TRAINING REPORT ON MUTUAL FUNDS INDUSTRY IN INDIA

Submitted to Maharishi Dayanand University, Rohtak In the partial fulfillment of degree of Bachelor of Business Administration (II) (Session 2006-2009)

Submitted to: By-

Submitted

____________________________________________________________ D.A.V. INSTITUTE OF MANAGEMENT, FARIDABAD

ACKNOWLEDGEMENT
Concentration, dedication, hard work and application are essential but not the only factor to achieve the desired goal. Those must be supplemented by the guidance assistance and cooperation of experts to make it success.

I am extremely grateful to my institute for providing me the opportunity to undertake this research project in the prestigious field. With profound pleasure, I extend my extreme sincere sense of gratitude and indebtedness to my faculty for extensive and valuable guidance that was always available to me ungrudgingly and instantly, which help me complete my project without difficulty. I express my deep and sincere gratitude to Ms Roma Sharma, faculty member for providing me first hand knowledge about other related subjects. Last but not the least I am indebted to Mr. Sharma, Director of our institute without whose sincere gratitude this project would not have been possible.

PREFACE
Practical exposure imbibes an integral part of management studies. One cannot rely merely upon the theoretical knowledge. However class lectures make the functional concepts clear, but these must be correlated with practical projects. I consider myself lucky to get the project in Indias best bank. It was a great learning experience. It helped me to get a practical insight into how to conduct research and to make my concepts clearer. In this project I have tried to give comprehensive picture of details of my project. Learning is like eating. It is not how much one eat that matters, what counts is how much you digest. Knowledge is potential power, wisdom is real power.

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Todays economy has caused business to rethink their technology decisions. Budgets have been cut and priorities have been reset. Companies can impact their bottom line tremendously by gathering necessary information. This dissertation is concerned with the study mutual funds industry in India During my tenure of dissertation I studied about mutual funds industry in India and deeply analyzed its various aspects. This dissertation shows the very aspect undertaken in context to MUTUAL FUNDS INDUSTRY IN INDIA

TABLE OF CONTENTS
S.No. 1 2 3 4 5 6 7 8 PARTICULARS INTRODUCTION OF THE STUDY RESEARCH AND METHODOLOGY DATA ANALYSIS AND INTERPRETATION SUGGESTIONS AND RECOMMENDATIONS OBJECTIVES OF THE STUDY LIMITATIONS OF THE STUDY CONCLUSION ANNEXURES BIBLIOGRAPHY QUESTIONNAIRE
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Page No. 5-36 37-44 41-46 47-47 48-48 49-49 50-50 51-54

INTRODUCTION OF THE STUDY

MUTUAL FUNDS:
A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities. In a mutual fund, the fund manager trades the fund's underlying securities, realizing capital gains or loss, and collects the dividend or interest income. Your search for Mutual Fund India information follows. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value (NAV), is calculated daily based on the total value of the fund divided by the number of shares purchased by investors. Mutual funds are financial intermediaries, which collect the savings of investors and invest them in a large and well diversified portfolio of securities such as money market instruments, corporate and government bonds and equity shares of joint stock companies. Mutual funds can survive and thrive only if they can live up to the hopes and trusts of their individual members .The project deals with the structure of mutual funds industry in India and its constituents. It also classified the mutual fund schemes and describes the major players in the industry. The project includes the analysis of performance of 7 mutual fund companies. Which comprises of 3 private players, 3 public and UTI.The Mutual fund companies have been selected on the basis of their AUM (ASSETS UNDER MANGEMENT).

COMPANIES HAVING PRIVATE OWNERSHIP 1. Birla Sun Life Mutual Fund 2. Franklin Templeton Mutual Fund 3. Prudential ICICI Mutual Fund 4. Axis Bank - 4-

COMPANIES HAVING PUBLIC OWNERSHIP 5. Canbank Mutual Fund 6. LIC Mutual Fund 7. SBI Mutual Fund

MUTUAL FUND-AN INTRODUCTION:

A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized 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. A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities (usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund. Mutual funds can invest in many different kinds of securities (Mutual Fund India). The most common are cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (high yield or junk bonds, investment-grade corporate bonds), type of issuers (government agencies, corporations, or municipalities), or maturity of the bonds (short or long term). Both stock and bond funds can - 5-

invest in primarily US securities (domestic funds), both US and foreign securities (global funds), or primarily foreign securities (international funds). Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts the future performance of investments appropriate for the fund and chooses the ones which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered through a parent management company, which may hire or fire fund managers.

DEFINITION:
A mutual fund is a trust that pools the savings of a number of investors who shares 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. . A mutual fund is a company that brings together money from many people and invest in a stock, bonds, or other asset the funds owns are known as its portfolio. Each investor in the fund owns share which represents a part of these holdings.

The U.S. Securities and Exchange Commission.

THE GOAL OF MUTUAL FUND:

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The goal of a mutual fund is to provide an individual to make money. There are several thousand mutual funds with different investments strategies and goals to chosen from. Choosing one can be over whelming, even though it need not be different mutual funds have different risks, which differ because of the funds goals fund manager, and investment style. Money from a mutual fund is made when the stocks, bonds or other securities increase in value ( a capital gain ) issue dividends or make interest payments when investing in a mutual fund the income you make it the result of income received from dividend paying stocks, and interest from bonds. If the fund sells a holding whose value is increased you make money even if the fund does not sell that specific holding. The fund itself will still increase in value, and in that way you may also make money therefore the value of shares you hold in mutual fund will increase in value when the holdings increases in value capital gains and income or dividend payments are best reinvested for younger investors. Retires often seek the income from dividend distribution to augment their income with reinvestment of dividends and capital distribution your money increase at a even greater rate. When you redeem your shares what you receive is the value of the share.

MUTUAL FUND OPERATIONS FLOW CHART:

The flow chart below describes broadly the working of a Mutual Fund:

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ORGANISATION OF A MUTUAL FUND:

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

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THE ADVANTAGES OF MUTUAL FUNDS:

The advantages of investing in a Mutual Fund are: Professional Management Diversification Convenient Administration Return Potential Low Costs Liquidity Transparency Flexibility Choice of schemes Tax benefits - 9-

Professional Management - The primary advantage of funds is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments. Diversification - By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than you as an individual would pay. Liquidity - Just like an individual stock, a mutual fund allows you to request that your shares be converted into cash at any time.

Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own line of mutual funds, and the minimum investment is small. Affordability: With many mutual funds, you can begin buying units with a relatively small amount of money Some mutual funds also let you buy more units on a regular basis with even smaller installments. Flexibility: Many mutual fund companies administer several different mutual funds and allow you to switch between funds within their 'fund family' at little or no charge. Performance Monitoring: The value of most mutual funds is reported daily in the financial press and on many Internet sites, allowing you to continually monitor the performance of your investment.

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DISADVANTAGES OF MUTUAL FUNDS:

Professional Management- Did you notice how we qualified the advantage of professional management with the word "theoretically"? Many investors debate over whether or not the so-called professionals are any better than you or I at picking stocks. Costs - Mutual funds don't exist solely to make your life easier--all funds are in it for a profit. The mutual fund industry is masterful at burying costs under layers of jargon.

Dilution - It's possible to have too much diversification (this is explained in our article entitled "Are You Over-Diversified?"). Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return.

MUTUAL FUND INDUSTRY IN INDIA:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases First Phase 1964-87 - 11-

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 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 public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores Third Phase 1993-2003 (Entry of Private Sector Funds) 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 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 fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds. Fourth Phase since February 2003

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In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

GROWTH IN ASSETS UNDER MANAGEMENT:

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The graph indicates the growth of assets over the years:

FUTURE OF MUTUAL FUNDS IN INDIA:

By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40,90,000 crore. The annual composite rate of growth is expected 13.4% during the rest of the decade. In the last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010, mutual fund assets will be double.

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SOME FACTS FOR THE GROWTH OF MUTUAL FUNDS IN INDIA

100% growth in the last 6 years. Number of foreign AMC's are in the que to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide.

Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required.

We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion.

'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities.

Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products.

SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance. Trying to curb the late trading practices.

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TYPES OF MUTUAL FUND SCHEMES:

By Structure
o o o

Open - Ended Schemes Close - Ended Schemes Interval Schemes

By Investment Objective
o o o o

Growth Schemes Income Schemes Balanced Schemes Money Market Schemes

Other Schemes
o o

Tax Saving Schemes Special Schemes

Index Schemes Sector Specfic Schemes

Equity funds: These funds involve only common stock investments. They can earn a lot of profit, but are also very risky.

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Fixed income funds: They include corporate and government securities. These funds offer fixed returns at a low risk. Balanced funds: This is the combination of bonds and stocks with a low risk. However, the investment does not earn a lot through these funds.

How it works?
Mutual fund shares can be purchased from the company itself or a broker. There are secondary market investors also, like the New York Stock Exchange. Per share net asset value of the funds or NAV is the price that you pay for buying a mutual fund share. It also includes the shareholder fee that is imposed by the fund, at time of purchase. The best feature of mutual funds is that these shares are redeemable. You, as an investor, can sell your shares back to the broker. In order to accommodate new investors, mutual fund companies generally create new shares and sell them. They keep selling their shares continuously till they become large. Investment advisers act as separate entities and are responsible for managing the investment portfolio of the mutual funds. Investing in mutual funds tends to lower the risk factor because they are the result of diverse investments. Since someone else manages your investments, you need not worry about keeping constant tabs on the investment, though a periodical check enhances your personal book of accounts. Managing funds is the full time job of the fund manager and he is responsible for the performance and health of the investment. The rate of returns in mutual funds is based on the increase or decrease of the value, during a specific period. Returns of a fund indicate the track record. It is important to remember that the past performance cannot guarantee future results. As in the case of any investment or business, mutual funds also have risks associated with the returns. It is essential to set your financial goals and requirements, before investing in a mutual fund.

TRENDS AND STRUCTURE OF THE INDIAN MUTUAL FUND INDUSTRY:

Though young, the industry has made significant strides in terms of its variety, sophistication and regulation. The mutual fund industry's existence in India is divided into four phases.

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The first phase which spanned across 1963-1987 saw UTI consolidating its position by offering a host of products and extending its reach throughout the country. The next phase (1987-93) marked the arrival of mutual funds sponsored by public sector banks and financial institutions. With the arrival of private sector players, both Indian and foreign, began the third phase (1993-1996).1996 marks yet another milestone in the history of the mutual fund industry in the country as SEBI (Mutual Funds) Regulations came into being. The fourth phase, which is in vogue now, begun in 2003, marks, perhaps, the most significant event in the history of the mutual fund industry restructuring of UTI. There was the rush of players into the mutual fund industry during the last decade could be attributed to low entry barriers, both regulatory and competitive, and the desire of the existing financial players to broad-base their activities in the financial sector. The period is also characterized by significant developments such as standardization of operations, increased influence of technology, best practices, product innovation, and improved regulatory environment.

EVOLVING DISTRIBUTION MODELS:

The growing need for a strong distribution network and models for the mutual fund industry in India to serve the huge untapped market in the country. It observes that the intensifying competition and the need to attain economies of scale are forcing industry players to increase their reach in non-metro cities and small towns, where the potential is high, but, penetration is low. This is resulting in fund houses exploring innovative distribution channels like Depository and Distributor models along with the traditional ones like Collection Center model. Further, increasing commoditization and growing needs of the customers are forcing players to shift to solution-based models from the product-based ones. In either model, the role of the distribution channel remains critical as it helps stave off competition by maintaining relationships, providing advisory services and customizing need-based solutions.

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INDIAN MUTUAL FUND INDUSTRY: OPPORTUNITIES AND CHALLENGES:

There are various challenges and opportunities before the industry. It suggests that a major challenge before the industry is how to attract retail investors, who are the backbone of the industry and who provide stability for the growth of the mutual fund industry. Further, to fuel its growth, the mutual fund industry needs to emphasize creating greater awareness among investors. Also, it is imperative that the mutual fund industry addresses the problem of size and its impact on the investors. A large size does not provide best returns to the investors as the cost of operations is high on account of high turnover.

MUTUAL FUND INDUSTRY IN INDIA: DEVELOPMENT AND GROWTH

The Indian mutual fund industry is one of the fastest growing sectors in the Indian capital and financial markets. The mutual fund industry in India has seen dramatic improvements in quantity as well as quality of product and service offerings in recent years. Mutual funds assets under management grew by 96% between the end of 1997 and June 2003 and as a result it rose from 8% of GDP to 15%. The industry has grown in size and manages total assets of more than $30351 million. Of the various sectors, the private sector accounts for nearly 91% of the resources mobilised showing their overwhelming dominance in the market. Individuals constitute 98.04% of the total number of investors and contribute US $12062 million, which is 55.16% of the net assets under management.

TOP INDIAN MUTUAL FUNDS:

ABN AMRO Mutual Fund

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Axis Bank Bank of Baroda Mutual Fund Benchmark Mutual Fund Birla Sunlife Mutual Fund Canbank Mutual Fund DBS Chola Mutual Fund Deutsche Mutual Fund DSP Merrill Lynch Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund Franklin Templeton HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund JM Mutual Fund

INVESTMENT TIPS INVEST IN THE MUTUAL FUND, NOT ITS NAV

What is NAV? Simply put, NAV is the sum total of all the assets of the mutual fund (at market price) less the expenses (fund manager fees, audit fees, registration fees among others); divide this by the number of - 20-

units and you arrive at the NAV per unit of the mutual fund. An illustration should help us better understand the same.

NAV calculation
Net Assets (Rs) No. of Units NAV (Rs) 51,00 0 5,000 10

Expenses (Rs) 1,000

The following illustration will clearly establish the irrelevance of NAV while making an investment decision.

NAV: Does size matter?

Open-ended large cap equity funds Franklin Prima Plus (G) Franklin Bluechip (G) Pru ICICI Power (G) HSBC Equity (G) Kotak 30 (G) HDFC Equity (G)

NAV (Rs) 146.17 138.10 84.51 74.42 72.06 153.79

1-Yr (%) 43.57 39.09 38.67 37.63 36.54 35.50

It is evident that the fund's current NAV and its expected performance are unrelated and therefore making an investment decision based on the NAV would be misguided. As an investor you need to consider factors like your own risk profile, the fund's management style and performance. - 21-

1. Risk profile Investors have a risk profile that dictates how much risk they can take on to achieve their investment objective. In this backdrop, they must identify mutual funds that can help them meet their investment objectives at the desired risk level. For instance, some equity funds adhere to the growth style of investment (aggressively managed funds), while others follow the value style of investment (conservatively managed funds). So it is important for investors to select a fund that takes on risk in line with their own risk appetite. 2. Fund management style Fund houses have varying fund management styles and processes. Some pursue the individualistic style, where the fund manager rather than the investment process plays a dominant role in the investment process. As opposed to this, there are fund houses that pursue a teambased investment approach where the investment process holds sway over the individual. Our preference is for the team-based style of investing since it is more stable and the mutual fund (and its investors) is not over-dependent on an individual. 3. Mutual fund performance It is imperative for investors to evaluate a mutual fund on parameters related to risk like Standard Deviation and Sharpe Ratio as also NAV appreciation. The risk parameters evaluate the volatility in performance (Standard Deviation) and returns generated by the fund per unit of risk borne (Sharpe Ratio). The best deal for an investor will come from a mutual fund that has higher NAV appreciation and Sharpe Ratio and lower Standard Deviation. Hopefully, we have resolved the debate on the NAV and have given the investor more relevant points to inquire about before considering investing in a mutual fund. So the next time your mutual fund distributor advances the low NAV or Rs 10 NAV argument, demand a detailed analysis of the mutual fund based on the parameters we have listed.

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DON'T IGNORE THE RISK FACTOR:

Investors would do well not to lose sight of the risk-return trade off while making investment decisions. Our advice to investors - always invest in line with your risk appetite and investment objectives. Chasing higher returns and turning a blind eye to risk in the process could prove hazardous to your finances. Schemes like NSC and PPF (offering an assured return of 8% per annum) and market-linked avenues like tax-saving funds are about as similar as chalk and cheese. Sure tax-saving funds can offer higher returns than NSC and PPF. But the differential should be seen as a reward for having taken on higher risk. Unlike NSC and PPF, wherein returns are assured and capital protected, investors in tax-saving funds take on the risk of even losing the capital invested, depending on market conditions. The investment advisor's rationale was fairly simple (and completely incorrect) - investors should only be concerned about the returns and opt for avenues that are equipped to offer the highest returns. A vital factor i.e. risk didn't feature in his scheme of things at all.

FAQS ON MUTUAL FUNDS:

What is a Mutual Fund? A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual / corporate investors and invests the same on behalf of the investors /unit holders, in equity shares, Government securities, Bonds, Call money markets etc., and distributes the profits. - 23-

Which was the First Mutual Fund to be set up in India? Unit Trust of India is the first Mutual Fund set up under a separate act, UTI Act in 1963, and started its operations in 1964 with the issue of units under the scheme US-64 Which are the other institutions that have floated Mutual Funds in India? Currently public sector banks like SBI, Canara Bank, Bank of India, institutions like IDBI, GIC, LIC Foreign Institutions like Alliance, Morgan Stanley, Templeton and Private financial companies like HDFC, Prudential ICICI, DSP Merrill Lynch, Sundaram, Kotak Mahindra etc. have floated their own mutual funds What is the Regulatory Body for Mutual Funds? Securities Exchange Board of India (SEBI) is the regulatory body for all the mutual funds mentioned above. All the mutual funds must get registered with SEBI. The only exception is the UTI, since it is a corporation formed under a separate Act of Parliament. Why should I choose to invest in a mutual fund? Mutual Funds provide the benefit of cheap access to expensive stocks Mutual funds diversify the risk of the investor by investing in a basket of assets A team of professional fund managers manages them with indepth research inputs from investment analysts. How do mutual funds diversify their risks? Financial theory states that an investor can reduce his total risk by holding a portfolio of assets instead of only one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced. Can mutual funds be viewed as risk-free investments?

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No. Mutual fund investments are not totally risk free. In fact, investing in mutual funds contains the same risk as investing in the markets, the only difference being that due to professional management of funds the controllable risks are substantially reduced.

What are the risks involved in investing in mutual funds? A very important risk involved in mutual fund investments is the market risk. When the market is in doldrums, most of the equity funds will also experience a downturn. What are the parameters on which a Mutual Fund scheme should be evaluated? Performance indicators like total returns given by the fund on different schemes, the returns on competing funds, the objective of the fund and the promoters image are some of the key factors to be considered while taking decision regarding mutual funds. What are the different types of plans that any mutual fund scheme offers? That depends on the strategy of the concerned scheme. But generally there are 3 broad categories. A dividend plan entails a regular payment of dividend to the investors. A reinvestment plan is a plan where these dividends are reinvested in the scheme itself. A growth plan is one where no dividends are declared and the investor only gains through capital appreciation in the NAV of the fund. What is NAV and how it is calculated? NAV is the net asset value of the fund. Simply put it reflects what the unit held by an investor is worth at current market prices.

What is Switch? - 25-

Some Mutual Funds provide the investor with an option to shift his investment from one scheme to another within that fund. For this option the fund may levy a switching fee. Switching allows the Investor to alter the allocation of their investment among the schemes What is the difference between mutual funds and portfolio management schemes? While the concept remains the same of collecting money from investors, the target investors are different. In the case of portfolio management the target investors are high net worth investors while in case of mutual funds the target investors are the retail investors. How does the concept of entry load work in case of unit purchases? An entry load is an additional cost that an investor pays at the point of entry. Assume that your proposed investment is Rs.10,000/-. Also assume that the current NAV of the fund is Rs.12.00 and that the entry load is Rs.0.50. Then you will receive 10000/12.50 = 800 units. The entry load could be different for each scheme. What are the broad guidelines issued for a MF? SEBI is the regulatory authority of MFs. SEBI has the following broad guidelines pertaining to mutual funds:

MFs should be formed as a Trust under Indian Trust Act and should be operated by Asset Management Companies (AMCs). MFs need to set up a Board of Trustees and Trustee Companies. They should also have their Board of Directors. The net worth of the AMCs should be at least Rs.5 crore. The AMC or any of its companies cannot act as managers for any other fund. All MF schemes should be registered with SEBI. - 26-

MFs should distribute minimum of 90% of their profits among the investors.

There are other guidelines also that govern investment strategy, disclosure norms and advertising code for mutual fund

FREQUENTLY USED TERMS Net Asset Value (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. Sale Price is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load. Repurchase Price Is the price at which a close-ended scheme repurchases its units and it may include a back-end load? This is also called Bid Price. Redemption Price Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load schemes.

Repurchase or Back-end Load Is a charge collected by a scheme when it buys back the units from the unit holders.

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RESEARCH METHODOLGY:
The whole study is based upon primary data. Therefore, information has been collected from various magazines, journals, websites, and bulletins. RESEARCH DESIGN

Scope of study:
The scope of any study should be to cover as large a population as possible to cover any errors. But due to time and money constraints, this study is limited to Ambala only. The study involves an interaction with the consumers An effort was put to cover every dealer in the city and obtain correct and relevant information DATA COLLECTION Collection of data is the critical point in the research process. There are two basic methods of data collection: Primary method Secondary method

For my analysis I have selected the primary method of data collection i.e. i. Questionnaire - 28-

ii. iii.

Interview method Telephone interview

DATA COLLECTION TECHNIQUE:

QUESTIONNAIRES INTERVIEWS

SAMPLING DESIGN Sampling unit: INDIVIDIUAL INVESTORS

Sampling size: 100

Sampling techniques: I use many sampling techniques like - 29-

Simple random sampling Stratified random sampling Judgment sampling

Data Analysis and Interpretation

PEOPLE CONSIDERS VARIOUS FACTORS WHILE INVESTING IN MUTUAL FUND

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Options Returns Tax saving Liquidity Risk free

Responses 49 26 16 9

Percentages (%) 49 26 16 9

People consider various factor while investing in mutual fund

60 % of response 50 40 30 20 10 0 1 2 3 options 4 5 Series1

PEOPLE CONSIDER VARIOUS BASES FOR INVESTING IN ANY PARTICULAR FUND

OPTIONS

RESPONSES

RESPONSES IN %

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Past performance of fund 64 Portfolio of fund 36

64 36

people consider various bases while investing in any particular fund

64

36

1 options 2

S1

responses in %

PREFERENCE OF VARIOUS MUTUAL FUNDS OF DIFFERENT PEOPLES Options Responses Franklin Templeton 17 Axis 19 Reliance 11 ICICI 18 SBI 29 Any other 8 Responses in % 17 19 11 18 29 8

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preference of various funds of different peoples

8%

17% 1 2 3 4 5 6

27% 19%

18%

11%

PEOPLE INVEST THE DIFFERENT % OF SAVING IN MUTUAL FUNDS

Sr.no 1 2 3 4

Options Responses 10-20% 46 20-30% 33 50% 15 More than 50% 6

Responses in % 46 33 15 6

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peoples invest the different % of savings in mutual funds

50 45 40 35 30 25 20 15 10 5 0 46

responses in %

33

15 6

2 options

PEOPLE EXPECTATIONS OF RETURN FROM DIFFERENT FUNDS

Sr.no 1 2 3 4

Options Responses 10-20% 32 20-30% 45 50% 9 More than 50% 4

Responses in % 32 45 9 4

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people expectations of returns from different funds

50 45 40 returns in % 35 30 25 20 15 10 5 0 1 2 options 3 4 9 4 32 45

SUGGESTIONS AND RECOMMENDATION

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SUGGESTIONS
The purpose of performance appraisal is to reward the employees, give them recognition, and help them in career growth. So, the employees should know the basis on which they are evaluated. For this, company should arrange special classes like once in a year for getting the employees aware about the whole performance appraisal process. The production managers or the personnel managers should interact more directly with their subordinates and try to know their needs, their problems and help or suggest them to overcome those difficulties. The company should invite suggestions from employees about changes or improvements they want in the appraisal system. The feedback process should be made more sound and effective so that the employees could know the areas where their performance is low so that they could make it better in the future. Special training sessions should be organized besides regular training programmes for low performance areas. There should be more transparency in awarding marks to the employees. It should be effectively based on the merit and performance of the employees and not on the basis of any personal contacts, blood relation or any affection. A small committee should be found that will keep a close watch on the whole exercise and make ensure that it should be a fair process. - 36-

OBJECTIVES OF STUDY
To study about various schemes of mutual funds in India. To study the recent and emerging trends in Mutual Fund Market. To analyze the performance of major private and public players in Mutual Funds Industry during 2009-10.

LIMITATIONS OF THE STUDY

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Total number of mutual funds in the market is so large that it needs lot of resources to analyze them all. There are 34 Mutual fund Companies providing more than 750 funds. They fall into large categories. Handling and analyzing such a varied and diversified data needs more time and resources.

As the project is based on secondary data, possibility of unauthenticated information can not be avoided.

The information about same scheme differ from one source to another

CONCLUSIONS
Indian mutual fund industry possesses great potential for growth. The drivers for growth are Structural changes in the financial sector An increasing awareness of mutual funds as a savings vehicle

Development and trends of mutual funds in India are The private sector has grown by 51.84% since 1999,. The growth has been primarily in open-ended products. - 38-

Development in the previous three years was dominated by the growth of debt products.

But with the positive outlook for equity markets, there have been increasing flows into equity products.

ANNEXURE

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Annexure
Questionnaire Bibliography

QUESTIONNAIRE
1. Do you invest in mutual fund? a) Yes b) no 2. 3. 4. 5. What are the factors you consider while investing in mutual fund? a) Returns b) tax saving c) liquidity d) risk free On what basis you invest in any particular fund? a) Past performance of fund b) portfolio of fund c) fund manager How you get information regarding mutual fund? a) Advertisement b) company sales force c) friends/relatives Which mutual fund you prefer to invest? a) Franklin Templeton b) AXIS c) Reliance d) ICICI e) SBI f) any other - 40-

6. 7. 8. 9. 10.

How long you prefer to keep your money in mutual fund? a) Short term b) long term How much of your saving you invest in mutual fund? a) 10-20% b) 20-30% c) 50% d) more than 50% How much return do you expect from a mutual fund? a) 10-20% b) 20-30% c) 50% d) more than 50% Which option in a mutual fund you like to choose? a) Growth b) dividend What type of fund you like to invest? a) Debt based b) equity based c) balanced fund

BIBLIOGRAPHY

Mutual Fund in India by V.A. Avdhani Money Outlook Business India Business world Business Today

Websites use: www.amfiindia.com www.mutualfundsindia.com www.valueresearchonline.com www.moneypore.com www.valuenotes.com

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