A PROJECT REPORT ON

STUDY OF MUTUAL FUND AND ITS PROSPECTS AS AN INVESTMENT OPTION IN INDIA
Undertaken at

SUBMITTED BY: NIKHIL MAHAJAN PGDM (2008-10) Roll No. 240 SUBMITTED TO: New Delhi Institute of Management
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As per the requirement of Post Graduate Diploma in Management

ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of gratitude to all those who have contributed significantly by sharing their knowledge and experience in the completion of this project work. My first word of gratitude is due to Mr. Nitish Dipankar, Area Sales Manager Standard Chartered Bank, Branch – New Friends Colony, New Delhi, my corporate guide, for his kind help and support and for his valuable guidance throughout the project. I am thankful to him for providing me with necessary insights and helping me out at every single step. My heartfelt thanks to my respected Faculty Guide namely Prof. Sanjay Tomar, Faculty of finance, New Delhi Institute of Management, Without her continuous help the project would not have been materialized in the present form. Her valuable suggestions helped me at every step. I would also like to thank the placement cell for all their efforts to arrange this training. I am also thankful to the respondent who helped us by filling up the questionnaire.

Nikhil Mahajan
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EXECUTIVE SUMMARY
Indian Stock market has undergone tremendous changes over the year. Investment in Mutual Fund has become a major alternative among Investors. In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being. Mutual Funds have not only contributed to the India growth story but have also helped families tap into the success of Indian Industry. As information and awareness is rising more and more people are enjoying the benefits of investing in mutual funds. The main reason the number of retail mutual fund investors remains small is that people with incomes in India do not know that about mutual funds. But once people are aware of mutual fund investment opportunities, the people who decide to invest in mutual funds increases. The trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to buy mutual funds and to use the right arguments in the sales process that customers will accept as important and relevant to their decision. This Project gave me a great learning experience and at the same time it gave me enough scope to implement my analytical ability. The analysis and advice presented in this Project Report is based on market research on the saving and investment practices of the investors and preferences of the investors for investment in Mutual Funds. This

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Report will help to know about Mutual fund as an investment option in India.

This Project as a whole can be divided into two parts. The first part gives an overview of Mutual Fund Industry and to understand Investor’s perception about Mutual Fund in context of their trading preference, explore investor’s risk perception & find out their preference over Top Mutual Funds. The second part deals with the investor perception regarding their investment preferences about investment in Mutual Fund. This part of the Project consists of data and its analysis collected through survey done on 50 people. Last part of the project report deals with observation of survey report and conclusion drawn upon on the basis of the same.

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CONTENTS

ACKNOWLEDGMENT

➢ EXECUTIVE SUMMERY ➢ COMPANY PROFILE
 About Standard Chartered Bank  Current Position Of Standard Chartered Bank  Recent Alliances And Strategic Acquisitions  Standard Chartered Bank In India

➢ INTODUCTION
 CONCEPT OF MUTUAL FUNDS  HISTORY OF INDIAN MUTUAL FUND INDUSTRY  HOW MUTUAL FUND ARE STURCTURED  REGULATING AGENCIES FOR MUTUAL FUND
 HOW INVESTOR EARN FROM MUTUAL FUND

 TYPES OF MUTUAL FUNDS  BENEFITS OF MUTUAL FUNDS  PERFORMANCE EVALUATION

✔ Parameters of mutual fund evaluation:
 Risk  Returns  Liquidity
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 Expense Ratio  Composition of Portfolio  TAX BANEFITS INVESTING IN MUTUAL FUNDS  MAJOR PLAYERS IN MUTUAL FUND INDUSTRY  TOP PERFORMANCE FUNDS  FUTURE OF MUTUAL FUNDS IN INDIA  MARKETING STRATEGY ADOPTED BY MUTUAL FUND ✔ Different sales methods ✔ Different methods of promotions

➢ MARKET STUDY
 Objective  Methodology  Analysis

➢ CONCLUSION ➢ RECOMMENDATIONS ➢ BIBLIOGRAPHY

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COMPANY PROFILE

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HISTORY
The Standard Chartered Group was formed in 1969 through a merger of two banks: The Standard Bank of British South Africa founded in 1863 and the Chartered Bank of India, Australia and China, founded in 1853. Both companies were keen to capitalise on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods from Europe to the East and to Africa.

The Chartered Bank
• Founded by James Wilson following the grant of a Royal Charter by Queen Victoria in 1853. • Chartered opened its first branches in Mumbai (Bombay), Calcutta and Shanghai in 1858, followed by Hong Kong and Singapore in 1859. • Traditional business was in cotton from Mumbai (Bombay), indigo and tea from Calcutta, rice in Burma, sugar from Java, tobacco from Sumatra, hemp in Manila and silk from Yokohama. • Played a major role in the development of trade with the East which followed the opening of the Suez Canal in 1869 and the extension of the telegraph to China in 1871. • In 1957 Chartered Bank bought the Eastern Bank together with the Ionian Bank's Cyprus Branches. This established a presence in the Gulf.

The Standard Bank
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Founded in the Cape Province of South Africa in 1862 by John Paterson. Commenced business in Port Elizabeth, South Africa, in January 1863.

Was prominent in financing the development of the diamond fields of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered there in 1885.

Expanded in Southern, Central and Eastern Africa and by 1953 had 600 offices.

In 1965, it merged with the Bank of West Africa expanding its operations into Cameroon, Gambia, Ghana, Nigeria and Sierra Leone.

In 1969, the decision was made by Chartered and by Standard to undergo a friendly merger. All was going well until 1986, when a hostile takeover bid was made for the Group by Lloyds Bank of the United Kingdom. When the bid was defeated, Standard Chartered entered a period of change. Provisions had to be made against third world debt exposure and loans to corporations and entrepreneurs who could not meet their commitments. Standard Chartered began a series of divestments notably in the United States and South Africa, and also entered into a number of asset sales. From the early 1990s, Standard Chartered has focused on developing its strong franchises in Asia, the Middle East and Africa using its operations in the United Kingdom and North America to provide customers with a bridge between these markets. Secondly, it would focus on consumer, corporate
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and institutional banking and on the provision of treasury services - areas in which the Group had particular strength and expertise. At Standard Chartered, success is built on teamwork, partnership and the diversity of our people. At the heart of their values lie diversity and inclusion. They are a fundamental part of their culture, and constitute a long-term priority in our theirs to become the world's best international

bank. Today they employ 73,000 people, representing 115 nationalities, and you'll find 61 nationalities among our 500 most senior leaders. We believe this diversity helps to fuel creativity and innovation, supporting the development of exciting new products and services for our customers worldwide. Standard Chartered PLC is listed on both the London Stock Exchange and the Stock Exchange of Hong Kong and is in the top 25 FTSE-100 companies, by market capitalization. Following the acquisition of Korea First Bank, Standard Chartered now employs 38,000 people in 950 locations in more than 50 countries in the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom and the Americas. It serves both Consumer and Wholesale Banking customers. Consumer Banking provides credit cards, personal loans, mortgages, deposit taking and wealth management services to individuals and small to medium sized enterprises. Wholesale Banking provides corporate and institutional clients with services in trade finance, cash management, lending, securities services, foreign exchange, debt capital markets and corporate finance.
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Standard Chartered is well established in growth markets and aims to be the right partner for its customers. The Bank combines deep local knowledge with global capability. The Bank is trusted across its network for its standard of governance and its commitment to making a difference in the communities in which it operates.

Type Public Founded 1853 Headquarter s London, England, UK

Key people Peter Sands, Chief Executive Industry Banking Products Financial Services

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Revenue $16,378 million (2008) Operating $4,568 million (2008) income Net income $3,511 million (2008) Employees 73,000 (2008) Website www.standardchartered.com

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CURRENT POSITION OF STANDARD CHARTERED BANK
Today, the bank is a leading player throughout the developing world. Standard Chartered Bank is one of the three banks issuing banknotes for Hong Kong (Standard Chartered Bank (Hong Kong) Limited became a noteissuing bank from 2004), the other two being the Bank of China (Hong Kong) and The Hongkong and Shanghai Banking Corporation. The bank supports marathons in many cities, including London (The City Run), Jersey, Singapore, Dubai, Lahore, Mumbai, Hong Kong, and Nairobi.

Standard chartered bank has its global presence in all over America, Asia, Africa, Middle East, and Europe.
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In its unique position as an international bank with strong franchise, Standard Chartered combines an in-depth knowledge of local markets with

global product expertise to offer effective financial solutions. The bank capitalizes on its onshore presence across Asia, Africa and the Middle East to offer customers convenient and reliable access to the widest range of currency markets, to date local market information, country-specific global risk management strategies, and customized capital raising and liquidity management solutions.

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Establishment of Standard Chartered Bank around the world
Country Year Established Country Year Established

United Kingdom China, India, Sri Lanka Hong Kong, Singapore Indonesia, Pakistan Philippines Malaysia Japan Zimbabwe The Gambia, Sierra Leone, Thailand Ghana Botswana USA

1853 1858 1859 1863 1872 1875 1880 1892 1894 1896 1897 1902

Australia Mexico, Oman Peru Jersey Brazil Venezuela Falkland Islands, Macau Taiwan Cameroon Nepal Vietnam Cambodia, South Africa

1964 1968 1973 1978 1979 1980 1983 1985 1986 1987 1990 1992

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Bangladesh Zambia Kenya Uganda Tanzania Bahrain Jordan Korea Qatar Brunei, UAE

1905 1906 1911 1912 1917 1920 1925 1929 1950 1958

Iran Colombia Laos, Argentina Nigeria Lebanon Cote d’Ivoire Mauritius Turkey Afghanistan

1993 1995 1996 1999 2000 2001 2002 2003 2004

RECENT ALLIANCES

AND STRATEGIC AQUISTIONS

In 2000, Standard Chartered acquired Grindlays Bank from ANZ Bank, increasing its presence in private banking and further expanding its operations in India and Pakistan. Standard Chartered retained Grindlays' private banking operations in London and Luxembourg and the subsidiary in Jersey, all of which it integrated into its own private bank. This now serves high net worth customers in Hong Kong, Dubai, and Johannesburg under the name Standard Chartered Grindlays Offshore Financial Services. In India, Standard Chartered integrated most of Grindlays' operations, making Standard Chartered the largest foreign bank in the country, despite Standard Chartered having cut some branches and having reduced the staff from 5500 to 3500 people.
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On 15th April 2005, the bank acquired Korea First Bank, beating HSBC in the bid. Since then the bank has rebranded the branches as SC First Bank. Standard Chartered completed the integration of its Bangkok branch and Standard Chartered Nakornthon Bank in October, renaming the new entity Standard Chartered Bank (Thailand). Standard Chartered also formed strategic alliances with Fleming Family & Partners to expand private wealth management in Asia and the Middle East, and acquired stakes in ACB Vietnam, Travelex, American Express Bank in Bangladesh and Bohai Bank in China. On 9th August 2006 Standard Chartered announced that it had acquired an 81% shareholding in the Union Bank of Pakistan in a deal ultimately worth $511 million.

This deal represented the first acquisition by a foreign firm of a Pakistani bank and the merged bank, Standard Chartered Bank (Pakistan), is now Pakistan's sixth largest bank. On 22 October, 2006 Standard Chartered announced that it has received tenders for more than 51 per cent of the issued share capital of Hsinchu International Bank (“Hsinchu”). On completion of the offer, Standard Chartered will have majority ownership of Hsinchu, Taiwan’s seventh largest private sector bank by loans and deposits as at 30 June, 2006.

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In

2006,

Standard

Chartered

in

Bangladesh,

announced an alliance with Dutch Bangla Bank Ltd to share their respective ATM operations. On 23 August, 2007 Standard Chartered entered into an agreement to buy a 49 percent of an Indian brokerage firm (UTI Securities) for $36 million in cash from Securities Trading Corporation of India Ltd., with the option to raise its stake to 75 percent in 2008 and, if both partners agree, to 100 percent by 2010. UTI Securities offers broking, wealth management and investment banking services across 60 Indian cities. On 29th February 2008, Standard Chartered PLC announced it has received all the required approvals leading to the completion of its acquisition of American Express Bank Ltd (AEB) from the American Express Company (AXP). The total cash consideration for the acquisition is US$ 823 million. The acquisition of AEB provides Standard Chartered with an opportunity to add capability, scale and momentum in the strategically important Financial Institutions and Private Banking businesses. It will add 19 more markets to the Standard Chartered footprint, while deepening presence in some core markets and providing access to several new growth markets.

STANDARD CHARTERED BANK IN INDIA

The Chartered Bank opened its first overseas branch in India, at Kolkata, on 12 April 1858. Eight years later the Kolkata agent described the Bank's credit locally as splendid and its business as flourishing, particularly the
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substantial turnover in rice bills with the leading Arab firms. When The Chartered Bank first established itself in India, Kolkata was the most important commercial city, and was the centre of the jute and indigo trades. With the growth of the cotton trade and the opening of the Suez Canal in 1869, Bombay took over from Kolkata as India's main trade centre. Today the Bank's branches and sub-branches in India are directed and administered from Mumbai (Bombay) with Kolkata remaining an important trading and banking centre. Standard Chartered Bank is the largest international banking Group in India with 78 branches in 30 cities. The Bank is having a combined customer base of 2.5 million in retail banking and over 1200 corporate customers.

Products offered by the bank
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Accounts
 Term Deposits

 Savings Accounts
     

aXcess Plus Account Super Value Account Parivaar Account No Frills Account aaSaan Account 2-in-1 Account

 Depository Services  Corporate Salary Account

 Current Accounts
 

Business Plus Account Enhanced Business Plus Account

Credit Cards
• • • • • • • • •

Emirates Platinum Card Platinum Card Emirates Titanium Card Super Value Titanium Card Gold Card EMI Card Executive Card Classic Card Business Gold Card

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Gold Rewards Card

Debit & Prepaid Cards

• • •

Debit Cards Shop Smart Card Platinum Debit Card Plus Extended Protection Plan Prepaid Cards Smart Travel


Loans & Mortgages
• • • • •

Home Loans Loan Against Securities Home Saver Loan Against Term Deposits Loan Against Property

NRI Banking
• • •

NRE Account NRO Savings Account FCNR Account

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• ➢

Accounts for Returning Indians

Exclusive Banking
• • •

Excel Banking Priority Banking Private Banking

Insurance & Investments
• • •

General Insurance Life Insurance Investment Services

STANDARD CHARETERED MUTUAL FUND

Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20, 1999.
IN 2008, Infrastructure Development Finance Corporation (IDFC) has outbid

other bidders such as Shinsei Bank, India bulls to emerge as winner in race to acquire Standard Chartered Mutual Fund for $205 million. Standard Chartered Mutual Fund has around Rs.14000 crore in assets of which Rs.4000 crore is in equity while rest is in debt. IDFC is one of India’s oldest lending institutions, and the deal would give it a foothold in the retail sector and improve its high margin fee based income.
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Standard Chartered will continue to distribute mutual fund products but will not manage funds and would only focus on consumer and commercial banking.

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INTRODUCTION

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INTRODUCTION
The one investment vehicle that has truly come of age in India in the past decade is mutual funds. Today, the mutual fund industry in the country manages around Rs 407,300 crore (As of March, 2009) of assets, a large part of which comes from retail investors. And this amount is invested not just in equities, but also in the entire gamut of debt instruments. A mutual fund is the ideal investment vehicle for today’s complex and modern financial scenario. Market for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become matured and information driven. Price changes on these assets are driven by global events happening in faraway places. A typical individual is unlikely to have the knowledge, skills inclination and time to keep track of events, understand their implication and act speedily. An individual also finds it difficult to keep track of his assets, investment, brokerage dues and bank transaction etc. A mutual fund is the answer to all these situations. It appoints professionally qualified and experienced staffs that manage each of these functions on full time basis. The large pool of money collected in the fund allows it to hire such staff at a very low cost to each investor. In effect, the mutual fund exploits economies of scale in all three area-research, investment and transaction processing. While the concepts of individual coming together to invest money collectively are not new, the mutual fund in its present form is a 20th century phenomena. In fact mutual fund gains popularity only after
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the Second World War. Globally, there are thousands of firms offering tens of thousands of mutual funds with different investment objectives. Today, mutual funds collectively manage almost as much as or compared to bank.

WHY DO WE NEED TO INVEST?
Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country. It is vitally important in this current day and age for all of us to begin taking control of our financial situation and start planning for our future, and the futures of our children. We can no longer rely on the government to hand out an aged pension once we retire. We cannot take for granted that at the end of our working life we will be taken care of financially. There are few main reasons to invest.
 Wealth

accumulation: This is largely a factor of investment

performance, including both short term performance of an investment and long term performance of a portfolio. Wealth management is the ultimate measure of the success of an investment decision.
 Tax Benefits: Legitimate reduction in the amount of tax payable is an

important part of the Indian psyche. Every rupee saved in taxes goes towards the wealth accumulation.

Supplement Income: This refers to money distributed at intervals by an investment, which are usually used by the investor for meeting regular expenses. Income needs tend to be fairly constant because

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they are related to lifestyle and are very well understood by the investors.
 Life Cover: Many investors look for investments that offer good

return with adequate life cover to manage the situation in case of any eventualities.

Retirement: Many investors invest for their retirement. They don’t want to depend upon other for day to day expenses.

CONCEPT OF MUTUAL FUNDS

A Mutual Fund is a trust that pools the saving of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instrument. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in the proportion of 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 portfolio at a relatively low cost. Anybody with a surplus of as little as a few thousand rupees can invest in Mutual funds.

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The

flow

chart

below

describes broadly the working of a mutual fund:-

WORKING OF MUTUAL FUND

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Savings form an important part of the economy of any nation. With savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents multiple avenues to the investors. Though certainly not the best or deepest of markets in the world, it has ignited the growth rate in mutual fund industry to provide reasonable options for an ordinary man to invest his savings. Investment goals vary from person to person. While somebody wants security, others might give more weightage to returns alone. Somebody else might want to plan for his child’s education while somebody might be saving for the proverbial rainy day or even life after retirement. With objectives defying any range, it is obvious that the products required will vary as well.

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HISTORY OF THE INDIAN MUTUAL FUND The Evolution
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 of India. The history of mutual funds in India can be broadly divided into four distinct phases

First Phase – 1964-87
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 Canbank Mutual
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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.

199293

Amoun Assets Mobilization t Under as % of gross Mobiliz Manageme Domestic ed nt Savings 11,057 1,964 13,021 38,247 8,757 47,004 5.2% 0.9% 6.1%

UTI Public Secto r Total

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
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with Franklin Templeton) was the first private sector mutual fund registered in July 1993. 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
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, 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
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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.

The graph indicates the growth of assets over the years.

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Latest Position of Mutual Funds
Assets under management (AUMs) of the Indian mutual fund industry for May’09 have set the record by piercing the Rs 6 lakh crore mark once again. Buoyed by a sharp rise in value of stocks, industry AUM at the end of May jumped nearly Rs 87,000 crore or 16% over April numbers (Rs 5.5 trillion), This level had been last topped in May 2008. This is third time in as many months that the AUM of the industry has rose, partially helped by the stock rally started in March that has led to sensex gain around 80% by May. The combined average AUM of the 34 fund houses in the country increased to Rs 6,39,609 crore in May as against Rs 5,51,254 crore in April. Apart from the 30% rise in net asset values of diversified equity funds in this month, the money that has come through liquid funds also bears significance. Most banks are awash with liquidity and many of them are parking their surplus cash with mutual funds to gain decent returns," Dhirendra Kumar of Value Research, an MF tracking firm said. MF industry officials said that June might see some redemptions kicking as it is the end of a quarter and many corporate are likely to cash out to beef up their balance sheets. However, with the sentiment for equities having improved considerably, they expect investors to stick on to equity schemes.

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ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the struc ture of mutual funds: -

SEBI
The regulation of mutual funds operating in India falls under the preview of authority of the “Securities and Exchange Board of India” (SEBI). Any person proposing
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to set up a mutual fund in India is required under the SEBI (Mutual Funds) Regulations, 1996 to be registered with the SEBI.

SPONSOR
Sponsor is defined under SEBI regulations as any person who, acting alone or in combination with another body corporate, establishes a mutual fund. The sponsor of a fund is akin to the promoter of a company as he gets the fund registered with SEBI. The sponsor should contribute at least 40% to the net worth of the AMC. However, if any person holds 40% or more of the net worth of an AMC shall be deemed to be a sponsor and will be required to fulfill the eligibility criteria in the Mutual Fund Regulations. The sponsor or any of its directors or the principal officer employed by the mutual fund should not be guilty of fraud or guilty of any economic offence.

TRUSTEES
The mutual fund may be managed by a Board of Trustees- a body of individuals, or a Trust company- corporate body. The Trustee does not directly manage the portfolio of securities. For this specialists function, they appoint an Asset Management Company. The mutual fund is required to have an independent Board of Trustees, i.e. two third of the trustees should be independent persons who are not associated with the sponsors in any manner. An AMC or any of its officers or
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employees are not eligible to act as a trustee of any mutual fund. The trustees are responsible for - inter alia – ensuring that the AMC has all its systems in place, all key personnel, auditors, registrar etc. have been appointed prior to the launch of any scheme.

Rights of Trustees  Trustees appoint the AMC, in consultation with the sponsor and according to SEBI Regulations  All Mutual Fund Schemes floated by the AMC have to be approved by the Trustees  Trustees can seek information from the AMC regarding the Operations and compliance of the mutual fund.  Trustees can seek remedial actions if they believe that the conduct of the fund’s business is not in accordance with SEBI Regulations. In certain specific events, the Trustees have right to dismiss the AMC, with the approval of SEBI and in accordance with the regulations.  Trustees review and ensure that net worth of the AMC is according to stipulated norms, every quarter Obligations of the Trustees  Trustees must ensure that the transactions of the mutual fund are in accordance with the trust deed  Trustees must ensure that the AMC has systems and procedures in place, and that all the fund constituents are appointed  Trustees must ensure due diligence on the part of AMC in the appointment of constituents and business associates

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 Trustees must furnish to the SEBI, on half yearly basis a report on the fund’s activities of the AMC  Trustees must ensure compliance with SEBI regulations

ASSET MANAGEMENT COMPANY
The sponsors or the trustees are required to appoint an AMC to manage the assets of the mutual fund. Under the mutual fund regulations, the applicant must satisfy certain eligibility criteria in order to qualify to register with SEBI as an AMC.  The sponsor must have at least 40% stake in the AMC.  The chairman of the AMC is not a trustee of any mutual fund.  The AMC should have and must at all times maintain a minimum net worth of Cr. 100 million.  The director of the AMC should be a person having adequate professional experience.

 The board of directors of such AMC has at least 50% directors who are not associate of or associated in any manner with the sponsor or any of its subsidiaries or the trustees.
Restrictions on the AMC
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 AMC’ s cannot launch a scheme without the prior approval of the trustees  AMC’ s have to provide full details of investments by employees and Board members in all cases where the investment exceeds Rs.1 Lakh  AMC’ s cannot take up any activity that is in conflict with the activities of the mutual fund

TRANSFER AGENTS
The transfer agent is contracted by the AMC and is responsible for maintaining the register of investors / unit holders and every day settlements of purchases and redemption of units. The role of a transfer agent is to collect data from distributors relating to daily purchases and redemption of units.

CUSTODIANS
The mutual fund is required, under the Mutual Fund Regulations, to appoint a custodian to carry out the custodial services for the schemes of the fund. Only institutions with substantial organizational strength, service capability in terms of computerization and other infrastructure facilities are approved to act as custodians. The custodian must be totally delinked from the AMC and must be registered with SEBI. Functions of the Custodians  Responsible for the securities held in the mutual fund’s portfolio  Keep an investment record of the mutual fund

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 Collect dividends and investment payments due on the mutual funds investment  Track corporate actions like bonus issues, right offers, offer for sale, buy back and open offers for acquisition

UNIT HOLDERS
They are the parties to whom the mutual fund is sold. They are ultimate beneficiary of the income earned by the mutual funds

REGULATING AGENCIES FOR MUTUAL FUND

➢ ➢ ➢

SEBI RBI Ministry of Finance Department of Company Affairs and

Company Law Board, Registrar of Companies

Stock Exchanges (For listed Mutual Funds)

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Securities and Exchange Board of India (SEBI) - the Capital Markets Regulator
Securities and Exchange Board of India (SEBI) was first established in the year 1988 as a non-statutory body for regulating the securities market. It became an autonomous body in 1992 and more powers were given through an ordinance. Since then it regulates the market through its independent powers. Objectives of SEBI  It tries to develop the securities market.  Promotes Investors Interest.  Makes rules and regulations for the securities market.

Functions of SEBI  Regulates Capital Market  Checks Trading of securities.  It enhances investor's knowledge on market by providing education.  It regulates the stockbrokers and sub-brokers.  To promote Research and Investigation.  Registering & regulating the working of venture capital funds & collective investing schemes, including Mutual Funds. SEBI as a Mutual fund regulator
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The

Government

of

India

constituted

Securities

and

Exchange Board of India, by an Act of Parliament in 1992, as the apex regulator of all entities that either raise funds in the capital markets or invest in capital market securities such as shares and debentures listed on stock exchanges. Mutual funds have emerged as an important institutional investor in capital market securities. Hence they come under the purview of SEBI. SEBI requires all mutual funds to be registered with them. It issues guidelines for all mutual fund operations including where they can invest, what investment limit and restrictions must be complied with. how they should account for income and expenses, how they should make disclosures of information to the investors and generally act in the interest of investor protection. Other entities that SEBI also regulates are companies when they issue equity or debt, share registrars. custodians, bankers in the primary markets, stock exchanges and brokers in the secondary markets, and foreign and institutional investors such as FIIs, offshore mutual funds with dedicated Indian mutual funds or venture capital investors.

Reserve Bank of India- the Money Markets Regulator

Reserve Bank of India is the apex monetary Institution of India. It is also called as the central bank of the country. The bank was established on April1, 1935 according to the Reserve Bank of India act 1934. It acts as the apex monetary authority of the country. The Central Office of the Reserve Bank has been in Mumbai since inception. The Central Office is where the Governor sits and is where policies are formulated. Though originally
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privately owned, since nationalization in 1949, the Reserve Bank is fully owned by the Government of India. What is the regulatory jurisdiction of RBI over mutual funds?  RBI is the monetary authority and the regulator of the banking system  Bank sponsored mutual funds were under the dual control of RBI and SEBI  Presently RBI is only the regulator of the sponsors of bank sponsored mutual funds. SEBI is the regulator of all mutual funds  Mutual funds are affected by the RBI stipulations on structure, issuance, pricing & trading of Govt. Securities

➢ Ministry of Finance
Role of Ministry of Finance in mutual fund regulations The Ministry of Finance, which is charged with implementing the government policies, ultimately supervises both RBI and SEBI. Besides being the ultimate policy making and supervising entity, the MF had also been playing the role of an Appellate Authority for any major disputes over SEBI guidelines on certain specific capital market related guidelines-in particular any cases of insider trading or mergers and acquisitions. Since 2003, however, a

Securities Appellate Tribunal has been created to provide the apex appeal mechanism for any decisions taken by SEBI. SAT works as an independent judicial authority.

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➢ Company Law Board, Department of Company
Affairs and Registrar of Companies
Mutual fund Asset Management Companies and corporate trustees are companies registered under the Companies Act, 1956and are therefore answerable to regulatory authorities empowered by the Companies Act. The primary legal interface for all companies is the Registrar of Companies (RoC). Rocs’, in turn, are supervised by the Department of Company Affairs. The DCA forms part of the Company Law Board, which is part of the Ministry of Law and Justice of the Govt. of India. The RoC ensures that the AMC, or the trustee company as the case may be, is in compliance with all provisions of the Companies Act. All AMC accounts and records are filed with the RoC, who may demand additional, informational and documents from company. The RoC monitors regulatory compliance by companies.

➢ Stock Exchanges
Stock exchanges are self-regulatory organizations supervised by SEBI. Many closed-end schemes of mutual funds are listed on one or more stock exchanges. Such schemes are subject to regulation by the concerned stock

exchange through a listing agreement between the fund and the stock exchange. Rules of the stock exchange and provisions of the Companies Act Would generally guide trading, clearing transfer and settlement of the buying and selling of mutual fund units in the markets. Funds or AMCs do not get directly involved with purchases and sales, of units of such listed
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closed-end schemes, as their registrars handle all such transfers as in case of shares.

➢ Association of Mutual Funds in India (AMFI)
Association of Mutual Funds in India (AMFI) incorporated in Aug 1995 is the Umbrella body of all the mutual fund registered with SEBI. It is nonprofit organization committed to develop the Indian mutual fund industry on professional, healthy & ethical lines & to enhance and maintain standards in all areas with a view to protecting & promoting the interests of Mutual Funds and their unit holders. AMFI is an industry association, incorporated in 1995, is not an SRO, so it can just issue guidelines to members. It cannot enforce regulations. Objectives of AMFI: To promote the interests of mutual funds and unit holders.  To set ethical, commercial and professional standards in the industry.

To increase public awareness of the mutual fund industry.

 AMFI is governed by a board of directors elected from

mutual funds and is headed by a full time chairman.  AMFI has therefore prepared guidelines for intermediaries called AMFI Guidelines & Norms for Intermediaries (AGNI).

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HOW INVESTOR EARN FROM MUTUAL FUND

Investors earn from a Mutual Fund in three ways:
1. Income is earned from dividends declared by mutual fund schemes from time to time. 2. If the fund sells securities that have increased in price, the fund has a capital gain. This is reflected in the price of each unit. When investors sell these units at prices higher than their purchase price, they stand to make a gain. 3. If fund holdings increase in price but are not sold by the fund manager, the fund's unit price increases. You can then sell your mutual fund units for a profit. This is tantamount to a valuation gain.

TYPES OF MUTUAL FUNDS
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A wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.

By structure:
a) open-ended schemes b) close-ended schemes c) Interval Funds

By Investment objective:
a) Growth / Equity Oriented Schemes 1) Index funds 2) Diversified funds 3) Sector funds a) Tax-saving funds b) Income / Debt Oriented Scheme c) Gilt funds d) Money Market or Liquid Funds e) Balanced Fund f) Load or no-load Fund

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By Structure
a) Open-ended schemes An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is more flexible and provides instant liquidity

b) Close-ended schemes A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. 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 they 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. c) Interval Funds Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

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By 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:

EQUITY

DEBT

MONEY MARKET

Diversified Fund Index Fund Sector Fund

Fixed Income Fund Gilt Fund

Money Market Mutual fund

Balance Fund

Liquid Fund

a) Growth / Equity Oriented Schemes
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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. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

Equity funds
As explained earlier, such funds invest only in stocks, the riskiest of asset classes. With share prices fluctuating daily, such funds show volatile performance, even losses. However, these funds can yield great capital appreciation as, historically, equities have outperformed all asset classes. At present, there are three types of equity funds available in the market these are:

Equity Funds

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Index Funds

Diversifie d Funds

Sector Funds

1) Index funds
These funds invest in the same pattern as popular market indices like S&P CNX Nifty or CNX Midcap 200. The money collected from the investors is invested only in the stocks, which represents the index. For example a Nifty fund will invest only in the Nifty 50 stocks. The objective of such funds is not to beat the market but to give a return equivalent to the market returns.

2) Diversified funds
Such funds have the mandate to invest in the entire universe of stocks. Although by definition, such funds are meant to have a diversified portfolio (spread across industries and companies), the stock selection is entirely the prerogative of the fund manager. These funds are generally meant for riskaverse investors who want a diversified portfolio across sectors.

3) Sector Funds The riskiest among equity funds, sector funds invest only in stocks of a specific industry, say IT or FMCG. A sector fund’s NAV will zoom if the sector performs well; however, if the sector languishes, the scheme’s NAV too will
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stay depressed. These funds are targeted at investors who are bullish or fancy the prospects of a particular sector. a) Tax-saving Funds Also known as ELSS or equity-linked savings schemes, these funds offer benefits under Section 88 of the Income-Tax Act. So, on an investment of up to Rs 10,000 a year in an ELSS, you can claim a tax exemption of 20 per cent from your taxable income. You can invest more than Rs 10,000, but you won’t get the Section 88 benefits for the amount in excess of Rs 10,000. The only drawback to ELSS is that you are locked into the scheme for three years. In terms of investment profile, tax-saving funds are like diversified funds. The one difference is that because of the three year lock-in clause, taxsaving funds get more time to reap the benefits from their stock picks, unlike plain diversified funds, whose portfolios sometimes tend to get dictated by redemption compulsions.

b) 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. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country.
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If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.

c) Gilt funds
These funds invest in Central and State Government securities. Since they are Government backed bonds they give a secured return and also ensure safety of principal amount. They are best suited for the medium to longterm investors. They invest only in government securities and T-bills–instruments on which repayment of principal and periodic payment of interest is assured by the government. This element of safety is why, in normal market conditions, gilt funds tend to give marginally lower returns than income funds.

d) Money Market or Liquid Funds These funds invest in highly liquid money market instruments (duration of up to one year) such as treasury bills, call money, CPs and CDs. They provide easy liquidity. They emerged as an alternative for saving and shortterm fixed deposit account with comparatively higher returns. These funds are ideal for corporate, institutional investors and business houses that invest their funds for very short periods. e) Balanced Fund
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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. As the name suggests, balanced funds have an exposure to both equity and debt instruments. They invest in a pre-determined proportion in equity and debt–normally 60:40 in favour of equity. On the risk ladder, they fall somewhere between equity and debt funds, depending on the fund’s debtequity spilt–the higher the equity holding, the higher the risk. Therefore, they are a good option for Investors who would like greater returns than from pure debt, and are willing to take on little more risk in the process.

f) Load or no-load Fund
A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable.

This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns.
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However, the investors should also consider the performance track record and service standards of the mutual fund which are more important. Efficient funds may give higher returns in spite of loads. A no-load fund is one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.

RISK V/S. RETURN

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INVESTMENT STRATEGIES

1. Systematic Investment Plan: An SIP is a method of investing a fixed sum, on a regular basis, in a Mutual Fund scheme. It is similar to regular saving schemes like a recurring deposit. A SIP allows one to buy units on a given date each month, so that one can implement a saving plan for themselves. A SIP can be started with as small as Rs. 500 per month in ELSS schemes to Rs. 100 per month in diversified equity schemes.
2. Systematic Transfer Plan:

Systematic Transfer Plan (STP) is a facility wherein unit holders of designated open-ended schemes of a Mutual Fund can opt to transfer a fixed amount or capital appreciated amount (variable amount) at regular intervals to another designated open-ended schemes of that Mutual Fund.

3. Systematic Withdrawal Plan: The Systematic Withdrawal Plan allows the investor the facility to withdraw pre-determined amount/units from his fund at a pre-determined interval. The investor’s units will be redeemed at the applicable NAV as on that day.

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BENEFITS OF MUTUAL FUNDS

SEBI Removes Entry Load for Mutual Funds

The entry load charged by fund houses has been abolished by the Securities and Exchange Board of India (SEBI). As per the decision distributors will now have to disclose their commission for the schemes. This decision gives the investors the independence to decide on the commission payable to the distributors. The absence of entry load and the introduction of the prevalent trail commission structure could lead to a shift of focus from new fund offerings to existing mutual fund schemes. It is expected to have a major impact on the sales of the mutual funds in the short term. The decision is also expected to instill transparency and prevent mis-selling by the distributors. However on the flip side it is considered that the removal of the upfront commission to the investors will impact the marketing of the mutual funds in the smaller towns.

➢ Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.
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➢ Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.

➢ Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

➢ Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

➢ Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

➢ Liquidity
In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the

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investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

➢ Transparency
Investor get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

➢ Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

➢ Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. Choices of mutual funds offer a family of scheme to suit your varying need of an individual over a lifetime.

➢ Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors.
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The operations of Mutual Funds are regularly monitored by SEBI.

PERFORMANCE EVALUATION
PARAMETERS OF MUTUAL FUND EVALUATION:  Risk

 Returns  Liquidity  Expense Ratio  Composition of Portfolio

 Risks Associated With Mutual Funds
Investing in mutual funds as with any security, does not come without risk. One of the most basic economic principles is that risk and reward are directly correlated. In other words, the greater the potential risk, the greater the potential return. The types of risk commonly associated with mutual funds are:

Interest Rate Risk

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It relates to the risk of reduction in the value of a security due to changes in interest rates. Interest rate changes directly affect bonds - as interest rates rise, the price of a previously issued bond falls; conversely, when interest rates fall, bond prices increase. The rationale is that a bond is a promise of a future stream of payments; an investor will offer less for a bond that pays-out at a rate lower than the rates offered in the current market. The opposite also is true. An investor will pay a premium for a bond that pays interest at a rate higher than those offered in the current market. For instance, a 10-year, Rs.1, 000 bond issued last year at a 4% interest rate is less valuable today, when the interest rate has gone up to 6%. Conversely, the same bond would be more valuable today if interest rates had gone down to 2%.

➢ Market Risk:
Market risk relate to the market value of a security in the future. Market prices fluctuate and are susceptible to economic and financial trends, supply and demand, and many other factors that cannot be precisely predicted or controlled.

Here's an illustration of the concept of market risk:
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Let's say you decide to buy a car. You can buy a brand-new car under full warranty. Or you can buy a used car with no warranty. Your choice will depend on a variety of factors, like how much money you want to spend, which features you want, how mechanical you are, and, of course, your risk tolerance. As you research different vehicles, you'll find that some makes and models have better performance and repair histories than others. But whichever car you chose, you will face certain risks on the road which have nothing to do with the car itself, but which can significantly impact your driving experience - including the weather, road conditions, even animals crossing the highway at night. While these factors may be out of your control, being aware of them can help prepare you to navigate them successfully.

Inflation Risk

It is the risk that general increases in prices of goods and services will reduce the value of money, and likely negatively impact the value of investments. For instance, Let’s say the price of a Tea increases from Rs.20 to Rs.40. In the past, Rs.40 would buy two pack of bread but now Rs.40 can buy
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only one pack of Tea, resulting in a decline in purchasing power of money. Inflation reduces the purchasing power of money and therefore has a negative impact on investments by reducing their value. This risk is also referred to as Purchasing Power Risk. Inflation and Interest Rate risks are closely related as interest rates generally go up with inflation. To keep pace with inflation and compensate for loss of purchasing power, lenders will demand increased interest rates. However, one should note that inflation can be cyclical. During periods of low inflation, new bonds will likely offer lower interest rates. During such times, investors looking only at coupon rates may be attracted to investing in low-grade junk bonds carrying coupon rates similar to the ones that were offered by ordinary bonds during inflation period. Investors should be aware that

such low-grade bonds, while they may to a certain extent compensate for the low inflation, bear much higher risks.

➢ Political Risk
Changes in the tax laws, trade regulations, administered prices etc. is some of the many political factors that create market risk. Although collectively, as citizens, we have indirect control through the power of our vote, individually as investors, we have virtually no control.
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➢ Business Risk
Business Risk is the uncertainty concerning the future existence, stability and profitability of the issuer of the security. Business Risk is inherent in all business ventures. The future financial stability of a company cannot be predicted or guaranteed, nor can the price of its securities. Adverse changes in business circumstances will reduce the market price of the company’s equity resulting in proportionate fall in the NAV of mutual fund scheme, which has invested in the equity of such a company.

➢ Economic Risk
Economic Risk involves uncertainty in the economy, which, in turn can have an adverse effect on a company’s business. For instance, if monsoons fall in a year, equity stocks of agriculture bases companies will fall and NAVs of mutual funds, which have invested in such stocks, will fall proportionately. There are 3 different methods with the help of which we can measure the risk.

METHODS OF MEASURING RISK  Standard Deviation(SD)
SD measures the fluctuations of a fund’s return around mean level. SD basically gives you an idea of how volatile the earning are. SD can be computed for both equity and debt fund. SDs of different fund can be
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compared with each other, or with SD of a market index or even that of another category.

 Beta Coefficient
Beta relates a fund’s return with a market index and measures the sensitivity of fund’s return to change in the market index. A beta of 1 indicates that the security`s price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security`s price will be more volatile than the market. Higher beta portfolios give greater returns in rising markets and are riskier in falling markets. But Beta is based on past performance, so it does not necessarily indicates future performance.

 R- Squared
R- Squared measures how much of a fund’s fluctuations is attributable to movements in overall market, from 0 to 100 %. Clearly, an index fund will have R- squared of nearly 100%. Non diversified funds will have lower R- squared. Overall Standard Deviation is the best measure of risk, even though it is also based on past returns. It is a broader than beta that measures total risk, not just market risk. Risk of both specialized and diversified funds, and both equity and debt funds are measurable with SD.

RETURNS
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Returns have to be studied along with the risk. A fund could have earned higher return than the benchmark. But such higher return may be accompanied by high risk. Therefore, we have to compare funds with the benchmarks, on a risk adjusted basis. William Sharpe created a metric for fund performance, which enables the ranking of funds on a risk adjusted basis.

✔ Sharpe ratio
The Sharpe ratio tells us whether a portfolio's returns are due to smart investment decisions or a result of excess risk. fund This can measurement is very useful because although one portfolio or

reap higher returns than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been.

Sharpe Ratio =

Risk Premium Funds Standard Deviation

✔ Treynor ratio
A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless investment per each unit of market risks. In other words, the Treynor ratio is a risk-adjusted measure of return based on systematic risk. It is similar to the Sharpe ratio, with the difference being that the Treynor ratio uses beta as the measurement of volatility. :

Treynor Ratio

=

Risk Premium

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Funds Beta Risk Premium = Difference between the Fund’s Average return and Risk
free return on government security or treasury bill over a given period .

 LIQUIDITY
Most of the funds being sold today are open-ended. That is, investors can sell their existing units, or buy new units, at any point of time, at prices that are related to the NAV of the fund on the date of the transaction. Since investors continuously enter and exit funds, funds are actually able to provide liquidity to investors, even if the underlying markets, in which the portfolio is invested, may not have the liquidity that the investor seeks.

 EXPENSE RATIO
Expense ratio is defined as the ratio of total expenses of the fund to the average net assets of the fund. Expense ratio can actually understate the total expenses, because brokerage paid on transactions of a fund are not included in the expenses. According to the current SEBI norms, brokerage commissions are capitalized and included in the cost of the transactions.

Expense ratio

=

Total Expenses Average Net Assets

 COMPOSITION OF THE PORTFOLIO
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Credit quality of the portfolio is measured by looking at the credit ratings of the investments in the portfolio. Mutual Fund fact sheets show the composition of the portfolio and the investments in various asset classes over time. Portfolio turnover rate is the ratio of lesser of asset purchased or sold by funds in the market to the net assets of the fund. If Portfolio ratio is 100% means portfolio has been changed fully. When Portfolio ratio is high means expense ratio is high.

Portfolio Ratio = Total Sales & Purchase Net Assets of fund

What is Net Asset Value?
The net asset value (NAV) is the market value of the fund's underlying securities. It is calculated at the end of the trading day. Any open-end funds buy or sell order received on that day is traded based on the net asset value calculated at the end of the day. The NAV per units is such Net Asset Value divided by the number of outstanding units

Market Value of Assets - Liabilities NAV = Units Outstanding

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TAX BANEFITS INVESTING IN MUTUAL FUNDS

a) Dividends Received From Mutual Fund ○ Income distributed by a fund is exempted in the hands of investors. ○ No TDS on any income distribution by mutual fund a) Capital Gains on Sale of Units ○ However ,if the investor sells his units and earns “Capital Gain”, the investor is subject to the capital gain tax as under: ✔ If units are held for not more than 12 months, they will be treated as short term capital asset, otherwise as long term capital asset. (This period is 36 months for assets other than shares and listed securities). ✔ Tax law definition of Capital Gains= Sale Consideration(cost of acquisition+ cost of improvements= cost of transfer) ✔ If the units were held for over one year, the investor gets the tax benefits of “Indexation”, which means his purchase price is marked up by an inflation index, so his capital gain amount is less than otherwise. Purchase price of a long term capital asset after Indexation is computed as Cost of acquisition or improvement=actual cost of acquisition or

improvement*cost inflation index for year of transfer / cost inflation index
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for year of acquisition or improvement or for 1981, whichever is later.

a) Schemes for Capital Gains Tax Exemption In accordance with Section 54EC of the I-T Act, Capital Gains on sale of mutual fund units (or other capital asset), if long term in nature, are exempt from tax,

if the entire amount of capital gain is invested in specified bonds issued by NABARD, NHAI or Rural electrification Corporation within 6 months of transfer of units. if the entire gain is not invested then, only proportionate exemption would be available. These units must then be held by the investor for at least 3 years from the date of their acquisition, and during this period, he must not take a loan/advance against the security of such units. If any of these conditions is violated, the amount of exemption granted under this section shall lapse and the investor will be charged the capital gains tax.

In accordance with Section54 ED of the I-Tact, Capital Gains on sale of mutual fund units (or other listed security), if long term in nature are exempted from tax to the extent such capital gains are invested in equity shares issued by a company formed and registered in India and offered for
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subscription to the public. Investment in such shares must be made within 6 months of sale of original mutual fund units. These shares are subject to a lock-in period of one year, i.e. they cannot be sold or transferred during this period. Example (54EC): An investor purchases mutual fund units on January1, 1995 for Rs. 10 lakhs. He sells them on February 15, 2001 for a net consideration of Rs. 14 lakhs.

Since the units were held for more than 1year, profit on sale will be treated as long Term capital gain Long term capital gains on the transaction= Sales proceeds (purchase price * cost inflation index for 2000-01 / cost inflation index for 1994-95)= 14,00,000-(10,00,000*351/259)= 44,788 (notional numbers used for cost inflation index)

Under Section 54 EC, he can claim exemption from capital gains tax subject to the following conditions:
✔ He invests Rs. 44788, the long term capital gain, in NABARD,

NHAI or Rural Electrification Corporation bonds ✔ Investment in such bonds must be made within 6 months of transfer of the units
✔ The bonds must be held by him for at least3 years from the date

of investment
✔ During this period of3 years, he should not take a loan/advance

against the security of the bonds

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In accordance with the amendment made by Finance Act 2000, a unit-holder has the option to pay tax on long term capital gains arising out of the sale of mutual fund units at a rate that is determined using one of the following methods: ○ At a flat rate of 10%on the capital gain without the benefit of indexation, or ○ At 20%on the capital gain after building in the impact of indexation. Plus applicable Surcharge and Education cess. a) Securities Transaction Tax (STT) The sale and purchase of units in equity -oriented scheme of Mutual Fund are subject to STT at the prescribed rate.

b) In accordance with section (80C) of the IT Act. As per this section an individual and HUF will be entitled to deduction up to Rs 1 lakh in respect of payment/deposit out of taxable income towards certain specified instruments which includes units of unit linked plans of mutual funds and ELSS. c) Wealth Tax Ownership of units is not considered as 'wealth' under the Wealth Tax Act, and is therefore not chargeable to wealth tax. d) Registration in Foreign Countries
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India has signed favorable Double Taxation Avoidance Agreements (DTAA) with certain selected certain foreign countries, whereby capital gains earned by investors based in such countries are not chargeable to tax in India. The purpose is to encourage investment in India routed through these countries.
e) Special Provisions for Offshore Fund Investors, NRIs, OCBs and

FIIs Under Section 195 of the Act the Mutual Fund is required to deduct tax at source at the rate of 20% on any long term capital gains if the payee-unit holder is a non resident. Short term capital gains tax is required to be deducted at source at the rate of 30% if the payee-unit holder is a nonresident non corporate and at the rate of 48% if the payee-unit holder is a foreign company. Further, in case of unit holders other than a foreign company, this tax deduction is required to be increased by a surcharge of 2% of such tax liability. As per CBDT circular No.715 dated August 8, 1995 in case of Resident unit holders, no tax is required to be deducted at source

from capital gains arising at the time of repurchase or redemption of the units. As per circular No. 728 dated October 30, 1995 issued by the Central Board of Direct Taxes in case of a remittance to a country with which a Double Taxation Avoidance Agreement is in force tax should be deducted at the rate provided in the Finance Act of the relevant year or at the rate provided in the DTAA whichever is more beneficial to the assesses. In order for the Unit
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holder to obtain benefit of a lower rate available under a DTAA the Unit holder will be required to provide the Mutual Fund with a certificate obtained from his Assessing Officer stating his eligibility for the lower rate.

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MAJOR

PLAYER

IN

MUTUAL

FUNDS INDUSTRY

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MAJOR PLAYER FUNDS INDUSTRY

IN

MUTUAL

ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund. ABN AMRO Asset Management is headquartered in London and Amsterdam with important units in Atlanta, Hong Kong, Chicago and Singapore. It provides tailored investment management services to its clients.

Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund was setup on December 24, 1994. The sponsors of Birla Mutual Fund are Birla Global Finance Limited and Sun Life (India) AMC Investments Inc. Sun Life Financial Group of Companies is a financial services organization headquartered in Toronto, Canada. The AMC of Birla Sun Life Mutual Fund is Birla Sun Life Asset Management Company Limited which was incorporated on September 5, 1994.
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The diversified schemes are as follows: • • • • • Debt Schemes Balanced Schemes Offshore Schemes Investment Plans Gift Certificates

Bank of Baroda Mutual Fund
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.

BOB Asset Management Company Ltd. is a wholly owned subsidiary of Bank of Baroda. The products of BOB Mutual Fund are • • • • • • • BOB Diversified Fund BOB ELSS'96 BOB ELSS'97 BOB Gilt Fund BOB Income Fund BOB Liquid Fund BOB Income Fund STP

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• • • • • •

BOB Balance Fund BOB Growth Fund GILT FUND - PF Plan BOB MIP Fund BOB NRI Fund BOB Children Fund

HDFC Mutual Fund
HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers nemely Housing Development Finance Corporation Limited and Standard Life Investments Limited. The products of HDFC Mutual Fund are as follows: • • • Equity Funds Balance Funds Debt Funds

Apart from this it also provides the following value added services: • • • SIP (Systematic Investment Plan) STP (Systematic Transfer Plan) SWAP (Systematic Withdrawal Advantage Plan)

HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.
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The AMC is HSBC Asset Management (India) Private Ltd., incorporated on December 12, 2001. The products of HSBC Mutual Fund are: • • • • • • • Equity Fund Cash Fund Gilt Fund Income Fund India Opportunities Fund MIP Floating Rate Fund

ING Vysya Mutual Fund
ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management (India) Pvt. Ltd. was incorporated on April 6, 1998.

ICICI PRUDENTIAL Mutual Fund
The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential
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ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993. Prudential ICICI Mutual Fund is the first private sector mutual fund in India to cross Rs. 10,000 crore mark in assets (figuare as on 30th November, 2002) and have won the trust of 5,50,000 investors. The Prudential ICICI Mutual Fund is the second largest mutual fund player in the private sector with assets in excess of Rs. 40 bn.

Sahara Mutual Fund
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.

SBI Mutual Fund
SBI Mutual Fund is a fully owned subsidiary of the State Bank of India, India's premier and highly respected bank with largest banking operation in the country.

Tata Mutual Fund
Tata Mutual Fund was setup on June 30, 1995. The Asset Management Company of Tata Mutual Fund is Tata Asset Management Limited, incorporated on March 15, 1994. The Trustee is Tata Trustee Company Private Limited. ABN AMRO Bank N.V. and Deutche Bank are the custodians
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of Tata Mutual Fund.

Tata Asset Management Limited is one of the fastest growing fund management companies in India. As on April 30, 2005, its asset under management was Rs. 7,703 crores. The products diversification of Tata Mutual Fund are as follows: Equity products • • • • • • • • • • • Tata Pure Equity Fund Tata Tax Saving Fund Tata Select Equity Fund Tata Life Sciences & Technology Fund Tata Equity Opportunities Fund Tata Index Fund Tata Growth Fund Tata Equity P/E Fund Tata Dividend Yield Fund Tata Infrastructure Fund Tata Service Industries Fund

Balanced products • • Tata Balanced Fund Tata Young Citizens' Fund

Debt products • • Tata Liquid Fund Tata Short Term Bond Fund

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• • • • • •

Tata Gilt Securities Fund Tata Income Fund Tata Income Plus Fund Tata Fixed Horizon Fund Tata Fixed Horizon Fund Series 1 Tata Monthly Income Fund

Kotak Mahindra Mutual Fund
Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having more than 1,99,818 investors in its various schemes. KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities.

Unit Trust of India Mutual Fund
UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Privete Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crore. The sponsorers of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds.
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Reliance Mutual Fund
Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.

Franklin Templeton India Mutual Fund
The group, Frnaklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India
Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investmenty management and credit services. Morgan Stanley Investment Management (MISM) was established in the
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year 1975. It provides customized asset management services and products to governments, corporations, pension funds and nonprofit organisations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the needs of Indian retail investors focussing on a long-term capital appreciation.

Escorts Mutual Fund
Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited.

Alliance Capital Mutual Fund
Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsorer. The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. with the corporate office in Mumbai.

Benchmark Mutual Fund
Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16, 2000 and
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headquartered in Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.

Canbank Mutual Fund
Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the sponsor. Canbank Investment Management Services Ltd. incorporated on March 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.

Chola Mutual Fund
Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.

LIC Mutual Fund
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882.The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund.

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GIC Mutual Fund
GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a Government of India undertaking and the four Public Sector General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act, 1882.

Assets Under Management (AUM) as at the end of MAY-2009 S. No Mutual Name Asset Under Management as on May 2009 (Rs. Cr.)

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Reliance Mutual Fund HDFC Mutual Fund ICICI Prudential Mutual Fund UTI Mutual Fund Birla Sun Life Mutual Fund SBI Mutual Fund LIC Mutual Fund Kotak Mahindra Mutual Fund Franklin Templeton Mutual Fund Tata Mutual Fund IDFC Mutual Fund DSP BlackRock Mutual Fund 22 Deutsche Mutual Fund Sundaram BNP Paribas MF HSBC Mutual Fund 28 Religare Mutual Fund Fidelity Mutual Fund PRINCIPAL Mutual Fund Canara Robeco Mutual Fund Fortis Mutual Fund JM Financial Mutual Fund

102,730 75,406 65,550 63,438 56,586 34,44 28,599 28,338 23,618 21,305 20,139 17,097 12,780 12,413 9,813 9,290 8,601 8,555 8,051 7,381 7,012

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22 23 24 25 26 27 28 29 30 31 32 33 34 35

JPMorgan Mutual Fund Baroda Pioneer Mutual Fund ING Mutual Fund DBS Chola Mutual Fund Morgan Stanley Mutual Fund 25 AIG Global Investment Group MF Benchmark Mutual Fund Taurus Mutual Fund Bharti AXA Mutual Fund Mirae Asset Mutual Fund Sahara Mutual Fund Escorts Mutual Fund Quantum Mutual Fund Edelweiss Mutual Fund Total

3,956 3,483 2,422 2,159 1,846 1,521 1,042 597 272 216 196 193 60 21 639,130

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Top 15 Equity Funds – Period (Last 12 months)

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Rank

Scheme Name

Date NA V (Rs .) Jun 10 13. , 2009 233 7 Jun 10 60. , 2009 607 3 Jun 10 11. , 2009 426 4 Jun 10 11. , 2009 380 7 Jun 10 15. , 2009 495 7 Jun 10 15. , 2009 157 3 Jun 10 26. , 2009 78 Jun 10 53. , 2009 09 Jun 10 68. , 2009 719 8 Jun 10 20. , 2009 144 2 Jun 10 20 , 2009

Last 12 Months %

1

Sundaram BNP Paribas Financial Services Opportunities Fund - Retails Growth Reliance Banking Fund - Growth

29.6211

2

24.2706

3

IDFC Small & Midcap Equity Fund Growth Birla Sun Life Pure Value Fund Growth Sahara Infrastructure Fund - Variable Pricing - Growth Sahara Infrastructure Fund - Fixed Pricing - Growth UTI Thematic Banking Sector Fund Growth Birla Sun Life Dividend Yield Plus Growth Sahara Growth Fund - Growth

23.4719

4

22.0529

5

21.2487

6

20.3514

7

20.2485

8

19.6799

9

18.1786

10

JM Mid Cap Fund - Growth

16.9359

11

UTI Opportunities Fund - Growth

16.2915

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12

Sahara Taxgain - Growth

Jun 10 26. , 2009 857 5 Jun 10 147 , 2009 .63 8 Jun 10 26. , 2009 605 3 Jun 10 13. , 2009 61

16.2537

13

HDFC Top 200 - Growth

16.2367

14

Reliance Pharma Fund - Growth

15.4775

15

ING Contra Fund - Growth

15.4368

.

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Top 15 Debt Funds - Period (Last 12 Months)
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Scheme Name Canara Robeco Income Scheme - Growth Reliance Monthly Income Plan - Growth ICICI Prudential Income Fund -Growth Kotak Twin Advantage Fund - Series II Growth Canara Robeco CIGO - Growth Birla Sun Life MIP - Savings 5 - Growth Fortis Flexi Debt Fund - Growth Reliance Income Fund - Retail - Growth Plan - Growth Kotak Bond Regular Plan - Growth IDFC Dynamic Bond Fund - Plan A Growth HDFC Monthly Income Plan - Long Term Plan - Growth Sahara Classic Fund - Growth Kotak Bond Deposit - Growth Birla Sun Life Income Plus - Growth Date NAV (Rs.) Last 12 Months % 30.6292 25.4067 23.3317 20.148 20.1395 20.0788 19.7022 17.3591 17.3302 17.2622 17.1898 17.1181 16.9271 16.7696

Jun 10 , 2009 18.8916 Jun 10 , 2009 18.0214 Jun 10 , 2009 29.0923 Jun 8 , 2009 Jun 10 , 2009 13.3472 25.83

Jun 10 , 2009 15.6728 Jun 10 , 2009 15.3372 Jun 10 , 2009 29.9583 Jun 10 , 2009 25.3655 Jun 10 , 2009 18.0191 Jun 10 , 2009 18.7451 Jun 10 , 2009 12.1373 Jun 10 , 2009 23.6208 Jun 10 , 2009 40.6119

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15

ING Income Fund - Regular Plan - Growth

Jun 10 , 2009 23.8533

16.6535

Top 15 Balance Funds – Period (Last 12 months)
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Scheme Name Reliance Regular Savings Fund - Balanced Growth Birla Sun Life 95 - Growth Canara Robeco Balance - Growth HDFC Balanced Fund - Growth Franklin Templeton India Balanced Fund Growth HDFC Prudence Fund - Growth Birla Sun Life Freedom Fund - Growth UTI Balanced Fund - Growth SBI Magnum Balanced Fund - Growth DSP BlackRock Balanced Fund - Growth Tata Balanced Fund - Growth Sundaram BNP Paribas Balanced Fund Growth LIC Balanced - Plan C (Growth) Kotak Balance - Growth PRINCIPAL Balanced Fund - Growth Date Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 Jun 10 , 2009 NAV (Rs.) 16.3028 230.19 45.73 36.943 40.4233 137.774 32.2 62.8 42.05 49.379 60.9672 38.1312 50.3595 21.546 25.43 Last 12 Months % 20.6585 17.4259 14.2679 11.0834 10.9625 10.8976 8.8941 7.4682 7.3133 6.5972 5.3812 5.0153 4.2062 2.9284 2.3256

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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. 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.

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 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.

MARKETING STRATEGY ADOPTED BY MUTUAL FUND COMPANIES

DIFFERENT METHODS OF SALES OF MUTUAL FUND

1.

Get in touch with Customers

Various AMC directly contact the customers through various database. Then the AMC convince the client to invest in their mutual fund. Many of the times due to promotion the customers also contact AMC for investment.

2. Online Investment
Some mutual fund Web sites allow customers to invest online. However, the customer must have an account with the banks AMC have partnered with. For example, Prudential ICICI Mutual Fund allows customers to buy funds online if he has a banking account with any of the following banks: Centurion Bank, HDFC Bank, ICICI Bank, IDBI Bank and UTI Bank.
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3. Through Distributors
Each AMCs sell its products through various distribution channels. The distributor in turn gets a variable commission from the AMC.The distributor have a client base of their own in which they promote the mutual fund. Some of the major distributors are listed below:
• • • • •

Indiainfoline Limited Karvy Sherkhan Religare Blue Chip India Limited

4 .Through Banks
Some of the AMCs are sister concern of the bank example Prudential ICICI Mutual Fund is a sister concern of ICICI BANK. These AMCs aggressively promote their mutual fund to their client and develop a interest in them to invest in mutual fund in order to get higher returns.

5. Through online finance portals
Some of the AMCs sell their Mutual Fund through online trading account example ICICI Direct sell funds online through online trading account. But the client must have a trading account with them. Some of the AMCs which sell their product through online trading accounts are:

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• • •

HDFC Securities ICICI Direct Kotak Street

METHODS ADOPTED BY AMCs PROMOTION AND CAMPAIGNING OF MUTUAL FUNDS

1) Through Advertisement
Each AMCs spends a lot of money in order to advertise for its Mutual Fund. The amount spend is high in case New Fund Offers i.e NFOs. Various mediums of advertisement use are given below: Television Radio Print Media Hoardings

2)

Online Blogs:

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Various AMC’s promote their product through online blogs. They advertise their product on various online sites.

3)

Telephonic Calls:

Almost all the distributors promote the Mutual Fund with the help of telephone. They have the phone numbers of existing clients and potential clients. A trained person makes a call to the clients and promotes the Mutual Fund.
4)

By Providing More Commission to Distributors:

The distributor gets a variable commission from the AMC when they sell their Mutual Fund. The commission varies from 0.5% to 5%. Thus by providing more commission to the distributor, the AMCs influence the distributor to promote their products only.
5)

By Putting Canopies:

This method is adopted by both distributor and AMCs in order to campaign for the product. They put canopy at a place where they could interact with maximum number of probable clients.

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MARKET STUDY

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STUDY AND SURVEY

Objective
This study is conducted in order to find out:➢ To study Mutual Fund industry in detail ➢ Current trends of mutual funds in the Indian market. ➢ Investor’s perception towards mutual funds as an investment option. ➢ Different views of professional advisors.

RESEARCH METHODOLOGY

I decided to do the project in two parts. The first part of the project deals with Mutual Fund as a whole and the second part deals with the investor perception regarding their investment preferences about investment in Mutual Fund. The first part of the project i.e. descriptive study comprising an overall study of Mutual fund as what it is, why to invest and where to invest, risk factor associated with it i.e. an overview of whole Mutual Fund industry.

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The second part of the project that is related to Mutual Fund and its prospects as an investment option in India and investor perception about investment in Mutual Funds available in market. Indian Stock market has undergone tremendous changes over the years. Investment in Mutual Fund has become a major alternative among Investors. The project has been

carried out to understand investors perception about Mutual Funds in the context of their trading preference and explore investor`s risk perception. The first part of the project relating the study of Mutual Funds is collected through secondary data obtained from internet, newspaper, magazines whereas the second par relating the Mutual Fund and its prospects as an investment option in India and investor perception about investment in Mutual Funds is covered using primary data.

Source of data collection
Both primary and secondary data are required Primary data is the first hand information collected directly from

respondents. The tool used here is questionnaire. Primary Data is collected through survey among existing clients along with other investors.

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The responses collected during the exercise are represented through bar graphs, pie charts and line graphs. Graphical representation helped to have a comparative outlook as it is easier to make comparison by having a glance at the picture than comparing on the basis of quantitative data. With the help of these diagrams the analysis regarding the study was conducted in order to achieve the desired objectives of the study. The analysis is done by considering following 4 parameters: ➢ ➢ ➢ ➢ General Analysis Age-wise Analysis Income-wise Analysis Occupation-wise Analysis

Secondary data is collected through internet, newspaper, magazines

DATA ANALYSIS AND
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INTERPRETATION

ANALYSIS & INTERPRETATION OF THE DATA

General Analysis
In this part of the analysis we take all the respondents as one group without segregating them into subgroups.

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Observations
Among the 50 respondents, maximum respondents are from age group 26-40yrs they cover around 34% of total population. This is because people in this age group are more responsive. And 22% of populations are from 1825 age group, 28% are from 41-55 age group and least population from 5665 age group I.e., 16%.

Occupation wise distribution of sample

Observations
Out of total 50 respondents 40% are in private service and 28% of them are in business, 24% of the total pie is owned by the government servant and retired hold the least i.e 8% of the total sample size.

Income Breakup

Out of total 50 respondents, respondents are mostly from 3-5 lacs income bracket, 24% of total populations are from 1.5-3lacs bracket and 14% of of respondents earning income above 7 lacs. Earlier investment

Observations
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In general it is observed that 96% of the population is involved in investment. That is, there is only 4% of the population which is not involved in investment. From this we can conclude only 4% of the population is unaware of available investment option. That is, very small part of our population is having low level of knowledge regarding investments.

Investment Avenue

Observations
Almost all respondents were aware of Fixed Deposit and when it comes to investing in this product, 23% of the people actually invested in this option, which is greater than any other investment option. Only 9% people invest in ULIPs this may be due to the fact that people are unaware this product provides both the benefits of insurance cover as well
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as investment. 16% people preferred investing in insurance. 18% people invest in Mutual funds, which is high in comparison to ULIPs, which means in India Mutual Fund industry has tremendous scope to expand. 13% of the respondents have invested in Real Estate, which may be due to the fact that it tends to give positive returns even when it has very less liquidity. With the recovery of the market, people have started investing in share market and14% of the respondents invest in this option. And 7% people have invested in gold.

Investment Objective

Observations
It is observed that 46% people invests with objective of long term gain, 24% people have children’s future as their investment objective as the cost of living and higher education is rising day by day.20% people investments for requirements after retirement and 10% have other investment objectives which may be for special purposes or personal needs..

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Risk taking capacity

Observations
Higher the risk, the more is the profit. People need to take risk to enjoy the benefits. Some investors want to play safe and this is the reason they invest in mutual fund, as it gives a minimum security and gives high returns as compared to its traditional counterparts. Most of people would like to take medium risk. 30% of respondents like to take low risk in the mutual fund investment. Most of these people look to invest in SIP and balanced funds because they want to assured returns with low risk. Around 20% of investors go in for are high risk. These groups of respondent are mostly of young age and plan well for the risk.

Expected rate of return

Observations
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From the graph it is observed that 28% people expect 20%30% return on their investments, 38% expect 10%-20% return, 26% expect less than 10% return, 8% expect above 30% interest. So, we can say that maximum number of people wants 10%-20% return on their investments.

Parameter of investment

Observations
From 50 respondents, 42% of people prefers safety of capital, these people generally like to invested in Fixed deposited, bonds and they are moderate risk takers.28% of people like to take tax benefits from their investments they generally invests in ULIPS, Mutual funds because in ULIP get tax benefits under section 80C.16% of people wants life cover,10% of people
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like regular income from investments. And only 4% wants flexibility in investment.

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Tenure of investment

Observations
The investment period is very important to increase the profits. The smart investor decides it in advance for how much time he would be keeping his money in the market and when he should leave squaring-up. Mostly (44%) they invest for more than 2 years to get maximum benefits. Only 2% of the total respondents want to invest for the period of less than 3 months, 24% of the respondents want to invest for the period of 3 to 9 months. And 30% of the respondents want to invest for 10 months to 2 years.

Withdrawal in-between

Observations
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From a 50 respondents 72% of people withdrawal in between a period of investment. And 28% of respondents expect that they will not need to withdraw money in between the investment tenure.

Factors influencing investing in Mutual Fund

Observations
There are many factors which influence the investment decision of the investors. It may be the current news (political, technological, financial, etc.), magazines, friends ,etc. in the study it is proved that many people trust the brokers most for the investment decisions. The Self-Evaluation is the next major factor. Reviews from financial Magazines and current news also matters. Any bad news can make a person change his /her decision.
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Around 36% of the investor depends on the brokers for their investment decisions. Around 26% people depend on their individual and self evaluation for investing in the mutual funds. 12% of people take reviews from financial magazines and 10% from friends.

Type of Mutual Fund

Observations
The schemes offered in the market are of two types, closed ended and open ended. The more demand was for the closed ended funds with the locking period of around 2-3 years. Around 62% of the investors go in for the closed ended scheme and 38% of the investors go for the open ended funds.

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Age-wise Analysis

Here, people are divided into subgroups on the basis of their age. People belonging to different age groups have different preferences due to their experience and mindset. They are analyzed on basis of age; this will help us to find how age affects the investment strategy of the investors. For analyzing the data age wise following four categories of age was made: ✔ ✔ ✔ ✔ 18-25 26-40 41-55 56-65 years years years years

In a sample, 34% lies in 26-40 category, 22% people are in age-group 1825, 28% are 41-55 age and 16% people lies in age group 56-65.

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Relation between age and earlier investment

Observations
➢ 18-25 In the survey, nine people of this age group are involved in investment. This may be due to highly active and well aware present generation. And only 2 people have not yet made any investment. This may be due to low earning, no earning or lack of knowledge. ➢ 26-40 In this age group everybody, start earning and as a result they also start investing their money to meet the future financial needs. In this age group people has already made an earlier investment. ➢ 41-55
In this age-group, everybody is well aware and is involved in investments, either small or large.

➢ 56-65 At this age, everybody has been into investments for one or the other reason. This is due to fact that investments are part of saving and at this age almost everybody realizes the importance of savings. Relation between age and investment Options

Observations
➢ 18-25 years

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At this age, people mostly choose Mutual Fund and closely followed by real estate, as their investment option. Then few people go for insurance, shares, fixed deposit and 3 out 11 people opt Gold. ➢ 26-40 years In this group, a person mostly makes investments in fixed deposits. Eleven respondents make investment in Insurance and ten respondents are involved in shares. Eight people invest in ULIPs and least preferable investment option in this age group is Gold. ➢ 41-55 years This age group also shows the similar trend with fixed deposits being the most favored investment option followed by mutual funds. In this age group, 5 people invest in shares and same number of people invests in Insurance. And three respondents take interest in Real Estate. ➢ 56-65 years In this group also, fixed deposit is the most preferred investment option, followed closely by real estate and mutual funds Relation between age and investment objective

Observations
➢ 18-25 years In this age group, around 63% of people invest for Long Term Gains. This may be due to Greater awareness and knowledge level of Young people in today’s scenario. However, they also plan for the retirement. ➢ 26-40 years In this age group, eight people invest for children’s future, and five people invest for their retirement. At this age, only four people have long term gain as an investment objective. ➢ 41-55 years
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Long term gain remains the major objective in this age group and few people have retirement, children’s future as an investment objective. ➢ 56-65 years Some specific personal needs becomes the most important objective of the people falling under this age group, followed closely by long term gain

Relation between age and Risk taking capacity

Observations
➢ 18-25 years One thing is quiet clear that low and high risk takers are in minority, age has very little significance. Majority of youngsters tend to put themselves in moderate risk return profile. ➢ 26-40 years As the age increases the income of the people increases, but still majority of respondents wanted to invest in medium risk return profile, however the number of people taking high risk increases. ➢ 41-55 years In this age group, nine people have Medium risk taking capacity. Five people have Low risk taking tendency and none in high risk profile. ➢ 56-65 years At this age group, number of medium risk taker people decreases, Four people have Low risk taking capacity and none in high risk profile.

Relation between age and Expected rate of return
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Observations
➢ 18-25 years Majority of respondents under this age group expect a return of more than 30%, closely followed by respondents who expect a return of 20-30%. Equal numbers of respondents expect a return of 10-20% as those expecting a return of more than 30%, whereas none of them expect a return of less than 10%. ➢ 26-40 years 6 out of 17 respondents of this age group expect a return of more than 30% and equal number of respondents expects a return of 20-30% and 10-20%, whereas only one respondent expect a return of less than 10%. ➢ 41-55 years 2 out of 17 respondents of this age group expect a return of more than 30% and 7 respondents expects a return of 20-30% , 3 respondents expect a return of 10-20%, whereas only 2 respondents expect a return of less than 10%. ➢ 56-65 years Equal numbers of respondents of this age group expect a return of less than 10% and 10-20%, followed by an investor each who expects a return of 2030% and more than 30%.

Relation between age and parameter governing investment

Observations
➢ 18-25 years In this age group equal numbers of respondents i.e. 4 respondents prefer safety of capital and tax saving parameter while investment. And two
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respondents want life cover from investment, an individual prefer flexibility in investment. ➢ 26-40 years In this age group maximum people prefer safety of capital and closely followed by tax saving. In this age group number of people prefers life cover increases and only one person want regular income from investment. ➢ 41-55 years In this age group also maximum people prefer safety of capital. In this age group tax saving people decreases and only one person want regular income from investment. ➢ 56-65 years In this age group also maximum people prefer life cover and regular income as most of people retired in this age group, they need regular income. And two respondents prefer tax saving parameter while investment.

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Relation between age and tenure of investment

Observations
➢ 18-25 years In this age group maximum respondent invest for a period of more than 2 years; respondents feel that their investment would double at the prevalent rate of return. Four people invest for a period of 10months-2 years and only two people invest for a period of 3–9 months. In this age group no one is interested in investment tenure of less than 3 months. ➢ 26-40 years

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In this age group number of people who invest for a period of more than 2 year increases as compared to age group 18-25. And three people prefer to invest their money for a period of 10 months- 2 years. Only one person invests for a period of 3-9 months in this age group. ➢ 41-55 years In this age group maximum respondents invest for a period of 3-9 months, which may be due to the fact that most of the responsibilities are to be fulfilled in this age. And in this age group number of people who invest for a period of more than 2 year decreases as compared to age group 26-40. Three respondents made investment for a period of 10 months -2 year and a respondent invest for period of less than 3 months. ➢ 56-65 years In this age group maximum respondents invest for a period of 10 months-2 year. In this age group number of people who invest for a period of 3-9 months decreases as compared to age group 41-55 and one respondent invest for a period of more than 2 years.

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Relation between age and expected withdrawal during the tenure of investment

Observations
➢ 18-25 years Only one person of this age group withdraws in between the tenure. And rests are quite sure that they will not withdraw in between the tenure, because they do not have much financial liability. ➢ 26-40 years In this age group number of people who do not withdraw in between the tenure decreases as compared to age group 18-25. And fourteen respondents withdraw in between the tenure. ➢ 41-55 years
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In this age group no one withdraw in between the tenure. ➢ 56-65 years In this age group number of people who do not withdraw in between the tenure decreases as compared to age group 41-55. And seven people withdraw in between the tenure. Relation between age and factor influencing investing in Mutual Fund

Observations
➢ 18-25 years In this age group 3 out of 7 people take broker advice. Two respondents take decisions by self evaluating and same number of respondent influence by other factors. ➢ 26-40 years In this age group 2 out of 5 people take decision their own. And rest of people influence by news, broker’s advice and other factors. ➢ 41-55 years In this age group maximum respondent decisions are influence by news. Two respondents take brokers advice and one person is decision influence by other factor. ➢ 56-65 years In this age group maximum decision are influence by broker’s advice and self evaluate. And one person decision is influence by other factor.

Relation between age and type of Mutual Fund
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Observations
➢ 18-25 years In this age group 5 out of 7 people prefer closed ended funds. Only two people prefer open ended funds. ➢ 26-40 years In this age group number of people who prefer closed ended fund decrease as compared to age group 18-25. And two people prefer open ended funds. ➢ 41-55 years In this age group number of people who prefer closed ended fund increases as compared to age group 26-40. In this age group number of people who prefer open ended fund increases as compared to age group 26-40. ➢ 56-65 years In this age group number of people who prefer closed ended fund decreases as compared to age group 41-55. And number of people who prefer open ended fund also decreases as compared to age group 41-55.

INCOME WISE ANALYSIS
Here, categorization is done on the basis of annual income. People follow different investment patterns based on their incomes. So, to have a clear understanding of investment patterns income-wise analysis is done. Four categories considered are:
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➢ Above 7 lacs

In a sample, 24% lies in subgroup of 1.5lacs-3lacs, 38% people are in subgroup of 3-5 lacs, 24% are category of 5-7 lacs and 14% people lies in subgroup of above 7lacs.

Relation between Income and earlier investment

Observations
➢ 1.5-3 lacs In this income group ten people involved in investment. Only two people have not yet made any investment. This may be due to low earning or no earning. ➢ 3-5 lacs In this income group 100% population is involved in investments. ➢ 5-7 lacs In this income group 100% population is involved in investments. But number of people who are involved in earlier investment decreases as compared to income group 3-5 lacs. ➢ Above 7 lacs
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At this level of earning, almost everybody has been into investments for one or the other reason. This is due to fact that investments are part of saving and with this much earning almost everybody has a view of earning by savings. Relation between Income and earlier investment

Observations
➢ 1.5-3 lacs In this income group, investors mostly choose fixed deposits and insurance as their investment option. Then 3 people go for shares and same number of people invests in mutual fund. 2 people go for gold as an investment and same number of people invests in ULIPs and real estate. ➢ 3-5 lacs In this group, a people mostly make investments in fixed deposits and mutual fund. This may be because of the fact that in fixed deposits return is sure. 9 people invest in insurance. 7 people make investments in ULIPS and 6 people are involved in Shares. 5 people invest in gold and 4 people in real estate. ➢ 5-7 lacs In this group, a people mostly make investments in fixed deposits and insurance. In this group, 8 people invest in real estate. 6 people invest in share, 5 people invests in mutual fund. 3 people take interest in ULIPS and same number of people invests in gold also.

➢ Above 7 lacs
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In this income-group, 6 people invest in mutual fund. 5 people takes interest in Real Estate, share and FD. 2 people take interest in ULIPS and 1 person in insurance.

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Relation between Income and investment objective

Observations
➢ 1.5-3 lacs In this group, 6 people invest for long term gains, 3 people invest for children’s future, and only 2 people invest for retirement this may be due to their lower earning. ➢ 3-5 lacs In this group, maximum people invest for long term gains, 6 people have children’s future as their investment objective and 3 people invest for their Retirement. ➢ 5-7 lacs Maximum numbers of people of this group have long term gains as their investment objective. 4 people invest for children’s futures as their objective. One person invests for retirement. ➢ Above 7 lacs In this group 3 out of 7 people have Long Term Gains as their investment objective, 2 people have retirement as their investment objective. And rest invests for children’s future. Relation between Income and risk taking capacity

Observations
➢ 1.5-3 lacs
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In this income group, mostly people have low risk taking capacity, two people have low medium risk taking capacity and only one person have High risk taking capacity. ➢ 3-5 lacs In this group, twelve people have medium risk taking capacity. 4 people have low risk taking capacity and only 3 people have High risk taking capacity. This may be due to fact that people of this income group want growth with surety. ➢ 5-7 lacs In this group, numbers of people have Medium risk taking capacity decreases as compared to 3-5 lacs income group. Numbers of people have high risk taking tendency increases as compared to 3-5 lacs income group. And only two people have low risk taking capacity. ➢ Above 7 lacs In this income group, five people have medium risk taking capacity. And two people have high risk taking capacity. Relation between Income and expected rate of return

Observations
➢ 1.5-3 lacs Seven people expect less than 10% returns, four people expect 10%-20% returns, and one person expects more than 30% interest. ➢ 3-5 lacs Ten people expect 10%- 20% returns, four people expect less than 10% returns, three people expect 20%-30%-interest, and two people expect above 30% rate of interest. ➢ 5-7 lacs
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In this income group maximum people expect 20%-30% returns, and rest of people expect 10%-20%, less than 10% return on investment. ➢ Above 7 lacs In this income group maximum people expect 20-30% and 10-20% returns. Only one person expects less than 10% return on investment.

Relation between Income and parameter governing investment

Observations
➢ 1.5-3 lacs In this income group maximum people prefer safety of capital, two people prefer life cover and same number of people prefers regular income from investment. One person wants tax benefits from investment. ➢ 3-5 lacs In this income group maximum people prefer safety of capital, four people like flexibility and same number of people prefer life cover from investment. And only two people want regular income from investment.
➢ 5-7 lacs

In this group maximum people prefer tax benefits and safety of capital. And one person prefers life cover from investment. ➢ Above 7 lacs In this group number of people who prefers tax benefits decreases as compared to 5-7 lacs income group. Number of people who prefers safety of
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capital also decreases as compared to 5-7 lacs income group. Only one person wants life cover. Relation between Income and tenure of investment

Observations
➢ 1.5-3 lacs In this income group, five people invest for period of 3-9 months followed by four people invest for period of 10months- two years. Only two people invest for period of more than 2 years and one person invests for period of less than 3 months. ➢ 3-5 lacs In this income group maximum people invests for period of 10 months-2 years followed by more than 2 years and four people invests for period of 39 months.
➢ 5-7 lacs

In this income group maximum people invests for period of more than 2 years. Decline in number of people invest for period of 10 months- 2 years and 3-9 months. ➢ Above 7 lacs In this income group five people invest for period of more than 2 years and only one person for 3-9 months.

Relation between Income and Expected Withdrawal during the tenure of investment

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Observations
➢ 1.5-3 lacs Eight people of this group expect withdraws in between the tenure. And rests are quite sure that they will not withdraw in between the tenure of investment. ➢ 3-5 lacs This group shows increase in number of people who withdraw between the tenure. And seven people do not expect withdrawal in between the tenure of investment.
➢ 5-7 lacs

Here, decline in number of people who expect withdrawals and do not expect withdrawals during the tenure of investment. ➢ Above 7 lacs In this income group, all respondents withdraw during the tenure of investment.

Relation between income and factor influencing investing in Mutual Fund

Observations
➢ 1.5-3 lacs In this income group people take their decision by self evaluating market conditions. ➢ 3-5 lacs

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In this income group maximum people influence by news and followed by broker’s advice, only three people take their decision by self evaluating market conditions.
➢ 5-7 lacs

In this income group maximum people influenced news and other factors. Only one respondent take brokers advice. ➢ Above 7 lacs In this income group, two people influence by news and one person by brokers advice.

Relation between income and type of Mutual Fund

Observations
➢ 1.5-3 lacs In this group two people prefer open ended funds and one person prefers closed ended funds. ➢ 3-5 lacs This group shows increase in both type of mutual fund. ➢ 5-7 lacs This group shows decline in both type of mutual fund. ➢ Above 7 lacs In this income group three people prefers closed ended and same number of people prefers open ended funds
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OCCUPATION WISE ANALYSIS:In this analysis we will analyze all the attributes on the basis of the occupation of the respondents. This will help us to find how occupation affects the investment strategy of the investors. Different occupational groups show different result and trends as the need of the person varies largely with different occupations. For the occupation wise analysis of the data, following four categories of age was made:➢ ➢ ➢ ➢ Private employee Government employee Business Retired

In a sample of 50 people, 40% are Pvt. Employee, 28% people are in Business, 24% are Govt. Employee, and 8% are Retired.

Relation between occupation and earlier investment

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Observations
➢ Business In this group, everybody has been into investments. This is due to fact that investments are part of saving and Businessman has no other way to make savings for his future prospects. ➢ Govt. Employee In this group, almost everybody is well is involved in investments, either small or large. This may be due to fact that all Govt. organizations provide investments schemes for which deductions are made from salary. Only one person does not involve in any investment. ➢ Pvt. Employee In this group, 19 out of 20 people is involved in investments. Only one person of this group is not into investments. This may be due to higher expenses than earnings. ➢ Retired Even in this group, everybody has made investments. This is due to fact that being retired they have no other source of income except investments which they must have made earlier.

Relation between occupation and investment Options

Observations
➢ Business In this group, eleven people invest in FD, eight people invest in Shares, seven people invest in mutual fund, six people equally invest in real estate and ULIPs. Insurance is taken by four people and one person is interested in gold.
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➢ Govt. Employee In this group, maximum people invest in FD and insurance, followed by six people invest in mutual fund, four people in shares, three people in real estate and two people each invested in ULIPs and gold. ➢ Pvt. Employee In this group, a people mostly make investments in FD, and closely followed by insurance and mutual fund. Eight people are involved in share and same number of people involved in real estate. And six people invests in gold, four invest in ULIPs.
➢ Retired

In this group, maximum people invested in Fixed Deposit and Mutual Fund.

Relation between occupation and investment objective

Observations
➢ Business In this group eight people have long term gain as their investment objective. And remaining take equal interest in both Retirement and children’s future. ➢ Govt. Employee Four people of this group have long term gain as their investment objective and same numbers of people have retirement as their objective. 3 out of 12 people have children’s future as an investment objective. Only one has other objective of investment. ➢ Pvt. Employee In this group, number of people who have long term gain and children’s futures as an investment objective increases. Three people have retirement as their investment objective. ➢ Retired
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This group shows decline in number of people who have long term gain and children’s futures as their investment objective. Only two people of this group have other investment objective.

Relation between occupation and risk taking capacity

Observations
➢ Business In this group, two people have Low risk taking capacity, nine people are medium risk takers and three people have high risk taking capacity. ➢ Govt. Employee In this group, maximum people medium risk taking capacity, closely followed by low risk taker and only one person has high risk taking capacity ➢ Pvt. Employee This group, show increase in number of people who have medium risk taking capacity. And six people have Low risk taking capacity and six people have High risk taking capacity. ➢ Retired In this group people either take Low risk or Medium risk. They are not ready to take High risk. This may be because at this age they are not ready to loose what they have earned till now. Moreover, they want to be financially secure.

Relation between occupation and expected rate of return

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Observations
➢ Business Six people expect 10%-20% returns, three people expect less than10% returns and two people expect 20%-30% interest return on investment. ➢ Govt. Employee Five people expect less than 10% returns, three people expect 10%-20% returns and four people expect 20%-30% interest return. ➢ Pvt. Employee In this group maximum people expect 20%-30% returns and closely followed by 10-20% return on investment. Four people expect less than 10% returns and only one person expect above 30% return. ➢ Retired In this group, three people expect 10%-20% and one person expects less than 10%.

Relation between occupation and parameter governing investment

Observations
➢ Business In this group, maximum people prefer safety of capital and then five people prefer tax benefits from investment, least is life cover.
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➢ Govt. Employee In this group, four people prefer safety of capital and same number of people prefers tax benefits from investment. Only two people want life cover and of people prefer equally regular income and flexibility in investment. ➢ Pvt. Employee In group number of people who prefer safety of capital increases. Five people go for tax benefits, three people go for regular income and one person go for flexibility in this group. ➢ Retired In this group, two people prefer life cover and same number of people prefers regular income from investment.

Relation between occupation and tenure of investment

Observations
➢ Business In this most of people invest for a period of less than 3 months, five people invest for a period of 3-9 months and 2 people invest for a period of 10 months-2 years. ➢ Govt. Employee In this group maximum people invest for a period of more than 2 years, closely followed by 10 months -2 years. Two people invest for a period of 39 months and an individual invest for a period of less than 3 months. ➢ Pvt. Employee

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In this group show increase in number of people invest for a period of less than 3 months. Six people invest for a period of 10 months -2 years and four people invest for a period of 3-9 months. ➢ Retired In this group, three people invest for a period of 10 months -2 years and one person invest for a period of 3-9 months.

Relation between occupation and Expected Withdrawal during the tenure of investment

Observations
➢ Business Only three people of this group expect not withdraw in between the tenure. And rests people will withdraw in between the tenure. ➢ Govt. Employee Here, maximum people expect withdrawals during the tenure and only one person do not expect withdrawals during the tenure. ➢ Pvt. Employee 50% people of this group do not expect any withdrawals during the tenure and 50% expect withdrawals during the tenure. ➢ Retired In this group four people expect withdrawals during the tenure.

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Relation between occupation and factor influencing investing in mutual fund

Observations
➢ Business In this group three people influence by broker’s advice and two people influence by news. Rest of people equally influence by other factors and self evaluating. ➢ Govt. Employee There is increase in number of people influence by news and self evaluation and decline in number of people influence by broker’s advice. ➢ Pvt. Employee In this group, maximum people influence by news and self evaluation. And two people each influence by brokers advice and other factors
➢ Retired

In this group two people decisions by self evaluating the market condition and one person is influenced by news.

Relation between occupation and type of mutual fund

Observations
➢ Business In this group, four people prefer open ended funds and three people prefer closed ended funds. ➢ Govt. Employee
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In this group equal number of prefer open and closed ended funds. ➢ Pvt. Employee In this group maximum people prefer closed ended funds and only two people prefer open ended funds.
➢ Retired

In this group two people prefer closed ended funds and only one person prefer open ended funds.

FINDINGS
➢ In survey, Age Group of 26-40 years was more in numbers. The second most Investors were in the age group of 41-55 years and the least were in the age group of 56-65 years. ➢ In Occupation group most of the Investors were Pvt. employees, the second most Investors were Govt. employees and the least were retired people. ➢ In family Income group, between Rs 3-5 lacs were more in number, the second most were in the Income group of more than Rs. 5-7 lacs and the least were in the group of above Rs. 7 lacs. ➢ Only 4% respondents are not involved in any form of an investment. ➢ In survey, maximum respondents had a Fixed Deposit, 76% invested in Mutual Fund. Only 7% respondents invested in Gold.
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➢ Mostly respondents made investment for long term gain, 24% for children’s future and 20% people investments for requirements after retirement. ➢ In survey, 50% of respondents would like to take medium risk and only 20% of respondents like to take high risk. ➢ Mostly Respondents expected 10-20% return from investment. ➢ Respondents like to invest for tenure of more than 2 years. And least invests for tenure of less than 3 months.
➢ From a 50 respondents, 72% of people withdrawal in between a period

of investment. ➢ From a 50 respondents, 56% population takes services of investment advisor and 44% population makes their own decision.

➢ In survey, 36% of respondents took Broker’s advice while investing in mutual Fund. ➢ In survey, 62% of Mutual Fund investors prefer closed ended schemes

LIMITATIONS OF THE STUDY

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Some of the limitations of the project are listed as below: 1. Due to the financial and time constraints a cluster analysis of the population so as to get better results was not feasible. 2. It was difficult to break the ice with the common people initially. It was a daunting task to convince them to fill in the personal details of the questionnaire where they have to mention the monthly income, occupation etc. 3. To convince the people for a proper interviewing process is also difficult.
4. The survey was conducted in Sarojni Nagar and Alaknanda Market.

The standard of living, per capita income of people, earning style, etc. of this region is different from other areas. Therefore, the inferences drawn from the survey can’t be generalized.

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CONCLUSION
Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, and Channels etc. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing. “Brand” plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are many AMCs but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and their Assets Under Management is larger than others whose Brand name are not well known like Principle, Sunderam, etc. Distribution channels are also important for the investment in mutual fund. Financial Advisors are the most preferred channel for the investment in mutual fund. They can change investors’ mind from one investment option to others. Many of investors directly invest their money through AMC
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because they do not have to pay entry load. Only those people invest directly who know well about mutual fund and its operations and those have time.

Indian mutual fund market has great potential in the future, investors are willing to pour money in mutual funds, despite some temporary restraints, and other economic factors are in favorable mode. Thus we need proper management of advisory services, more schemes, financial advisors and institutions to cater untouched markets.

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RECOMMENDATIONS

✔ Create more awareness of mutual funds Investors should be made aware of the benefits. Nobody will invest until and unless he is fully convinced. Investors should be made to realize that ignorance is no longer bliss and what they are losing by not investing. ✔ Concentrate on the rural areas Mutual funds AMC (Asset Management Company) must concentrate on their rural areas & try to expand area of operation. It must come up with new scheme, which may offer stable returns with security of funds. ✔ An aggressive marketing Mutual fund houses must undertake an aggressive marketing to sell mutual funds. It must advertise on the media like television & newspaper, financial magazines. ✔ Provide factual details Company should provide factual details about the mutual funds to related parties. It must give comparison of different schemes, fund houses. It must provide NAV, return across the different period. ✔ Mutual funds have bright future Investors are willing to pour money in mutual funds, despite some temporary restraints. Thus we need proper management of advisory services, more schemes, financial advisors and institutions to cater
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untouched markets. Younger people aged under 35 will be a key

new customer group into the future, so making greater efforts with younger customers who show some interest in investing should pay off. Customers with graduate level education are easier to sell to and there is a large untapped market there. To succeed however, advisors must provide sound advice and high quality.
✔ More appointments of Relationship Managers There should be more appointments of RMs so that every customer gets equalized attention. ✔ Build excellent customer service Build excellent customer service so that the existing customers get a regular updates about funds into which they have invested. Especially what is their fund value at a current date.
✔ More emphasis should be given to investors who depends on

the broker advice to invest this is the junction where the company can increase its customer base. ✔ Provision for class room Provision for class room training for new investors for boost their moral and give basic knowledge about mutual fund. And also some tips can also be given to these investors during the session.
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✔ Innovative The company should come up with innovative ways of service at their door steps this may be a costly affair but will surely give positive results in the long run.

BIBLIOGRAPHY

BOOKS REFRRED
AMFI Mutual Fund Business World

WEB SITES
• • • • • • •

www.amfiindia.com www.mutualfundsindia.com www.mutualfundsindia.com www.ask.com www.faq.com www.bseindia.com www.amfiindia.com/mutual funds/nav/about funds/open ended schemes.com www.investopedia/aboutus/html

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QUESTIONNAIRE

Name 1. Age 18-25 56-65 2. Gender Male 3. Occupation

………………………………………..

26-40

41-55

Female

Govt. Employee Retired

Private Employee

Business

4. What is your annual income? 1.5-3lacs Above 7lacs 5. Have you made any earlier investment?
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3-5lacs

5-7lacs

Yes

No

6. Are you holding any of the following investment products? (Select all applicable options) Fixed Deposits Funds Real Estate Gold Shares ULIPs Insurance Mutual

7. While investing you will be more concerned about? (Mark the following in accordance to their importance) Very Important Safety of Capital Life Cover Tax Efficiency Flexibility Regular Income 8. What is your primary investment strategy? Retirement future Others Long term gain Children’s Somewhat Important Not Important

9. How would you like to invest your money? Low Risk Medium Risk High Risk

10. What returns do you expect from investments?

Less than 10% More than30%

10-20%

20-30%

11.You plan to make withdrawals during the term of your investment?
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Yes 12.Parameter guiding your investment? Safety of capital Regular income

No

Life cover flexibility

Tax saving

13.Factors influencing while investing in Mutual Fund? Advice from Broker Current news Self Evaluation Others 14.Which type of Mutual Fund do you prefer? Open Ended Schemes Closed Ended Schemes

GLOSSARY

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Your financial consultant who gives professional advice on the fund's investments and to supervise the management of its assets. Amortization A method of equated monthly payments over the life of a loan. Payments usually are paid monthly but can be paid annually, quarterly, or on any other schedule. In the early part of a loan, repayment of interest is higher than that of principal. This relationship is reversed at the end of the loan. Appreciation When an investment increases in value, it appreciates. For example, a equity share whose price goes from Rs. 20/- to Rs. 25/- has appreciated by Rs. 5/-. Arbitrage The practice of buying and selling an interlaced stock on different exchanges in order to profit from minute differences in price between the two markets. Asset Property and resources, such as cash and investments, comprise a person's assets; i.e., anything that has value and can be traded. Examples include stocks, bonds, real estate, bank accounts, and jeweler. Asset Allocation When you divide your money among various types of investments, such as stocks, bonds, and short-term investments (also known as "instruments"), you are allocating your assets. The way in which your money is divided is called your asset allocation. Annualized Return This is the hypothetical rate of return that, if the fund achieved it over a year's time, would produce the same cumulative total return if the fund performed consistently over the entire period. A total return is expressed in a percentage and tells you how much money you have earned or lost on an investment over time, assuming that all dividends and capital gains are reinvested. Balanced Fund A mutual fund that maintains a balanced portfolio, generally 40% bonds and 60% equity. Bid or Sell Price The price at which a mutual fund's shares are redeemed (bought back) by the fund. The bid or redemption price means the current net asset value per share, less any redemption fee or back-end load. NEW DELHI INSTITUTE OF MANAGEMENT 155 | P a g e

Capital This is the amount of money you have invested. When your investing objective is capital preservation, your priority is trying not to lose any money. When your investing objective is capital growth, your priority is trying to make your initial investment grow in value. Capital Gain Profit from a sale of an investment constitutes a capital gain. For example, if you bought a share of stock for Rs. 5/- and later sold it for Rs. 7/-, you would have a capital gain of Rs. 2/-. Capital Gains Distributions Payments (usually annually) to mutual fund shareholders of gains realized on the sale of portfolio securities. Capital Growth A rise in market value of a mutual fund's securities, reflected in its NAV per share. This is a specific long-term objective of many mutual funds. Derivative An investment contract based on an underlying investment called an "instrument." The most common type of derivative is an option contract, which involves the right to buy or sell the underlying instrument at an agreed price. Futures contracts are also derivatives. Diversification The policy of spreading investments among a range of different securities to reduce the risks inherent in investing.

Dividend When companies pay part of their profits to shareholders, those profits are called dividends. A mutual fund's dividend is money paid to shareholders from investment income the fund has earned. The amount of each share's dividend depends on how well the company does. Endorsement Assigning or transferring a lien to another person is accomplished through the use of an endorsement. The words "PAY TO THE ORDER OF" and then the name of the NEW DELHI INSTITUTE OF MANAGEMENT 156 | P a g e

person to whom the lien is being assigned to, is written. If there is not enough space on the original note to write an endorsement, it is written on a separate piece of paper that is permanently affixed to the original note. This is called an along. Face Value The face value is the term used to describe the value of a bond in terms of what the company which issued the bond will actually repay when the loan matures. It's sometimes described as nominal or par value. Load A sales charge or commission assessed by certain mutual funds ("load funds") to cover their selling costs. Redeemable Preferred shares or bonds that give the issuing corporation an option to repurchase securities at a stated price. These are also known as callable securities. Redemption Fee A fee charged by a limited number of funds for redeeming, or buying back, fund units. Redemption Price The price at which a mutual fund's units are redeemed (bought back) by the fund. The redemption price is usually equal to the current NAV per unit. Reinvestment Date The date on which a share's dividend and/or capital gains will be reinvested (if requested) in additional fund shares.

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