AN ORGANISATION STUDY OF ICICIdirect.com INTERNSHIP REPORT
SUBMITTED TO BANGALORE UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS OF THE MBA DEGREE COURSE
VIKAS MAHESHWARI
PROF. B.V. RUDRAMURTHY
2005-07
Associate Bharatiya Vidya Bhavan # 43, Race Course Road Bangalore-560001
DECLARATION
I hereby certify that the internship entitled An Organizational Study of ICICIdirect.com has been carried out by me under the guidance and
supervision of Prof. B.V. Rudramurthy, M. P. Birla Institute of Management, Associate Bharatiya Vidya Bhavan, Bangalore.
The work was carried out in partial fulfillment of the requirement for the award of M. B. A. course of Bangalore University.
The report or any part thereof has not been submitted to any University or Institute for the award of any diploma or degree.
Bangalore September 29, 2006 Vikas Maheshwari Reg. No. 05XQCM6112
Associate Bharatiya Vidya Bhavan # 43, Race Course Road Bangalore-560001
DECLARATION
I hereby certify that the internship entitled An Organizational Study of ICICIdirect.com has been carried out by me under the guidance and
supervision of Prof. B.V. Rudramurthy, M. P. Birla Institute of Management, Associate Bharatiya Vidya Bhavan, Bangalore.
The work was carried out in partial fulfillment of the requirement for the award of M. B. A. course of Bangalore University.
The report or any part thereof has not been submitted to any University or Institute for the award of any diploma or degree.
Bangalore September 29, 2006 Vikas Maheshwari Reg. No. 05XQCM6112
M. P. Birla Institute of Management ASSOCIATE BHARATIYA VIDYA BHAVAN #43, RACE COURSE ROAD, BANGALORE -560001, INDIA
Prof. B.V. Rudramurthy
Tel 080-22382798/9634, Fax 080-22389635 Email:
[email protected] [email protected],, Website: www.mpbim.com
Certificate
This is to certify that this report entitled An Organizational Study of ICICIdirect.com is a compilation of the internship study carried out by Mr.
Vikas Maheshwari (Reg. No. 05XQCM6112), a Student Executive of MP Birla Institute of Management, Bangalore. Mr. Vikas Maheshwari worked under my guidance and supervision.
Bangalore September 29, 2006 ( B.V. Rudramurthy)
M. P. Birla Institute of Management ASSOCIATE BHARATIYA VIDYA BHAVAN #43, RACE COURSE ROAD, BANGALORE -560001, INDIA
Dr. N. S. Malavalli PRINCIPAL
Tel 080-22382798/9634, Fax 080-22389636 Email:
[email protected], Website: www.mpbim.com
Certificate
This is to certify that this report entitled An Organizational Study of ICICIdirect.com is the output of internship carried out by Mr. Vikas Maheshwari , a Student Executive of MP Birla Institute of Management,
Bangalore under the guidance and supervision of Prof, B. V. Rudramurthy, MPBIM, Bangalore (Internal Guide) and Mr. Ravi Agarwal, Unit Manager, ICICI DIRECT, Malleshwaram, Bangalore(External Guide) and Mr. Pradeep K.,Regional product manager,ICICIdirect.com,Bangalore.
Bangalore October 29, 2006 (N. S. Malavalli)
ACKNOWLEDGEMENT
I express my deep sense of gratitude to Prof. B.V. Rudramurthy, M. P. Birla Institute of Management (MPBIM), Associate Bharatiya Vidya Bhavan, Bangalore, for his most valuable guidance, inspiring supervision, periodical monitoring and sparing his precious time in my internship. I also express my sincere gratitude to Mr. Ravi Agarwal , Unit Manager, ICICIdirect.com, Malleshwaram, Mr. Pradeed K., Regional Product Manager, ICICIdirect.com, Bangalore for all the inspirations and giving me an opportunity to carry out the organizational study of ICICIdirect.com. Without his guidance and help, the internship would not have been possible. I am grateful to DR. N. S. Malavalli, Principal, MPBIM for providing the facilities. I owe my sincere gratitude to all my friends Lalit Kankani, Vishal Agarwal, Rishiraj Maheshwari, Kishan Somani who discussed on the internship from time to time, co-operated and helped me and in the work. I am indebted to my parents, brother and sisters who encouraged me always in my study.
Vikas Maheshwari
CONTENTS Chapter I INDUSTRY/COMPANY PROFILE
Chapter II ORGANISATION STRUCTURE
Chapter III PRODUCT PORTFOLIO
Chapter IV HUMAR RESOURCE OF ICICI BANK
Chapter V SWOT ANALYSIS, VISION & GOALS
Chapter VI RECOMMENDATIONS
BIBLIOGRAPHY Part B
Analysis between Equity and Mutual Funds
Executive summary
ICICI Ltd. Is one of the India ’s largest financial institution is gearing up to transform itself in to a universal bank leveraging on the ‘click and mortar’ strategy. The company has a presence in diverse segments of the financial market by way of its subsidiaries. In the present scenario the service industry has given utmost importance of doing a particular task at a faster time in order to satisfy the customers and to attract new customers. The main reason of establishing a depositary system is to lessen the work and fast the processing. This system is overcoming the disadvantages of the physical trading of the securities in the stock exchange. ICICI Direct.com is a truly online share trading site, which means that from the time you punch in a buy or sell trade on you computer to the final settlement in you account, everything happens completely online. The 3-in-1 e-invest account integrates your brokerage, bank and one or more depository accounts to make sure that you can do the otherwise cumbersome share trading from your home or office, absolutely at any time of the day. Objectives of The Study
Study of ICICI Study of ICICIdirect.com Study of the product offered by ICICIdirect.com Study of demat service providers Study of the organizational structure of ICICIdirect.com SWOT analysis. Recommendations
CHAPTER I INDUSTRY / COMPANY PROFILE
Overview ICICI Bank is India's second-largest bank with total assets of about Rs.2513.89 bn and a network of over 614 branches and offices and about 2200 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. ICICI Bank's equity shares are listed in India on stock exchanges at Kolkata and Vadodara, the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning feebased income and the ability to participate in the payments system and
provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.
INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After
consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. With the growth of industries, the financial services sector has assumed great momentum with unprecedented investment and employment potential. ICICI is no exception to this global phenomenon. Beginning with a modest commercial banking, the bank has embarked upon a wide range of banking, financial and insurance services.
Being the first development bank registered under the Companies Act, 1956, the range of services offered by the bank has expanded considerably. The following services assume a significant portion of the bank ’s activities; Commercial Banking Development Banking Trading in Securities Merchant Banking Insurance Mutual Funds Foreign Exchange Dealings The bank has made significant inroads into the retail banking sector, thereby, indicating growth in business and exploitation of consumer potential integrated with the overall policy objective of mobilization of savings into investments.
THE MOST COMPREHENSIVE ONLINE SHARE TRADING SITE
INDUSTRY PROFILE
The Indian middle class is large and growing; wages are low; many workers are well educated and speak English; investors are optimistic and local stocks are up. Despite political turmoil, the country presses on with economic reforms. The only cause of worry that India could face is Infrastructural hassles. The rapid economic growth of the last few years has put heavy stress on India's infrastructural facilities. The projections of further expansion in key areas could snap the already strained lines of transportation unless massive programs of expansion and modernization are put in place. Problems include power demand shortfall, port traffic capacity mismatch, poor road conditions (only half of the country's roads are surfaced), low telephone penetration (1.4% of population).
Diverse Market
The Indian market is widely diverse. The country has 17 official languages, 6 major religions, and ethnic diversity as wide as all of Europe. Thus, tastes and preferences differ greatly among sections of consumers. Therefore, it is advisable to develop a good understanding of the Indian market and overall economy before taking the plunge. Research firms in India can provide the information to determine how, when and where to enter the market. There are also companies which can guide the foreign firm through the entry process from beginning to end --performing the requisite research, assisting with configuration of the project, helping develop Indian partners and financing, finding the land or ready premises, and pushing through the paperwork required.
Indian Stock Market Overview:
The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are the two primary exchanges in India. In addition, there are 22 Regional Stock Exchanges. However, the BSE and NSE have established themselves as the two leading exchanges and account for about 80 per cent of the equity volume traded in India. The NSE and BSE are equal in size in terms of daily traded volume. Most key stocks are traded on both the exchanges and hence the investor could buy them on either exchange. The primary index of BSE is BSE Sensex comprising 30 stocks. NSE has the S&P NSE 50 Index (Nifty) which consists of fifty stocks. The BSE Sensex is the older and more widely followed index. Both these indices are calculated on the basis of market capitalization and contain the heavily traded shares from key sectors. The markets are closed on Saturdays and Sundays. Both the exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE Online Trading) and NEAT (National Exchange Automated Trading) System. It facilitates more efficient processing, automatic order matching, faster execution of trades and transparency. The key regulator governing Stock Exchanges, Brokers, Depositories, Depository participants, Mutual Funds, FIIs and other participants in Indian secondary and primary market is the Securities and Exchange Board of India (SEBI) Ltd.
Working of a stock market:
A person desirous of buying/selling shares in the market has to first place his order with a broker. When the buy order of the shares is communicated to the broker he routes the order through his system to the exchange. The order stays in the queue exchange's systems and gets executed when the order logs on to the system within buy limit that has been specified. The shares purchased will be sent to the purchaser by the broker either in physical or demat format. Emergence of ICICIdirect.com:
Due to the existing financial market scenario and the ever increasing use of computers and its tools most predominantly the internet, ICICI in 2000 appointed Mckinsey to study the market potential for an online portal dealing in trading with securities. Mckinsey in its report stated the market potential to consist at around Twenty Five thousand people only. But regardless of this fact, ICICI DIRECT.COM was started and now it has grown to more than Four lakh Fifty thousand customers.
CHAPTER II ORGANIZATION STRUCTURE
ORGANIZATION STRUCTURE ICICI Bank believes that the structure of an organization needs to be dynamic, constantly evolving and responsive to changes both in the external and internal environments. The organizational structure is designed to support our business goals, and is flexible while at the same time ensuring effective control and supervision and consistency in standards across business groups. The organizational structure is divided into five principal groups
–
Retail Banking, Wholesale Banking, Project Finance, Special
Assets Management, International Business and Corporate Centre. The Retail Banking Group comprises ICICI Bank's retail assets business including various retail credit products, retail liabilities (including our own deposit accounts as well as distribution of third part liability products) and rural micro-banking. The Wholesale Banking Group comprises ICICI Bank's corporate banking business including credit products and banking services, with separate dedicated groups for large corporates. Government and public sector entities and emerging corporates. Treasury, structured finance and credit portfolio management also form part of this group. The Project Finance Group comprises our project finance operations for infrastructure, oil and gas, manufacturing and shipping sectors. The Special Assets Management Group is responsible for large non-performing loans and accounts under watch. The International Business Group is responsible for ICICI Bank's international operations as well as coordinating the international strategies and alliances of its subsidiaries and affiliates.
The Corporate Centre comprises all shared services and corporate functions, including finance and secretarial, investor relations, risk management, legal, human resources and corporate branding and communications. Organizational Structure of Karnataka Region: The organization structure at ICICIdirect.com is lateral in nature. It is headquartered at Mumbai from where the top most hierarchy operates. As ICICI is spread all over India the second level hierarchy consists of a regional product manager.
ORGANISATIONAL CHART
ICICI direct .com
PRODUCT DEVELOPMENT
RETAIL
OPERATIONS
DIRECT BUSINESS CATALYST
HUGE NETWORTH INDIVIDUAL DESK
SALES
E - INVEST
WISE INVEST
PRODUCT CO-ORDINATOR CROSS SELLING
HIGH NETWORTH INDIVIDUAL
REGIONAL PRODUCT MANAGER
SEGMENT MANAGER
EXIBITIONS / STALLS
CORPORATE RETAIL
SEGMENT MANAGER
SEGMENT MANAGER
SEGMENT MANAGER
UNIT MANAGERS
Refer to the next page TRANIEES/AGENTS
WISE INVEST
PRODUCT CO-ORDINATOR
REGIONAL PRODUCT MANAGER
SEGMENT MANAGER
UNIT MANAGER
TRAINEES/ AGENTS
Sales consists of two products E-Invest and Wise Invest. For both these products there are product co-ordinators. Sales of both these products are regionally looked after by Mr. Madhusudhan, Regional Product manager for South India. These products are divided into four categories:Corporate Retail Exhibitions/ stalls HNI handled by Cross Selling
Under these category heads, a team of segment managers ’ work at regional level to achieve the purposes set out by them. They also have to report to the Regional Product manager. The bank usually has many branches to look after which Unit managers along with trainees/agents are appointed who report to the Segment managers and the Regional product manager.
CHAPTER III PRODUCT PORTFOLIO
THE PRODUCTS
1. E-Invest Account --Online Share Trading A/c
2. WISE Invest Account --Online Investment A/c
Products available on E-Invest
E-Invest
Derivatives
Mutual Funds
Cash
Futures
Purchases
Margin
Options
Redemption
Equity
BTST
SIP & SWP
Spot
Switch In / Out
Transfer In
IPOs
GOI Bonda
Bonds
ICICI Bonds
DEMAT
ICICI Bank Demat Services boasts of an ever-growing customer base of over 5 Lakh Account Holders. In its continuous endeavor to offer best of the class services to its customers it offers the following features: Online access to the customers demat account. Checks holdings, and status of requests and much more. Dedicated specially trained customer care executives at its call centre, to handle all queries. Holding and Transaction details available round the clock on IVR (Interactive Voice Response) system. With a countrywide network of over 614 branches, one is never far from an ICICI Bank Demat Services outlet. Customers can also avail online share trading services from ICICIdirect.com and get a 3 in 1 account inclusive of a demat, ICICI bank account and a online trading account.
EQUITY: Trading shares - The past Calling broker Waiting for pick-up Placing orders Placing wrong orders Waiting for order confirmation Waiting for contract notes Writing cheques/ TIFDs for pay-in Chasing broker for monies/ shares after payout
Trading shares - ICICIdirect.com way Integrated 3-in-1 account removes all hassles after placing order. Monies/Shares get debited/ credited automatically on payin/payout days. Go to website- available anytime Place orders- even after market hours Get order status anytime- even modify/cancel orders anytime if order lies unexecuted. No writing cheques/TIFDs. No chasing broker. Get contract notes online.
More about 3-in-1 account This account integrates your bank, demat and broking accounts. If you purchase/sell shares, the funds are automatically debited/ credited from/to your bank account and shares are automatically credited/debited to/from your demat account respectively on the settlement date. This therefore completely eliminates the hassles of writing cheques/TIFDs or chasing brokers etc. And brings CONVENIENCE to your share trading.
Products and Services
A product for every need, ICICIdirect.com is the most comprehensive website, which allows you to invest in shares, mutual funds and other financial products. Simply put we offer you ’re a product for every investment need of yours. 1. Trading in shares:
ICICIdirect.com offers you various options while trading in Shares.
Cash Trading
This is a delivery based trading system, which is generally done with the intention of taking delivery of shares or monies. A cash position is meant to be settled by delivery, the required cash or securities are blocked in full.
Margin Trading
You can also do an intra-settlement trading upto 4 times your available funds, wherein you take long buy/short sell positions within the same settlement cycle.
Spot Trading
When you are looking at an immediate liquidly option, ‘Cash
on Spot’ may work the best for you, On selling
shares through “cash on spot”, money is credited to your bank a/c the same evening and not on the exchange payout date. This money can then be withdrawn from any of ICICI Bank ATM’s BTST
Buy Today Sell Tomorrow (BTST) is a facility that allows you to sell shares even one day after the buy order date, without you having to wait for the receipt of shares into your demat account.
CallNTrade
CallNTradeR allows you to call on a local number in your city and trade on the telephone through our Customer Service Executive. This facility is currently available in over 11 major states across India.
Trading on NSE/ Through ICICI direct. com, you can trade on NSE as BSE
well as BSE
Market Order
You could trade by placing market orders during market hours that allows your to trade at the best obtainable price in the market at the time of execution of the order
Limit Order
Allows you to place a buy/sell order at a price defined by you, the execution can happen at a price more favourable than the price, which is defined by you, limit orders can be placed you during holidays and non market hours too.
What s so unique about ICICIdirect.com? ’
Convenience:
A unique 3-in-1 account integrates your banking, broking and demat accounts. .
Speed:
You can now get the latest quotes of scrip ’s on ICICIdirect.com and place an order almost instantly. Control:
You can be assured that you have in fact placed an order at the price you always wanted to, but may not have been able to do so till now. Thereby giving you control over your own trades. Independence:
Instead of transferring monies to a broker's pool or towards deposits, you can manage your own demat and bank accounts when you trade through ICICIdirect.com. Trust:
ICICIdirect.com comes to you from ICICI, the organisation trusted by millions of Indians.
Host of content features Keep yourself updated Weekly & monthly stock movers News from CNBC and Reuters Screen stocks View P&L, financial ratio, background and balance sheet of over 5000 companies with our corporate info bank. My research - a step-by-step guide to help you research a stock. Latest NAV for mutual funds Portfolio tracker to monitor the gains and losses on your investments. ICICIdirect University to guide you through concepts and on how to trade
Value added services Regular communicating Ideal MF portfolios, Ideal asset allocation, Start and end dates for IPO’s and bonds, Invitation to sessions on Investments / Mutual funds etc.
WHY PEOPLE PREFER ICICI BANK FOR ONLINE SHARE TRADING: ICICI DIRECT E-INVEST ACCOUNT BECOMING A CUSTOMER EXISTING BANK CUSTOMERS BANK ACCOUNT / DEMAT ACCOUNT NEW ICICI E-INVEST CUSTOMERS ONLINE INVESTING SETTLEMENT OF TRADE MARGIN PRODUCT CASH ON SPOT BUY TODAY SELL TOMMAROW (BTST) TRADING IN DERIVATIVES (FUTURES&OPTIONS) DIGITALLY SIGNED CONTRACT NOTE CORPORATE BENEFITS NON PARI PASSU (NPP) SHARES MUTUAL FUNDS FAQ RESEARCH AND OTHER RESOURCES PASSWORD SECURITY ACCESSING BANK ACCOUNTAND SETTING LIMITS ACCESS TO WEB SITE RETAIL DEBT
C2T AND ITS BENEFITS
C2T: CONVERSION TO TRADING – A GLIMPSE
A new version of after sales service that has a dual benefit to both bank and the customers. C2T is an approach in ICICI Bank, through which the already existing customers who are not trading or who have not at all activated or logged in their I-Direct A/c over a period, say 3 to 6 months are tried to be converted into regular traders through this process or approach. In this process, the feedback of the existing customers- those who have not been traded yet or who have not been trading for a considerable period of time is found out or unearthed form the Database of the customers, with the help of computers and other tracking systems. Thus a list of such customers is generated periodically and is distributed to some of the bank branches in various regions to convert them into traders.
BENEFITS OF C2T:
Enables both customers and Bank to benefit form the process. All the problems & doubts of the customer can be solved and help him in using the product fully. Good Customer Relationship is established. Helps bank in getting more brokerage charges in future. Improves the loyalty of the customer for the bank.
INVESTMENTS ICICI Bank Bonds •
GOI Bonds
•
Mutual Funds
•
IPO
GOI Savings Bonds 6.5% Savings Bonds (Non Taxable), 2003 •
Low risk.
•
Interest Income is Tax Free.
•
Nomination facility available
•
Cannot be traded.
•
No loan facility available (as per rule of GOI).
8% Savings Bonds (Taxable), 2003 •
Low risk.
•
Reasonable investment tenure.
•
Nomination facility available.
•
Cannot be traded in secondary market.
•
Interest income taxable.
•
No loan facility available (as per rule of GOI).
MUTUAL FUNDS INVESTMENTS THROUGH ICICI BANK About Mutual Funds
Mutual Funds pool money of various investors to purchase a wide variety of securities while pursuing a specific goal. Selection of Securities for the purpose is done by specialists from the field. Returns generated are distributed to the Investors. Mutual Fund Companies offer various schemes. Investors can choose any particular Fund/Scheme or mix of Funds/Schemes depending upon their perception towards risk. Investment is done on the basis of prevailing Net Asset Values of various schemes. Mutual Funds Investments are subject to Market Risks. Types of Funds Sold:
ICICI Bank helps customers to determine which types of funds they need to meet their investment goals. This may include the following types of funds: •
Debt
: Liquid schemes, Income schemes, G-sec schemes,
Monthly Income Schemes etc. •
Equity
: Diversified Equity Schemes, Sector Schemes, Index
Schemes etc. •
Hybrid Funds: Balanced Schemes, Special Schemes - Pension
Schemes, Child education Schemes etc.
ICICI Bank helps customers to identify an appropriate mix of Mutual Fund schemes for their portfolio using asset allocation strategies. Through ICICI Bank one can invest in various schemes of multiple mutual funds with decent performance record. Customers can take the aid of ICICI Bank's various research reports on mutual funds and their schemes before choosing a scheme for investment.
ICICI Bank offers investment in Mutual Funds through Multiple Channels: With ICICI Bank, you can invest in Mutual Funds through the following channels: •
ICICI Bank Branches
•
ICICI Bank ATMs
•
ICICI Direct.Com
IPO Invest in IPO's Online:
One can invest in IPO ’s online through www.ICICIdirect.com with same convenience of investing in equities - hassle-free and with zero paper work. Also, get in-depth analyses of new IPO ’s issues (Initial Public Offerings) which are about to hit the market. IPO calendar, recent IPO listings, prospectus/offer documents and live prices will help customers to keep on top of the IPO markets.
Products available on Wise Invest
WISE Invest
Mutual funds
Insurance
Bank Deposits
GOI Bonds
Purchase
New Policies
FD
Tax Saving Bonds
Redemption
Premium Payments
RD
Bonds
IPO s ’
SIP & SWP
Switch In / Out
Transfer In
WISE Invest Account With ICICIdirect s WISE Invest Account, one can invest in ’
Mutual funds, Tax saving bonds, GOI bonds, Insurance, IPOs conveniently at the click of a mouse You can now do away the hassles of filling up long forms, writing cheques, waiting in long queues, following up with various brokers / agents etc All this and more at an account opening fee of just Rs. 350. Upgradation of the account to a share trading account can be done anytime in future
Products Offered under WISE Invest MFs, Tax saving bonds, GOI bonds, IPOs, Insurance FDs / RDs….all at the click of a button.
Why WISE Invest Usual way of investing will entail Continuous follow-up with broker. Filling up long forms for MFs and IPO ’s. Contacting an insurance agent and writing cheques for insurance. Visiting the bank and standing in queues for FDs & tax saving bonds. etc This account will do away all these hassles. You can make all your investments online conveniently and track all past investments at any time of the day.
Value added services We will be regularly communicating Ideal MF portfolios. Ideal asset allocation. Start and end dates for IPO’s and bonds. Invitation to sessions on Investments / Mutual funds etc.
CHAPTER IV HUMAN RESOURCE OF ICICI BANK
HUMAN RESOURCE OF ICICI BANK:
The Human Resources Department of the Bank is one of the most proactive HR departments in the Indian Banking industry, having won several industry awards for implementing proactive HR practices in the Banking industry. The HR department provides the ideal foil to the relentless business drive of the Retail and Wholesale Banking Groups and prides itself on its role as a human relations change agent in the Bank. Areas of HR interest include Employee Relations, Performance Management Systems, Recruitment and Placement, Career Development and Training & Development. A dedicated team of professional HR practitioners proactively anticipates environmental changes and plans appropriate organizational interventions with a view to enhance employee satisfaction. Positions for Post Graduates in HR/Personnel Management from premier institutes exist in the Recruitment, Training and Performance Management departments. WORK CULTURE AT ICICI BANK
It is a tech-savvy, non-hierarchical, work environment where early responsibility and independent decision-making enable each employee to reach his/her potential. Coupled with this is a strong performance management system that has built a meritocracy where high performing-high potential individuals are duly rewarded.
SELECTION PROCESS
In the continuous endeavor to improve the selection process for recruitment at all levels in ICICI Bank, it has carried out an in-depth study of the competencies required to succeed in ICICI Bank. As per our research, the competencies which indicated success at the entry level in ICICI Bank are: Drive for results Process Orientation Interpersonal Effectiveness Analytical Thinking Innovation Team Effectiveness In order to assess the same ICICI Bank uses a set of 3 tools: 1. A Mental Ability Tests (for candidates with 0-2 years of work experience) 2. A Personality profiling system 3. A Personal Interview The Mental Ability Test gives ICICI Bank a fair and objective
assessment of candidates’ skills in the areas of verbal reasoning, numerical reasoning & diagrammatic reasoning. These are important skills for the role of an entry level manager and people who do well in these tests tend to do well in their jobs at ICICI Bank. The total time taken in this exercise is 2 hours with each of the three sections lasting 40 minutes. Candidates (at all levels regardless of the number of years of work experience) are also required to complete the Occupational Personality Questionnaire (OPQ) before they appear for the interview, the results of which are integrated into ICICI Bank's interview process.
CHAPTER V SWOT ANALYSIS, VISION AND GOALS
The ICICI Bank Vision... To be the preferred brand for total financial & banking solutions for corporates, government sector & individuals
VISION OF ICICI BANK
Directing strengthsChanneling thoughts Creating value Zeroing in on a goal Concentrating efforts for effect Activating ideas into enterprise Delivery beyond expectations
GOALS OF ICICI BANK
Mobilising and structuring resources Capitalizing on opportunities Focusing on core competence Creating group dynamics Enhancing customer centricity Value engineering Delivering beyond expectations
SWOT ANALYSIS STRENGTH:
1) BACKED BY A STRONG COMPANY: ICICI Bank is India's First Universal Bank, which offers the widest range of financial products and services. It is also India’s largest private sector bank and has a nationwide network of 614 branches. 2) PRODUCT AIMED AT CONVENIENCE: ICICIdirect.com is the first company to offer 3 in 1 account. ICICIdirect.com is unique innovative and distinguished product that reduces the hassles and offers wide convenience to the customers. 3) EVER INCREASING USAGE: ICICIdirect.com has a growing customer base of more than 6 million and is rapidly adding more due to increased use of internet and more and more investors entering the stock market. 4) AUTOMATIC TRADING : ICICIdirect.com has a feature where in at a previously determined price fed to the computer results in buy/sell of the desired security automatically without any manual presence.
WEAKNESS:
1) HIGH BROKERAGE RATES The brokerage charged by the company, especially on the delivery transactions is very high in comparison to the competitors. Company is charging .75% brokerage on delivery calls which is very high in comparison with other stock broking firm. 2) CUSTOMER SERVICE The customer service department is not efficient to handle the grievances of the retail customers. Also there is no such relationship manager for retail customer to handle the problems faced by them. 3) ACCOUNT OPENING TIME The time taken for opening the account is too much in comparison with other companies. Customer often complain of delays in receiving accounts details or login and passwords.
OPPORTUNITIES:
1) EVER INCREASING USERS OF INTERNET: As per research India is adding millions of internet users every year. This provides a huge opportunity to ICICIdirect.com to tap such users. 2) INCREASE IN THE NUMBER OF INVESTORS ENTERING THE STOCK MARKET: Recently due to the surge in IPO ’s and increased income of people in India has led to more and more people taking interest in stock market which is a huge opportunity for ICICIdirect.com. 3) TAX SAVINGS ONLINE: ICICIdirect.com offers many products like Tax saving Bonds and Mutual funds. People today are keen on saving tax and for the same they can invest in these products online. Thus this brings in a huge potential market for ICICIdirect.com. 4) PROVIDING TRUE SERVICE: ICICIdirect.com reduces paper work, reduces hassles like tracking the brokers and following the investment along with this it assures safety and security. Thus ICICIdirect.com is potentially one of the most revolutionary product which will find increased usage in this modern world.
THREATS:
1) FEAR OF SAFETY: People in India are very avert to giving out their credit card numbers or buying and selling shares. This mentality possesses a significant trend because ICICIdirect.com in its essence is a portal for online trading in securities. 2) EMERGENCE OF OTHER PLAYERS: New players like Reliance are about to enter the market which is a big threat for the company. Reliance being substantially good company can definitely give tough competition to ICICIdirect.com 3) FLUCTUATIONS IN THE SECURITY MARKET: Stock market scams, increase in oil prices, terrorist attacks etc cause huge fluctuations in securities market which dissuades investors who opt for liquidity or gold. 4) THREAT FROM LOCAL BROKERS : Local brokers charged less brokerage as compare to ICICIdirect.com which can lead to a shift in loyalty favouring the local brokers.
CHAPTER VI RECOMMENDATIONS
RECOMMENDATIONS 1) EDUCATING THE CUSTOMERS:Educating the customers that as interest rate on fixed deposits or mutual funds or postal deposits are coming down, there is no difference between investing in share market and in banks. 2) REDUCTION
IN
BROKERAGE
AND
ACCOUNT
OPENING
CHARGES: ICICIdirect.com charges its customers higher brokerage charges than the local brokers which sometime amounts to double the local brokerage charges. Therefore reduction in brokerage charges has to be seriously looked into by ICICIdirect.com. 3) BE IN TOUCH WITH THE CUSTOMERS : Addressing the customer ’s queries and receiving constant feedback is a must because ICICIdirect.com is an online portal and there is very less exchange of communication between the customers and the principal. 4) PROCESSING TIME: It was noted that during the recent IPO ’s other players like Karvy opened demat accounts in one day where as the minimum required time for ICICIdirect.com was four days. This led to the loss of many customers.
BIBLIOGRAPHY WEBSITES:
www.ICICIdirect.com www.ICICIbank.com www.google.com
MAGAZINES AND BOOKS REFERRED:
India Today Business World Marketing Management by Philip Kotler
PART B OF THE INTERNSHIP REPORT
ANALYSIS BETWEEN EQUITY AND MUTUAL FUNDS
RESEARCH EXTRACT In the current economic scenario interest rates are falling and fluctuation in the share market has put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because of investments are risky in nature and investors have to consider various factors before investing in investment avenues. These factors include risk, return, volatility of shares and liquidity. The main objective of comparing investment in equity shares with mutual fund schemes is to analyze the performance of mutual funds with their benchmark and comparing them with equities by using risk, return, beta and alpha as a parameter. Historical data were taken for calculating risk, return, alpha and beta. Analysis has done on percentage method for comparing equity shares with mutual fund schemes. Compare to equities mutual funds are less risky with stable returns and mutual funds gives the investor a diversified portfolio. Those who have well knowledge in equity market they can go for equity investments rather that investing in mutual funds because no control on the expenses made by the fund manager. The study will guide the new investor who wants to invest in equity and mutual fund schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. The study recommends new investors to go for mutual funds rather than equities, because of high risk and market instability.
Introduction to Equity Capital and Mutual Fund
Issue of shares is the most important method of raising capital. Finance raised by the issue of shares serves as a financial floor to the company ’s capital structure. Shares indicate the ownership or equity interest in the assets of the company. Shares are of different nominal or face values and of different kinds to attract different kinds of investors. The maximum amount of capital to be raised by the issue of shares is mentioned in the memorandum of association. During 1990-91 and 1991-92, equity accounts for 35 to 39 percent of the total capital raised respectively. This proportion was reversed in 1992-93, the first year of free pricing, when the share of equity increased to 62 percent. He share of equity finance increased to a high of 73.18 percent in 1994-95. However, in 1995-96 there is a rise in the importance of debt largely due to the high interest rates in the economy and negative returns from the secondary market.
Mutual Funds In India (1964 - 2000)
The end of millennium marks 36 years of existence of mutual funds in this country. The ride through these 36 years is not been smooth. Investor opinion is still divided. While some are for mutual funds others are against it. UTI commenced its operations from July 1964 .The impetus for establishing a formal institution came from the desire to increase the propensity of the middle and lower groups to save and to invest. UTI came into existence during a period marked by great political and economic uncertainty in India. With war on the borders and economic turmoil that depressed the financial market, entrepreneurs were hesitant to enter capital market. The already existing companies found it difficult to raise fresh capital, as investors did not respond adequately to new issues. Earnest efforts were required to canalize savings of the community into productive uses in order to speed up the process of industrial growth. The then Finance Minister, T.T. Krishnamachari set up the idea of a unit trust that would be "open to any person or institution to purchase the units offered by the trust. However, this institution as we see it, is intended to cater to the needs of individual investors, and even among them as far as possible, to those whose means are small." His ideas took the form of the Unit Trust of India, an intermediary that would help fulfill the twin objectives of mobilizing retail savings and investing those savings in the capital market and passing on the benefits so accrued to the small investors.
UTI commenced its operations from July 1964 " with a view to encouraging savings and investment and participation in the income, profits and gains accruing to the Corporation from the acquisition, holding, management and disposal of securities." Different provisions of the UTI Act laid down the structure of management, scope of business, powers and functions of the Trust as well as accounting, disclosures and regulatory requirements for the Trust. One thing is certain – the fund industry is here to stay. The industry was one-entity show till 1986 when the UTI monopoly was broken when SBI and Canbank mutual fund entered the arena. This was followed by the entry of others like BOI, LIC, GIC, etc. sponsored by public sector banks. Starting with an asset base of Rs. 25 crore in 1964 the industry has grown at a compounded average growth rate of 27% to its current size of Rs.90000 crore. The period 1986-1993 can be termed as the period of public sector mutual funds (PMFs). From one player in 1985 the number increased to 8 in 1993. The party did not last long. When the private sector made its debut in 199394, the stock market was booming. The opening up of the asset management business to private sector in 1993 saw international players like Morgan Stanley, Jardine Fleming, JP Morgan, George Soros and Capital International along with the host of domestic players join the party. But for the equity funds, the period of 1994-96 was one of the worst in the history of Indian Mutual Funds. 1999 — YEAR OF THE FUNDS
Mutual funds have been around for a long period of time to be precise for 36 yrs but the year 1999 saw immense future potential and developments in this sector. This year signaled the year of resurgence of mutual funds and the regaining of investor confidence in these MF ’s. This time around all the participants are involved in the revival of the funds ----- the AMC ’s, the unit holders, the other related parties. However the sole factor that gave lifer to the revival of the funds was the Union Budget. The budget brought about a large number of changes in one stroke. An insight of the Union Budget on mutual funds taxation benefits is provided later. It provided centre stage to the mutual funds, made them more attractive and provides acceptability among the investors. The Union Budget exempted mutual fund dividend given out by equity-oriented schemes from tax, both at the hands of the investor as well as the mutual fund. No longer were the mutual funds interested in selling the concept of mutual funds they wanted to talk business which would mean to increase asset base, and to get asset base and investor base they had to be fully armed with a whole lot of schemes for every investor .So new schemes for new IPO ’s were inevitable. The quest to attract investors extended beyond just new schemes. The funds started to regulate themselves and were all out on winning the trust and confidence of the investors under the aegis of the Association of Mutual Funds of India (AMFI) One cam say that the industry is moving from infancy to adolescence, the industry is maturing and the investors and funds are frankly and openly discussing difficulties opportunities and compulsions.
Concept of Equity Capital and Mutual Fund
The term Equity literally means the stock or ownership of a company. They are also known as ordinary shares. The rate of dividend on equity shares varies according to the amount of profit available and the intention of board of directors. In the event of winding up of the company, equity shares can be refunded only after all other claims, including those of preference shares for the refund of their capital, have been met. Equity capital or financing is money raised by a business in exchange for a share of ownership in the company. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock of that private company. Two key sources of equity capital for new and emerging businesses are angel investors and venture capital firms. Equity capital is represented by funds that are raised by a business, in exchange for a share of ownership in the company. Equity financing allows a business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time. The Equity Capital Markets Group (ECM) oversees the Firm's activities in the primary equity and equity-linked markets, as well as monetization derivatives. It provides support in the origination of primary market transactions and manages their structuring, syndication, marketing and distribution.
The world over, it ’s been shown that over long tenures, equities – with their risk premia – have provided approximately 7 percentage points higher returns than risk-free options. People have to accumulate significant amounts of wealth during their working years. Right now, a 17-year bond gives you only 5.5 per cent. So, it is imperative that these people have some exposure to equity. A mutual fund is a trust that pools the money of many investors -- its shareholders -- to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. Those securities are professionally managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio -- entitled to any profits when the securities are sold, but subject to any losses in value as well. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. There are myriad kinds of mutual funds, each with its own goals and methodologies. Whether or not a mutual fund is a good investment is a matter of much public debate, with many claiming they are excellent for the average person, and others saying they are simply a poor way to invest. For the individual investor, mutual funds provide the benefit of having someone else manage your investments, take care of recordkeeping for your account, and diversify your rupees over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds.
A mutual fund, by its very nature, is diversified -- its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversify. Many critics of mutual funds point out that scarcely over 20% of mutual funds outperform the Standard and Poor's 500 Index. This means that nearly 80% of the time, an investor would have been more profitable by simply buying equal shares in all 500 of the companies currently on the S&P 500.
Schemes of Mutual funds Schemes according to Maturity Period:
A mutual fund scheme can be classified into open-ended scheme or closeended scheme depending on its maturity period.
Open-ended Scheme:
An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.
Close-ended Scheme:
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.
Schemes according to Investment Objective:
A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:
Growth / Equity Oriented Scheme:
The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. Income / Debt Oriented Scheme: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets.
Balanced Scheme :
The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in
equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.
Money Market or Liquid Fund:
These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.
Gilt Fund:
These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.
Index Funds:
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc, these schemes invest in the securities in the same weightage comprising of an index. NAV ’s of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme.
Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only those sectors
or
industries
as
specified
in
the
offer
documents.
e.g.
Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries.
Tax Saving Schemes:
These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equityoriented scheme.
Advantages of Equity Capital and Mutual Fund:
Advantages of Equity Capital:
1. High dividend and high value:-
In times of prosperity, the equity shareholders get a very high rate of dividend, sufficiently higher than that on preference shares. At the same time, their share value will also go up in the market.
2. Voting rights:-
It is only the equity shareholders who enjoy voting rights on all the policy matters of the company.
3. Pre-emptive right to new shares:-
Equity shareholders have the pre-emptive right to purchase new shares. Under the provisions of the companies act, the existing shareholders of the company have a right to allotment of newly issued shared.
4. Many privileges and rights:-
Equity shareholders enjoy many privileges and rights. For example, they can vote at meetings, elect directors, control the directors to run the company efficiently and profitably, look into the books and records of the company and transfer or sell their shareholdings.
Advantages of Mutual Fund:
1. Professional Investment Management:-
By pooling the funds of thousands of investors, mutual funds provide fulltime, high-level professional management that few individual investors can afford to obtain independently. Such management is vital to achieving results in today's complex markets. Your fund managers' interests are tied to yours, because their compensation is based not on sales commissions, but on how well the fund performs.
2. Diversification:-
Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund shareowners can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities.
3. Low Cost :-
If you tried to create your own diversified portfolio of 50 stocks, you'd need at least Rs.1,00,000 and you'd pay thousands of rupees in commissions to assemble your portfolio. A mutual fund lets you participate in a diversified portfolio for as little as Rs.10,000, and sometimes less. And if you buy a noload fund, you pay or no sale charges to own them.
4. Convenience and Flexibility:-
You own just one security rather than many, yet enjoy the benefits of a diversified portfolio and a wide range of services. Fund managers decide what securities to trade, clip the bond coupons, collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised.
5. Quick, Personalized Service:-
Most funds now offer extensive websites with a host of shareholder services for immediate access to information about your fund account. Or a phone call puts you in touch with a trained investment specialist at a mutual fund company who can provide information you can use to make your own investment choices, assist you with buying and selling your fund shares.
6. Ease of Investing:-
You may open or add to your account and conduct transactions or business with the fund by mail, telephone or bank wire. You can even arrange for automatic monthly investments by authorizing electronic fund transfers from your checking account in any amount and on a date you choose.
7. Total Liquidity, Easy Withdrawal:-
You can easily redeem your shares anytime you need cash by letter, telephone, bank wire or check, depending on the fund. Your proceeds are usually available within a day or two.
8. Life Cycle Planning:-
With no-load mutual funds, you can link your investment plans to future individual and family needs -- and make changes as your life cycles change. You can invest in growth funds for future college tuition needs, then move to income funds for retirement, and adjust your investments as your needs change throughout your life.
9. Market Cycle Planning:Planning:-
For investors who understand how to actively manage their portfolio, mutual fund investments can be moved as market conditions change. You can place your funds in equities when the market is on the upswing and move into money market funds on the downswing or take any number of steps to ensure that your investments are meeting your needs in changing market climates.
10. Investor Information:Information:-
Shareholders receive regular reports from the funds, including details of transactions on a year-to-date basis. The current net asset value of your shares (the price at which you may purchase or redeem them) appears in the mutual fund price listings of daily newspapers. You can also obtain pricing and performance results for the all mutual funds at this site, or it can be obtained by phone from the fund.
Withdrawals:11. Periodic Withdrawals:-
If you want steady monthly income, many funds allow you to arrange for monthly fixed checks to be sent to you, first by distributing some or all of the income and then, if necessary, by dipping into your principal.
12. Dividend Options:-
You can receive all dividend payments in cash. Or you can have them reinvested in the fund free of charge, in which case the dividends are automatically compounded. This can make a significant s ignificant contribution to your long-term investment results.
13. Automatic Direct Deposit:-
You can usually arrange to have regular, third-party payments -- such as Social Security or pension checks -- deposited directly into your fund account. This puts your money to work immediately, without waiting to clear your checking account, and it saves you from worrying about checks being lost in the mail.
14. Recordkeeping Service:-
With your own portfolio of stocks and bonds, you would have to do your own recordkeeping of purchases, sales, dividends, interest, short-term and long-term gains and losses. Mutual funds provide confirmation of your transactions and necessary tax forms to help you keep track of your investments and tax reporting.
15. Safekeeping:-
When you own shares in a mutual fund, you own securities in many companies without having to worry about keeping stock certificates in safe deposit boxes or sending them by registered mail. You don't even have to worry about handling the mutual fund stock certificates; the fund maintains your account on its books and sends you periodic statements keeping track of all your transactions.
16. Retirement and College Plans:-
Mutual funds are well suited to Individual Retirement Accounts and most funds offer IRA-approved prototype and master plans for individual retirement accounts (IRAs) and Keogh, 403(b), SEP-IRA and 401(k) retirement plans.
17. Online Services:-
The internet provides a fast, convenient way for investors to access financial information. A host of services are available to the online investor including direct access to no-load companies. Visit Company Links to access these Companies.
18. Sweep Accounts:-
With many funds, if you choose not to reinvest your stock or bond fund dividends, you can arrange to have them swept into your money market fund automatically. You get all the advantages of both accounts with no extra effort.
19. Asset Management Accounts:-
These master accounts, available from many of the larger fund groups, enable you to manage all your financial service needs under a single
umbrella from unlimited check writing and automatic bill paying to discount brokerage and credit card accounts.
Disadvantages of Equity Capital and Mutual Fund Disadvantages of Equity Capital:
1. No refund of capital:-
Since equity shares cannot be refunded, excessive issue of such shares may leads to overcapitalization, particularly when the earning capacity of the company declining.
2. Benefits only in prosperity:-
During the periods of prosperity, the company has to distribute heavy dividends on these shares.
3. Manipulation of control:-
Since the equity shares have proportionate voting power, the company ’s management may be vitiated by manipulation of votes, clique-formation, abuse of proxy rights etc.
4. High risk:-
Equity share holders cannot claim dividend as a matter of right, because the decision to fit the rate of dividend on equity shares is vested in the Board of Directors. Therefore investors as a class may find equity shares unsafe, unattractive and unremunerative.
5. Unhealthy Speculation:-
During the period of boom, the market value of shares will go up, which leads to unhealthy speculation in the stock market.
Disadvantages of Mutual Fund:
There are certainly some benefits to mutual fund investing, but you should also be aware of the drawbacks associated with mutual funds.
1. No Insurance:-
Mutual funds, although regulated by the government, are not insured against losses. The Federal Deposit Insurance Corporation (FDIC) only insures against certain losses at banks, credit unions, and savings and loans, not mutual funds. That means that despite the risk-reducing diversification benefits provided by mutual funds, losses can occur, and it is possible (although extremely unlikely) that you could even lose your entire investment.
2. Dilution:-
Although diversification reduces the amount of risk involved in investing in mutual funds, it can also be a disadvantage due to dilution. For example, if a single security held by a mutual fund doubles in value, the mutual fund itself would not double in value because that security is only one small part of the fund's holdings. By holding a large number of different investments, mutual funds tend to do neither exceptionally well nor exceptionally poorly.
3. Fees and Expenses:-
Most mutual funds charge management and operating fees that pay for the fund's management expenses (usually around 1.0% to 1.5% per year). In addition, some mutual funds charge high sales commissions, 12b-1 fees, and redemption fees. And some funds buy and trade shares so often that the transaction costs add up significantly. Some of these expenses are charged on an ongoing basis, unlike stock investments, for which a commission is paid only when you buy and sell (see Investor Guide University: Fees and Expenses).
4. Poor Performance:-
Returns on a mutual fund are by no means guaranteed. In fact, on average, around 75% of all mutual funds fail to beat the major market indexes, like the S&P 500, and a growing number of critics now question whether or not professional money managers have better stock-picking capabilities than the average investor.
5. Loss of Control:-
The managers of mutual funds make all of the decisions about which securities to buy and sell and when to do so. This can make it difficult for you when trying to manage your portfolio. You also should remember that
you are trusting someone else with your money when you invest in a mutual fund. 6. Trading Limitations:-
Although mutual funds are highly liquid in general, most mutual funds (called open-ended funds) cannot be bought or sold in the middle of the trading day. You can only buy and sell them at the end of the day, after they've calculated the current value of their holdings.
7. Size:-
Some mutual funds are too big to find enough good investments. This is especially true of funds that focus on small companies, given that there are strict rules about how much of a single company a fund may own. If a mutual fund has $5 billion to invest and is only able to invest an average of $50 million in each, then it needs to find at least 100 such companies to invest in; as a result, the fund might be forced to lower its standards when selecting companies to invest in.
8. Inefficiency of Cash Reserves:-
Mutual funds usually maintain large cash reserves as protection against a large number of simultaneous withdrawals. Although this provides investors with liquidity, it means that some of the fund's money is invested in cash instead of assets, which tends to lower the investor's potential return.
QESTIONNAIRE
Name :
Occupation:
Age: Annual Income(approx): Address:
1. Do you make Investments in the capital market? Yes____ No____
2. What kind of investment you generally look for Medium term_____ Long term________ Short term_______
3. What kind of risk and return you generally look for? High Risk________
High Return________
Low Risk________
Low Return________
4. Have you heard about mutual funds? Yes____ No____
5. What do you prefer to invest in – Equity or Mutual funds? Give reason for your
answer.
6. Are you aware of the risk and returns in Equity and Mutual funds? Yes___ No___
7. Do you know about Mutual Funds Schemes? If yes, name few of them.
8. Which Mutual fund you are investing in and why?
9. Do you invest in tax saving Mutual Funds? Yes______ No______
10.Name few of the shares in which you have made investment
Analysis from the survey
The questionnaire was filled by the ICICIdirect.com customers. The basis of the survey was to find out what is a customer ’s mentality towards the investment. Also to find out what is the awareness level of customers for Equity and Mutual Funds. The age group of the customers varies from 22 to 60 and above. On the basis of the questionnaires filled by the customers we can draw a rough outline about the investment making decisions.
In the present scenario, awareness of the stock market is increasing amongst masses. A person whether investing or not in the capital market, keep tracks of the market, its volatility, its moves because if not today, definitely he is going to invest tomorrow. The returns are coming in such a good way that non investors are getting goose pimples from returns which investors are getting.
Conclusions Investors
Some 50 people were included in the survey.
86% of them had made investment in capital market.
14% of them had not invested in capital market but still they were aware
of the Equity market.
Type of investment
62% of the investors were interested in long term investments.
16% of the investors were interested in long term investments.
22% of the investors were interested in short term investments.
We can say that people don ’t invest much from long term perspective. The reason is simple that they don ’t want to get their money blocked. Majority of them invest for short term or medium term only.
Risk and Return
70% of the investors want an ideal investment of low risk and high
return.
20% of the investors are ready to take high risk if they are getting high
returns.
10% of the investors are there who don ’t mind in low returns provided
risk is low.
Awareness about mutual funds
90% of the investors are aware about mutual funds. The awareness is
maximum in service class people because of tax saving schemes in mutual funds.
10% of the investors are still there who are really not aware about the
mutual funds. They have heard of it but don ’t know what is it.
Which is better - Equity or Mutual Funds
48% of the investors were interested in Equity. The reasons given by the
people were high and good returns in the Equity, liberty to manage their own portfolio, freedom in selecting the company in which they want to invest in, no entry and exit load, etc.
30% of the investors were interested in Mutual Funds. The reasons given
by them were safer investment compared with Equity, low risk factor, efficient fund manager who are handling Mutual funds, various user friendly schemes to invest in Mutual Funds even if the amount is very less, Tax exemption benefit by investing in Mutual Funds etc.
14% of the investors were there who don ’t mint to invest either in equity
or mutual funds. They see profit in both.
8% of the investors were there who were not cleared about where to
invest in. Risk and Return in Equity and Mutual Fund
62% of the investors were aware about the risk and returns in both
Equity and Mutual Funds.
38% were not aware about the risk and returns in Equity and Mutual
funds.
Mutual Funds Schemes
16% of the investors were aware of the various mutual funds schemes.
84% of the investors were not aware of the schemes. Though they have
heard about the Mutual Funds but knowledge about these Funds is not there. People don ’t even know the procedure of investment in the Mutual Funds.
Mutual Funds
To name few of the Mutual Funds where in investors have invested their money, they are as follows :
DSP Merrill Lynch SBI UTI ICICI Prudential Birla Sun Life Franklin Templeton Kotak Mahindra Prudential ICICI Tata Standard Chartered Reliance HDFC
