Mutual Fund A Safer Investment

INDEX
PART I
1. Executive Summary
2. Introduction to Mutual Fund
3. Industrial background.
4. Company Profile
PART II
5. Research Design / Methodology.

a. Project Idea
b. Objectives
c. Duration of the Project
d. Need for study
e. Research Methodology
f. Proposed outcome
g. Benefits/ Limitations of Mutual Fund
6. Recommendation
7. Conclusion
8. Bibliography.
BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

Executive Summary

Mutual Fund investment is the fastest growing investment industry in the present
scenario and it needs to be properly supported with educating the investor community
which is not aware of Mutual Fund as it is of other forms of investment patterns like
those of Fixed Deposits, Savings Accounts, Postal Deposits, Recurring Deposits,
Insurance plans, Stocks etc.
Indian Mutual Fund investment is picking up fast, which has already happened in
countries like US, U.K, France etc., the recent trends have shown that private ltd
companies are doing far better as compared to Government PSU’s in India which was not
the case few years earlier and this implies that people are more attracted towards Mutual
Funds investment as compared to other form of the investments.
Introduction to Mutual Fund

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. Investor bears in the same
proportion as the amount of the contribution make a single investor’s ownership of the
fund to the total amount of the fund.
A mutual fund uses the money collected from investors to buy those assets, which are
specifically permitted by its stated investment objective. Thus an equity fund would buy
mainly equity assets — ordinary shares, preference shares, warrants, etc. A bond fund
would mainly buy debt instruments such as debentures, bonds or government securities.
It is these assets, which are owned by the investors in the same proportion as their
contribution bears to the total contributions of all investors put together.
When an investor subscribes to a mutual fund, he or she buys a part of the assets or the
pool of funds that are outstanding at that time. It is no different from buying “shares” of a
joint stock company, in which case the purchase makes the investor a part owner of the
company and its assets.

TYPES OF MUTUAL FUNDS
Mutual funds can be classified in different ways according to their investment objectives,
their constitution, as follows:
 Equity Fund
 Debt / Income Funds
 Balanced Funds
 Liquid / Money Market Funds
 Closed Ended funds
 Open Ended Funds
 Load Funds
 No Load Funds
CLASSIFICATION BASED ON INVESTMENT OBJECTIVE:
Funds can be classified according to their investment objectives on 4 main categories as

they best reflect the risk and returns associated with investing in mutual funds.
1. EQUITY FUNDS:

Equity funds invest a major portion of their corpus in equity shares issued by companies,
acquired directly in initial public offerings or through the secondary market. Equity funds
would be exposed to the equity price fluctuation risk at the market level, at the industry
or sector level and at the company-specific level. Equity funds, Net Asset Values fluctuate
with all these price movements these price movements are caused by all kinds of external
repayment as in case of debt instruments. Hence, Equity Funds are generally considered
at the higher end of the risk spectrum among all funds available in the market. On the
other hand, unlike debt instruments that offer fixed amounts of repayments equities can
appreciate in value in line with the issuer’s earnings potential, and so offer the greatest
potential for growth in capital.
Equity Funds adopt different investment strategies resulting in different levels of risk.
Hence, they are generally separated into different types in terms of their investment
styles. Below are some of the major types of equity funds, arranged in order of higher to
lower risk level
a. Aggressive Growth Funds
b. Growth Funds
c. Specialty Funds
1. Sector Funds
2. Offshore Funds
3. Small-Cap Equity Funds
4. Option Income funds

All AMC’s have floated this type of funds. Prominent examples include JM Equity Fund,
Morgan Stanley Growth Fund, Mastergain 92, Birla Advantage Fund, Sun F&C Value
Fund, Kothari Pioneer Prima fund etc.
2. DEBT/INCOME FUNDS:
Debt Funds invest in debt instruments issued not only by governments, but also by
private companies, banks and financial institutions and other entities such as
infrastructure companies/utilities. By investing in debt, these funds target low risk and
stable income for the investor as their key objectives. However, as compared to the
money market funds, they do have a higher price fluctuation risk, since they invest in
longer-term securities. Similarly, as compared to Gilt Funds, general debt funds do have a
higher risk of default by their borrowers.
1. Debt funds are largely considered as Income Funds as they do not target capital
appreciation, look for high current income, and therefore distribute a substantial part of
their surplus to investors. Income funds that target returns substantially above market
levels can face more risks. Different investment objectives set by the fund managers
would result in different risk profiles.

3. BALANCED FUNDS:
These are funds that invest both in equity shares and income bearing instruments.
Then idea is to reduce the volatility of the fund while providing some upside for capital
appreciation. There is some flexibility in changing the asset composition between equity
and debt and the fund managers exploit this to buy the best asset class at each time.
Prominent balanced funds include JM Balanced Fund, Alliance 95, Tata Twin Option
Balanced and GIC balanced funds. Govt. has announced special concessions for funds
with more that 50% of the assets invested in equity. So for next three years the dividend
will be taxed neither in the hands of the investor nor in the hands of the funds.
4. LIQUID / MONEY MARKET FUNDS:
Often considered to be at the order of risk level, Money Market Funds invest in securities
of a short-term nature, which generally means securities of less than one-year maturity.
The typical, short term, interest bearing instruments these funds invest in include
Treasure Bills issued by Governments, Certificates of Deposit issued by banks and
Commercial Paper issued by companies. In India, Money Market Mutual Funds also
invests in the inter bank call money market.
The major strengths of money market funds are the liquidity and safety of principal that
the investors can normally expect from short-term investments. These funds invest in
highly liquid money market instruments. They have emerged as an alternative for savings
and short term fixed deposit accounts. Regulations for managing liquid funds are more
flexible than those for managing money market funds. Hence they are more popular than
the latter. Eg. Birla Cash Plus, Prudential Liquid Fund, Templeton India Liquid fund, UTI
fund, UTI Money Market Funds, JM Liquid fund.

CLASSIFICATION BASED ON CONSTITUTION OBJECTIVE:
1. OPEN END-CLOSED END FUNDS:
An open-end fund is one that has units available for sale and repurchase at all time. An
investor can buy or redeem units from the fund itself at a price based on the Net Asset
Value (NAV) per unit. NAV per unit is obtained by dividing the amount of the market
value of the fund’s assets (plus accrued income minus the fund’s liabilities) by the
number of units outstanding. The number of units outstanding goes up or down every
time the fund issued new units outstanding. The number of units outstanding goes up or
down every time the fund issued new units or repurchases existing units. In other words,
the ‘unit capital’ of an open-end mutual fund is not fixed but variable. The fund size and
its total investment amount go up if more new subscriptions come in from new investors
than redemptions by existing investors; the fund shrinks when redemptions of units
exceed fresh subscriptions.
Note that an open-end fund is not obliged to keep selling/issuing new units at all times,
and many successful funds stop issuing further subscriptions from new investors after
they reach a certain size and think they cannot manage a larger fund without adversely
affecting profitability. On the other hand, an open-end fund rarely denies to its investors
the facility to redeem existing units, subject to certain obvious conditions. For example,
redemption is only possible after the investor’s cheque for initial subscription has cleared,
or until after any “look-in period” specified by the fund is over, or only after the specified
redemption period for collection of funds.

Unlike an open-end fund, the ‘unit capital’ of a closed-end fund is fixed, as it makes a
one-time sale of a fixed number of units. Later on, unlike open-end funds, closed-end
funds do not allow investors to buy or redeem units directly from the funds. However, to
provide the much closed-end funds get themselves listed on a stock exchange. Trading
through a stock exchange enables investors to buy or sell units of a closed-end mutual
fund from each other, through a stockbroker, in the same fashion as buying or selling
shares of a company. The fund’s units may be traded at a discount or premium to NAV
based on investor’s perceptions about the fund’s future performance and other market
factors affecting the demand for or supply of the fund’s units.
2. LOAD AND NO-LOAD FUNDS:
Marketing of a new mutual fund scheme involves initial expenses. These expenses may
be recovered from the investors in different ways at different time. Three usual ways in
which a fund’s sales expenses may be recovered from the investors are:
I. At the time of investor’s entry into the fund/scheme, by deducting a specific amount
from his initial contribution, or
2. By charging the fund/scheme with a fixed amount each year, during the stated number
of years, or
3. At the time of the investor’s exit from the fund/scheme, by deducting a specified
amount from the redemption proceeds payable to the investor.
These charges made by the fund managers to the investors to cover distribution expenses
are often called a “front-end or entry-load”. This is the first case above. The load amount
charged to the scheme over a period of time is called a “deferred load”. This is the third
case above. Some funds may also charge different amount of loads to the investors,
depending upon how many years the investor has stayed with the fund; the longer the
investor stays with the fund, less the amount of “exit load” he is charged. This is called
“contingent deferred sales charge”.

Note that the front-end load amount is deducted from the initial contribution/purchase
amount paid by the incoming investor, thus reducing his initial investment amount.
Similarly exit loads would reduce the redemption proceeds paid out to the outgoing
investor. If the sales charge is made on a deferred basis directly to the scheme, the
amount of the load may not be apparent to the investor, as the scheme’s NAV would
reflect the net amount after the deferred load.
Funds that charge front-end, back-end or deferred loads are called load funds. Funds that
make no such charges or loads for sales expenses are called no-load funds.
In India, SEBI has defined a “load’ as the one-time fee payable by the investor to allow
the fund to meet initial issue expenses including brokers’/agents/distributors’
commissions, advertising and marketing expenses. SEBI definition of a load fund would
include all funds that charge a front-end load, which is in line with the internationally
used definition. However, SE would consider a fund to be “a no-load” fund, if an AMC
absorbs these initial marketing expenses and does not charge the fund-a situation that is
somewhat special to India and not widely prevalent elsewhere. Internationally, a fund,
even when it does not make a front-end load, would still be considered a load fund, if it
charges an exit load or a deferred sales load.

Industrial Background
Concept of Mutual Fund:

Mutual Fund is an American Concept and the terms “Investments Trust”, Investment
Company”, “Mutual Fund”, “Money Fund” etc. are being used interchangeably in
American Literature. Investment Company as defined in the US Investment company Act
1940 is any issuer that is or holds out as being engaged primarily or proposes to engage
primarily in the business of investing, reinvesting or trading in securities, is engaged or
proposes to the business of issuing face amount of certificates of the installment type or
has been engaged in such business and has any such certificates outstanding; is engaged
or proposes to engage in the business of investing, reinvesting, owning, holding or
trading in securities and bounds or proposes to acquire investment securities having a
value exceeding 40% of the value of such issuer’s total assets(exclusive of government of
securities and a cash items) on an unconsidered basis.

The profits or losses are shared by the investors in proportion to their investments. The
mutual fund normally comes out with number of schemes with different objectives which
are launched from time to time. A Mutual fund is required to be registered with Securities
and Exchange Board of India (SEBI) which regulates securities markets before it can
collect funds from the public.
As the countries first and foremost mutual fund, Unit Trust of India has played significant
supportive role in this process. As a pioneering garner larger household savings. It
responded innovatively to the needs of investment and income goals of different strata of
society. Under one roof there are schemes for every one in the family, from the newborn
child to old and retired individuals. The Unit Trust has lunched schemes to cater to
varying notions of savers. Thus, there are saving schemes for those who prefer safe and
steadily rising returns. There are also high growth schemes for those who can wait and
are prepared to take some risk with UTI
With a view to providing a wider choice to small investors, the Government amended
Banking Regulation Act to permit commercial banks to launch mutual fund India.
Considering the fact that the household sector has a dominant share in the aggregate net
savings of the economy, banks in their quest for mobilizing the community savings into
productive avenues have found in mutual funds a lucrative opportunity.

COMPANY PROFILE
Reliance Group
The reliance group, founded by Dhirubhai H. Ambani (1932-2002), is India’s largest

private sector enterprise, with the business in energy and materials value chain, Group’s
annual revenues are in excess of US$ 34 billion. When Dhirubhai embarked on his first
business venture, he had a seed capital of barely US$300(Around Rs.140000). Over the
next three and a half decades, he converted his fledgling enterprise into an Rs.60000
crore colossus an achievement that earned Reliance a place on the global fortune 500 list,
the first ever Indian private company to do so.
Backward vertical integration has been the cornerstone of the evolution and growth of
Reliance. Starting with textiles in the late seventies, reliance pursued a strategy of
backward vertical integration- in polyester, fiber intermediates, plastics petrochemicals,
petroleum refining and oil and gas exploration and production to be fully integrated along
the materials and energy value chain. The group’s activities span exploration and
production of oil and gas, petroleum refining and marketing, petrochemicals (polyester,
fiber intermediates, plastics and chemicals), textiles and retail.
The group export products in excess of US$ 20 billion to 108 countries in the world.
Major group companies are reliance industries limited (including main subsidiaries
Reliance petroleum limited and reliance retail limited) and reliance industrial
infrastructure limited

Anil Dhirubhai Ambani
Anil Ambani (born June 4, 1959) is an Indian businessman. As
of October 6th 2007, he has net worth of US$45 billion, making him the 6th richest
person in the world. His was the world’s fastest-growing multi-billion-dollar fortune in
percentage terms as his wealth tripled in 1 year. Anil Ambani is the chairman of Reliance
Capital, Reliance Communications and Chairman and managing director, Reliance
energy, and was formerly vice Chairman Director of reliance industries limited. His
personal stake in reliance Communication is 66%. Reliance group is India’s largest
business house, founded by Anil’s father Dhirubhai Ambani (1938-2002).
The total investors’ wealth in the four Anil Ambani group firms – Reliance
communications (RCOM), Reliance Capital (RCL), Reliance Energy (REL) & Reliance
Natural Resources Limited (RNRL) has reached 1, 42,384Cr Rupees. While total
promoter holding is estimated at about Rs.87,000 Cr, Anil’s wealth comes mostly from
his over 65% stake RCOM, which has market capital of about rupees 1,03,000 Cr. He
also has over 50% in RCL (Market capital of Rs.24, 000 Cr. 35% in REL (market capital
of Rs.12700 cr.) and close 54% in RNRL, which has a market capital of about Rs.2, 600
cr.
Ambani joined reliance in 1983 as co-chief executive Officer and is credited with having
pioneered many financial innovations in the Indian capital markets. For example, he led
India’s first forays into overseas capital markets with international public offerings of
global depositary receipts, since 1991, around US$2 billion from overseas financial
markets: with 100 year Yankee bond issue in January 1997 being the high point, after
which people regarded him as a financial wizard. He has steered the Reliance group to its
current status as India’s leading textiles, petroleum, petrochemicals, powder, and Telecom
Company. One if his major achievement in the entertainment industry is the takeover of
Ad labs, the movie production to distribution to multiplex company that owns Mumbai’s
only dome theatre.

INTRODUCTION
The Reliance group – one of India’s largest business houses with revenues of Rs. 990
billion ($22.6 billion) that is equal to 3.5 percent of the country’s gross domestic
product was split into two.
The group – which claims to contribute nearly 10 per cent of the country’s indirect tax
revenues and over six percent of India’s exports – was divided between Mukesh
Ambani and his younger brother Anil on June 18, 2005.
The group’s activities span exploration, production, refining and marketing of oil and
natural gas, petrochemicals, textiles, financial services, insurance, power and telecom.
The family also has interests in advertising agency and life sciences.
Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average
Assets Under Management (AAUM) of Rs. 90,938 Crores (AAUM for Mar 08 ) and an
investor base of over 66.87Lakhs.
Reliance Mutual Fund, a part of the Reliance – Anil Dhirubhai Ambani Group, is one of
the fastest growing mutual funds in the country.
RMF offers investors a well-rounded portfolio of products to meet varying investor
requirements and has presence in 115 cities across the country. Reliance Mutual
Fund constantly endeavors to launch innovative products and customer
service initiatives to increase value to investors.
“Reliance Mutual Fund schemes are managed by Reliance Capital Asset

Management Limited., a subsidiary of Reliance Capital Limited, which holds
93.37% of the paid-up capital of RCAM, the balance paid up capital being held by
minority shareholders.”
Reliance Capital Ltd. is one of India’s leading and fastest growing private
sector financial services companies, and ranks among the top 3 private sector financial
services and banking companies, in terms of net worth.
Reliance Capital Ltd. has interests in asset management, life and general insurance,
private equity and proprietary investments, stock broking and other financial services.
Reliance Mutual fund has largest AUM in India. Reliance capital asset Management is
no. 1 AMC in India but the picture is not the same in Chhattisgarh. In Chhattisgarh they
are no. 2 AMC. Management of Reliance mutual fund wants to expand its feet in

Chhattisgarh, before taking any step they want to understand market & investor and
distributor behavior of SMEs, so they may plan accordingly to capture Chhattisgarh
Market. In this research we have to analyze why, how, where, when & how much an
investor invest & according to it, we have to make profile of investors. In this report I
have endeavored to understand the factors affecting Investment behavior of an
investor in Chhattisgarh. This behavioral study consists of how any investor invests in
CG. What factor they consider, why these factors they consider, where do they invest,
how do they invest, purpose behind investment, size of investment, timing of
investment & duration of investment. This study gave us basis to profile investors.

About Reliance Mutual Fund
Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act,
1882 with Reliance Capital Limited (RCL), as the Settler/Sponsor and Reliance Capital
Trustee Co. Limited (RCTCL), as the Trustee.
RMF has been registered with the Securities & Exchange Board of India (SEBI) vide
registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital
Mutual Fund has been changed to Reliance Mutual Fund effective 11th March 2004 vide
SEBI's letter no. IMD/PSP/4958/2004 date 11th March 2004. Reliance Mutual Fund was
formed to launch 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.
The main objectives of the Trust are :

 To carry on the activity of a Mutual Fund as may be permitted at law and
formulate and devise various collective Schemes of savings and investments for people in
India and abroad and also ensure liquidity of investments for the Unit holders;
 To deploy Funds thus raised so as to help the Unit holders earn reasonable returns
on their savings and
 To take such steps as may be necessary from time to time to realise the effects
without any limitation.
VISION STATEMENT
To be a globally respected wealth creator, with an emphasis on customer care and a
culture of good corporate governance.
MISION STATEMENT
To create and nurture a world-class, high performance environment aimed at delighting

their customers.

Research Design
Organization:
Reliance Mutual Fund, Belgaum
Nature of Business:
Deal in Mutual funds.

Topic of the study:
“Mutual fund a safer investment”
Need for the Study:
 Association of mutual fund in India
 Asset Management company
Objectives of the study:
 To understand the concept of Mutual fund, its working and various types of
mutual fund.
 To study the various schemes of mutual fund.
 To compare the performance of four mid cap funds.
 To study the risk involved in MFs
Research Methodology:
Study of mutual fund market:
Collection of data:
 Primary data: Interaction with the executives of mutual fund Organizations.

 Secondary data: Data Fact sheets of Reliance, SBI, Kotak, Tata and Sundaram
Mutual Funds and collected through various web-sites, Magazines, Journals and
newspaper
 Analysis of data
 Preparation of project report
Scope of the project

The scope of the project is limited to analysis of mid cap mutual funds.
Proposed Outcome:
 Avoids hassle free investments
 Avoids time consumption for research
MUTUAL FUND STRUCTURE

The structure of mutual fund consists of
Sponsor
Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the
Investment Managed and meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not
responsible or liable for any loss or shortfall resulting from the operation of the Schemes
beyond the initial contribution made by it towards setting up of the Mutual Fund.
Trust

The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian
Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian
Registration Act, 1908.
Trustee
Trustee is usually a company (corporate body) or a Board of Trustees (body of

individuals). The main responsibility of the Trustee is to safeguard the interest of the unit
holders and ensure that the AMC functions in the interest of investors and in accordance
with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the
provisions of the Trust Deed and the Offer Documents of the respective Schemes.
Asset Management Company (AMC)
The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. The AMC
is required to be approved by the Securities and Exchange Board of India (SEBI) to act as
an asset management company of the Mutual Fund. Atleast 50% of the directors of the
AMC are independent directors who are not associated with the Sponsor in any manner.
The AMC must have a net worth of atleast 10 crore at all times.
Registrar and Transfer Agent
The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to
the Mutual Fund. The Registrar processes the application form; redemption requests and
dispatches account statements to the unit holders. The Registrar and Transfer agent also
handles communications with investors and updates investor records.
Benefits of Mutual Fund investment
Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of
companies and selects suitable investments to achieve the objectives of the scheme.
Diversification

Mutual Funds invest in a number of companies across a broad cross-section of industries
and sectors. This diversification reduces the risk because seldom do all stocks decline at
the same time and in the same proportion. You achieve this diversification through a
Mutual Fund with far less money than you can do on your own.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such
as bad deliveries, delayed payments and follow up with brokers and companies. Mutual
Funds save your time and make investing easy and convenient.
Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return
as they invest in a diversified basket of selected securities.
Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing
in the capital markets because the benefits of scale in brokerage, custodial and other fees
translate into lower costs for investors.
DEMERITS OF INVESTMENTS IN MUTUAL FUNDS
No control over the costs:
Since investors do not directly monitor the funds operations they cannot control the costs
effectively. Regulators therefore usually limit the expenses of mutual funds.
No tailor-made portfolios:
Mutual fund portfolios are created and marketed by AMC’s, into which investors invest.
They cannot create tailor made portfolios.
Managing a portfolio of funds:
As the number of mutual funds increases, in order to tailor a portfolio for him, an investor
may be holding a portfolio of funds, with the costs of monitoring them and using them,
being incurred by him.
Benefits of investing in Mutual Funds:

1. Qualified and experienced professionals manage Mutual Funds. Generally,
investors, by themselves, may have reasonable capability, but to assess a financial
instrument a professional analytical approach is required in addition to access to
research and information and time and methodology to make sound investment
decisions and keep monitoring them.
2. Since Mutual Funds make investments in a number of stocks, the resultant
diversification reduces risk. They provide the small investors with an opportunity
to invest in a larger basket of securities.
3. The investor is spared the time and effort of tracking investments, collecting
income, etc. from various issuers, etc.
4. It is possible to invest in small amounts as and when the investor has surplus
funds to invest.
5. Mutual Funds are registered with SEBI. SEBI monitors the activities of Mutual
Funds.
6. In case of open-ended funds, the investment is very liquid as it can be redeemed at
any time with the fund unlike direct investment in stocks/bonds.
Risks involved in investing in Mutual Funds:

Mutual Funds do not provide assured returns. Their returns are linked to their
performance. They invest in shares, debentures and deposits. All these investments
involve an element of risk. The unit value may vary depending upon the performance of
the company and companies may default in payment of interest/principal on their
debentures/bonds/deposits. Besides this, the government may come up with new
regulation which may affect a particular industry or class of industries. All these factors
influence the performance of Mutual Funds.
Market Risk

Sometimes prices and yields of all securities rise and fall. Broad outside influences
affecting the market in general lead to this. This is true, may it be big corporations or
smaller mid-sized companies. This is known as Market Risk. A Systematic Investment
Plan (“SIP”) that works on the concept of Rupee Cost Averaging (“RCA”) might help
mitigate this risk.
Political/Government Policy Risk
Changes in government policy and political decision can change the investment
environment. They can create a favorable environment for investment or vice versa
Inflation Risk
Inflation is the loss of purchasing power over time. A lot of times people make
conservative investment decisions to protect their capital but end up with a sum of money
that can buy less than what the principal could at the time of the investment. This happens
when inflation grows faster than the return on your investment. A well-diversified
portfolio with some investment in equities might help mitigate this risk.
Interest Rate Risk
In a free market economy interest rates are difficult if not impossible to predict. Changes
in interest rates affect the prices of bonds as well as equities. If interest rates rise the
prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising
interest rate environment. A well-diversified portfolio might help mitigate this risk.
Liquidity Risk
Liquidity risk arises when it becomes difficult to sell the securities that one has
purchased. Liquidity Risk can be partly mitigated by diversification, staggering of
maturities as well as internal risk controls that lean towards purchase of liquid securities.
Credit Risk

The debt servicing ability (may it be interest payments or repayment of principal) of a
company through its cash flows determines the Credit Risk faced by you. This credit risk
is measured by independent rating agencies like CRISIL who rate companies and their
paper. A ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poor
credit quality. A well-diversified portfolio might help mitigate this risk.
The different plans that Mutual Funds offer:

Growth Plan
A growth plan is a plan under a scheme wherein the returns from investments are
reinvested and very few income distributions, if any, are made. The investor thus only
realises capital appreciation on the investment. This plan appeals to investors in the high
income bracket. Under the dividend plan, income is distributed from time to time. This
plan is ideal to those investors requiring regular income.
Automatic Investment Plan

Under the Automatic Investment Plan (AIP) also called Systematic Investment Plan
(SIP), the investor is given the option for investing in a specified frequency of months in
a specified scheme of the Mutual Fund for a constant sum of investment. AIP allows the
investors to plan their savings through a structured regular monthly savings program.
Entry/Exit Load:
A Load is a charge, which the AMC may collect on entry and/or exit from a fund. A load
is levied to cover the up-front cost incurred by the AMC for selling the fund. It also
covers one time processing costs. Some funds do not charge any entry or exit load. These
funds are referred to as 'No Load Fund'. Funds usually charge an entry load ranging
between 1.00% and 2.00%. Exit loads vary between 0.25% and 2.00%.
ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI) :

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

The Association of Mutual Funds of India works with 30 registered AMCs of the
country. It has certain defined objectives which juxtaposes the guidelines of its Board of
Directors. The objectives are as follows:
 This mutual fund association of India maintains high professional and ethical
standards in all areas of operation of the industry.
 It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in the
activities of mutual fund and asset management. The agencies who are by any
means connected or involved in the field of capital markets and financial services
also involved in this code of conduct of the association.
 AMFI interacts with SEBI and works according to SEBI’s guidelines in the
mutual fund industry.
 Association of Mutual Fund of India does represent the Government of India, the
Reserve Bank of India and other related bodies on matters relating to the Mutual
Fund Industry.

 It develops a team of well qualified and trained Agent distributors. It implements
a programme of training and certification for all intermediaries and other engaged
in the mutual fund industry.
 AMFI undertakes all India awareness programme for investors in order to
promote proper understanding of the concept and working of mutual funds.
 At last but not the least association of mutual fund of India also disseminate
information’s on Mutual Fund Industry and undertakes studies and research either
directly or in association with other bodies.
Name of the Asset Management Company:

Name of the Asset Management
Company
Website
ABN AMRO Asset Management
(India) Ltd.
http://www.assetmanagement.abnamro.co.in/
Benchmark Asset Management Co. http://www.benchmarkfunds.com/

Pvt. Ltd.
Birla Sun Life Asset Management
Co. Ltd.
http://www.birlasunlife.com/
BOB Asset Management Co. Ltd. http://www.bobmf.com/
Canbank Investment Management
Services Ltd.
http://www.canbankmutual.com/
DBS Cholamandalam Asset
Management Ltd.
http://www.dbscholamutualfund.com/
Deutsche Asset Management (India)
Pvt. Ltd.
http://www.dws-india.com/
DSP Merrill Lynch Fund Managers
Ltd.
http://www.dspmlmutualfund.com/
Escorts Asset Management Ltd. http://www.escortsmutual.com/
Fidelity Fund Management Pvt.Ltd. fidelity.co.in
Franklin Templeton Asset
Management (India) Pvt. Ltd.
http://www.franklintempletonindia.com/
HDFC Asset Management Co. Ltd. http://www.hdfcfund.com/
HSBC Asset Management (India)
Pvt. Ltd.
http://www.hsbcinvestments.co.in/
ING Investment Management

(India) Pvt. Ltd.
http://www.ingvysyamf.com/
JM Financial Asset Management
Pvt. Ltd.
http://www.jmfinancialmf.com/
Jeevan Bima Sahayog Asset

Management Co. Ltd.
http://www.licmutual.com/
Kotak Mahindra Asset Management
Co. Ltd.
http://www.kotakmutual.com/
Lotus India Asset Management Co.
Pvt. Ltd.
http://www.lotusindiaamc.com/
Morgan Stanley Investment
Management Pvt. Ltd.
http://www.msgfindia.com/
Principal Pnb Asset Management
Co. Pvt. Ltd.
http://www.principalindia.com/
Prudential ICICI Asset Management
Co. Ltd.
http://www.pruicici.com/

Quantum Asset Management Co.
Pvt. Ltd.
http://www.quantumamc.com/
Reliance Capital Asset Management
Ltd.
http://www.reliancemutual.com/
Sahara Asset Management Co. Pvt.
Ltd.
http://www.saharamutual.com/
SBI Funds Management Pvt. Ltd. http://www.sbimf.com/
Standard Chartered Asset
Management Co. Pvt. Ltd.
http://www.standardcharteredmf.com/
Sundaram BNP Paribas Asset
Management Co. Ltd.
http://www.sundarambnpparibas.in/
Tata Asset Management Ltd. http://www.tatamutualfund.com/
Taurus Asset Management Co. Ltd. http://www.taurusmutualfund.com/
UTI Asset Management Co. Pvt.
Ltd.
http://www.utimf.com/
Mutual Fund Globally
 The money market mutual fund segment has a total corpus of $ 1.48 trillion in the
U.S. against a corpus of $ 100 million in India.
 Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only
Fidelity and Capital are non-bank mutual funds in this group.
 In the U.S. the total number of schemes is higher than that of the listed companies
while in India we have just 277 schemes
 Internationally, mutual funds are allowed to go short. In India fund managers do

not have such leeway.

 In the U.S. about 9.7 million households will manage their assets on-line by the
year 2003, such a facility is not yet of avail in India.
 On- line trading is a great idea to reduce management expenses from the current 2
% of total assets to about 0.75 % of the total assets.
Changes Taken Place
 Lower Costs: As per SEBI regulations, bond funds can charge a maximum of
2.25% and equity funds can charge 2.5% as administrative fees. Therefore if the
administrative costs are low, the benefits are passed down and hence Mutual
Funds are able to attract mire investors and increase their asset base.
 Better Advice: Mutual funds could provide better advice to their investors
through the Net rather than through the traditional investment routes. Direct
dealing with the fund could help the investor with their financial planning.
 New investors would prefer online: Mutual funds can target investors who are
young individuals and who are Net savvy, since servicing them would be easier
on the Net.
Future of Mutual Fund
Mutual Funds sponsored by various public sector financial institutions have made
considerable dent particularly in the sphere of resource mobilization during the short
period of their existence. This they have been able to achieve through launching of
several scheme offering triple benefits of income, liquidity and growth. However, they
have so far confined their area of operations to urban areas leaving vast savings
potentiality in rural hinterlands untapped. By beneficences of rural a5reas and introducing
them about the benefits of the schemes, mutual funds can raise burgeoning amount of
resources, which can be gainfully employed for the national development.
All this is possible only when the people have full confidence that their investments in
mutual funds will remain safe. To inspire such confidence it is necessary that the

Government should enact a comprehensive legislation on the pattern of the UTI Act
govern the operations of all the mutual funds.
The asset base will continue to grow at an annual rate of about 30 to 35 % over the next
few years as investor’s shift their assets from banks and other traditional avenues. Some
of the older public and private sector players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge with stronger
players in three to four years. In the private sector this trend has already started with two
mergers and one takeover. Here too some of them will down their shutters in the near
future to come.
But this does not mean there is no room for other players. The market will witness a
flurry of new players entering the arena. There will be a large number of offers from
various asset management companies in the time to come. Some big names like Fidelity,
Principal, Old Mutual etc. are looking at Indian market seriously. One important reason
for it is that most major players already have presence here and hence these big names
would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in India as this would
enable it to hedge its risk and this in turn would be reflected in its Net Asset Value
(NAV).
SEBI is working out the norms for enabling the existing mutual fund schemes to trade in
derivatives. Importantly, many market players have called on the Regulator to initiate the
process immediately, so that the mutual funds can implement the changes that are
required to trade in Derivatives.
COMPARISON OF MUTUAL FUND WITH OTHER INVESTMENT
Mutual Funds with Sharers:

In case of investing in shares you’ll have to spend the time to study and learn the market,
also you should learn to buy individual stocks, because you maximize your gains by
investing in the leading stocks in the leading groups in the markets. If you don’t want to
spend the time, delegate it to a good diversified domestic stock fund. The mutual fund
company has an investment manager for each scheme that decides upon where to invest,
how to invests and when to invest. He will take care of your investment.

Mutual Funds with Fixed Deposit:
In case of the fixed deposit the money, which you have invested, will lock in for certain
period until the fixed deposit matures. That is before the lock in period you can’t remove
your money. The returns on the fixed deposit are only the interest prescribed on it. Where
as in the mutual fund investment there is exit option for every scheme by which you can
exit at any time. Due to which your money will not be locked. In the mutual fund
investment the returns are through the dividend and also the growth appreciation.
Mutual funds are now also competing with commercial banks in the race for retail
investor’s savings and corporate float money. The power shift towards mutual funds has
become obvious. . The basic fact lies that banks cannot be ignored and they will not close
down completely. Their role as intermediaries cannot be ignored. It is just that Mutual
Funds are going to change the way banks do business in the future.
Banks v/s Mutual Funds
BANKS MUTUAL FUNDS

Returns Low Better
Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Interest calculation Minimum balance between 10th Everyday
& 30th. Of every month

Guarantee Maximum Rs.1 lakh on deposits None
INVESTORS SEVEN RULES
Here are seven rules that go a long way in helping you meet your investment objectives.
Know your risk profile:

Your investments should reflect your risk taking capacity. Equity funds might lure when
the market is rising and your neighbor is making money, but if you are not cut out for the
risk that accompanies it don’t bite the bait. So, check if the funds objective matches
yours. Invest only after you have found your match. If you are racked by uncertainty,
seek exper4t advice from a qualified financial advisor.
Identify your investment horizon:

Invest in an equity fund only if you are willing to stay on for at least two years. For
income and gilt funds, have a one-year perspective at least. Anything less than one year,
the only option among mutual funds is liquid funds.
Read the offer document carefully:

The offer document contains essential details pertaining to the fund, including the
summary information (type of scheme, the name of the Asset Management Company and
price of units among other things), investment objectives and investment procedure,
financial information and risk factors.
Go through the fund fact sheet:

Fund fact sheets give you valuable information of how the fund has performed in the
past. You can check the funds portfolio, its diversification levels and its performance in
the past. The more fact sheets you examine, the better.
Diversify across fund houses:

If you are routing a substantial sum through mutual funds, you should diversify across
fund houses. That way, you spread your risk.
Do not chase incentives:

Don’t get lured by investment incentives. Some financial intermediaries give upfront
incentives, in the form of a percentage of your initial investment, to invest in a particular
fund. Don’t buy it. Your focus should be to find a fund that matches your investment
needs and risk profile, and is a performer.

Track your investments:
One easy way to keep track of your fund is to keep track of the intelligent investor
rankings of mutual funds, which are complied on a quarterly basis. These rankings allow
you to take note of your funds performance and risk profile and compare it across various
time periods as well as across its peer set,
Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of the assets fund net of its
liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the
assets in the fund, this is the amount that the shareholders would collectively own. This
gives rise to the concept of net asset value per unit, which is the value, represented by the
ownership of one unit in the fund. It is calculated simply by dividing the net asset value
of the fund by the number of units.
Calculation of NAV:
The most important part of the calculation is the valuation of the assets owned by the
fund. Once it is calculated, the NAV is simply the net value of assets divided by the
number of units outstanding. The detailed methodology for the calculation of the asset
value is given below.
NAV= (Market valueof the scheme’s investment) + Other Assets (Including accrued
interest) + Unamortized issue expenses (only in case of schemes launched on load basis)
– All Liabilities except All Asset and liabilities are valued at the current prices
Details on the above items

For liquid shares/debentures, valuation is done on the basis of the last or closing market
price on the principal exchange where the security is traded
For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be
estimated. For shares, this could be the book value per share or an estimated market price
if suitable benchmarks are available. For debentures and bonds, value is estimated on the
basis of yields of comparable liquid securities after adjusting for illiquidity. The value of
fixed interest bearing securities moves in a direction opposite to interest rate changes
Valuation of debentures and bonds is a big problem since most of them are unlisted and
thinly traded. This gives considerable leeway to the AMCs on valuation and some of the
AMCs are believed to take advantage of this and adopt flexible valuation policies
depending on the situation.
Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, with
every passing day, interest is said to be accrued, at the daily interest rate, which is
calculated by dividing the periodic interest payment with the number of days in each
period. Thus, accrued interest on a particular day is equal to the daily interest rate
multiplied by the number of days since the last interest payment date. Usually, dividends
are proposed at the time of the Annual General meeting and become due on the record
date.
Mutual Fund Weightage to various sectors in March'2011

investment trend by various fund houses over the last 6 months
Sector Investment (Rs. cr) Weightage
Engineering 14,169.39 14.2%
Banking/Finance 12,710.10 12.7%
Information Technology 11,838.24 11.9%
Oil & Gas 7,706.11 7.7%
Automotive 6,731.96 6.7%
Cement 5,822.06 5.8%
Telecom 5,683.10 5.7%
Pharmaceuticals 5,533.54 5.5%
Manufacturing 5,322.88 5.3%
Metals & Mining 4,976.70 5.0%
Media 3,183.53 3.2%

Chemicals 3,131.07 3.1%
Conglomerates 2,603.40 2.6%
Miscellaneous 1,990.53 2.0%
Services 1,834.24 1.8%
Utilities 1,772.22 1.8%
Consumer Non-Durables 1,771.20 1.8%
Food & Beverage 1,467.79 1.5%
Tobacco 1,420.23 1.4%
Consumer Durables 177.89 0.2%
TOTAL 99,846.19 100.0%
Systematic Investment Plan - A plan for future…
1 Investment - The basics

We can define investment as the process of “Sacrificing something now for the prospect
of gaining something later”. The definition implies that there are three dimensions of an
investment-time, today’s sacrifice and prospective gain. Investment is a three-step
process.
Identifying ones
Step 1
financial goals
Select of asset
Step 2
classes
Regular savings
Step 3
plan

For example,
If Mr. X’s monthly consumption expenditure is Rs 20,000 today and he wants to maintain
the same standard of living when he retires. What sum he will require if he is 30-year-
old now? Assuming five percent inflation he would need Rs 78,400 a month when he
retires at 58. Now to earn this amount every month from investment that earn 5 percent a
year, he would need to have saved Rs 1.88 Crore when he retires.
If he can put aside 20,000 a month he can just invest them in bonds that earn 5 percent
and reach the target in most non-volatile manner. At the other extreme, he could invest
just Rs 4166 every month in equities. Assuming 15 per cent returns this should generate
the desired Rs 1.8 Crore. Actually real strategy should be to take a middle path between
these two extremes and allocate some portion of portfolio to both based on your own
financial situation and risk taking ability.
Taking a cue from the above example systematic investment plan is the one, which
helps in achieving financial goal of an individual.
1
2 What is a Systematic Investment Plan?
Systematic Investment Plan (SIP) is a disciplined way of investing, where you invest
fixed amounts at a regular frequency. You often decide to start saving and investing
regularly, but get caught up in your day-to-day activities and forget investments. SIP, the
time-tested investment approach helps bring in the much-needed discipline, and has
shown good results the world over.
1 Benefits of SIP:
2
0 Rupee cost averaging
1 Power of compounding
2 Makes Investment a habit
3 Low Cost (No entry load)
4
3 Rupee Cost Averaging:
X and Y who are on a trip to a riverbank decide to test their swimming skills. X dives
deep into the water, kicks his legs, splashes the water, stroke hard, shows all his skill to
move faster than the current of the water. Y decides just to remain afloat and allow the
stream to take him along with it. In the end, to your surprise you find that Y has covered
more distance than X.
The same applies to equity market also; most of us try to time the market perfectly. But,
this is difficult at best given the volatility of the stock markets. Unfortunately, it is
impossible to consistently predict the markets and even experienced investment

professionals find it hazardous to do so. Nevertheless, there is a proven investment
strategy that can help you offset the volatility of the markets and turn it into an advantage.
This strategy is called Rupee Cost Averaging. Below is the example to explain how it
works nder systematic investment plan:
Month Amount Fluctuating Rising Market Falling

Invested (Rs) Market Market
Price Units Price Units Price Units
1 2,000.00 12.00 166.67 12.00 166.67 12.00 166.67
2 2,000.00 15.00 133.33 14.00 142.86 10.00 200.00
3 2,000.00 9.00 222.22 16.00 125.00 8.00 250.00
4 2,000.00 15.00 133.33 18.00 111.11 6.00 333.33
Total 8,000.00 51.00 655.56 60.00 545.64 36.00 950.00
Average Rs. 12.20(i.e. Rs. 8000/ 655.55 Rs. 14.66(i.e. Rs 8.42(i.e.Rs.
cost per units) Rs. 8000/ 8000/950.00 units)
unit 545.63 units)

Simply put, Rupee Cost Averaging is a disciplined investment practice that takes the
guesswork out of "timing" the markets. The essence of this strategy is that more units are
purchased automatically when prices are low and fewer units when prices are high. Over
time, this result in the average cost per unit - the money you pay - being lower than the
average price per unit
Power of compounding
Inflation can steadily erode the value of your income. However, long-term investing can
provide returns that outpace inflation-through the power of compounding.
Year after year, any money that you invest may earn interest, dividends, or capital gains.
When you reinvest those earnings, they help generate additional earnings; those
additional earnings help generate more earnings, and so on. This is called compounding.
Let us take an example, two friends, X, and Y are 20 years old. X decides that he wants to
start investing his money early to build himself a secure future and decides to save Rs.
5,000 monthly (i.e. Rs. 60,000 per annum) at the age of 20. Y feels that he is young and
wants to enjoy his money for
the time being. Y wakes up late and decides to invest at the age of 35 years and decides to
save Rs. 10,000 per month (i.e. Rs. 1,20,000 per annum). At the age of 60 years when
they want to retire, using an interest rate of 7% per annum, X who had invested Rs. 5,000
monthly for 25 years has Rs. 1.15 cr. and Y who had invested Rs. 10,000 monthly for the
same amount of time has Rs. 57 lacs. Please refer to the illustrations below for a better
understanding.
COMPARISON BY NATURE OF INVESTMENTS
The table below compares the investment options with respect to Return, Safety,
Volatility, Liquidity, and Convenience.
Investment Return Safety Volatility Liquidity Convenience

Options
Equity High Low High High or Moderate
Low
F1 Bonds Moderate High Moderate Moderate High
Corporate Moderate Moderate Moderate Low Low
Debentures
Company Moderate Low Low Low Moderate

Fixed
Deposits
Bank Low High Low High High
Deposits
PPF Moderate High Low Moderate High
Life Low High Low Low Moderate
Insurance
Real estate High Moderate High Low Low
Mutual High High Moderate High High
Funds
Reliance Gold Savings Fund

(An Open Ended Fund of Fund Scheme)
HIGHLIGHTS/SUMMARY OF THE SCHEME
1.INVESTMENT OBJECTIVE
The investment objective of the Scheme is to seek to provide returns that closely
correspond to returns provided by Reliance Gold Exchange
Traded Fund (RGETF).
2. LIQUIDITY
The units of the Scheme shall be available for ongoing sale / subscription / repurchase /
redemption within five business days of allotment.
The repurchase/redemption proceeds will be dispatched within 10 working days from the
date of receipt of valid requests for repurchase/redemption. The AMC will pay interest

@15% per annum for the period of delay in the event of failure to despatch the
redemption or repurchase proceeds within 10 working days.
3.BENCHMARK
The Scheme’s performance will be benchmarked against the price of physical gold.
4.TRANSPARENCY/NAV DISCLOSURE
(a) The AMC will calculate and disclose the first NAV not later than 5 business days from
the date of allotment of units. Subsequently, the NAV will be calculated and disclosed at
the close of every Business Day which shall be published in at least two daily newspapers
and also uploaded on the website of AMFI at www.amfiindia.com and website of
Reliance Mutual Fund at www.reliancemutual.com respectively by 10.A.M on the next
business day.
(b) Publication of Abridged Half-yearly Unaudited Financial Results in the newspapers or

as may be prescribed under the Regulations from time to time.
(c) Communication of Portfolio on a half-yearly basis to the Unit holders directly or

through the Publications or as may be prescribed under the Regulations from time to
time.
(d) Despatch of the Annual Reports of the respective Schemes within the stipulated
period as required under the Regulations.
5.LOADS
The following Load Structure is applicable during the new fund offer and continuous
offer including SIP installments in the scheme till further notice.
Entry Load – Nil
In accordance with the requirements specified by the SEBI circular no. SEBI/IMD/CIR
No.4/168230/09 dated June 30, 2009 no entry load will be charged for purchase /
additional purchase / switch-in accepted by the Fund with effect from August 01, 2009.
Similarly, no entry load will be charged with respect to applications for registrations
under systematic investment plans/ systematic transfer plans accepted by the Fund
with effect from August 01, 2009.
Exit Load - 2%- If redeemed or switched out on or before completion of 1 year from the
date of allotment of units, Nil - If redeemed or switched out after the completion of 1 year
from the date of allotment of units.

Switchover Facility
Available, subject to minimum Rs. 5000/- & any amount thereafter in switch in scheme
(for opening a new folio/account) and minimum Rs 1000 & any amount thereafter for
additional switch in.
Inter scheme Switch: At the applicable exit loads in the respective schemes.
Inter Plan/Inter Option Switch: No load applicable for Inter Plan/Inter Option
Switch.
Contingent Deferred Sales Charge (CDSC) 0%
All loads including Contingent Deferred Sales Charge (CDSC) for the Scheme shall be
maintained in a separate account and may be utilized towards meeting the selling and
distribution expenses. Any surplus in this account may be credited to the scheme,
whenever felt appropriate by the AMC
.
Pursuant to SEBI Circular No. SEBI/IMD/CIR No. 4/ 168230/09 dated June 30, 2009,
upfront commission shall be paid directly by the investor to the AMFI Registered
Distributor based on the investor’s assessment of various factors including the services
rendered by the AMFI Registered Distributor.
According to the said circular, exit load of upto 1% of the redemption value charged to
the Unit Holder by the Mutual Fund on redemption of units shall be retained by the
scheme in a separate account and will be utilized for payment of commission to the
AMFI Registered Distributor and to meet other marketing and selling expenses.
Any amount in excess of 1% of the redemption value charged to the Unit Holder as exit
load shall be credited to the Scheme immediately.
6. MINIMUM APPLICATION AMOUNT
Rs 5000 and in multiples of Re 1 thereafter
Additional Purchase Amount
Rs 1000 and in multiples of Re 1 thereafter
7. PLANS & OPTIONS
The Scheme will have following plans & options:

(a) Growth Plan

(1) Growth Option
(b) Dividend Plan
(1) Dividend Payout Option
(2) Dividend Reinvestment Option
Analysis of Data
Study of four Mid Cap Funds

Magnum Mid Cap Fund (SBI Mutual Fund)
Open Ended Equity Fund

Date of Inception: 17/03/2005
Corpus (Assets Under Management): Rs.343.64Cr
Options: Growth and Dividend
Top 10
holdings:

Column1 Column2 Column3 Column4
Top
Holdings
(Apr 29, 11)
Equity Sector Value Asset
(Rs cr) %
GlaxoSmith Food &
Con Beverage 21.11 8.11
Cadila
Health Pharmaceuticals 19.91 7.65
Motherson
Sumi Automotive 19.81 7.61
Swaraj
Engines Engineering 17.23 6.62
United Food &
Brewerie Beverage 16.17 6.21
Elecon Eng Engineering 10.99 4.22
Tamil
Newsprint Manufacturing 10.02 3.85
UTV
Software Media 9.53 3.66
Ipca Labs Pharmaceuticals 9.01 3.46

Page
Industries Manufacturing 8.2 3.15
Asset Allocation:
Equity 95.78
Others 0
Debt 0
Money 0
Market
Cash/c 4.21
all

Performance Report:
Period Returns
1wk 1.58%
1month 4.87%
3months 7.10%
6months 8.91%
1year 5.24%
3years 1.96%
5years 3.31%
Tata Mid Cap Fund:

Tata Mid Cap Fund - Growth Top Holdings

Column1
Column2
Company Holdings(%)

Bank of Baroda share price 5.04
Asian Paints share price 3.69
Polaris Software Lab share price 3.45
Gujarat State Petronet share price 3.2
Tamil Nadu Newsprint And Papers share

price 2.95
Asset Allocation:
Class %
Equity 90.48
Others / Unlisted N.A

Debt N.A

Mutual Funds N.A
Money Market N.A

Cash / Call 9.52
Net Receivable / Payable N.A
Performance Report:
Period Return
1wk 1.09%
1month 3.49%
3months 7.36%

6months 7.85%
1year 2.11%
3years 2.58%
5years 5.41%
Sundaram Select Mid Cap Fund:

Top 10 holdings:
Column1 Column2 Column3 Column4
Top Holdings (Apr

29, 11)
Equity Sector Value Asset

(Rs cr) %
Ipca Labs Pharmaceuticals 109.11 4.93
IndusInd Bank Banking/Finance 102.01 4.61
Coromandel Int Chemicals 97.17 4.39
IndraprasthaGas Oil & Gas 91.03 4.12

FAG Bearings Engineering 80.06 3.62
Petronet LNG Oil & Gas 78.48 3.55
Trent Retail & Real Estate 75.21 3.4
SRF Manufacturing 72.29 3.27

Mphasis Technology 71.17 3.22
EID Parry Food & Beverage 68.1 3.08
Asset Allocation:
Column1 Column2
Equity 90.27
Others 1.6
Debt 0
Mutual Funds N.A
Money Market 0
Cash / Call 8.13

Performance Report:
Period Return
Last 7yr 29.0%
Last 5yr 12.5%
Last 3yr 11.4%
Last 2yr 51.0%
Last 1yr 8.7%
Kotak Mid Cap Fund:


Top 10 holdings:
Column1 Column2
Gloxo consumer healthcare 3.24%

Lupin 3.21%
Zuari industries 2.82%

EID-Parry 2.81%
Union Bank of India 2.53%
Asset Allocation:
Class %
Equity 91.82
Others / Unlisted N.A

Debt N.A
Mutual Funds N.A
Money Market 6.11

Cash / Call N.A
Net Receivable /
Payable 2.07

Performance Report:
Period Return
1yr 7.1%
3yr 3.9%
5yr 6.9%
Comparison table of equity diversified midcap mutual funds

SBI TATA KOTAK SUNDARAM
Corpus Rs.343.64Cr Rs.249.42Cr Rs.344.11Cr Rs.991.45Cr
Asset Allocation Eq: 95.79% Eq:90.48% Eq: 91.82% Eq: 90.87%

Cash:4.21% Cash:9.52% Maney market: Cash: 8.13%
6.11%
Returns 1yr : 5.24% 1yr: 2.11% 1yr : 7.1% 1yr: 8.7%
By looking into the table we can say that Sundaram select mid cap mutual fund is
performing extremely well in the market. It has large corpus. And it has wide
diversification in investment. By investing nearly one third in cash market it is
actively gaining the opportunity of cash market. Its diversified investment resulted in
good returns to the investors and increase in the NAV.
Findings
By comparing these four equity diversified mid cap fund’s performance we can say
that the fund’s performance and its NAV depends on the following factors-
 Its portfolio in which it has invested
 The asset allocation of the fund

 The sectors to which it has targeted
 The bench mark of stock market index which it has taken as base
The common objective of all mid cap funds, with slight difference in words, is to
provide investors with opportunities for long term growth in capital along with the
liquidity of an open ended scheme by investing predominantly in a well-diversified
basket of equity stocks of companies whose market capitalization is between Rs. 200
crores to Rs. 2000 crores and in debt and money market instruments.
Out of above Sundaram Select Mid Cap is performing very well in the
market since inception. It is ranked number one in returns by money control. Even
we can say that Sundarm Select Mid Cap fund has started earlier than other three but
it has a very selective and diversified portfolio and its corpus is also huge compare
to other three. It has also sustained its growth from inception.
The reason for difference in NAV of each fund is its portfolio, asset
allocation, selection of sectors, and proportion of investment in the selected sector,
different options, and different objective of the schemes etc.
So while investing in any existing mutual fund’s scheme it is better to
look at its portfolio and also the performance, but the present performance may not be
assured in future.
Rate of Return =Price Change +Dividend Received*100
Purchase Price

The general equation used to calculate the compounded value after N years is
given below:
A=P (1+I) to the power n
P = principal
I = Interest rate
N= number of years
Suggestions
 Transparency, Flexibility and Ease of understanding, these core benefits of

Mutual Funds need to be effectively communicated to the customers.

 Though being riskier in nature mutual funds returns, sizable amount of returns
to the investors, this will play a role of enlightening new investors in the pool.
 The Mutual Fund Industry must convince the general public about the latest
development (i.e. tax exemptions on dividends & returns in Mutual Funds by
the finance ministry.) This would largely help to get clients.
 People generally want a reasonable return on their investment. Majority of the

investors try to see that their investments are secure. In case of equity mutual
funds both in the growth and dividend plans have been realizing more than
15%-20% returns on a year-to-year basis. This has uplifted the mutual fund
Industry in the country. This will largely attract people to invest in Mutual
Funds.
 In the current scenario the bank are returning in the area of 4.5%to 8% returns/
annum, which are taxable. On the other hand tax-free returns of minimum two
digits in equity mutual funds are need of the day, to beat inflation in our
economy.
 By creating active awareness regarding the progress of Mutual Fund, the

Industry in India has seen tremendous growth in the last three years. This should
be further proceeded more aggressively.
Conclusions:

As per the study Mutual Fund has good future. It is gaining importance in the
minds of consumers. Common people are taking more interest in Mutual Funds along
with other conventional investment options. But the service providers like “Reliance
Mutual Fund” need to more educate the customers. Midcap funds are more promising. So
the companies need to promote these funds more in order to benefit the investor and gain
their confidence.
Investing in mutual fund is safe because there are various schemes which are performing
well in the market like Mid cap funds
The procedure of investing in Mutual Fund is easy so common man can easily invest in
Mutual Fund.

BIBLIOGRAPHY
 Introduction to Mutual Fund By AMFI

 Brochures
 Journals
Web Sites:
 www.amfiindia.com
 www.reliancemutual.com
 www.moneycontrol.com

Mutual Fund A Safer Investment

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INDEX

5. Research Design / Methodology.

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

those of Fixed Deposits, Savings Accounts, Postal Deposits, Recurring Deposits,

Insurance plans, Stocks etc.

Funds investment as compared to other form of the investments.

Introduction to Mutual Fund

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

fund to the total amount of the fund.

contribution bears to the total contributions of all investors put together.

company and its assets.

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

CLASSIFICATION BASED ON INVESTMENT OBJECTIVE:

Funds can be classified according to their investment objectives on 4 main categories as

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

potential for growth in capital.

lower risk level

a. Aggressive Growth Funds

3. Small-Cap Equity Funds

4. Option Income funds

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

Fund, Kothari Pioneer Prima fund etc.

higher risk of default by their borrowers.

would result in different risk profiles.

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

4. LIQUID / MONEY MARKET FUNDS:

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

1. OPEN END-CLOSED END FUNDS:

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

2. LOAD AND NO-LOAD FUNDS:

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

Concept of Mutual Fund:

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

The reliance group, founded by Dhirubhai H. Ambani (1932-2002), is India’s largest

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

“Reliance Mutual Fund schemes are managed by Reliance Capital Asset

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

The main objectives of the Trust are :

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

To create and nurture a world-class, high performance environment aimed at delighting

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

Reliance Mutual Fund, Belgaum

Deal in Mutual funds.

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

“Mutual fund a safer investment”

Need for the Study:

 Association of mutual fund in India

 Asset Management company

Objectives of the study:

Study of mutual fund market:

 Primary data: Interaction with the executives of mutual fund Organizations.

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)

 Preparation of project report

Scope of the project

 Avoids hassle free investments

 Avoids time consumption for research

MUTUAL FUND STRUCTURE

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA)