Performance analysis and risk management

EXECUTIVE SUMMARY

India’s economy is highly developing. The development is taken place due to

the growth in the financial system. This financial system provides the
background to various investors regarding varied options to invest. Thus,
development of the economy depends on how these investors invest for the well
being in long run.

As financial markets become more sophisticated and complex, investors need a

financial intermediary who provides the required knowledge and professional
expertise on successful investing. Mutual Funds represent perhaps the most
appropriate investment opportunity for investors. No wonder the concept of
Mutual Fund was initially developed in the U.S. market, but the entry of the
concept in the Indian Financial Market was in the year 1964 with the
formulation of the UTI, at the initiative of the RBI and Govt. of India.

For most people, money is a delicate matter and when it comes to investing they
are wary. Simply because there are many investment options out there, each out
promising the other. An important question facing many investors is whether to
invest in Banks, National Savings, Post office, Non-banking finance companies,
Fixed deposits, Shares etc. or to invest distinctively in Mutual Funds.

It has been perceived that there is huge potential market in the region of New
Delhi. Thus an exploratory research with the hypothesis “The region of New
Delhi being progressively industrializing & developing should provide a large
& wider market share for Mutual Fund” has been done.

Thus the purpose of this research was to find why people do not actively invest
in mutual fund in spite of various benefits like Professional management,
Diversification, Convenience liquidity, Flexibility, Tax benefits etc. as well as to
find out potential of business of KARVY in distribution of Mutual Fund in New
Delhi.

After performing the detailed exploratory research by interviewing different

persons who act as investment advisor like Insurance advisor and Post office
advisor etc. with the help of questionnaire, certain facts were revealed regarding
the view about Mutual Funds in the mind of investors.

I have observed that approximately 60% of the people are unaware of Mutual
Funds but most of them are interested to know about Mutual Funds and ready to
attend seminar arranged by KARVY. They are also interested to work with
KARVY if sufficient information is provided to them about Mutual Fund and
KARVY.

People from service class prefers safety of income plus the regular income as
well as tax benefits while on the other hand Professional and Businessman
focus on high return with some risk.

For growth and development of the Mutual Fund Industry, the misconception
regarding Mutual Fund should be removed & the awareness for the same should
be made.
 HR POLICY

Karvy’s HR Department is located at Hyderabad.

Recruitment and Selection Policy:

The upper level members like zonal managers, regional managers, branch
managers and senior executives are recruited by publishing recruitment
advertisement in leading national level newspaper. The qualified applicant are
then called for interview and selected.

The regional manager has authority to select lower level employee like peon,
marketing executives, accountant etc. by approval of zonal manager.

Training and Development:

Continuous training and upgrading technical, behavioral and managerial skills

is a way of life in Karvy. Karvy encourages employees to hone their skills
regularly to enable them to face the challenges of the changing requirements of
customers that fit market up and down.

Training needs analysis is done on a regular basis and systematic methodologies

are ensured that skills and capabilities of all employees are constantly upgraded
to enable them to perform in the challenging work environment.

New employee has given training under experienced employee. The new
employee work under experience employee and observe his all activities. When
company employs new technology or there is any change in the working of
company the training program is arranged.

Employee Motivation:

Karvy’s employees are highly empowered. They don’t have to report any
person of the same branch but they report upper level branch. If particular
branch earn certain profit then Karvy gives them special incentives. This also
helps in maintaining co-operation between employees.
NATIONAL LEVEL ORGANIZATION CHART

CM & MD
(Hyderabad)

GM GM GM
(Marketing) (Finance) (HRM)

Zonal Manager

Regional Manager

Branch Mgr. Branch Mgr. Branch Mgr.

Accountant Sr. Executives

Executives

[National Level Organization Chart of Karvy]

 COMPETITORS DETAILS

1. Bajaj Capital

It was established in 1964 at Delhi. In 1965 it innovates a new financial

instrument ‘Companies Fixed Deposits’ and becomes the first company to raise
Fixed Deposits. The objective of company is to provide professional
guidance to investors on where, when and how to invest and to assist the
corporate sector in its resource raising activities. Bajaj Capital became the
first company to set up ‘Investment Centers’ all over India for this
purpose. Today, Bajaj Capital has 90 offices in over 40 important Indian
Cities and has a team of around 500 employees nationwide.

Services provided

Merchant banking
Buying and Selling of Money Market Investments
Distribution of financial products
Investment Advisory Service

» Company fixed deposits

» Bonds
» Mutual funds
» Life insurance
» General insurance
» Pension schemes
» Post office schemes
» Tax saving schemes
» Insurance linked investment schemes
» Initial public offerings
» Housing loans
» NRI schemes
» Car insurance

Financial Planning
 » Investment planning
» Retirement planning
» Insurance planning
» Children's future planning
» Tax planning
» Short-term cash flow planning
2.MCS Ltd.

It is established in 1985 in Delhi. It is one of the largest Data Processing House

employing more than 600 people.

MCS Ltd. has 8 branches all over India.

Volumes Handled
Share registry activities for over 100 corporate servicing over 10 million
investors.
Mutual fund operations for 25 funds, servicing over 4.5 million investors.
Billing & settlement plan for Indian operations of IATA Geneva for 1.2
million tickets per annum covering (26 airlines & over 1200 agents).

Services Offered:

Registrars and Transfer Agents

Registrars to IPO’s /Right Issues
Registrars to Open Offers
Registrars to Mutual Funds
Data Processing for Airlines
Print Shop Services

MCS is a major player in these activities in the Country with a market share of
about 25%. MCS today provides these services to over 140 Corporate and
Mutual Funds for a total investor base of 15 million.
3. N.J.India Investments Pvt. Ltd.
NJ India Invest (formerly known as NJ Capital stocks) was started in 1994 to
cater to the growing financial services sector. NJ India Invest evolved out as a
client focused need based investment advisory firm. NJ regards mutual fund as
one of the best investment avenue available to satisfy any kind of investment
need.
4. ICICI Securities Ltd.

ICICI Securities Limited (i-SEC) is a wholly owned investment-banking

subsidiary of ICICI Limited. ICICI is the only non-Japanese Asian financial
institution to be listed on the New York Stock Exchange (NYSE). ICICI
Securities was formed on 22nd Feb. 1993, when ICICI's Merchant Banking
Division was spun off into a new company; ICICI Securities today is India's
leading Investment Bank and one of the most significant players in the Indian
capital markets.

ICICI Brokerage Services Limited (IBSL) set up in March 1995, IBSL is a

100% subsidiary of i-SEC. It commenced its securities brokerage activities in
February 1996 and is registered with the National Stock Exchange of India
Limited and The Stock Exchange, Mumbai.

ICICI has started a website ICICIdirect.com which is the most comprehensive

website, which allows you to invest in Shares, Mutual funds, Derivatives
(Futures and Options) and other financial products.

ICICI has a large network of branches all over India.

Services offered:
Merchant Banking
Demat Service
Stock Broking

5. HDFC

HDFC is the leading financial company in India. IT has large network of

branches all over India. HDFC Securities which is fully subsidiary of HDFC
provides demat service.

HDFC and its subsidiary provides following services.

Demat Service
Life Insurance
Banking Service
Housing Finance
Vehicle Finance
Education Loan
Personal Loan
 Mutual Fund

6. Kotak Securities Ltd.

Kotak Securities needs no introduction as one of the largest stock broking

houses in the country and a leading distributor of primary market offerings.
Kotak Securities limited is a joint venture between Kotak Mahindra Bank and
Goldman Sachs, the international investment banking and brokerage firm.

Kotak Securities is a corporate member of both the BSE and the NSE. It is also
a depository participant with the National Securities Depository Limited
(NSDL) for trading and settlement of dematerialized shares.

Services offered:

Stock Broking
Financial Product Distribution
Demat Services
Investment Advisory Services

7. Motilal Oswal Securities Ltd.

Motilal Oswal Securities Ltd (MOSt) is one of the leading equity research and
broking houses of India. MOSt has a 20-member research team, which is
engaged round the clock in analyzing the Indian economy and corporate sectors
to identify equity investment ideas. Asia Money Broker's Poll 2002 has rated
MOSt as one of the best Indian broking house, for research, for the second time
since 2000.

Motilal Oswal is member of NSDL and CDSIL for DP. It has wide network of
branches. It has 158 branches all over India.

Services Offered:

Demat Services
Stock Broking
Investment Advisory Service
 PRODUCT DETAILS

Mutual funds serve as a link between the saving people and the capital market
in that they mobilize saving from investors and bring them to borrowers in the
capital markets. In short, it is a common pool of money into which investors
place their contribution that is to be invested in accordance with a stated
objective.

A mutual fund uses the money collected from the investors to buy those assets,
which are specially permitted by its stated investment objective. When an
investor subscribes to a mutual fund, he/she buys a part of asset or the pool of
funds that are outstanding at that time.

A mutual fund is constituted as an investment company and an investor buys

into the fund, means he buys the share of the fund and is known as a unit holder.
Since each unit holder is a part of owner of a mutual fund, it is necessary to
establish the value of his part. Since the unit held by an investor evidences the
ownership of the fund’s assets, the value of the total asset of the fund when
divided by the total number of units issued by the mutual fund gives us the
value of one unit. This is called as Net Asset Value (NAV).
1. Types of Mutual Funds in which they invest

Inference: Graph shows that most of the people (58 %)

invest in equity based mutual funds. They are risk taker.
Company can take care of these investors by suggesting
them balanced and debts funds.

2. Why they are not investing in mutual funds.

Inference: Graph shows that 48% of people are not investing in

Mutual fund because of bitter past experience. 14% have not knowledge
about mutual funds. 22 % do not believe on this service.
6 % are not able to select the best scheme for them.Company assumes
 that these investors have lack of advisory. So company should suggest
them for investing on basis of professional advisor.

3. People those interested to know more about mutual fund.

Inference: Graph shows that 86 % of people are interested to know

more about mutual funds. This is the great opportunity for the
company to increase the investors by making them aware about
mutual funds and telling them benefits associated with mutual funds.
 LIMITATIONS

Due to limitation of time and cost constrains a sample size of only 50

respondents are chosen.

Data Analysis and interpretation done may not be that strong due to small
sample and ‘Convenience Sampling Method’.

The sample extent for research is only Delhi.

Some of the respondents may be biased in giving responses.

My inexperience in research area might have affected results.

 GLOSSARY

Corporate advisory services

Merchant bankers offer customised solutions to solve the financial problems of

their clients. Merchant bankers study the working capital practices that exist
within the company and suggest alternative policies. They also advise the
company on rehabilitation and turnaround strategies, which would help
companies to recover from their current position. They also provide advice on
appropriate risk management strategies.

Loan syndication

Arrangement of loans for clients, by analysing their cash flow pattern, so that
the terms of borrowing meet the client’s cash requirements and offer assistance
in loan documentation procedures.

Portfolio

Total number of all holdings held by a company is called portfolio. The

portfolio mix is aimed at spreading the risk over different sectors. It consists of
all assets of company.

NAV

Net Asset Value is the current market worth of the mutual fund shares. It is
calculated daily by taking the funds total asset securities, cash and any accrued
earning deducting liabilities, and dividing the reminder by the number of shares
outstanding.

Depository

The principal function of a depository is to dematerialize securities and enable

their transactions in book-entry form. A depository established under the
Depositories Act can provide any service connected with recording of allotment
of securities or transfer of ownership of securities in the record of a depository.
Capital gain

The profit made from selling shares, mutual funds etc.

IPO

Abbreviation for Initial Public Offering. Generally associated with admission to

listing of the share capital on the stock exchange.