Undertaken at


Submitted To

Submitted By

M.B.A (591)


Certificate by the Organization
This is to certify that Mr. Ram Achal Maurya, pursuing MBA at INSTITUTE OF BUSINESS MANAGEMENT VBS PURVANCHAL UNIVERSITY, JAUNPUR has worked under my supervision and guidance on his dissertation entitled “DESCRIPTIVE STUDY OF FINANCIAL PRODUCT DISTRIBUTION” at Reliance Money Limited,Varanasi from May JUN 01, 2009 to July 20th 2009. To the best of my knowledge this is an original piece of work.

Name of Guide Signature Date

Certificate by the faculty guide

S.B. Name of Faculty Signature Date STUDENT’S DECLARATION 4 .This is to certify that the project report entitled “DESCRIPTIVE STUDY OF FINANCIAL PRODUCT DISTRIBUTION” at Reliance Money Limited. PURVANCHAL UNIVERSITY JAUNPUR. Varansi is a bonafide record of work done by Ram Achal Maurya. and submitted in partial fulfillment of the requirements of MBA program of INSTITUTE OF BUSINESS MANAGEMENT V.

here by declare that project entitled “DESCRIPTIVE STUDY OF FINANCIAL PRODUCT DISTRIBUTION “ submitted in the partial fulfillment of the degree for “Master Of Business Administration” to “INSTITUTE OF BUSINESS MANAGEMENT V. student of MBA . UNIVERSITY I further declare that all the facts and figures furnished in this project report are the outcome of my own intensive research and findings. Ram Achal Maurya.I.S. MBA (2008-10) RO LL NO-591 5 .. Ram Achal Maurya.B. PURVANCHAL JAUNPUR“ is of my own accurate work.

Ram Achal Maurya.ACKNOWLEDGEMENT “Expression of feelings by words makes them less significant when it comes to make statement of gratitude” It gives me pleasure to express my most profound regards and sense of great indebtedness and sincere gratitude to my Corporate Guide Mr. ALOK SINGH & Dr. I would also like to thank my co employees who gave guidance and support during the completion of the project. S. Varanasi). Reliance Money ltd.Mr. 6 . Ashish Tiwary and Mr. BAINERJI for her guidance in preparing this report. Fahad Rahman. Pawan Kumar Sahu (Cluster Head Sales. I would thank to my faculty guide Dr.

the Company Profile. 7 . This Report will help to know about the investors’ Perception about Mutual Funds in the context of their trading preference. The analysis and advice presented in this Project Report is based on market research on the saving and investment practices of the investors and preferences of the investors for investment in Mutual Funds. explore investor’s risk perception & find out their preference over Top Mutual funds. But once people are aware of mutual fund investment opportunities.EXECUTIVE SUMMARY In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being. The main reason the number of retail mutual fund investors remains small is that nine in ten people with incomes in India do not know properly about mutual funds. Mutual Funds have not only contributed to the India’s growth story but have also helped families tap into the success of Indian Industry. The trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to buy mutual funds and to use the right arguments in the sales process that customers will accept as important and relevant to their decision. As information and awareness is rising more and more people are enjoying the benefits of investing in mutual funds. The first part gives an insight about Mutual Fund and its various aspects. This Project as a whole can be divided into two parts. This Project gave me a great learning experience and at the same time it gave me enough scope to implement my analytical ability. the number who decide to invest in mutual funds increases to as many as one in five people.

I also taken interview of many People those who were coming at the Reliance Money Branch where I done my Project. 8 .Objectives of the study. For the collection of Primary data I made a questionnaire and surveyed of 100 people. One can have a brief knowledge about Mutual Fund and its basics through the Project. I visited other AMCs in VARANASI to get some knowledge related to my topic. Research Methodology. I hope the research findings and conclusion will be of use. This Project covers the topic “DESCRIPTIVE STUDY OF FINANCIAL PRODUCT DISTRIBUTION” The data collected has been well organized and presented. The second part of the Project consists of data and its analysis collected through survey done on 100 people.

CONTENTS Certificate by the Organization Certificate by the faculty guide Student’s Declaration 4 Acknowledgement 5 Executive Summary CHAPTER 1 2 3 6 10-17 11 12 13 18-48 19 22 31 33 35 41 47 Company Profile Vision & Mission Organizational Structure Product Offering INTRODUCTION About Mutual Funds Organization of Mutual Fund Advantages of Mutual Fund Disadvantages of Mutual Fund History of Indian Mutual Fund Industry Types of Mutual Fund Bank vs. Mutual Fund CHAPTER 2 CHAPTER3 EVALUVATION and STRATAGIES 49-60 Investment Strategies Performance Evaluation Risk vs. Return 49 50 60 61-68 CHAPTER 4 MAJOR PLAYERS 9 .

About major Mutual Funds Companies Competition in Mutual Fund Industry 61 67 CHAPTER 5 OBJECTIVES AND METHODOLOGY 69-72 Significance of the Study Managerial Usefulness of the Study Objectives Scope of the Study Research Methodology 69 69 70 70 71 CHAPTER 6 DATA ANALYSIS AND INTERPRETATION 73 Findings Limitations Recommendations 86 87 89 91-94 91 94 CHAPTER APPENDIX Questionnaire Bibliography 10 .

life and general insurance. has interests in asset management. offering an investment avenue for a wide range of asset classes. Reliance Capital Ltd. Equity and Commodity derivatives. 11 . Offshore Investments. IPO’s. Reliance Money provides a comprehensive platform. private equity and proprietary investments. Mutual Funds.55. in terms of net worth. stock broking and other financial services. Equities. Reliance Money is promoted by Reliance Capital.115.000 crores (US$ 14 billion). enabling you to access amongst others. Money Changing and Credit Cards. Money Transfer.000 crores (US$ 29 billion). net assets in excess of Rs. ranking among the top 3 private sector financial services and banking companies.325. and net worth to the tune of Rs. with a market capitalization of Rs. Reliance Capital is a part of the Reliance Anil Dhirubhai Ambani Group. Its endeavor is to change the way India transacts in financial market and avails financial services. Thus. Reliance Money offers a single window facility. one of India's leading and fastest growing private sector financial services companies.000 crores (US$ 81 billion).COMPANY PROFILE The Reliance – Anil Dhirubhai Ambani Group (ADAG) is among India’s top three private sector business houses on all major financial parameters. Life Insurance and General Insurance products.

12 .VISION To build a global enterprise for all our stakeholders. To give millions of young Indians the power to shape their destiny. and A great future for our country. high performance environment aimed at delighting our customers by providing endless financial products in all part of the country. The means to realize their full potential… MISSION To create and nurture a world-class.

ORGANIZATIONAL STRUCTURE National Head Zonal Head Zonal Head Zonal Head Zonal Head Regional Head Regional Head Regional Head Regional Head Cluster Head Cluster Head Centre Manager Centre Manager BDEs BDEs BDEs BDEs BDEs 13 .

National Level Zonal Level : : National Head Zonal Head Regional head Regional Level : Divisional level : Cluster Head Branch Level Area Level : : Center Manager Business Development Executives & Freelancers Advantages offered by Reliance money over other companies: • Cost Effective • Convenience • Security • Single Window for Multiple Products • 3 in 1 Integrated Access • Demat Account with Reliance Capital • Other Services like research. Trading Portal (with almost negligible brokerage) • Equity Broking • Commodity Broking 14 . live news from Reuter and Dow Jones etc. PRODUCT OFFERING 1.

• Derivatives ( Futures & Options ) • Offshore Investments (Contract For Differences) • D-Mat Account. 2. Financial Products • Mutual Funds • Life Insurance o ULIP plan o Term Plan o Money Back Plan • General Insurance o Vehicle/Motor Insurance o Health Insurance o House insurance • IPO’s • NFOs 3. Value-Added Services • Retirement Planning • Financial Planning • Tax Saving • Children Future Planning 15 .

What are the benefits of opening a Demat account? Demat account has become a necessity for all categories of investors for the following reasons/ benefits: 16 . Credit Cards 5. the abbreviation for dematerialize account.4. Gold coins retailing TRADING PORTAL Online trading refers to buying and selling of the shares / stocks / contracts / bonds with the use of internet. is a type of banking account which dematerializes paper based physical stock shares. The Securities and Exchange Board of India (SEBI) mandates a Demat account for share trading and for opening a DEMAT account a Permanent Account Number (PAN) is also mandatory. This account is popular in India. DEMAT ACCOUNT In India. a Demat account. In this shares are not issued in physical form rather they are transferred in the dematerialized form in the Demat account directly. The dematerialized account is used to avoid holding physical shares: the shares are bought and sold through a broker.

. • Instantaneous transfer of securities enhances liquidity. paperwork and signing of multiple transfer forms is done away with. thefts. forgery of signatures fake certificates. Therefore. • It is a safe and convenient way to hold securities compared to holding securities in physical form. etc. Although. . which are a third 17 . How Reliance Money Scored Over Others? 1. Any number of securities can be transferred/delivered with one delivery order. deletion of deceased's name. address. Two Way Authentication: Reliance offers its customers with a token (an electronic gadget) that generates a password. • Change of name.• SEBI has made it compulsory for trades in almost all scrip’s to be settled in Demat mode. trades up to 500 shares can be settled in physical form. interceptions and subsequent misuse of certificates. etc. registration of power of attorney. • Each share is a market lot for the purpose of transactions – so no odd lot problem.can be effected across companies by one single instruction to the DP. • No stamp duty is levied on transfer of securities held in Demat form. physical settlement is virtually not taking place for the apprehension of bad delivery on account of mismatch of signatures. • It eliminates delays. It facilitates taking advances against securities on low margin/low interest.

3. 5. The password generated by the token is valid only for a period of 32 seconds.level of security in addition to the customer log in and a password provided. If the web page expires. User friendly software: The portal offered is very easy to understand and use. Lowest Brokerage: Reliance offers the lowest brokerage of 1 paisa which is very less with respect to the other DPs in the market. 2. Reliance Capital's stock brokerage arm Reliance Money launched Internet trading services through web-enabled retail kiosks. 4. Forex and offshore investment: Reliance provides the offshore facility which no other AMC is providing in the market. Better research and news: Reliance offers news from the DOW JONES and REUTERS. 18 . Seeking to bring share trading closer to consumers just like ATMs. a new password generated by the token has to be keyed in by the customer. for the fresh login.

have the expertise for various analytical tools & make use of them. these combined with modern technology guides the investor. etc. through grapevine. Over the past years a number of technical & theories for analysis have evolved.INTRODUCTION Investment in share markets are influenced by the analysis & reasoning which help in predicting the market to some extent. explore investor’s risk perception & find out their preference over Top Mutual 19 . Generally a small investor’s investments are based on market sentiments. The project has been carried out to have an overview of Mutual Fund Industry and to understand investor’s perception about Mutual Funds in the context of their trading preference. The small investors are not in a position to benefit from the market the way Mutual Funds can do. The big players in the market. They can invest through the Mutual Funds who are more experienced and expert in this field than a small investor himself. tips & intuition. inside information. like Foreign Institutional Investors. The small investors depend on brokers and brokerage house for his investments. In recent years a large number of players have entered into his market. Mutual Funds.

The flow chart below describes broadly the working of a mutual fund A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and 20 . The money thus collected is then invested in capital market instruments such as shares.MUTUAL FUNDS A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. debentures and other securities. professionally managed basket of securities at a relatively low cost. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified.

invests the same on behalf of the investors/unit holders. Investors of mutual funds are known as unit holders. A Mutual Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. 21 . Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. in Equity shares. Bonds. The investors in proportion to their investments share the profits or losses. Government securities. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. Call Money Markets etc. Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. In the other words. a Mutual Fund allows investors to indirectly take a position in a basket of assets. and distributes the profits. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time.

22 .

• Company Form: These forms of mutual funds are more popular in US. Trustee of one mutual fund cannot be a trustee of another mutual fund. 23 .ORGANISATION OF A MUTUAL FUND: There are many entities involved and the diagram below illustrates the organizational set up of a Mutual Fund: The Mutual Funds are structured in two forms: Company form and Trust form. There must be at least 4 members in the Board of Trustees and at least 2/3 of the members of the board must be independent. mutual funds are organized as Trusts. • Trust Form: In India. The Trust is either managed by a Board of Trustees or by a Trustee Company.

a bank or a financial institution. such as on capital and profits. Fund Sponsor 2. In order to run a mutual fund in India. the sponsor has to obtain a license from SEBI.2 Brokers 4. Other Fund Constituents 4. it has to satisfy certain conditions. Asset Management Company 4. a sponsor is to a mutual fund.4 Distributors FUND SPONSOR What a promoter is to a company. Mutual Fund as Trust 3. The Sponsor appoints the Trustees.3 Transfer Agent 4. default-free dealings and a general reputation for fairness. The sponsor initiates the idea to set up a mutual fund. It could be Indian or foreign. The sponsor must have been profit making in at least 3 years of the above 5 years.1 Custodian and Depositors 4. Custodian and the AMC with the prior approval of SEBI and in accordance with SEBI Regulations. It could be a financial services company. 24 . track record (at least five years in financial services). For this. It could do it alone or through a joint venture.Unit Trusts – Constituents: A Mutual Fund is set up in the form of a Trust which has the following constituents:1.

1882 by the Sponsor. This sometimes meant meeting shortfalls from their own pockets. The trust deed is registered under the Indian Registration Act. The Trust appoints the Trustees who are responsible to the investors of the fund. and their job is to protect the interests of the unit holders.. Now that assured return schemes are passed.e. so long as it is complemented by good fund management. preferably. and can be either individuals or corporate bodies. the sponsor takes big-picture decisions related to the mutual fund. In order to ensure they are impartial and fair. choose sponsors who are good money managers. helps. i. TRUSTEES Trustees are like internal regulators in a mutual fund. be profitable. 1908. not have any association with the 25 . Trustees are appointed by the sponsors. sponsors also had to fulfill return promises made to the unit holders. as the government did for UTI. whom it appoints. Financial muscle. TRUST The Mutual Fund is constituted as a Trust in accordance with the provisions of the Indian Trusts Act. SEBI rules mandate that at least two thirds of the trustees be can hire the best talent. leaving money management and other such nitty-gritty to the other constituents. as money is then not an impediment for the mutual fund. The sponsor should inspire confidence in you as a money manager and. invest in technology and continuously offer high service standards to the investors.Like the company promoter. who have a reputation for fair business practices and who have deep pockets. In the days of assured return schemes. All things considered. such bailouts won’t be required.

seeks their approval for the work it does.  Trustees must ensure due diligence on the part of AMC in the appointment of constituents and business associates.  Trustees must ensure that the AMC has systems and procedures in place.  Trustees can seek remedial actions from AMC. Rights of the Trustees:  Trustees appoint the AMC in consultation with the sponsor and according to the SEBI Regulations. which subsequently. and in cases can dismiss the AMC. They check if the AMCs investments are within defined limits and whether the fund’s assets are protected.  Trustees must furnish to the SEBI.sponsor. Trustees can be held accountable for financial irregularities in the mutual fund. Trustees appoint the AMC. 26 . Trustees float and market schemes. every quarter. on half yearly basis a report on the activities of the AMC.  Trustees review and ensure that the net worth of the AMC is according to the stipulated norms. and reports periodically to them on how the business being run. Obligations of the Trustees:  Trustees must ensure that the transactions of the mutual fund are in accordance with the trust deed.  All Mutual Fund Schemes floated by the AMC have to be approved by the Trustees. and secure necessary approvals.  Trustees can seek information from the AMC regarding the operations and compliance of the mutual fund.

Although these people are employed by the AMC. and fund managers. on over Rs. generally referred to as the Chief Executive Officer (CEO). The trustees sign an investment agreement with the AMC. Trustees must ensure compliance with SEBI Regulations. If a scheme’s corpus is up to Rs. There is the head of the fund house. if a fund house has two schemes. Under him comes the Chief Investment Officer (CIO). It is the AMC that employs fund managers and analysts. with a corpus of Rs.100 crores and Rs. who manages its schemes.200 crores 27 . The AMC is usually a private limited company in which the sponsors and their associates or joint venture partners are the shareholders. The people in the AMC who should matter the most to you are those who take investment decisions. and other personnel.25% of its corpus a year. its you. It is the AMC that handles all operational matters of a mutual fund – from launching schemes to managing them to interacting with investors. who shapes the fund’s investment philosophy. So. Each scheme pays the AMC an annual ‘fund management fee’. which is linked to the scheme size and results in a corresponding drop in your return. the fee is 1% of the corpus. sectors and companies. the unit holders. who track markets. They are assisted by a team of analysts.100 crores. partly or wholly. which spells out the functions of the AMC. who pays their salaries. ASSET MANAGEMENT COMPANY (AMC) An AMC is the legal entity formed by the sponsor to run a mutual fund.100 crores it pays 1.

28 .  The actions of its employees and associates have to be as mandated by the trustees. other than that of asset management  At least half of the members of the Board of an AMC have to be independent. which could well turn into an exercise in cutting corners. Again.25 crore (1. the AMC will earn Rs.25+2) as fund management fee that year. the balance has to be met by the sponsor. while a sponsor with less financial clout might force the AMC to trim costs.  AMC must have a minimum net worth of Rs. financial strength comes into play: a cash-rich sponsor can easily pump in money to meet short falls.  An AMC cannot be an AMC or Trustee of another Mutual Fund.  AMCs cannot indulge in any other business.10 crores at all times. Regulatory requirements for the AMC:  Only SEBI registered AMC can be appointed as investment managers of mutual funds.3.  The 4th schedule of SEBI Regulations spells out rights and obligations of both trustees and AMCs. Obligations of the AMC:  Investments have to be according to the investment management agreement and SEBI regulations.respectively. If an AMCs expenses for the year exceed what it earns as fund management fee from its schemes.

Scheme take over: If an existing mutual fund scheme is taken over by another AMC. The two mutual funds continue to exist. it is called as scheme take over. Conditions under which an AMC can be taken over: SEBI approval is required for the change of ownership and unit holders have to be informed of the takeover.  AMCs have to make the necessary statutory disclosures on portfolio. and provided the option to exit at NAV without load.  AMCs have to provide full details of the investments by employees and Board members in all cases where the investment exceeds Rs.  Unit holders should be notified of the merger. Restrictions on the AMC:  AMCs cannot launch a scheme without the prior approval of the trustees. Conditions under which two AMCs can be merged: SEBI Regulations require the following:  SEBI and Trustees of both the funds must approve of the merger. 29 .  AMCs cannot take up any activity that is in conflict with the activities of the mutual fund.1 lakh. Trustee and SEBI approval and notification of the unit holders are required for scheme take over. AMCs have to submit detailed quarterly reports on the working and performance of the mutual fund. NAV and price to the investors.

It also track corporate actions like bonus issues. and distribution of dividends and segregation of assets between the schemes. are responsible for the investor servicing functions. also known as the transfer agents. offer for sale. ensures that the assets of a mutual fund are not in the hands of its sponsor. but it cannot service Deutsche Mutual Fund.CUSTODIAN A custodian handles the investment back office of a mutual fund. Some fund houses handle such 30 .  Brokers are the registered members of the stock exchange. right offers. For example.  In some cases.  Act as an important source of market information. This condition. sending fact sheets and annual reports.  They charge a commission for their services. Its responsibilities include receipt and delivery of securities. Deutsche Bank is a custodian. REGISTRAR OR TRANSFER AGENTS Registrars. provide investment managers with research reports. BROKERS Role of Brokers in a Mutual Fund:  They enable the investment managers to buy and sell securities. The sponsor of a mutual fund cannot act as a custodian to the fund. collection of income. This includes issuing and redeeming units. its mutual fund arm. buy back and open offers for acquisition. formulated in the interest of investors.

DISTRIBUTORS Role of Selling and Distribution Agents: • Selling agents bring investor’s funds for a commission. • Banks and post offices also act as distributors.functions in-house. also have investor service centers of their own in some cities. in addition to registrars.  Incorporating changes in the investor information. Karvy and CAMS are the more popular ones.  Recording details of the investors. Most mutual funds.  Keeping investor information up to date. 31 . Some of the investor – related services are: Processing investor applications. • Distributors appoint agents and other mechanisms to mobilize funds from the investors.  Processing dividend payout. It doesn’t really matter which model your mutual fund opt for. as longas it is prompt and efficient in servicing you. Others outsource it to the Registrars. • The commission received by the distributors is split into initial commission which is paid on mobilization of funds and trail commission which is paid depending on the time the investor stays with the fund.  Sending information to the investors.

Mutual Funds save your time and make investing easy and convenient. Return Potential Over a medium to long-term.Advantages of Mutual Fund Professional Management Mutual Funds provide the services of experienced and skilled professionals. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. delayed payments and follow up with brokers and companies. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries. Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. Low Costs 32 .

Liquidity In open-end schemes. Flexibility Through features such as regular investment plans. the proportion invested in each class of assets and the fund manager's investment strategy and outlook. In closed-end schemes. regular withdrawal plans and dividend reinvestment plans. Choice of Schemes 33 . Transparency Investors get regular information on the value of their investment in addition to disclosure on the specific investments made by their scheme. the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. Affordability Investors individually may lack sufficient funds to invest in high-grade stocks. custodial and other fees translate into lower costs for investors. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. you can systematically invest or withdraw funds according to your needs and convenience. the investor gets the money back promptly at net asset value related prices from the Mutual Fund.Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage.

while the latter is. but now SEBI has eliminated this entry load which will be applicable from August 1. It takes 1% before 1 year and nill after 1 year. the fund manager under performs the benchmark index by an equal amount. Usually. Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI. ‘Load’. called. This includes marketing and initial costs deducted at the time of entry itself. No control over costs The costs of the fund management process are deducted from the fund. No Entry Load Entry load is the commission charged (1. 2009 Disadvantages of Mutual Fund Exit load It is the commission or charged paid when an investor exits from a mutual fund. 34 . Then there is the annual asset management fee and expenses.Mutual Funds offer a family of schemes to suit your varying needs over a lifetime. everything else being equal. processing etc. together called the expense ratio. the former is not counted while measuring performance.25%) at the time of buying the fund to cover the cost of selling. it is imposed to discourage withdrawals. A Standard 2 percent expense ratio means that.

Taxes During a typical year. Of course. that lowers the portfolio return commensurately. whether he is a buy and hold type of manager or one who aggressively churns the fund.No tailor-made portfolio The portfolio of a fund does not remain constant. if you invest in Index Funds. you will pay taxes on the income you receive. If the manager does not perform as well as you had hoped. The extent to which the portfolio changes is a function of the style of the individual fund manager i. If your fund makes a profit on its sales. because these funds do not employ managers. No Guarantee of return No investment is risk free. anyone who invests through a mutual fund runs the risk of losing money. whether the fund constantly receives fresh subscriptions and redemptions.e.e. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. you might not make as much money on your investment as you expected. Management risk When you invest in a mutual fund. Such portfolios changes have associated costs of brokerage. no matter how balanced the portfolio. custody fees. you forego management risk. However. It is also depends on the volatility of the fund size i. 35 . you depend on the fund's manager to make the right decisions regarding the fund's portfolio. registration fees etc. even if you reinvest the money you made. If the entire stock market declines in value. the value of mutual fund shares will go down as well. most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios.

public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). the mutual fund industry had assets under management of Rs. The first scheme launched by UTI was Unit Scheme 1964. The history of mutual funds in India can be broadly divided into four distinct phases. Punjab National Bank Mutual Fund (Aug 89). It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India.HISTORY OF INDIAN MUTUAL FUNDS INDUSTRY The mutual fund industry in India started in 1963 with the formation of Unit Trust of India. First Phase – 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament.UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87).700 Crores of assets under management. SBI Mutual Fund was the first non. LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. at the initiative of the Government of India and Reserve Bank the. Third Phase – 1993-2003 (Entry of Private Sector Funds) 36 . In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. Bank of Baroda Mutual Fund (Oct 92).6. At the end of 1988 UTI had Rs. At the end of 1993.47. Bank of India (Jun 90).004 Crores. Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non.UTI. Indian Bank Mutual Fund (Nov 89).

The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. The number of mutual fund houses went on increasing. a new era started in the Indian mutual fund industry. The Unit Trust of India with Rs. functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. giving the Indian investors a wider choice of fund families.44. 37 . the assets of US 64 scheme. except UTI were to be registered and governed.541 Crores of assets under management was way ahead of other mutual funds. As at the end of January 2003. under which all mutual funds.With the entry of private sector funds in 1993. Also. representing broadly. The Specified Undertaking of Unit Trust of India. Fourth Phase – since February 2003 In February 2003.29.805 Crores.21. assured return and certain other schemes. there were 33 mutual funds with total assets of Rs. 1993 was the year in which the first Mutual Fund Regulations came into being.835 crores as at the end of January 2003. 1.

2004. 38 .000 Crores of assets under management and with the setting up of a UTI Mutual Fund. The graph indicates the growth of assets over the years.153108 Crores under 421 schemes. which manage assets of Rs. there were 29 funds. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.The second is the UTI Mutual Fund Ltd. It is registered with SEBI and functions under the Mutual Fund Regulations. BOB and LIC. the mutual fund industry has entered its current phase of consolidation and growth. and with recent mergers taking place among different private sector funds. sponsored by SBI. conforming to the SEBI Mutual Fund Regulations.76. As at the end of September. PNB.

The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards. 39 .Note: While UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003.

The performance of mutual funds in India through figures is appreciable.S. the market regulations did not allow portfolio shifts into alternative investments. the losses by disinvestments and of course the lack of transparent rules in the whereabouts rocked confidence among the investors. FMCG and technology sector. by the end of 1987. Funds collection. 1. which averaged at less than Rs100bn per annum over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. the Assets Under Management rose to Rs. the investors disinvested by selling at a loss in the secondary market. since only closed-end funds were floated in the market.S. One more thing to be noted. Funds now have shifted their focus to the recession free sectors like pharmaceuticals. In India. Those days. The U. India had been at the first stage of a revolution that has already peaked in the U. The net asset value (NAV) of mutual funds in India declined when stock prices started falling in the year 1992. 67bn. mutual fund assets are not even 10% of the bank deposits. 67bn. From Rs. Total collection for the financial year ending March 2000 reached Rs450bn. in March 1993 and the figure had a three times higher performance by April 2004. The 1992 stock market scandal. Funds performances are improving. but this trend is beginning to change.The Assets Under Management of UTI was Rs. The figures indicate that in 40 . It rose as high as Rs. The performance of mutual funds in India suffered qualitatively.540bn. In the 2000 mobilization had exceeded Rs300bn. boasts of an Asset base that is much higher than its bank deposits. 470 bn. There was rather no choice apart from holding the cash or to further continue investing in shares.

Their role as intermediaries cannot be ignored. (Source: Thinktank.the first quarter of the year 1999-2000 mutual fund assets went up by 115% whereas bank deposits rose by only 17%. The basic fact lies that banks cannot be ignored and they will not close down completely. The Financial Express September. It is just that Mutual Funds are going to change the way banks do business in the future 41 . 99) This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk.

Mutual fund schemes may be classified on the basis of its structure and its investment objective.

By Structure:
Open Ended Fund :
As the name implies the size of the scheme (fund) is open – i.e. not specified or pre-determined. Entry to the fund is always open, the investor who can subscribe at anytime. Such fund stands ready to buy or sell its securities at anytime. The key feature of Open-ended schemes is Liquidity. It implies that the capitalization of the fund is constantly changing as investors sell or buy their shares. Further, the shares or units are normally not traded on the stock exchange but are repurchased by the funds at announced rates. Open-ended schemes have comparatively better liquidity despite the fact that these are not listed. The reason is that investors can any time approach mutual fund for sale of such units. No intermediaries are required. Moreover, the realizable amount is certain since repurchase is at a price based on declared net asset value (NAV). The portfolio mix of such schemes has to be investments, which are actively traded in the market. Otherwise it will not be possible to calculate NAV. This is the reason that generally open-ended schemes are equity based. In Open-ended schemes, the option of dividend reinvestment is available.


Close Ended Fund:
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.

Interval Scheme:
Interval Schemes combine the features of both open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV based prices.

By Investment Objective:
Growth/Equity Oriented Schemes:
The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option; capital appreciation etc. and the investors may choose an option depending on their preference. The investor must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth


schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

Income/Debt oriented Schemes:
The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity market. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long-term investors may not bother about these fluctuations.

Balanced Fund:
The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equities and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.
• •

Debt-oriented funds- Investment below 65% in equities Equity-oriented funds - Invest at least 65% in equities, remaining in debt

Money market / Liquid fund:

1961 as the government offers tax incentives for investment in specified avenues. These schemes are growth oriented and invest predominantly in equities. preservation of capital and moderate income. These schemes are designed on the basis of tax policy with special tax incentives to tax taxpaying investors. Equity Linked Savings Schemes (ELSS).g. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. Pension Schemes launched by the mutual funds also offer tax benefits. E. Returns in these schemes fluctuate much less compared to other funds. Sector Specific Schemes: 45 .. These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act. These schemes invest exclusively in safer short-term instruments such as treasury bills. commercial paper and inter-bank call money. government securities etc.These funds are also income funds and their aim is to provide easy liquidity. Others Scheme: Tax Saving (ELSS) Schemes: All the mutual funds floated by public sector banks and insurance companies have launched tax saving schemes. Their growth opportunities and risks associated are like any equity-oriented scheme. certificates of deposit.

Equity diversified funds: 100% of the capital is invested in equities spreading across different sectors and stocks. Index funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index. Investors need to keep a watch in the performance of those sectors/industries and must exit at an appropriate time.These are the schemes. Fast Moving Consumer Goods (FMCG). Power or Infrastructure etc. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index. etc These schemes invest in the securities in the same weightage comprising of an index. they are more risky compared to diversified funds. E.g. Dividend yield funds: It is similar to the equity diversified funds except that they invest in companies offering high dividend yields. S&P NSE 50 index (Nifty). The return sin these funds are dependent in the performance of the respective sector/ industries. They may also seek advice of an expert. Thematic funds: 46 . though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Pharmaceuticals. While these funds may give higher returns. which invest in the securities of only those sectors or industries as specified in the offer documents. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. Software.

cements sectors etc.Invest 100% of the assets in sectors which are related through some theme. an infrastructure fund invests in power.g. derivatives and money markets. in the absence of arbitrage opportunities. Floaters invest in debt instruments which have variable coupon rate. Funds are allocated to equities. E. Arbitrage fund : They generate income through arbitrage opportunities due to mispricing between cash market and derivatives market. Higher proportion (around 75%) is put in money markets. Load or no-load Fund: 47 . Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes Floating rate funds: Invest in short-term debt papers. construction. MIPs: Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities. Gilt funds: These funds invest exclusively in government securities. FMPs: Fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.

A Load Fund is one that charges a percentage of NAV for entry or exit.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs. The fund mobilization trend by mutual funds indicates that money is going to mutual fund in a big way. However. Efficient funds may give higher returns in spite of loads. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale of units.10. The investors should take the loads into consideration while making investment as these affect their yields/returns.9. then the investors who buy would be required to pay Rs. If the entry as well as exit load charged is 1%.90 per unit. That is. 48 . Suppose the NAV per unit is Rs. each time one buys or sells units in the fund. This charge is used by the mutual fund for marketing and distribution expenses. The coming few years will show that the traditional saving avenues are losing out in the current scenario. The power shift towards mutual funds has become obvious. | BANKS V/S MUTUAL FUNDS: Mutual Funds are now also competing with commercial banks in the race for retail investor’s savings and corporate float money. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. A noload fund is one that does not charge for entry or exit. the investors should also consider the performance track record and service standards of the mutual fund which are more important. a charge will be payable.

but this trend is beginning to change. The basic fact lies that banks cannot be ignored and they will not close down completely. The investor gets fewer units when the 49 . It is just that mutual funds are going to change the way banks do business in the future. In India. Risk Investment options Network Liquidity Quality of assets Interest calculation Guarantee BANKS MUTUAL FUNDS High Low Moderate More Low but improving Better Transparent Everyday Low High Low Less High penetration At a cost Not transparent Minimum balance between 10th & 30th of every month Maximum Rs. mutual fund assets are not even 10 per cent of the bank deposits.S. boasts of an Asset base that is much higher than its bank deposits. Their role as intermediaries cannot be ignored. This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk.India is at the first stage of a revolution that has already peaked in the U. The U.1 lakh on None deposits INVESTMENT STRATEGIES Systematic Investment Plan (SIP): under this a fixed sum is invested each month on a fixed date of a month. CATEGORY Returns Administrative exp.S. Payment is made through post dated cheques or direct debit facilities.

Many funds do not even charge even any transaction feed for this service an added advantage for the active investor. This is called as the benefit of Rupee Cost Averaging (RCA) Systematic Transfer Plan (STP): They allow the investors to transfer on a periodic basis a specified amount from one scheme to another within the same fund family meaning two schemes belonging to the same mutual fund. Systematic Withdrawal Plan (SWP): These plans are best suited for people nearing retirement. Performance Evaluation PARAMETERS OF MUTUAL FUND EVALUATION:  Risk  Returns  Liquidity  Expense Ratio  Composition of Portfolio 50 . This service allows the investor to manage his investment actively to achieve his objectives. In these plans an investor invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money at regular intervals to take care of expenses. A transfer will be treated as redemption of units from the scheme from which the transfer is made .NAV is high and more units when the NAV is low.Such redemption or investment will be at the applicable NAV.

does not come without risk. supply and demand. individually as investors. Political Risk: Changes in the tax laws. 51 . is some of the many political factors that create market risk. we have virtually no control. In other words. The types of risk commonly associated with mutual funds are: Market Risk: Market risk relate to the market value of a security in the future. we have indirect control through the power of our vote.Risks Associated With Mutual Funds: Investing in mutual funds as with any security. Inflation Risk: Inflation or purchasing power risk. the NAV of the scheme will fall because the scheme will be end up holding debt offering lowest interest rates. and many other factors that cannot be precisely predicted or controlled. For instance. the greater the potential return. as measured by the Consumer Price Index. relates to the uncertainty of the future purchasing power of the invested rupees. Although collectively. as citizens. the greater the potential risk. trade regulations. One of the most basic economic principles is that risk and reward are directly correlated. The risk is the increase in cost of the goods and services. Market prices fluctuate and are susceptible to economic and financial trends. if an investor invests in a long term debt mutual fund scheme and interest rate increase. administered prices etc. Interest Rate Risk: Interest Rate risk relates to the future changes in interest rates.

if monsoons fall in a year. The future financial stability of a company can not be predicted or guaranteed. which have invested in such stocks. e Defensive Fund If Beta > 1 then Funds will give higher returns when market rises & higher losses when market falls i. There are 3 different methods with the help of which we can measure the risk. which. nor can the price of its securities. Business Risk is inherent in all business ventures.e. Aggressive Fund 52 . Beta Coefficient Measure of Risk: Beta relates a fund’s return with a market index. Economic Risk : Economic Risk involves uncertainty in the economy.Business Risk: Business Risk is the uncertainty concerning the future existence. in turn can have an adverse effect on a company’s business. which has invested in the equity of such a company. It basically measures the sensitivity of funds return to changes in market index.e. For instance. If Beta = 1 then Fund moves with the market i. will fall proportionately. equity stocks of agriculture bases companies will fall and NAVs of mutual funds. stability and profitability of the issuer of the security. Measurement of risk I. Adverse changes in business circumstances will reduce the market price of the company’s equity resulting in proportionate fall in the NAV of mutual fund scheme. Passive fund If Beta < 1 then Fund is less volatile than the market i.

III. How to Calculate the Value of a Mutual Fund: The investors’ funds are deployed in a portfolio of securities by the fund manager. Basically it gives you an idea of how volatile your earnings are. It also helps in measuring total risk and not just the market risk of the portfolio. The net assets represent the market value of assets. Higher the Ex-marks lower the risk of the fund because a fund with higher Ex-marks is better diversified than a fund with lower Ex-marks. It is broader concept than BETA. which belong to the investors. it is essential that the market value of their investments is used to determine the price at which such entry and exit will take place. in net asset terms. Net Asset Value or NAV of a mutual fund is the value of one unit of investment in the fund. Ex –Marks or R-squared Measure Of Risk : Ex –Marks represents co relation with markets. It measures the fluctuations of fund’s returns around a mean level. on a given date. The value of these investments keeps changing as the market price of the securities change. Standard Deviation Measure Of Risk : It is a statistical concept. of Units Outstanding as at the NAV date 53 . which measures volatility. NAV = Net Assets of the scheme / Number of Units Outstanding Where Net Assets are calculated as:(Market value of investments + current assets and other assets + Accrued income –current liabilities and other liabilities – less accrued expenses) / No.II. Since investors are free to enter and exit the fund at any time.

but the sale price cannot be higher than 107 % of NAV.20 to Rs. Measuring Mutual Fund Performance: We can measure mutual fund’s performance by different method: • Absolute Return Method: Percentage change in NAV is an absolute measure of return. which finds the NAV appreciation between two points of time.g: If NAV of one fund changes from Rs. we find out 54 . The major factors affecting the NAV of a fund are:  Sale and purchase of securities  Sale and repurchase of units  Valuation of assets  Accrual of income and expenses SEBI requires that the fund must ensure that repurchase price is not lower than 93% of NAV (95% in the case of a closed-fund). is called as annualisation. as a percentage.22 in 12 months then Absolute return = (22 – 20)/20 X 100 =10% • Simple Annual Return Method : Converting a return value for a period other than one year. In order to annualize a rate. e .NAV of all schemes must be calculated and published at least weekly for closed-end schemes and daily for open-end schemes. On the other side. Also the difference between the repurchase price and the sale price of the unit is not permitted to exceed 7% of the sale price. into a value for one year. a fund may sell new units at a price that is different from the NAV.

In this method.20 to Rs.what the return would be for a year. An investor buys 100 units of a fund at Rs.g: If NAV of one fund changes from Rs.22 in 6 months if in between dividend of Rs. Total Return = (Dividend distributed + Change in NAV)/ NAV at the start X 100 e . 2009 he receives dividends at the rate of 10%. in the same manner it did. if the return behaved for a year. and adds it to the NAV appreciation. The ex-dividend 55 . to arrive at returns. for any other fractional period. 2009.20 to Rs.22 in 6 months then Annual Return = (22 – 20) /20 X 12/6 X 100 = 20% • Total Return Method: The total return method takes into account the dividends distributed by the mutual fund. E . the dividends are reinvested into the scheme as soon as they are received at the then prevailing NAV (ex-dividend NAV).g: If NAV of one fund changes from Rs.5 on January 1. 4 has been distributed then Total Return = {4 + (22 – 20)}/20 X 100 = 30% • Total Return when dividend is reinvested: This method is also called the return on investment (ROI) method. = ((Value of holdings at the end of the period/ value of the holdings at the beginning) –1)*100 E.g. On June 30. 10.

the fund’s NAV was Rs. 12.5*100= 1050 Number of units re-invested = 100/10. 2009. Value of holdings at the beginning period= 10.51/1050)-1)*100 = 28. In this method return is calculated with the following formula: A = P X (1 + R / 100) N Where P = Principal invested A = maturity value N = period of investment in years R = Annualized compounded interest rate in % R = {(Nth root of A / P) – 1} X 100 E.756*12.NAV was Rs. Return on Investment = ((1344. On December 31.25 = 9.25 = 1344.25.05% • Compounded Average Annual Return Method: This method is basically used for calculating the return for more than 1 year.756 End period value of investment = 109.25. 100 & in the end we get return of Rs. 10.2 % RETURNS: 56 .51 Rs. 200 & period of investment is 10 years then annualized compounded return is 200 = 100 (1 + R / 100) 10 Rate = 7. g: If amount invested is Rs.

That is. on a risk adjusted basis. because brokerage paid on transactions of a fund are not included in the expenses. in which the portfolio is invested. According to the current SEBI norms. at prices that are related to the NAV of the fund on the date of the transaction. Expense ratio = Total Expenses / Average Net Assets 57 . at any point of time. may not have the liquidity that the investor seeks. A fund could have earned higher return than the benchmark. Expense ratio can actually understate the total expenses. Therefore. But such higher return may be accompanied by high risk. we have to compare funds with the benchmarks. which enables the ranking of funds on a risk adjusted basis. LIQUIDITY: Most of the funds being sold today are open-ended. William Sharpe created a metric for fund performance. Since investors continuously enter and exit funds. Sharpe Ratio = Risk Premium / Funds Standard Deviation Treynor Ratio = Risk Premium / Funds Beta Risk Premium = Difference between the Fund’s Average return and Risk free return on government security or treasury bill over a given period . brokerage commissions are capitalized and included in the cost of the transactions.Returns have to be studied along with the risk. investors can sell their existing units. EXPENSE RATIO: Expense ratio is defined as the ratio of total expenses of the fund to the average net assets of the fund. or buy new units. funds are actually able to provide liquidity to investors. even if the underlying markets.

Portfolio Ratio = Total Sales & Purchase / Net Assets of fund In order to meaningfully compare funds some level of similarity in the following factors has to be ensured:  Size of the funds  Investment objective  Risk profile  Portfolio composition  Expense ratios Fund evaluation against benchmark: Funds can be evaluated against some performance indicators which are known as benchmarks. Portfolio turnover rate is the ratio of lesser of asset purchased or sold by funds in the market to the net assets of the fund.COMPOSITION OF THE PORTFOLIO: Credit quality of the portfolio is measured by looking at the credit ratings of the investments in the portfolio. If Portfolio ratio is 100% means portfolio has been changed fully. Mutual Fund fact sheets show the composition of the portfolio and the investments in various asset classes over time. When Portfolio ratio is high means expense ratio is high. There are 3 types of benchmarks:  Relative to market as whole 58 .

Sector fund . I-BEX 59 . Market Index Fund . Large diversified equity fund – BSE 100. This is a passive management style. For example.Sectoral Indices Debt Funds: Debt fund can also be judged against a debt market index e.r. Relative to other comparable financial products  Relative to other mutual funds  Relative to market as whole: There are different ways to measure the performance of fund w. Active Equity Funds: The fund manager actively manages this fund.t market as Equity Funds Index Fund – An Index fund invests in the stock comprising of the index in the same ratio.g. To evaluate performance in such case we have to select an appropriate benchmark.BSE Sensex Nifty Index Fund – NIFTY The difference between the return of this fund and its index benchmark can be explained by “TRACKING ERROR”.


Ltd. The AMC.MAJOR PLAYERS IN MUTUAL FUNDS INDUSTRY ABN AMRO Mutual Fund ABN AMRO Mutual Fund was setup on April 15. 2004 with ABN AMRO Trustee (India) Pvt. as the Trustee Company. ABN AMRO 61 .

The Board of Trustees. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. ING Vysya Mutual Fund ING Vysya Mutual Fund was setup on February 11. Japan. the Philippines. was incorporated on April 6. The AMC. 1999 with the same named Trustee Company. Deutsche Bank AG is the custodian. 1992 under the sponsorship of Bank of Baroda. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund. It is a joint venture of Vysya and ING.000 Crores.Asset Management (India) Ltd. Indonesia and Bermuda apart from India. Recently it crossed AUM of Rs. HSBC Mutual Fund HSBC Mutual Fund was setup on May 27. 1998. 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Ltd. ING Investment Management (India) Pvt. 1992. the US. was incorporated on November 4. Bank of Baroda Mutual Fund (BOB Mutual Fund) Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30. HDFC Mutual Fund HDFC Mutual Fund was setup on June 30. 10. HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund. Birla Sun Life Mutual Fund Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada. 2003. 62 . 2000 with two sponsor namely Housing Development Finance Corporation Limited and Standard Life Investments Limited.

It is presently having more than 1.818 investors in its various schemes. and ICICI Ltd. as the sponsor. They have already launched 35 Schemes out of which 15 have already yielded handsome returns to investors. 7. 1993 with two sponsors. State Bank of India Mutual Fund has more than Rs. Prudential ICICI Mutual Fund was setup on 13th of October.. 1996 with Sahara India Financial Corporation Ltd. of America. Sahara Mutual Fund Sahara Mutual Fund was set up on July 18. 1882. State Bank of India Mutual Fund State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund. Now it has an investor base of over 8 Lakhs spread over 18 schemes. 5. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June. Today it is the largest Bank sponsored Mutual Fund in India. 99. Kotak Mahindra Mutual Fund Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. 1995 works as the AMC of Sahara Mutual Fund. approximately. 2005) of AUM. Kotak Mahindra 63 . Tata Asset Management Limited is one of the fastest in the country with more than Rs. one of the largest life insurance companies in the US of A.703 Crores (as on April 30. Limited. the India Magnum Fund with a corpus of Rs. Tata Mutual Fund Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act. KMAMC started its operations in December 1998.Prudential ICICI Mutual Fund The mutual fund of ICICI is a joint venture with Prudential Plc. and Tata Investment Corporation Ltd. Prudential Plc. 225 cr. The paid-up capital of the AMC stands at Rs 25. Sahara Asset Management Company Private Limited incorporated on August 31. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt.8 crore. 1993. The sponsors for Tata Mutual Fund are Tata Sons Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd.500 Crores as AUM.

Franklin Templeton India Mutual Fund The group. Reliance Mutual Fund Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act. manages the UTI Mutual Fund with the support of UTI Trustee Company Private Limited.Mutual Fund offers schemes catering to investors with varying risk . Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities. Index Funds. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB). The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Franklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409. Equity Funds and Balance Funds. Standard Chartered Asset Management Company Pvt. is the AMC which was incorporated with SEBI on December 20.2 bn. Ltd. Unit Trust of India Mutual Fund UTI Asset Management Company Private Limited. Standard Chartered Mutual Fund Standard Chartered Mutual Fund was set up on March 13. Ltd. Income Funds. 1995 as Reliance Capital Mutual Fund which was changed on March 11. It was registered on June 30. The Trustee is Standard Chartered Trustee Company Pvt. It was the first company to launch dedicated gilt scheme investing only in government securities.20000 Crore. The schemes of UTI Mutual Fund are Liquid Funds. 1882. 2004. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or 64 . 2005). Punjab National Bank (PNB). established in Jan 14. Limited is the Trustee. State Bank of India (SBI). and Life Insurance Corporation of India (LIC). UTI Asset Management Company presently manages a corpus of over Rs. It is one of the largest financial services groups in the world. (as of April 30. Asset Management Funds. 2003.return profiles. 2000 sponsored by Standard Chartered Bank.1999.

This is the first close end diversified equity scheme serving the needs of Indian retail investors focusing on a long-term capital appreciation. corporations. Ltd. Its services are also extended to high net worth individuals and retail investors. Benchmark Asset Management Company Pvt. Ltd. Open end Sector Equity schemes. Incorporated on October 16. 1995 with the name Escorts Asset Management Limited. Ltd.) Ltd. is the AMC. the Alliance Capital Asset Management India (Pvt. 1994 with Alliance Capital Management Corp. Closed end Income schemes and Open end Fund of Funds schemes to offer. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). pension funds and non-profit organizations. investment management and credit services. Benchmark Mutual Fund Benchmark Mutual Fund was setup on June 12. 1996 with Escorts Finance Limited as its sponsor. It provides customized asset management services and products to governments. as the Trustee Company. Morgan Stanley Mutual Fund India Morgan Stanley is a worldwide financial services company and its leading in the market in securities.through their website. with the corporate office in Mumbai. as the sponsorer and Benchmark Trustee Company Pvt. Canara Bank Mutual Fund 65 . and AMC. Open end Income and Liquid schemes. Open end Tax Saving schemes. Ltd. The Trustee Company is Escorts Investment Trust Limited. Alliance Capital Mutual Fund Alliance Capital Mutual Fund was setup on December 30. Its AMC was incorporated on December 1. Escorts Mutual Fund Escorts Mutual Fund was setup on April 15. The Trustee is ACAM Trust Company Pvt. Open end Hybrid schemes. 2001 with Niche Financial Services Pvt. 2000 and headquartered in Mumbai. They have Open end Diversified Equity schemes. of Delaware (USA) as sponsorer. Morgan Stanley Investment Management (MISM) was established in the year 1975.

1882. 1997. Fidelity Investments is an international provider of financial services and investment resources that help individuals and institutions meet their financial objejectives 66 . (UII) and is constituted as a Trust in accordance with the provisions of the Indian Trusts Act. Chola Mutual Fund Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. viz. 1882. was setup on January 3. sponsored by General Insurance Corporation of India (GIC). The New India Assurance Co. LIC Mutual Fund Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. . incorporated on March 2. (NIA). Ltd (OIC) and United India Insurance Co. Ltd.Canara bank Mutual Fund was setup on December 19. Ltd. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund. 1993 is the AMC. It contributed Rs. Cholamandalam Trustee Co. Ltd (NIC). is the Trustee Company and AMC is Cholamandalam AMC Limited. a Government of India undertaking and the four Public Sector General Insurance Companies. National Insurance Co. 2 Crores towards the corpus of the Fund. Ltd. The Oriental Insurance Co. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act. The Company started its business on 29th April 1994. GIC Mutual Fund GIC Mutual Fund. Fidelity Investments Fidelity Investments was founded in 1946. Canara bank Investment Management Services Ltd. 1987 with Canara Bank acting as the sponsor. The Corporate Office of the AMC is in Mumbai.

Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing 67 .COMPETITION IN MUTUAL FUNDS INDUSTRY The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by nationalized banks and smaller private sector pl ayers.

which makes money in a long term and requires deep-pocketed support in the intermediate years. broker education and support etc. float new schemes etc. usage of technology. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. They quickly realized that the AMC business is a business. The foreign owned companies have deep pockets and have come in here with the expectation of a long haul. Most of these AMCs have not been able to retain staff. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. and it is doubtful whether. barring a few exceptions. Few hired specialized staff and generally chose to transfer staff from the parent organizations. some have merged with others and there is general restructuring going on. The performance of most of the schemes floated by these funds was not good. 68 . sharp improvement in service standards and disclosure. they have serious plans of continuing the activity in a major way. they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these. They can be credited with introducing many new practices such as new product innovation.then. The service levels were also very bad. The experience of some of the AMCs floated by private sector Indian companies was also very similar. Some have sold out to foreign owned companies. In fact.

OBJECTIVES AND METHODOLOGY Significance: Significance of the project is to find out prospect investors of Mutual Funds and also to provide key information about the investor’s perception and preferences by Mutual Fund industry. The study will help in getting information about their performance at distributors as well as at their own 69 .

• The study will also give information about prospective investors both individual as well as institutional clients in areas of surrey where they can get lead. • It provides the AMC a feedback from customers regarding their problems and perception about investing in mutual funds so that they can improve their services Objectives:  To study the Mutual funds industry in detail  To study the Investment procedure in Mutual funds  To study the Accounting and Valuation methods of Mutual Funds  To study in brief various Mutual funds promoted by Reliance Money 70 .investment center or why people go for Mutual Fund for investments. Studies will also helps in finding out the problems related to distribution. Managerial Usefulness of Study: • The study also provides the problems related to distribution of Mutual Fund so that they can improve the service rendered by them as a distributor. • The study provides the complete information about all close competitors in Mutual Fund investment.

So. To study the investors Preference regarding Investment in Mutual Funds Scope of the Study: • In current scenario. The first part of the project is comprised of the study of Mutual Funds as a whole and the second part deals with the investor’s perception regarding their investment preferences about investment in Mutual Funds. RESEARCH METHODOLOGY I decided to do the project in two parts. they can look for some other investment options like Mutual Funds. the bank rates have been cut down rapidly due to severe competition. which can provide them higher returns in medium to long term and can easily meet their financial goals. • To look out for new prospective customers who are willing to invest in Mutual Funds. so people are not going for contemporary deposits because that cannot provide them the better returns or the desired interest rates. 71 .

why to invest and where to invest. The project has been carried out to understand investor’s perception about Mutual Funds in the context of their trading preference and explore investor’s risk perception.The first part of the project i. risk factor associated with it i. The tool used here is questionnaire. an overview of whole Mutual fund industry. Primary Data is collected through survey among existing clients along with the other investors. Indian Stock market has undergone tremendous changes over the years.e. The first part of the project relating the study of Mutual funds is collected through secondary data obtained from internet & books whereas the second part relating the Investors perception about investment in Mutual Funds is covered using primary data. I had prepared a questionnaire for collecting the primary data.e. descriptive study is comprising an overall study of Mutual funds as what it is. 72 . Investment in Mutual Funds has become a major alternative among Investors. SOURCE OF DATA COLLECTION Primary data is the first hand information collected directly from the respondents. The second part of the project that is related to investor’s perception about investment in Mutual funds available in market.

books.Secondary data sheets. is collected through internet. magazines and fact 73 .


INVESTMENT IN MUTUAL FUNDS 9% yes 28% 63% no earlier. Franklin Templeton. The demand for the mutual funds have increased in the past few years with many Foreign players entering in the Indian market. 75 . Still there are few who are not investing in stopped Interpretation:. DSP Meryll Lynch to name few. Fidelity.The major part of the sample taken has invested in the Mutual Funds.

000 peak 76 .000 mark by SENSEX was motivational force in this. These are those investors who entered into the market after noticing the rise in the market. The achievement of 20.EXPERIENCE IN THE MARKET Experience 26% 53% 21% Less Than a Year 1-4 Years More Than 4 Years Interpretation:. There are very few who have experience of less than a year. Major part was having vast experience that is of more than 4 years. These are the ones who have been in the market and saw it rising to conquer the 10.The experience in the market was the factor which influenced the investments.

They considered it as a safer avenue for investment rather than going to Share Market which is much risky as compared to MF.Trading Preference of the Investors Trading Preference 16% 28% Speculation Investment Both 56% Interpretation:. Few still prefer to speculate and wait for NAVs to appreciate. 77 . Main purpose of investment in MF by people was not to speculate.The presence in the market is because of two reasons. Either the investors prefer to speculate and benefit out of it or it is simply to have it as one more investment avenue just like the fixed deposits. etc.

Still some want to be invested for over 2 years.More Than 3 months 2 Year 2 Year Investment Period Less Than 3-9 Months 9 months . The smart investor decides it in advance for how much time he would be keeping his money in the market and when he should leave squaring-up. 78 . The timing must be right enough to benefit from fluctuations.Average Investment Period of Investors Average Investment Period 50% 23% 10% 0% 42% 25% S1 Less Than 3-9 Months 9 months . The least responded to the 3-9 months period. Many people consider the investment for 9 months – 2 years as a right option.More Than Series1 23% 10% 42% 25% Interpretation:.The investment period is very important to increase the profits.

financial. It may be the current news (political.Factors Influencing the Investment Decision of Investors Factors Influencing Investment 40% 30% 20% 10% 0% 10% 6% Self 30% 32% 20% 30% 2% Other 2% 20% Broke News Magzi Frien 10% 6% Series1 32% Interpretation:. 79 .). Magazines and current News also matters. Magazines. etc. The “Self-Evaluation” is the next major factor. technological. etc. in the study it proved that many people trust the brokers most for the investment decisions. Any bad news can make a person change his/her decision.There are many factors which influence the investment decision of the investors. friends. The experienced person trust himself thereafter he/she invests.

RISK TAKING Moderate High Low 0% 20% 40% 60% Interpretation:. The people need to take the risk to enjoy the benefits.“The higher the Risk. Some investors were willing to take lower risk and this was the reason they gave for investing in the MF. the more the Profits”. Most of the people would like moderate level of risk in there investments. 80 .

The confidence was appreciable with which they are looking forward to a rise in their investments. Major part of the sample feels that the rise would be of around 15%.Expected Rise in Income Expected Rise In Income 12% 8% 48% Upto 15% 15-25% 25-35% More than 35% 32% Interpretation:. Only 8% of the respondents were confident enough to expect a rise of upto 35%.The optimism is shown in the attitude of the respondents. 81 .

Preference In Mutual Funds Preference in Mutual Funds Equity ELSS Balanced SIP 2% Income Others Money Market 17% 19% 15% 9% 20% 18% Interpretation:. Balanced Funds. etc. This provides some exemption in the Tax also. Bonds. Income Funds. There are Equity funds.There are different types of mutual funds available in the market according to the needs of the investors. The risk is also low in this. Some people would like to have Equity Linked Saving Schemes (ELSS). The highest sought after fund is the Income fund which offers a regular income through investments in the Govt. It was followed by the Equity Fund which offers higher returns but it is riskier also. SIP. 82 .

The willingness to bear the loss was not high.Investor’s willingness to take Loss Loss Willing To Take 60% 50% 40% Percentage 30% 20% 10% 0% Less than 5% 5-10% Category More Than 10% 12% 35% 53% Interpretation:. Very few agreed to be able to bear a loss of more than 10%. 83 . Most of the investors were not willing to bear a loss of more than 5%. The desire for having profits is higher but nobody was ready to take loss.

84 .Types of Schemes Type of Schemes 44% 56% Closed Ended Funds Open Ended Funds Interpretation:. The more demand was for the Close ended funds with a locking period of around 2-3 years. The exit load refrain the person from quitting earlier.The schemes offered in the market are of two types. closed ended and open ended.

BRAND NAME EFFECTIVENESS 60% 50% 40% 30% 20% 10% 0% Yes 56% 23% 21% NO Can't Say Interpretation:.From the data collected it is clear that most of the people are not influenced by the company name while investing in a Fund 85 .

86 .From the data collected it is clear that most of people look at the returns that the Mutual funds are providing .INFLUENCE BY RETURN OR NAV 60% 50% 40% 30% 20% 10% 0% BY NAV RETURNS Both 23% 21% 56% Interpretation:.They look at the returns not the current NAV However there is some class of people who look at these parameters and their percentage is 23% and some consider both factors while investing in funds and their percentage is 21%.

• Income funds and ELSS are among the few top funds • People are not willing to take much risk and bear loss. • 48% respondents reflected confidence and optimism in the context of their investments. • Most of the people look at the returns that are given by a Funds56% are Fund Experience was the main factor that made a person invest in mutual funds 87 in this favour and only 23% people are there who consider Fund name and current NAV of the fund before investing into a Mutual .FINDINGS The study done was a tool to analyze the present setup and to know the investors perception regarding investment in Mutual Funds . • Mutual Funds are more of an investment option than the speculative avenue. It attracted as a safer avenue as compared to share market. • Broker’s advice matters to as much as 32% of the people. The following were the findings of the study: • People with less experience were inclined towards investment in the Mutual Funds. Major part of people preferred self-evaluation as best. The study proved fruitful and many facts came to the light. People tend to gain through long investments rather than through short term.

There were certain limitations faced during the study.  Some people were not willing to disclose the investment profile  The biased ness was being taken care of.  The area of sample was decided after taking into consideration the major factors like  Availability of investors  Approachability,  Time available with investor for interaction, etc.

To be a part of Reliance Money was the best opportunity for me to had:  A practical exposure of financial world.  Independently handling of clients.  Came to know the practical problems of clients.
 Learnt corporate culture.  Learnt the technical procedures and analysis of various research systems,

such as marketing research and equity research.


 Applauded by the management team of Reliance Money .
 Opened D-Mat and Trading Accounts which is an achievement.

 Selling 5 Reliance Infrastructure Fund (NFO) worth Rs. 40,000  Opening the two SIP worth Rs. 1000 & 500.  Generated revenues for the organization by performing heavy trading on behalf of the self developed clients.


What I recommend firstly there should be [1] First Aid Kit for New Entrant into Securities Market This will be a new step towards a good service provider in this field. After all, this market depends on the after sales service. After seeing such a boost in the share market, not only our Adult generation but also the young generation is also so much excited to enter the share market. Now the actual problem starts specially with the young ones in excitement initially they invests the money & due to lack of experience they loose big block of money in one go & later they blames the company about the loss. So, to make them train in the field we should provide them the initial precautions that they should take while enter into the market. “The More You Care For Your Customer More The Faith Will Get Develop From Customer Side” [2] Provision for Class Room training for the new investors For the above reason same thing to boost there moral and to give them some thing related to the market will help them. Also some tips can also be given to these investor during the session as a precautions.


All the recommendations are for the improvement in the functioning of the front end operations of the Reliance Money Ltd. 91 . The recommendations are purely based on the problems that I had faced as a Management Trainee. Our relationship manager many times don’t have that much time to discuss all that details on phone. (Varanasi Branch). So for general query handle we can have a separate section. It gives a feeling to the customer that company care for them.[3] Toll Free Number Customers generally want to call to the respective branch for asking some problems or give orders. [4] Customer Care for general query handle Initially customer want to solve his or her problem at the moment as it arises. (5) More Appointments of Relationship Managers There should be more appointments by RM so that every customer get equalized attention Note: The recommendations which I have listed here above are strictly based on the knowledge of the securities market that I have acquired during my training of two months duration. they may sometime get busy with the meeting with client. a customer can save the money by dialing on the toll free number.

92 .ANNEXURE – 1 QUESTIONNAIRE Name: .) Stocks: ______ Bonds: ______ Options: ______ Real Estate: ______ (1) Do you invest in Mutual Funds? Yes No Earlier. Investment Presently Held: Occupation: ……………………… Please list the value of the assets in your total investments portfolio :( in Rs. 3 to 9 months.……………………. Phone: . 9 months to 2 year. More than 2 year... Securities:_______ Bank Deposits: _______ (2) What is your Experience in the market? Less than a year 1-4 years (3) What is your Trading Preference? Speculation Investment More than 4 years Both (4) What is your Average investment period? Less than 3 months.…………………….. now stopped Mutual Funds: _______ Bullion: _______ Govt....

(5) Factors influencing the investment decisions? Advice from Broker Reviews in Financial Magazines Self Evaluation (6) How much Risk are you willing to take? High Low Current news Advice from Friends Others___________ Moderate (7) How much Appreciation do you expect from your Investments? Up to 15% More than 35% (8) What is your preference in Mutual Funds? Equity Money Market Funds Balanced Funds Others (9) How much loss are you willing to take? High Moderate Low Income ELSS SIP 15%-25% 25%-35% (10) Which type of Mutual funds do you prefer? Open Ended Schemes Closed Ended Schemes 93 .

....(11) Do you get influenced by the name of Company promoting Mutual Funds? Yes No Can’t Say (12) Do you get influenced by the returns given by a fund or by the current NAV of a fund? By NAV By Returns Both (13) Any suggestions: ……………………………………………………………... ………………………………………………………………… Thank You Signature 94 ..

com www. 5. www.mutualfundsindia.BIBLIOGRAPHY Sites visited 1. Books Referred AMFI Mutual Fund 95 . 4. 3.Reliance money.

96 .