Investment Pattern Analysis of Kolkata based Corporate and institutional Investors in mutual Fund

TABLE OF CONTENTS

Chapter 1 INTRODUCTION
1.1. PURPOSE
1.2. SCOPE OF THE PROJECT
1.3. LIMITATIONS

Chapter 2 PROJECT PROCEEDINGS
2.1. PROJECT PROPOSED
2.2. OBJECTIVE OF THE PROJECT
2.3. PHASE 1
2.4. PHASE 2
2.5. PHASE 3
2.6. PHASE 4

Chapter 3 METHODOLOGY
3.1. DEFINING THE PROJECT OBJECTIVE:
3.2. RESEARCH STEPS:
3.3. RESEARCH METHOD:

Chapter 4 ANALYSIS
4.1. QUANTITATIVE ANALYSIS

Chapter 5 SUMMARY AND CONCLUSIONS
5.1. FINDINGS
5.2. CONCLUSIONS

Chapter 6 REFERENCES
6.1. REFERENCES

Chapter 7 Appendices

LIST OF FIGURES

Fig. 2.1 - Project Phases

Fig. 4.1 - Flow Chart of Factor Analysis Procedure
Fig. 4.2 Scree Plot
Fig. 4.3 - Pie Chart of Average Investment Window
Fig. 4.4 - Pie Chart of Short Term Investment
Fig. 4.5 - Pie Chart of Long Term Investment
Fig. 4.6 - Pie Chart of Size of Investment
Fig. 4.7 - Pie Chart of Mutual Fund Information

LIST OF TABLES

Table 4.1 - Variable Description
Table 4.2 - Correlation matrix Construction
Table 4.3 - KMO and Bartlett's Test
Table 4.4 - Communalities of SPSS Output
Table 4.5 - Total Variance Explained
Table 4.6 - Significance Test (1 Tailed)
Table 4.7 - Component Matrix of SPSS Output
Table 4.8 - Rotated Component Matrix
Table 4.9 - Variables under Factors
Table 4.10 - Factor Model
Table 4.11 - Residuals of SPSS Output
Table 4.12 - Data View of Average Investment Window
Table 4.13 - Data View of Short Term Investment
Table 4.14 - Data View of long Term Investment
Table 4.15 - Data View of Size of Investment
Table 4.16 - Data View of Mutual Fund Information

Table 7.1 - BSE Listed Kolkata based Companies
Table 7.2 - List of Kolkata Based Companies
Table 7.3 - List of Kolkata based Companies analyzed with their Annual Report 2007 - 08
Table 7.4 - Sample of Questionnaire

EXECUTIVE SUMMARY

Mutual Fund industry is one of the fastest growing industries in India, with so many investment options around giving an investor a wide range of choices to invest into. It offers a specialized service where the funds of the investors are professionally managed by the fund managers with various schemes offering all kinds of investors a product of their choice. This industry is in the growth phase and has a long way to go, but at present the bigger avenues from where the investments come have saturated like the large corporate companies.

SBI Mutual Fund is also going through same phase. The company is looking for new sources of mobilizing funds into the business and they have launched new scheme called SBI GETS, has got a segment which is very lucrative, has a big potential to draw money.

So with the help of Company guide, Faculty guide I decided to analyze the investment pattern of Kolkata based Corporate and Institutional investors in Mutual Funds.

During the analysis I have used indirect survey techniques to get the primary data. Moreover there is the use of both structured and unstructured type of questionnaire to interview the respondent.

With the help of both quantitative analysis it can be said that SBI Mutual Fund has a very remarkable balance sheet which looks good even in the time of recession. It offers a wide range of funds for the investors to invest in which makes it one of the most desired Mutual Fund House in the country.

Factor Analysis affirmed that the investment pattern of Kolkata based Corporate and institutional investors in Mutual Funds depend on the six factors. They are Profitability Factor, Market Fluctuation Factor, Security Factor, Risk Orientation in Fund Decision, Awareness of Mutual Fund, and Performance of Mutual Funds. The survey also stated that the institutional investors are more interested in maintaining their portfolios for at least a month or more. The awareness of institutional investors regarding Mutual Funds is low which is indicated by the fact that still 48 percent of investors invest in Bank FDs which has a greater tax on income as compared to Mutual Fund returns. The survey clearly indicates that the institutional investors are majorly influenced by the agents and brokers when it comes on to decided which Mutual Fund to invest in.

Chapter 1 INTRODUCTION

1.1. PURPOSE

The purpose of the project is about studying the investment pattern of corporate and institutional investors based in Kolkata. Corporate and Institutional investors are the “Corporate Houses” based in Kolkata. The project revolves around the study of the surplus fund management of these “Corporate Houses” in Kolkata. The study will also constitute of a research based on the investment and the risk return study of the surplus funds of the “Corporate Houses” in Mutual Funds.

These “Corporate Houses” tend to park their short term funds in one of the financial instruments for a very limited period and thus enjoy the returns corresponding to the choice of their financial instrument and the period of the investment. The financial instruments can be any one of the following:

1. Bank Fixed Deposits
2. Equity Funds
3. Debt Funds
4. Government Bonds and Securities
5. Income Funds

If we talk about SBI Mutual Funds, these institutional investors divert their short term surplus funds to:

1. SBI Equity Funds
2. SBI Debt Funds
3. SBI Balanced Funds

As the aspects of this project is multidimensional so as its purpose. It will take into consideration the mutual benefit of the company coupled with gaining some practical knowledge about these financial instruments & the overall market scenario in Kolkata.

1.2. SCOPE OF THE PROJECT

Regarding the scope of the project work, it is quite large in the sense that not only it has given me the practical exposure to the Mutual Fund sector but also it has provided an in-hand experience of Mutual Fund’s financial products. It has also given me the opportunity to interact with the various top level management executives of various companies as a representative of the company.

In this project, customers are the ultimate focal point and the whole research has been carried out regarding their awareness level about mutual funds.

The project also involves a market research on the investment pattern of corporate and institutional investors based in Kolkata in Mutual Funds. Regarding this, a questionnaire has been developed and client meeting is being conducted. The questions revolve around the factors effecting the investment decisions in Mutual Funds with respect to the Institutional Investors based in Kolkata. The information obtained from the Institutional Investors (i.e. CFOs of various companies) is noted down in a systematic format and then using the market research tools and certain software like SPSS, the information is analyzed as per the requirements of the project. Since, the project’s objective is market research of the investment patterns, the market research tools are used to analyze the effect of different variables on the investment patterns.

1.3. LIMITATIONS

Although the project aims at making an in-depth market research but there are some practical limitations regarding the methodology followed & the overall procedure. These can be summed up under the following points:

1. All strategies and practices of the company may not be revealed due to company policy.
2. Since the geographical scope of the project is limited to the city of Kolkata as few companies are having corporate office at Kolkata, hence the study captures the perspective of institutional investors who are located at Kolkata which is a major geographical constraint.
3. The stipulated time of three months is not sufficient for an extensive research needed for the completion of this project. Hence, time is a major limitation in this project.
4. Sample selected sometimes, does not represent true population as the methodology followed is random sampling.
5. The subject of this study is rather difficult as there are numerous products in the mutual fund market and they differ a lot from each other in themes, investment pattern and returns.
6. Unwillingness to invest on mutual funds due to current market recession.

Chapter 2 PROJECT PROCEEDINGS

2.1. PROJECT PROPOSED

Approach to analyze the investment pattern of Kolkata based Corporate and Institutional investors in Mutual Funds.

2.2. OBJECTIVE OF THE PROJECT

The main objective of the project is to study the surplus fund management of Kolkata based institutional investors to maximize our sales. The project deals with the analysis of investment pattern of Kolkata based Institutional investors in mutual fund and the proper management of the surplus fund available with them which in turn helps in maximizing profits with minimized risk.

The project has been divided into four main phases. The objectives of the project were also decided on the basis of the phases of the project. The phases of the project are:

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Fig. 2.1 - Project Phases

In this section we will take each phase one by one and discuss about the objectives fulfilled.

2.3. PHASE 1

The first phase constituted of gaining insight about the Mutual Fund industry on a whole. I learnt about how the industry works and how it behaves as according to the market condition as I have mentioned it in the Chapter 2 in details. I also learnt about SBI Mutual Funds and how it works as an organization. Further ahead, I learnt and gained knowledge about all the financial instruments offered by SBI Mutual Fund. This I have mentioned it separately in Chapter 3. The learning constituted of the risk return study of the various portfolios offered by SBI Mutual Fund.

Objectives of the phase

This phase constituted of two major objectives:

1. Gaining knowledge about Mutual Funds
2. Learning about the Mutual Fund industry and its working

2.4. PHASE 2

The second phase constituted of the study of all the existing Mutual Funds in the market. It comprised of a detailed analysis of the major players in the Mutual Fund Industry and their performance in the recent times. The study also comprised of a detailed review of the existing investors and the risk return analysis of the portfolios offered by SBI Mutual Fund. This has been already mentioned in Chapter 3. The detail analysis of prevalent schemes of SBI Mutual Fund has been mentioned in Chapter 3.

Objective of the phase

The second phase consists of the following objective:

1. How a mutual fund organization works i.e. SBI Mutual Fund

2.5. PHASE 3

The third phase is comprised of profiling the existing and the probable investors and then analyzing their Annual Reports to dig into their investment pattern and find the ways of making them interested to invest in SBI Mutual Funds.

Objectives of the phase

1. Improvement of the Existing Investors database
2. Preparation of separate database for New Investors
3. Analysis of Annual Reports of the updated database

This was one of the most important objectives which the company set for me. SBI Mutual Fund as an organization has a huge database of its own. The database consists of right from small and medium scale investors to big corporate investors. The other sources are:

- Retail Chains
- Private Banks
- Foreign Banks
- SBI Associates

To go a further step ahead, I searched the BSE site and got the information of more than 2500 companies which were listed on BSE. The second phase was to extract all the companies whose headquarters are located in Kolkata. This is primarily because if the corporate office (Headquarter) is located in Kolkata, it indicates that the treasury of the company is also in the same location.

This process provided me with the list of the companies for which further research can be done. There were a total of 49 companies which were added to the SBI MF’s database due to this exercise. The list of the companies is mentioned in Chapter 6 as table 6.1

After this search I was provided with a company data base. Out of those I found the below mentioned companies which are located in Kolkata with their Corporate Office. It is the list of around 300 companies. The list of the companies is mentioned in Chapter 6 as table 6.2.

With the old and the newly created database in reach i.e. of around 350 companies, I ventured into the net and downloaded the companies’ Annual Reports of 2007-08. And finally I could find the Annual report of 60 companies which is mentioned in Chapter 6 as table 6.3.

The next part of this activity was to analyze the investment pattern of the companies from the downloaded Annual Reports. The analysis consisted of the following points: The first step was to check whether the company is into investments The second step was to check on the “Reserves & Surplus” existing with the company. This was to ensure that the company is in a good position to invest The third step was to look into the schedules of Investments (if any) and divide the whole investments into following category:

1. Government Securities
2. Mutual Funds
3. Shares
4. Bonds
5. Debentures
6. Others

With this data ready, I was able to identify whether the company was investing in Mutual Funds or not and if the company can be a future client to SBI Mutual Fund.

2.6. PHASE 4

The next step was to make cold calls to the shortlisted companies’ executives and try to pitch the products to them. With the help of my company guide and faculty guide I prepared a Handholding for cold calls which is mentioned below.

Handholding for Cold Callers

Opening Statement

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If positive response, then state the prevalent schemes. Tell them details of required scheme.

If the customer is not aware of the financial products of SBIMF then listen their requirements and put your product in front of him/ her.

Summarize and Confirm

"For my own understanding, what you are truly saying is...

(Recap what the prospect shared with you; their requirements and objectives.) Is that accurate/ correct?

Once you determine the meeting time, continue with:

If you are interested then we can show you the presentation of the prevalent schemes.

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Thanks. Have a great day!

During the pitching phase I fix an appointment with the company personals for the survey of my project. I am doing the survey on the basis of the Questionnaire. Questionnaire is prepared with the help of company guide as well as faculty guide. The design of Questionnaire will be discussed in the next section of the project report. After that I have decided to do qualitative as well as quantitative analysis. After that methodology and analysis will be documented in the report.

Chapter 3 METHODOLOGY

3.1. DEFINING THE PROJECT OBJECTIVE:

Research objective

The research objective is defined as a market research on investors behavior regarding the investment patterns based on various factors like type of investment, size of investment etc.. Apart from this, the actual functioning of the investment and services vertical of SBI Mutual Fund is to be known and the customer relationship enhancement is aimed through customer interaction. Actual sales are done with the intention of understanding the intricacies of the closure process. In short it can be categorized as:

- To know the preference of investments of the investors.
- To know the awareness level about different products.
- To know the risk aversion of the investors under various segments.
- To know the importance of various source of information and marketing channels in purchasing mutual fund products.
- To know the importance of selection criteria for purchasing different products.

3.2. RESEARCH STEPS:

In order to achieve the project objective the research and analysis is done in various stages. From the understanding of the project I decided to go for an exploratory research first to get a better idea of the market. And then go for the main descriptive research. In this step following decisions were taken. The stages can be categorized as below.

Exploratory Research:

The first step towards the research will begin with an exploratory research. In this research my primary data is through the questionnaire which I prepared for analysis of investment pattern of corporate investors. This step will give us some idea about our clients and new clients. The exploratory research was required to understand the products in depth and to explore the investors’ behavior for the investment. For the exploratory research my secondary data is review of literatures which I have gathered before starting the survey.

Descriptive Research:

The descriptive research part will be follow with the same questionnaire as discussed above. This questionnaire is formed on the laptop, both in word as well as in excel format so that responses can be directly stored in softcopies. This strategy will not only save paper and make the project environment friendly but also save us from the extra effort of entering the data on the laptop after collecting it.

Throughout the project internet will be used a lot to read about the different (clients) companies’ annual report to gather information for the research. And any special features thus noticed will be documented.

Planning the Research Design

This research is a conclusive research whose objective is to determine the effect of various variables on the investment patterns of investors and the options preferred by them. For attaining this, a cross sectional design will be used i.e. information will be collected from sample of population only once.

Questionnaire design:

The questionnaire is designed in two formats.

1) Word Format
2) Excel Sheet Format

To finalize the questionnaire following steps were done:

Specify the information needed:

First of all information needed for research work was defined. In this case, information regarding size of investment, type of company, past experiences, benefits received from various options, , and the selection criteria for investment was needed. So such questions which would ask respondent to respond for the same were put in the questionnaire.

Select interviewing method:

Personal interview method was selected along with the unstructured talk with the RMs and the company’s financial head. This could provide as a help in gathering the required information.

Determination of the content of individual question:

To know the content of individual questions, a customer interaction took place with the RMs of SBI bank and the company’s financial head basis and then according to the needs of research the questionnaire was prepared.

Decide on the question structure:

All the questions are closed ended questions. The questions are multiple choice questions with one or more appropriate options. It contains both structured and unstructured questions. It contains both structured and unstructured questions. In this Likert Scale has been used for the comparison purpose. Its values are set on the ordinal scale.

Proper arrangement of the questions:

The questions were arranged in such a format that there was a flow attained while answering them. The questions are in such a way that it benefits both the project as well as organization’s objectives.

3.3. RESEARCH METHOD:

For carrying out this research best method would be survey method.

Selecting a Sample and a Sampling Procedure:

A sample size of 60 has been taken. No sampling technique has been used. Population size for research is very small so I assumed my population as sample size. Reason behind such a small population is that only 60 Kolkata based companies are having annual report on the internet or the prowess with their schedule VI.

Collection and Evaluation of Data:

For data collection questionnaire was filled up during individual interaction. After data were collected, evaluation of data was done using research methods and software like SPSS. For evaluation, coding of the questions was done and the appropriate methods like Factor analysis (to club together different variables affecting investment pattern analysis of Kolkata based corporate investors.

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