This document contains an outline of chapters for a project report on comparing direct equity investments and mutual funds. It includes chapters on the rationale, objectives, literature review, scope of study, research design, findings and analysis, conclusion and limitations. The literature review section discusses various investment avenues in India such as bank deposits, post office schemes, public provident funds, company fixed deposits, stocks, bonds, money market instruments, mutual funds, life insurance, real estate, precious objects and financial derivatives. It also compares direct equity investments and mutual funds, providing brief introductions to equity shares and mutual funds.
4. ACKNOWLEDGEMENT
On the completion of this project I would like to take this opportunity as a
platform to thank all the people who helped me in this work and who made
this project a success.
I express my heartfelt gratitude and thanks to Dr Sanjiv Mittal
for his guidance and support throughout this project. I am also thankful to
him for giving his suggestions and encouragement throughout the project
work and helping me continuously at each and every stage
4
5. Executive Summary
Each investment alternative has its own strengths and weaknesses. Some
options seek to achieve superior returns (like equity), but with
corresponding higher risk. Other provide safety (like PPF) but at the expense
of liquidity and growth. Other options such as FDs offer safety and liquidity,
but at the cost of return. Mutual funds seek to combine the advantages of
investing in arch of these alternatives while dispensing with the
shortcomings.
Indian stock market is semi-efficient by nature and, is considered as one of
the most respected stock markets, where information is quickly and widely
disseminated, thereby allowing each security’s price to adjust rapidly in an
unbiased manner to new information so that, it reflects the nearest
investment value. And mainly after the introduction of electronic trading
system, the information flow has become much faster. But sometimes, in
developing countries like India, sentiments play major role in price
movements, or say, fluctuations, where investors find it difficult to predict
the future with certainty. Some of the events affect economy as a whole,
while some events are sector specific. Even in one particular sector, some
companies or major market player are more sensitive to the event. So, the
new investors taking exposure in the market should be well aware about the
maximum potential loss, i.e. Value at risk.
5
6. It would be good to diversify one’s portfolio to include equity mutual
funds and stocks. The benefit of diversification are that while risk exposure
from a particular asset may not be very high, it would also give the
opportunity of participating in the party in the equity markets- which may
have just begun- in a relatively safe manner(than investing directly into
stock markets). Mutual funds are one of the best options for investors to
choose from. It must be realized that the performance of different funds
varies time to time. Evaluation of a fund performance is meaningful when a
fund has access to an array of investment products in market. An investor
can choose from a variety of funds to suit his risk tolerance, investment
horizon and objective. Direct investment in equity offers capital growth but
at high risk and without the benefit of diversification by professional
management offered by mutual funds.
6
7. Chapter 1
RATIONALE
India presents a vast potential for investment and is actively encouraging the
players especially entrance of foreign players into the market. India is also
one of the few markets in the world which offers high prospects for growth
and earning potential in all areas of business.
In the current market scenario where there is more expenditure than
one’s salary, inflation touching its high and fixed deposits going down day
by day, thus net rate of return on the investments being below the inflation
rate. To meet these growing requirements, the investors need to invest his
disposable income to reap short as well as long term benefits. Those who do
make diverse investments are able to squeeze maximum benefits.
The rationale behind undertaking this project is to understand the
awareness and acceptance of various investment alternatives and to make a
comparative study as which mode of equity investments are preferred by
individuals. That is direct equity or the mutual funds.
7
8. OBJECTIVES:
• To make a comparison between direct investment in equity and
investment through Mutual funds.
• Study of select Mutual Funds schemes with the point of attractiveness
to investors.
8
9. LITERATURE REVIEW
Investment avenues in India
Savings form an important part of the economy of any nation. With the
savings invested in various options available to the people, the money acts
as the driver for growth of the country. Indian financial scene too presents a
plethora of avenues to the investors. Though certainly not the best or deepest
of markets in the world, it has reasonable options for an ordinary man to
invest his savings. Banks are considered as the safest of all options, banks
have been the roots of the financial systems in India. Promoted as the means
to social development, banks in India have indeed played an important role
in the rural upliftment. For an ordinary person though, they have acted as the
safest investment avenue wherein a person deposits money and earns
interest on it. The two main modes of investment in banks, savings accounts
and fixed deposits have been effectively used by one and all.
However, today the interest rate structure in the country is headed
southwards, keeping in line with global trends. With the banks offering little
above 9 percent in their fixed deposits for one year, the yields have come
down substantially in recent times. Add to this, the inflationary pressures in
economy and one has a position where the savings are not earning. The
inflation is creeping up, to almost 8 percent at times, and this means that the
value of money saved goes down instead of going up. This effectively mars
any chance of gaining from the investments in banks. Just like banks, post
offices in India have a wide network. Spread across the nation, they offer
financial assistance as well as serving the basic requirements of
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10. communication. Among all saving options, Post office schemes have been
offering the highest rates. Added to it is the fact that the investments are safe
with the department being a Government of India entity. So, the two basic
and most sought after features, such as - return safety and quantum of
returns was being handsomely taken care of. Though certainly not the most
efficient systems in terms of service standards and liquidity, these have still
managed to attract the attention of small, retail investors. However, with the
government announcing its intention of reducing the interest rates in small
savings options, this avenue is expected to lose some of the investors.
Public Provident Funds act as options to save for the post retirement
period for most people and have been considered good option largely due to
the fact that returns were higher than most other options and also helped
people gain from tax benefits under various sections. This option too is
likely to lose some of its sheen on account of reduction in the rates offered.
Another often-used route to invest has been the fixed deposit schemes
floated by companies. Companies have used fixed deposit schemes as a
means of mobilizing funds for their operations and have paid interest on
them. The safer a company is rated, the lesser the return offered has been the
thumb rule. However, there are several potential roadblocks in these. First of
all, the danger of financial position of the company not being understood by
the investor lurks. The investors rely on intermediaries who more often than
not, don’t reveal the entire truth. Secondly, liquidity is a major problem with
the amount being received months after the due dates. Premature redemption
is generally not entertained without cuts in the returns offered and though
they present a reasonable option to counter interest rate risk (especially
when the economy is headed for a low interest regime), the safety of
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11. principal amount has been found lacking. Many cases like the Kuber Group
and DCM Group fiascoes have resulted in low confidence in this option.
The options discussed above are essentially for the risk-averse, people who
think of safety and then quantum of return, in that order. For the brave, it is
dabbling in the stock market.
Stock markets provide an option to invest in a high risk, high return
game. While the potential return is much more than 10-11 percent any of the
options discussed above can generally generate, the risk is undoubtedly of
the highest order. But then, the general principle of encountering greater
risks and uncertainty when one seeks higher returns holds true. However, as
enticing as it might appear, people generally are clueless as to how the stock
market functions and in the process can endanger the hard-earned money.
For those who are not adept at understanding the stock market, the task of
generating superior returns at similar levels of risk is arduous to say the
least. This is where Mutual Funds come into picture.
Mutual Funds are essentially investment vehicles where people with
similar investment objective come together to pool their money and then
invest accordingly. Each unit of any scheme represents the proportion of
pool owned by the unit holder (investor). Appreciation or reduction in value
of investments is reflected in net asset value (NAV) of the concerned
scheme, which is declared by the fund from time to time. Mutual fund
schemes are managed by respective Asset Management Companies (AMC).
Different business groups/ financial institutions/ banks have sponsored these
AMCs, either alone or in collaboration with reputed international firms.
11
12. Several international funds like Alliance and Templeton are also
operating independently in India. Many more international Mutual Fund
giants are expected to come into Indian markets in the near future.
Investment alternatives in India
• Non marketable financial assets: These are such financial assets
which gives moderately high return but can not be traded in market.
Bank Deposits
Post Office Schemes
Company FDs
PPF
• Equity shares: These are shares of company and can be traded in
secondary market. Investors get benefit by change in price of share
and dividend given by companies. Equity shares represent ownership
capital. As an equity shareholder, a person has an ownership stake in
the company. This essentially means that the person has a residual
interest in income and wealth of the company. These can be classified
into following broad categories as per stock market:
Blue chip shares
Growth shares
Income shares
Cyclic shares
Speculative shares
12
13. • Bonds: Bonds are the instruments that are considered as a relatively
safer investment avenues.
G sec bonds
GOI relief funds
Govt. agency funds
PSU Bonds
RBI BOND
Debenture of private sector co.
• Money market instrument: By convention, the term "money
market" refers to the market for short-term requirement and
deployment of funds. Money market instruments are those
instruments, which have a maturity period of less than one year.
T-Bills
Certificate of Deposit
Commercial Paper
• Mutual Funds- A mutual fund is a trust that pools together the
savings of a number of investors who share a common financial goal.
The fund manager invests this pool of money in securities, ranging
from shares, debentures to money market instruments or in a mixture
of equity and debt, depending upon the objective of the scheme. The
different types of schemes are
Balanced Funds
Index Funds
Sector Fund
Equity Oriented Funds
13
14. • Life insurance: Now-a-days life insurance is also being considered as
an investment avenue. Insurance premiums represent the sacrifice and
the assured sum the benefit. Under it different schemes are:
Endowment assurance policy
Money back policy
Whole life policy
Term assurance policy
• Real estate: One of the most important assets in portfolio of investors
is a residential house. In addition to a residential house, the more
affluent investors are likely to be interested in the following types of
real estate:
Agricultural land
Semi urban land
Farm House
• Precious objects: Investors can also invest in the objects which have
value. These comprises of:
Gold
Silver
Precious stones
Art objects
• Financial Derivatives: These are such instruments which derive their
value from some other underlying assets. It may be viewed as a side
bet on the asset. The most important financial derivatives from the
point of view of investors are:
Options
Futures
14
15. Direct equity vs. mutual funds
1) Equity share/Direct investment
2) Mutual funds, a brief introduction
3) Equity Fund
4) Difference between direct equity and mutual fund
15
16. 1) Equity share/Direct investment
Equity shares: These are shares of company and can be traded in secondary
market. Investors get benefit by change in price of share or dividend given
by companies. Equity shares represent ownership capital. As an equity
shareholder, a person has an ownership stake in the company. This
essentially means that the person has a residual interest in income and
wealth of the company. These can be classified into following broad
categories as per stock market:
Blue chip shares- Shares of large, well established, financially strong
companies with an impressive record of earnings and dividends.
Growth shares-Shares of companies that have fairly entrenched
positions in a growing market and which enjoy an above average rate
of growth as well as profitability.
Income shares-Share of companies that have fairly stable operations,
relative limited growth opportunities, and high dividend payout ratios.
Cyclic shares – Share of companies that have a pronounced
cyclicality in their operations.
Defensive shares- Shares of companies that are relatively unaffected
by the ups and downs in general business conditions.
Speculative shares- Shares of companies that tend to fluctuate widely
because there is a lot of speculative trading in them.
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17. 2) Mutual Funds: A brief introduction
A Mutual Fund is a trust that pools the savings of a number of investors
who share a common financial goal. The money thus collected is invested
by the fund manager in different types of securities depending upon the
objective of the scheme. These could range from shares to debentures to
money market instruments. The income earned through these investments
and the capital appreciations realized by the schemes 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 portfolio at a
relatively low cost. The small savings of all the investors are put together to
increase the buying power and hire a professional manager to invest and
monitor the money. Anybody with an investible surplus of as little as a few
thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has
a defined investment objective and strategy.
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18. INCEPTION OF MUTUAL FUNDS IN INDIA
The history of mutual funds in India can be divided into 5 important phases:
1963-1987
The Unit Trust of India was the sole player in the industry. Created by an
Act of Parliament in 1963, UTI launched its first product, the Unit Scheme
1964, which is even today the single largest mutual fund scheme. UTI
created a number of products such as monthly income plans, children plans,
equity-oriented schemes and off shore funds during this period. UTI
managed assets of Rs.6,700 crores at the end of this phase.
1987-1993
In 1987 public sector banks and financial institutions entered the mutual
fund industry. SBI mutual fund was the first non- UTI fund to be set up in
1987. Significant shift of investors from deposits to mutual fund industry
happened during this period. Most funds were growth-oriented closed-ended
funds. By the end of this period, assets under UTI’s management grew to
Rs.38,247 crores and public sector funds managed Rs.8,750 crores.
1993-1996
In 1993, the mutual fund industry was open to private sector players, both
Indian and foreign. SEBI’s first set of regulations for the industry were
formulated in 1993, and substantially revised in 1996.Signifficant
innovations in servicing, product design and information disclosure
happened in this phase, mostly initiated by private players.
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19. 1996-1999
The implementation of the new SEBI regulations and the restructuring of the
mutual fund industry led to rapid asset growth. Bank mutual funds were
recast according to the SEBI recommended structure, and the UTI came
under voluntary SEBI supervision.
1999-2002
This phase was marked by the rapid growth in the industry, and significant
increase in market shares of private sector players. Assets crossed
Rs.1,00,000 crore .The tax break offered to mutual fund in 1999 created
arbitrage opportunities for a number of institutional players. Bond funds and
Liquid funds registered the highest growth in this period, accounting for
nearly 60% of the assets. UTI’s share of the industry dropped to nearly 50%.
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20. Types of mutual funds:
Open ended schemes
An open-end fund is one that is available for subscription all through the
year. This type of Mutual funds does not have a predefined maturity period.
The key feature is liquidity. Direct dealing is another noticeable feature. One
can easily buy and sell units at Net Asset Value related prices.
Close ended schemes
Here maturity period is predefined usually ranging from 2 to 15 years.
Investment can be done directly in the scheme at the time of the initial issue
and units can be brought and sold whenever units are listed in the stock
exchanges.
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21. Types of Schemes
1. Equity/growth oriented Funds: Equity schemes are those that invest
predominantly in equity shares of companies. An equity scheme seeks
to provide returns by way of capital appreciation. As a class of assets,
equities are subject to greater fluctuations. Hence, the NAVs of these
schemes will also fluctuate frequently. Equity schemes are more
volatile, but offer better returns.
2. Balanced Funds: The aim of balanced funds is to provide both
growth and regular income. Such schemes periodically distribute a
part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents.
3. Index Funds: An Index Fund is a mutual fund that tries to mirror a
market index, like Nifty or BSE Sensex , as closely as possible by
investing in all the stocks that comprise that index in proportions
equal to the weight age of those stocks in the index.
4. Income/debt oriented Funds: These schemes invest mainly in
income-bearing instruments like bonds, debentures, government
securities, commercial paper, etc. These instruments are much less
volatile than equity schemes. Their volatility depends essentially on
the health of the economy e.g., rupee depreciation, fiscal deficit,
inflationary pressure. Performance of such schemes also depends on
bond ratings.
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22. 3) Equity Funds
As explained earlier, such funds invest only in stocks, the riskiest of asset
classes. With share prices fluctuating daily, such funds show volatile
performance, even losses. However, these funds can yield great capital
appreciation as, historically, equities have outperformed all asset classes. At
present, there are four types of equity funds available in the market. In the
increasing order of risk, these are:
a) Index funds
These funds track a key stock market index, like the BSE (Bombay Stock
Exchange) Sensex or the NSE (National Stock Exchange) S&P CNX Nifty.
Hence, their portfolio mirrors the index they track, both in terms of
composition and the individual stock weightages. For instance, an index
fund that tracks the Sensex will invest only in the Sensex stocks. The idea is
to replicate the performance of the benchmarked index to near accuracy.
Index funds don’t need fund managers, as there is no stock selection
involved.
Investing through index funds is a passive investment strategy, as a fund’s
performance will invariably mimic the index concerned, barring a minor
"tracking error". Usually, there’s a difference between the total returns given
by a stock index and those given by index funds benchmarked to it. Termed
as tracking error, it arises because the index fund charges management fees,
marketing expenses and transaction costs (impact cost and brokerage) to its
unit holders. So, if the Sensex appreciates 10 per cent during a particular
22
23. period while an index fund mirroring the Sensex rises 9 per cent, the fund is
said to have a tracking error of 1 per cent.
To illustrate with an example, assume you invested Rs 1,000 in an index
fund based on the Sensex on 1 April 1978, when the index was launched
(base: 100). In August, when the Sensex was at 3.457, your investment
would be worth Rs 34,570, which works out to an annualised return of 17.2
per cent. A tracking error of 1 per cent would bring down your annualised
return to 16.2 per cent. Obviously, lower the tracking error, the better are the
index funds.
b) Diversified funds
Such funds have the mandate to invest in the entire universe of stocks.
Although by definition, such funds are meant to have a diversified portfolio
(spread across industries and companies), the stock selection is entirely the
prerogative of the fund manager. This discretionary power in the hands of
the fund manager can work both ways for an equity fund. On the one hand,
astute stock-picking by a fund manager can enable the fund to deliver
market-beating returns; on the other hand, if the fund manager’s picks
languish, the returns will be far lower. Returns from a diversified fund
depend a lot on the fund manager’s capabilities to make the right investment
decisions. A portfolio concentrated in a few sectors or companies is a high
risk, high return proposition.
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24. c) Tax-saving funds
Also known as ELSS or equity-linked savings schemes, these funds offer
benefits under Section 88 of the Income-Tax Act. So, on an investment of
up to Rs 10,000 a year in an ELSS, one can claim a tax exemption of 20 per
cent from his taxable income. One can invest more than Rs 10,000, but then
he won’t get the Section 88 benefits for the amount in excess of Rs 10,000.
The only drawback to ELSS is that one has to lock into the scheme for three
years.
In terms of investment profile, tax-saving funds are like diversified funds.
The one difference is that because of the three year lock-in clause, tax-
saving funds get more time to reap the benefits from their stock picks, unlike
plain diversified funds, whose portfolios sometimes tend to get dictated by
redemption compulsions.
d) Sector funds
The riskiest among equity funds, sector funds invest only in stocks of a
specific industry, say IT or FMCG. A sector fund’s NAV will zoom if the
sector performs well; however, if the sector languishes, the scheme’s NAV
too will stay depressed. Barring a few defensive, evergreen sectors like
FMCG and pharma, most other industries alternate between periods of
strong growth and bouts of slowdowns. The way to make money from sector
funds is to catch these cycles–get in when the sector is poised for an
upswing and exit before it slips back.
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25. 4) Difference between direct equity and mutual funds
A mutual fund is the ideal investment vehicle for today’s complex and
modern financial scenario. Markets for equity shares, bonds and other fixed
income instruments, real estate, derivatives and other assets have become
mature and information driven. Price changes in these assets are driven by
global events occurring in faraway places. A typical individual is unlikely to
have the knowledge, skills, inclination and time to keep track of events,
understand their implications and act speedily. An individual also finds it
difficult to keep track of ownership of his assets, investments, brokerage
dues and bank transactions etc.
Investing in Mutual Fund is convenient because of two basic reasons. All
investment carry risks, especially equity investment that bears larger risks,
their returns are more volatile and uneven. To cut down the risk one needs to
put money in several instruments rather than in one or two products. A
Mutual Fund can effectively spread its investments across various sectors of
the economy and amongst several products. Risk diversification is the Key.
Secondly ’where to invest and where not to’, is a specialized business. One
may not have the expertise, time and resources of a well-managed fund.
25
26. ADVANTAGES OF A MUTUAL FUND
1. Professional Management
Qualified professionals manage money, but they are not alone. They
have a research team that continuously analyses the performance and
prospects of companies. They also select suitable investments to
achieve the objectives of the scheme, so you see that it is a continuous
process that takes time and expertise that will add value to
investment. These fund managers are in a better position to manage
investments and get higher returns.
2. Diversification
The cliché, "don’t put all eggs in one basket" really applies to the
concept of intelligent investing. Diversification lowers risk of loss by
spreading money across various industries. It is a rare occasion when
all stocks decline at the same time and in the same proportion. Sector
funds will spread investment across only one industry and it would
not be wise for portfolio to be skewed towards these types of funds
for obvious reasons.
3. Choice of Schemes
Mutual funds offer a variety of schemes that will suit investors needs
over a lifetime. When they enter a new stage in life, all needed to do
is sit down with investment advisor who will help to rearrange
portfolio to suit altered lifestyle.
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27. 4. Affordability
A small investor may find that it is not possible to buy shares of larger
corporations. Mutual funds generally buy and sell securities in large
volumes that allow investors to benefit from lower trading costs. The
smallest investor can get started on mutual funds because of the
minimal investment requirements. One can invest with a minimum of
Rs. 500 in a Systematic Investment Plan on a regular basis.
5. Tax Benefits
Investments held by investors for a period of 12 months or more
qualify for Capital gains and will be taxed accordingly (10% of the
amount by which the investment appreciated, or 20% after factoring
in the benefit of cost indexation, whichever is lower). These
investments also get the benefit of indexation.
6. Liquidity
With open-end funds, you can redeem all or part of investment any
time you wish and receive the current value of the shares or the NAV
related price. Funds are more liquid than most investments in shares,
deposits and bonds and the process is standardized, making it quick
and efficient so that you can get cash in hand as soon as possible.
27
28. 7. Rupee Cost Averaging
Through using this concept of investing the same amount regularly,
mutual funds give investor the advantage of getting the average unit
price over the long-term. This reduces risk and also allows you to
discipline self by actually investing every month or quarterly and not
making sporadic investments.
8. The Transparency of Mutual Funds
The performance of a mutual fund is reviewed by various publications
and rating agencies, making it easy for investors to compare one to
the other. Once you are part of a mutual fund scheme, you are
provided with regular updates, for example daily NAVs, as well as
information on the specific investments made and the fund manager’s
strategy and outlook of the scheme.
9. Easy To Administer
Mutual funds units in modern times are not issued in the form of
certificates, with a minimum denomination rather they are issued as
account statement switch a facility to hold units in fraction upto 4
decimal points.
10.Highly Regulated
The governing of mutual funds by SEBI ensures that the fund
activities are carried out in the best interest of the investors.
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29. DISADVANTAGES OF MUTUAL FUNDS
The following are some of the reasons which are deterrent to mutual fund
investment:
• Costs despite Negative Returns — Investors must pay sales charges,
annual fees, and other expenses regardless of how the fund performs.
And, depending on the timing of their investment, investors may also
have to pay taxes on any capital gains distribution they receive —
even if the fund went on to perform poorly after they bought shares.
• Lack of Control — Investors typically cannot ascertain the exact
make-up of a fund's portfolio at any given time, nor can they directly
influence which securities the fund manager buys and sells or the
timing of those trades.
• Price Uncertainty — with an individual stock, you can obtain real-
time (or close to real-time) pricing information with relative ease by
checking financial websites or by calling your broker. You can also
monitor how a stock's price changes from hour to hour — or even
second to second. By contrast, with a mutual fund, the price at which
you purchase or redeem shares will typically depend on the fund's
NAV, which the fund might not calculate until many hours after
you've placed your order. In general, mutual funds must calculate
their NAV at least once every business day, typically after the major
U.S. exchanges close.
29
30. Some mutual fund schemes with the point of attractiveness to investors
-
Comparison of best performing mutual funds with index Equity
schemes:
Equity schemes are those that invest predominantly in equity shares of
companies. An equity scheme seeks to provide returns by way of capital
appreciation. As a class of assets, equities are subject to greater fluctuations.
Hence, the NAVs of these schemes will also fluctuate frequently. Equity
schemes are more volatile, but offer better returns. These can be further
classified into three types:
1. Diversified Equity schemes:
The aim of diversified equity funds is to provide the investor with capital
appreciation over a medium to long period (generally 2 – 5 years). The fund
invests in equity shares of companies from a diverse array of industries and
balances (or tries to) the portfolio so as to prevent any adverse impact on
returns due to a downturn in one or two sectors.
2. Equity Linked Saving Schemes (ELSS):
These schemes generally offer tax rebates to the investor under section 88 of
the Income Tax law. These schemes generally diversify the equity risk by
investing in a wider array of stocks across sectors. ELSS is usually
considered a variant of diversified equity scheme but with a tax friendly
offer
30
31. 3. Sectoral Fund/ Industry Specific schemes:
Industry Specific Schemes invest only in the industries specified in the offer
document. The investment of these funds is limited to specific industries like
InfoTech, FMCG, and Pharmaceuticals etc. These are ideal for investors
who have already decided to invest in particular sector or segment. Sectoral
Funds tend to have a very high risk-reward ratio and investors should be
careful of putting all their eggs in one basket.
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32. CHAPTER 2
Scope of the study
Geographical scope
The data for the research was collected from five zones of Delhi – namely
B1 Community Centre – Janak Puri, Pacific Mall, C.P., Nehru Place and
M2K Rohini.
Product scope
The research was conducted to find out about the preference of the target
population for Equity Diversified Mutual Funds and Direct Equity. Besides
this the research was conducted to know about reasons for preferring mutual
funds and direct equity funds.
Target Population
The target population mainly included service class people. Hence
convenient sampling was used in deciding on the target population.
Research Design
First an exploratory research was conducted to get some insights about the
topic. Secondary data analysis was performed. It was followed by
questionnaire filling. Findings of the exploratory research were regarded as
input to further research. This research will be followed by descriptive
design.
32
33. Data Collection
Secondary Data
Secondary data was collected from various sources such as internet and
financial magazines.
Primary Data
In Primary data, structured questionnaire was made and the target
respondents were asked to fill the questionnaire.
Questionnaire Design
Objective was to make respondents little familiar with the context of the
questions. This was also aimed at collecting data about the sample profile
that’ll be subsequently analyzed so that the scope of the project is fully
explored.
Question 1 was aimed to check the awareness level of the respondent about
various investment avenues.
Question 2 was an open ended question intended to find out some more
factors which people consider important while investing.
Question 3 was aimed to understand the most preferred mode of investment.
Question 4 was designed to understand the types of mutual fund where
people have invested.
Question 5 was designed to understand the importance of past returns in
making decisions about various investment schemes.
33
34. Question 6 was designed to understand if returns were the only criteria for
evaluating the performance.
Question 7 was designed to understand the approach of people in making
investment.
Question 8 was designed to find out what factors are considered important
by people who invest different investments.
Question 9 was formulated to know the period of portfolio review done by
people.
Question 10 was put to find out the long term and short term investors.
Question 11 was asked to find out how actively investors change their
portfolio.
Question 12 was asked to compare the equity diversified mutual funds and
direct equity.
Question 13 & 15 were asked to judge the factors why people prefer to
invest in Mutual Funds and Direct Equity.
Question 14 was asked to find out the availability of information sources for
various schemes.
34
35. Sampling
• Sample Framework
The sample framework consists of a people who have invested in any
funds or investment schemes.
• Sample Design
The sample was taken using convenient sampling.
• Sample size
The sample size was around 50 respondents.
Procedure for data collection
For the purpose of primary data collection the target population was
administered with a questionnaire which had both structured as well as
unstructured questions.
35
36. SELECTION CRITERIA FOR SCHEMES:
Selection of equity diversified funds are done here on the basis of their
Return, risk , liquidity, affordability, entry-exit load, and performance over
the years. Also,
1. Only open ended funds are considered while choosing best equity
related mutual funds.
2. Among growth and dividend schemes, only growth scheme has been
taken so as to avoid repetition (as portfolio remains same for both the
options)
3. Selection has been done on the basis of last 1 year performance.
36
37. Equity diversified funds
The five funds I have chosen after comparing their performance vis-à-vis
the other mutual funds in this category of funds are:
Equity Diversified Asset Size NAV 1yr 2yr 3yr
(Rs. cr.) (Rs./Unit)
Magnum Global Fund (G) 1,361.77 42.49 13.4 56.6 61.7
ICICI Pru Services Indus. (G)
465.98 15.66 31.7 -- --
ICICI Pru Dynamic Plan (G)
1,962.93 65.16 17.8 58.7 48.0
Reliance Growth Fund (G) 3,263.71 269.46 12.9 49.2 49.5
Birla Frontline Equity (G) 147.76 51.37 23.4 48.7 35.3
As on April 19, 2007
37
38. SBI MAGNUM GLOBAL FUND 94 - GROWTH
Objective
Aims at providing growth opportunities through investment in equities.
Scheme Performance (%) as on Apr 17 , 2007
14 days 1 month 3 months 1 year 3 yrs* Inception*
5.51 5.36 -8.76 14.5 61.54 13.38
Top 10 Holdings as on Mar 30, 2007
Company Nature Value (Cr.) %
Term Deposit Debt 300 22.03
Infotech Enterprises Limited EQ 59.1 4.34
Havells India Ltd EQ 42.49 3.12
Shree Cement Ltd EQ 42.08 3.09
Thermax Limited EQ 35.27 2.59
United Phosphorus Limited (New) EQ 34.59 2.54
JaiPrakash Associates Ltd. EQ 34.04 2.5
Dishman Pharmaceuticals & Chemicals EQ 31.87 2.34
Crompton Greaves Ltd EQ 28.05 2.06
Bharat Earth Movers Ltd EQ 27.51 2.02
Mutual Fund
SBI Mutual Fund
191, Maker Tower
E, Cuffe Parade
Mumbai
Tel.-22180221,,
Asset Management Company
SBI Funds Management Ltd.
191, Maker Tower E Wing,
Cuffe Parade
Mumbai - 400005
Tel.- 22180221,22180225
Registrar
NA
*Returns are annualized
Email Address partnerforlife@sbimf.com
Net Asset Value (Rs/Unit) 42.43 As On Apr 18, 2007
38
39. Fund Information
Type of Scheme Open Ended
Nature of Scheme Equity
Inception Date Sep 30, 1994
Face Value(Rs/Unit) 10
Fund Size (Rs. in crores) 1361.77 on Mar 30, 2007
Increase/Decrease since Feb 28, 2007 (Rs. in
131.56
crores)
Rolled Over To Open Ended
Minimum Investment (Rs) 2000
Purchase Redemptions Daily
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is
Entry Load 2.25%. and Amount greater than 50000000 then
Entry load is 0%.
If redeemed bet. 0 Months to 6 Months; and
Amount Bet. 0 to 49999999 then Exit load is 1%.
Exit Load
and Amount greater than 50000000 then Exit load
is 0%.
Last Dividend Declared
24 % On Nov 22, 2004
Top Industry Allocation as on Mar 30, 2007
Housing & Construction 8.83%
Computers - Software & Education 7.51%
Banks 6.98%
Electricals & Electrical Equipments 6.15%
Pharmaceuticals 5.78%
Cement 4.9%
Engineering & Industrial Machinery 4.61%
Steel 3.05%
Diversified 3%
Chemicals 2.54%
Asset Allocation as on Mar 30, 2007
Equity Debt Money Market
64.32 22.03 13.65
39
40. PRUDENTIAL ICICI SERVICE INDUSTRIES FUND - GROWTH
Objective
To provide capital appreciation and income distribution to unitholders by investing predominantly in equity/
equity related instruments of companies involved in service industries and the balance in debt securities
and money market instruments including call money.
Scheme Performance (%) as on Apr 17 , 2007
14 days 1 month 3 months 1 year 3 yrs* Inception*
7.93 8.52 -3.57 33.85 NA 38.47
Top 10 Holdings as on Mar 30, 2007
Company Nature Value (Cr.) %
Nucleus Software Exports Ltd EQ 24.24 5.2
Nifty EQ 20.75 4.45
ICICI BANK LTD. EQ 19.2 4.12
Jain Irrigation Systems Ltd EQ 16.82 3.61
India Infoline EQ 15.76 3.38
Jagran Prakashan Ltd EQ 15.33 3.29
Bharat Electronics Ltd EQ 14.74 3.16
Punjab National Bank EQ 13.72 2.94
Wipro Ltd EQ 12.66 2.72
Aditya Birla Nuvo Limited. EQ 12.48 2.68
Mutual Fund
Prudential ICICI Mutual Fund
8th Floor, Peninsula Tower, Ganpatrao Kadam Marg,
Off Senapati Bapat Marg, Lower Parel
Mumbai
Tel.-24997000,24999777,
Asset Management Company
Prudential ICICI Asset Management Company Ltd.
8th Floor, Peninsula Tower
Ganpatrao Kadam Marg, Lower Parel
Mumbai – 400013
Tel.- 24997000, 24999777
Registrar
NA
*Returns are annualized
Email Address enquiry@pruicici.com
Net Asset Value (Rs/Unit) 15.71 As On Apr 18, 2007
40
41. Fund Information
Type of Scheme Open Ended
Nature of Scheme Equity
Inception Date Nov 11, 2005
Face Value(Rs/Unit) 10
Fund Size (Rs. in crores) 465.9787 on Mar 30, 2007
Increase/Decrease since Feb 28, 2007 (Rs. in
41.954
crores)
Minimum Investment (Rs) 5000
Purchase Redemptions Daily
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is
Entry Load 2.25%. and Amount greater than 50000000 then
Entry load is 0%.
If redeemed bet. 0 Months to 6 Months; and
Amount Bet. 0 to 49999999 then Exit load is 1%.
Exit Load
and Amount greater than 50000000 then Exit load
is 0%. If redeemed after 6 Months; Exit load is 0%.
Top Industry Allocation as on Mar 30, 2007
Banks 24.881%
Computers - Software & Education 24.2607%
Pharmaceuticals 8.64%
Miscellaneous 6.948%
Housing & Construction 5.2501%
Plastic 5.2243%
Electronics 4.6377%
Auto & Auto ancilliaries 4.4105%
Printing & Stationary 3.2905%
Telecom 2.9289%
Asset Allocation as on Mar 30, 2007
Equity Debt Money Market
90.98 1.01 8.01
41
42. PRUDENTIAL ICICI DYNAMIC PLAN - GROWTH
Objective
Seeks to generate capital appreciation by actively investing in equity and equity related securities. For
defensive considerations, the Scheme may invest in debt, money market instruments and derivatives.
Scheme Performance (%) as on Apr 17 , 2007
14 days 1 month 3 months 1 year 3 yrs* Inception*
6.74 7.6 -4.31 20.42 47.45 52.19
Top 10 Holdings as on Mar 30, 2007
Company Nature Value (Cr.) %
Reliance Industries Ltd EQ 137.03 6.8
Nifty EQ 134.89 6.69
Tata Consultancy Services Ltd. EQ 132.01 6.55
ICICI BANK LTD. Debt 111.42 5.53
Infosys Technologies Ltd EQ 109.89 5.45
ICICI BANK LTD. EQ 98.69 4.9
Deccan Chronicle Holdings Ltd EQ 89.15 4.42
ITC Ltd EQ 71.04 3.52
State Bank of India EQ 59.67 2.96
Oil & Natural Gas Corpn Ltd EQ 59.43 2.95
Mutual Fund
Prudential ICICI Mutual Fund
8th Floor, Peninsula Tower, Ganpatrao Kadam Marg,
Off Senapati Bapat Marg, Lower Parel
Mumbai
Tel.-24997000,24999777,
Asset Management Company
Prudential ICICI Asset Management Company Ltd.
8th Floor, Peninsula Tower
Ganpatrao Kadam Marg, Lower Parel
Mumbai – 400013
Tel.- 24997000, 24999777
Registrar
NA
*Returns are annualized
42
43. Email Address enquiry@pruicici.com
Net Asset Value (Rs/Unit) 65.4576 As On Apr 18, 2007
Fund Information
Type of Scheme Open Ended
Nature of Scheme Equity
Inception Date Oct 18, 2002
Face Value(Rs/Unit) 10
Fund Size (Rs. in crores) 2015.4082 on Mar 30, 2007
Increase/Decrease since Feb 28, 2007 (Rs. in
205.825
crores)
Minimum Investment (Rs) 5000
Purchase Redemptions Daily
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is
Entry Load 2.25%. and Amount greater than 50000000 then
Entry load is 0%.
Exit Load Exit Load is 0%.
Top Industry Allocation as on Mar 30, 2007
Banks 34.2554%
Computers - Software & Education 16.9829%
Diversified 11.6376%
Miscellaneous 11.1168%
Auto & Auto ancilliaries 6.6698%
Oil & Gas, Petroleum & Refinery 4.1303%
Tobacco & Pan Masala 3.5249%
Steel 2.9893%
Engineering & Industrial Machinery 2.8463%
Telecom 2.6469%
Asset Allocation as on Mar 30, 2007
Equity Debt Money Market
88.99 6.27 4.74
43
44. RELIANCE GROWTH - GROWTH
Objective
Seeks to provide Long Term Capital Appreciation
Scheme Performance (%) as on Apr 17 , 2007
14 days 1 month 3 months 1 year 3 yrs* Inception*
6.89 8.45 -3.39 14.63 49.3 33.06
Top 10 Holdings as on Mar 30, 2007
Company Nature Value (Cr.) %
JSW Steel Limited. EQ 156.35 4.79
Reliance Industries Ltd EQ 127.26 3.9
Jindal Saw Ltd. EQ 121.98 3.74
Bharat Earth Movers Ltd EQ 119.5 3.66
Divis Laboratories Limited EQ 87.23 2.67
Gujarat State Fertilizers & Chemicals Ltd EQ 69.64 2.13
Lupin Ltd. EQ 69.36 2.13
Cambridge Solutions Ltd. EQ 67.66 2.07
Jain Irrigation Systems Ltd EQ 65.93 2.02
JaiPrakash Associates Ltd. EQ 65.41 2
Mutual Fund
Reliance Mutual Fund
Kamala Mills Compound, Trade World, B - Wing
7th Floor, Senapati Bapat Marg, Lower parel (West)
Mumbai
Tel.-30414800,,
Asset Management Company
Reliance Capital Asset Management Ltd.
Kamala Mills Compound, Trade World, B - Wing
7th Floor, Senapati bapat marg, Lower parel (West)
Mumbai - 400013
Tel.- 30414800,
Registrar
NA
*Returns are annualized
44
45. Email Address
Net Asset Value (Rs/Unit) 270.51 As On Apr 18, 2007
Fund Information
Type of Scheme Open Ended
Nature of Scheme Equity
Inception Date Oct 7, 1995
Face Value(Rs/Unit) 10
Fund Size (Rs. in crores) 3263.71 on Mar 30, 2007
Increase/Decrease since Feb 28, 2007 (Rs. in
19.79
crores)
Rolled Over To Open Ended
Minimum Investment (Rs) 5000
Purchase Redemptions Daily
NAV Calculation Daily
Fund Manager Kunj Bansal
Amount Bet. 0 to 19999999 then Entry load is
2.25%. and Amount Bet. 20000000 to 49999999
Entry Load
then Entry load is 1.25%. and Amount greater than
50000000 then Entry load is 0%.
Exit Load Exit Load is 0%.
Top Industry Allocation as on Mar 30, 2007
Steel 11.377%
Computers - Software & Education 8.3493%
Diversified 7.5886%
Pharmaceuticals 6.8423%
Engineering & Industrial Machinery 5.437%
Auto & Auto ancilliaries 5.3191%
Banks 4.5433%
Chemicals 3.8827%
Housing & Construction 3.4685%
Telecom 3.2962%
Asset Allocation as on Mar 30, 2007
Equity Debt Money Market
86.66 0 13.34
45
46. BIRLA SUNLIFE FRONTLINE EQUITY FUND - GROWTH
Objective
Primary objective is growth of capital and secondary objective is income generation and distribution of
dividend.
Scheme Performance (%) as on Apr 17 , 2007
14 days 1 month 3 months 1 year 3 yrs* Inception*
7.58 9.77 -1.78 25.58 34.68 20.81
Top 10 Holdings as on Mar 30, 2007
Company Nature Value (Cr.) %
Crompton Greaves Ltd EQ 7.28 4.93
Bharati Tele - Ventures EQ 6.82 4.62
Bharat Heavy Electricals Ltd EQ 6.09 4.12
Hindustan Lever Ltd EQ 5.64 3.82
Tata Consultancy Services Ltd. EQ 5.12 3.46
ICICI BANK LTD. EQ 5.12 3.46
Mahindra & Mahindra Ltd EQ 4.68 3.17
Maruti Udyog Ltd EQ 4.51 3.05
United Phosphorus Limited (New) EQ 4.47 3.02
Siemens Ltd EQ 4.4 2.98
Mutual Fund
Birla Mutual Fund
Ahura Centre , 2nd Floor, A. 96/A-D,
Mahakali Caves Road, Andheri (E)
Mumbai
Tel.-56928000, ,
Asset Management Company
Birla Sunlife Asset Management Company Ltd.
2nd Floor, Tower B Ahura Centre, 96 A D,
Mahakali Caves Road, Andheri(E)
Mumbai - 400093
Tel.- 56928000,
Registrar
NA
*Returns are annualized
Email Address bmfmail@birlasunlife.com
Net Asset Value (Rs/Unit) 51.25 As On Apr 17, 2007
46
47. Fund Information
Type of Scheme Open Ended
Nature of Scheme Equity
Inception Date Aug 30, 2002
Face Value(Rs/Unit) 10
Fund Size (Rs. in crores) 147.7555 on Mar 30, 2007
Increase/Decrease since Feb 28, 2007 (Rs. in
20.114
crores)
Previous Name Alliance Frontline Equity Fund
Minimum Investment (Rs) 5000
Purchase Redemptions Daily
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is
Entry Load 2.25%. and Amount greater than 50000000 then
Entry load is 0%.
Exit Load Exit Load is 0%.
Top Industry Allocation as on Mar 30, 2007
Banks 14.6851%
Computers - Software & Education 13.3958%
Telecom 10.2279%
Auto & Auto ancilliaries 10.155%
Electricals & Electrical Equipments 9.0495%
Diversified 7.5506%
Engineering & Industrial Machinery 4.1312%
Pharmaceuticals 3.3174%
Chemicals 3.0241%
Electronics 2.9805%
Special Features
Aims to track the sectoral weights of BSE 200 index.
Asset Allocation as on Mar 30, 2007
Equity Debt Money Market
9.61 0 10.39
47
48. Direct Equity
The four stocks are chosen on the basis of their past returns and Beta .
• Reliance Industries
• Tata Motors
• State Bank of India
• Infosys Technologies
48
53. FINDINGS AND ANALYSIS
In this chapter the findings of the performance evaluation of the various
equity diversified mutual funds and direct equity with respect to benchmarks
is listed. The mutual funds and stocks have been chosen on the basis of their
returns over past three years. The benchmark chosen is BSE Sensex for the
comparison. The mutual funds chosen are:
1. SBI Magnum Global Fund (G)
2. ICICI Prudential Services Indus.(G)
3. ICICI Prudential Dynamic Plan (G)
4. Reliance Growth Fund (G)
5. Birla Frontline Equity (G)
Direct Equity chosen for purpose are:
1. Reliance Industries
2. Tata Motors
3. State Bank of India
4. Infosys Technologies
53
54. Risk and return analysis:
FUND MARKET SD
RETURN RETURN MARKET
EQUITY DIVERSIFIED
SBI Magnum Global Fund (G)
13.40% 15.89% 1.75%
ICICI Prudential Services
31.70% 15.89% 1.75%
Indus.(G)
ICICI Prudential Dynamic
17.80% 15.89% 1.75%
Plan (G)
Reliance Growth Fund (G)
12.90% 15.89% 1.75%
Birla Frontline Equity (G)
23.40% 15.89% 1.75%
54
55. DIRECT EQUITY
FUND MARKET
SD FUND SD MARKET FUND BETA
RETURN RETURN
Reliance 71.85% 2.18% 15.89% 1.75% 1.01
Tata Motors -21.97% 2.56% 15.89% 1.75% 1.13
SBI 2.57% 2.28% 15.89% 1.75% 0.91
Infosys Technologies 35.04% 2.03% 15.89% 1.75% 0.92
The above table presents the risk and return statistics for the sample funds,
stocks and market. Of the 5 funds selected 3 show higher returns than the
market, which indicates that 60% of the funds show higher returns than the
market.
In case of individual stocks, Reliance Industries and Infosys Technologies
earned a higher return than the market while the other two stocks namely,
SBI earned a lower return and Tata Motors returns were negative.
The average returns for the equity diversified funds was 19.84% while the
average return after investing in individual stocks was 21.87%. However, In
both cases the returns earned were more than the market/benchmark average
of BSE Sensex.
The average risk for the equity diversified is less than the benchmark’s risk
which is 1.75%. This indicates that the funds have taken lower risks than the
market.
55
56. On the other hand, the average risk for individual stocks is much higher
than the equity diversified funds and market standard deviation as well. This
indicates that investing in direct equity is far more riskier than equity
diversified funds.
56
57. INVESTOR SURVEY ANALYSIS
To understand the investor’s preference following questions have been
asked:
1. Investment avenues you are aware of:
Bonds
Investment avenues you
are aware of Bank
40 FDs
30
respondents Mutual Funds
20
(Equity/Debt)
10 Direct Equity
0
Bullion
investment avenues
Gilts
Real estate
Most of the people are aware of Banks and Direct Equity investments.
Mutual Funds are being considered an attractive investment opportunity by
the investors. However, awareness about FDs and Gilts is low
comparatively.
2. Factors considered while investing gave several different answers as it
was an open ended question. The answers ranged from liquidity,
attractiveness, growth of industry (in case of shares), return, risk, etc.
57
58. 3. Your portfolio includes majority of:
Govt. securities
Portfolio includes majority of and bonds
equity linked
12 Mutual Funds
10 Real estate
8
Responden 6
ts 4 Bullion’s
2
0
Equity shares
Investment Commodity
Avenues
F.Ds
This question gave an insight into the type of investors. Most people prefer
to invest in Bullions and Government securities and Bonds due to less risk
factor associated with these investments. Equity shares are preferred by
people who have knowledge about market and others prefer mutual funds as
an investment option.
58
59. 5. Types of Mutual funds invested in :
Type of Mutual fund invested in
60
53
50
42
40
33
30
30
23
20
20
12
10
0
Equity diversified Equity index Equity tax planning Balanced:equity Balanced:debt Money Market Debt
From the above graph we find that most of the investors have invested in
equity oriented schemes whether it is diversified; index based or tax saving
schemes. The result could be attributed to the higher returns generated by
the funds as against debt schemes and in the given market scenario with a
highly buoyant market this seems to be a suitable selection.
59
61. 6. Past returns as a good measure of performance :
Past returns as a good measure of performance
27%
73%
yes no
The graph suggests that a majority of the investors consider returns as a
good measure of performance evaluation. However, whether the investors
consider returns to be a sufficient criterion or not would be shown in the
following graph:
61
63. 6. Past returns as the only measure of performance:
Past returns as the only measure for performance evaluation
44%
56%
yes no
From the graph it is indicated that a majority of the individuals consider
returns to be the only criteria to judge a funds’ performance. This suggests
that most of them do not use any other measures like risk adjusted returns
and other considerations while evaluating the performance of a mutual fund.
63
64. 7. Approach in making Investment
23%
39%
a) You take educated view on the Investments
b) You take friendly advice and make decision
c) You rely totally on your investment advisor
38%
Out of 50 people surveyed, approximately 39% of investors rely totally on
investment advisors, while 38% prefers to take friendly advice and rest
(23%) take educated view on investments for investing in the various funds.
64
66. 8. While investing, you are more concerned about:
While investing, you are concerned with :
38%
42%
a) Safety of principal
b) Earning interests above the inflation rate
c) Earning high returns
20%
Before investing, one needs to be sure of the safety, risk attached with the
particular investments and the returns earned. 42% of the people were more
concerned about the safety of principle and 38% people were more
interested in earning higher returns.
66
68. 9. How often do you monitor your portfolio?
Out of 50 people surveyed, approximately 32% of investors monitor their
investment daily; while 24% monitors twice a month and only 8% of the
respondents monitor their portfolio after more than a month.
68
69. 10. How long do you invest?
It was really a tough choice for investors as many of the respondents were
not sure about their investment tenure. About half of them agreed that they
like to book the profit as and when they reach the targeted return. Only 4%
agreed that they are very long term player and don’t change the portfolio
often. Around 12% told, they like to book their portfolio within 3-5 years,
whereas 20% were those who were mid-term player. Surprisingly, only 16%
turned out to be short- term player.
69
70. 11. How your portfolio allocation has changed over the time
Out of 50 people surveyed, 70% of the respondents said that they have made
significant changes in their portfolio, while 26% have changed their
portfolio and rest (4%) didn’t changed their portfolio at all.
70
71. 12. You prefer to invest in Equity through?
a) Equity –linked Mutual Funds
b) Direct investment in stock market
c) Both
15%
52%
33%
This answer helped in doing a comparative analysis between Direct Equity
and Equity linked Mutual funds. 52% people prefer to invest in equity
linked mutual funds because of more diversification and less risk associated
with these funds. 33% people prefer to invest in Direct Equity who have the
time and knowledge to track the market and predict changes hoping to get
higher returns.
71
72. 13. You prefer Mutual Funds (Equity) because (as per their first choice)
Major reason for preferring Equity diversified Mutual Funds was
Diversification of portfolio and lack of time. This helped to reduce risk with
decent returns to the investors.
72
73. 14. Sources of information for mutual funds
sources of information
70 68
60
53
50
40
percentage of people using
33 33
the source
30
23
20
12 12
10
10
0
magazines mutual fund prospectus relationship financial mutual fund others
websites manager newspapers fund's tracking
periodic agency
report
The graph indicates that the most popular source of information for mutual
funds is the relationship managers of the banks or investment agents that the
investors rely on for their investments. Another important source is the
prospectus of the fund and of other funds, mutual fund websites are another
important source of this information.
73
75. 15. You prefer direct investment because (as per their first choice)
From the graph it is indicated that a majority of the individuals prefers direct
investment in equity because of the higher returns associated with it, while
33% of the respondents prefers it because they wants to manage their
portfolio on their own.
75
76. CONCLUSION
After the entire analysis of survey and questionnaires, we find that
most of the respondents said that they have equity stocks in their portfolio.
And among these (who invests in equity) 52%, investors prefer to invest
through Mutual funds and only 33% (17 investors) said that they do invest
directly in equity market.
According to survey people prefer to invest into Mutual funds than
investing directly into stocks. 46% of the respondents feel that mutual funds
reduce their risk in investing in the market as it gives diversification to
their portfolio. 17% respondents said that it give them the benefit of
professional management. Just 14% said it give them liquidity irrespective
of market conditions. And also lack of time was cited as the reason by 23%
of the respondents. Out of those who said that they prefer to directly invest
in stock market, majority (54%) gave high weightage to high risk and high
returns game. 33% said that they want to be their own fund managers. Also,
over 48% agreed that they prefer to book profit as they reach their profit
target. They do believe in churning and enjoy making higher returns.
Some investors told that they like to keep a certain percentage of their
portfolio into mutual funds and the rest they want to manage by themselves.
It can also be seen from findings that an investor has made higher returns in
a long run by investing into direct equities, but if one wants to make a higher
returns in the short run and mid term horizon, then definitely mutual funds
are the best buy.
76
77. LIMITATIONS
• Paucity of time as we have to do this project with our course
curriculum doing all other assignments, exams etc.
• Indian stock market is semi-efficient market, where sentiments play a
major role in price; hence 100% accurate predictions cannot be made
about its future path.
77
78. QUESTIONNAIRE
Objective: - To find out investor’s preference between mutual fund and
direct equity investment.
1. Investment avenues you are aware of:
a) Bonds b) Bank FDs c) Mutual Funds (Equity/Debt)
d) Direct Equity e) Bullion f) Gilts g) Real estate
h) Any other (please specify) ____________________________________
2. Factors considered while investing__________________________
3. Your portfolio includes majority of:
a) Govt. securities and bonds b) equity linked Mutual Funds
c) Real estate d) Bullion’s
e) Equity shares f) Commodity
g) F.Ds
4. Types of Mutual funds invested in:
a) Equity Diversified b) Equity Index
c) Equity Tax Planning d) Balanced Equity
e) Balanced Debt f) Money Market
g) Debt
5. Do you consider past returns as a good measure of a funds
performance?
YES NO
6. Do you base your performance evaluation on returns only?
YES NO
78
79. 7. Your approach in making Investment is:
a) You take educated view on the Investments
b) You take friendly advice and make decision
c) You rely totally on your investment advisor
d) Others
8. While investing, you are more concerned about:
a) Safety of principal
b) Earning interests above the inflation rate
c) Earning high returns
d) Others
9. How often do you monitor your portfolio?
a) Daily b) Weekly c) Twice in a month
d) Monthly e) More than a month
10. How long do you invest:
a) Short term (0-1 yr) b) Midterm (1-3 yrs)
c) Long term (3-5yrs) d) More than 5 years
e) Till you reach your target or returns
11.How your portfolio allocation has changed over the time
a) Didn’t Change
b) Changed
c) Changed significantly
79
80. 12. You prefer to invest in Equity through:
a) Equity –linked Mutual Funds
b) Direct investment in stock market
c) Both
13. You prefer Mutual Funds (Equity) because ( pls rank in order of
preference)
a) Diversification of portfolio
b) Liquidity
c) Professionally managed
d) Lack of time
e) Any other (please specify) _______________
14.What are the various sources from where you get the performance
evaluation data/advice for the funds?
Magazines Financial Newspapers
Mutual fund websites Mutual funds’ Annual and
periodic reports
Relationship managers Fund tracking agencies (value
research etc.)
Prospectus for a new fund
Any other please Specify_______________________________________
15.You prefer to invest in Direct Equity because :
a. You make higher returns
b. It keeps you busy
c. You like to manage your own funds
80
81. BIBLIOGRAPHY:
Magazines:
• Mutual fund Insight
• Investors India
• Business World
• Business India
Websites:
• www.bseindia.com
• www.moneycontrol.com
• www.google.co.in
• www.capitalmarket.com
• www.indiainfoline.com
• www.yahoofinance.com
• www.mutualfundsindia.com
81