A

Summer Training Project Report

On
“Comparative study of Mutual Fund with other
Investment securities- HDFC BANK”

SUBMITTED FOR THE PARTIAL FULFILLMENT OF THE DEGREE OF

MASTERS OF BUSINESS ADMINISTRATION

OF
CHANDIGARH BUSINESS SCHOOL OF ADMINISTRATION LANDRAN
(MOHALI)
By
RISHABH MALHOTRA
1625080
MBA III SEMESTER
UNDER THE SUPERVISION OF
Mrs. Dipti Batra
(Assistant Professor)

1
 DECLARATION

I, RISHABH MALHOTRA student of MBA semester iii, hereby declare that the project
work presented in this report is my contribution and has been carry out under supervision of
Mrs. DIPTI BATRA of (CBSA) CGC LANDRAN and Mr. VINAY BHALLA of HDFC
Bank. The objective of the training undertaken is to get specialized knowledge in the
specialized field, which further sharpen the skill and add practicality in the specialization.
This work has not previously submitted to any other university for any other examination.

(Signature of student)

Rishabh Malhotra
Chandigarh Business School Administration

DATE: -
PLACE:-

2
CERTIFICATE BY THE ORGANISATION

3
 PREFACE

"Experience is the best teacher." This saying is very well applicable in everyone's life.
Therefore as a student of management it must apply to me also. Then the question arises that
from where we can get this experience. Obviously we must undergo practical Training. To
serve this purpose I had undergone 45 days summer training at HDFC BANK LIMITED and
as an outcome I have prepared this project report.
This project report on "Comparative study of Mutual Fund with other investments Securities”
in retail investors of HDFC Bank Limited and other places of Ambala"for MBA students.
This project also deals with various activities of HDFC BANK LIMITED. The experience of
this training will be useful in my future and findings of this particular project will be Helpful
to take decision regarding to marketing and advertising of mutual fund schemes to HDFC
BANK LIMITED.

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 ACKNOWLEDGEMENT

First of all, I would like to express my sincere gratitude to Nanoo Makhija, Branch manager
of HDFC BANK LIMITED, Ambala Cantt branch for allowing me for summer at HDFC
BANK LIMITED.
I would also like to express my gratitude to Mrs. Dipti Batra of CBSA and Mr. Vinay
Bhalla, my project mentor and other faculty members of HDFC, for guide me.
I would like to thank following persons 'Who help me a lot in my summer training.
 Mr. Arjun Bhatia, HDFC BANK LIMITED
 Mr. Kamal. HDFC BANK LIMITED
 Mrs.Deepti, HDFC BANK LIMITED.
 Mr. Pankaj, HDFC BANK LIMITED.
 Mr. Rohit, HDFC bank, Ambala Cantt branch
 Mr. Harpreet HDFC bank, Ambala Cantt branch.
 Mr. Rahul, HDFC Mutual Fund, Ambala Cantt branch.
I also thank to respondents, 'who have been helpful and faithful enough to give the required
information, which helped my project to be a great success, 'Which the main and important
part of my project. I feel happy indeed and it has given me a lot of pleasure in company.
Last but not the least would like to extent my deep sense of gratitude to my family, friends
and all whom guided and helped me during my training period.

Place: -

Date: -

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 EXECUTIVE SUMMARY

The entire report is an unforgettable journey of support, knowledge, experience, dedication,

perfection, and patience. For me it is all about to understand a customer and market of mutual
fund industry and in comparison of other investment securities.
The report is specially oriented to particular area, though it is representing the strong base of
Investment management-which covers different Investment avenues, their handling
contribution, strategy, portfolios, and related risk factors. Mutual funds- how they are formed,
history, scenario, types, trends, myths, distribution, advantages, and even disadvantages of
them.
Comparison of mutual funds with other investments, some do's and don'ts about mutual finds
while investing. Company details and its progress and its Interpretation base for analysis,
conclusion, findings, and questionnaire, which helped a lot in consumer, survey analysis.
Asset allocation, accounting, taxation, valuation and necessary information for generating
base for conclusion. And at last but not the least the collected data from city and their
Interpretation.

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 CONTENTS

Sr. No. Name of Table

1 Objectives of Study 9

2 About the Company 10

3 Mutual Funds

 Introduction 18

 History of Mutual Fund 20

 Advantages of Mutual Fund 22

 Structure of Mutual Fund 23

 Types of Mutual Fund Schemes 24

3.1 NET ASSETS VALUE (NAV) 28

4 Comparison of Mutual Fund with other investment securities

4.1 Mutual Fund vs Fixed Deposits 29

4.2 Mutual Fund vs Insurance 31

4.3 SIP vs Recurring Deposits 33

4.4 Mutual Fund vs Public Provident Fund 36

4.5 Mutual Fund vs Gold 39

4.6 Mutual Fund vs Real Estate 41

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4.7 Mutual Fund vs Shares 42

5 Literature Review 44

6 Research Methodology 45

7 Questionnaire 46

8 Data Analysis and Interpretation 48

9 Findings 55

.
10 Conclusion 56

11 References 57

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 OBJECTIVES OF STUDY

1. To understand in depth about different investment avenues available in India.

2. To find out how investor get information about the various financial instruments.

3. To know which investment is better or in which way.

4. To know the factors which investor consider before investing.

9
 About
The
Company :

10
BACKGROUND

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an ‘in principle’ approval from the Reserve Bank of India (RBI) to set up a bank
in the private sector, as part of RBI’s liberalisation of the Indian Banking Industry in
1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited',
with its registered office in Mumbai, India. HDFC Bank commenced operations as a
Scheduled Commercial Bank in January 1995.

PROMOTER

HDFC is India’s premier housing finance company and enjoys an impeccable track record
in India as well as in international markets. Since its inception in 1977, the Corporation
has maintained a consistent and healthy growth in its operations to remain the market
leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling
units. HDFC has developed significant expertise in retail mortgage loans to different
market segments and also has a large corporate client base for its housing related credit
facilities. With its experience in the financial markets, strong market reputation, large
shareholder base and unique consumer franchise, HDFC was ideally positioned to
promote a bank in the Indian environment.

BUSINESS FOCUS

HDFC Bank’s mission is to be a World Class Indian Bank. The objective is to build
sound customer franchises across distinct businesses so as to be the preferred provider of
banking services for target retail and wholesale customer segments, and to achieve
healthy growth in profitability, consistent with the bank’s risk appetite. The bank is
committed to maintain the highest level of ethical standards, professional integrity,
corporate governance and regulatory compliance. HDFC Bank’s business philosophy is
based on five core values: Operational Excellence, Customer Focus, Product Leadership,
People and Sustainability.

Capitial Structure

As on 31st March, 2015 the authorized share capital of the Bank is Rs. 550 crore. The
paid-up share capital of the Bank as on the said date is Rs501,29,90,634/- ( 2506495317 )
equity shares of Rs. 2/- each). The HDFC Group holds 21.67 % of the Bank's equity and
about 18.87 % of the equity is held by the ADS / GDR Depositories (in respect of the

11
bank's American Depository Shares (ADS) and Global Depository Receipts (GDR)
Issues). 32.57 % of the equity is held by Foreign Institutional Investors (FIIs) and the
Bank has 4,41,457 shareholders.
The shares are listed on the Bombay Stock Exchange Limited and The National Stock
Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on
the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global
Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No
US40415F2002.

AMALGAMATION OF TIMES BANK & CENTURION BANK OF PUNJAB

WITH HDFC BANK

On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was
formally approved by Reserve Bank of India to complete the statutory and regulatory
approval process. As per the scheme of amalgamation, shareholders of CB0P received 1
share of HDFC Bank for every 29 shares of CB0P.The amalgamation added significant
value to HDFC Bank in terms of increased branch network, geographic base, and a bigger
pool of skilled manpower.

In a milestone transaction in the Indian banking industry, Times Bank Limited (another
new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was
merged with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of
two private banks in the New Generation Private Sector Banks. As per the scheme of
amalgamation approved by the shareholders of both banks and the Reserve Bank of India,
shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of
Times Bank.

DISTRIBUTION NETWORK

HDFC Bank is headquartered in Mumbai. As of March 31, 2015, the Bank’s distribution
network was at 4,014 branches in 2,464 cities. All branches are linked on an online real-
time basis. Customers across India are also serviced through multiple delivery channels
such as Phone Banking, Net Banking, Mobile Banking and SMS based banking. The
Bank’s expansion plans take into account the need to have a presence in all major
industrial and commercial centres, where its corporate customers are located, as well as
the need to build a strong retail customer base for both deposits and loan products. Being
a clearing / settlement bank to various leading stock exchanges, the Bank has branches in
centres where the NSE / BSE have a strong and active member base.

The Bank also has a network of 11,766 ATMs across India. HDFC Bank’s ATM network
can be accessed by all domestic and international Visa / MasterCard, Visa Electron /
Maestro, Plus / Cirrus and American Express Credit / Charge cardholders.

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 MANAGEMENT

Mrs. Shyamala Gopinath holds a Master’s Degree in Commerce and is a CAIIB. Mrs.
Gopinath has 39 years of experience in financial sector policy formulation in different
capacities at RBI. As Deputy Governor of RBI for seven years and member of the Board.
Mrs. Gopinath had been guiding and influencing the national policies in the diverse areas
of financial sector regulation and supervision, development and regulation of financial
markets, capital account management, management of government borrowings, forex
reserves management and payment and settlement systems.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years
and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia

.The Bank's Board of Directors is composed of eminent individuals with a wealth of

experience in public policy, administration, industry and commercial banking. Senior
executives representing HDFC areal soon the Board.

Senior banking professionals with substantial experience in India and abroad head various
businesses and functions and report to the Managing Director. Given the professional
expertise of the management team and the overall focus on recruiting and retaining the
best talent in the industry, the bank believes that its people are a significant competitive
strength.

TECHNOLOGY

HDFC Bank operates in a highly automated environment in terms of information

technology and communication systems. All the bank’s branches have online
connectivity, which enables the bank to offer speedy funds transfer facilities to its
customers. Multi-branch access is also provided to retail customers through the branch
network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. In terms of
core banking software, the Corporate Banking business is supported by Flexcube, while
the Retail Banking business by Finware, both from i-flex Solutions Ltd. The systems are
open, scaleable and web-enabled.

BUSINESS PROFILE

HDFC Bank caters to a wide range of banking services covering commercial and
investment banking on the wholesale side and transactional / branch banking on the retail

13
side. The bank has three key business segments:
 Wholesale Banking

The Bank’s target market is primarily large, blue-chip manufacturing companies in the
Indian corporate sector and to a lesser extent, small & mid-sized corporates and agri-
based businesses. For these customers, the Bank provides a wide range of commercial and
transactional banking services, including working capital finance, trade services,
transactional services, cash management, etc. The bank is also a leading provider of
structured solutions, which combine cash management services with vendor and
distributor finance for facilitating superior supply chain management for its corporate
customers. Based on its superior product delivery / service levels and strong customer
orientation, the Bank has made significant inroads into the banking consortia of a number
of leading Indian corporates including multinationals, companies from the domestic
business houses and prime public sector companies. It is recognised as a leading provider
of cash management and transactional banking solutions to corporate customers, mutual
funds, stock exchange members and banks.

 Treasury
Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on
various treasury products are provided through the bank’s Treasury team. To comply with
statutory reserve requirements, the bank is required to hold 25% of its deposits in
government securities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio.
 Retail Banking

The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and
delivered to customers through the growing branch network, as well as through alternative
delivery channels like ATMs, Phone Banking, NetBanking and Mobile Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus
and the Investment Advisory Services programs have been designed keeping in mind
needs of customers who seek distinct financial solutions, information and advice on
various investment avenues. The Bank also has a wide array of retail loan products
including Auto Loans, Loans against marketable securities, Personal Loans and Loans for
Two-wheelers. It is also a leading provider of Depository Participant (DP) services for
retail customers, providing customers the facility to hold their investments in electronic
form.

HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the MasterCard Maestro debit card as
well. The Bank launched its credit card business in late 2001. By March 2015, the bank
had a total card base (debit and credit cards) of over 25 million. The Bank is also one of

14
the leading players in the “merchant acquiring” business with over 235,000 Point-of-sale
(POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank
is well positioned as a leader in various net based B2C opportunities including a wide
range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.

RATINGS / AWARDS

Credit Rating

HDFC Bank has its deposit programmes rated by two rating agencies - Credit Analysis &
Research Limited. (CARE) and Fitch Ratings India Private Limited. The bank's Fixed
Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which
represents instruments considered to be "of the best quality, carrying negligible
investment risk".

CARE has also rated the bank's Certificate of Deposit (CD) programme "PR 1+" which
represents "superior capacity for repayment of short term promissory obligations". Fitch
Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "tAAA (ind)"
rating to the bank's deposit programme, with the outlook on the rating as "stable". This
rating indicates "highest credit quality" where "protection factors are very high".

HDFC Bank also has its long term unsecured, subordinated (Tier II) Bonds of Rs.4 billion
rated by CARE and Fitch Ratings India Private Limited. CARE has assigned the rating of
"CARE AAA" for the Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the
rating "AAA (ind)" with the outlook on the rating as "stable". In each of the cases referred
to above, the ratings awarded were the highest assigned by the rating agency for those
instruments.

Corporate Governance Rating:

The bank was one of the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL). The rating provides an independent
assessment of an entity's current performance and an expectation on its "balanced value
creation and corporate governance practices" in future. The bank was assigned a 'CRISIL
GVC Level 1' rating in January 2007 which indicates that the bank's capability with
respect to wealth creation for all its stakeholders while adopting sound corporate
governance practices is the highest
Awards and Accolades :
HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian
Bank". We realized that only a single-minded focus on product quality and service
excellence would help us get there. Today, we are proud to say that we are well on our
way towards that goal

15
Over the years, the Bank has received recognition and awards from several leading
organizations and publications, both domestic and international (details are available
on http://www.hdfcbank.com/aboutus/awards/default.htm).

Some important awards that the Bank won:

2015

AIMA Managing India Awards 2015 - Business Leader of the Year -

Aditya Puri

Barron's - World's 30 Best CEOs - Mr Aditya

Puri

Finance Asia poll on Asia's Best - Best Managed Public Company -

Companies 2015 India'
Best CEO- Aditya Puri
Best Corporate Governance- Rank 3
Best Investor Relations- Rank 3

J. P Morgan Quality Recognition Award - Best in class straight Through

Processing Rates

2014

Euromoney - HDFC Bank wins Best Private Banking Services for

Super affluent clients for 5 years in a row at Euromoney
Awards

Euromoney Private - Best Private Banking Services award for Net-worth-

Banking and specific services category for Super affluent clients (US$
Wealth 1 million to US$ 5 million).
Management - Best Private Banking Services award Asset
Survey 2015 Management

FE Best Bank - Best Bank in the New Private sector

Awards -Winner-Profitability
- Winner -Efficiency

Business Today - -Best Large Bank - Overall

KPMG Study 2014 - Best Large Bank - Growth

16
Businessworld- - Best Large Bank
PwC India Best - Fastest Growing Large Bank
Banks Survey 2014

Asiamoney FX Poll - Best Domestic Provider of FX options

2014 - Best Domestic Provider of FX products & Services
- Best Domestic Provider of FX research & market
coverage
- Best Domestic provider for FX Services

The Asian Banker Strongest Bank in India in the Asian Banker 500 (AB
500) Strongest Bank by Balance Sheet Ranking 2014

Dun & Bradstreet - - Best Bank - Managing IT Risk (Large Banks)

Polaris Financial - Best Bank - Mobile Banking (Large Banks)
Technology - Best Bank - Best IT Team (Private Sector Banks)
Banking Awards
2014

Forbes Asia Fab 50 Companies List for the 8th year

BrandZ TM Top 50 India's Most Valuable Brand

Most Valuable
Indian Brands study
by Millward Brown

Finance Asia - Best Bank - India

Country Awards - Best CEO- Rank 1
2014 and poll on - Best CSR - Rank 1
India's Top - Best CFO - Rank 2
Companies

Asiamoney Best of Best Domestic Banks - India

Dun & Bradstreet - Best Corporate in Banking Sector

Manappuram
Finance Limited
Corporate Award
2014

17
 WHAT ARE MUTUAL FUNDS?

There are a lot of investment avenues available today in the financial market for an investor
with an investable 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 Market 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 would 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.

 Concept of Mutual Funds:

A mutual fund is a common pool of money into which investors place their contributions that
are to be invested in accordance with a stated objective. The ownership of the fund is thus
joint or "mutual"; the fund belongs to all investors. A single investor's ownership of the fund
is in the same proportion as the amount of the contribution made by him or her bears to the
total amount of the fund.
Mutual Funds are trusts, which accept savings from investors and invest the same in
diversified financial instruments in terms of objectives set out in the trusts deed with the view
to reduce the risk and maximize the income and capital appreciation for distribution for the
members. A Mutual Fund is a corporation and the fund manager's interest is to professionally
manage the funds provided by the investors and provide a returns on them after deducting
reasonable management fees.
The objective sought to be achieved by Mutual Fund is to provide an opportunity for lower
income groups to acquire without much difficulty financial assets. They cater mainly to the
needs of the individual investor whose means are small and to manage investors portfolio in a
manner that provides a regular income, growth, safety, liquidity and diversification
opportunities.

DEFINITION:

"Mutual funds are collective savings and investment vehicles where savings of small (or
sometimes big) investors are pooled together to invest for their mutual benefit and returns
distributed proportionately'

"A mutual fund is an 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 fund's assets are invested according to an investment objective into the fund's portfolio of
investments. Aggressive growth funds seek long-term capital growth by investing primarily in

18
stocks of fast-growing smaller companies or market segments. Aggressive growth funds are
alsocalled capital appreciation funds".

Why Select Mutual Fund?

The risk returns 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 investors opt for
bank FD, which provide moderate returns 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 management, diversification, convenience and liquidity. That doesn't
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
riskier but are also invested in the stock markets which involves a higher risk but can expect
higher returns. Hedge fund involves a very high risk since it is mostly traded in the
derivatives market which is considered very volatile.

HIGHER RISK HIGHER RISK

MODERATE RETURNS HIGHER RETURNS

VENTURE
EQUITY
CAPITAL

BANK FD

FD LOWER RISK
MUTUAL
LOWER RISK POSTAL FUNDS HIGHER RETURNS
LOWER RETURNS SAVING

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 THE MUTUAL FUND INDUSTRY IN INDIA:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India
(UTI) at the initiative of the Reserve Bank of India (RBI) and the Government of India. The
objective then was to attract small investors and introduce them to market investments. Since
then, the history of mutual funds in India can be broadly divided into six distinct phases.

Phase I (1964-87): Growth Of UTI:

In 1963, UTI was established by an Act of Parliament. As it was the only entity offering
mutual funds in India, it had a monopoly. Operationally, UTI was set up by the Reserve Bank
of India (RBI), but was later delinked from the RBI. The first scheme, and for long one of the
largest launched by UTI, was Unit Scheme 1964.
Later in the 1970s and 80s, UTI started innovating and offering different schemes to suit the
needs of different classes of investors. Unit Linked Insurance Plan (ULIP) was launched in
1971. The first Indian offshore fund, India Fund was launched in August 1986. In absolute
terms, the investible funds corpus of UTI was about Rs 600 crores in 1984. By 1987-88, the
assets under management (AUM) of UTI had grown 10 times to Rs 6,700 crores.
Phase II (1987-93): Entry of Public Sector Funds:
The year 1987 marked the entry of other public sector mutual funds. With the opening up of
the economy, many public sector banks and institutions were allowed to establish mutual
funds. The State Bank of India established the first non-UTI Mutual Fund, SBI Mutual Fund
in November 1987. This was followed by Canbank Mutual Fund,LIC Mutual Fund, Indian
Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund.
From 1987-88 to 1992-93, the AUM increased from Rs 6,700 crores to Rs 47,004 crores,
nearly seven times. During this period, investors showed a marked interest in mutual funds,
allocating a larger part of their savings to investments in the funds.

Phase III (1993-96): Emergence of Private Funds:

A new era in the mutual fund industry began in 1993 with the permission granted for the entry
of private sector funds. This gave the Indian investors a broader choice of 'fund families' and
increasing competition to the existing public sector funds. Quite significantly foreign fund
management companies were also allowed to operate mutual funds, most of them coming into
India through their joint ventures with Indian promoters.
The private funds have brought in with them latest product innovations, investment
management techniques and investor-servicing technologies. During the year 1993-94, five
private sector fund houses launched their schemes followed by six others in 1994-95.
Phase IV (1996-99): Growth And SEBI Regulation:
Since 1996, the mutual fund industry scaled newer heights in terms of mobilization of funds
and number of players. Deregulation and liberalization of the Indian economy had introduced
competition and provided impetus to the growth of the industry.

20
A comprehensive set of regulations for all mutual funds operating in India was introduced
with SEBI (Mutual Fund) Regulations, 1996. These regulations set uniform standards for all
funds. Erstwhile UTI voluntarily adopted SEBI guidelines for its new schemes. Similarly, the
budget of the Union government in 1999 took a big step in exempting all mutual fund
dividends from income tax in the hands of the investors. During this phase, both SEBI and
Association of Mutual Funds of India (AMFI) launched Investor Awareness Programme
aimed at educating the investors about investing through MFs.
Phase V (1999-2004): Emergence of a Large and Uniform Industry:
The year 1999 marked the beginning of a new phase in the history of the mutual fund industry
in India, a phase of significant growth in terms of both amount mobilized from investors and
assets under management. In February 2003, the UTI Act was repealed. UTI no longer has a
special legal status as a trust established by an act of Parliament. Instead it has adopted the
same structure as any other fund in India - a trust and an AMC.
UTI Mutual Fund is the present name of the erstwhile Unit Trust of India (UTI). While UTI
functioned under a separate law of the Indian Parliament earlier, UTI Mutual Fund is now
under the SEBI's (Mutual Funds) Regulations, 1996 like all other mutual funds in India.
The emergence of a uniform industry with the same structure, operations and regulations
make it easier for distributors and investors to deal with any fund house. Between 1999 and
2005 the size of the industry has doubled in terms of AUM which have gone from above Rs
68,000 crores to over Rs 1,50,000 crores.
Phase VI (From 2004 Onwards): Consolidation and Growth:
The industry has lately witnessed a spate of mergers and acquisitions, most recent ones being
the acquisition of schemes of Allianz Mutual Fund by Birla Sun Life, PNB Mutual Fund by
Principal, among others. At the same time, more international players continue to enter India
including Fidelity, one of the largest funds in the world.

21
 ADVANTAGES OF MUTUAL FUNDS:

Mutual fund investments in stocks, bonds and other instruments require considerable
expertise and constant supervision, to allow an investor to take the right decisions. Small
investors usually do not have the necessary expertise and time to undertake any study that can
facilitate informed decisions. While this is the predominant reason for the popularity of
mutual funds, there are many other benefits that make mutual funds appealing.
1. Diversification Benefits: Diversified investment improves the risk return profile of
the portfolio. Optimal diversification has limitations due to low liquidity among small
investors. The large corpus of a mutual fund as compared to individual investments
makes optimal diversification possible. Due to the pooling of capital, individual
investors can derive benefits of diversification.
2. Low Transaction Costs: Mutual fund transactions are generally very large. These
large volumes attract lower brokerage commissions and other costs as compared to
smaller volumes of the transactions that individual investors enter into. The brokers
quote a lower rate of commission due to two reasons. The first is competition for the
institutional investors business. The second reason is that the overhead cost of
executing a trade does not differ much for large and small orders. Hence for a large
order these costs spread over a large volume enabling the broker to quote a lower
commission rate.
3. Availability of Various Schemes: There are four basic types of mutual funds: equity,
bond, hybrid and money market. Equity funds concentrate their investments in stocks.
Similarly bond funds primarily invest in bonds and other securities. Equity, bond and
hybrid funds are called long-term funds. Money market funds are referred to as short-
term funds because they invest in securities that generally mature in about one year or
less. Mutual funds generally offer a number of schemes to suit the requirement of the
investors.
4. Professional Management: Management of a portfolio involves continuous
monitoring of various securities and innumerable economic variables that may affect a
portfolio's performance. This requires a lot of time and effort on part of the investors
along with in-depth knowledge of the functioning of the financial markets. Mutual
funds are managed by fund managers generally with knowledge and experience whose
time is solely devoted to tracking and updating the portfolio. Thus investment in a
mutual fund not only saves time and effort for the investor but is also likely to produce
better results.
5. Liquidity: Liquidating a portfolio is not always easy. There may not be a liquid
market for all securities held. In case only a part of the portfolio is required to be
liquidated, it may not be possible to see all the securities forming a part of the
portfolio in the same proportion as they are represented in the portfolio; investing in
mutual funds can solve these problems. A fund house generally stands ready to buy
and sell its units on a regular basis. Thus it is easier to liquidate holdings in a Mutual
Fund as compared to direct investment in securities.

22
 6. Returns: In India dividend received by investors is tax-free. This enhances the yield
on mutual funds marginally as compared to income from other investment options.
Also in case of long-term capital gains, the investor benefits from indexation and
lower capital gain tax.
7. Flexibility: Features of a MF scheme such as regular investment plan, regular
withdrawal plans and dividend reinvestment plan allows investors to systematically
invest or withdraw funds according to the needs and convenience.
8. Well Regulated: All mutual funds are registered with SEBI and they function within
the provisions of strict regulations designed to protect the interest of investors. The
SEBI regularly monitors the operations of an AMC.

STRUCTURE OF MUTUAL FUNDS IN INDIA:

In India, the mutual fund industry is highly regulated with a view to imparting operational
transparency and protecting the investor's interest. The structure of a mutual fund is
determined by SEBI regulations. These regulations require a fund to be established in the
form of a trust under the Indian Trust Act, 1882. A mutual fund is typically externally
managed. It is now an operating company with employees in the traditional sense.
Instead, a fund relies upon third parties that are either affiliated organizations or independent
contractors to carry out its business activities such as investing in securities. A mutual fund
operates through a four-tier structure. The four parties that are required to be involved are a
sponsor, Board of Trustees, an asset management company and a custodian.
1. Sponsor: A sponsor is a body corporate who establishes a mutual fund. It may be one
person acting alone or together with another corporate body. Additionally, the sponsor
is expected to 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, he shall be deemed to be a
sponsor and will be required to fulfill the eligibility criteria specified in the mutual
fund regulation.
2. Board Of Trustees: A mutual fund house must have an independent Board of
Trustees, where two-thirds of the trustees are independent persons who are not
associated with the sponsor in any manner. The Board of Trustees of the trustee
company holds the property of the mutual fund in trust for the benefit of the unit-
holders. They are responsible for protecting the unit-holder's interest.
3. Asset Management Company: The role of an AMC is highly significant in the
mutual fund operation. They are the fund managers i.e. they invest investors' money in
various securities (equity, debt and money market instruments) after proper research
of market conditions and the financial performance of individual companies and
specific securities in the effort to meet or beat average market return and analysis.
They also look after the administrative functions of a mutual fund for which they
charge management fee.
4. Custodian: The mutual fund is required by law to protect their portfolio securities by
placing them with a custodian. Nearly all mutual funds use qualified bank custodians.
Only a registered custodian under the SEBI regulation can act as a custodian to a
mutual fund.

23
 Over the years, with the involvement of the RBI and SEBI, the mutual fund industry
has evolved in a big way giving investors an opportunity to make the most of this
investment avenue. With a proper structure in place, the industry has been able to cater
to more number of investors. With the increase in awareness about mutual funds
several new players have joined the bandwagon.

TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position,
risk tolerance and return expectations etc. thus mutual funds 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 funds scheme to choose from. It is easier to think of mutual funds
in categories, mentioned below.

TYPES OF MUTUAL
FUNDS

BY INVESTMENT OTHER
BY STRUCTURE BY NATURE OBJECTIVE SCHEMES
Open - Ended Equity Fund Growth Tax Saving
Schemes Schemes Schemes

- Ended
Close Income
Debt Funds Index Schemes
Schemes Schemes

Interval Balanced Balanced Sector Specific

Schemes Funds Schemes Schemes

Money Market
Schemes

BY STRUCTURE

1. 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 liquidity.

2. 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.

24
3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-ended and close-
ended schemes. The units may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals at NAV related prices.

BY NATURE

1. 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 manager’s 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 Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high on the
risk-return matrix.

2. 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 their corpus in securities issued by Government, popularly known
as Government of India debt papers. These Funds carry zero Default risk but are
associated with Interest Rate risk. These schemes are safer as they invest in papers
backed by Government.
 Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.
 MIPs: Invests maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market. These
scheme ranks slightly high on the risk-return matrix when compared with other debt
schemes.
 Short Term Plans (STPs): Meant for investment horizon for three to six 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 Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments

25
 like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are
meant for short-term cash management of corporate houses and are meant for an
investment horizon of 1day to 3 months. These schemes rank low on risk-return
matrix and are considered to be the safest amongst all categories of mutual funds.
3. Balanced Funds:
As the name suggest they, are a mix of both equity and debt 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 worlds.
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
objective and invest accordingly
.

BY INVESTMENT OBJECTIVE:

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.
Income Schemes: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.
Balanced Schemes:
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 50:50).
Money Market Schemes:
Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate
income. These schemes generally invest in safer, short-term instruments, such as treasury
bills, certificates of deposit, commercial paper and inter-bank call money.
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:

26
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 entire corpus is put to work.

OTHER SCHEMES

Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to
time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings
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 only 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 such schemes would be more or less
equivalent to those of the Index.
Sector Specific Schemes:
These 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 at an appropriate time.

27
 NET ASSET VALUE (NAV):
Since each owner is a 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 needs to be assigned a value.
Since the units held by investor evidence the ownership of the fund’s 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 investor’s 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 fund’s 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 fund will be Rs. 30.00(1000/100*3). Note that the value of the fund’s
investments will keep fluctuating with the market-price movements, causing the Net Asset
Value also to fluctuate. For example, if the value of our fund’s 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 fund’s assets

28
 Comparsion of Mutual Funds With Other Securities

Mutual Fund Vs Fixed Deposits

What is a fixed deposit?

You invest money in a fixed deposit with a bank. The money you invest called the principal,
is very safe. (You will not lose this money). You also earn interest on your money. The
interest paid to you, is compounded quarterly.
What is a mutual fund?
A mutual fund in India, collects and pools your and other investor’s money. This money is
invested in stocks, if you choose an equity mutual fund. It is invested in government bonds,
corporate bonds and money market instruments, if you choose debt funds. Your money is
invested in a mix of equity and debt, if you choose hybrid funds.
Your total investment in the mutual fund, either in stocks, bonds or a mix of both, is divided
into units. You are given units of the mutual fund, depending on the cash you invest. The
NAV (Net Asset Value), gives you the value of the mutual fund. Your mutual fund is
managed by a fund manager. The fundmanager decides which stocks, bonds or assets, your
money must be invested in, depending on the type of mutual fund you choose.
Fixed Deposits vs Mutual Funds
Equity mutual funds vs Fixed deposits
Let’s compare fixed deposits vs equity mutual funds. Equity mutual funds, invest your
money in reputed stocks. Equity mutual funds are known to give high returns, but at high risk.
They are affected by the movements in the stock market. When stock markets do well, you
get good returns. When stock markets fall, you could lose a lot of money.Fixed deposits

29
remain unaffected by market conditions. Movements in the stock market, do not affect FD
interest rates.
Debt mutual funds vs Fixed deposits
Debt mutual funds, invest your money in government bonds and corporate bonds. While
government bonds are extremely safe, corporate bonds can be risky. Corporate bonds which
have low rating, offer higher interest. However there is a risk of a default. Still debt mutual
funds are considered, a safe investment in India.
When interest rates are going down in the economy, (repo rates are cut by the RBI), debt
mutual funds give good returns. Banks on the other hand, offer lesser interest on FD’s, when
repo rates fall. If you are willing to take a slightly higher risk, invest in debt mutual funds,
instead of fixed deposits.
Fixed deposits are safer than debt mutual funds.
Taxation of fixed deposits vs mutual funds
Taxation of FD vs equity mutual funds
You have to pay tax on the interest, you earn on your fixed deposit. You have to pay income
tax, based on the income tax bracket, you fall under. The interest income is added to your
taxable salary and you are taxed, as per the income tax slab you fall under. This is known as
the marginal rate of taxation.
If you invest your money in an equity mutual fund, the returns/profit you get, are called
capital gains. If you stay invested for more than a year, the returns you get, are called long
term capital gains. These returns are…TAX FREE. Yes …. TAX FREE. This makes equity
mutual funds a great investment, for youth in India. If you stay invested in equity mutual
funds for less than a year, your returns are called short term capital gains. Your short term
capital gains are taxed at 15%.

Taxation of FD vs debt mutual funds

If you invest your money in a debt mutual fund, the returns/profit you get, are called capital
gains. If you stay invested for more than 3 years, the returns you get, are called long term
capital gains. Your long term capital gains are taxed at 20%, with indexation. Indexation
benefit can make the post-tax return of debt funds, far superior to fixed deposits. With
indexation benefits, you have to pay tax, only on what you really gain. Short term capital
gains (less than 3 years) are taxed, as per the income tax bracket you fall under.
“You are the master of your destiny.” You invest your money, depending on the amount of
risk, you are willing to bear. You also need to take a look at the time horizon (time you are
willing to stay invested), in FD vs mutual fund. Come what may; n ever lose money in your
investment.

30
 Mutual Funds Vs Insurance.Where To Invest?

Growing rich is all about being a good investor. Just invest your money and watch it grow.
But is it that simple? Investing is risky business. Some investments are considered more risky,
than others. This is when you must remember. All investments have risk. Even the highly
popular fixed deposit, which households in India, simple love carries risk. Yes, the returns
you get from your fixed deposits, are eaten up by inflation. Inflation the rise in prices of
goods and services with time, eats up your money. Now to the big question Should you totally
avoid investments like equity mutual funds, which are considered risky? The answer is No. If
you are comfortable bearing risk in your investments, then .High Risk = High Return.
‘’Risk comes from not knowing what you’re doing.” So should you invest your hard earned
money in an equity mutual fund, which many investors believe, is quite a dangerous thing to
do? Then there is the famous ULIP (Unit Linked Insurance Plan), which is insurance +
investment .two for the price of one Something you and several of our citizens, simply love.
Is availing a ULIP, a wise choice?
What is a ULIP?
Unit linked insurance plans popularly called ULIP’s, are offered by life insurers in India. A
ULIP is a twin benefit plan,
Life insurance + investment
You and several investors, pay a premium and invest in a ULIP. The sum assured of the
ULIP, depends on the premium you pay. The life insurer pools this money and deducts the
expenses, for giving you life insurance cover. The remaining amount is invested in equity
(stocks) or fixed income (debt) or hybrid (mix of equity + debt), after deducting the cost of
investing and other expenses, depending on the fund you choose.
A fund manager is appointed by the life insurer to manage your money. His job….get you
good returns on your investment. The money you and several other investors invest, is divided
into units. You get units based on the amount you invest. If you invest in equity mutual funds,
the value of units, rises and falls with the movements of the stock markets. If
you/policyholder die before the maturity of the ULIP, your family gets the death benefit. This
may be either the sum assured; only the fund value, or sum assured + fund value, depending
on the type of ULIP.

31
What is a mutual fund?
A mutual fund in India, pools and then invests your and other investor’s money, in stocks or
bonds or even a mixture of both, stocks and bonds. The total investment made by the mutual
fund, either in stocks/bonds, is then divided into units. You get units, based on the proportion
of your investment (cash you invest in a mutual fund). The value of the mutual fund, is
measured by its Net Asset Value (NAV). This is the value at which you (investor), buy and
sell mutual funds.
Cost of investing…Mutual fund vs ULIP
•You have the expenses of the fund manager, when you invest in a mutual fund. The mutual
fund charges you an exit load (charges when you exit the mutual fund). The maximum
expense ratio that an equity mutual fund can charge you is 2.5%. (This is 2.5% of the amount
you invest). For debt mutual funds it is 2.25%.
•The ULIP has premium allocation charges (This could be around 7% of the premium). You
have mortality charges, used to give you life cover. You also have fund management charges
(money paid to the fund manager to manage investments) and also policy administration
charges.
The cost of investing in a mutual fund, is much lesser than a ULIP.
Lock in…Mutual fund vs ULIP
ULIP’s have a lock in of 5 years. You cannot touch your money for 5 years. This could be a
problem, if you require money in an emergency. If you invest in an open ended mutual fund,
you can invest or withdraw money, each day. You can easily exit from the mutual fund in an
emergency. ELSS, a type of mutual fund, has a 3 year lock in. You cannot touch your money
for 3 years.
When it comes to lock in, mutual funds win hands down.
Tax benefits…Mutual fund vs ULIP
You get a tax deduction under Section 80 C, up to INR 1.5 lakhs a year on your taxable
salary, for the premiums you pay for the ULIP. The maturity amount you get when the ULIP
matures, or the death benefit your family gets on your death, in tax free under Section
10(10D). If you survive the maturity period of the ULIP, you get the maturity value of your
ULIP. Most mutual funds do not have tax benefits. However ELSS a type of mutual fund,
enjoys EEE benefits. The money you invest in ELSS, enjoys a tax deduction up to INR 1.5
Lakhs, under Section 80 C of the income tax act. The money which accumulates and is
withdrawn at maturity, is tax free.
ULIP’s enjoy tax benefits. Mutual funds do not have tax benefits. However ELSS with EEE
benefits, are an excellent tax saving tool.
Never mix insurance with investments. You avail life insurance to make sure your family is
well cared for, even in your absence. Avail a term life insurance plan, to do the job. The
purpose of investing is to make your money grow. Mutual funds help your money grow, with
time. This makes mutual funds an excellent investment. However if you have availed a ULIP,
it makes sense to continue with it, till maturity. Be Wise, Get Rich.

32
 Recurring Deposit vs SIP

Setting aside a fixed amount of money every month specifically for savings or investment is
the best way to create wealth. Systematic Investment Program (SIP) in Mutual Funds and
Recurring Deposits are two most popular ways to invest a fixed amount every month. In a
SIP, the investor has to set aside small amounts of money either monthly or quarterly rather
than having to invest a lump amount. In a Recurring Deposit scheme, a person deposits a
fixed amount every month for a predefined period of time. At the end of the tenure, he gets
back the interest and investment amount.

For people willing to invest a fixed amount every month rather than a single time investment
of huge amount, opening a RD, PPF or starting a SIP are the most preferred options.

SIP Vs RD - Product Structure

Recurring Deposits - In a Recurring Deposit scheme, the individual has to first choose the
tenure and monthly deposit amount. Once the plan starts, the investor must deposit the
amount every month over the tenure. Generally, the tenure varies from a minimum of 6
months and thereafter in addition of 3 months to a maximum tenure of up to 10 years.
Recurring Deposit proves to be gentle on one’s pocket given that the investor decides the
amount and also the risk is considerably low.

Interest rates for recurring deposits are decided based on the tenure and deposit amount. The
rate of interest for recurring deposit generally varies from 7% to 8% and senior citizens are
offered a higher rate of interest. Recurring Deposit accounts can be started at banks or post
offices. Unlike SIP, in RD you will know how much to expect at the end of tenure. For
example, if you want to save a corpus of Rs. 3 lakh for an international trip, you can use a RD
Calculator to decide how much you have to deposit every month and for how many years to
save Rs. 3 lakhs.

One of the main disadvantages of Recurring Deposits is the fact that it is not tax efficient.
Interest income from RD is added to income for declaring tax liability and a TDS will be
applicable on the RD interest if it exceeds Rs. 10,000.

Systematic Investment Plan - A SIP can be chosen by investing in mutual funds. In a SIP, the
investor has to deposit a small sum every month or every quarter and the amount of
investment can be as low as Rs. 500. If you choose a mutual fund scheme and invest in SIP,
based on the plan that you have opted for they will allocate your money in debt or equity. In
recent times, equity mutual funds have generated good returns which have been in excess of
recurring deposit or fixed deposit schemes. The returns generated by SIP mutual funds have
been around 12% to 22% in the last 5 to 10 years. One of the main disadvantages of SIP lies
in the fact that even if you keep depositing the amount, nothing can be promised and if the
stock markets crash, you might end up losing more than what you get. Also, you will have to
hold the fund for a long time to get good returns

33
Which is Better Systematic Investment Plan Or Recurring Deposit
Factors Recurring Deposit (RD)
In a RD scheme, you will have to
invest in a deposit plan that will
Investment give you fixed rate of returns. You
Scheme can also opt for flexible recurring
deposit scheme if you are looking
for more flexibility.
Recurring Deposits are not prone to
Risk Factor risks and is one of the safest form
of investment.
In a Recurring deposit scheme, the
Investment
Type
investor has to deposit a fixed
amount every month.
As the rate of interest is fixed in a
recurring deposit scheme, the return
Returns
is also fixed and known at the time
of investment.
Recurring Deposit is liquid but
Liquidity premature withdrawal or closure
will attract penalty charges.
Recurring Deposit amount or the
Taxation interest earned on it are not
exempted from tax.
34
Systematic Investment Plan (SIP)
In a SIP for mutual funds, you can
choose between debt or equity type of
funds depending on your risk
capability.
Returns that you can expect from the
SIP are variable. There can be a risk of
capital and returns depending on the
stock market. But, recent data shows us
the SIP gives good returns if held for a
long period of time.
Systematic Investment Plan is a way to
put your money on mutual funds.
Investment can be done on a periodic
basis - daily, weekly, monthly or
quarterly.
The returns from a SIP for mutual
funds is dependent on debt and equity
markets and is also based on the fund
scheme chosen by the investor.
In terms of liquidity, a SIP is better
when compared to RD. SIP can be
closed and the money can be
withdrawn without any penal charges.
SIP investments and returns are
exempted from tax only when invested
on Equity Linked Savings Scheme
(ELSS) funds.
Instalment Recurring Deposit usually come SIPs offer flexible instalment plans of
Frequency with monthly instalments daily, weekly, monthly, quarterly etc.

SIPs can help in all kinds of

Recurring Deposits usually serve
Investment
Goal
short-term savings goal and do not
help in long-term wealth growth.
investments goals, whether short- or
long –term, depending on the
frequency of investment, funds chosen
and other factors.

35
 Mutual Fund vs Public Provident Fund

Public provident fund (PPF) and tax saving funds (ELSS) are different products - former is
fixed income instrument and the latter is an investment in stocks. ELSS can be a volatile
journey and may not suit risk averse investors. However, it comes with the combination of
two big advantages - lock in of just three years and aof returns in excess of inflation.
PPF offers tax free assured returns in long term. But the returns may not remain attractive.
The interest rate may drop below 8% given the falling interest rate regime we are into.
While some investors may want to include both these options in their portfolio, it makes sense
to delve deeper into each one of them before you invest.
PPF - It is a scheme issued by the Government of India under the PPF Act of 1968. It is a
fixed income security scheme that enables one to invest a minimum amount of Rs.500 and a
maximum of Rs.1,50,000 per annum. PPF account matures after 15 years. So, the lock-in
period for PPF investment reduces every year. Compared to this, with ELSS, every
investment is subject to a fresh lock-in of three years.
Returns are not fixed. Interest rate for the year is notified by Ministry of Finance, Government
of India. Interest rate for FY2016 is 8.7% p.a. and 8.1% for qtr ended Jun2016, which is
excellent for a debt product.
Individuals who are residents of India can ONLY open an account under the scheme. Only
one PPF account can be maintained by an Individual, except an account that is opened on
behalf of a minor. Thus, PPF account can also be opened by either parent under the name of a
minor. However, each person is eligible for only one account under his/her name. Mother and
father both cannot open Public Provident Fund (PPF) accounts on behalf of the same minor.
Thus, in case a couple has two children, they can maximum open four accounts i.e. two in
their own accounts and two in the name of their children under guardianship of either of the
parent. Also, non-resident Indians (NRIs) are NOT eligible to open an account. Howevera
resident who becomes an NRI during the tenure prescribed under Public Provident Fund
Scheme, may continue to subscribe to the fund until its maturity on a non-repatriation basis.
However, such an account will not be eligible for extension of five years at the time of
maturity, if at the time of maturity, an account holder is an NRI. Since 13th May, 2005, Hindu
Undivided Family can NOT open an account under the scheme. However, accounts opened
prior to that date may continue subscription to their account till maturity. They also can not
extend the account any further, after thisdate.
One can have guaranteed and tax free returns by investing in a PPF account. Currently,
deposits under PPF earn interest of 8.10% per annum. PPF investments are tax deductible,
along with the fact, that the returns are completely, tax free. The lock in period of the PPF
scheme is as long as fifteen years and can be extended in block of five years after maturity.
Partial withdrawals can be made on the commencement of the seventh year.
Since, the return in PPF is guaranteed and is backed by the government, there is low risk
associated with repayment. However, any investor who parks too much money in fixed-
income assets can face other types of risk such as inflation risk. A high rate of inflation would
erode the value of your savings. There is an issue of liquidity too - should the investor need

36
the money for some emergency it would be difficult since the PPF has a lock-in period of 15
years

Other Features -
1. Premature withdrawal of funds – PPFs give a hard time when it comes to withdrawing
investments before the maturity of 15 years is done. Partial withdrawals are permitted
from the seventh year.

2. Loans – Having lock-in periods of 15 years and being stable financial instruments,
from the third year, PPFs can easily be used as collaterals for availing loans for
vehicles, housing and other secured loans.

3. Investment Security – Provided by the Government of India, PPFs offer rates that
rarely changein a major way and are one of the safest possible investments one can
make in India.After initial maturity of 15 years, you can extend your PPF account in
block of 5 years.
PPF falls in Exempt-Exempt-Exempt (EEE) category. Interest earned and the maturity
amount isexempt from income tax

Now, let us look at ELSS-

Equity Linked Savings Scheme (ELSS), is an instrument of savings and investment
managed by many mutual funds. It is a diversified equity mutual fund. A minimum
investment of Rs.500 is required and it has no cap on the maximum investment. It has
a mandatory lock-in period of 3 years, after which all the investment and the returns
can be withdrawn. These investments offer tax free returns as long term capital gains
on equity funds are tax free. Dividend on equity based mutual fund is exempt from
dividend distribution tax as well. Being equity market linked investments, these have a
higher risk, but also present a better case of gaining more returns than any other
savings scheme that relies on fixed income instruments.

Other Features -
1. Premature withdrawal of funds – Premature withdrawal of funds from ELSS
investments is not allowed - not until the lock-in period of 3 years is over.
2. Loans – Equity Linked Savings Scheme investments are market dependent
instruments and can only be used as collaterals for availing loans for vehicles,
housing and other secured loans after the lock-in periods are over. Better rates can
be availed on loans, if investments are pledged with banks that offer the particular
ELSS schemes
3. Comparison of risk and returns –

Should you invest in PPF or ELSS?

Your investment choice should be guided by your investment objectives and your risk
tolerance level and liquidity requirements. Investors with high risk tolerance should

37
invest in ELSS, while investors with low risk tolerance should invest in PPF. Over a
long time frame, wealth creation potential is much higher with ELSS. Young investors
should opt for ELSS, since they usually have high risk tolerance and a sufficiently
long time horizon to ride out the volatilities associated with equity investments. As
you approach retirement, your risk tolerance goes down and PPF is a better investment
option in such a situation. Investors with moderate risk tolerance level can invest in
both PPF and ELSS in accordance with their optimal asset allocation strategy.

Salaried individuals are mandatorily required to contribute a portion of their salary to

employee provident fund (EPF). The EPF interest rate is similar to the PPF interest
rate and the maturity amount is tax free. The EPF contribution of the employee as well
as PPF and ELSS investments goes towards the section 80C tax savings. If you are not
a salaried individual and looking for some safe fixed income saving option, PPF can
be considered.

Returns –ELSS is expected to offer better returns than PPF in long term. Currently,
average 5 year compounded return for ELSS schemes is 13.31% pa and average 10
year compounded return for ELSS schemes is 12.86% pa. This is far better than PPF
rate of return of more than 8%.

Risks – Over longer term, volatility (price risk) reduces significantly, in equity
instruments. There is little risk of capital in PPF, as it is backed by Central
Government of India.

When investing, investors must also consider shortfall risk. This is the risk that an
investment’s actual return will not be sufficient to generate the money needed to meet
one’s investment goals. That is why equity is so crucial in an investor’s portfolio
because good equity investments over the long term do provide returns which outpace
inflation. According to inflation.eu, the average CPI in India over the past 10 years has
fluctuated in wide range of 5.7% (2016) to 12.11% (2010).

If investors invested all their money in fixed return investments like PPF, there is a
very high probability that they would not save sufficiently for retirement, unless they
were earning obscene amounts of money.

Also, the return in PPF has declined over the years. From 12% at the turn of the
century, it dropped down to 11%, then 9.5%, 9% and finally 8%+ where is languished
for many years. Between FY12 and FY15 the rate hovered between 8.6% and 8.7%. If
you take the average inflation by year, the CPI from 2008 to 2013 has fluctuated
between 8.32% and 12.11%. All in all, the PPF has not done an excellent job in
consistently beating inflation over the last few years. You need some equity to create
wealth.

To sum up, if you are willing to take up some risk go with an ELSS, otherwise it is the
good old PPF makes a better bet.

38
 Mutual Fund vs Gold

Gold has always been the safe haven of investment. In the last 5 years, no asset other
than gold has registered a significant growth rate. But recently, even gold witnessed a
fumble in the market. The pace at which the price of gold has stumbled down during
the last 6 – 7 months, has turned the whole market skeptical about the sanctity of this
ever shining investment.
As a result, mutual funds has again come up the charts as a preferred investment.
Mutual funds mitigate risks by distributing the investment along a wide of spectrum of
industries. Put simply, it works on the wisdom of not putting all your eggs in one
basket. But making an investment in mutual funds, unlike gold investment, requires a
great deal of planning and vigilance on the investor's part.
Let's get on to the 'Gold investment vs Mutual Fund' debate and try to delineate which
of the two is a better avenue for making an investment.

Gold investment Mutual Funds

Definition Gold is a precious metal that has Mutual Fund is a complex

always been highly valued in the financial product that works by
market and works as good as the investing the investor's funds in
paper money equities, debts and other money
market instruments

Category Gold investment is an investment Mutual fund is a pure form of

asset as well as a functional investment
commodity

Management The investment is made and The investment is professionally

managed at the sole discretion of managed by money market experts
the investor

Strategy Investment can be divided into Mutual funds involve

physical gold and gold ETFs but diversification of portfolio
that is, more or less, the same through investing in a variety of
thing. There's no diversification securities
involved.

Risk Storing and carrying around gold No such risk is involved in mutual
Involved involves risk of theft and funds. As a matter of fact, mutual
burglary. However, there's no such funds can be bought and sold
risk in gold ETFs online

39
Trading Buying and selling gold involves
 no charges
 no intermediary
 no documentation
Returns Gold does not encash the highs of
the market. It doesn't earn
anything and doesn't pay any
dividends.
Variants Gold is gold there are no types to
it, except for the quality
parameter, implying that 24K gold
is always costlier than 22K gold
Liquidity Gold is an asset with a high
liquidity. It is can be traded with
anyone anywhere
Investment At a whopping price of 26,320 per
Cost 10 gms, (as on the date this article
was published) one needs to think
twice before investing in it. Even,
the minimum investment that has
to be made to start with is quite
high.
Market There's no need to be vigilant
Knowledge while investing in gold. Even a
not-so-smart investor is able to get
substantial returns, provided
he/she invests it for a long term
Stability Gold is not resistant to the market
fluctuations. But, no matter, how
bad it might look, it's value tends
40
BuBuying and selling mutual
funds
 involves intermediary
 incurs entry and exit charges
 requires documentation
Mutual fund ride both the bull and
bear to yield substantial returns to
the investor.
Mutual Funds have many variants
to it based on the kind of funds.
So it becomes very important that
you go for a right mutual fund
suiting your investment appetite
Mutual funds are quite liquid as
well, enabling you to cash your
funds at the current Net Asset
Value. However, they are saleable
only in a specific segment of the
market. You can't sell it to anyone
anywhere
Investing in mutual funds is quite
affordable and flexible. The
amount you want to invest
depends on the number of units
you can afford to purchase. The
minimum investment can start
from as low as Rs 1000
Investing in a mutual fund needs
you to be on your toes all the time.
Only a smart investor with a
know-how of money market can
make his/her way to profit through
mutual fund
Mutual fund is a highly dynamic
financial product that keeps on
riding the lows and highs of
 to always go up in the long run. market and thus is nowhere near
to be called as stable investment
avenue

Mutual Fund vs Real Estate

There is always demand for real estate and historically the prices have been going up sharply.
There is hardly been any instance of prices of properties dropping drastically. This makes real
estate the most obvious investment option. The only reason one may not have made
investments in real estate is lack of funds.
On the other side people have different perceptions about mutual funds. They believe that
mutual funds are very risky. Investing in mutual funds or stocks is akin to gambling. Returns
generated in mutual funds are less than in real estate.

What is the fact? Is real estate actually the best or a mutual fund is a better option?
We will broadly look at two parameters to establish the truth; Returns and risk.

Returns in real estate:

Let us take the earlier mentioned example. Property bought in 2000 at Rs 15 lacs is worth Rs
75 lacs today. Growth of Rs 60 lacs in a matter of just 12 years, fantastic! Isn’t?

Ok, let us mathematically check at what rate it has grown. We know that bank deposits give -
9% per annum. How do you find how much has the property given every year? We can use
the compound annual growth rate (CAGR) or use XIRR function in MS excel.

The property grew at the rate of 13.17% for the period Jan 2000 to Jan 2013.
Now, assume one had invested Rs 15 lacs in HDFC Top 200 G for the same period. He would
have made Rs 1.29 crs at a rate of 18%.

Large cap diversified equity funds tend to give higher returns compared to real estate in the
long term.

Now let us look at the risks..

Only the ignorant will claim real estate is less risky than mutual funds. It is a matter of
perception. The matter of the fact is that both equity mutual funds and real estate both belong
to the growth asset category. The performance of both real estate and equity mutual funds as
an asset category majorly depends on the performance of overall economy. If the GDP grows
at 8% you can expect real estate to grow at 13-14% and equity mutual funds to grow at 15-
17% in the long run. Remember I said long run. In the short run lot of funny things happen,
hence both may not be suitable.

41
How do we plan investments?
Do not see both real estate and equity mutual funds as mutually exclusive, meaning either real
estate or equity mutual funds. If you are rich and have large surpluses then have both in
yourportfolio.
If you are a salaried employee, you may not have huge surplus to invest in property. Then do
not take a home loan and invest in property. The best alternative will be to do an SIP in equity
mutual funds; you will end up better off. In case you want a home to live and you are under
family pressure, then you can take a home loan.

Mutual Fund vs Shares

We come across many investors who need clarification on whether they should invest directly
in equities or via mutual funds. These investors have the perception that it is better to invest in
equities directly rather than through mutual funds and the most common arguments or reasons
for these beliefs are: It is easier for the amount invested in equity to double than it would be
through a mutual fund; some would even say that the latter is not possible. Also due to
volatility in share market, it is a more exciting investment experience. This has led us to
analyze the similarities between direct equities and equity mutual funds or rather the
difference.

“Should one invest in direct equities or equity mutual funds”? First of all, you need to
understand that from a taxation point of view, equity mutual funds and direct equity have the
same structure – there is no difference at all.

Volatility: Volatility in stocks is high as compared to volatility in mutual funds. As seen from
the table below, we have made a comparison between HDFC Equity Fund (highest assets in
equity- Rs. 17,168 crores) with ICICI Bank and Maruti Suzuki, which are the top equity
holdings in the same scheme’s portfolio. ICICI Bank was down by 10.55% and Maruti Suzuki
was up by 49.07% in the last one year; whereas HDFC Equity Fund is down by 0.57% in the
last one year. Hence, in stocks you can see wild volatility whereas in mutual funds,
thevolatility is much less. Given below is the return chart reflecting the volatility over
different time periods for illustration.

1 month 3 months 6 months 1 year

HDFC Equity Fund -2.93 -6.20 -4 -0.57
ICICI Bank -8.04 -16.25 -18.09 -10.55
Maruti Suzuki 6.66 12.27 22.53 49.07
S&P BSE SENSEX - 2.94 -7.89 -10.88 -3.77

Returns as on September 28, 2015.

Comparing apples with oranges: When one invests in mutual funds, one buys a basket or
portfolio of stocks. A typical mutual fund portfolio will consist of 20-25 stocks, each with
their own price movements, which may sometimes cancel each other out. The movement of a
single stock, on the other hand, can be clearly captured. Thus you cannot compare the two
investment avenues. If at all one wants to do a comparison it has to be a complete portfolio
v/s portfolio.

42
Change in valuations: When investing in direct equities, volatility in the stock price
valuations can be triggered by any announcements/events/performance etc. For example, the
recent negative event at Motherson Sumi systems due to the Volkswagen fiasco has led to
significant volatility and a fall of approx. 24% in its share price in the last one month, as on
Sep 28, 2015.

Hence, anyone holding Motherson Sumi stock, would need to take a call on whether to sell it
or hold it or buy more, based on his or her conviction and perception. If one who has invested
in a mutual fund holding that stock, he or she does not need to take any call as that is the
responsibility of the fund manager.

Therefore, investment in direct equities requires you to time specific investments based on
valuations, which would require regular monitoring of the same. In the case of mutual funds,
you do not have to look at valuations. With direct investment in stocks, you not only have to
be abreast with the developments in the economy but also keep a close track of the companies
in which you have made any investment.

Available resources: Compared to the money available for investment with an individual, the
investment options seem unlimited. Hence, one needs to be very selective when making
investments decisions. For example, consider an individual who has bought shares of stock
XYZ at Rs. 100 with the funds available. In case the share price of XYZ drops to Rs. 70 and
he wants to buy more of the same stock, he may not be able to do so as his resources may be
exhausted or he may have to disturb his overall portfolio to access the funds.

In the case of mutual funds, there is a much larger corpus of funds available as it is a pool of
funds where multiple investors are investing and dis-investing on a daily basis. So, whenever
the fund has a net inflow, the fund can increase its exposure to certain stocks but the flip side
is also true, when there is a net outflow, the fund may have to exit some stocks to manage the
liquidity requirements.

For example, Mr. A and Mr. B both have invested in a fund. However, when Mr. A invested
in the fund, the stock price was Rs. 100 and when Mr. B invested in the fund, the stock price
was Rs. 70. Hence, in this way, the fund’s average cost becomes Rs. 85 and both Mr. A and
Mr. B are benefited as the cost has come down from Rs. 100 to Rs. 85 for Mr. A and Mr. B
has a profit of Rs. 15.

The above pointers may sound slightly confusing, so we summarize it as below:

Direct equities: You should consider investing in direct equities if you have the time to
actively monitor and research stocks, you have a reasonable knowledge about the financial
markets and you have the patience to bear market volatility. In such cases, it is preferable to
invest as lumpsum.

Mutual funds: You should consider investing in mutual funds if you do not have the time to
actively monitor your investments and cannot bear market volatility. Also, you should invest
in mutual funds from a more goal-oriented perspective and we think systematic investment
plans (SIP) are the best way to invest in them to create wealth from your income saved over a
long period of time.

43
 LITERATURE REVIEW

Ajay Khorana, Henri Servaes, and Peter Tufano (2012) 6 studied the mutual fund industry
in 56 countries and examined where this financial innovation has flourished. The fund
industry is larger in countries with stronger rules, laws, and regulations and specifically where
mutual fund investors' rights are better protected. The industry is also larger in countries with
wealthier and more educated populations, where the industry is older, trading costs are lower
and in which defined contribution pension plans are more prevalent. The industry is smaller in
countries where barriers to entry are higher. These results indicate that laws and regulations,
supply-side and demand-side factors simultaneously affect the size of the fund industry.
Huhmann (2005) 7 opines that increased number of mutual funds all over the world, mainly
in developed countries, is an indication of investors' preference for this indirect mode of low-
risky investment.
Deepak Agrawal (2011 8 in his paper provides an overview of mutual fund activity in India.
He also analyzes data at both the fund-manager and fund-investor levels. The 26 study
revealed that the performance of the Mutual Fund Industry in India is affected by saving and
investment habits of the people on one hand and on the second side the confidence and loyalty
of the fund manager.

44
 RESEARCH METHODOLOGY

This Report is based on primary as well as secondary data, however primary data helps in
taking the views of the investors by the way of questionnaire and secondary data helps in
getting the information about different investment avenues.
One of the most important users of Research Methodology is that it helps in identifying the
problem, collecting, analyzing the required information or data and providing an alternative
solution to the problem. It also helps in collecting the vital information that is required by the
Top Management to assist them for the better decision making both day to day decisions and
critical ones.

a) Research Design: Descriptive Design

b)Data Collection Method: Survey Method

c)Universe: Ambala Cantt

d)Sampling Method: The sample was collected through personal visits, formally and
informal talks and through filling up the Questionnaire prepared. The data has been analyzed
by using mathematical or statistical tools.
e)Sample Size:50 respondents

f)Sampling Unit: Businessmen, Government Servant, Retired Individuals

g)Data Source: Secondary data

h)Data Collection Instrument: Structured Questionnaire

i) Sample Design: Data has been presented with the help of Bar Graph, Pie Chart, and Line
Graph etc.

j) Duration Of The Study: The study was carried out for a period of 45 Days, from 1stJune
to15thJuly ‘17.

45
 Survey on Comparative Study of Mutual Fund with Other
Investment Securities

Name :
Age :
Mob. :

Ques.1 What is your Qualification?

Under-graduation Graduation
Post-Graduation Others

Ques.2 What is your Occupation?

Government Job Business
Private Job Others

Ques.3 What is your annual income?

< 250000 2.5 lac - 5 lac
5 lac – 10 lac >10 lac

Ques.4 Do you have any idea about Mutual Fund?

Yes No

Ques.5 From where you came to know about Mutual Fund?

Advertisement Peer Group
Banks Financial Advisor

Ques.6 Have you invested in Mutual Fund?

Yes No

Ques.7 If No, reason

Not aware Risky investment

46
 Less Liquidity Good Returns in Long term only

Ques.8 If Yes, then in which company?

Reliance SBI
UTI HDFC

Others

Ques.9 Where you will prefer to invest?

Savings FD
Insurance Mutual Fund

Post Office Shares

Gold Real Estate
Recurring Deposits

Ques.10 Which mode of investment will you prefer?

Long Term Short-Term

Ques.11. Objective of investment?

Preservation Current Income
Conservative Aggressive Growth

47
 Data Analysis & Interpretation

1. Analyzing to according to Age

Age of Investors
>=30 31-35 36-40 41-45 46-50 >50
No. of Investors,
>=30, 3, 3%

No. of Investors, >50,

10, 10% No. of Investors,
31-35, 12, 12%

No. of Investors, 46-

50, 18, 18%

No. of Investors, 36-

40, 35, 35%
No. of Investors, 41-
45, 22, 22%

Interpretation - Here, it is been found that most of the investors i.e,35% of the
investors who invest in Mutual Fund lies in between the age group of 36-40, they are more
reluctant as well as experienced in this field of Mutual Fund.
Then the Second highest age group lies in between the age group of 41-45 (22%), they are
also aware of the benefits in investing in mutual fund.
The least interested group is the Youth Generations.

2. Analyzing according to Qualification

48
 Qualification of Investors
No. of Investors

Qualification

Interpretation - Out of my survey of 100 people, 71% of the investors are Graduates and
Post Graduates and 16.67% are Under Graduates and Others, around 12.5%, which may
include persons who have passed their 10th standard or 12th standard invests in Mutual Funds.

3. Analyzing according to Occupation

Investor's Proffession
Series1, Others,
5, 5% Series1,
Government,
Series1, 24, 24%
Business, 25,
25%

Series1,
Private, 46,
46%

Interpretation - Here it is amazed to see that around 46% of the investment is been invested
by the persons working in Private sectors, according to them investing in Mutual Funds is
more safer as well as more gainer.
Then we find that the businessmen of around 25%gives more preference in investing in
mutual funds, they think that investing in mutual fund is better than investing in shares as well
as Post office.

49
Next we see that the persons working in Government sectors of around 24% only invests in
Mutual Fund.

4. Analyzing according to Monthly Family Income

Income of<=10000,
Series1, Investors
0%
0,
<=10000 10001-20000 20001-30000 >30000

Series1, 10001-
20000, 18, 18%

Series1, >30000, 43,

43%

Series1, 20001-
30000, 39, 39%

Interpretation - Here , we find that investors of around 43% with the monthly income of Rs.
>30000 are the most likely to invest in Mutual fund , than any other income group

5. Analyzing data according to factors seen before investing

50
 Preference of Investment
No. of Investors

Preference of Investment

Interpretation - As it can be clearly Stated from the above Diagram that investors before
investing, the main criteria that they used to give more Preference is Low Risk. According to
them, if a scheme is low risk, it may or may not give a very good return , but still 56% of the
investors choose low risk as the option while investing in Mutual Funds.
Then we see that 27% of the investors take High return as one of their most important
criteria. According to them, if there is no high return then we should opt for Post office and
not mutual fund.
11% of the investors take trust as one of their important factors
Only 4% of the Investors think liquidity as their most preferable options.

6. Analyzing data according to mode of investment

Long Term Short Term

Mode of Investment

Series1,
Long
Term,
18, 18%

Series1, Short
Term, 82, 82%

51
Interpretation - It can be clearly stated from the above Figure that 82% of the investors like
to invest in SIP, as the investor feels that they are more comfortable to save via SIP than the
Long term.
While 18% of the investors find SIP as very burdensome, and they are more reluctant to save
in Long term investment.

7. Analyzing data according to objective of investment

Objective of Investment
No. of Investors

Objective

Interpretation - Here we see that 36% of the investor’s objectives are to preserve the
principal amount, so that it can be used as a savings for the future period.
While 22% investors invest to get derive their current income through investing in Mutual
Funds.
While 15% and 17% of the investors invest to get a conservative as well as aggressive growth.

8. Analyzing data according to awarness about Mutual Fund

Awarness about Mutual

Fund
No. of Investors

Knowledge about Mutual Fund

Interpretation -. From The total lot of 100 people, 96 people are actually aware of the fact
of Mutual fund and are regular investors of Mutual Funds.

52
4 People were there who have just heard the name or rather are just aware of the fact of
existence of the word called Mutual Fund, but doesn’t know anything else about Mutual
Funds.

9. Analyzing data according to from where they came to know about Mutual Fund.

Chart Title
No. of Investors

Intimated about Mutual Fund

Interpretation -Here from the Line Graph it can be clearly stated that around 46% of the
investors came to know the benefits of Mutual Fund from Financial Advisors. According to
the suggestions given by the financial advisors, people use to choose Mutual Funds Scheme.
Then Secondly,24% and 21% of the people used to know from Advertisement and Peer
group respectively.
Lastly 9% of the investors do invests after being intimated by the Banks about the benefits of
Mutual Funds.

10. Analyzing data according to investors choice of investing in different Mutual Fund
Companies.

Series1, Series1
UTI , 10, Different Mutual Fund ,
10% Others
Company Series1, , 13,
Reliance, 13%
45, 45%

Series1, SBI,
17, 17%
Series1,
HDFC, 15,
15%

53
Interpretation -From this above Pie Chart it can be clearly stated that 45% , 17%of the
people like to invest in large cap companies where return is comparatively less but risk is low
thus they invest in Reliance, SBI respectively.
15%, 10% of the people like to invest in Mutual Fund Companies like HDFC, UTI, etc. where
risk is slightly higher than the above two mentioned companies as well as return is also
slightly high
13% of the investors like to invest in the Small Cap’s and Mid Cap’s companies.

54
 FINDINGS

Through this Project the results that was derived are-

 People who lie under the age group of 30-40 have more experience and are more
interested in investing in Mutual Funds.
 There was a lot of lack of awareness or ignorance, that’s why out of 200 people,
80 people who is aware out of which some have invested in Mutual Fund and 100
people is unaware of investing in Mutual Funds.
 Generally, People employed in Private sectors and Businessman are more likely to
invest in Mutual Funds, than other people working in other professions.
 Generally investors whose monthly income is above Rs. 20001-30000 are more
likely to invest their income in Mutual Fund, to preserve their savings of at least
more than 20%.
 People generally like to save their savings in Mutual Fund, Fixed Deposits and
Savings Account.
 Many people came to know about Mutual Fund from Financial Advisors,
Advertisement as well as from their Peer group , and they generally invest in the
Mutual Fund by taking advices from their Legal Advisors.
 Investors generally like to invest in Large Cap Companies like Reliance, SBI, etc.
to minimize their risk.
 The most popular medium of investing in Mutual Fund is through SIP and
moreover people like to invest in Equity Fund though it is a risky game.
 The main Objective of most of the Investors is to preserve their Income.

55
 CONCLUSION

Mutual Funds now represent perhaps most appropriate investment opportunity for most
investors. As financial markets become more sophisticated and complex, investors need a
financial intermediary who provides the required knowledge and professional expertise on
successful investing. As the investor always try to maximize the returns and minimize the
risk. Mutual fund satisfies these requirements by providing attractive returns with affordable
risks. The fund industry has already overtaken the banking industry, more funds being under
mutual fund management than deposited with banks. With the emergence of tough
competition in this sector mutual funds are launching a variety of schemes which caters to the
requirement of the particular class of investors. Risk takers for getting capital appreciation
should invest in growth, equity schemes. Investors who are in need of regular income should
invest in income plans.

The stock market has been rising for over three years now. This in turn has not only protected
the money invested in funds but has also to helped grow these investments.

This has also instilled greater confidence among fund investors who are investing more into
the market through the MF route than ever before.

Reliance India mutual funds provide major benefits to a common man who wants to make his
life better than previous.
The mutual fund industry as a whole gets less than 2 per cent of household savings against the
46 per cent that go into bank deposits. Some fund managers say this only indicates the sector's
potential. "If mutual funds succeed in chipping away at bank deposits, even a triple digit
growth is possible over the next few years.

56
REFERENCES

Books:
 The Indian Financial System (second edition) by Bharati V. Pathak.
Published by Dorling Kindersley (India) Pvt. Ltd., licensees of Pearson
Education in South Asia.
 Bhalla V.K. (2001), Financial Management & Policy II Edition, Anmol
Publications, New Delhi
 Khan & Jain(1997), Financial Management and Policy, Tata Mc Graw
Hill, New Delhi
 Kothari C.R. (2000), Research Methodology, Wishwa Prakashan, New
Delhi

Magazines:
 Money Outlook (May &June 2009)
 Business world (May & June 2009)

Websites
 www.hdfcfund.com
 www.moneycontrol.com

57