A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.

The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital 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 a diversified, professionally managed basket of securities at a relatively low cost. Mutual Funds over the years have gained immensely in their popularity. Apart from the many advantages that investing in mutual funds provide like diversification, professional management, the ease of investment process has proved to be a major enabling factor. However, with the introduction of innovative products, the world of mutual funds nowadays has a lot to offer to its investors. With the introduction of diverse options, investor needs to choose a mutual fund that meets his risk acceptance and his risk capacity levels and has similar investment objectives as that of the investor. With the plethora of schemes available in the Indian markets, an investor needs to evaluate and consider various factors before making an investment decision. Hence an investor must infer the fact sheets of the various scheme to asses the portfolio management style of the fund manager. Mutual funds provide risk diversification: diversification of a portfolio is amongst the primary tenets of portfolio structuring, and a necessary one to reduce the level of risk assumed by the portfolio holder. Mutual funds represent one such option. So it is always safe for investor to invest their hard earned money in those schemes which have invested in stock of diverse sectors with potential to earn higher returns. The Project, tries to explain about the history, growth, & pros and cons of investing in Mutual Funds and the second part of it deals with the comparative analysis of risk and returns of equity fund, gilt fund and balanced fund schemes of SBI Mutual fund with HDFC Mutual Fund (with reference to bench mark index- BSE 100) for three financial years - April 2009-March 2010, April 2010- March 2011 & April 2011March 2012. The project includes a brief idea about the growth of Mutual Fund industry (History), the broad idea about the organization and concept of Mutual Fund and SEBI Guidelines on Mutual Funds. The main objective of the project was to make comparative performance analysis of SBI Mutual Fund with HDFC Mutual Fund. The other objective was to study the different kinds of schemes provided by the SBI and HDFC mutual funds. In this research an attempt has been made to analyze the past performance of the SBI Mutual Fund schemes in comparison with the HDFC Mutual Fund Schemes. The study is done on three different schemes offered by the Mutual Funds of SBI and HDFC to know their performance for the past three financial years (April 2009 to March 2012) and to know the risk and returns of the funds. The study is based on Secondary data- three years (April 2009- March 2012) monthly NAVs of SBI Mutual Fund and HDFC Mutual Fund for comparison of the three schemes- Equity fund; Gilt fund and Balanced fund with reference to benchmark index (BSE 100). The tool for analysis of risk and return are Average returns (Arithmetic mean), Standard deviation, Beta, Alpha, Sharpe ratio & Treynor Ratio. The findings of the study infer that both the Mutual fund schemes were affected due to the volatility of the market conditions in the year 2010-11, but later revived in the year 2011-2012.