Share Trading and Mutual Fund A CUSTOMER PERSPECTIVE by Sanjay Gupta

Share Trading and Mutual Fund “A CUSTOMER PERSPECTIVE”

SUMMER PROJECT REPORT In partial fulfillment for the award of two year full time Master of Business Administration (MBA) degree of Uttar Pradesh Technical University, Lucknow Submitted by ANUJ HALDIYA Roll No.:0827270011

Under Supervision RAMESH YADAV Designation: Branch Manager Name of Company: RELIANCE MONEY

Submitted to:

Uttar Pradesh Technical University ,Lucknow Greater Noida Instiute of Tecnology-MBA Institute 7,konowledge Park-II 1

Greater Noida -201306 S .NO

CONTENTS

PAGE NO

CERTIFICATE

3-4

DECLARATION

ACKNOWLEDGEMENT

6-7

LIST OF GRAPHS

INTRODUCTION

9-17

REVIEW OF RELATED LITERATURE

18-56

DESIGN OF STUDY

THE STUDY

58-66

OBJECTIVE OF STUDY

DATA COLLECTION SOURCE

DATA COLLECTION METHOD

69-72

ANALYSIS OF DATA

73-92

FINDINGS

93-95

CONCLUSION AND RECOMMENDATION

96-98

REFRENCES

BIBILIOGRAPHY

100

QUESTIONNAIRE

101-104

CERTIFICATE

This is to certify that the Summer Training Project Report entitled Share Trading and Mutual Fund “A CUSTOMER PERSPECTIVE” being submitted by Mr. Anuj Haldiya in partial fulfillment of the requirement for the degree of the Master of Business Administration from U. P. Technical University, Lucknow, is an independent original research work done by him under my supervision and guidance.

Place: Gr. Noida

Director

Date:

GNIT- MBA Institute

DECLARATION This is to certify that Mr.Anuj Haldiya, a student of master Degree MBA (2008-2010), Greater Noida Institute of Technology, Uttar Pradesh Technical University, Uttar Pradesh has worked on the Project Share Trading and Mutual Fundâ&#x20AC;&#x153;A CUSTOMER PERSPECTIVEâ&#x20AC;?. The period for which he was working on this project was for 6 weeks, starting from 1 June, 2009 to July 18, 2009. This dissertation report has the requisite standard for the partial fulfillment the master Degree in master of Business Administration. To the best of our knowledge, the contents are based on original research. ANUJ HALDIYA ROLL 0827270011

NO:-

ACKNOWLEDGEMENT It has been very enriching experience working in â&#x20AC;&#x153;RELIANCE MONEYâ&#x20AC;? (Anil Dhirubhai Ambani Group), Bareilly (U.P.). This department deals with all products like DMAT A/c, Share Trading, Mutual Fund, Life Insurance and General Insurance etc. I am extremely thankful to everyone who has helped me to give this project its present form. I am very thankful to Mr. Anand Prakash (Center Manager) and Mr. Ramesh Yadav(Branch Manager) for providing me the opportunity to undergo the practical training in the Sales and Distribution Division of Reliance Money Limited under the supervision of Mr. Ramesh Yadav (Assistant Center Manager). He guided me from time to time and gave me dynamic ideas and suggestions by which I am able to complete my training successfully.

I am thankful to the. Reliance Money Limited staff members who made me feel comfortable during my training period & helping me in completion of work assigned during the training period. I sincerely thank all the visible and non-visible hands, which helped me to complete the practical training with great success. Last but not least I would like to thank my family who have always encouraged me and taught me to think and work out innovatively, whatsoever is the field of life .To be very candid, whatever I know about marketing concept that has been possible due to the well managed intense training education imparted under conditions, which are quite conducive to learning, at my institute

Greater Noida Institute Of Technology, Mgt.

Institute Gr. Noida. Education and acquisition of knowledge has no limits or boundaries. It is an ever â&#x20AC;&#x201C; expanding field and we need to keep our faculties straight and absorb this vast ocean of knowledge, as much as we can. Doing things we not only widen our personal horizons but also able to present ourselves as a more intelligent being in front of other. ANUJ HALDIYA

LIST OF GRAPHS

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13

Topic Preference of investment Awareness of online share trading Preference of investing in stock market Awareness of reliance money as a brand Awareness of reliance money facilities Customers having de-mate account in companies Frequency of investment Percentage of earnings invested in Share Trading Problems faced during trading Rating of products of Reliance Money Customer awareness for the different brokerage company Preference toward Mutual Funds In which type of mutual fund people invest their money 8

14 15 16

What people see before investing in share market? Comparison of Reliance money against other brokerage company According to the Family expenses

CHAPTER -1

INTRODUCTION

COMPANY PROFILE

Reliance Capital

Reliance Reliance Mutual fund General Insurance Mutual Fund

Reliance Reliance Life Insurance Money

Reliance Consumer Finance

Reliance money is a part of the reliance Anil Dhirubai Ambani Group and is promoted by Reliance capital, the fastest growing private sector financial services company in India, ranked amongst the top 3 private sector financial companies in terms of net worth. Reliance money is a comprehensive financial solution provider that enables you to carry out trading and investment activities in a secure, cost-effective and convenient manner. Through reliance money, you can invest in a wide 10

range of asset classes from Equity, Equity and commodity Derivatives, Mutual Funds, insurance products, IPO’s to availing services of Money Transfer & Money changing. Reliance Money offers the convenience of on-line and offline transactions through a variety of means, including its Portal, Call & Transact, Transaction Kiosks and at it’s network of affiliates. Some key steps of the company that are as….. “Success is a journey, not a destination.” If we look for examples to prove this quote then we can find many but there is none like that of Reliance Money. The company which is today known as the largest financial service provider of India. • Success sutras of Reliance Money: The success story of the company is driven by 8 success sutras adopted by it namely trust, integrity, dedication, commitment, enterprise, hard work and team play, learning and

innovation, empathy and humility. These

are the values that bind success with Reliance Money. • Vision of Reliance Money To achieve & sustain market leadership, Reliance Money shall aim for complete customer satisfaction, by combining its human and technological resources, to provide world class quality services. In the process Reliance Money shall strive to meet and exceed customer's satisfaction and set industry standards. 11

â&#x20AC;˘ Mission statement: â&#x20AC;&#x153;Our mission is to be a leading and preferred service provider to our customers, and we aim to achieve this leadership position by building an innovative, enterprising , and technology driven organization which will set the highest standards of service and business ethics.â&#x20AC;?

BUSINESS OVERVIEW Reliance Capital has interests in asset management and mutual funds, life and general insurance, private equity and proprietary investments, stock broking, depository services, distribution of financial products, consumer finance and other

activities

financial

services.

Reliance Mutual Fund is India's no.1 Mutual Fund. Reliance Life Insurance is India's fastest growing life insurance company and among the top 4 private sector insurers. Reliance General Insurance is India's fastest growing general insurance company and the top 3 private sector insurers. Reliance Money is the largest brokerage and distributor of financial products in India with more than 2.5 million customers and the largest distribution network. Reliance 12

Consumer finance has a loan book of over Rs. 8,000 crores at the end of June 2008. Reliance Capital has a net worth of Rs.6,862 crores (US$ 1.6 billion) and total assets of Rs. 19,940 crores (US$ 4.6 billion) as of June 30, 2008 and over 26,000 employees. Money has increased its market share among private financial companies to nearly Convenient & effective – Anytime & anywhere financial transaction capability. Launched in April 2007. It provides the Flat fees system. It has 2.2 million customers in 1 year of official launch. It has over 5,000 outlets across 700 towns/cities. Average daily turnover – in excess of Rs 2,000 crores. Considering the entire life market, including the Rs. 12,890 crores booked by life insurance Corporation, Reliance life insurance market share works out to around 6.25% . The life insurance market continuous to be dominated by LIC which has about 67% share this only a marginal dip from its 73% share in end-July . These comparisons are only for first year or new business premium. The gap between Reliance life insurance and the second-in-line private insurer is vast. In fact, this scenario has led some analysts to wonder if the company is not a trifle too aggressive. But others say this has more to do with the companies’ customer-centric focus, its pan-India presence and superior risk management and investment strategies. Reliance Money is not, however, resting on its laurels. Company’s customer centric approach will be studied during the training period and the finding of the research work will definitely focus on the present condition & future requirement (if any) relating to products of company. 13

BOARD OF DIRECTORS Anil Dhirubhai Ambani - Chairman Regarded as one of the foremost corporate leaders of contemporary India, Shri Anil D Ambani, 50, is the chairman of all listed companies of the Reliance ADA Group, namely, Reliance Communications, Reliance Capital, Reliance Energy, Reliance Natural Resources and Reliance Power. He is also Chairman of the Board of Governors of Dhirubhai Ambani Institute of Information and Communication Technology, Gandhi Nagar, Gujarat. Till recently, he also held the post of Vice Chairman and Managing Director in Reliance Industries 14

Limited (RIL), India's largest private sector enterprise. Anil D Ambani joined Reliance in 1983 as Co-Chief Executive Officer, and was centrally involved in every aspect of the company's management over the next 22 years. He is credited with having pioneered a number of path-breaking financial innovations in the Indian capital markets. He spearheaded the country's first forays into the overseas capital markets with international public offerings of global depositary receipts, convertibles and bonds. Starting in 1991, he directed Reliance Industries in its efforts to raise over US$ 2 billion. He also steered the 100-year Yankee bond issue for the company in January 1997. Amitabh Jhunjhunwala - Vice-Chairman Shri Amitabhabh Jhunjhunwala, 51, is a Fellow Chartered Accountant. He has vast experience in the areas of financial services and capital markets. Shri Jhunjhunwala was appointed to the Board on March 7, 2003 and was appointed Vice Chairman on March 20, 2006. He is a Director on the Board of Harmony Art Foundation and Reliance Anil Dhirubhai Ambani Group Pvt. Ltd. Rajendra Chitale - Independent Director Shri Rajendra P. Chitale, 46, an eminent Chartered Accountant, is the Managing Partner of M/s M. P. Chitale & Associates. He is a Director on boards of the National Securities Clearing Corporation Limited, Asset Reconstruction Company (India) Ltd, Hinduja TMT Limited, HTMT Global Solutions Ltd, Ambuja Cement Limited, SME Rating Agency of India Limited, Ishan Real Estate PLC and Reliance General Insurance Company 15

Ltd. He is also a member of the advisory board of the Insurance and Regulatory Authority of India (IRDA). He has also served on the boards of Life Insurance Corporation of India, Unit Trust of India, SBI Capital Markets Ltd., National Stock Exchange of India Ltd. and Small Industries Development Bank of India. Shri C. P. Jain Shri C.P. Jain, 61, is the former Chairman and Managing Director of NTPC Ltd. (National Thermal Power Corporation). Shri Jain has an illustrious career spanning over four decades of contribution in the fields of financial management, general management, strategic management and business leadership. He is a fellow member of the Institute of Chartered Accountants of India with an advanced diploma in Management and is a law graduate. Shri C. P. Jain joined the Board of NTPC in 1993 as Director (Finance), was elevated as Chairman & Managing Director in September 2000 and superannuated in March 2006. He is Chairman of the Global Studies Committee of World Energy Council (WEC), world's largest energy NGO with nearly hundred member-nations. He has been on several important committees of the Government of India, latest being the 'Adhoc Group of Experts on Empowerment of CPSEs'. He was Chairman of Standing Conference of Public Enterprises (SCOPE) between April 2003 and March 2005. He is a Director on the Board of IL & FS Infrastructure Development Corporation and, is also a member of the Audit Advisory Board of the Comptroller and Audit General of India.

COMPANY PRODUCTS Reliance Money is a comprehensive solutions provider offering a complete basket of financial services. Through Reliance Money, currently, a 17

customer will be able to transact amongst others, in equity and commodity, derivatives, offshore investments, IPOâ&#x20AC;&#x2122;s, mutual funds and insurance products. At the present the company has more than 350 employees across 75 locations with a total number of 42 offices. Reliance Money can be segregated into four main products which include: 1.

Reliance Life Insurance Plans

Reliance General Insurance Policies

Reliance Mutual Funds

Reliance On Line Trading Facility

CHAPTER-2

REVIEW OF RELATED LITERATURE

RELIANCE DEMATE ACCOUNT Overview of Demat Account. In India, a Demat account, the abbreviation for dematerialised account, is a type of banking account which dematerializes paper-based physical stock shares. The dematerialised account is used to avoid holding physical shares: the shares are bought and sold through a stock broker. This account is popular in India. The Securities and Exchange Board of India (SEBI) mandates a demat account for share trading above 500 shares. As of April 2006, it became mandatory that any person holding a demat account should possess a Permanent Account Number (PAN), and the deadline for submission of PAN details to the depository lapsed on January 2007. Procedure 1. Fill demat request form (DRF) (obtained from a depository participant or DP with whom your depository account is opened). 2. Deface the share certificate(s) you want to dematerialise by writing across Surrendered for dematerialisation. 3. Submit the DRF & share certificate(s) to DP. DP would forward them to the issuer / their R&T Agent . 4. After dematerialisation, your depository account with your DP, would be credited with the dematerialised securities. 20

Reliance Money Demat Account Services Reliance Money – Transacting and investing simplified. Get ready to change the way you transact and invest in financial products and services. Whether you wish to transact in equity, equity & commodity derivatives, IPO’s offshore investments or prefer to invest in mutual funds, life & general insurance products or avail money transfer and money changing services, you can do it all through reliance money. Simply open a reliance money account and enjoy the convenience of handling all your key financial transactions through this one window. Benefits of having a reliance money account • It’s cost effective You pay comparatively lower transaction fees. As an introductory offer, we invite you to pay a flat fee of just Rs. 500/- and 750/- and transact through reliance money. This fee is valid for two months or a specified transaction value See the table below for details.

• Its offers single – window access Through reliance money’s associates, you can transact in equity, equity and commodities derivatives, offshore investments mutual funds, IPO’s life insurance, general insurance, money transfer, money changing and credit cards, amongst others.

• Its convenient You can access reliance money’s services through • The internet • Transaction kiosks • The phone (call & transact) • Our all – India network of associates On an assisted trade (through the call centre or our network of associates) a charge of Rs 12 per executed trade will be applicable. • Its Safe 22

Your account is safeguarded with a unique security number that changes every 32 seconds. This number works as a dynamics password to keep your account extra safe.

• Its provides you a demat account You get your own demat account with reliance capital at an annual fee of just Rs. 50/-. •

Its provides you a 3-in-1 facility.

You can access your banking, trading and demat account through a single window and transfer funds across accounts seamlessly. • It provide you value- added services At www.reliancemoney.com, you get • Reliable research, including views of external experts with an enviable track record • Live news updates from Reuters and Dow Jones 23

• CEO’s / expert views on the economy and financial markets • Tools that help you plan your investments, tax, retirement, etc. in the personal finance section • Risk Analyser for analysis of your risk profile • Asset allocators to build an appropriate investment portfolio

Reliance Money provides 3 different trading platforms for equity trading: Insta Trade Fast Trade Easy trade The benefits • A safe and convenient way to hold securities; • Immediate transfer of securities; •

No stamp duty on transfer of securities;

• Elimination of risks associated with physical certificates such as bad delivery, fake securities, delays, thefts etc.; •

Reduction in paperwork involved in transfer of securities;

•

Reduction in transaction cost;

•

No odd lot problem, even one share can be sold;

•

Nomination facility; 24

•

Change in address recorded with DP gets registered with all companies in which investor holds securities electronically eliminating the need to correspond with each of them separately;

•

Transmission of securities is done by DP eliminating correspondence with companies;

•

Automatic credit into demat account of shares, arising out of bonus/split/consolidation/merger etc.

•

Holding investments in equity and debt instruments in a single account.

Required Documents The extent of documentation required to open a demat account may vary according to your relationship with the institution. If you plan to open a demat account with a bank, a savings, current and, or other account for which the holder have been issued a check book, such holder has an edge over the nonaccount holder. In fact, banks usually offer additional incentives to customers who open a demat account with them. Along with the application form, your photographs (with co-applicants) and proof of identity/residence/date of birth have to be submitted. The DPs also ask for a DP-client agreement to be executed on non-judicial stamp paper. Here is a broad list: • A canceled check, preferably MICR • Proof of Identification • Proof of Address 25

• Pan card (mandatory) •

Recent photographs, one and, or more

For proof of identification and, or address self-attested facsimile copies of PAN card, Voter’s ID, Passport, Ration card, Driver’s license, Photo credit card, Employee ID card, Bank attestation, latest IT returns and, or latest Electricity/Landline phone bill are sufficient. While they only ask for photocopies of the documents, they will need the originals for verification.

Points To Remember 1. Only securities admitted by NSDL can be dematerialised. The list is available with your DP. 2. Only securities registered in the name of the account holder can be dematerialised. 3. Dematerialisation is normally completed within 15 days after the share certificates have reached the issuer/ their R&T Agent. Thus it may take you a month from the date you hand over shares, to receive demat credit. 4. Dematerialisation would be done only when the issuer / their R&T Agent is satisfied of genuineness of securities & ownership status. 5. All the joint holders should sign the DRF. 26

6. The pattern of holding in the DRF should match the pattern of holding on the share certificate & the pattern in which account is opened. 7. Demat requests with name(s) not matching exactly with the name(s) appearing on the certificates merely on account of initials not being spelt out fully or put after or prior to the surname, would be processed, provided the signature(s) of the client(s) on the DRF tallies with the specimen signature(s) available with the issuer/ their R & T agent. 8. If the signature in the DRF does not match with the signature available with the issuer/ their R & T agent, the issuer/ their R & T agent may at the time of demat confirmation, ask for additional documentation (like bank attestation/ notarisation, etc.) to prove that the certificate belongs to the person who forwarded the DRF. 9. In case there is any problem in processing the DRF, contact your DP and if he cannot resolve the problem you may contact NSDL.

RELIANCE MUTUAL FUND The Concept of Mutual Fund A mutual fund is a common pool of money into which investors place their contributions that are to be invested in accordance with a stated objective. The ownership of the fund is thus ‘joint’ and ‘mutual’; the fund belongs to all investors Reliance Mutual Fund 27

Reliance Mutual Fund (RMF), a part of the Reliance - Anil Dhirubhai Ambani Group, is India's leading Mutual Fund, with average Assets Under Management of Rs. 90,813 crores for the month of June 2008, and an investor base of over 6.7 million. Reliance Mutual Fund offers investors a well rounded portfolio of products to meet varying investor requirements. Reliance Mutual Fund has a presence in 300 cities across the country and constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Ltd., a wholly owned subsidiary of Reliance Capital Ltd.

Organization of a Mutual Fund Here are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:

Types of Mutual Funds on the Basis of Risk Vs Returns

Sector Funds

R e t u r n s

Diversified Equity Funds Balanced Funds MIPs Gilt Funds Income Funds Floaters Money Market Funds

Risk 29

Frequently used term in Mutual Funds • Net Asset Value (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. • Sale Price Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load. • Repurchase Price Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price • Redemption Price Is the price at which open-ended schemes repurchase their units and closeended schemes redeem their units on maturity. Such prices are NAV related. • Sales Load Is a charge collected by a scheme when it sells the units. Also called, ‘Frontend’ load. Schemes that do not charge a load are called ‘No Load’ schemes

• Repurchase or ‘Back-end’ Load Is a charge collected by a scheme when it buys back the units from the unit holders. Types of Reliance Mutual Funds 1. Reliance Growth Fund 2. Reliance Vision Fund 3. Reliance Banking Fund 4. Reliance Diversified Power Sector Fund 5. Reliance Pharma Fund 6. Reliance Media & Entertainment Fund 7. Reliance NRI Equity Fund 8. Reliance Equity opportunities Fund 9. Reliance Index Fund 10.Reliance Tax Saver (ELSS) Fund 11.Reliance Equity Fund 12.Reliance Long Term Equity Fund 13.Reliance Regular Saving Fund The key term in mutual funds Dividend Policy: Dividend will be distributed from the available distributable surplus after the deduction of the divided distribution surplus after the deduction of the dividend distribution tax and the applicable surcharge, if any. The mutual fund is not guaranteeing or assuring any dividend. Pease read the 31

offer document for details. Further payment of all the dividends shall be in compliance with SEBI circular No. SEBI/IMD/CIR No. 1/64057/06 dated 4/4/06. Applicable NAV : Sale of units by reliance mutual fund: in respect of valid applications received up to 3 p.m. by the mutual fund alongwith a local cheque or a demand draft payable at par at the place where the application is received, the closing NAV of the day on which application is received shall be applicable. Repurchase including Switch-out: in respect of valid applications received upto 3 pm by the mutual fund, same dayâ&#x20AC;&#x2122;s closing NAV shall be applicable. In respect of valid applications received after 3 p.m. by the mutual fund, the closing NAV of the next business day shall be applicable. Daily net Asset Value(NAV) publication: the NAV will be declared on all working days and will be published in 2 newspaper. NAV can also be viewed on www.reliancemutualfund.com and www.amfiindia.com . Tax Benefits to the mutual fund:

Reliance Mutual Fund is a Mutual fund

registered with the securities & exchange board of India and hence the entire income of the mutual fund will be exempt from income tax in accordance with the provisions of section 10(23D) of the income tax act, 1961. The mutual fund will receive all income without any deduction of tax at source under the provisions of section 196(iv) of the act. An exemption has been granted under the finance (No.2) act, 2004 to open ended equity oriented mutual funds from paying distribution tax on income distributed without any time limit, effective from 1 April 2004. Securities transaction Tax: 32

Name of Transaction Payable by Rate of Tax Purchase and sale of Both purchaser as well 0.125% equity shares or units of as seller equity oriented mutual funds on a recognised stock

exchange

delivery basis Sale on stock exchange seller

0.025%

of equity shares or units of

equity

oriented

mutual funds on nondelivery basis sale of derivatives Seller reorganized

0.017%

stock

exchange Sale of units of equity Seller

0.25%

oriented mutual funds to the mutual fund

There are two types of investment in Mutual Funds. • Lump Sum • Systematic Investment Plan(SIP) . •

Lump sum: In Lump sum the investment is only one times that

is of Rs. 5,000. and if the investment is monthly then the investment will be 6,000/-. 33

â&#x20AC;˘

Systematic Investment Plan(SIP) :

We have already mentioned about SIPs in brief in the previous pages but now going into details, we will see how the power of compounding could benefit us. In such case, every small amounts invested regularly can grow substantially. SIP gives a clear picture of how an early and regular investment can help the investor in wealth creation. Due to its unlimited advantages SIP could be redefined as â&#x20AC;&#x153;a methodology of fund investing regularly to benefit regularly from the stock market volatility. In the later sections we will see how returns generated from some of the SIPs have outperformed their benchmark. But before moving on to that lets have a look at some of the top performing SIPs and their return for 1 year:

Amoun Scheme Reliance

NAV

Total Amount

NAV

Date

1000

62.74

30/5/2008 14524.07

diversified

power sector retail

Reliance regular savings equity principal

22.20 1000

30/5/2008 13584.944

opportunities fund 1000 DWS investment

18.86

30/5/2008 14247.728

opportunities fund BOB growth fund

35.31 42.14

30/5/2008 13791.157 30/5/2008 13769.152

global

1000 1000

In the above chart, we can see how if we start investing Rs.1000 per month then what return weâ&#x20AC;&#x2122;ll get for the total investment of Rs. 12000. There is reliance diversified power sector retail giving the maximum returns of Rs. 2524.07 per year which comes to 21% roughly. Next we can see if anybody would have undertaken the SIP in Principal would have got returns of app. 18%. We can see reliance regular savings equity, DWS investment opportunities and BOB growth fund giving returns of 13.20%, 14.92%, and 14.74% respectively which is greater than any other monthly investment options. Thus we can easily make out how SIP is beneficial for us. Its hassle free, it forces the investors to save and get them into the habit of saving. Also paying a small amount of Rs. 1000 is easy and convenient for them, thus putting no pressure on their pockets. Now we will analyze some of the equity fund SIP s of Birla Sunlife with BSE 200 and bank fixed deposits In a tabular format as well as graphical. Exposure of Mutual Funds Companies in India The concept of mutual funds in India dates back to the year 1963. The era between 1963 and 1987 marked the existence of only one mutual fund company in India with Rs. 67bn assets under management (AUM), by the end 35

of its monopoly era, the Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund companies in India took their position in mutual fund market. The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund. The succeeding decade showed a new horizon in Indian mutual fund industry. By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started penetrating the fund families. In the same year the first Mutual Fund Regulations came into existence with re-registering all mutual funds except UTI. The regulations were further given a revised shape in 1996. Kothari Pioneer was the first private sector mutual fund company in India which has now merged with Franklin Templeton. Just after ten years with private sector players penetration, the total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in India in which some are as below. • ABN AMRO Mutual Funds • Birla Sun life mutual Funds • Bank of Baroda Mutual Fund • HDFC Mutual Fund • HSBC Mutual Fund • ING Vysya Mutual Fund • Prudential ICICI Mutual Fund 36

• Sahara Mutual Fund • State Bank of India Mutual Fund • Tata Mutual Fund (TMF) • Kotak Mahindra Asset Management Company (KMAMC) • UTI Asset Management Company Private Limited • Reliance Mutual Fund (RMF) • Standard Chartered Mutual Fund • Escorts Mutual Fund • Alliance Capital Mutual Fund • Benchmark Mutual Fund • Canbank Mutual Fund • Chola Mutual Fund • LIC Mutual Fund • GIC Mutual Fund Working of a Mutual Fund

Terms and conditions • This facility offered only to the investors having bank accounts in selected cities which are specific in the form of the SIP. • Submit the following document at least 21 working days before the first SIP date for ECS( Electronic clearing Service). • The first SIP cheque should be issued from the same bank account which is to be debited under ECS for subsequent installments. • The bank account provided for ECS(Debit) should participate in local MICR clearing. •

SIP auto debit facility is available only on specific dates of the month i.e. 2nd or 10th or 18th or 28th .

• The investor agrees to abide by the terms and conditions of ECS facility of Reserve bank of India. • An investor can opt for monthly or quarterly frequency. • Only one SIP per month or per quarter is permitted per folio/account. • Minimum investment amount – monthly SIP option – 60 installments of Rs. 100/- each or 12 installment or Rs. 500/- each or 6 installments of Rs. 1000/- each and in multiples of Re.1/- thereafter. •

The gap between the 1st cheque/ installment & the 2nd cheque / installment should be at least 21working days. However subsequent cheques should have a gap of at least a month or a quarter depending upon the frequency chosen.

Advantages of Mutual Funds •

Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value.

•

Professional

Management:

Most

mutual

funds

pay

topflight

professionals to manage their investments. These managers decide what securities the fund will buy and sell. •

Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud.

•

Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash.

•

Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet.

•

Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because 39

index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index •

Transparency

•

Flexibility

•

Choice of schemes

•

Tax benefits

•

Well regulated

Drawbacks of Mutual Funds Mutual funds have their drawbacks and may not be for everyone: •

No Guarantees: No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.

•

Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial consultants, or financial

planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund. â&#x20AC;˘

Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.

â&#x20AC;˘

Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers

How You Can Invest in a Mutual Fund? There are two ways in which you can invest in a mutual fund. 1. One-Time Outright Payment If you invest directly in the fund, you just hand over the cheques and you get your fund units depending on the value of the units on that particular day.

Let’s say you want to invest Rs 10,000. All you have to do is approach the fund and buy units worth Rs 10,000. There will be two factors determining how many units you get. Entry load This is the fee you pay on the amount you invest. Let’s say the entry load is 2.25%. Two percent on Rs 10,000* would Rs 225. Now, you have just Rs 9,775 to invest.

NAV The Net Asset Value is the price of a unit of a fund. Let’s say that the NAV on the day you invest is Rs 30. So you will get 326.67 units (Rs 9800 / 30).

2. Periodic Investments This is referred to as a SIP (Systematic Investment Plan). That means that, every month, you commit to investing, say, Rs 1,000 in your fund. At the end of a year, you would have invested Rs 12,000 in your fund. Let’s say the NAV on the day you invest in the first month is Rs 20; you will get 50 units. 42

The next month, the NAV is Rs 25. You will get 40 units. The following month, the NAV is Rs 18. You will get 55.56 units. So, after three months, you would have 145.56 units. On an average, you would have paid around Rs 21 per unit. This is because, when the NAV is high, you get fewer units per Rs 1,000. When the NAV falls, you get more units per Rs 1,000. 1. Is there a load? An exit load is a fee you pay the fund when you sell the units, just like the entry load is a fee you pay when you buy the units. Initially, funds never charged an entry load on SIPs. Now, however, a number of them do. You will also have the check if there is an exit load. Generally, though, there is none. Also, if there is an entry load, an exit load will not be charged. An exit load may be charged if you stop the SIP mid-way. Letâ&#x20AC;&#x2122;s say you have a one-year SIP but discontinue after five months, then an exit load will be levied. These conditions will wary between mutual funds. 2. What is the Minimum Investment? If you do a one time investment, the minimum amount that you have to invest is Rs 5,000. If you invest via an SIP, the amount drops. Each fund has its own minimum amount. Some may keep it at least Rs 500 per month; others may keep it as 43

Rs 1,000. [Only in Reliance mutual funds, you can invest as little as Rs. 100/- per month.] 3. How often does one have to invest? It would depend on the fund. Some insist the SIP must be done every month. Others give you the option of investing once in three months or once in six months. They also give fixed dates. So you will get the option of various dates and you will have to choose one. Letâ&#x20AC;&#x2122;s say you are presented with these dates: 1, 10, 20 or 30. You can pick any one date. If you pick the 10th of the month, then on that day, the amount you have decided to invest in the fund has to be credited to your mutual fund. 4. How must the payment be made? You can opt for the Electronic Clearance Service from your bank; this means the mutual fund will, as per your instructions, debit a certain amount from your account every month. Letâ&#x20AC;&#x2122;s say you have a SIP of Rs 1,000 every month and you have chosen to invest in it on the 10th of every month. Under this option, you can instruct your mutual fund to directly debit your bank account of Rs 1,000 on the due date.

If you donâ&#x20AC;&#x2122;t have the required money in your account, then for that month, no units will be allocated to you. But, if this continues periodically, the mutual fund will discontinue the SIP. You need to check with each mutual fund what their parameters are. Alternately, you can give cheques to your mutual fund. In this case, they may ask for five Post Dated Cheques upfront with your first investment. Since these cheques are dated ahead of time, they cannot be processed till the date indicated. 5. Must I state for how long I want the SIP? Yes. You will have to state whether you want it for a year or two years, etc. If, during the course of this period, you realize you cannot continue with the SIP, all you have to do is inform the fund 15 days prior to the payout. The SIP will be discontinued. You can continue to keep your money with the fund and withdraw it when you want. 6. Do all funds offer SIP? No. Liquid funds, cash funds and floating rate debt funds do not offer an SIP. These are funds that invest in very short-term fixed-return investments. Floating rate debt funds invest in fixed return investments where the interest rate moves in tandem with interest rates in the economy (just like a floating rate home loan).

All types of equity funds (funds that invest in the shares of companies), debt funds (funds that invest in fixed-return investments) and balanced funds (funds that invest in both) offer a SIP. 7. Tax implications Let’s say you have invested in the SIP option of a diversified equity fund. If you sell the units after a year of buying, you pay no capital gains tax. If you sell if before a year, you pay capital gains tax of 15%. Let’s say you invest through a SIP for 12 months: January to December 2007. Now, in March 2008, you want to sell some units. Will you be charged capital gains tax? The system of first-in, first-out applies here. So, the amount you invest in January 2007 and the units you bought with that money will be regarded as the units you sell in March 2008. For tax purposes, the units that you sell first will be considered as the first units bought.

8. How will an SIP help? When you buy the units of a fund, you may do so when the NAV is really high. For instance, let’s say you bought the units of a fund when the Bull Run was at its peak, leading to a high NAV. 46

If the market dips after that, the value of your investments falls and you may have to wait for a long while to make a return on your investment. But, if you invest via a SIP, you do not commit the error of buying units when the market is at its peak. Since you are buying small amounts continuously, your investment will average out over a period of time. You will end up buying some units at a high cost and some units a lower price. Over time, your chances of making a profit are much higher when compared to an one-time investment.

SHARE TRADING

Points To Consider Before Investing Itâ&#x20AC;&#x2122;s always risky to invest your money in one stock. The confidence in a stock may be effective but the overconfidence can be hazardous. The stocks and stock markets have very irregular nature. It is very hard to analyze the future conviction of a stock. The unpredictable things may occur, which may have shocking effects on the investors. The investors should always track few lucrative stocks before investing. The investors are always advised to interpret the stocks and stock market correctly, study the past as well as present movements of the stocks, and adopt the flexible policies that may deal with the changing market trends. It is very difficult to predict the future of the stock market, but the investors outline brief plan about how the market may perform in the coming future on the basis of market trends. The stock markets are highly volatile and erratic in nature. The investors should follow the active market trends and manage their stocks in such a way so that they must earn some gain. If you are a day trader, you should make proper selection of the stock and when the suitable time comes, sell it. Donâ&#x20AC;&#x2122;t wait for further increase; otherwise you may lose your money. In case of long-term investing, you should pick the stocks that have some demand and when the price reaches to its highest peak, covering your costs plus profits, then its better to sell it. You must take help from an expert and follow proper instructions to make bigger profits.

Stock Market Story Stock exchange provides an opportunity to investors to invest money in the securities of their choice. It is a structured securities market that offers sufficient marketability and price stability for shares so essential for the requirements of investors. It (stock market) is considered as a symbol of the growth of an economy. Stock market offers a balanced measure of security and integrity in the sale and purchase of different securities. Through the interchange of demand for the supply of securities, a well-structured securities market helps in accurate valuation of stocks. The stock exchange assists in the systematic flow of distribution of savings as between various kinds of aggressive investments. The stock exchange is considered as an organization of huge significance in every country. Industrial development and expansion hinge upon capital formation, that is, money being invested in various securities. This becomes achievable on a large scale due to subsistence of stock exchanges. Those who are interested in investing their funds are usually fascinated towards securities issued by various companies. The prices of particular securities traded at the stock exchanges reflect their relative demand and supply. The prices of securities also indicate the financial health of individual companies. This serves as a guide to the investors to invest in sound securities. The security price index schedule provides a reasonable indication of the state of the economy, industry and business. Thatâ&#x20AC;&#x2122;s why the stock exchange 49

is known as the â&#x20AC;&#x2DC;barometer of the economy.â&#x20AC;&#x2122; Just like, the barometer depicts the changes in atmospheric pressure; stock market quotes give an idea about the economic progress of a country.

Swing Stock Trading Swing stock trading is a short-term trading technique in which stocks are held only for shorter periods such as two to four days or weeks. Normally, the newcomers adopt this style and it depends on the weekly or monthly variations in stock prices. Swing trading provides higher returns as compared to day trading. However, swing traders have to suffer overnight risk, which could have adverse affect on stock price. Swing traders suffer less challenge from big traders. During the upward trend, a swing trader observes a particular stock for a couple of days. If there is a downfall in the market, the trader shifts to another emerging stock. Swing trading is most productive, when the markets are performing firmly. A swing trader appraises the temporary impulsion and pricing strategies of the stock, rather than its basic value. Swing stock trading carries lesser risks. A swing stock trader takes advantage from the expected steady market instabilities. When there is substantial price variation in the market, the swing trader

sells the stock without waiting. Swing stock trading provides quick results, but the important thing is to choose the right market and the right stocks. Swing trading ignores rapid increase or decrease in stock prices and the prices tend to go in straight direction without fluctuating. Swing trading is best for part-time traders, while day traders have to watch each and every movement in quotes and they have to stick to their computers for many hours. Swing trading doesn't require that type of focus and dedication. In brief a swing traderâ&#x20AC;&#x2122;s aim is to generate money by captivating the immediate changes that stocks attain in their lifetime, and at the same time manipulating their risk by following suitable money management practices.

Day Trading Numerous people have wrong perception that short term trading strategy is chancy and long term trading strategy is secure. But this is wrong, both short term trading and long term trading can be effectual trading strategies. Stock market is a place where investors can earn lots of money in the short time as well as in the long run. The return on investments mainly depends on the time durations for which the investments are made. There are various types of trading styles that investors may opt to make profits from the stock market. In this article we talk about day trading. Under day trading method, the stocks are held only for short periods - for few hours or minutes or seconds. The day trading offers various opportunities to make big profits daily. The trading process for the day trading comprises exciting strategies, which assist the investor to make good profits. 51

Day traders buy and sell stocks during the whole day, hoping that the price of the stocks will rise and let them to make quick gains. A day trader will sell all stocks before closing of stock market. The purpose of day trading is to speedily get in and out of any stock for a return anywhere from a few cents to several points per share on an intra-day basis. The day trading helps investors to control the fear of overnight risk. If the investors have ideal plans to choose the investment opportunities from the stock market, the day trading is the best option idea to make quick money.

Online Stock Investing Benefits Online stock investing is an emerging technique to trade stock but when practiced by the average person can be a complete waste of money and time. The average person needs to be acquainted with the ups and downs of stock trading in order that they can stop losing money when they buy and sell stock. In reality, when you purchase stock, you are becoming a shareholder in that company. The company will then take the money you used up to obtain that share to amplify the company and make more money. When the business makes more money the stock price will grow up. You can then sell the stock to make more money than you invested, or if the company loses money from when you purchased the stock you suffer a loss. If you are interested in entering the online stock-investing world, you should go online and make an account thru an online brokerage company. After setting up your online account, you can begin to trade stock. It is also

very important that you have some knowledge about stock trading. Here are some benefits of online stock investing:  When trading stock online the broker's commissions are less. The Brokerage charges are Rs. 12 per transaction and not depending on the amount of money in the Reliance Money  Online trading is advantageous as the company lets the investor to chart the lucrative stocks and also updates the investor with the most recent updates and news on the stock market.  One of the best parts about online stock trading stock is its easiness to access your account, get detailed information about the company and stock you invested in, etc.  You have total freedom to buy and sell stock in your own way and at your own time. Basically online investing is the best way to invest money with complete freedom.  If you want help while trading online you are capable of making contact with other trained brokers and investment counselors and ask questions to them.  When you trade stock at your home, you save lots of money and time.

Investing In the Stock Market Online stock trading is a new technique of buying and selling stocks, which has created a boom in the stock market industry. It has made all people to have the benefit of stock trading by using their own PC. Now you can buy and sell any stock over the Internet and it doesn’t take much to begin. Thru 53

online facility, you can have a proper check over the market situation from any corner of the world. In todayâ&#x20AC;&#x2122;s hasty and hard life, nobody has time to personally visit the stock brokers or companies to collect information or to invest in their schemes. So, the invention of internet has proved to be the most excellent tool in the stock trading that has given rise to trade stock online from the comfy atmosphere of your home or office. Here are few points that you have to consider while getting involved into it: - You should make proper research for a well-known and trustworthy company before putting your hands in stock market as there are several Internet sites that deal in the buying and selling business of stocks. You should get through the evaluations and testimonials of different investors those who are already dealing with them and you can also visit bulletin boards to grab information about other companies. - There are several Internet sites that are linked to the buying and selling of stock to foreign markets while some are related to the overseas as well as domestic markets. You should decide earlier with which company you want to start trade so that you should not mix up the things. - You should always go for the sites that are completely secured as your financial plus personal information has to be inserted over the site to start the stock trading online. If the security of the site is less than your level of satisfaction then need not to step in as there might be the chances that your loaded data can be abused in future. 54

- First investigate about the payment or other charges charged by different sites. You should always choose the site charging less fees per trade, thus, you should take the benefit of online trading that cannot be enjoyed in trading stock in a traditional manner. Online investment sites provide 24 x 7 hours assistance so that if you need any help, they should always be present to support you.

Online Stock Trading Is Very Opportunistic Stock market is a place where investors can make continuous profits by investing their funds in different segments. Stock trading has turned into big business, now-a-days. It offers several choices to investors, which include breakeven (BE) systems, online stock trading, futures trading and chances to make bigger gains. Each stock investment is based on three vital constituents i.e. capital, outlook and technique. There are numerous investors that buy or sell shares on a daily basis. The online facility has made stock trading an easier and simpler process. The online stock trading (buying and selling of stocks) thru Internet has attained much important all through the world. Because of its advantages, it had attracted more and more users. Online stock trading lets investors to buy or sell shares automatically. It is a resourceful and suitable method to scrutinize the stock market and make investments in the lucrative sections. But, it is vital that investors should have proper knowledge about stock market basics, otherwise it will create problems in future. 55

The online stock trading has offered an opportunity to investors to branch out their temporary plus permanent investment plans, and to make investment in stock markets all thru the world. The other benefit of online trading is that investors need to pay less brokerage charges. It also helps investors to take immediate action, without any delay. The number of online companies also provides the services like stock trading, automatic investment and even reinvestment of dividends with info to buy or sell once the price reaches a higher level. In order to make better returns on investments, investors can hire a stock broker. Investors can also take help from a trading professional or a trading institute that will offer advantageous opportunities for their investment bag.

Points to Remember for a Newcomer in Stock Market We all are interested in investing money in the stock market, which provides opportunities to increase our wealth within short periods. Stock exchanges encourage investments and provide a permanent market for securities. Various types of securities are traded there. Therefore it is an easy way for investors to utilize their available cash instead of blocking. If there is an upward trend in the stock market, then you can easily reap gains in much lesser time, but if there is downfall, you need to wait for some profitable time. Stock market fixes no limits on investors; they can easily make their profits and raise their profitability accordingly.

But, it is necessary that you must know the basic rules and conditions of the stock market. The trading in a stock exchange is done under strict rules and in a very orderly manner. Stock market conditions assist you to earn higher gains with your limited incomes. If you are a newcomer, then you have to gain some knowledge about this opportunistic market. Stock market carries higher degree of risk for all. Whether you are a day trader, swing trader or long-term holder, you need to follow some rules. Stock exchanges are well-organized markets that publish the quote list of the securities traded on daily basis. The investor gets the latest prices of their securities, which are prepared by the experts. Stock exchange acts as a middleman between the seller and buyer of securities. Therefore, it helps in mobilization of funds for the companies.

Is trading through the Internet safe? The safety of transactions on the Internet depends on the encryption system used. The better this transaction system, the more difficult it is for any person to hack the site. Internationally, the best system available today is the 128-bit encryption, a system, which evens the Pentagon uses. ICICIdirect.com is one of the few online share-trading sites in the country equipped with this 128-bit encryption. Secondly, you too can ensure the safety of the transactions online. You normally get a secured user id and password, the secrecy of which is to be maintained

entirely

by 57

you.

Thirdly, if the transaction system requires no manual intervention, you further improve the safety in the transactions. Among Indian sites, ICICIdirect.com is one of the very few fully integrated online trading sites. This enables the elimination of the possibility of any manual intervention. Which means orders are directly sent to the exchange ensuring that you get the

best

and

right

price?

What about security of my money demat shares and my transaction documents? In systems where the broking, banking and demat accounts are completely integrated, your money remains in your own bank account, and does not get transferred

the

broker's

pool

account.

Is trading through the Internet a difficult and cumbersome process? The experience of trading through Internet depends a great deal on the type of product offered by the site. Say, for example, one of the issues bothering you may be tired of the paperwork involved after every trade in writing cheques

TIFDs.

You would then seek a system that eliminates these processes. In online trading sites, the greater the back-end integration of the system, the greater the amount of work the sites do for you, therefore greater the convenience available to you.For example, incase of ICICIdirect.com, your broking 58

account, bank account and demat account are linked electronically. So when you punch in a buy or sell order, the system checks the funds/ shares availability and automatically credits/debits the accounts once the order is executed

the

exchange.

But I am not comfortable with Internet, or with finance, how can online trading be easy for me? Contrary to common perceptions, trading through Internet does not require either any expertise in working on the computer, or any special financial skills. You could try the demo (demonstration) of the online trading sites like ICICIdirect.com to find out why others like you, with little or no knowledge about the Internet or finance, have switched on to online trading. Or you could attend the demonstrations sessions held by such websites in your city.

How frequently is the price updated at all these online trading sites? The tickers available at online trading sites provide instantaneous updates. Also, some websites can offer to transact in those shares instantaneously and

with

convenience.

How can I be sure that I shall be trading at a price I want to or at a price appearing in the website? The solution to your problem could be provided in different ways by different online share trading sites. At Reliance Money, for any trade order, the customer is asked to click "Proceed" after he has the opportunity to completely check the order verification form. Moreover, you have the option of modifying or canceling the order till the moment the order is executed at the exchange. Finally, online trade confirmations reach reaches our customers within 4 minutes, while contract notes are dispatched at the end of the day and reach within 12-24 hours. With Reliance Money, you decide what you want to buy and buy the share at the price you want to and therefore you are in total control of your trades.

CHAPTER -3

DESIGN OF STUDY

THE STUDY MARKET ANALYSIS Markets In tune with the global stock markets that began to recover from the second half of 2003; Indian stock markets too witnessed rapid growth. India’s two leading indices, the most popular BSE Sensex, and the one most used by the markets the National Stock Exchanges’ S&P CNX Nifty rose to record levels. Both primary and secondary market activity experienced sharp surge. Much progress was made in further strengthening and streamlining risk management, market regulation and supervision. A few aspects of the major developments in the India’s stock markets are described below. And the insurance sector is also play an important role in the growth of the financial market. Market Structure Indian securities market is fairly large as compared to several other emerging markets. There are 22 stock exchanges in the country, though the entire liquidity is shared between the country’s two national level exchanges namely, the National Stock Exchange of India and the Bombay Stock Exchange Ltd. The regional stock exchanges are in pursuit of business models 62

that make them viable and vibrant. Meanwhile, these exchanges have become members of the national level exchanges through formation of subsidiaries whose business is showing continuous growth and progress. The number of brokers in various stock exchanges rose from 6,711 in 199495 to 9,335 in FY06. The number of brokers in all the exchanges together peaked to 10,213 in the year FY01 but gradually declined thereafter when the regional stock exchanges began to lose business in the light of wide ranging market structure reforms introduced since then. In FY01, when the markets were in upswing, several regional stock exchanges were generating business owing to the availability of deferral products, such Badla and different settlement calendars prevailing at that time in these exchanges. For instance in FY01, the Delhi Stock Exchange registered cash market turnover of Rs 838.71 bn; Uttar Pradesh Stock Exchange, Rs 247.47 bn, Ludhiana Stock Exchange Rs 97.32 bn, Pune Stock Exchange Rs 61.71 bn as against Rs 13,395.11 bn of the turnover at the National Stock Exchange and Rs 10,000.32 bn turnover at the Bombay Stock Exchange. With the abolition of the deferral products and introduction of uniform T+2 settlement cycle, the liquidity in these exchanges flowed to the national level system consisting of NSE and BSE. Major Player in the Insurance Sector There are many reputed companies in the market which provide the Insurance for living being and non living beings. The companies in life Insurance are as follows. Life Insurer in Public Sector 63

• Life Insurance Corporation of India Life Insurer in Private Sector • Reliance life Insurance Company Limited • ICICI Prudential Life Insurance • Bajaj Allianz Life Insurance • Tata AIG Life Insurance corporation Limited • HDFC Standard Life Insurance • Birla Sun Life Insurance • SBI Life Insurance • Kotac Mahindra old Mutual Life Insurance • Aviva Life Insurance • MetLife India Life Insurance • ING Vysya Life Insurance • Max New York Life Insurance • Shriram Life Insurance • Bharti AXA Life Insurance Co. Limited • IDBI Forties Life Insurance Co. Limited • Argon Religare Life Insurance Co. Limited

Major Broking house 64

During the analysis of the market it has been found that there are a lot of the brokeing house in the market which are providing the online trading facility to the individuals or the group of the individuals. • 5paisa.com You can now buy and sell shares on 5paisa.com with speeds comparable and at times better than NSE's NEAT Terminal. This speed and reliability comes only with perseverance of pioneer backed by huge investment in technology! You can now buy and sell shares on 5paisa.com with speeds comparable and at times better than NSE's NEAT Terminal. This speed and reliability comes only with perseverance of pioneer backed by huge investment in technology. • Advani Share Brokers Advani Share Broker, a reputed Bombay based on investment house, operates from India's financial hub, Dalal Street, since sixty years. It deals in equities, debt and derivatives on the Bombay Stock Exchange and the National Stock Exchange of India. • AGROY Group of Companies Agroy group of companies is a well established name in the field of capital markets and financial services. AGROY Finance & Investment Ltd. (AFIL) is the group's flagship company engaged in capital markets as a premier financial and stock broking house. The company was formed in July 1992. Since then it has enjoyed patronage of a large number of valued customers and business partners. • Anand Rathi Securities Limited Anand Rathi Securities Limited provides financial and advisory services including wealth management, investment banking, corporate advisory, 65

brokerage & distribution of equities, commodities, mutual funds and insurance - all of which are supported by powerful research teams. • India bulls India bulls is India's leading retail financial services company with 70 locations spread across 62 cities. While our size and strong balance sheet allow us to provide you with varied products and services at very attractive prices, our over 450 Client Relationship Managers are dedicated to serving your unique needs.

• Religare Securities Ltd. Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare Securities Limited, Religare Finvest Limited, Religare Commodities Limited and Religare Insurance Advisory Services Limited provides integrated financial solutions to its corporate, retail and wealth management clients. Provides various financial services which include Investment Banking, Corporate Finance, Portfolio Management Services, Equity & Commodity Broking, Insurance and Mutual Funds. • Jaypee Capital Services Ltd. Jaypee Capital Services Ltd. is a registered self-clearing member with National Stock Exchange and SEBI. It has the expertise and the experience to capitalize on daily stock movements and employ over 20 specialist traders certified by the NSE. 66

• ICICI Direct Online share and mutual funds trading facility by the ICICI group. • Arcade Share & Stock Brokers Arcadia group began its modest journey in 1995 and now Arcadia proudly boasts

about

membership

NSE,BSE,

Depository

Participant

(CDSL),MCX,NCDEX .The philosophy of client servicing backed by all principal Indian Stock and Commodity exchange gives Arcadia edge over other players in the industry segment to offer value based services to its customers. •

Indianstockmarket.net

Indianstockmarket.net is an effort to educate Indian investor by providing useful stock news, stock market websites, informative articles, resources to various investment guides.

Major Developments in equity brokerage industry in India • Corporate memberships • Wider product offerings • Greater reliance on research • Accessing equity capital markets • Foreign collaborations and joint ventures • Specialized services/niche broking • Online broking • Emerging challenges and outlook for the brokerage industry 67

• Fragmentation • Global Opportunities • Competition from foreign firms • Investor Protection

LEGAL AND REGULATORY ENVIRONMENT  SEBI - The capital markets regulators also regulates the mutual funds in India. SEBI requires all mutual funds to be registered with them. SEBI issues guidelines for all mutual funds operations - investment, accounts, expenses etc.

 RBI- as supervisor of banks owned mutual funds - As banks in India came under the regulatory jurisdiction of RBI, bank owned funds to be under supervision of RBI and SEBI.  RBI as supervisor of Money Market Mutual Funds - RBI has supervisory responsibility over all entities that operate in the money markets. Hence in the past Money Market Mutual Funds scheme of Mutual funds had to be abide by policies laid down by RBI. Recently, it has been decided that Money Market Mutual Funds of registered mutual funds will be regulated by SEBI through SEBI (Mutual Fund) Regulations 1996.  Ministry of Finance - (MoF) ultimately supervises both the RBI & the SEBI and plays the role of apex authority for any major disputes over SEBI guidelines.  Company Law Board - Dept of Company Affairs - Registrar of companies AMCs of Mutual funds are companies registered under the companies Act 1956 and therefore answerable to regulatory authorities empowered by the Companies Act.  Stock Exchanges Stock Exchanges are self-regulatory organizations supervised by SEBI. Many of closed ended funds of AMCs are listed as stock exchanges and are traded like shares

 Office of the Public Trustee Mutual funds being public trust are governed by the Indian Trust Act 1882. The Board of trustees or the Trustee Company is accountable to the office of the public trustee, which in turn reports to the Charity commissioner  Unit Trust of India Unit Trust of India formed under UTI Act 1963.The Management of the Trust is under a Board of trustees, which has names of RBI, IDBI, LIC, and SBI with the chairman appointed by the Government of India in consultation with the IDBI.  Self-Regulatory organizations A Self Regulatory organization (SRO) is an association representing a group of market participants, which is empowered by the apex regulatory authority to exercise pre-defined authority over regulation of their members. For example stock exchanges. However everybody representing a group of market participants does not automatically become a SRO.

 Association of Mutual funds of India (AMFI) AMFI is not a SRO. It has been formed in 1995 with the objective of representing the Mutual fund industry collectively with a view - To promote the interests of Mutual Funds and Unit holders. - To set ethical, commercial and professional standards in the industry. 70

- To increase public awareness of Mutual funds in the country

OBJECTIVE OF STUDY

The main objective of training is to aware students about new market concept & industrial environment in which they have to work after the completion of their course It is not possible for students to master everything in this short span of time. But it does help the students in knowing about what is happening in the market & new technologies & trends that are prevalent in the market. My objective during the summer training was to learn about all the products. The company provides the knowledge about the online share trading, DMAT A/C, mutual fund and Life Insurance. It gave the basic knowledge as well as the concept behind these. I also learned about how to deliver the products in front of the customers. It was a good learning that how to interact with the different kind of customer in the market. Therefore I have selected a topic for the project which is related to customer perspective about share trading and mutual fund with reference to Reliance Money.

DATA COLLECTION SOURCE 72

Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites and some special publications of R-MONEY.

DATA COLLECTION METHOD DATA COLLECTION: Proceeding further after determines the Methodology and limitation of the study the next step is to analyze the Data being collected for the study. Data is being collected from various sources like: Questionnaire  Personal visit  Telephonic Information etc. VI.I QUESTIONAIRE:Questionnaire is a written form being given to the prospective investor to give feedback about the services provided to them and also to find the satisfaction level of the investor for a particular investment product .Questionnaire is an easy and simple way of collecting a data .After filling up of form the next step is to evaluate the form in different dimensions and draw a conclusion. It is difficult to get a Questionnaire filled by corporate because of time they don’t have time to fill the Questionnaire so at the time of meeting them personally or after that the Questionnaire is filled by us. The Sample size taken for this study is 100 which is not enough to draw a conclusion but due to time limitation only this much size has been taken into consideration. After analyzing the Questionnaire the following evaluation has been done:-

CATEGORY OF

TOTAL

INVESTORS

INCOME

IT PEOPLE DOCTORS TIMBER MERCHANTS JEWELLERS REAL ESTATE AGENTS

HIGH HIGH HIGH HIGH HIGH

RISK

LOW LOW HIGH HIGH HIGH

RETURN

HIGH HIGH HIGH HIGH HIGH

After analyzing the above table the conclusion was made that the business people are more Risk taker while professional people are less Risk taker where the return expected in both the case are high. VI.II PERSONAL VISIT:The second way of collecting data is Personal Visits to the cooporates personally by fixing an appointment. Personal Visit gives a clear picture of the conclusion drawn in Questionnaire It gives a clear view of the client Awareness about the product .Some of the difficulties in making Personal Visits are: To take a time or appointment from the cooperates.  To convenes investor to invest in a particular product. Personal Visit gives a clear picture about the Investment areas of both the categories

PROFESSIONAL PEOPLE BUSINESS PEOPLE PPF LAND KISAN VIKAS PATR GOLD BANK ACCOUNT STOCKS INSURANCE INSURANCE FURTHER STUDIES etc. VEHICLES etc. From the above table it is clear that the Professional people invest in the Value Added items where as Business people they invest in Future Prospect assets like land, gold etc. VI.III TELEPHONIC INFORMATION:The further source of collecting data is telephonic information with the existing customer and the prospective investors. It is very difficult to reveal the data of investors from the company itself because it has been kept as a secret document. After getting a data some problems too come in the way. Some are: People are not ready to listen.  People ask question like from where did you get the number?  From this source not much of the Information is drawn.  Few respondents where not happy with the level of customer services endured by

SCOPE OF STUDY The research was carried out in Bareilly city only. I have visited people randomly nearby my locality, different shopping malls, small retailers etc.

Data sources: Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by interacting with various people. The secondary data has been collected through various journals and websites and some special publications of R-MONEY.

Sampling: Sampling procedure: The sample is selected in a random way, irrespective of them being investor or not or availing the services or not. It was collected through mails and personal visits to the known persons, by formal and informal talks and through filling up the questionnaire prepared. Sample size: The sample size of my project is limited to 100 only. Sample design: 77

Data has been presented with the help of pie charts. .

CHAPTER-4

ANALYSIS OF DATA

Preference of Investment

Fig.1 Result of Preference of Investment

This shows that although the mutual funds market is on the rise yet, the most favored investment continues to be in the Share Market. So, with a 79

more transparent system, investment in the Stock Market can definitely be increased.

Awareness of Online Share Trading

Fig. 2 Result of Awareness of Online Share Trading

With the increase in cyber education, the awareness towards online share trading has increased by leaps and bounds. This awareness is expected to increase further with the increase in Internet education.

Preference of investing in stock market

High returns and high risk

Tax Benefits

Short term gain from investment

35% 45%

20%

The study shows that most of the people prefer to invest in stock market because of high risk and high return whereas some other try to capture the short term gain from investment. But a very few section of people invest because of the benefits they gain in tax.

Awareness of Reliance Money as a Brand

Fig.4 Result of Awareness of Reliance money as a Brand This pie-chart shows that reliance money has a reasonable amount of Brand awareness in terms of a premier Retail stock broking company. This brand image should be further leveraged by the company to increase its market share over its competitors.

Awareness of Reliance Money Facilities 82

Fig .5 Result of Awareness of Reliance money Facilities

Although there is sufficiently high brand equity among the target audience yet, it is to be noted that the customers are not aware of the facilities provided by the company meaning thereby, that, the company should concentrate more towards promotional tools and increase its focus on product awareness rather than brand awareness.

Customers having Demat account in companies

Reliance

India bulls

Kotak Mahindra

ICICI Direct

others

9% 33% 23%

14% 21%

7. Frequency of Trading

Fig 7 Result of Frequency of Trading

Inspite of the huge returns that the share market promises, we see that there is still a dearth of active traders and investors. This is because of the non â&#x20AC;&#x201C; transparent structure of the Indian share market and the skepticism of the target audience that is generated by the volatility of the stock market. It requires efficient bureaucratic intervention on the part of the Government.

8. Percentage of earnings invested in Share Trading

Fig 8 Result of percentage of earning invested in share trading This shows that people invest only upto 10% of their earnings in the stock market, again reiterating the volatile and non-transparent structure of the Indian stock market. Hence, effective and efficient steps should be undertaken to woo the customers to invest more in the lucrative stock market.

9. Problems faced during trading

Network Problem

Information Related Problem

Manual operating problem

Service provide problem

20%

10%

50%

The most common problem faced by people during trading is the information related problem i.e., they donâ&#x20AC;&#x2122;t get the required information about trading either online or offline. Whereas some other problems are also there like network problem, in manual operating problem and service provider problem.

10. Rating of products of Reliance Money

Excellent

Good

Average

10%

Poor

20%

50%

About 20% of the people rated the products of reliance money as excellent whereas 50% rated it as good. While some others rated it as average and a very small portion of people rated it as poor.

11. Customer awareness for the different brokerage company

not Company

somewhat

less

aware

direct Reliance

Money Karvey Sharekhan

38 45 30

30 15 20

12 25 34

20 15 16

ICICI

Awareness Chart

Number

50 40

more aware

somewhat aware

not more aware

less aware

0 icici direct

Reliance Money

Karvey

Sharekhan

Company

The awareness about various companies is tabulated above. It is shown in the bar chart that the maximum customers are aware of karvey Brokerage Company. The awareness towards ICICI Direct and Sharekhan is nearly same. About 48% customers are aware about the Reliance money. Only 20% customer said that we donâ&#x20AC;&#x2122;t know the exactly the services provided by the Reliance Money.

12.Preference toward Mutual Funds SA

To minimize the risk Influenced by past

performance

Broker motivation

For assurance & security

100 90 80 70 60 50 40 30 20 10 0

SA A N D SD

To minimize the risk

Influenced by past performance

Broker motivation

For assurance & security

People invest their money in the mutual fund. It is shown in the bar chart that persons invest their money in mutual fund only to minimize the risk. Because investing money in mutual fund has a less risk. Therefore 90% customer said that they prefer to invest money in mutual fund. People get more assurance and security by investing their money in mutual fund. Mostly people influenced by their past performance and people are not more motivated by broker when they invest in mutual fund. 13.In which type of mutual fund people invest their money

Growth Fund

Tax Saving Fund

Balanced Fund

Equity Fund

Any other

In which type of mutual fund customer invest mostly

10%

Growth Fund Tax Saving Fund Balanced Fund 56%

26%

Equity Fund Any other

It is shown in the above pie chart that nearly 56% people invest money in growth funds. After this people like to invest their money in Tax saving 93

fund. People invest money in balanced fund and equity fund nearly 10% and 8% respectively. There is more chance to get less in growth fund but there is more security of money.

14. What people see before investing in share market?

Company Image

Company Performance

motivated by experience person

market cap of company

about investing company 70

Company Image

60 50

Company Performance

40 30

motivated by experience person

market cap of company

10 0 1

Every person thinks about the company in which he is going to invest. He get the information form magazines, Newspapers and also through internet. About 58% people said that they see the current and last performance of the company before investing the money in share market. 19%people see the company image before investing the money in the share market. Nearly 10% people see the market cap and motivated by any experience person before investing money. 15. Comparison of Reliance money against other brokerage company Provide better return to the

SA 67

A 21

N 2

D 0

SD 0

customer Brokerage charges are very less Transparency of money to the

88 65

11 24

1 7

0 4

0 0

customer is high Security of money is high Easy to access online trading No charges if you do share trading

57 37 79

19 29 17

16 7 3

6 18 1

2 9 0

yourself Charge coupon strategy is good Provide full satisfaction to the

49 41

38 18

3 14

8 23

2 4

customer Provide the information in easy and

better way More careful for his customer

100 90 80 70 60 50 40 30 20 10 0

SA A N D SD

Provide better return to the customer

Brokerage Transparency of charges are very money to the less customer is high

Security of money is high

Easy to access online trading

Reliance money provides the good return to the customer as it is shown in the above bar chart. More than 60% customers are strongly agreed with this comment. 20% are those people who are agree with this comment. It is clearly shown in the above chart that reliance money is a cheapest brokerage company in present scenario. People opt that there is more transparency of money for the customer. More than 60% customers think that it properly manages the money of customers. The security of customer is also very high in the reliance money because there are no intermediaries between the Reliance money. The software provided by the Reliance money is easy to access in comparison to others as well as have high speed.

90 80 70 60 50 40 30 20 10 0

SA A N D SD No charges if Charge coupon Provide full Provide the More careful for you do share strategy is good satisfaction to information in his customer trading yourself the customer easy and better way

It is shown in the above chart that it will not cut any charges if customers do share trading himself. The charge coupon strategy of reliance money is a very good and people are attracting towards this company due to these facility. There is some problem in the satisfaction level to the customer of reliance money. More than 20% customer said that it doesnâ&#x20AC;&#x2122;t care their customer after opening their DMAT A/C. Most of customers are satisfied with the information provided by the reliance money.

16. According to the Family expenses

Family Expenses

No. of Customer 14 37 34 11 4

upto 5000 5001-10,000 10,001-20,000 20,001-30,000 30,001 and above

No. of Customer acc. to their family expenses

11%

14%

upto 5000 5001-10,000 10,001-20,000

34%

37%

20,001-30,000 30,001 and above

Those people whose family expenses are more than 30,000 per month invest more money in the stock market and mutual fund.

Therefore

investment is depending on the family income. Share Trading is all about 98

the risk of money. Sometime person loose money and some time gain depending upon the market conditions.

CHAPTER -5

FINDINGS

 As the test result shows that there is significant difference among the opinion of the customers regarding the positioning factors, the following conclusions will elaborate the positioning factors which are given more preference by consumers.  At the survey conducted upon 200 people, (67.5%) are already mutual fund investors/an insurance policy owner or are interested to invest in future or take an insurance policy and the remaining are not interested in doing either of it. So there is enough scope for the company to target those participants (32.5%) to convert them into investors through their convincing power and great communication skills.  Now, when those rest people were asked about the reason of not investing in mutual funds , then most of the people held their ignorance responsible for that. They lacked knowledge and information about the mutual funds . Whereas just 10 people enjoyed investing in other option.  Out of the 135 persons who already have invested in mutual funds/or taken an Insurance policy are interested to invest, only 18% have sound knowledge of MFs and various Insurance policies, 34% people are aware of only the schemes in which they

100

have invested. 27% possess partial knowledge whereas 21% stands nowhere in knowledge about MFs and as far as the Insurance polices are concerned they are still confused. ď ś 33 participants buy forms directly from the AMCs, 28 from brokers only, 55 from brokers and sub-brokers even then 15 people buy from other sources. The brokers and sub brokers have the maximum reach so they should try to make those investors aware f the happenings, even the AMCs should follow it. ď ś When asked about the most alluring feature of MFs, most of them opted for diversification, followed by reduction in risk, helps in achieving long term goals and helps in achieving long term goals respectively. ď ś Most of the investor preferred to invest at a young unmarried stage. Even 32 persons were ready to invest at a stage of young married with children but person with older children avoid investing due to increased expenses. But again the number rose to 27 at pre-retirement stage.

101

CHAPTER-6

CONCLUSION AND RECOMMENDATION

102

RECOMMENDATIONS The company is new one and subsidiaries of Reliance Capital and separated from it in the last year. The company penetrates its market share in a very fast way. The franchisees of Reliance money is increasing day by day in big cities where people are have ability to invest their money in stock market. But there is a need to concentrate on few places where it can come out from weak points. In India most of people have lot of money but they are not aware of these concept. Therefore there is need to spread the awareness among people through a proper channel. The following factors can help to improve the market share of reliance money. 1.

The major factor on which company should concentrate is a proper service provided to the customer. The customer is the king for the company. It is the customer by which the company is progressing.

It is providing their ad on TV in proper way but there is a need to improve the ad in print media like Hindi newspaper and some more magazines which is penetrating in the rural area.

The company should have the customer data in a proper way and should communicate their customer weekly or fortnightly.

The company should take the written feedback about the services provided by the Reliance money franchisees.

103

It should provide the training to the maximum number of management student so that the awareness about the reliance Money products and brand image spread in a fast and in a right way.

CONCLUSIONS It is concluded that Reliance money is improving their infrastructure and market share in a fast way. The above analysis shows that it is giving competitive to the other brokerage companies. Its brand image is increasing day by day in the mind of common man. The maintenance charges of the Reliance Money are far â&#x20AC;&#x201C;far less than the other companies. People are more ready to give initial cost Rs. 500 for employee person and Rs, 750 for the businessman. After that there is not so much charges for the share trading. It is only company which shows the higher growth when market goes down. The service provided to the customer is averaged. This is the only factor where there is a need of improvement of proper service. People know the company but they are less aware of the services provided by the company.

104

REFERENCES WEBSITES 1.

www.reliancemoney.com

www.demataccount.com

www.traderji.com

www.sharemarketbasics.com

www.sharekhan.com

105

BIBLIOGRAPHY Books 1. Business research Methods

William G, Zikmund

2. Marketing Management

Philip Kotler

3. Investments

Bodie, Kane & Marcus

Magazines 1. Business Today 2. Business World

Newspaper 1. The Economic Times 106

2. Times of India 3. Business Standard

QUESTIONNAIRE I, the student of Greater Noida Institute of Technology, Gr. Noida conducting a survey on the topic Share Trading and Mutual Fund â&#x20AC;&#x153;A Customer Perspectiveâ&#x20AC;? Basis Reliance Money to analysis the customer trend in the security market. Thank you very much for your kind responses. 1. Do you invest your money in share trading and mutual fund? (a)Yes If Yes

(b) No

2. According to your awareness rank (1 to 4) the following brokerage company. 1- More aware, 4- Less aware Company

ICICI direct

Reliance Money

Rank

107

Karvy

Share khan

3. You get the information about share market and mutual fund through – (a) Magazine (e) other specify

(b) TV

(d) Friend and relative

4. You do share trading through(a) Yourself (b) brokerage company (c) Friend person 6.

(d) any experience

You prefer invest your money in mutual funds- Tick () your agreement Where SA-Strongly Agree, A-Agree, N-Neutral, D-Disagree and SDStrongly Disagree SA A N D SD To minimize the risk Influenced by past performance Broker motivation For assurance & security 6. In which type of mutual fund do you invest? (a) Growth fund d) Equity fund

(b) Tax saving fund (e) Any other specifies

7. Who influenced your decision to invest in Mutual Fund? (a) Broker others

(b) Friends and Family

8. What brokerage charges are you currently paying? (a) 0.00-0.05 (b) 0.06-0.25 (e) 0.76 and above

(d) 0.51-0.75

9. Which of the following company do you know which provide the share trading facility? Please () 108

(d)

Company Tick(ď&#x192;ź)

ICICI direct

Reliance Money

Karvy

Sharekhan

10. How much return do you think to get from share trading? (a) 10% (b) 11-20% (c) 21-30% (d) 31-40% (f) Above 50 11. What do you see before investing in share market?

(e) 41-50%

(a) Company image by experience person

(b) company performance (d) market cap of company

12. According to you which one provides better service (Rank the following 1 to 4 where 1- Better service, 4- Poor Service Company

ICICI direct

Reliance Money

Karvy

Share khan

Rank 13. When do you start thinking over market, what is going to happen in near future? (a) After loosing the money the basis of increasing trend

(b) before loosing the money (d) globalization factor

14. How much time do you give daily to analyze the market? (a) Up to 1 hour and above

(b) 2 hour

(d) 4 hour

(e) 5

15. When you loose money then on which you blame? (a) Knowledge level Company

(b) your decision

109

(d)

16. According to you which option is better to invest your money? (a) Mutual Fund Share trading

(b) Fixed Deposit

(d)

17. Do you make any portfolio before investing in share trading? (a) Yes

(b) No

18. Reliance Money attracts more customers against other brokerage company because Where SA-Strongly Agree, A-Agree, N-Neutral, D-Disagree and SDStrongly Disagree S A 1

Provide better return to the customer

Brokerage charges are very less

3 4

Transparency of money to the customer is high Security of money is high

Easy to access online trading

6 7

No charges if you do share trading yourself Charge coupon strategy is good

Provide full satisfaction to the customer

Provide the information in easy and better way More careful for his customer

1 0

110

S D

111