A project report on

Analysis of Mutual fund & customer preference towards mutual fund

With reference to

IL & FS investsmart
Visakhapatnam Submitted in partial fulfillment for the course in

Master of Business Administration-IB (2008-10)

Under the esteemed guidance of Prof. Dr. M.Subramanyam Submitted by

Vijetha.E

Gitam Institute Of International Business

Rushikonda, Visakhapatnam

OBJECTIVES: To find out percentage of savings in mutual fund.

To find out the level of satisfaction towards Return on Investment on Mutual fund.

To find out the factors which are influencing the investors to invest.

METHODOLOGY:Primary Data:- Questionnaire Secondary Data:Magazines, publications, books and Internet

LIMITATIONS: The study is limited to Vishakhapatnam only This study is done with reference to one Brokerage firm only.

The sample size is restricted to 100 only which cannot give clear details.

MUTUAL FUNDS
Meaning:-

A mutual fund is a mechanism whereby a financial institution or company pools funds from individuals and invests the pooled amounts in stocks, bonds and other securities. In other words, you and some other investors come together, pool your funds and entrust it to a company for profit gaining investments The company in turn invests the collected money in stocks, bonds and other securities. The combined holdings of a mutual fund are its portfolio. Each individual investor is issued units in proportion to the shares owned. Mutual fund investors are known as unit holders. Mutual funds spread the risk of investment by investing in diverse industries. It accommodates investors who can't spend a lot of money for investing individually.

History:
Massachusetts Investors Trust (now MFS Investment Management) was founded on March 21, 1924, and, after one year, it had 200 shareholders and $392,000 in assets. The entire industry, which included a few closedend funds, represented less than $10 million in 1924. The stock market crash of 1929 hindered the growth of mutual funds. In response to the stock market crash, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require that a fund be registered with the Securities and Exchange Commission (SEC) and provide prospective investors with a prospectus that contains required disclosures about the fund, the securities themselves, and fund manager. The SEC helped draft the Investment Company Act of 1940,

which sets forth the guidelines with which all SEC-registered funds today must comply. With renewed confidence in the stock market, mutual funds began to blossom. By the end of the 1960s, there were approximately 270 funds with $48 billion in assets. The first retail index fund, First Index Investment Trust, was formed in 1976 and headed by John Bogle, who conceptualized many of the key tenets of the industry in his 1951 senior thesis at Princeton University[3]. It is now called the Vanguard 500 Index Fund and is one of the world's largest mutual funds, with more than $100 billion in assets. A key factor in mutual-fund growth was the 1975 change in the Internal Revenue Code allowing individuals to open individual retirement accounts (IRAs). Even people already enrolled in corporate pension plans could contribute a limited amount (at the time, up to $2,000 a year). Mutual funds are now popular in employer-sponsored "defined-contribution" retirement plans such as (401(k)s) and 403(b)s as well as IRAs including Roth IRAs.

HISTORY OF INDIAN MUTUAL FUND:The history of the Indian mutual fund industry can be traced to the formation of UTI in 1963. This was a joint initiative of the Government of India and RBI. It held monopoly for nearly 30 years. Since 1987, non-UTI mutual funds entered the scenario. These consisted of LIC, GIC and publicsector bank backed Indian mutual funds. SBI Mutual fund was the first of this kind. 1993 saw the entry of private sector players on the Indian Mutual Funds scene. Mutual fund regulations were revised in 1996 to accommodate changing market needs.

Fund Structure and Constituents:In USA Mutual funds are investment companies when it comes to UK open ended funds are unit trusts; close ended funds are investment trusts. In case of India Mutual funds are established as trusts and fall under regulatory jurisdiction of SEBI. In India the main fund constituents are :- sponsor - trust trustees asset management company custodian transfer agent and distributor. In India mutual fund is a pass-through structure. Unit holders are the beneficial owners of the net assets of the mutual fund scheme. Trustees are the registered owners of the scheme assets and have a fiduciary responsibility.

SPONSERS :-

1) Person or a body that settles/sets up/establishes the mutual fund trust. 2) Appoints the trustee company or board of trustees, AMC, custodian 3) Qualification a) Contribution-40% net worth of AMC
b) Should have firm financial track record for 5 years.

Trust Trustees
1. There can be a trustee company (comes under companies Act, 1956 as well) or board of trustees (comes under Indian Trust Act only) 2. Investments are held by them in fiduciary capacity 3. Appointment of the asset management company (with prior approval of SEBI) and overseeing its functions. 4. All mutual fund schemes to be approved by trustees 5. Right to dismiss AMC (with SEBI approval) 6. Trustees receive fees for services rendered 7. Must furnish half-yearly report to SEBI on fund activities

Asset Management company

1. It is the investment manager 2. Should have a net worth of rs10 cr. All the time 3. Responsible to trustees 4. Submit quarterly report to SEBI on activities. 5. Must comply with SEBI regulations.

Other fund constituents :Custodian:1. Should be independent of the sponsor 2. Appointed by the sponsor either directly or acting through the board of trustees. 3. Safe keeping of physical securities

4. Keeping account of securities of the schemes 5. Participating in cleaning through depository.

Transfer Agents:1. Issue and redeem units on behalf of the fund 2. Other related services such as preparation of transfer documents and updating investor records.

Distribution:1. Appointed by AMC 2. May act on behalf of different funds 3. Independent individual are appointed as agents.
4. Should be AMFI registered.

TURNING POINT:The year 1993 was a remarkable turning point in the Indian Mutual Fund industry. The stock investment scenario till then was restricted to UTI (Unit Trust of India) and public sector. This year marked the entry of private sector mutual funds, giving the Indian investors a wider choice of selecting mutual funds. From then on, the graph of mutual fund players has been on the rise with many foreign mutual funds also setting up funds in India. The industry has also witnessed several mergers and acquisitions proving it advantageous to the Indian investors.

GOVERNING BODY:In India, SEBI (The Securities and Exchange Board of India) is the regulating authority that SEBI formulates policies and regulates the mutual funds to protect the interest of the Indian investors. There have been revisions and amendments from time to time. Even mutual funds promoted by foreign entities come under the purview of SEBI when operating in India. SEBI has revised its regulations to allow Indian mutual funds to invest in both gold and gold related instruments.

OVERVIEW OF MUTUAL FUNDS:CONCEPT

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart

ORGANIZATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:

Organisation of a Mutual Fund ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a Mutual Fund are: 1. Professional Management 2. Diversification 3. Convenient Administration 4. Return Potential 5. Low Costs 6. Liquidity 7. Transparency 8. Flexibility 9. Choice of schemes 10. Tax benefits 11. Well regulated

PHASES OF Mutual Fund Industry in India Phase 1:Establishment and Growth of Unit Trust of India - 1964-87
Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate

under the regulatory control of the RBI until the two were de-linked in 1978 and the entire control was tranferred in the hands of Industrial Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the largest number of investors in any single investment scheme over the years. UTI launched more innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare (Inida's first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns) during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700 crores.

Phase II.
Entry of Public Sector Funds - 1987-1993
The Indian mutual fund industry witnessed a number of public sector players entering the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Muatual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% market share.
Mobilis Amo 199293 unt Mobi lised Assets Under Manage ment ation as % gross Domest ic Savings 11,05 7 of

UTI

38,247

5.2%

Public Sector

1,964

8,757

0.9%

Total

13,02 1

47,004

6.1%

Phase III. Emergence of Private Sector Funds - 1993-96

The permission given to private sector funds including foreign fund management companies (most of them entering through joint ventures with Indian promoters) to enter the mutal fund

industry in 1993, provided a wide range of choice to investors and more competition in the industry. Private funds introduced innovative products, investment techniques and investorservicing technology. By 1994-95, about 11 private sector funds had launched their schemes.

Phase IV. Growth and SEBI Regulation - 1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after the year 1996. The mobilisation of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds. Invetors' interests were safeguarded by SEBI and the Government offered tax benefits. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted all dividend incomes in the hands of investors from income tax. Various Investor Awareness Programmes were launched during this phase, both by SEBI and AMFI, with an objective to educate investors and make them informed about the mutual fund industry. In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal status as a trust formed by an Act of Parliament. The primary objective behind this was to bring all mutual fund players on the same level. UTI was re-organised into two parts: 1. The Specified Undertaking,

2.The UTI Mutual Fund

Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past schemes (like US-64, Assured Return Schemes) are being gradually wound up. However, UTI Mutual Fund is still the largest player in the industry. In 1999, there was a significant growth in mobilisation of funds from investors and assets under management which is supported by the following data:

GROSS FUND MOBILISATION (RS. CRORES) PUBLIC SECTOR PRIVATE SECTOR

FROM

TO

UTI

TOTAL

3101-April-98 March99 3101-April-99 March00

11,67 9

1,732

7,966

21,377

13,53 6

4,039

42,173

59,748

3101-April-00 March01 3101-April-01 March02 31Jan-03 3101-Feb.-03 March03 3101-April-03 March04 3101-April-04 March05 3101-April-05 March06

12,41 3

6,192

74,352

92,957

4,643

13,613

1,46,267

1,64,523

01-April-02

5,505

22,923

2,20,551

2,48,979

7,259*

58,435

65,694

68,558

5,21,632

5,90,190

1,03,246

7,36,416

8,39,662

1,83,446

9,14,712

10,98,158

ASSETS UNDER MANAGEMENT (RS. CRORES) T O T A L 6 31March-99 8, 53,320 8,292 6,860 4 7 2

U AS ON T I

PUBLI C SECTO R

PRIVAT E SECTO R

Phase V.
Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutal fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29 funds as at the end of March 2006. This is a continuing phase of growth of the industry through consolidation and entry of new international and private sector players.

Types of Mutual funds

Existing types of mutual funds can be classified into three types. They are:

Based on Maturity period:

Open-ended mutual fund Close-ended mutual funds.

Based on Investment objective:

Growth scheme or Equity scheme Income scheme or debt oriented scheme Balanced scheme Money market scheme.

Other Equity-related schemes:

Tax savings scheme Index scheme Sectoral scheme.

As a prospective mutual fund investor, you can decide to invest in growth scheme, income scheme or balance scheme either as an open-ended or a close-ended mutual fund.

1. Open ended mutual funds

If you are looking for a scheme that gives you the feasibility for subscription all through the year, an open-ended mutual fund is the appropriate choice. With no fixed maturity period, you can buy and sell units at Net Asset Value (NAV) prices. Ease of liquidity is the key aspect of open-ended mutual funds.

2. Close ended mutual funds

Unlike an open-ended mutual fund, you have the option for subscription only during a specified period, normally at the time of public issue of shares or debentures. Also, the maturity period is fixed ranging from 3-15 years. Once the initial public issue of shares is over, you can buy or sell the units on the respective stock exchanges. An additional feature of close-ended mutual fund is the option of selling the units back to the mutual fund, at NAV related prices. Closed-end funds are often confused with, and mistakenly called, mutual funds. A major difference is that closed-end funds behave more like a stock -- the market value is driven by supply and demand for the shares. On the other hand, an open-end mutual fund continually issues new shares to investors and does not trade on an exchange.

Perhaps the best way to understand a closed-end fund is to compare it with an open-end mutual fund.

Open-End Mutual Funds vs. Closed-End Funds

We can think of a mutual fund as open-ended because the cash flow door -- both into and out of the fund -- is always open. In other words, the portfolio manager continues to invest new cash from investors, and the fund company continues to offer new shares of the fund to new investors. We can think of a closed-end fund, then, as closed-ended because the cash flow door -- into and out of the fund -- is always (with a few exceptions) closed. The manager only invests a fixed amount of cash that was raised in an initial public offering of the funds shares. If we want to buy shares of the fund, we buy the shares from another investor via a stock exchange. The number of fund shares do not fluctuate based on investor demand.

Similarities in Closed-End Funds and Mutual Funds

Like mutual funds, closed-end funds are:

A diversified portfolio of stocks, bonds, or a combination of the two Professionally managed by an investment advisor Either actively or passively managed Required to distribute capital gains and dividends to shareholders Regulated by the U.S. Securities and Exchange Commission

Differences in Closed-End Funds and Mutual Funds

Unlike mutual funds, closed-end funds:

Are traded on a stock exchange (NSYE) or over-the-counter (NASDAQ) Are bought and sold at market price versus the underlying securities value Are valued based on supply and demand for the fund Can be purchased and sold throughout the trading day Use leverage (borrow cash to invest in more assets) to enhance their returns

Buying and Selling

A closed-end fund trades like a stock -- on a stock exchange or over-the-counter -while an open-end mutual fund is bought and sold directly with the fund company. The cost of the transaction for a closed-end fund is similar to the cost of a stock trade. There are also internal management fees paid to the fund company to manage the fund. Another cost to be aware of is the bid-ask spread. If you place an order to buy a closed-end fund and, at the same time, place an order to sell the fund, the prices for both would be different. In other words, your cost to buy the fund and the price you would get for selling the fund would be different. For instance, you might sell at the bid price of $9.90, while you would buy at the ask price of $10. This $.10 difference is known as the bid-ask spread and is considered the cost of doing business on the exchange or over the counter. You can buy both types of funds through a broker. The broker processes the transaction on the stock exchange in the case of closed-ends, or with the fund company in the case of mutual funds.

Based on Investment objective: Growth scheme or Equity scheme

If you do not expect immediate liquidity and willing to gain over a period of time, growth scheme could be your preferred choice. Under the growth scheme, mutual funds invest a majority of funds in equities (shares) and a small portion in money market instruments. Over a long period of time they promise increased return on investments but are exposed to high risks given the perennial fluctuation in equity markets, which is influenced by external factors such as social, political and economic factors.

Income scheme
Also termed as monthly income scheme, this involves investing in income funds that can fetch you regular and steady income. Investments are made in fixed income securities such as bonds, corporate debentures, money market instruments and government securities. You may not benefit from capital appreciation as it is very limited but the risks are much lower compared to the growth fund. Fluctuations in the equity market may not affect you, but the change in interest rates (as and when it become effective) is likely to have an impact on returns. The net asset value of your funds is likely to increase or decrease with corresponding changes in interest rates.

Balanced scheme
Investing in balanced fund, you enjoy the twin benefits of growth and a regular income. This is possible as the funds are invested both in equities (shares) and fixed income securities (such as bonds, corporate debentures and government securities). This means, in case the proportion of investment is higher in equities than in fixed income securities, as an investor you would be exposed to higher risks.

Money Market schemes

Easy liquidity, preservation of capital and moderate income- these are key aspects of

money market schemes. Under this scheme, your funds are invested exclusively in shortterm instruments such as treasury bills, commercial paper, certificates of deposit and interbank call money, government securities etc. Commercially safe, it is less volatile compared to other funds. You can select money market schemes for its short period and less risks.

Other Equity-related schemes: Tax Savings scheme

Equity linked savings schemes (ELSS) and pension schemes are the two schemes that offer tax rebates or tax benefits. Subscriptions to the units not more than Rs.10, 000 would be eligible to a deduction from Income tax. Governed by the provisions of the Income Tax Act, you can enjoy Tax incentives for investments in specified avenues. However, you cannot assign/transfer/pledge/redeem/switch the units purchased under this scheme until completion of 3 years from the date of allotment of individual units.

Index schemes
Under this scheme, the performance of the market as a whole, or a specific sector is assessed. This helps you to decide on whether to invest on the market as a whole or in any specific fund.

Sectoral schemes
You can decide to invest in specific sectors namely, FMCG, Information Technology, Banking, Pharmaceuticals etc. Sectoral schemes pose high risk as compared to equity schemes. This is because the portfolio is less diversified and very specific, concentrating on selected industrial group.

Equity Funds:Equity funds are considered to be the more risky funds as compared to other fund types, but they also provide higher returns than other funds. It is advisable that an investor looking to invest in an equity fund should invest for long term i.e. for 3 years or more. There are different types of equity funds each falling into different risk bracket. In the order of decreasing risk level, there are following types of equity funds:

Aggressive Growth Funds - In Aggressive Growth Funds, fund managers aspire for maximum capital appreciation and invest in less researched shares of speculative nature. Because of these speculative investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than other equity funds.

Growth Funds - Growth Funds also invest for capital appreciation (with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in companies that are expected to outperform the market in the future. Without entirely adopting speculative strategies, Growth Funds invest in those companies that are expected to post above average earnings in the future.

Speciality Funds - Speciality Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. Criteria for some speciality funds could be to invest/not to invest in particular regions/companies. Speciality funds are concentrated and thus, are comparatively riskier than diversified funds.. There are following types of speciality funds:

Sector Funds: Equity funds that invest in a particular sector/industry of the market are known as Sector Funds. The exposure of these funds is limited to a particular sector (say Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is why they are more risky than equity funds that invest in multiple sectors.

Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one or more foreign companies. Foreign securities funds achieve international diversification and hence they are less risky than sector funds. However, foreign securities funds are exposed to foreign exchange rate risk and country risk.

Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds. Market capitalization of Mid-Cap companies is less than that of big, blue chip companies (less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies have market capitalization of less than Rs. 500 crores. Market Capitalization of a company can be calculated by multiplying the market price of the company's share by the total number of its outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of Large-Cap Companies which gives rise to volatility in share prices of these companies and consequently, investment gets risky.

Option Income Funds*: While not yet available in India, Option Income Funds write options on a large fraction of their portfolio. Proper use of options can help to reduce volatility, which is otherwise considered as a risky instrument. These funds invest in big, high dividend

yielding companies, and then sell options against their stock positions, which generate stable income for investors.

Diversified Equity Funds - Except for a small portion of investment in liquid money market, diversified equity funds invest mainly in equities without any concentration on a particular sector(s). These funds are well diversified and reduce sector-specific or company-specific risk. However, like all other funds diversified equity funds too are exposed to equity market risk. One prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times.

ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time of filing the income tax return. ELSS usually has a lock-in period and in case of any redemption by the investor before the expiry of the lock-in period makes him liable to pay income tax on such income(s) for which he may have received any tax exemption(s) in the past.

Equity Index Funds - Equity Index Funds have the objective to match the performance of a specific stock market index. The portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index. Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and therefore, are more risky.

Value Funds - Value Funds invest in those companies that have sound fundamentals
and whose share prices are currently under-valued. The portfolio of these funds comprises of shares that are trading at a low Price to Earning Ratio (Market Price per Share / Earning per Share) and a low Market to Book Value (Fundamental Value) Ratio. Value Funds may select companies from diversified sectors and are exposed to lower risk level as compared to growth funds or speciality funds. Value stocks are generally from cyclical industries (such as cement, steel, sugar etc.) which make them volatile in the short-term. Therefore, it is advisable to invest in Value funds with a longterm time horizon as risk in the long term, to a large extent, is reduced.

Equity Income or Dividend Yield Funds - The objective of Equity Income or Dividend Yield Equity Funds is to generate high recurring income and steady capital appreciation for investors by investing in those companies which issue high dividends (such as Power or Utility companies whose share prices fluctuate comparatively lesser than other companies' share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as compared to other equity funds.

2. Debt / Income Funds

Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial institutions, governments and other entities belonging to various sectors (like infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors. In order to ensure regular income to investors, debt (or income) funds distribute large fraction of their surplus to investors. Although debt securities are generally less risky than equities, they are subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. To minimize the risk of default, debt funds usually invest in securities from issuers who are rated by credit rating agencies and are considered to be of "Investment Grade". Debt funds that target high returns are more risky. Based on different investment objectives, there can be following types of debt funds:

Diversified Debt Funds - Debt funds that invest in all securities issued by entities
belonging to all sectors of the market are known as diversified debt funds. The best feature of diversified debt funds is that investments are properly diversified into all sectors which results in risk reduction. Any loss incurred, on account of default by a debt issuer, is shared by all investors which further reduces risk for an individual investor.

Focused Debt Funds* - Unlike diversified debt funds, focused debt funds are
narrow focus funds that are confined to investments in selective debt securities, issued by companies of a specific sector or industry or origin. Some examples of focused debt funds are sector, specialized and offshore debt funds, funds that invest only in Tax Free Infrastructure or Municipal Bonds. Because of their narrow orientation, focused debt funds are more risky as compared to diversified debt funds. Although not yet available in India, these funds are conceivable and may be offered to investors very soon.

High Yield Debt funds - As we now understand that risk of default is present in all
debt funds, and therefore, debt funds generally try to minimize the risk of default by investing in securities issued by only those borrowers who are considered to be of "investment grade". But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those issuers who are considered to be of "below investment grade". The motive behind adopting this sort of risky strategy is to earn higher interest returns from these issuers. These funds are more volatile and bear higher default risk, although they may earn at times higher returns for investors.

Assured Return Funds - Although it is not necessary that a fund will meet its objectives or provide assured returns to investors, but there can be funds that come with a lock-in period and offer assurance of annual returns to investors during the lock-in period. Any shortfall in returns is suffered by the sponsors or the Asset Management Companies (AMCs). These funds are generally debt funds and provide investors with a low-risk investment opportunity. However, the security of investments depends upon the net worth of the guarantor (whose name is specified in advance on the offer document). To safeguard the interests of investors, SEBI permits only those funds to offer assured return schemes whose sponsors have adequate net-worth to guarantee returns in the future. In the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI) that assured specified returns to investors in the future. UTI was not able to fulfill its promises and faced large shortfalls in returns. Eventually, government had to intervene and took over UTI's payment obligations on itself. Currently, no AMC in India offers assured return schemes to investors, though possible. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end schemes having short term maturity period (of less than one year) that offer a series of plans and issue units to investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the exchanges. Fixed term plan series usually invest in debt / income schemes and target short-term investors. The objective of fixed term plan schemes is to gratify investors by generating some expected returns in a short period.

3.

Gilt Funds

Also known as Government Securities in India, Gilt Funds invest in government papers (named dated securities) having medium to long term maturity period. Issued by the Government of India, these investments have little credit risk (risk of default) and provide safety of principal to the investors. However, like all debt funds, gilt funds too are exposed to interest rate risk. Interest rates and prices of debt securities are inversely related and any change in the interest rates results in a change in the NAV of debt/gilt funds in an opposite direction.

4. Money Market / Liquid Funds

Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt instruments. These securities are highly liquid and provide safety of investment, thus making money market / liquid funds the safest investment option when compared with other mutual fund types. However, even money market / liquid funds are exposed to the interest rate risk. The typical investment options for liquid funds include Treasury Bills (issued by governments), Commercial papers (issued by companies) and Certificates of Deposit (issued by banks).

5. Hybrid Funds
As the name suggests, hybrid funds are those funds whose portfolio includes a blend of

equities, debts and money market securities. Hybrid funds have an equal proportion of debt and equity in their portfolio. There are following types of hybrid funds in India: Balanced Funds - The portfolio of balanced funds include assets like debt securities, convertible securities, and equity and preference shares held in a relatively equal proportion. The objectives of balanced funds are to reward investors with a regular income, moderate capital appreciation and at the same time minimizing the risk of capital erosion. Balanced funds are appropriate for conservative investors having a long term investment horizon. Growth-and-Income Funds - Funds that combine features of growth funds and income funds are known as Growth-and-Income Funds. These funds invest in companies having potential for capital appreciation and those known for issuing high dividends. The level of risks involved in these funds is lower than growth funds and higher than income funds.

Asset Allocation Funds

Mutual funds may invest in financial assets like equity, debt, money market or non-financial (physical) assets like real estate, commodities etc.. Asset allocation funds adopt a variable asset allocation strategy that allows fund managers to switch over from one asset class to another at any time depending upon their outlook for specific markets. In other words, fund managers may switch over to equity if they expect equity market to provide good returns and switch over to debt if they expect debt market to provide better returns. It should be noted that switching over from one asset class to another is a decision taken by the fund manager on the basis of his own judgment and understanding of specific markets, and therefore, the success of these funds depends upon the skill of a fund manager in anticipating market trends.

6. Commodity Funds
Those funds that focus on investing in different commodities (like metals, food grains, crude oil etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a commodity fund that invests in all available commodities is a diversified commodity fund and bears less risk than a specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in gold, gold futures or shares of gold mines) are common examples of commodity funds.

7. Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized assets of housing finance companies, are known as Specialized Real Estate Funds. The objective of these funds may be to generate regular income for investors or capital appreciation.

8. Exchange Traded Funds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like a single stock at index linked prices. The biggest advantage offered by these funds is that they offer diversification, flexibility of holding a single share (tradable at index linked prices) at the same time. Recently introduced in India, these funds are quite popular abroad.

9. Fund of Funds
Mutual funds that do not invest in financial or physical assets, but do invest in other mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a portfolio comprising of units of other mutual fund schemes, just like conventional mutual funds maintain a portfolio comprising of equity/debt/money market instruments or non financial assets. Fund of Funds provide investors with an added advantage of diversifying into different mutual fund schemes with even a small amount of investment, which further helps in diversification of risks. * Funds not yet available in India Guide for selecting a mutual fund Before deciding to invest in a mutual fund, set your objectives, the extent of investment and the duration of investment. 1. Every investor must carefully read the prospectus to check the goals of the particular mutual fund. This will also throw light on the fees. Check out the advisors to the mutual fund and who manages it. 2. Features of scheme, risk factors, expenses, fees and company profile should be given due importance. 3. Consider past performance of all the schemes of the mutual fund 4. Compare with other schemes with similar investment objective 5. Check the market ratings for debt oriented schemes 6. Assess the returns in the NAV, size of the asset and liquidity features. 7. Seek expert opinions

Advantages of investment in mutual funds

1. Advantages of professional expertise

2. Diversified investment options 3. Governed by regulations for investors. 4. Ease of liquidity 5. Tax benefits 6. Low costs/Affordability 7. Flexibility to achieve financial goals. 8. Ease of operation (by mail, phone or the internet)

Disadvantages of investment in mutual funds

1. 2. 3. 4.

Absence of guarantee on returns Extra fees and commissions (Ex: loads) Tax on profit made Discretion of fund's manager (not for index funds)

STOCK EXCHANGE
Stock exchange or bourse is a mutual organization which provides facilities for stock brokers and traders, in trading company stocks and other securities, and for the issue of redemption of securities and other financial tools and capital events like the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less linked to such a physical place. Electronic networks run modern markets are, providing them great speed and cost of transactions. Stock exchange is often called the most important element of a stock market. The Demand and Supply in the stock markets is attracted by number of factors that affect the price of stocks. A stock market is a public market for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. The size of the world stock market was estimated at about $36.6 trillion US at the beginning of October 2008. [1] The total world derivatives market has been estimated at about $791 trillion face or nominal value, [2] 11 times the size of the entire world economy. [3]

The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Moreover, the vast majority of derivatives 'cancel' each other out (i.e., a derivative 'bet' on an event occurring is offset by a comparable derivative 'bet' on the event not occurring.).

The First Stock Exchanges

In 11th century France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers. Historian Fernand Braudel suggests that in Cairo in the 11th century, Muslim and Jewish merchants had already set up every form of trade association and had knowledge of many methods of financial dealings, disproving the belief that these were originally invented later by Italians. Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse, hung on the front of the house where merchants met.

House Ter Beurze in Bruges, Belgium. However, it is more likely that in the late 13th century commodity traders in Bruges gathered inside the house of a man called Van der Burse, and in 1309 they institutionalized this until now informal meeting and became the "Bruges Bourse". The idea spread quickly around Flanders and neighboring counties and "Bourses" soon opened in Ghent and Amsterdam.

In the middle of the 13th century, Venetian bankers began to trade in government securities. In 1351, the Venetian Government outlawed spreading rumors intended to lower the price of government funds. There were people in Pisa, Verona, Genoa and Florence who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of influential citizens, not by a duke.

The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profitsor losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. In 1688, the trading of stocks began on a stock exchange in London. On May 17, 1792, twenty-four supply brokers signed the Buttonwood Agreement outside 68 Wall Street in New York underneath a buttonwood tree. On March 8, 1817, properties got renamed to New York Stock & Exchange Board. In the 19th century, exchanges (generally famous as futures exchanges) got substantiated to trade futures contracts and then choices contracts.

New York Stock Exchange

Importance of stock market Function and purpose

The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up and coming economy. In fact, the stock market is often considered the primary indicator of a country's economic strength and development. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of

households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'tre of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

The role of stock exchanges

Stock exchanges have multiple roles in the economy, this may include the following:

Raising capital for businesses

The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public.

Mobilizing savings for investment

When people draw their savings and invest in shares, it leads to a more rational allocation of resources because funds, which could have been consumed, or kept in idle deposits with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels and firms.

Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines, increase distribution channels, hedge against volatility, increase its market share, or acquire other necessary business assets. A takeover bid or a merger agreement through the stock market is one of the simplest and most common ways for a company to grow by acquisition or fusion.

Profit sharing
Both casual and professional stock investors, through dividends and stock price increases that may result in capital gains, will share in the wealth of profitable businesses.

Corporate governance
By having a wide and varied scope of owners, companies generally tend to improve on their management standards and efficiency in order to satisfy the demands of these shareholders and the more stringent rules for public corporations imposed by public stock exchanges and the government. Consequently, it is alleged that public companies tend to have better management records than privately-held companies . However, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies. The dot-com bubble in the early 2000s, and the subprime mortgage crisis in 2007-08, are classical examples of corporate mismanagement. Companies like Pets.com (2000), Enron Corporation (2001), One. Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI WorldCom (2002), Parmalat (2003), American International Group (2008), Lehman Brothers (2008), and Satyam Computer Services (2009) were among the most widely scrutinized by the media.

Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors.

Government capital-raising for development projects

Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature.

Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could

eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy

Trading

The London Stock Exchange.

Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order. Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders. Actual trades are based on an auction market model where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. When the bid and ask prices match, a sale takes place on a first come first served basis if there are multiple bidders or askers at a given price.The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace. The exchanges provide real-time trading information on the listed securities, facilitating price discovery.

Circuit breakers:The New York Stock Exchange and the Chicago Mercantile Exchange introduced the concept of a circuit breaker. The circuit breaker halts trading if the Dow declines a prescribed number of points for a prescribed amount of time. It was introduced to control into the stock market in an attempt to prevent a re-occurrence of the events of Black Monday. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner.

% drop time of drop 10% drop 10% drop 10% drop 20% drop 20% drop 20% drop 30% drop

close trading for

before 2PM

one hour halt

2PM - 2:30PM

half-hour halt

after 2:30PM

market stays open

before 1PM

halt for two hours

1PM - 2PM

halt for one hour

after 2PM

close for the day

any time during day close for the day

Leveraged strategies
Stock that a trader does not actually own may be traded using short selling; margin buying may be used to purchase stock with borrowed funds; or, derivatives may be used to control large blocks of stocks for a much smaller amount of money than would be required by outright purchase or sale.

Short selling:In short selling, the trader borrows then sells it on the market, hoping for the price to fall. The trader eventually buys back the stock, making money if the price fell in the meantime or losing money if it rose. Exiting a short position by buying back the stock is called "covering a short position." This strategy may also be used by unscrupulous traders to artificially lower the price of a stock. Hence most markets either prevent short selling or place restrictions on when and how a short sale can occur. The practice of naked shorting is illegal in most stock markets.

Margin buying:In margin buying, the trader borrows money to buy a stock and hopes for it to rise. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks' value. A margin call is made if the total value of the investor's account cannot support the loss of the trade Before that, speculators typically only needed to put up as little as 10 percent of the total investment represented by the stocks purchased. Other rules may include the prohibition of free-riding:

Bull market
A bull market tends to be associated with increasing investor confidence, motivating investors to buy in anticipation of future price increases and future capital gains. In describing financial market behavior, the largest group of market participants is often referred to, metaphorically, as a herd. This is especially relevant to participants in bull markets since bulls are herding animals. A bull market is also sometimes described as a bull run. Dow Theory attempts to describe the character of these market movements.

India's Bombay Stock Exchange Index, SENSEX, was in a bull run for almost five years from April 2003 to January 2008 as it increased from 2,900 points to 21,000 points. Bear market A bear market is a steady drop in the stock market over a period of time. [3] It is described as being accompanied by widespread pessimism. Investors anticipating further losses are often motivated to sell, with negative sentiment feeding on itself in a vicious circle. Prices fluctuate constantly on the open market. To take the example of a bear stock market, it is not a simple decline, but a substantial drop in the prices of the majority of stocks over a defined period of time. According to The Vanguard Group, "While theres no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period."

Bombay stock exchange

Bombay Stock Exchange is the oldest stock exchange in Asia with a rich heritage, now spanning three centuries in its 133 years of existence. What is now popularly known as BSE was established as "The Native Share & Stock Brokers' Association" in 1875. BSE is the first stock exchange in the country which obtained permanent recognition from the Government of India under the Securities Contracts Act 1956. BSE's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized. It migrated from the open outcry system to an online screen-based order driven trading system in 1995. Earlier an Association of Persons, BSE is now a corporatised and demutualised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI). With demutualisation, BSE has two of world's best exchanges, Deutsche Borse and Singapore Exchange, as its strategic partners. Over the past 133 years, BSE has facilitated the growth of the Indian corporate sector by

providing it with an efficient access to resources. There is perhaps no major corporate in India which has not sourced BSE's services in raising resources from the capital market.

Today, BSE is the world's number 1 exchange in terms of the number of listed companies and the world's 5th in transaction numbers. The market capitalization as on December 31, 2007 stood at USD 1.79 trillion. An investor can choose from more than 4,700 listed companies, which for easy reference, are classified into A, B, S, T and Z groups. The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic stature, and is tracked worldwide. It is an index of 30 stocks representing 12 major sectors. The SENSEX is constructed on a 'free-float' methodology, and is sensitive to market sentiments and market realities. Apart from the SENSEX, BSE offers 21 indices, including 12 sectoral indices. BSE provides an efficient and transparent market for trading in equity, debt instruments and derivatives. It has a nation-wide reach with a presence in more than 359 cities and towns of India. BSE has always been at par with the international standards. The systems and processes are designed to safeguard market integrity and enhance transparency in operations. BSE is the first exchange in India and the second in the world to obtain an ISO 9001:2000 certifications. It is also the first exchange in the country and second in the world to receive Information Security Management System Standard BS 7799-2-2002 certification for its BSE On-line Trading System (BOLT). BSE continues to innovate. In recent times, it has become the first national level stock exchange to launch its website in Gujarati and Hindi to reach out to a larger number of investors. It has successfully launched a reporting platform for corporate bonds in India christened the ICDM or Indian Corporate Debt Market and a unique ticker-cum-screen aptly named 'BSE Broadcast'.

Minimum Listing Requirements for New Companies

The following eligibility criteria have been prescribed effective August 1, 2006 for listing of companies on BSE, through Initial Public Offerings (IPOs) & Follow-on Public Offerings (FPOs): 1. Companies have been classified as large cap companies and small cap companies. A large cap company is a company with a minimum issue size of Rs. 10 crore and market capitalization of not less than Rs. 25 crore. A small cap company is a company other than a large cap company.

a. In respect of Large Cap Companies i. ii. iii. The minimum post-issue paid-up capital of the applicant company (hereinafter referred to as "the Company") shall be Rs. 3 crore; and The minimum issue size shall be Rs. 10 crore; and The minimum market capitalization of the Company shall be Rs. 25 crore (market capitalization shall be calculated by multiplying the postissue paid-up number of equity shares with the issue price).

b. In respect of Small Cap Companies i. ii. iii. The minimum post-issue paid-up capital of the Company shall be Rs. 3 crore; and The minimum issue size shall be Rs. 3 crore; and The minimum market capitalization of the Company shall be Rs. 5 crore (market capitalization shall be calculated by multiplying the postissue paid-up number of equity shares with the issue price); and The minimum income/turnover of the Company shall be Rs. 3 crore in each of the preceding three 12-months period; and The minimum number of public shareholders after the issue shall be 1000. A due diligence study may be conducted by an independent team of Chartered Accountants or Merchant Bankers appointed by BSE, the cost of which will be borne by the company. The requirement of a due diligence study may be waived if a financial institution or a scheduled commercial bank has appraised the project in the preceding 12 months.

iv. v. vi.

2. For all companies : a. In respect of the requirement of paid-up capital and market capitalization, the issuers shall be required to include in the disclaimer clause forming a part of the offer document that in the event of the market capitalization (product of issue price and the post issue number of shares) requirement of BSE not being met, the securities of the issuer would not be listed on BSE. b. The applicant, promoters and/or group companies, shall not be in default in compliance of the listing agreement.

c. The above eligibility criteria would be in addition to the conditions prescribed under SEBI (Disclosure and Investor Protection) Guidelines, 2000.

SCHEDULE OF LISTING FEES FOR THE YEAR 2008-09 Securities *other than Privately Placed Debt Securities Sl. No. Particulars 1 Initial Listing Fees 2 Annual (i) Companies (ii) AboveRs. Rs. Amount (Rs.) 20,000.00 with 5 10 listed crore crore Listing capital* and and upto upto upto Rs. Rs. Rs. 5 10 20 Fees crore 10,000.00 crore 15,000.00 crore 30,000.00

(iii)Above

Companies which have a listed capital* of more than Rs. 20 crore are required to pay an additional fee @ Rs. 750 for every additional Rs. 1 crore or part thereof. NOTE: In case of debenture capital (not convertible into equity shares) , the fees will be 25% of the above fees. *includes equity shares, preference shares, fully convertible debentures, partly convertible debentures and any other security convertible into equity shares. Privately Placed Debt Securities Sl. No. 1 Particulars Initial Listing Fees Amount (Rs.) NIL

Annual Listing Fees Rs.2,500.00 (i)Issue size up to Rs.5 crore Rs.3,750.00 (ii)Above Rs.5 crore and up to Rs.10 crore Rs.7,500.00 2 (iii)Above Rs.10 crore and up to Rs.20 crore Above Rs.20 crore Additional fee of Rs.200.00 for every additional Rs.1 crore or part thereof

Subject to a maximum of Rs.30,000.00 per instrument. The cap on the annual listing fee of debt instruments per issuer is Rs.5,00,000.00 per annum.

National Stock exchange

The National Stock exchange is the largest Stock exchange of the country and the third largest in the world. Before the NSE, the Indian securities industry was inefficient due to lack

of proper infrastructure and a few select brokerage firms controlling the industry. There was a great resistance to setting up modern facilities and innovative infrastructure. The basic idea of setting up the NSE was facilitating computerized market trading. The intention was to set up a vibrant and viable debt market, and in the middle of 1993 it came into existence. The trading started in the middle of 1994.The NSE is jointly owned by a group of financial institutions, Insurance companies, banks and other financial intermediaries. This was done by competitively harnessing the latest technology and adapting a new system of operations through the VSAT (Very Small Earth Based Aperture Terminals) terminals. The fully automatic screen based trading system is based on the principle of an order driven market which provides complete flexibility to the participants. There are no trading floors as in conventional stock exchanges. The trading is entirely screen based with automatic order processing. One can obtain the entire market information, which is dynamically updated, at the click of a button. The system also conceals the identity of the market operators. As the market investors can sit and operate from their own houses and homes, they have all the facilities of back office support. The connection with other traders through the satellite link is established, and each member receives the market information at the same

COMPANY PROFILE

IL&FS Investsmart Limited

IL&FS Investsmart (IIL) which stands for Infrastructure Leasing and Financial Services is known for its innovative and pioneering initiatives in the areas of Infrastructure, Corporate and Investment Banking. IIL was incorporated as Investsmart India Limited on September 01, 1997. It has received certificate of commencement of business on October 07, 1997. IIL has owned subsidiary IL&FS to carry on share and stock broking activities.

GROWTH and Corporate Events:IIL has started broking activity in NSE on February 1998 and in BSE in August 1999.Orix corporation, Japan became share holder of IIL in January 2002. IL&FS Merchant Banking Services Limited (IMBSL) and Debt on net India Limited (DIL)merged with IIL. Name of the company was changed from Investsmart India Limited to IL&FS InvestSMART in March 2003.

The company is now held by HSBC, one of the world's largest banking and financial services organizations. HSBC holds 93%of share. In India, The HSBC Group offers a range of financial services including corporate, commercial, retail and private banking, insurance, asset management, investment banking, equities and capital markets, institutional brokerage, custodial services. It also provides software development expertise and global services facilities for the HSBC Group's operations worldwide.

IL&FS Investsmart is one of India's leading financial services organizations providing varied range of Financial Services for corporates and individuals. Investsmart has a strong presence across wide range of products and operates in the areas of Investment Management and Advisory Services, Broking Services, Merchant Banking, Project Syndication, Equity and Debt Broking, Commodity Broking and Distribution of Financial Products.

IL&FS Investsmart Ltd has an all India presence through its network of branches and franchisees over 126 cities. Following a successful Initial Public Offer IPO), IIL has been listed on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). IIL is geared towards understanding and achieving the financial goals of all its customers, through its specialists in the aforesaid areas. IL&FS Investsmart group engages nearly 2000 professionals across various areas of financial services and corporate functions. Our team is spread over 300 offices in India and overseas. It actively seeks a diverse range of professionals to deliver specialized services to its clients across the globe. What it look for are personal values, dynamism, skill, customer centricity and high-energy to continuously nurture an enjoyable professional culture.

Work culture :Friendly & formal work culture founded on principles of mutual respect, co-operation, trust & human values. An opportunity to satisfy economic needs consistent with the prevalent business environment .A performance driven work culture and open to new ideas and suggestions from all Team Members. Its products:1. Retail offerings 2. Institutional offerings

3. Online products.

I.

RETAIL OFFERINGS:-

A. B.

Advisory products Trading products

A.ADVISORY PRODUCTS:-

I.

Mutual fund advisory services-

IIL team of experts across India helps customers in selecting the right scheme from over 500 offerings, matching their needs, goals and risks. In addition to this IIL also help customers constantly monitor their MF portfolio, making changes according to their changing needs as per the market scenario, in order to make customer money work for them. This is precisely the reason why IIL has been recognized as Best Performing Financial Advisor by CNBC TV 18 for two years in a row 2005-06 and 2006-07.

II.

Portfolio Management Services (PMS):-

Financial markets today offer enormous growth potential. But managing investors own investments can be an extremely challenging task. Anticipating market trends, assessing the impact of socio-economic changes on investor investments, keeping abreast of latest corporate developments and financial analysis all adds up. Managing ones investments has become nearly a full-time affair that requires considerable time and expertise. At IL&FS Investsmart, we offer you just the solution that allows you to relax as we put your money to work through the IIL-PMS, a Discretionary Portfolio Management Service.

III.

IPO Advisory & Distribution Services:-

IL&FS Investsmart (IIL) is one of India's leading companies engaged in the activity IPO Advisory and Distribution. Our primary markets division does a comprehensive research before recommending issues to clients. Our pan India reach helps us in mobilizing large number of applications across India during public offerings, this has ensured that we constantly figure

amongst the top ranking performers in the primary market distribution space. As a part of our online offering, customers can invest in IPO's not only through our branches but also through our website, which also provides you with regular updates on the IPO scenario, Open IPO's as well as all the forthcoming IPO's at any given point of time.

IV.

Insurance Advisory Services:-

We are a composite insurance broker providing comprehensive risk management solutions, both for corporates as well as individuals. Our solutions include identification, measurement and assessment of the risk and handling of the risk, of which insurance is an integral part. We deal into both life insurance and general insurance products for all insurance companies across India.

Our key service features include the following:

Risk management solutions for all

Comprehensive research for all policies available on a regular basis Recommendations on a comprehensive insurance cover based on clients needs Maintain proper records of client policies Continuous monitoring of client account

B.TRADING PRODUCTS:-

1. Equities & Derivatives:- IL&FS Investsmart is a full service broking house offering services across both the Cash and F&O segments. Our experienced team of Research Analysts and Advisory Managers guide you with appropriate solutions, backed by in-depth research, knowledge and expertise on a regular basis. We would constantly help you with strategies for investments in equities, recommendations for trading on futures & options, hedging with Nifty and other product and opportunities of risk-less arbitrage between various segments.

2. INSTITUTIONAL OFFERINGS:-

A.

Investment Banking Service

IL&FS Investsmart (IIL) offers you extensive range of Investment Banking Services for equity related products and instruments. Our team advises you on transactions like business structuring and capital raising opportunities based on your corporate needs and state of capital markets. Services we specialize in include Management of: Initial Public Offering (IPOs) Follow-on Offerings Qualified Institutional Placements (QIPs) Buyback of Equities Open Offers Mergers & Acquisitions Private Equity Placements .ESOPs

B. Institutional Equity Broking Services:Our efficient execution, quality research, top quality human resources and complete compliance with stock exchange regulations, as well as business standard ethics lend towards our exemplary services to investors, through IPOs, equities, derivatives and mutual funds. We also focus on identifying undiscovered value stocks to investors. Through its gamut of services, this division is well-suited to corporate investors, banks, financial institutions, insurance companies and FIIs. Our Institutional Equity Business (IEB) is well positioned to offer support for a complete range of investment banking service to corporates.

C. Institutional Debt Broking Services:-

Our institutional debt broking division includes secondary market broking, primary market debt placement & distribution and provident fund advisory services. Secondary debt broking is the principle service provided by this division. The clients mainly comprise of institutional debt players, such as banks, primary dealers, mutual funds, large provident funds and in some cases corporate treasuries. The primary market services cover placement of debt paper issued by corporates, with institutional segments covering banks, mutual funds etc. Pre marketing the placement / issuance Selling / placing the issuance Assisting in any related documentation for the issuance Assisting in all other steps to complete the issuance for draw down funds

3. On line products: A. SmartSTART:- SmartStart is a powerful browser based trading system for those who are relatively new to online investing. A unique integrated account, which integrates your banking, broking, and demat accounts. A comprehensive trading service, which allows you to invest in equities and derivatives. SmartStart trading platform allows you the flexibility of trading on any internet capable system, with access to both the NSE and BSE.

B. SmartINVEST:SmartInvest is a browser-based system designed for customers who transact occasionally. It is ideal for investors who believe in the Buy and Hold approach towards investment in equities. SmartInvest capability as a browser-based trading platform gives you the benefit of real-time streaming data with the flexibility of trading on any Internet capable system. With access to both the NSE & BSE, you are in the driver's seat when routing your order to the best price on either of the exchanges. SmartInvest sophisticated yet easy to use point and click order entry interface allows you to react more quickly to the markets and make better decisions.

C.SmartTRADE:SmartTrade is an EXE based desktop software designed for active traders who transact frequently to capture favorable short-term price movements. The platform offers active traders the tools they need to make critical decisions with confidence. SmartTrade is designed and built from the ground up to address the needs of active traders. SmartTrade makes the most of state-of the-art technology to deliver power, speed and reliability. Through an easy-to-use interface, users are provided with the same tools and advantages that the professionals enjoy.

IIL Subsidiary companies:-

IL&FS Investsmart Securities Limited (IISL):- It is the wholly owned subsidiary of the IIL and is engaged in Equity market through its memberships on National Stock Exchange (NSE) & Bombay Stock Exchange (BSE) IISL offers Equity & Derivatives Broking, PMS, IPO Mobilisation, Mutual Funds Distribution and other Investment Advisory Services to both retail as well as institutional clients through a network of branches and franchisees across India. IISL also, has a quality team of researchers that advise the clients across industries on a regular basis.

IL&FS Investsmart Insurance & Risk Management Services Ltd (IIIRMSL): IIRMSL is a wholly owned subsidiary of IIL and offers Insurance Broking services for individuals, groups as well as corporate clients. As a broker, we also provide advisory services for all insurance products offered by various insurance companies.The current set up are spread across 11 locations involving dedicated teams doing retail distribution of insurance products. Within a short span of less than 1 year, IIRMSL has managed be become one of the top 10 insurance broking companies in India.

IL&FS Academy for Insurance & Finance Ltd (IAIFL):

IAIFL is a wholly owned subsidiary of IIL and is one of the first and the largest Insurance Training Institution licensed by the IRDA and has established a first mover advantage in this business. It is the largest training institution in the pre-licensing segment having a national footprint in 30 cities. IAIFL has till date trained about 40,000 advisors across all the private insurance companies at various parts of the company. It has implemented a structured framework for delivery of the 100 hours Agents Training programs, which includes faculty resources, institutionalised mechanisms for program evaluation, feedback reports to the clients and ongoing program up-gradation to ensure quality and uniformity of approach across multiple locations in the country.

IL&FS Investsmart Asia Pacific Private Limited (IIAPPL): IL&FS Investsmart Asia Pacific Private Limited (IIAPPL) is the wholly owned subsidiary of the IIL and is based out of Singapore. IIAPPL is involved in servicing NRI's and FII's from the Asia Pacific region to access the Indian capital markets. IIAPPL works in close association with both the Retail as Institutional Business Divisions in India

IL&FS Investment Financial Services Limited: IL&FS Investsmart Financial Services Limited (IIFSL) (Formerly known as Tajir Investment & Properties Limited) is a Non-Banking Finance company registered with Reserve Bank of India. IIFSL has been recently acquired by IL&FS Investsmart Limited (IIL) as a wholly owned subsidiary. IIFSL was engaged in hire purchase activity and sale of properties till June 30, 2006. However, in view of the buoyancy observed in Indian financial sector and its outlook for the coming years, management decided to diversify into financial sector by offering new products. After reviewing various options, the management of the company decided to take up securities financing related activities from July 1, 2006 and the Company is currently offering financing products such as Margin Trade Financing, Loan Against Shares, IPO Financing and ESOP Financing.

1.

What is your annual income? Particulars 1 to 2 lacks 2 to 4 lacks 4 to 6 lacks Above 6 lacks No of persons 30 40 20 10

2. Saving percentage of your annual income

Particulars 0% to 10% 10% to 20% 20% to 30% Above 30%

NO of persons 45 32 14 09

3. Percentage of savings in the following options

Particulars Bank deposits Equity Mutual fund Insurance

No of persons 30 18 40 12

4. If Mutual funds; why do you prefer Mutual fund?

Particulars Low risk To get tax benefit Better portfolio Mgt

No of persons 65 14 21

5. If Not; why do you prefer other?

Particulars High return Liquidity Flexibility

NO of persons 37 44 19

6. Are you satisfied with return on investment?

Particulars Satisfied Neutral Dissatisfied

No of persons 61 18 21

7. Are you satisfied with protection against Market fluctuations?

Particulars Satisfied Neutral Dissatisfied

No of persons 76 20 04

8. How do you take investment decision?

Particulars By Help of experts On my own Friends & family Papers & net

No of persons 39 33 11 17

9. What is your prefernce next to Mutual funds

Particulars Bank deposits Equity Post office Gold Real estate insurance

NOof persons 38 19 17 08 07 11

10.What factors are influencing your investments

Particulars Economy Stock market Own finance Return

No of persons 16 24 28 22