

as a person who carries on the business of

banking, which is specified as:

conducting current accounts for his customers

paying cheques drawn on him, and

collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act that codifies the

law in relation to negotiable instruments, including cheques, and this Act contains a statutory

definition of the term banker: bankerincludes a body of persons, whether incorporated or not,

who carry on the business of banking' (Section 2, Interpretation). Although this definition

seems circular, it is actually functional, because it ensures that the legal basis for bank

transactions such as cheques does not depend on how the bank is organised or regulated.

The business of banking is in many English common law countries not defined by statute but

by common law, the definition above. In other English common law jurisdictions there are

statutory definitions of the business of bankingorbanking business. When looking at these

definitions it is important to keep in mind that they are defining the business of banking for

the purposes of the legislation, and not necessarily in general. In particular, most of the

definitions are from legislation that has the purposes of entry regulating and supervising banks

rather than regulating the actual business of banking. However, in many cases the statutory

definition closely mirrors the common law one. Examples of statutory definitions:


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"banking business" means the business of receiving money on current or deposit account,

paying and collecting cheques drawn by or paid in by customers, the making of advances to

customers, and includes such other business as the Authoritymay prescribe for the purposes

of this Act; (Banking Act (Singapore), Section 2, Interpretation).

"banking business" means the business of either or both of the following:

receiving from the general public money on current, deposit, savings or other similar account

repayable on demand or within less than [3 months] ... or with a period of call or notice of less

than that period;

paying or collecting cheques drawn by or paid in by customers

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct

debit and internet banking, the cheque has lost its primacy in most banking systems as a

payment instrument. This has led legal theorists to suggest that the cheque based definition

should be broadened to include financial institutions that conduct current accounts for

customers and enable customers to pay and be paid by third parties, even if they do not pay

and collect cheques.

Standardactivities

Banks act as payment agents by conductingchecking or current accountsfor customers,

paying cheques drawn by customers on the bank, and collecting cheques deposited to


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customers' current accounts. Banks also enable customer payments via other payment

methods such as telegraphic transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current accounts, by accepting term

deposits, and by issuing debt securities such asbanknotes and bonds. Banks lend money by

making advances to customers on current accounts, by making installment loans, and by

investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered indispensable by

most businesses, individuals and governments. Non-banks that provide payment services such

as remittance companies are not normally considered an adequate substitute for having a bank

account.

Banks borrow most funds from households and non-financial businesses, and lend most funds

to households and non-financial businesses, but non-bank lenders provide a significant and in

many cases adequate substitute for bank loans, and money market funds, cash management

trusts and other non-bank financial institutions in many cases provide an adequate substitute

to banks for lending savings to.

Widercommercialrole

y The commercial role of banks is not limited to banking, and includes:y issue of banknotes (promissory notes issued by a banker and payable to bearer on

demand)

y processing of payments by way of telegraphic transfer,EFTPOS, internet banking orother means

y issuing bank drafts and bank chequesy accepting money on term deposity lending money by way of overdraft, installment loan or otherwisey providing documentary and standbyletters of credit (trade finance),

guarantees, performance bonds, securities underwriting commitments and other forms

of off-balance sheet exposures

y safekeeping of documents and other items in safe deposit boxesy currency exchange


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y acting as a 'financial supermarket' for the sale, distribution or brokerage, with orwithout advice, of insurance, unit trusts and similar financial products

Channels

Banks offer many different channels to access their banking and other services:

y A branch is a retail locationy ATM is a machine that dispenses cash and sometimes takes deposits without the need

for a human bank teller. Some ATMs provide additional services.

y Mail: most banks accept check deposits via mail and use mail to communicate to theircustomers, eg by sending out statements

y Telephone banking is a service which allows its customers to perform transactionsover the telephone without speaking to a human

y Call centery Online banking is a term used for performing transactions, payments etc. over the

Internet

y Mobile banking is a method of using one's mobile phone to conduct bankingtransactions

y Video banking is a term used for performing banking transactions or professionalbanking consultations via a remote video and audio connection. Video banking can be

performed via purpose built banking transaction machines (similar to an Automated

teller machine), or via a videoconference enabled bank branch.

]Economicfunctions

The economic functions of banks include:

y issue of money, in the form of banknotes and current accounts subject tocheque or payment at the customer's order. These claims on banks can act as money because

they are negotiable and/or repayable on demand, and hence valued at par. They are

effectively transferable by mere delivery, in the case ofbanknotes, or by drawing a

cheque that the payee may bank or cash.


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y netting and settlement of payments banks act as both collection and paying agentsfor customers, participating in interbank clearing and settlement systems to collect,

present, be presented with, and pay payment instruments. This enables banks to

economise on reserves held for settlement of payments, since inward and outward

payments offset each other. It also enables the offsetting of payment flows between

geographical areas, reducing the cost of settlement between them.

y credit intermediation banks borrow and lend back-to-back on their own account asmiddle men.

y credit quality improvement banks lend money to ordinary commercial and personalborrowers (ordinary credit quality), but are high quality borrowers. The improvement

comes from diversification of the bank's assets and capital which provides a buffer to

absorb losses without defaulting on its obligations. However, banknotes and deposits

are generally unsecured; if the bank gets into difficulty and pledges assets as security,

to raise the funding it needs to continue to operate, this puts the note holders and

depositors in an economically subordinated position.

y maturity transformation banks borrow more on demand debt and short term debt, butprovide more long term loans. In other words, they borrow short and lend long. With a

stronger credit quality than most other borrowers, banks can do this by aggregating

issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g.

withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in

marketable securities that can be readily converted to cash if needed, and raising

replacement funding as needed from various sources (e.g. wholesale cash markets and

securities markets).


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BankingServicesin India

Bank Account

Opening bank account is the most common and first service of thebanking sector. There are

different types of bank account in Indian banking sector. The bank accounts are as follows:

Bank Savings Account - Bank Savings Account can be opened for eligible person / persons

and certain organisations / agencies (as advised by Reserve Bank of India (RBI) from time to

time)

Bank Current Account - Bank Current Account can be opened by individuals / partnership

firms / Private and Public Limited Companies / HUFs / Specified Associates / Societies /

Trusts, etc.

Bank Term Deposits Account - Bank Term Deposits Account can be opened by individuals /

partnership firms / Private and Public Limited Companies / HUFs/ Specified Associates /

Societies / Trusts, etc.

Bank Account Online - With the advancement of technology, the major banks in the public

and private sector has faciliated their customer to open bank account online. Bank account

online is registered through a PC with an internet connection. The advent of bank account

online has saved both the cost of operation for banks as well as the time taken in opening an

account.

Generalprocedure toopen an account

The Bank will provide you with details of various types of accounts that you may open with

the Bank.

You can have your choice on what type of account would best suit you, based on your needs

and requirements

The Bank will, prior to opening an account, require documentation and information as

prescribed by the "Know Your Customer" (KYC) guidelines issued by RBI and or such other

norms or procedures adopted by the Bank prior to opening the account.


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The due diligence process that the Bank would follow, will involve providing documentation

verifying your identity, verifying your address, and information onyour occupation or

business and source of funds. As part of the due diligence process theBank may also require

an introduction from a person acceptable to the Bank if they so deem necessary and will need

your recent photographs.

The Bank is required by law to obtain Permanent Account Number (PAN) or General Index

Register (GIR) Number or, where you do not possess such registration, declaration in Form

No. 60 or 61 as specified under the Income Tax Rules.

In the event that the account opening process is likely to take longer than normal, the Bank

will inform you of the revised timeline.

You can also call your branch or the executive for any queries that you may have and the

branch / executive will revert on the query at the earliest.

The Bank will provide you with the account opening forms and other relevant material to

enable you open the account. Bank personnel will advise you on the complete details of

information that would be required by the Bank for the verification process.

The Bank reserves the right, at its sole discretion, to open any account and at such terms as

the Bank may prescribe from time to time

Plastic Money

Credit cards in India is gaining ground. A number of banks in India are encouraging people to

use credit card. The concept of credit card was used in 1950 with the launch of charge cards in

USA by Diners Club and American Express. Credit card however became more popular with

use of magnetic strip in 1970.Credit card in India became popular with the introduction of

foreign banks in the country. Credit cards are financial instruments, which can be used more

than once to borrow money or buy products and services on credit. Basically banks, retail

stores and other businesses issue these.


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Loans

Banks in India with the way of development have become easyto apply in loan market. The

following loans are given by almost all the banks in the country:

Personal Loan

Car Loan or Auto Loan

Loan against Shares

Home Loan

Education Loan or Student Loan

In Personal Loan, one can get a sanctioned loan amount between Rs 25,000 to 10,00,000

depending upon the profile of person applying for the loan. SBI, ICICI, HDFC, HSBC are

some of the leading banks which deals inPersonal Loan.

Almost all the banks have jumped into the market of car loan which is also sometimes termed

as auto loan. It is one of the fast moving financial product of banks. Car loan / auto loan are

sanctioned to the extent of 85% upon the ex-showroom price of the car with some simple

paper works and a small amount of processing fee.

Loan against shares is very easy to get because liquid guarantee is involved in it.

Home loan is the latest craze in the banking sector with the development of the infrastructure.

Now people are moving to township outside the city. More number of townships are coming

up to meet the demand of 'house for all'. The RBI has also liberalised the interest rates of

home loan inorder to match the repayment capability of even middle class people. Almost all

banks are dealing in home loan. Again SBI, ICICI, HDFC, HSBC are leading.

The educational loan, rather to be termed as student loan, is a good banking product for the

mass. Students with certain academic brilliance, studying at recognised colleges/universities

in India and abroad are generally given education loan / student loan so as to meet the

expenses on tuition fee/ maintenance cost/books and other equipment.


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Money Transfer

Beside lending and depositing money, banks also carry money from one corner of the globe to

another. This act of banks is known as transfer of money. This activity is termed as remittance

business. Banks generally issue Demand Drafts, Banker's Cheques, Money Orders or other

such instruments for transferring the money.

It has been only a couple of years that banks have jumped into themoney transfer businessess

in India. The international money transfer market grew 9.3% from 2003 to 2004 i.e. from

US$213 bn. to US$233 bn. in 2004. Economists say that the market of money transfer will

further grow at a cumulative 10.1% average growth rate through 2008.

Visa has recently introduced the 'Visa Money Transfer' option for its savings and current

account holder of any bank with a visa debit card. This facility helps its customer to

transfer funds from his bank account to any visa card, eitherdebit or credit within India.A

Visa Money Transfer is of similar kind, in many respects, to the third-party fund transfer

option given by some banks to its account holders through e-cheque, but this is restricted to

only visa cardholders.

For NRIs

Almost all the Indian Banks provide services to the NRIs. There are different types of

accounts for them. They are:

Non-Resident (Ordinary) Account - NRO A/c

Non-Resident (External) Rupee Account - NRE A/c

Non-Resident (Foreign Currency) Account - FCNR A/c

An Indian resident who is earning forign exchange can also maintain Foreign Currency

account in the country with an authorised dealer bank but only to the maximum limit of 50%

of such foreign exchange earnings under the Exchange Earners Foreign Currency Account

(EEFC) Scheme.

NRO A/c.: The funds, credited to this account, cannot be repatriated outside India in foreign

exchange, without prior permission of the Reserve Bank of India. Interest, earned is eligible


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for repatriation outside India, net of Indian taxes. The remittance of interest (net of taxes) will

be permitted by the authorised dealer who maintains the account, if the account holder makes

an application to the authorised dealer, in the prescribed form. No RBI permission is required

for remittance of interest.

NRE A/c.: The funds, standing to the credit of this account, as well as interest earned thereon,

are remittable outside India in free foreign exchange, without permission of the RBI. The

interest income is not subject to Indian Income-tax. Credits to the accounts should be in the

form of remittance in foreign exchange from outside India, as well as other funds, which are

eligible to be remitted outside India, in free foreign exchange. Funds, emanating from local

sources, are not eligible to be credited to these accounts, unless these funds are otherwise

remittable outside India, in terms of the existing Exchange Control Regulations.

FCNR A/c.:These accounts can be opened in four foreign currencies:

Pounds Sterling;

US Dollars;

Japanese Yen;

Euro.

For the purpose of opening an account, remittance in foreign exchange, in the same currency,

should be received in India. The accounts can be opened only as fixed deposits, with a

minimum maturity of one year and, a maximum maturity of three years. The principal, as well

as interest, earned on these accounts, is remittable outside India, in the same currency or, in

other convertible currency, as desired by the account holder. The interest, earned on these

deposits, is exempt from Indian Income-tax.


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RESERVE BANK OF INDIA

The central bank of the country is the Reserve Bank of India (RBI). It was established in April

1935 with a share capital of Rs. 5 crores on the basis of the recommendations ofthe Hilton

Young Commission. The share capital was divided into shares of Rs. 100 each fully paid

which was entirely owned by private shareholders in the begining. The Govt. held share of

nominal value of Rs.2,20,000. Reserve Bank of India was nationalised in the year 1949. The

general superintendence and direction of the Bank is entrusted to Central Board of Directors

of 20 members, the Governor and four Deputy Governors, one Government official from the

Ministry of Finance, ten nominated Directors by the Government to give representation to

important elements in the economic life of the country, and four nominated Directors by the

Central Government to represent the four local Boards with the headquarters at Mumbai,

Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central

Government appointed for a term of four years to represent territorial and economic interests

and the interests of cooperative and indigenous banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of

1934) provides the statutory basis for the functioning of bank. The Bank was constituted for

the need of following:

y To regulate the issue of banknotesy To maintain reserves with a view to securing monetary stability andy To operate the credit and currency system of the country to its advantage.


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Functionsofthe RBI

Issue of Notes

The Reserve Bank has the monopoly of note issue in the country. It has the sole right to issue

currency notes of various denominations except one rupee note.

Banker to the Government

It performs all the banking functions of the state and the central Government and it also

tenders useful advice to the Government on matters related to economic and monetary policy.

It also manages public debt for the Government.

Bankers Bank

The Reserve Bank performs same functions for the other banks as the other banks ordinarily

perform for their customers. It is not only a banker to the commercial banks, but it is the

lender of the last resort.

Controller ofCredit

The Reserve Bank undertakes the responsibility of controlling credit created by the

commercial banks. It makes extensive use of quantitative and qualitative techniques to control

and regulate credit effectively in the country.

Custodial of Foreign Reserve

For the purpose of keeping the foreign exchange rates stable the Reserve Bank buys and sells

the foreign currencies and also protects the countrys foreign exchange funds.


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CHAPTER-II

COMPANY PROFILE


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ING VYSYA BANK LTD.

ING Vysya Bank Limited, is an Indian retail bank, formed after the global financial

institution ING acquired a 44% stake in Vysya Bank Ltd in October 2002, and took over

management of the bank.

History

The Vysya Bank was established in 1930, in Bangalore (now Bengaluru) with the aim of

offering banking services to those who were currently not privileged enough to do so. In 1948

The Vysya Bank became a scheduled bank.On 7 October 2002 ING Group took over the

Management of the Bank.ING Vysya Bank currently has about 470 branches spread all over

India.

Headquarters- Bangaluru

Current CEO

Mr. Shailendra Bhandari (IIM-A Alumni)

Growth ofthe ING VYSYA BANK

Vysya Bank Ltd was one of the first private sector banks in the country and was set up in the

year 1930. The main objective of setting up the bank was to provide financialsupport to the

various sectors of the economy. In the year 1948, the Vysya Bank was listed among the

Scheduled Banks.

In order to increase its profit and add to its operations, the Vysya Bank Ltd merged with

ING. Currently, it is one of the well known banks in the country and has around 677 branches

across various parts of the country. The headquarters of the bank is located in the city of

Bangalore. Among the total number of branches, there are 407 regular branches, 28 satellite

offices, 39 extension counters. The number of ATMs is around 203 which are expected to

increase within the next few years. The deposit of the bank amounts to around Rs. 204980.00

millions while the net worth is around Rs 14260.00 millions. The profits of the bank amount

to around Rs. 1569.00 millions.


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Productsandservicesofthe ING VYSYA BANK

Being a well known name in the domain of financial and banking services in the country, the

ING Vysya Bank Ltd has come up with a number of financial solutions and services in a

number of areas. Some of the well known segments in which the bank offers customized and

specialized services are:

y Accounts and depositsy Short and long term loansy Private bankingy NRI services

Personal Banking: The personal banking department of ING Vysya Bank Ltd offers high

quality services and solutions to cater to the financial needs and preferences. The high end

solutions make them a one stop organization to fulfill the needs and requirements of the

customers. Some of the well known services offered in the segment of personal banking are:

y Mutual Fundsy Tax Savings Bondsy Savings Accounty NRI Servicesy Credit & Debit Cardy Internet Bankingy Phone Bankingy Mobile Bankingy Self Bankingy Term depositsy

Demat accountingy Wealth managementy Debit and credit card accountingy Payment services


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Wealth Management services: The wealth management services of the ING Vysya Bank Ltd

offers the best services in order to take care of the needs and preferences of the consumers in

various wealth management sectors. The secure services offered bythe bank also minimize

the risk processes and also offer the best of returns.

In addition to these, ING Vysya Bank Ltd also offers business banking facilities and services

of high standards. The services are meant to take care of the business needs andalso provide

high degree of financial stability to the various corporate organizations and business sectors.

Some of the well known services that are offered include:

y Long and term loans in the agro based sectory SME- Power Business account and loansy

Financial market analysisy Market tradingy Asset liability management servicesy Financial market salesy Cash management servicesy Corporate and investment banking servicesy Off shore borrowing servicesy Trade and community finance services

In addition to these, ING Vysya Bank Ltd also carries out research and development to add

more stability to the Indian economic scenario. The customers are also given useful guidance

about investing their assets and funds.


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RELIANCE MUTUAL FUND

INTRODUCTION

The Reliance group one of Indias largest business houses with revenues of Rs. 990 billion

($22.6 billion) that is equal to 3.5 percent of the countrys gross domestic product was splitinto two.The group which claims to contribute nearly 10 per cent of the countrys indirect

tax revenues and over six percent of Indias exports was divided between Mukesh Ambani

and his younger brother Anil on June 18, 2005.

The groups activities span exploration, production, refining and marketing ofoil and

natural gas, petrochemicals, textiles, financial services, insurance, power and telecom. The

family also has interests in advertising agency and life sciences.

Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Average Assets

Under Management (AAUM) of Rs. 90,938 Crores (AAUM for Mar 08 ) and an investor

base of over 66.87Lakhs.Reliance Mutual Fund, a part of the Reliance Anil Dhirubhai

Ambani Group, is one of the fastest growing mutual funds in the country.

RMF offers investors a well-rounded portfolio of products to meet varying investor

requirements and has presence in 115 cities across the country.Reliance Mutual

Fund constantly endeavors to launch innovative products andcustomer service initiatives to

increase value to investors.

Reliance Mutual Fundschemesaremanaged by Reliance Capital Asset Management

Limited., asubsidiary ofReliance Capital Limited, which holds 93.37% ofthepaid-up

capitalofRCAM, the balancepaid upcapital being held by minority shareholders.

Reliance Capital Ltd. is one of Indias leading and fastest growing private sectorfinancial

services companies, and ranks among the top 3 private sectorfinancial services and banking

companies, in terms of net worth.

Reliance Capital Ltd. has interests in asset management, life andgeneral insurance, private

equity and proprietary investments, stock broking and otherfinancial

services. Reliance Mutual fund has largest AUM in India. Reliance capital asset

Management is no. 1 AMC in India. Management of Reliance mutual fund wants to expand

its feet in Chhattisgarh, before taking any step they want to understand market & investor

and distributor behavior of SMEs, so they may plan accordingly to capture Chhattisgarh

Market. In this research we have to analyze why, how, where, when & how much an


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investor invest & according to it, we have to make profile ofinvestors. In this report I have

endeavored to understand the factors affecting Investment behavior of an investor in

Chhattisgarh. This behavioral study consists of how any investor invests in CG. What factor

they consider, why these factors they consider, where do they invest, how do they invest,

purpose behind investment, size of investment, timing of investment & duration of

investment. This study gave us basis to profile investors.

SPONSORS

Reliance Mutual Fund schemes are managed byReliance Capital Asset Management

Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up

capital of RCAM, the balance paid up capital being held by minority shareholders., the

sponsor. Reliance Mutual Fund (RMF) has been sponsored by Reliance Capital Ltd (RCL).

The promoter of RCL is AAA Enterprises Private Limited. Reliance Capital Limited is a

Non Banking Finance Company. Reliance Capital Limited is one of the Indias leading and

fastest growing financial services companies, and ranks among the top three private

sector financial services and banking companies, in terms of net worth.

Reliance Capital has interests in asset management and mutual funds, life and non-

life insurance, private equity and proprietary investments, stock broking and other activities

in the financial services sector. The net worth of RCL is Rs. 5,161.23 crores as on March 31,

2007.


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THE AMC

RELIANCE CAPITAL ASSET MANAGEMENT COMPANY

Reliance Capital Asset Management Limited (RCAM), a company registered under the

Companies Act, 1956 was appointed to act as the Investment Manager of Reliance Mutual

Fund.

Reliance Capital Asset Management Limited (RCAM) was approved as theAsset

Management Company for the Mutual Fund by SEBI vide their letter no IIMARP/1264/95

dated June 30, 1995. The Mutual Fund has entered into an Investment Management

Agreement (IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997

in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is

authorized to act as Investment Manager ofReliance Mutual Fund. The net worth of

the Asset Management Company including preference shares as on September 30, 2007 is

Rs.152.02 crores.

Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management

Limited., a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up

capital of RCAM, the balance paid up capital being held by minority shareholders.

Reliance Capital Asset Management Limited (RCAM) was approved as the Asset

Management Company for the Mutual Fund by SEBI by their letter no. IIMARP/1264/95

dated June 30, 1995. The Mutual Fund has entered into an Investment Management

Agreement (IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997

in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is

authorized to act as Investment Manager of Reliance Mutual Fund.

SCHEMES

1. A. EQUITY/GROWTH SCHEMES The aim of growth funds is to provide capitalappreciation over the medium to long- term. Such schemes normally invest a major part

of their corpus in equities. Such funds have comparatively high risks. These schemes

provide different options to the investors like dividend option, capital appreciation, etc.

and the investors may choose an option depending on their preferences. The investors

must indicate the option in the application form. The mutual funds also allow the

investors to change the options at a later date. Growth schemes are good for investors

having a long-term outlook seeking appreciation over a period of time.


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1. B. DEBT/INCOME SCHEMES The aim of income funds is to provide regular andsteady income to investors. Such schemes generally invest in fixed income securities

such as bonds, corporate debentures, Government securities and money market

instruments. Such funds are less risky compared to equity schemes. These funds are not

affected because of fluctuations in equity markets. However, opportunities of capital

appreciation are also limited in such funds. The NAVs of such funds are affected because

of change in interest rates in the country. If the interest rates fall, NAVs of such funds are

likely to increase in the short run and vice versa. However, long term investors may not

bother about these fluctuations.

1. C. SECTOR SPECIFIC SCHEMES These are the funds/schemes which invest in thesecurities of only those sectors or industries as specified in the offer documents. E.g.

Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks,

etc. The returns in these funds are dependent on the performance of the respective

sectors/industries. While these funds may give higher returns, they are more risky

compared to diversified funds. Investors need to keep a watch on the performance of

those sectors/industries and must exit at an appropriate time. They may also seek advice

of an expert.


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CHAPTER III

RESEARCH METHODOLOGY


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RESEARCH METHODOLOGY

Research methodology is the way to systematically solve the research problem. Research

methodology just does not deal with research methods but also consider the logic behind the

methods. It may be understood as the science of studying how research is done scientifically

and systematically. In it we study the various steps that are generally adopted by the

researcher in study of his research problem along with the logic behind them. It is necessary

for the research to know the research method and technique. He must also clearly understand

the procedure would apply to problem given to him. All this means that it is necessary for the

researcher to design the methodology from problem to problem.

So, the research methodologies adopted by the researcher in this project are as

follows:

Objectiveofstudy

To know the awareness of mutual fund among salaried class people. To study the need of mutual fund for salaried class people. To study the benefits of mutual fund for salaried class people. To encourage salaried class people for investment. To make the people aware of Mutual Fund and to solve their misconceptions about the

investment plan.

Population

Sum total of all the units that confirms to some designated part of specification is called

population. While conducting the research work, researcher has selected Raipur city as the

universe. All the data which has been collected is completely done in theRaipur city.

Sample

The sample is the representative unit of population. The researcher has taken the Salaried

people of Raipur city as sample.


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SampleSize

Sample size refers to number of items to be selected from the population to constitute a

sample. The size of the sample should neither be excessively large, nor too small. It should be

optimum. An optimum sample size is one, which fulfills the requirement of efficiency,

reliability and flexibility. Since in this research the researcher has collected the sample

according to his own convenience and keeping in mind the time and cost constraint, so the

sample size is is 40.

Sampling Method

The researcher adopted convenient method of sampling. In this method the sample are chosen

primary on the basis of convenience to the investigator. In this type of sampling, the

researcher selects the items for the sample deliberately; his choice concerning the items

remains supreme. In other words, under this sampling the organizers of the inquiry

purposively choose the particulars unit of the universe for constituting a sample on the basis

that the small mass that they so select out of a huge one will be typical or representative of the

whole.

SourceofDatacollection

The task of data collection begins after a research problem has defined. Researcher should

keep in mind two types of data, primary data and secondary data. The primary data are those,

which collected afresh and for the first time, thus happen to be original in character. The

secondary data, on the other hand, are those which have already been collected by someone

else and which have already been passed through the statistical process.Researcher while

conducting the research work has used Secondary as well as Primary source of data.

Data Collection Tools

These are the tools used for collecting data. Researcher has gathered the data by administering

questionnaire from salaried people of Raipur City.


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Questionnaire

The term questionnaire refers to a self-administering process whereby the respondent

himself/herself reads the question and records his/her answers without assistance of an

interviewer. Although the instrument is essentially question asking and data gather tool. A

questionnaire is more structured and standardized. The questionnaire consists of a number of

questions printed or typed in a definite order on a form or a set of forms. This method of data

collection is quite popular in case of big enquiries.

Statistical Technique

Percentage Method was used by the researcher in the analysis of the data in his research.

Percentage refers to a special kind of ratio. Percentages are used in making comparisons

between two or more series of data. Percentages are used to describe relationships.

Percentages can also be used to compare the relative terms, the distribution of two or more

series of data.


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CHAPTER - IV

DATA INTERPRETATION


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DATA INTERPRETATION

1. What is your approximate monthly income?5 10 thousand 10 15 thousand

15 20thousand Above 20 thousand

Mostly respondents covered under the study had approx monthly income of 10-15 thousand.

The respondents having 15-20 thousand as their monthly salary are having Governmental job.

The respondents having above 20 thousand as their monthly salary are having corporate job

17%

35%

33%

15%

MONTHLY INCOME

5-10 THOUSAND 10- 15 THOUSAND 15- 20 THOUSAND ABOVE 20 THOUSAND


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2. What is the pattern of your income usage?a)Income Expenditure Saving Investment

b) Income Investment Saving Expenditure

Nearly 80% of the respondents follow the first (traditional) investment option. The reason

behind it is they are unaware of the ideal investment pattern and the traditional plan is

followed since many decades.

a

80%

b

20%

income usage pattern


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3. Do you like to invest your money in financial crisis?Yes No

Nearly 60% of the respondents do not want to invest during financial crisis. The reason given

was that during financial crisis the family needs are there first priority.

Yes

40%

No

60%

investment in financial crisis


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4. Of the following what at present are your investment needs?a)to build a corpus for retirement

b)to save for children education/ marriage

c)to provide for medical emergencies

d)to provide for family financial security

e)to create wealth

Most of the respondents wanted to invest for financial security as they want to secure their

future. The investment for medical purpose has increased since there is no certainty of life.

20%

22%

18%

0%

10%

Investment needs

bulid corpus saving for children medical financial security create wealth


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5. Which of the following you think as investment for tax-saving?y Mutual Fundy Fixed Deposity Insurancey Provident Fundy All of the above

Mostly respondents preferred Provident Fund as there investment for tax saving as they highly

rely on it and has been popular since many years.

Mutual Fund

22%

PF

43%

FD

16%

Insurance

19%

Investment for tax saving


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6. Do you know about Mutual Fund?Yes No

Mostly respondents are not aware of the Mutual Fund. The reason behind it was due to the

traditional investment pattern they manage to get very less fund for the investment purpose

since expenditure was done prior to investment.

yes

37%

no

63%

knowledgeofMutual Fund


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7. Which feature of Mutual Fund are you aware of?High return Diversification

NAV Tax saving

Most of the respondents only know that mutual fund has high return. The reason behind was

that only corporate people knew about mutual fund. The respondents having Governmental

job are not fully aware of the characteristics of mutual fund.

32%

27%

23%

18%

Awareness ofwhich featurs ofMutual

Fund

high return NAV Diversif ication tax saving


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8. After knowing the schemes in a mutual fund, which scheme would you prefer?Debt Equity Balanced Real Estate Gold Fund

After knowing the various schemes of Mutual Fund most of the respondents opted for the

balanced fund scheme since in this fund the money is been diversified and risk is been

lowered. The respondents of corporate job agreed to invest in equity and were able to take

risk.

Debt

20%

Equit

15%

Balanced

40%

Gold

15%

Real

estate

10%

Preferred schemes


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9. Which mode of investment would you prefer?Investing lump sum amount Investing on monthly basis

Mostly respondents wanted to invest on monthly basis rather than investing in lump sum.

The reason for that is on monthly basis the respondents felt they can afford to invest also there

are many commitments to be fulfilled.

Lump Sum

43%Monthly Basis

57%

Preferredmodeofinvestment


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10.Do you about the SIP plan?Yes No

Mostly respondents are not aware of the SIP plan. Here the mutual fund companies can cater

to salaried people the SIP plan which will best suit their needs.

40%

60%

knowledgeof SIP plan

Yes No


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11.Would you invest in Mutual Fund knowing the fact that it provides higher return thanFixed Deposit?

Yes No

73% of the respondents felt that mutual fund is better option than FD. The respondents were

also ready to invest in mutual fund provided that full information was supplied to them.

The respondent found Mutual Fund as the best investment plan for their investment needs and

is affordable and liked the scheme.

Yes

73%

No

27%

Is Mutual Fund better than FD


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CHAPTER - V

CONCLUSION

SUGGESTION


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Conclusion

y Most of the salaried class people are not aware of the ideal pattern of investment i.e.they used to expend money as soon as they get there income. The ideal pattern of

investment had been liked by the respondents and wanted to adopt it.y The mutual fund company can target the salaried class people for SIP since the

respondents preferred monthly basis investment.

y Mutual Fund as an investment tool is best for the salaried class people since they canget good and stable return as well as there wealth also gets growth.

y The salaried class people preferred investing in Mutual Fund also because it is verygood to invest as the money is auto debited from there account.

y After getting the response from the salaried class people, the respondents have felt thatmutual fund is a better investment option than other investment schemes.


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Suggestion

y The respondents suggested that mutual fund offering company should not charge anyhidden charges.

yThe respondents suggested that there should be some schemes for the salariedclass

people.

y The mutual fund companies can attract more customers by holding a seminar orbydelivering presentations in schools, colleges, or even in clubs so that more and more

people would come to know about the investment plan and many would adopt the

plan.

y The banks can also offer its existing customers to invest in the Mutual Fund afterexplaining the terms and conditions.

y The banks should conduct an interactive session for its customers so that they too getthe opportunity to know about Mutual Fund.

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