Ch Institute of Management and Commerce
Total Page:16
File Type:pdf, Size:1020Kb
CH INSTITUTE OF MANAGEMENT AND COMMERCE „A STUDY OF THIRD PARTY PRODUCTS AND WEALTH MANAGEMENT ACTIVITIES IN HDFC BANK‟ As a Partial Fulfillment For the Degree of Post Graduate Diploma in Management (PGDM) Reporting Officer: Submitted By: Rashmi Singh Konark Jain 1 CERTIFICATE This is to certify that Konark Jain of PGDM in CHInstitute of Management and Commerce, Indore has carried out a Major Research Project titled “A STUDY OF THIRD PARTY PRODUCTS AND WEALTH MANAGEMENT ACTIVITIES IN HDFC BANK”. The work done by him is genuine and authentic. The work carried out by the student was found satisfactory. I wish him all the success in career. Date: - Reporting Officer Place: - Rashmi Singh HDFC Bank. Indore 2 ACKNOWLEDGEMENT This research was made possible as per the requirement of the PGDM course under CHInstitute of Management and Commerce. Many individual took interest and were supportive of my effort. In fact, many have given me their time generously and it is not possible to mentionall of them here and there act of goodness. I take the opportunity to place and record my deep sense of gratitude to all who have helped me in completion of my study. I express my heartiest thanks to Rashmi Singh who took keen interest towards my project and provided me with deep insight on importance of mutual fund awareness. I also humbly thank my friends and batch mates for their generous participation in the data collection process. 3 Introduction 4 A Third-Party Product: - A third party products refers to a product that's produced by a company other than Apple. Usually, third-party products are supported by the company that made them. If you need help with a third-party product, contact the company who made the product instead of Apple. Apple does support some third-party products that come with an Apple computer. Who are the first and second party? Technically speaking, Apple is the “first party.” “Second party" usually refers to the person using the product.” Example of third party products:- Mutual fund, life Insurance, General Insurance, Health Insurance. Wealth Management:- A professional service which is the combination of financial/investment advice, accounting/tax services, and legal/estate planning for one fee. Wealth management services are provided by banks, professional trust companies, and brokerages. For those with sizeable assets [usually over $500,000], professional wealth management can help you plan your estate or invest your assets based on personal criteria and financial goals. Mutual Fund:- A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge. Mutual funds are investment companies regulated by the Investment Company Act of 1940. Related: open-end fund, closed-end fund. Concept of mutual funds A mutual fundis a trust that pools the savings of a no. 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 appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in diversified, professionally managed basket of securities at a relatively low cost. 5 History of the Indian Mutual Fund Industry The origin of the mutual fund industry in India was with the formation of UTI in the year 1963, at the initiative of the reserve bank and Government of India. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. It has seen 218.5% increases in assets under their management from 2003 to 2007(May 31st), 38 fund houses managing Rs. 3, 87,896 crores (May 31st, 2008). The main reason of its slow growth initially, was because mutual fund industry was new in India. I experienced that lot of investors are aware of mutual fund and how does it work but still they are not aware of how does it function and how does the investments decision take place. DIFFERENT PHASES OF MUTUAL FUND INDUSTRY First Phase: 1964-87 (Growth of Unit Trust of India) Unit Trust of India (UTI) was established in 1963 by an act of Parliament. It was set up by the RBI and functioned under the Regulatory and administrative control of RBI. In 1978 UTI was De-linked from the RBI and IDBI took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was unit scheme in 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under management. Second Phase: 1987-1993 (Entry of Public sector funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by PSU banks and LIC& GIC. SBI Mutual fund was the first non- UTI Mutual fund established in June 1987 followed by can bank mutual fund (Dec87), Punjab National Bank Fund (Aug 89), Indian Bank (Nov 89), Bank of India (Jun90), Bank of Baroda (Oct 92), LIC established its mutual fund in June 1989 while GIC had established its mutual fund in December 1990.at the end of 1993 the mutual fund industry had assets under management of Rs. 47,004 cores. Third Phase: 1993-1996 (Entry of Private Sector Funds) 6 With the entry of private sector funds in 1993, a new era started in the Indian Mutual Fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first mutual fund regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund to be registered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised mutual fund regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.The number of mutual houses went on increasing, with many foreign mutual funds setting up in India and also the industry had witnessed several mergers and acquisitions. Fourth Phase: 1996-1999 (Growth and SEBI Regulation) From here onwards mutual fund industry in India saw tighter regulations and higher growth. Competition arises because of deregulation and liberalization of the Indian economy. Measures were taken both by SEBI to protect the investor, and the government to enhance the investors returns through tax benefits. NOTE: In 1996 SEBI introduced comprehensive set of regulation for all mutual fund companies operating in India. During this phase both SEBI and AMFI launched various investor awareness campaigns aimed at educating the investors about the investment through mutual fund. Fifth Phase: 1999-2004 (Emergence of uniform industry) In1999, dividends from mutual funds were tax exempt in the hands of the investors. In Feb 2003, UTI act was repealed. UTI no longer has special legal status as a trust established by an act of parliament. Instead it has to adopt the same structure as any fund in India-a trust and an AMC. NOTE: UTI mutual fund is the present name of the erstwhile Unit Trust of India. 7 Phase Sixth: 2004 onwards (Consolidation and growth) As at the end of May 2007, there were 38 fund houses. Now it is the time to strengthen what is the best channel to invest your funds. The stage is set for growth through consolidation and new entry both in international and private sectors. TYPES OF MUTUAL FUNDS There are a number of mutual funds to suit the needs and preferences of investors. The choice of the fund is linked to the demand of the investor. The earning objective of investor helps in deciding the types of funds where investment should be done. To achieve the differing objective of investors, mutual funds adopt different strategies and accordingly offer different schemes of investment. According to structure: The most important classification of mutual fund is on the basis of the structure of their operations as all types of mutual funds fall under this classification. Accordingly, to this scheme, the mutual funds can be divided into three categories, i.e. open ended funds, close-ended funds and the interval funds. Open-ended schemes Open-ended scheme means a scheme of mutual fund, which offers units for sale without specifying any duration for redemption. These schemes do not have a fixed maturity and entry or exit to the fund is always open to the investors who can subscribe at any time. The fund redeems or repurchases the units or shares at periodically announced rates. First, open-end mutual fund shares are priced at their net asset value (NAV) , which are computed on a daily basis when market is closed. These repurchase rates are based upon the net current assets of the fund. Thus, Open-ended funds provide better liquidity to the investors.