You are on page 1of 75








BANDRA (E), MUMBAI 400 051


I, Rahul D. Belote of the Chetanas H. S. College Of Commerce And Economics, Bandra

(E), hereby declare that I have completed the project entitled MUTUAL FUND
INVESTMENT in partial fulfillment of the requirement for the third year of the
bachelor of management studies course for the academic year 2012-2013.

I further declare that information submitted by me is true and original to the best of my

DATED: ____________
PLACE: _____________

Signature of Student

(Rahul D. Belote)


This to certify that Mr. Rahul D. Belote has successfully carried out the project work on
the topic of Study Of Marketing Strategy Of Hotel In Mumbai in partial fulfillment of
Bachelor of Management Studies as per the curriculum laid down by the University of
Mumbai for the academic year 2012-2013.
This is a bonafide project work and to the best of my knowledge, the information
presented is true and original.

Project Guide

External Examiner




College Seal


I am grateful to the Mumbai University for giving us an opportunity to

showcase our interest and talent in the form of this project. I am also
thankful to the Management of Chetana Hazarimal Somani College of
Commerce and Economics for making all the facilities available and
espousing the cause of the research.

My deepest gratitude goes to my guide Prof. Debjani Singha for her

invaluable time and contribution in the making of this project, which has
also helped increase my knowledge about the subject. Without her support
and guidance, the competition of this project would not have been possible.
I would also like to thank the authorities at various Mutual funds for giving
me their time and information needed to complete this project.
Lastly I would like to thank my faculty members, family and friends who
have supported me in this project.

Mr. Rahul D. Belote.


The main purpose of doing this project was to know about mutual fund and its
functioning. This helps to know in details about mutual fund industry right from its
inception stage, growth and future prospects.
It also helps in understanding different schemes of mutual funds. Because my study
depends upon prominent funds in India and their schemes like equity, income, balance as
well as the returns associated with those schemes.
The project study was done to ascertain the asset allocation, entry load, exit load,
associated with the mutual funds. Ultimately this would help in understanding the
benefits of mutual funds to investors.


To give a brief idea about the benefits available from Mutual Fund Investment.
To give an idea of the types of schemes available
To discuss about the market trends of Mutual Fund investment.
To study some mutual fund companies and their funds.
To observe the fund management process of mutual funds.
Explore the recent developments in the mutual funds in India.
To give an idea about the regulations of mutual funds.


Through I tried to collect some primary data but they were too inadequate for the

purposes of the study.

Time is critical factors limiting this study.
The study is limited to selected mutual funds schemes.
Past performance may not guarantee the future return.
The portfolio of mutual fund investments can change according to the market

A mutual fund is scheme in which several people invest their money for a
common financial cause. The collected money invests in the capital market
and money, which they earned, is divided based on the number of units,
which they hold.
The mutual fund industry started in India in a small way that the UTI Act
creating what was effectively a small savings division within the RBI. Over
a period of 25 years this grew fairly successfully and gave investors a good
return, and therefore in 1989, as the next logical step, public sector banks
financial institutions were allowed to float mutual funds and their success
emboldened the government to allow the private sector to foray into this
The advantages of mutual fund are professional management,
diversification, economies of scale, simplicity, and liquidity.
The disadvantages of mutual fund are high costs, over-diversifications,
possible tax consequences, and the inability of management to guarantee a
superior return.
The most important trend in the mutual fund industry is the aggressive
expansion of the foreign owned mutual fund companies and the decline of
the companies floated by nationalized banks and smaller private sector

The biggest problems with mutual funds are their cost and fees it include
purchase fee, Redemption fee, Exchange fee, management fee, Account fee
& Transaction costs. There are some loads which add to the cost of mutual
fund. Load is type of commission depending on the type of funds.
Mutual funds are easy to buy and sell. You can either buy them directly
from the fund company or through a third party. Before investing in any
funds one should consider some factor like objective, risk, Fund Managers
and scheme track record, cost factor etc.
There are many types of mutual funds. You can classify funds based
structure (open-ended & close-ended), Nature (equity, debt, balanced),
investment objectives (growth, income, money market) etc.
A code of conduct and registration structure for mutual fund intermediaries,
which were subsequently mandated by SEBI. In addition, this year AMFI
was involved in a number of developments and enhancements to the
regulatory framework.





























































There are a lot of investment avenues available today in the financial market
for an investor with an investible surplus. He can invest in Bank Deposits,
Corporate Debentures, and Bonds where there is low risk but low return. He
may invest in stock of companies where the risk is high and the returns are
also proportionately high. The recent trends in the stock markets have
shown that an average retail investor always lost with periodic bearish tends.

People began opting for portfolio managers with expertise in stock markets
who could invest on their behalf. Thus we had wealth management services
provided by many institutions. However they proved too costly for a small
investor. These investors have found a good shelter with the mutual funds.
What is Mutual Fund?
A mutual fund is a financial intermediary that allows a group of investors to pool their
money together with a predetermined investment objective. The mutual fund will have a
fund manager who is responsible for investing the gathered money into wide variety of
different securities (stocks or bonds). When investors invest in a mutual fund, they are
buying units or portions of the mutual fund and thus on investing becomes a unit holder
of the fund.
A mutual fund is a professionally managed investment company that combines the
money of many individuals and invests this pooled money in a wide variety of different
securities. It is by pooling the money of many individuals that mutual funds are able to
provide the diversification and money management (along with many other advantages)
that were once reserved only for the wealthy.
Professional money managers take this pool of money and invest it in a wide variety
of stocks, bonds, or other securities depending on the investment objective, or goal, of the
particular fund. It is the investment objective of the fund that guides the manager in
selecting the various securities for the fund.
It is the investment objective of the mutual fund that also guides the investor on which
funds to invest in. Since different investors have different objectives, there are a number
of different kinds of mutual funds, i.e., some mutual funds may provide monthly income
while others seek long-term capital appreciation.
Mutual funds can be classified according to their investment objective. Some of the
classifications include money market funds, growth funds, balanced funds, income funds,
and many others.


A Mutual Fund is a vehicle for investing in stocks and bonds. It is not an alternative
investment option to stocks and bonds; rather it pools the money of several investors and
invests this in stocks, bonds, money market instruments and other types of securities.
Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual
fund unit gets a proportional share of the fund's gains, losses, income and expenses.
A Mutual Fund is a body corporate registered with the Securities and Exchange Board
of India (SEBI) that pools up the money from individual / corporate investors and invests
the same on behalf of the investors /unit holders, in equity shares, Government securities,
Bonds, Call money markets, in order to provide highly relative safety and returns etc.,
and distributes the profits. In other words, a mutual fund allows an investor to indirectly
take a position in a basket of assets. Mutual funds have become one of the most attractive
ways for the average person to invest their money.
Each Mutual Fund with different type of schemes is managed by respective Asset
Management Company (AMC). An investor can invest his money in one or more
schemes of Mutual Fund according to his choice and becomes the unit holder of the
scheme. The invested money in a particular scheme of a Mutual Fund is then invested by
fund manager in different types of suitable stock and securities, bonds and money market
instruments. Each Mutual Fund is managed by qualified professional man, who uses this
money to create a portfolio which includes stock and shares, bonds, gilt, money-market
instruments or combination of all.
When investors invest in a mutual fund, they are buying units or portions of the
mutual fund and thus on investing becomes a unit holder of the fund. Mutual funds are
considered as one of the best available investments as compare to others they are very
cost efficient and also easy to invest in, thus by pooling money together in a mutual fund,
investors can purchase stocks or bonds with much lower trading costs than if they tried to
do it on their own. But the biggest advantage to mutual funds is diversification, by
minimizing risk & maximizing returns.
Mutual funds are set up to buy many stocks. Beyond that, investors can diversify even
more by purchasing different kinds of stocks which helps to spreading out investors

money across different types of investments and hence, reduces risk tremendously up to
certain extent. It could take you weeks to buy all these investments, but if you purchased
a few mutual funds you could be done in a few hours because mutual funds automatically
diversify in a predetermined category of investments.
It could take you weeks to buy all these investments, but if you purchased a few
mutual funds you could be done in a few hours because mutual funds automatically
diversify in a predetermined category of investments.

Mutual funds are collective savings and investments vehicles where savings of
small (or sometime big) investors are pooled together to invest for their mutual benefit
and returns distributed proportionately.

A mutual fund is on investment that pools your money with the money of an
unlimited number of other investors. In return, you and the other investors each own
shares of the fund. The funds assets are invested according to an investment objective
into the funds portfolio of investments. Aggressive growth funds seek long-term capital
growth by investing primarily in stocks of fast-growing smaller companies or market
segments. Aggressive growth funds are also called capital appreciation funds.

Why select mutual fund?

The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investor opt
for bank FD, which provide moderate return with minimal risk. But as he moves ahead
to invest in capital protected funds and the profit-bonds that give out more return which is

slightly higher as compared to the bank deposits but the risk involved also increases in
the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual
funds provide professional managements, diversification, convenience and liquidity.
That doesnt mean mutual fund investments risk free.
This is because the money that is pooled in are not invested only in debts funds which
are less higher riskier but are also invested in the stocks markets which involves a higher
risk but can expects higher returns. Hedge fund involves a very high risk since it is
mostly traded in the derivatives market which is considered very volatile.











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

First Phase-(1964-87):
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was
setup 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 managements.

Second Phase (1987-1993) (Entry of Public sector funds):

1987 marked the entry of non- UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in

June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993,
the mutual fund industry had assets under management of Rs.47, 004 crores.

Public Sector

Amount Mobilised

Assets Under

Mobilisation as % of gross


Domestic Savings










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, 1993was
the year in which the first Mutual Fund Regulations came into being, under which all
mutual funds, except UTI were to be registered and governed. The erstwhile Kothari
Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by
a more comprehensive and revised Mutual Fund Regulations in 1996.
The industry now functions under the SEBI (Mutual Fund) Regulations 1996.The
number of mutual fund houses went on increasing, with many foreign mutual
funds setting up funds in India and also the industry has witnessed several mergers
and acquisitions. As at the end of January 2003, there were 33 mutual funds with
total assets of Rs.1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of
assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003:

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 doesn't come under the purview of the Mutual Fund Regulation 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 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. A graph indicates the growth of assets over the years.

A graph indicates the growth of assets under management over the years.




1) Professional Management
Mutual funds offer investors the opportunity to earn an income or build their wealth
through professional management of their investible funds. There are several aspects to
such professional management viz. investing in line with the investment objective,
investing based on adequate research, and ensuring that prudent investment processes are
2) Affordable Portfolio Diversification
Units of a scheme give investors exposure to a range of securities held in the
investment portfolio of the scheme. Thus, even a small investment of Rs 5,000 in a
mutual fund scheme can give investors a diversified investment portfolio. As will be seen
in Unit 12, with diversification, an investor ensures that all the eggs are not in the same
basket. Consequently, the investor is less likely to lose money on all the investments at
the same time. Thus, diversification helps reduce the risk in investment. In order to
achieve the same diversification as a mutual fund scheme, investors will need to set apart
several lakh of rupees. Instead, they can achieve the diversification through an investment
of a few thousand rupees in a mutual fund scheme.
3) Economies Of Scale
The pooling of large sums of money from so many investors makes it possible for the
mutual fund to engage professional managers to manage the investment. Individual
investors with small amounts to invest cannot, by themselves, afford to engage such
professional management. Large investment corpus leads to various other economies of
scale. For instance, costs related to investment research and office space get spread across
investors. Further, the higher transaction volume makes it possible to negotiate better
terms with brokers, bankers and other service providers.
4) Liquidity
At times, investors in financial markets are stuck with a security for which they cant
find a buyer worse; at times they cant find the company they invested in! Such

investments, whose value the investor cannot easily realise in the market, are technically
called illiquid investments and may result in losses for the investor. Investors in a mutual
fund scheme can recover the value of the moneys invested, from the mutual fund itself.
Depending on the structure of the mutual fund scheme, this would be possible, either at
any time, or during specific intervals, or only on closure of the scheme. Schemes where
the money can be recovered from the mutual fund only on closure of the scheme are
listed in a stock exchange. In such schemes, the investor can sell the units in the stock
exchange to recover the prevailing value of the investment.

5) Tax Benefits
Specific schemes of mutual funds (Equity Linked Savings Schemes) give investors the
benefit of deduction of the amount invested, from their income that is liable to tax. This
reduces their taxable income, and therefore the tax liability. Further, the dividend that the
investor receives from the scheme is tax-free in his hands.
6) Tax Deferral
As will be discussed in Unit 6, mutual funds are not liable to pay tax on the income
they earn. If the same income were to be earned by the investor directly, then tax may
have to be paid in the same financial year. Mutual funds offer options, whereby the
investor can let the moneys grow in the scheme for several years. By selecting such
options, it is possible for the investor to defer the tax liability. This helps investors to
legally build their wealth faster than would have been the case, if they were to pay tax on
the income each year.
7) Convenient Options
The options offered under a scheme allow investors to structure their investments in
line with their liquidity preference and tax position.

8) Investment Comfort
Once an investment is made with a mutual fund, they make it convenient for the
investor to make further purchases with very little documentation. This simplifies
subsequent investment activity.
9) Regulatory Comfort
The regulator, Securities & Exchange Board of India (SEBI) has mandated strict
checks and balances in the structure of mutual funds and their activities. These are
detailed in the subsequent units. Mutual fund investors benefit from such protection.
10) Systematic Approach To Investments
Mutual funds also offer facilities that help investor invest amounts regularly through a
Systematic Investment Plan (SIP); or withdraw amounts regularly through a Systematic
Withdrawal Plan (SWP); or move moneys between different kinds of schemes through a
Systematic Transfer Plan (STP). Such systematic approaches promote an investment
discipline, which is useful in long term wealth creation and protection.


Lack of portfolio customization some securities houses offer Portfolio Management
Schemes (PMS) to large investors. In a PMS, the investor has better control over what
securities are bought and sold on his behalf. On the other hand, a unit-holder is just one
of several thousand investors in a scheme. Once a unit-holder has bought into the scheme,

investment management is left to the fund manager (within the broad parameters of the
investment objective). Thus, the unit-holder cannot influence what securities or
investments the scheme would buy. Large sections of investors lack the time or the
knowledge to be able to make portfolio choices. Therefore, lack of portfolio
customization is not a serious limitation in most cases.


Choice Overload

Over 800 mutual fund schemes offered by 38 mutual funds and multiple options within
those schemes make it difficult for investors to choose between them. Greater
dissemination of industry information through various media and availability of
professional advisors in the market should help investors handle this overload.

No Control Over Costs

All the investor's moneys are pooled together in a scheme. Costs incurred for

managing the scheme are shared by all the Unit holders in proportion to their holding of
Units in the scheme. Therefore, an individual investor has no control over the costs in a
scheme. SEBI has however imposed certain limits on the expenses that can be charged to
any scheme. These limits which vary with the size of assets and the nature of the scheme.
An investor in a mutual fund has no control of the overall of investing. The investor
pays investment management fees as long as he remains with the fund, albeit in return for
the professional management and research. Fees are payable even if the value of his
investments is declining. A mutual fund investor also pays fund distribution costs, which
he would not incur in direct investing. However, this shortcoming only means that there
is a cost to obtain the mutual fund services.



Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. thus mutual fund has Variety of
flavors, Being a collection of many stocks, an investors can go for picking a mutual fund
might be easy. There are over hundreds of mutual fund scheme to choose from. It is
easier to think if mutual funds in categories, mentioned below,




Equity Fund


Debt Fund




Tax Saving










Open-Ended Funds, Close-Ended Funds and Interval Funds

Open-ended funds:
Are open for investors to enter or exit at any time, even after the NFO.
When existing investors buy additional units or new investors buy units of the
open ended scheme, it is called a sale transaction. It happens at a sale price,

which is equal to the NAV.

When investors choose to return any of their units to the scheme and get back

their equivalent value, it is called a re-purchase transaction.

This happens at a re-purchase price that is linked to the NAV. Although some unitholders may exit from the scheme, wholly or partly, the scheme continues
operations with the remaining investors.


The scheme does not have any kind of time frame in which it is to be closed. The
ongoing entry and exit of investors implies that the unit capital in an open-ended
fund would keep changing on a regular basis.


Close-ended funds:
Have a fixed maturity.
Investors can buy units of a close-ended scheme, from the fund, only during its

The fund makes arrangements for the units to be traded, post-NFO in a stock

exchange. This is done through a listing of the scheme in a stock exchange.

Such listing is compulsory for close-ended schemes. Therefore, after the NFO,
investors who want to buy Units will have to find a seller for those units in the

stock exchange.
Similarly, investors who want to sell Units will have to find a buyer for those

units in the stock exchange.

Since post- NFO, sale and purchase of units happen to or from counter-party in
the stock exchange and not to or from the mutual fund the unit capital of the
scheme remains stable.


Interval funds:
Combine features of both open-ended and close-ended schemes.
They are largely close-ended, but become open-ended at pre-specified intervals.
For instance, an interval scheme might become open-ended between January 1 to

15, and July 1 to 15, each year.

The benefit for investors is that, unlike in a purely close-ended scheme, they are
not completely dependent on the stock exchange to be able to buy or sell units of

the interval fund.

Minimum duration of an interval period in an interval scheme/plan is 15 days.
No redemption/repurchase of units are allowed except during the specified
transaction period (the period during which both subscription and redemption may

be made to and from the scheme).

The specified transaction period will be of minimum 2 working days, as per
revised SEBI Regulations.


Equity Fund:
These funds invest a maximum part of their corpus into equities holdings. The
structure of the fund may vary different for different schemes and the fund managers
outlook on different stocks. The Equity funds are sub-classified depending upon their
investment objective, as follows:

Diversified Equity Funds

Mid-cap Funds
Sector Specific Funds
Tax Saving Funds
Equity investments are meant for a longer time horizon, thus Equity funds rank

high on the risk-return matrix.


Debt Funds:
The objective of these Funds is to invest in debt papers. Government authorities,
private companies, banks and financial institutions are some of the major issuers of
debt papers. By investing in debt instruments, these funds ensure low risk and
provide stable income to the investors. Debt funds are further classified as:

Gilt Funds:

Invest in only treasury bills and government securities, which do not have a credit risk
(i.e. the risk that the issuer of the security defaults).

Income Funds:
Invest a major portion into various debt instruments such as bonds, corporate

debentures and Government securities.



Seeks to declare a dividend every month. It therefore invests largely in debt securities.
However, a small percentage is invested in equity shares to improve the schemes yield.
As will be discussed in Unit 8, the term Monthly Income is a bit of a misnomer and
investor needs to study the scheme properly, before presuming that an income will be
received every month.

Short Term Plans:

Meant for investment horizons for 3 to 6 months. These funds primarily invest in
short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs).
Some portion of the corpus is also invested in corporate debentures.

Liquid schemes:

Or Money Market Schemes are a variant of debt schemes that invest only in debt
securities where the moneys will be repaid within 91-days. As will be seen later in this
Work Book, these are widely recognized to be the lowest in risk among all kinds of
mutual fund schemes.


Balance Funds
As the name suggest they, are a mix of both equity and debts funds. They invest in

both equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both
the words. Equity part provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment
parameter viz,

Each category of funds is backed by an investment philosophy, which is pre-defined in

the objectives of the fund. The investor can align his own investment needs with the
funds objectives and invest accordingly.



Growth Schemes:

Growth Schemes are also known as equity schemes. The aim of these schemes is to
provide capital appreciation over medium to long term. These schemes normally invest a
major part of their fund in equities and are willing to bear short-term decline in value for
possible future appreciation.

Balanced Funds:

Balanced Schemes aim to provide both growth and income by periodically distributing
a part of the income and capital gains they earn. These schemes invest in both shares and
fixed income securities, in the proportion indicated in their offer documents (normally

Income Funds:

Income Schemes are also known as Debt schemes. The aim of these schemes is to
provide regular and steady income to investors. These schemes generally invest in fixed
income securities such as bonds and corporate debentures. Capital appreciation in such
schemes may be limited.

Money Market Scheme:

Money market schemes aim to provide both growth and income by periodically
distributing a part of the income and capital gains they earn. These schemes invest in
both shares and fixed income securities, in the proportion indicated in their offer



Load Funds:

A load fund is one that charges a commission for entry or exit. That is, each time you
buy or sell units in the fund, a commission will be payable. Typically entry and exit loads
range from 1% to 2 %. It could be worth paying the load, if the fund has a good
performance history.

No-Load Funds:

A No-Load Fund is one that does not charge a commission for entry or exit. That is,
no commission is payable on purchase or sale of units in the fund. The advantage of a
no-load fund is that the corpus is put to work.

Tax Saving Scheme
Tax-saving schemes offer tax rebates to the investor under tax laws prescribed from
time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity
Linked Saving Scheme (ELSS) are eligible for rebate.

Index Schemes:

Index schemes attempt to replicate the performance of a particular index such as the
BSE Sensex or the NSE 50. The portfolio of these schemes will consist of those stocks
that constitute the index. The percentage of each stock to the total holding will be
identical to the stocks index weightage. And hence, the returns from schemes would be
more or less equivalent to those of the Index.

Sector Specific Schemes:

There are the funds/schemes which invest in the securities of only those sectors or
industries as specified in the offer documents e.g. Pharmaceuticals, Software, Fast
moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are
dependent on the performance of the respective sectors/industries. While these funds
may give higher returns, they are more risky compared to diversified funds. Investors

need to keep a watch on the performance of those sectors/industries and must exit an
appropriate time.


Since each owner is part owner of a mutual fund, it is necessary to establish the value
of his part. In other words, each share or unit that an investor holds to be assigned a
value. Since the units held by investor evidence the ownership of the funds assets, the
value of the total assets of the fund when divided by the total number of units issued by
the mutual fund gives us the value of one unit. This is generally called the NET ASSET
Value (NAV) of one unit or one share. The value of an investors part ownership is thus
determined by the NAV of the number of units held.

Calculation of NAV:
Let us see an example. If the value of a funds assets stands at Rs. 100 and it has 10
investors who have bought 10 units each, the total numbers of units issued are 100, and
the value of one unit is Rs. 10.00 (1000/100). If a single investor in fact owns 3 units, the
value of his ownership of the funds will be Rs. 30.00(1000/100*3). Note that the value
of the funds investments will keep fluctuating with the market-price movements, causing
the Net Asset Value also to fluctuate. For example, if the value of our funds asset
increased from Rs.1000 to 1200, the value of our investors holding of 3 units will now be
(1200/100*3) Rs. 36. The investment value can go up or down, depending on the
markets value of the funds assets.


Standard Risk Factors:
Investment in Mutual Fund Units involves investment risks such as trading volumes,
settlement risk, liquidity risk, default risk including the possible loss of principal.
As the price / value / interest rates of the securities in which the scheme invests
fluctuates, the value of your investment in the scheme may go up or down (Mutual Funds
may also provide factors affecting capital market in general and not limited to the
Past performance of the Sponsor/AMC/Mutual Fund does not guarantee future
performance of the scheme.
The name of the scheme does not in any manner indicate either the quality of the
scheme or its future prospects and returns.
The sponsor is not responsible or liable for any loss resulting from the operation of the
scheme beyond the initial contribution of _____ made by it towards setting up the Fund.
The present scheme is the first scheme being launched under its management.
(Applicable, if the AMC has no previous experience in managing a Mutual Fund)
The present scheme is not a guaranteed or assured return scheme (applicable to all
schemes except assured return schemes)
Scheme Specific Risk Factors
Schemes investing in Equities - Describe briefly risks associated with investment in
Schemes investing in Bonds Describe briefly risks associated with fixed income
products like Credit Risk, Prepayment Risk, Liquidity Risk etc.
Risks associated with Investing in Foreign Securities - (if the scheme invests in these
Risks associated with Investing in Derivatives - (if the scheme invests in these
Risks associated with Investing in Securitised Debt - (if the scheme invests in these

Risks associated with Short Selling and Securities Lending - (if the scheme intends
to participate in short selling and securities lending).


The mutual fund collects money directly or through brokers from investors. The
money is invested in various instruments depending on the objective if the scheme. The

income generated by selling securities or capital appreciation of these securities is passed

on to the investors in proportion to their investment in the scheme. The investments are
divided into units and the value of the units will be reflected in Net Asset Value or NAV
of the unit. NAV is the market value of the assets of the scheme minus its liabilities. The
per unit NAV is the net asset value of the scheme divided by the number of units
outstanding on the valuation date. Mutual fund companies provide daily net asset value
of their schemes to their investors. NAV is important, as it will determine the price at
which you buy or redeem the units of a scheme. Depending on the load structure of the
scheme, you have to pay entry or exit load.


SEBI (Mutual Fund) Regulations, 1996 as amended till date define mutual fund as a
fund established in the form of a trust to raise moneys through the sale of units to the
public or a section of the public under one or more schemes for investing in securities
including money market instruments or gold or gold related instruments or real estate
assets. Key features of a mutual fund that flows from the definition are:


It is established as a trust
It raises moneys through sale of units to the public or a section of the public
The units are sold under one or more schemes
The schemes invest in securities (including money market instruments) or gold or gold
related instruments or real estate assets.
SEBI has stipulated the legal structure under which mutual funds in India need to be
constituted. The structure, which has inherent checks and balances to protect the
investors, can be briefly described as follows:
Mutual funds are constituted as Trusts.
The mutual fund trust is created by one or more Sponsors, who are the main persons
behind the mutual fund business.
Every trust has beneficiaries. The beneficiaries, in the case of a mutual fund trust, are
the investors who invest in various schemes of the mutual fund.
The operations of the mutual fund trust are governed by a Trust Deed, which is executed
by the sponsors. SEBI has laid down various clauses that need to be part of the Trust
The Trust acts through its trustees. Therefore, the role of protecting the beneficiaries
(investors) is that of the Trustees. The first trustees are named in the Trust Deed, which
also prescribes the procedure for change in Trustees.
In order to perform the trusteeship role, either individuals may be appointed as trustees
or Trustee Company may be appointed. When individuals are appointed trustees, they are
jointly referred to as Board of Trustees. A trustee company functions through its Board of
Day to day management of the schemes is handled by an Asset Management Company
(AMC). The AMC is appointed by the sponsor or the Trustees.

The trustees execute an investment management agreement with the AMC, setting out
its responsibilities.
Although the AMC manages the schemes, custody of the assets of the scheme
(securities, gold, gold-related instruments & real estate assets) is with a Custodian, who is
appointed by the Trustees.
Investors invest in various schemes of the mutual fund. The record of investors and their
unit-holding may be maintained by the AMC itself, or it can appoint a Registrar &
Transfer Agent (RTA).

Let us understand the various agencies, by taking the example of the constitution of SBI
Mutual Fund.
Mutual Fund Trust SBI Mutual Fund

State Bank of India


SBI Mutual Fund Trustee Company Private Limited


SBI Funds Management Private Limited


HDFC Bank Limited, Mumbai CITI BANK N.A., Mumbai Stock

Holding Corporation of

India Ltd., Mumbai Bank of Nova Scotia

(custodian for Gold)


Computer Age Management Services Pvt. Ltd.

Other Service Providers

The custodian has custody of the assets of the fund. As part of this role, the custodian
needs to accept and give delivery of securities for the purchase and sale transactions of
the various schemes of the fund. The Custodian is appointed by the mutual fund. A
custodial agreement is entered into between the trustees and the custodian. The SEBI

regulations provide that if the sponsor or its associates control 50% or more of the shares
of a custodian, or if 50% or more of the directors of a custodian represent the interest of
the sponsor or its associates, then that custodian cannot appointed for the mutual fund
operation of the sponsor or its associate or subsidiary company. An independent
custodian ensures that the securities are indeed held in the scheme for the benefit of
investors an important control aspect. The custodian also tracks corporate actions such
as dividends, bonus and rights in companies where the fund has invested. All custodians
need to register with SEBI.
The RTA maintains investor records. Their offices in various centres serve as Investor
Service Centre (ISCs), which perform a useful role in handling the documentation of
investors. The appointment of RTA is done by the AMC. It is not compulsory to appoint a
RTA. The AMC can choose to handle this activity in house. All RTAs need to register
with SEBI.
Auditors are responsible for the audit of accounts. Accounts of the schemes need to be
maintained independent of the accounts of the AMC. The auditor appointed to audit the
scheme accounts needs to be different from the auditor of the AMC. While the scheme
auditor is appointed by the Trustees, the AMC auditor is appointed by the AMC.
Fund Accountants
The fund accountant performs the role of calculating the NAV, by collecting information
about the assets and liabilities of each scheme. The AMC can either handle this activity
in-house, or engage a service provider.
Distributors have a key role in selling suitable types of units to their clients i.e. the
investors in the schemes. Distributors need to pass the prescribed certification test, and


register with AMFI. Regulatory aspects of their role are discussed in Unit 3, while some
of the distribution and channel management practices are covered in Unit 5.
Collecting Bankers
The investors moneys go into the bank account of the scheme they have invested in.
These bank accounts are maintained with collection bankers who are appointed by the
AMC. Leading collection bankers make it convenient to invest in the schemes by
accepting applications of investors in most of their branches. Payment instruments
against applications handed over to branches of the AMC or the RTA need to be banked
with the collecting bankers, so that the moneys are available for investment by the
scheme. Through this kind of a mix of constituents and specialized service providers,
most mutual funds maintain high standards of service and safety for investors.


With the increase in mutual fund players in India, a need for mutual fund association
in India was generated to function as non-profit organization. Association of Mutual
Funds in India (AMFI) was incorporated on 22nd August, 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has been
registered with SEBI. Till date all the AMCs are that have launched mutual fund
schemes are its members. It functions under the supervision and guidelines of its Board
of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund Industry
to a professional and healthy market with ethical lines enhancing and maintaining
standards. It follows the principle of both protecting and promoting the interests of
mutual funds as well as their unit holders.

The objectives of Association of Mutual Funds in India:


The (AMFI) works with 30 registered AMCs of the country. It has certain defined
objectives which juxtaposes the guidelines of its Board of Directors. The objectives are
as follows:

This mutual fund association of India professional and ethical standards in all

areas of operation of the industry.

It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in the
activities of mutual fund and asset management. The agencies who are by any
means connected or involved in the field of capital markets and financial services

in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual

fund industry.
Associations of Mutual Fund of India do represent the Government of India, the
Reserve Bank of India and other related bodies on matters relating to the Mutual

Fund Industry.
It develops a team of well qualified and trained Agents distributors. It implements
a programed of training and certification for all intermediaries and other engaged

in the mutual fund industry.

AMFI undertakes all India awareness program for investors in order to promote

proper understanding of the concept and working of mutual funds.

At last but not the least association of Mutual Fund of India also disseminate
information on Mutual Fund Industry and undertakes studies and research either
directly or in association with other bodies.

AMFI Publications:
AMFI publish mainly two types of bulletin. One is on the monthly basis and the other
is quarterly. These publications are of great support for the investors to get intimation of
the knowhow of their parked money.


ROLE OF MUTUAL FUNDS:Mutual funds perform different roles for different constituencies:

Their primary role is to assist investors in earning an income or building their

wealth, by participating in the opportunities available in various securities and

It is possible for mutual funds to structure a scheme for any kind of investment
objective. Thus, the mutual fund structure, through its various schemes, makes it
possible to tap a large corpus of money from diverse investors. (Therefore, the
mutual fund offers schemes. In the industry, the words fund and scheme are

used inter changeably.

Various categories of schemes are called funds. In order to ensure consistency
with what is experienced in the market, this Workbook goes by the industry
practice. However, wherever a difference is required to be drawn, the scheme

offering entity is referred to as mutual fund or the fund)

The money that is raised from investors, ultimately benefits governments,
companies or other entities, directly or indirectly, to raise moneys to invest in

various projects or pay for various expenses.

As a large investor, the mutual funds can keep a check on the operations of the

investee company, and their corporate governance and ethical standards.

The projects that are facilitated through such financing, offer employment to
people; the income they earn helps the employees buy goods and services offered
by other companies, thus supporting projects of these goods and services

companies. Thus, overall economic development is promoted.

The mutual fund industry itself, offers livelihood to a large number of employees
of mutual funds, distributors, registrars and various other service providers.
Higher employment, income and output in the economy boost the revenue
collection of the government through taxes and other means. When these are spent

prudently, it promotes further economic development and nation building.

Mutual funds can also act as a market stabilizer, in countering large inflows or
outflows from foreign investors. Mutual funds are therefore viewed as a key
participant in the capital market of any economy.


1. Including the best assets in portfolio is most important:

Even the best of experts will agree that the combination of your assets in portfolio
investment (security, income and growth) accounts for more than 80% of the overall
performance of your portfolio. In other words, the growth potential of your portfolio
(Mutual fund investing) is mainly determined by the quality and combination of different
types of assets in portfolio. Mutual fund investing diversification enables an investor to
create an excellent portfolio as they are managed by qualified fund manager.
Let us see a very generalist example, consider mutual fund investing portfolio (A)
which is composed entirely of bond. This portfolio will show low growth and has low
risk. This is an example of money market mutual fund. In comparison, consider mutual
fund investing portfolio (B) which is composed of 65% stocks and 35% bonds. The
portfolio (B) will grow stronger but is more risky that the portfolio (A). This is an
example of balanced mutual fund. In comparison, consider mutual fund investing
portfolio (C) which is composed of 95% stocks and 5% bonds. This portfolio will grow
faster but carry huge risks of losses. It is important to understand that stock prices are
very volatile in short term. But value stocks (blue chip companies) are certain to show
good growth in long term. This portfolio (C) is an example of growth mutual fund.

Growth linked mutual fund investing shall be done always with long term time horizon
(min 5 to 7 years).
2. Mutual fund investing in international markets is good:
To give an example of the magnitude of world investment potential, Canada is about
4.9% of world market capitalization. This means that if you limit your investment in
Canada only, you may miss out (95.1%) on many opportunities that is available in global
markets. A combination of global and domestic investment, which is possible by
international mutual fund investing, can increase the potential returns while reducing risk.
3. Long term mutual fund investment in growth funds reduces risk:
In all assets classes, returns can fluctuate widely. The fluctuations will be more in
stocks and least in stocks. For long periods, however, yield tends to balance and stabilize.
Mutual fund investing if done for long term; reduces risk and increases the potential for
high returns.

4. Benefits to regular contribution (Systematic Investment) in mutual funds

Start early for higher growth. A pre-approved procurement plan (PAP0 also better
known a systematic investment plan SIIP in India, can help you achieve your investment
goals. It is a practical and comfortable to save on a regular basis than to invest a big lot at
once. Investing a predetermined amount in mutual fund investing at regular intervals can
reduce the average purchase cost of each share. We buy more shares when the price is
low and fewer when prices are high, so its possible to increases yield. In addition, it is
not important to time the market when you are investing regularly.

5. Mutual Fund investing in index links fund is a good investment option:

Managers of index funds emulate the performance of a particular financial market
index, such as the S & P / TSX / SENSEX / NSE maintaining a mutual fund that tracks

the same index or a representative sample in the same proportions. Index funds provide
investors a high degree of diversification, reflecting the composition of stock indices
generally contains a portion a portion of many companies among the largest, strongest
and recognized in their geographic area. This management approach, called passive
management usually offers investors a lower management costs, because with the
emulation of the equity portfolio of the market index, research costs are low. The savings
thus obtained is transferred to investors.



power of

Competitive Rivalry
within an Industry
I Industry

power of


1) Competitive Rivalry:
In Mutual fund industry, competition is too high. Many Fund houses offer large
number of schemes.
2) Threat of Substitute Products:
It means many companies offer similar types of product, which create threats for
new companies because of substitute of their product is being offered by their major

3) Bargaining Power of Supplier:

In Mutual Fund industry, Supplier would be the Stock Market which provides
valuable stock to the various schemes of Fund houses. Fund Manager has Bargaining
power in the form of analytical skill to select most valuable and inexpensive scripts
for its Portfolios.

4) Bargaining Power of Customer:


Customers of Mutual Funds industry would Bargain on the basis of returns and
Expense ratio (Expense incurred in managing the Fund) of various schemes.
Customer would choose the funds, which have low Expense ratio and probably give
high return in future.
5) Threats of New Entrance:
In Mutual Fund Industry, new players would be abandon due to Market regulator
SEBIs policy like removing the entry load, many legal requirement ect. Also,
volatility in the Stock market and high competition level would force new player to
keep themselves away from the industry.



From investors viewpoint mutual funds have several advantages such as:

Professional management and research to select quality securities

Spreading risk over a larger quantity of stock whereas the investor has limited to
buy only a hand full of stocks. The investor is not putting all his eggs in one

Ability to add funds at set amounts and smaller quantities such as $100 per month

Ability to take advantage of the stock market which has generally out performed
other investment in the long run

Fund manager are able to buy securities in large quantities thus reducing
brokerage fees

However there are some disadvantages with mutual funds such as:

The investor must rely on the integrity of the professional fund manager

Fund management fees may be unreasonable for the services rendered

The fund manager may not pass transaction savings to the investor

The fund manager is not liable for poor judgment when the investor's fund loses

There may be too many transactions in the fund resulting in higher fee/cost to the
investor - This is sometimes call "Churn and Earn"

Prospectus and Annual report are hard to understand


Investor may feel a lost of control of his investment dollars

There may be restrictions on when and how an investor sells/redeems his mutual
fund shares

Company Fixed Deposits versus Mutual Funds

Company deposits are unsecured borrowing by the company accepting the
deposit. Credit rating of the fixed program is an indication of the inherent
default risk in the investment.
The moneys of investors in a mutual fund scheme are invested by the
AMC in specific investments under that scheme. The investments are held
and managed in-trust for the benefits of schemes investors. On the other
hand, there is no such direct correlation between a companys fixed deposit
mobilization, and the avenues where those resources are deployed.
A corollary of such linkage between mobilization and investment is that
the gains and losses from the mutual fund scheme entirely flow through to
the investors. Therefore, there can be no certainly of yield, unless a named
guarantor assures a return or, to a lesser extent, if the investment is in a serial

gilt scheme. On the other hand, the return under a fixed deposit is certain,
subject only to the default risk of the borrower.

Both fixed deposits and mutual funds offer liquidity, but subject to some
The provider of liquidity in the case of fixed deposits is the borrowing
company. In mutual funds, the liquidity provider is the scheme itself (for
open-end schemes) or the market (in the case of closed-end schemes).
The basic value at which fixed deposits are encashed is not subject
market risk. However, the value at which units of a redeemed depends on
the market. If securities have gained in value during the period, then the
investor can even earn a return that is higher that will what he anticipated
when he invested. But he could also end up with a loss.
Early encashment of fixed deposits is always subject to a penalty charged
by the company that accepted the fixed deposits. Mutual fund schemes also
have the option of charging a penalty on early redemption of units
(through by way of an exit load). If the NAV has appreciated adequately,
then even after the exit load, the investor could earn a capital gain on his


Bank Fixed Deposits verses Mutual Fund:

Bank fixed deposits are similar to company fixed deposits. The major difference is
that banks are generally more stringently regulated than companies. They even operate
stricter requirements regarding Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio
While the above are causes for comfort, are protected by the Deposits too are subject
to default risk. However, given the political and economic impact of bank defaults, the
governments as well as Reserve Bank of India (RBI) try to ensure that banks do not fail.
Further, bank deposits up-to Rs.100,000 are protected by the Deposits Insurance and
Credit Guarantee Corporation (DICGC), so long as the bank has paid the required
insurance premium of 5 paisa per annum for every Rs.100 of deposits. The monetary
ceiling of Rs. 100,000 is for all the deposits in all the branches of a bank, held by the
depositor in the same capacity and right.






Administrative exp.






Investment options




High penetration

Low but improving


At a cost


Quality of assets

Not transparent


Interest calculation


Every month


Guarantor is needed

Guarantor is not needed



Not needed


Eligibility to Invest
The following are eligible to purchase Units of most schemes:
Individual Investors:
They invest for their personal benefit or the benefit of their family.
Resident Indian adult individuals, above the age of 18. They can invest, either singly or
jointly (not exceeding three names)
Minors i.e. persons below the age of 18: Since they are not legally eligible to contract,
they need to invest through their Parents/ Lawful guardians.
Hindu Undivided Families (HUFs): Here family members pool the family money
(inherited) for investments. The head of the family (called Karta) invests on behalf of the
family. Against his name in the application, he would add the letters HUF to show that
the investment belongs to the family.
Non-Resident Indians (NRIs) / Persons of Indian origin (PIO) resident abroad. An
Indian citizen, who is working abroad, and his / her family residing abroad, is typical
NRIs who invest in India. Some Indians go on to become citizens of foreign countries
such as US, Canada, New Zealand etc. Since India does not permit dual citizenship, they
need to give up their Indian citizenship. However, their status as erstwhile Indians,
entitles them to invest in mutual fund schemes on full repatriation or non-repatriation

basis. As part of the documentation, they will need to provide their PIO (Person of Indian
Origin) Card / OCI (Overseas Citizenship of India) Card. NRI / PIO resident abroad have
the facility of investing on repatriable basis i.e. when they sell the investment, the sale
proceeds can be transferred abroad. Alternatively, they can invest on non-repatriable
basis, in which case the proceeds from the sale of those investments cannot be remitted
abroad. The conditions related to making payments for repatriable investments are
discussed later in this unit.
Foreign investors can invest in equity schemes of MFs registered with SEBI after
completing KYC process.
Non-individual Investors: Here, the individuals who sign the documents are investing
on behalf of organizations / institutions they represent, such as:

Companies / corporate bodies, registered in India

Registered Societies and Co-operative Societies
Religious and Charitable Trusts
Trustees of private trusts
Partner(s) of Partnership Firms
Association of Persons or Body of Individuals, whether incorporated or not
Banks (including Co-operative Banks and Regional Rural Banks) and Financial

Institutions and Investment Institutions

Other Mutual Funds registered with SEBI
Foreign Institutional Investors (FIIs) registered with SEBI
International Multilateral Agencies approved by the Government of India
Army/Navy/Air Force, Para-Military Units and other eligible institutions
Scientific and Industrial Research Organizations
Universities and Educational Institutions

The following are not permitted to invest in mutual funds in India:

An individual who is a foreign national (unless of course, the person is an NRI or
PIO / OCI card holder.
Any entity that is not an Indian resident, as per FEMA (except when the entity is
registered as FII with SEBI, or has a sub-account with a SEBI-registered FII).
Overseas Corporate Bodies (OCBs) i.e. societies / trusts held, directly or
indirectly, to the extent of over 60% by NRIs, or trusts where more than 60% of
the beneficial interests is held by such OCBs.

Sources of Information on Eligibility

The individual investors eligible to invest as detailed above, can invest in any mutual
fund scheme, unless the mutual fund comes out with a specific scheme, or a plan within a
scheme, that is not intended for individual investors. The non-individual investors eligible
to invest as detailed above, can invest in a mutual fund. However, it is a good practice to
check the Who can Invest section of the Offer Document, especially for a first time
investor. Further, in some schemes, only specific classes of non-individual investors are
permitted. For instance: Some gilt schemes have specific plans, which are open only for
Provident Funds, Superannuation and Gratuity Funds, Pension Funds, Religious and
Charitable Trusts and Private Trusts. In the case of Exchange Traded Funds, only
authorized participants and large investors can invest in the NFO Subsequently, in the
stock exchange, anyone who is eligible to invest can buy Units of the ETF.
KYC Requirements for Mutual Fund Investors
Previously it was compulsory for all investments of Rs.50,000 and above to be compliant
with the regulatory requirements prescribed under the Anti-Money Laundering Act, 1992
and SEBI circulars in this regard. The regulations have now been revised.
The following investors have to be KYC compliant, irrespective of the investment value:
Non-individual investors i.e. companies, partnership firms, trusts, HUF etc.
Non-Resident Indians
Investors coming through channel distributors SEBI is keen that investors have
unrestricted access to AMCs, and thus ensure that AMCs can execute all financial and
non-financial transactions of investors. Therefore, it has been stipulated that:
c) All new folios/ accounts shall be opened only after ensuring that all investor-related
documents including account opening documents, PAN, KYC, PoA (if applicable),
specimen signature are available with AMCs/RTAs and not just with the distributor.
d) For existing folios, AMCs are responsible for updation of the investor related
documents including account opening documents, PAN, KYC, PoA (if applicable),
specimen signature by November 15, 2010.
Broadly, mutual fund investors need the following documents:

Proof of Identity
Proof of Address
PAN Card
Mutual funds have made an arrangement with CDSL Ventures Ltd (CVL), a wholly
owned subsidiary of Central Depository Services (India) Ltd. (CDSL), to make it
convenient for mutual fund investors to comply with the documentation requirements.
Appendix 5 is CVLs prescribed form for Individuals; Appendix 6 is CVLs prescribed
form for non-Individuals.
Select branches / offices of mutual funds, registrars and large distributors serve as
Points of Service (PoS) for the KYC documentation. Investors will need to provide the
Original, along with a copy of the relevant documents, to any of the PoS (listed in AMFI
website The Original will be returned after verification.
Alternatively, the investor can provide a True Copy attested by a Notary Public, Gazette
Officer or Manager of a Scheduled Commercial Bank.
CVL provides a facility where the PoS, from their own office, can access CVLs
system, enter the requisite data and generate an acknowledgement with a Mutual Fund
Identification Number (MIN). Based on this acknowledgement, the mutual fund investor
can invest in any mutual fund. Thus, the KYC documentation has to be done only ONCE,
with CVL acting through the PoS.
Similarly, in the event of change of address or any other information, the mutual fund
investor needs to fill the standard form and follow the prescribed process only once, with
any of the PoS. Based on that, the information will be updated with all the mutual\ funds
where the investor has invested.
Where investment is made by a minor, KYC requirements have to be complied with by
the Guardian.
In the case of investments by a Power of Attorney holder on behalf of an investor,
KYC requirements have to be complied with, by both, investor and PoA holder.


PAN Requirements for Micro-SIPs

PAN Card is compulsory for all mutual fund investments. Exception has been made for
Micro-SIPs i.e. SIPs where annual investment (12 month rolling or April-March financial
year) does not exceed Rs 50,000. Micro-SIP investment by individuals, minors and soleproprietary firms are exempted from the requirement of PAN card. Instead, the investors











IDENTIFICATION documents along with Micro SIP applications:

Voter Identity Card
Driving License
Government / Defense identification card
Photo Ration Card
Photo Debit Card (Credit card not included because it may not be backed up by a bank
Employee ID cards issued by companies registered with Registrar of Companies)
Photo Identification issued by Bank Managers of Scheduled Commercial Banks /
Gazette Officer / Elected Representatives to the Legislative Assembly / Parliament
ID card issued to employees of Scheduled Commercial / State / District Co-operative
Senior Citizen / Freedom Fighter ID card issued by Government.
Cards issued by Universities / deemed Universities or institutes under statutes like
Permanent Retirement Account No (PRAN) card issued to New Pension System (NPS)
subscribers by CRA (NSDL).
Any other photo ID card issued by Central Government / State Governments /Municipal
authorities / Government organizations like ESIC / EPFO.
The Document must be current and valid. Document copy shall be self-attested by the
investor / attested by the ARN holder mentioning the ARN number. Investors have to
give a declaration stating that the he does not have any existing Micro SIPs which
together with the current application will result in aggregate investments exceeding Rs.
50,000 in a year. It may be noted that the relaxation in documentation requirements for

micro-SIPs is not available for HUFs and non-individuals. It is available for NRIs, but
not PIOs.

Additional Documentation Requirements applicable for Institutional

Since institutional investors are not natural persons, authorized individuals invest on
behalf of the institution. Therefore, the following additional documents are essential:
Eligibility for the investing institution to invest. For instance, a company / trust is
eligible to invest under the laws of the country, but the companys own incorporation
(Memorandum of Association and Articles of Association or Trust Deed) may not have
provided for such investments. The company / trust cannot invest if its incorporation
documents do not provide for investments of this type. Similarly, in some states,
permission of the Charity Commissioner is necessary, before Religious and Charitable
Trusts can invest.
Authorisation for the investing institution to invest. This is typically in the form of a
Board Resolution.
Authorisation for the official to sign the documents on behalf of the investing
institution. This again is provided for in the Board Resolution.
These documentation requirements for institutional investors are in addition to the normal
KYC documentation, discussed earlier.

Demat Account
Dematerialisation is a process whereby an investors holding of investments in physical
form (paper), is converted into a digital record. Benefit of holding investments in demat
form is that investors purchase and sale of investments get automatically added or
subtracted from their investment demat account, without having to execute cumbersome
paperwork. Settlement of most transactions in the stock exchange needs to be
compulsorily done in demat form.

The benefits of demat facility for mutual fund investors has increased, with National
Stock Exchange and Bombay Stock Exchange making available screen-based platforms
for purchase and sale of mutual fund schemes.
The demat facility is typically initiated by the mutual fund, which would tie up with a
Depository (like National Securities Depository Ltd or Central Depository Securities
Ltd). On the basis of this tie-up, investors can go to a Depository Participant (which is
generally a bank or a broking house) and demat their investment holding i.e. convert their
physical units into demat units. In order to avail of this facility, the Depository Participant
will insist on the investor opening a demat account.
Usual KYC documentation will be required. On dematerialisation, the investors unitholding will be added to his / her demat account. As and when the investor sells the unitholding, the relevant number of units will be reduced from the investors demat account.
The investors benefits from a demat account are as follows:
Less paperwork in buying or selling the Units, and correspondingly, accepting or giving
delivery of the Units.
Direct credit of bonus and rights units that the investor is entitled to, into the investors
demat account.
Change of address or other details need to be given only to the Depository Participant,
instead of separately to every company / mutual fund where the investor has invested.
The investor also has the option to convert the demat units into physical form. This
process is called re-materialisation.


Indian MF industry has immense growth
potential: Jimmy A Patel, CEO, Quantum
Mutual Fund
ET Bureau May 21, 2012, 01.07PM IST

(Interviewed by Shailesh Menon, Rajesh Naidu and Bakul Chugan Tongia)

The Indian mutual fund industry is currently going through a rough patch. Not only are
the industry's assets under stress, but given the current macro-economic concerns, the
survival of many of the relatively small and new fund houses is under doubt. With retail
investors becoming more skeptical about the MF industry, the ET Intelligence Group
attempts to address their concerns by asking industry veterans to give a fresh perspective
on investment prospects, and the growth drivers and factors that are likely to impact
mutual funds in India . Edited excerpts:


How would you describe the current state of affairs in the Indian MF industry?
The Indian mutual fund industry has immense growth potential, and if aided well by
technological advancements and increased awareness, MFs can be a major contributor to
the overall Indian economy. However, it appears, the industry has not learnt from its past
mistakes. The industry still seems to be operating on an asset gathering mandate, and not
an asset managing one; the focus of the industry still seems to be driven by business
agendas and not on building a community that is truly concerned about its investors;
market share and "piece-of-the-wallet" concerns still precede issues like investor safety
and delivery of risk-adjusted returns. The fund industry is still in a learning stage, though
unfortunately, it seems to forget its earlier lessons all too soon
The MF industry, a few years ago, had set tall targets for itself. How far are we from
achieving those targets?
Targets are necessary. It's not just about achieving them, but more about moving in
that direction. Rather than meeting a number, the industry should focus on becoming
absolutely investor-friendly - right from the time an investor starts understanding about
mutual funds through to the entire experience of helping him create wealth. Better

regulations, advanced technology and conscientious managements will help in moving

towards this aim.
Why should retail investors invest in funds when the future of many fund houses
itself is in doldrums?
When you choose to invest with a fund house, you should ascertain its background
well so that you can be sure of the future of your investments. In times such as now, retail
investors should choose to get convinced about the investment philosophy of a fund
house before investing in it, rather than get convinced by brilliant marketing gimmicks or
aggressive distribution strategies. Investors must take care to choose their fund well.
Should the retail investor (today) go by the fund house or the scheme performance's,
especially if the scheme belongs to a smaller fund house?
If a fund is like a prospective life partner, a fund house is like its family. If you have
solid family background backing your chosen partner, it reduces the scope of unwanted
future uncertainties. However, the size of fund or a fund house has little to do with its
performance. When you look at performance, consider consistent track records rather
than spikes in returns, especially in the short term. A consistent fund will probably
provide you with greater comfort in times of volatility as compared to a one-year star
What do you think is the future of relatively smaller and newer fund houses?
The skepticism about the future of smaller fund houses is sheer speculation. Smaller
fund houses will continue to do well in the coming years just like their larger peers. The
Indian mutual fund industry has a bright future for transparent and ethical fund houses
that are truly concerned about investors and focus on investor security and on delivering
risk-adjusted returns, irrespective of their size or their years of existence.
Do you think the industry will consolidate in the coming years?


While the law of economics suggests consolidation, which would reduce costs greatly,
different fund houses have different needs and objectives which might not sync favorably
with such an approach. For all you know, several fund houses may not even go for
consolidation; the moment they see their business becoming unviable they may just exit
the business. This may be the case for foreign fund houses operating in India. Domestic
fund houses again will not consolidate their business; they will try to survive the bad
times... They will wait for a gain in their valuations before finding a partnership deal with
some other player wanting to start an AMC business in the country.

In current times, when survival of the fittest holds water, what steps have you taken
to ensure your existence? What are your strategies to sustain this business?
We are a different fund house. Being the only direct-to-investor fund house, we are
constantly exploring new avenues to reach out to our investors and spread what we call
"the Quantum way of investing". Here again, the online medium would be our strength as
we look to reach out to the base of over 100 million online Indians and bring them a
better way of creating wealth over the long term. Some of our best ideas are a simple
implementation of our investors' feedback.
Do you think it is time the industry explored newer investment avenues - beyond
equities, fixed income and gold?
Investors today are saturated with schemes. Investors are also paranoid about opaque
markets, the disappointing corruption reports and repetitive scams. It thus, is the
responsibility of the industry to collaborate to re-instill faith in investors, not by
increasing the number of investor awareness programmes, or by launching new ad
campaigns to promote this message, but by simply stepping away from the wallet-share
game and retrospect on how they could best be asset managers working for the benefit of
the end investor.
What is your advice to retail investors with respect to investing in mutual funds and
equity markets?

The purpose of investing in MFs is to have a professionally managed portfolio of

products that suit your requirement. An investor has a few basic requirements: one, create
wealth over the long term for which you need an equity scheme; two, save tax for which
you would need an Equity-Linked Savings Scheme; three, need to have some cash in
reserve in case of an emergency for which you will need to look at a debt/liquid scheme;
and four, need to counter equity exposure for which you could opt for a Gold ETF. These
are the basic products that an investor needs to have, and not the hordes of schemes that
clutter his portfolio.


Best Mutual Funds to Invest in 2012 in

If your exiting mutual fund portfolio is bleeding or you are still struggling to make your
first investment list of Best Mutual Funds to Invest in 2012 may help you. I have
covered 12 diversified equity funds & couple of debt funds in this list so that you can
make a proper diversified portfolio.
I have also attached consolidated factsheet of Best Mutual Funds at the end of this article
this includes investment objective, past performance, ranking in their category, chart,
expense ratio, sector/stocks these funds have invested in and some other relevant

Best Mutual Funds to invest in 2012 Equity Funds


Any fund with holding of more than 65% in equity can be considered as an equity fund.
But to keep things simple I have just taken 4 categories of diversified equity funds &
ignored balanced funds, sector funds, international funds or Equity Linked Saving
Schemes. Equity funds are divided according to Market Cap (size of the company).
If you are still not convinced with Mutual Funds you should read Magic of Systematic
Investment Plan (SIP).

Top Mutual Funds Ranking

Scheme Name







SBI Emerg Buss Fund - Gr






Kotak Bond Deposit - Gro






SBI Magnum Balanced Fund






IDFC Monthly Income Plan





Escorts Liquid Plan - Gr






Not Ranked

Reliance Equity Linked S


Not Ranked





R* Shares Banking ETF


Not Ranked





L&T Gilt Investment - Gr


Not Ranked







Reliance Mutual Fund is Indias leading Mutual Fund with Quarter Average Assets under
management (AAUM) of Rs 102066Crores.
Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of
the fastest growing mutual funds in the country. RMF offers investors a well-rounded
portfolio of products to meet varying investor requirements and has presence in 159 cities
across the country. Reliance Mutual Fund constantly endeavors to launch innovative
products and customer service initiatives to increase value to investors. "Reliance Mutual
Fund schemes are managed by Reliance Capital Asset Management Limited., a
subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of
The schemes that I have taken for analysis from Reliance Mutual Fund are:


1.1 RELIANCE BANKING FUND (G) [under Sector Fund]: The primary investment
objective of the Scheme is to seek to generate continuous returns by actively investing in
equity and equity related or fixed income securities of companies in the Banking Sector.
Fund overview:
Fund TypesInvestment PlanAssets sizesLaunches dateBenchmarkFund Manager-

Open Ended
Rs1466 Crores
May21, 2003
Bank Nifty
Mr. Sunil Singhania.

primary investment objective of the Scheme is to generate consistent returns by investing
in equity / equity related or fixed income securities of media & entertainment and
other associated companies.
Fund overview:
Fund TypesInvestment PlainAssets sizesLaunch dateBenchmarkFund Manager-

Open Ended
Rs112.05 crores
Sep 27, 2007
Mr. Sailesh Raj Bhan

1.3 RELIANCE VISION (G) [under large cap fund]: Seeks to provide long term capital
appreciation by primarily investing in growth oriented stocks.
Fund overview:
Fund TypesInvestment PlanAssets SizesLaunch dateBench mark-

Open Ended
Rs 61crores
Aug8, 2007
BSE 100

Fund Manager-

Mr. Ashwani Kumar

MOSL Motilal Oswal Securities Ltd.

Motilal Owasal Securities Ltd. (MOSL) is a well-diversified financial services firm. The
Financial Products and services offered by MOSL include Wealth Management, Broking
& Distribution, Commodity Broking, Portfolio Management Services, Institutional
Equities, Private Equity, Investment Banking Services and Principal Strategies.
The Customer base of MOSL includes Retail customers, mutual funds, foreign
institutional investors, financial institutions and corporate clients. Among these, the
company directly deals with High Net Worth Individuals thereby defining the criticality
of quality of customer experience for them.
MOSL has a wide-spread network in over 576 cities and towns in India and 1,257
business locations. On September 30th, 2009 the total registered customers with MOSL
were 5, 80,667. With a large customer bank, effective call handling and information
management becomes the root problem.
Business Challenges:
In a financial service enterprise like MOSL, customer account management and effective
customer handling takes center stage. In case of MOSL, an interesting point that came
forward was the direct relation between the customer and advisor or account manager. In
case the advisor shifts job or is unable to attend the call of this customer next time, the
probability of this customer shifting as well increased manifold.

Addressing the problem of advisor attrition and training a new advisor for effective
account management of a High Net worth (HNW) Customer is a major challenge in
investment and trading businesses. In similar business environments, an advisor usually
manages multiple accounts sometimes up to 15 in number. Managing the customer
information and maintaining interaction records for regulatory purposes becomes a
challenge. Also if all 15 customers are trying to reach the same advisor at some profitable
market position for immediate trading, handling or prioritizing calls in real-time becomes
an unachievable task leading to loss in business or even customer loss.
The business required add-on productivity to enhance customer experience. This included
increased call handling capacity per agent during peak call flow periods and also access
to the missed calls to initiate a real-time callback to retain the customer interest. When
the customer calls frequency is much less, the advisors sort and dial out to HNW clients
from database. This sorting and getting live call connects takes up a major chunk of the
advisors productive time. An automation of this process to harness maximum advisor
productivity was another business challenge.

Key Business Requirements

Drishti's expertise in Enterprise Communications Applications and Contact Center
Software were the major determinants for the client to choose Drishti as its technology
partner. After a thorough review of client's infrastructure, Drishti and the client had
numerous meetings to discuss the requirements and possible solutions in detail to address
client's pain points.
The key business requirements chalked out were an intelligent routing system that could
route the customer calls to the right advisor and also an advanced number or lead
management system that could automate client sorting and dialing processes to eliminate
wastage of advisor time. A complete interaction and information management solution
needed to be implemented for a unified customer experience.


Some highlight points of solution provided by Ameyo technology deployed at MOSL
Centralized Information Management Ameyo provided for central management of
all customer information by recording of all customer-advisor transactions and regular
updated of all customer details in the integrated CRM. This enabled a new advisor to
effectively handle an existing customer. The HNI customer did not feel a disconnect or
the inconvenience to share previously communicated information again. Thus the pain
point of customer attrition rated due to unavailability of same advisor could be addressed
Effective Customer Interaction Management - Multiple phone lines were configured
per advisor and multiple queues created to handle numerous simultaneous interactions.
The system pre-informed the advisor about the customer calling in or being called. A
customized CRM interface displaying customer info popped-up with each call to equip
the advisor with real-time info. The IVR and Dialer components were implemented for
broadcasting, as well as manual dialing.

No Important HNI call went Unpicked - A new desktop view was created for the
advisor enabling him/her to view his/her queue and pickup calls based on his/her
intelligence and market scenario. This enabled minimized drop rates for HNI calls during
peak hours. Thus the M-shaped call flow peaking at market opening and closing times
could be managed efficiently without any important customer being ignored.

Right Advisor per Customer - A intelligent multi-site, need- & skill-based routing
system was implemented for over 400 seats, with 3-4 lines per advisor, adding up to a

total of over 1400 channels. This enabled routing of customer calls to the advisor best
equipped or trained to handle the customer account. Prompt and proficient customer
handling translated to increased business.
Pick n choose Customer from Call Queues - Unlike a typical ACD, IP-PBX
functionality where calls are routed to the next available agent, the advisors can view the
calls in their personal or generic queues, and click on the call they wish to take. The
queue also shows clients rating, as certain HNW (High Net Worth) clients need to be
attended on a priority basis (on choice of the advisor). The system creates multiple ACD
queues for every advisor where he/she can view the clients in the queue waiting to be
served by him/her.

Advanced Customer reach-out integrated with Dial n Trade - Complete outbound

dialing - including broadcast, manual and preview was implemented integrated with the
enhanced Dial 'n' Trade platform of MOSL where retail customers dial. High uptime was
ensured by eliminating single point of failure.

Pro-active Notifications - The system sent pro-active Email and SMS alerts on different
events and triggers. For instance, an advisor should be able to view missed calls during
her/his unavailability, so a callback could be scheduled appropriately. This ensured that
no important call missed earlier went unnoticed and a callback was initiated on time so
that no business opportunity was missed.
Enhanced Customer Service - Deployment of advanced technology platform to keep
ahead of time for a time-critical business process like MOSL's was a major determinant
of the success of Ameyo at MOSL. Prompt customer service coupled with pro-active
information delivery via broadcast messages that inform clients of specific market
behavior or event during the day were needed to enhance customer experience.


Value Delivered:
Increased Efficiency Hence More Profitability per Advisor
Single View of all Business Operations A centrally managed unified interface giving
complete view of all interactions and queues was implemented. The advisors could now
handle more accounts.
Greater Consumer Satisfaction and Retention
Increase in quality of customer handling Missed Call live report and queue view of
waiting calls enabled them to choose or pick priority calls. The customer gets to talk to
his/her preferred advisor.
Perfect Match to Current and Future needs
Custom Made Solution for Trading Houses Drishti's Ameyo Contact Center Software
was tailored to their needs including changes in business logic and User Interface.
Ameyo's Service Oriented Architecture and Model driven UI generation greatly reduced
the time for delivery.
All-in-one solution with Managed view of Customer Interactions
Single Solution for all Customer Interaction Processes- The client today has a managed
solution with a consolidated view of operations across geographies and functions. This
opens arena of data collation/ analysis and future improvement since any new process
flow or a change in existing process can be easily accommodated.
About Drishti (
Drishti provides Contact Center Software & Enterprise Communications Solutions. The
Company creates

innovative communications


for next-generation

enterprises, dynamically empowering them to manage their Business Processes. Drishti's

customers enjoy significant benefits in terms of increase in efficiency levels, reduction in
operational costs, flexibility to grow, consistent user experience and a demonstrable ROI.
Drishti's innovative solutions are running successfully at hundreds of client locations
across the globe. The Company has been awarded the BPO News Best Contact Center
Solution 2007, IP Contact Center Technology Awards 2008, Member's Choice Award
2008, and the NASSCOM Innovation Awards 2008. Drishti is also among the Deloitte
Fast 500 Company in APAC and Red Herring.


A study of preferences of the investors for investment in

mutual funds.
(i). Name:(ii). Add: -

Contact No:-

(iv). Age:(v). Qualification:71

A. Graduation/PG


B. under Graduate


(v). Occupation. Pl tick ()

A. Govt. [

Agriculture [

Sec B. [

Pvt. Sec [

E. Others [

C. Business [


(vi). what percentage of your monthly family income are invested? Pl tick ().
A. 5% to 10%

20% to 25% [

B. 10% to 15% [


15% to 20%


1. What kind of investments you prefer most? Pl tick (). All

A. Saving account

B. Fixed deposits

C. Insurance

D. Post Office-NSC, etc.

E. mutual Fund
H. Real Estate

F. Shares/Debentures

G. Gold/ Silver

j. PF

2. While investing your money, which factor you prefer most?

A. Liquidity

B. Low Risk

[ ]

C. High Return [ ]

D. Company reputation [ ]
3. Have you ever invested your money in mutual fund?
A. Yes

[ ]

B. No

If yes,
I) where do you find yourself as a mutual fund investor?

A. Totally ignorant

[ ]

B. Partial knowledge of mutual funds

[ ]

C. Aware only of any specific scheme in which you invested [ ]

D. Fully aware

[ ]

II) How do you come to know about Mutual Fund?

A. Advertisement

D. Financial Advisors

B. Peer Group

C. Banks

[ ]

III) Which mutual fund scheme have you used?

A. Open-end

[ ]

Liquid fund

[ ]

D. Mid- Cap

[ ]

B. Close-ended

E. Regular Income fund [ ]


F. Long-Cap

[ ]
G. Growth fund

[ ]

H. Sector fund

[ ]

If no,
I) if not invested in Mutual Fund then why?
A. Not aware of MF

[ ]

C. Not any specific reason

B. Higher risk

[ ]

[ ]

4. Which feature of the mutual funds attracts you most?

A. Diversification

[ ]

Better return and safety

D. Regular Income

B. Tax benefit

[ ]


[ ]

E. Reduction in risk and transaction cost

5. In which Mutual Fund you have invested? Please tick (). All


D. Reliance [



E. ICICI prudential funds


F. JM mutual fund

G. Other.

[ ]

6. When you invest in Mutual Funds which mode of investment

will you prefer?
A. One Time Investment

B. Systematic Investment Plan (SIP) [

7. Where from you purchase mutual funds?

A. Directly from the AMCs [
C. Brokers/ sub-brokers


B. Brokers only
D. Other sources

8. Which AMC will you prefer to invest?

Assets Management Company.



C. Reliance

E. Kotak


G. JM finance

9. Which sector are you investing in mutual fund?

A. General 1st

C. Gold fund

E. Power sector

F. Debt fund

G. Banking fund

B. Oil & Petroleum

D. Diversified equity funds [


H. Real estate fund

I. General

10. How would you like to receive the returns every year?
A. Dividend payout
C. Growth in NAV


B. Dividend re-investment