CHAPTER 1

INTRODUCTION

“ A STUDY OF MUTUAL FUNDS IN HDFC BANK”

(A) COMPANY PROFILE- HDFC BANK

HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC)

HDFC was incorporated in 1977 as the first specialized mortgage company in India. HDFC
provides financial assistance to individuals, corporates and developers for the purchase or
construction of residential housing. It also provides property related services (e.g. property
identification, sales services and valuation), training and consultancy. Of these activities,
housing finance remains the dominant activity. HDFC has a client base of around 9.5 lac
borrowers, over 1 million depositors, over 91,000 shareholders and 50,000 deposit agents as at
March 31, 2008. HDFC has raised funds from international agencies such as the World Bank,
IFC (Washington), USAID, DEG, ADB and KFW, international syndicated loans, domestic
term loans from banks and insurance companies, bonds and deposits. HDFC has received the
highest rating for its bonds and deposits program for the twelfth year in succession. HDFC
Standard Life Insurance Company Limited, promoted by HDFC was the first life insurance
company in the private sector to be granted a Certificate of Registration (on October 23, 2000)
by the Insurance Regulatory and Development Authority to transact life insurance business in
India.

STANDARD LIFE INVESTMENTS LIMITED

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The Standard Life Assurance Company was established in 1825 and has considerable
experience in global financial markets. The company was present in the Indian life insurance
market from 1847 to 1938 when agencies were set up in Kolkata and Mumbai. The company
re-entered the Indian market in 1995, when an agreement was signed with HDFC to launch an
insurance joint venture. On April 2006, the Board of The Standard Life Assurance Company
recommended that it should demutualise and Standard Life plc float on the London Stock
Exchange. At a Special General Meeting held in May voting members overwhelmingly voted
in favour of this. The Court of Session in Scotland approved this in June and Standard Life plc
floated on the London Stock Exchange on 10 July 2006. Standard Life Investments was
launched as an investment management company in 1998. It is a wholly owned subsidiary of
Standard Life Investments (Holdings) Limited, which in turn is a wholly owned subsidiary of
Standard Life plc. Standard Life Investments is a leading asset management company, with
approximately US$ 300 billion as at March 30, 2008, of assets under management. The
company operates in the UK, Canada, Hong Kong, China, Korea, Ireland and the USA to ensure
it is able to form a truly global investment view. In order to meet the different needs and risk
profiles of its clients, Standard Life Investments Limited manages a diverse portfolio covering
all of the major markets world-wide, which includes a range of private and public equities,

VISION OF HDFC MUTUAL FUND

To be a dominant player in the Indian mutual fund space, recognized for its high levels of ethical
and professional conduct and a commitment towards enhancing investor interests

HDFC MUTUAL FUND PRODUCTS SCHEMES

EQUITY FUNDS-

 HDFC Capital Builder Fund

 HDFC Core & Satellite Fund
 HDFC Equity Fund
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  HDFC Growth Fund
 HDFC Long Term Equity Fund
 HDFC Premier Multi-Cap Fund
 HDFC Top 200 Fund
 HDFC Mid-Cap Opportunities Fund
 HDFC Index Fund
 HDFC Index Fund Nifty Plan
 HDFC Index Fund SENSEX Plan
 HDFC Index Fund SENSEX Plus Plan
 Equity Linked Savings Scheme
 HDFC Long Term Advantage Fund
 HDFC Tax Saver

BALANCED FUNDS-
 HDFC Balanced Fund
 HDFC Children's Gift Fund Investment Plan
 HDFC Children's Gift Fund Savings Plan

DEBT FUNDS –

 HDFC Cash Management Fund - Savings Plus Plan

 HDFC Floating Rate Income Fund
 Long Term Plan
 HDFC Floating Rate Income Fund Short Term Plan
 HDFC Gilt Fund Short Term Plan
 HDFC Gilt Fund Long Term Plan
 HDFC High Interest Fund
 HDFC High Interest Fund - Short Term Plan
 HDFC Income Fund
 HDFC MF Monthly Income Plan - Short Term Plan

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  HDFC MF Monthly Income Plan - Long Term Plan
 HDFC Multiple Yield Fund
 HDFC Multiple Yield Fund Plan 2005
 HDFC Short Term Plan
 HDFC Quarterly Interval Fund - Plan A
 HDFC Quarterly Interval Fund - Plan B
 HDFC Quarterly Interval Fund - Plan C

LIQUID FUNDS-

 HDFC Cash Management Fund - Call Plan

 HDFC Cash Management Fund - Savings Plan
 HDFC Liquid Fund
 HDFC Liquid Fund - PREMIUM PLAN
 HDFC Liquid Fund - PREMIUM PLUS PLAN
 HDFC Fixed Maturity Plan
 FMP

(A) INTRODUCTION TO PROJECT-

A MUTUAL FUND is an investment company designed to pool the funds of smaller investors
and place them under professional management. A mutual fund allows small investors to
diversify their portfolios. When a mutual fund is formed, it issues a prospectus detailing its
intended investment strategy, and it is not permitted to deviate from that strategy without public
disclosure. A mutual fund prospectus also details the fees investors will be charged, which can
be substantial. In the US, a mutual fund is regulated by the SEC. A mutual fund may invest in
stocks, bonds, options, futures, currencies, and commodities. Although any specific mutual
fund is required to follow a specific investing strategy, the range of strategies available is wide.
A mutual fund such as an index fund may attempt to replicate market or sector index. A mutual
fund may specialize in large-cap, small-cap or even micro-cap stocks. Investors seeking regular

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income can invest in a mutual fund that specializes in government bonds or, for the more
aggressive corporate debt.

For comparative analysis of performance of mutual funds in India I have taken 4 INDIAN
EQUITY MUTUL FUND SCHEMES. These are

1. HDFC Equity Fund

2. FIDELITY Equity Fund
3. RELIANCE Vision Fund
4. FRANKLIN INDIA Blue Chip Fund

For comparing the performance of these mutual fund schemes, I have used four different
financial ratios, which generally depicts risk and return relationship, concerned with these funds
then performance will be deduced by interpreting the result of the ratios that which fund is
performing well on the financial basis.

(B) INTRODUCTION TO MUTUAL FUNDS-

MUTUAL FUNDS

A MUTUAL FUND is simply a financial intermediary that allows a group of investors to pool
their money together with a predetermined investment objective. The mutual fund will have a
fund manager who is responsible for investing the pooled money into specific securities
(usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions)
of the mutual fund and become a shareholder of the fund. Mutual funds are one of the best
investments ever created because they are very cost efficient and very easy to invest in (you
don't have to figure out which stocks or bonds to buy). If you would like to know the history of
mutual funds,

By pooling money together in a mutual fund, investors can purchase stocks or bonds with much
lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual
funds is diversification.

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Diversification is the idea of spreading out your money across many different types of
investments. When one investment is down another might be up. Choosing to diversify your
investment holdings reduces your risk tremendously.

The most basic level of diversification is to buy multiple stocks rather than just one stock.
Mutual funds are set up to buy many stocks (even hundreds or thousands). Beyond that, you
can diversify even more by purchasing different kinds of stocks, then adding bonds, then
international, and so on. It could take you weeks to buy all these investments, but if you
purchased a few mutual funds you could be done in a few hours because mutual funds
automatically diversify in a predetermined category of investments (i.e. - growth companies,
low-grade corporate bond )

A MUTUAL FUND is an investment company designed to pool the funds of smaller investors
and place them under professional management. A mutual fund allows small investors to
diversify their portfolios. When a mutual fund is formed, it issues a prospectus detailing its
intended investment strategy, and it is not permitted to deviate from that strategy without public
disclosure. A mutual fund prospectus also details the fees investors will be charged, which can
be substantial. In the US, a mutual fund is regulated by the SEC. A mutual fund may invest in
stocks, bonds, options, futures, currencies, and/or commodities. Although any specific mutual
fund is required to follow a specific investing strategy, the range of strategies available is wide.
A mutual fund such as an index fund may attempt to replicate market or sector index. A mutual
fund may specialize in large-cap, small-cap or even micro-cap stocks. Investors seeking regular
income can invest in a mutual fund that specializes in government bonds or, for the more
aggressive, corporate debt.

STOCKS

Stocks represent shares of ownership in a public company. Examples of public companies

include IBM, Microsoft, Ford, Coca-Cola, and General Motors etc. Stocks are the most
common ownership investment traded on the market.

BONDS

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Bonds are basically a chance for you to lend your money to the government or a company. You
can receive interest and your principle back over predetermined amounts of time. Bonds are the
most common lending investment traded on the market.

There are many other types of investments other than stocks and bonds (including annuities,
real estate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds.

A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such as
shares, debentures and other securities. 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, professionally managed basket of securities at a
relatively low cost. The flow chart below describes broadly the working of a mutual fund

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In the working of mutual fund, there are following steps-
1. First of all, Asset Management Company issues new fund offer.
2. Interested investors invest the money with fund manager.
3. Then fund manager invests the money in different profitable securities.
4. Then securities generate returns.
5. These returns are passed back to investors.
Returns are given to investors according to the units given to them which is determined
according to the investment made by them in the mutual funds.

ORGANIZATION OF MUTUAL FUND-

For organization of mutual fund there is a set criterion which has to be opted.
There are many entities involved and the diagram below illustrates the organizational set up of
a mutual fund:

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SPONSORS

The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund
needs to be constituted in the form of a trust and the instrument of the trust should be in the
form of a deed registered under the provisions of the Indian Registration Act, 1908. The sponsor
is required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the asset
management company. The board of trustees manages the MF and the sponsor executes the
trust deeds in favor of the trustees. It is the job of the MF trustees to see that schemes floated
and managed by the AMC appointed by the trustees are in accordance with the trust deed and
SEBI guidelines.

ASSET MANAGEMENT COMPANY

The sponsor also appoints the asset management company (AMC) for the investment and
administrative functions. The AMC does the research, the managers the corpus of the fund. It
launches the various schemes of the fund, manages them, and then liquidates them at the end
of their term. It also takes care of the other administrative work of the fund. It receives an annual
management fee from the fund for its services.

BOARD OF TRUSTEES

The board of trustees is responsible for protecting the investor’s interests. Under the SEBI
regulation 1996, trustee means a person who holds the property of the mutual fund in trust, for
the benefit of the unit holders. The word “trustee” can be used to denote board of trustees. In

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case a trustee company governs the trust, it can be used to denote either the trustee company or
its directors.

CUSTODIANS

The custodians are appointed by the sponsor to look after the transfer and storage of securities.
Only a registered custodian under the SEBI Regulation can act as a custodian of a mutual fund.
The functions of custodian a cover a wider range of services like safe keeping of securities bid
settlement, corporate action, and transfer agent. In addition, they may be contracted to perform
administrative functions like fund accounting, cash management and other similar functions

TYPES OF MUTUAL FUNDS SCHEMES-

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position,
risk tolerance and return expectations etc. The table below gives an overview into the existing
types of schemes in the Industry.

Equity / Growth Fund Li

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Mutual Fund Schemes

1. By Structure

 Open - Ended Schemes

 Close - Ended Schemes
 Interval Schemes

2. By Investment Objective

 Growth Schemes
 Income Schemes
 Balanced Schemes

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  Money Market Schemes

3. Other Schemes

 Tax Saving Schemes

 Special Schemes
 Index Schemes
 Sector specific schemes

CLOSED ENDED MUTUAL FUND

A closed-end mutual fund has a set number of shares issued to the public through an initial
public offering. These funds have a stipulated maturity period 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. nice underwritten, closed-end funds trade
on stock exchanges like stocks or bonds. The market price of closed-end funds is determined
by supply and demand and not by net-asset value (NAV), as is the case in open-end funds.
Usually closed mutual funds trade at discounts to their underlying asset value.

OPEN ENDED MUTUAL FUND

An open-end mutual fund is a fund that does not have a set number of shares. It continues to
sell shares to investors and will buy back shares when investors wish to sell. Units are bought
and sold at their current net asset value.

Open-end funds keep some portion of their assets in short-term and money market securities to
provide available funds for redemptions. A large portion of most open mutual funds is invested
in highly liquid securities, which enables the fund to raise money by selling securities at prices
very close to those used for valuations.

LARGE CAP FUNDS

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Large cap funds are those mutual funds, which seek capital appreciation by investing primarily
in stocks of large blue chip companies with above-average prospects for earnings growth.

Different mutual funds have different criteria for classifying companies as large cap. Generally,
companies with a market capitalization in excess of Rs. 1000 crore are known large cap
companies. Investing in large caps is a lower risk-lower return proposition (vis-à-vis mid cap
stocks), because such companies are usually widely researched and information is widely
available.

MID CAP FUNDS

Mid cap funds are those mutual funds, which invest in small / medium sized companies. As
there is no standard definition classifying companies as small or medium, each mutual fund has
its own classification for small and medium sized companies. Generally, companies with a
market capitalization of up to Rs.500 crores are classified as small. Those companies that have
a market capitalization between Rs. 500 crores and Rs. 1,000 crores are classified as medium
sized.

Big investors like mutual funds and Foreign Institutional Investors are increasingly investing in
mid caps nowadays because the price of large caps has increased substantially. Small / mid
sized companies tend to be under researched thus they present an opportunity to invest in a
company that is yet to be identified by the market. Such companies offer higher growth potential
going forward and therefore an opportunity But mid cap funds are very volatile and tend to fall
like a pack of cards in bad times. So, caution should be exercised while investing in mid cap
mutual funds.

EQUITY MUTUAL FUNDS

Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest pooled
amounts of money in the stocks of public companies.

Stocks represent part ownership, or equity, in companies, and the aim of stock ownership is to
see the value of the companies increase over time. Stocks are often categorized by their market

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capitalization (or caps), and can be classified in three basic sizes: small, medium, and large.
Many mutual funds invest primarily in companies of one of these sizes and are thus classified
as large-cap, mid-cap or small-cap funds. Equity fund managers employ different styles of stock
picking when they make investment decisions for their portfolios. Some fund managers use a
value approach to stocks, searching for stocks that are undervalued when compared to other,
similar companies. Another approach to picking is to look primarily at growth, trying to find
stocks that are growing faster than their competitors, or the market as a whole. Some managers
buy both kinds of stocks, building a portfolio of both growth and value stocks.

BALANCED FUND

Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a combination
of common stock, preferred stock, bonds, and short-term bonds, to provide both income and
capital appreciation while avoiding excessive risk.
Balanced funds provide investor with an option of single mutual fund that combines both
growth and income objectives, by investing in both stocks (for growth) and bonds (for income).
Such diversified holdings ensure that these funds will manage downturns in the stock market
without too much of a loss. But on the flip side, balanced funds will usually increase less than
an all-stock fund during a bull market

GROWTH FUNDS

Growth funds are those mutual funds that aim to achieve capital appreciation by investing in
growth stocks. They focus on those companies, which are experiencing significant earnings or
revenue growth, rather than companies that pay out dividends.

Growth funds tend to look for the fastest-growing companies in the market. Growth managers
are willing to take more risk and pay a premium for their stocks in an effort to build a portfolio
of companies with above-average earnings momentum or price appreciation.In general, growth
funds are more volatile than other types of funds, rising more than other funds in bull markets
and falling more in bear markets. Only aggressive investors, or those with enough time to make
up for short-term market losses, should buy these funds.

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NO-LOAD MUTUAL FUNDS

Mutual funds can be classified into two types - Load mutual funds and No-Load mutual funds.
Load funds are those funds that charge commission at the time of purchase or redemption. They
can be further subdivided into (1) Front-end load funds and (2) Back-end load funds. Front-end
load funds charge commission at the time of purchase and back-end load funds charge
commission at the time of redemption.

On the other hand, no-load funds are those funds that can be purchased without commission.
No load funds have several advantages over load funds. Firstly, funds with loads, on average,
consistently under perform no-load funds when the load is taken into consideration in
performance calculations. Secondly, loads understate the real commission charged because they
reduce the total amount being invested. Finally, when a load fund is held over a long time
period, the effect of the load, if paid up front, is not diminished because if the money paid for
the load had invested, as in a no-load fund, it would have been compounding over the whole
time period.

EXCHANGE TRADED FUNDS

Exchange Traded Funds (ETFs) represent a basket of securities that are traded on an exchange.
An exchange traded fund is similar to an index fund in that it will primarily invest in the
securities of companies that are included in a selected market index. An ETF will invest in
either all of the securities or a representative sample of the securities included in the index. The
investment objective of an ETF is to achieve the same return as a particular market index.

Exchange traded funds rely on an arbitrage mechanism to keep the prices at which they trade
roughly in line with the net asset values of their underlying portfolios.

VALUE FUNDS

Value funds are those mutual funds that tend to focus on safety rather than growth, and often
choose investments providing dividends as well as capital appreciation. They invest in
companies that the market has overlooked, and stocks that have fallen out of favour with

17
mainstream investors, either due to changing investor preferences, a poor quarterly earnings
report, or hard times in a particular industry.

Value stocks are often mature companies that have stopped growing and that use their earnings
to pay dividends. Thus value funds produce current income (from the dividends) as well as
long-term growth (from capital appreciation once the stocks become popular again). They tend
to have more conservative and less volatile returns than growth funds.

MONEY MARKET MUTUAL FUNDS

A money market fund is a mutual fund that invests solely in money market instruments. Money
market instruments are forms of debt that mature in less than one year and are very liquid.
Treasury bills make up the bulk of the money market instruments. Securities in the money
market are relatively risk-free.

Money market funds are generally the safest and most secure of mutual fund investments. The
goal of a money-market fund is to preserve principal while yielding a modest return. Money-
market mutual fund is akin to a high-yield bank account but is not entirely risk free. When
investing in a money-market fund, attention should be paid to the interest rate that is being
offered.

INTERNATIONAL MUTUAL FUNDS

International mutual funds are those funds that invest in non-domestic securities markets
throughout the world. Investing in international markets provides greater portfolio
diversification and let you capitalize on some of the world's best opportunities. If investments
are chosen carefully, international mutual fund may be profitable when some markets are rising
and others are declining.

However, fund managers need to keep close watch on foreign currencies and world markets as
profitable investments in a rising market can lose money if the foreign currency rises against
the dollar

SECTOR MUTUAL FUNDS

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Sector mutual funds are those mutual funds that restrict their investments to a particular segment
or sector of the economy. These funds concentrate on one industry such as infrastructure, heath
care, utilities, pharmaceuticals etc. The idea is to allow investors to place bets on specific
industries or sectors, which have strong growth potential.

These funds tend to be more volatile than funds holding a diversified portfolio of securities in
many industries. Such concentrated portfolios can produce tremendous gains or losses,
depending on whether the chosen sector is in or out of favour.

INDEX FUNDS

An index fund is a type of mutual fund that builds its portfolio by buying stock in all the
companies of a particular index and thereby reproducing the performance of an entire section
of the market. The most popular index of stock index funds is the Standard & Poor's 500. An
S&P 500 stock index fund owns 500 stocks-all the companies that are included in the index.

Investing in an index fund is a form of passive investing. Passive investing has two big
advantages over active investing. First, a passive stock market mutual fund is much cheaper to
run than an active fund. Second, a majority of mutual funds fail to beat broad indexes such as
the S&P.

FUND OF FUNDS

A fund of funds is a type of mutual fund that invests in other mutual funds. Just as a mutual
fund invests in a number of different securities, a fund of funds holds shares of many different
mutual funds. Fund of funds are designed to achieve greater diversification than traditional
mutual funds. But on the flipside, expense fees on fund of funds are typically higher than those
on regular funds because they include part of the expense fees charged by the underlying funds.

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MUTUAL FUND INDUSTRY IN INDIA

(A) HISTORY

GLOBAL HISTORY- Introduced in Belgium in 1822. This form of investment soon spread
to Great Britain and France. Mutual funds became popular in the United States in the 1920s and
continue to be popular since the 1930s, especially open-end mutual funds. Mutual funds
experienced a period of tremendous growth after World War II, especially in the 1980s and
1990s.

HISTORY OF MUTUAL FUND INDUSTRY IN INDIA-

The origin of mutual fund industry in India is with the introduction of the concept of mutual
fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year
1987 when non-UTI players entered the industry. UTI remained the only fund till the
government allowed public sector banks to start mutual funds in 1987. Major PSU banks like

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SBI, Canara Bank, Indian Bank and Punjab National Bank started offering their products.
Insurance giants LIC and GIC also started their own mutual fund subsidiaries. They were all
reasonably successful as equity investments gained popularity during the bull market of the
early nineties.

In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality
wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase;
the Assets under Management (AUM) were Rs. 67bn. The private sector entry to the fund
family raised the AUM to Rs. 470 ban in March 1993 and till Putting the AUM of the Indian
Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone,
constitute less than 11% of the total deposits held by the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the con
April 2004; it reached the height of 1,540 ban Putting the AUM of the Indian Mutual Funds
Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less
than.
11% of the total deposits held by the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence,
it is the prime responsibility of all mutual fund companies, to market the product correctly
abreast of selling. Private sector players were allowed into the industry in 1993 after SEBI was
established as the market regulator. A host of private banks and international fund houses
started their operations and investors could chose from many innovative products. SEBI
brought out comprehensive guidelines for establishment and management of mutual funds in
1996.

In 2003, the Unit Trust of India, which was not under SEBI regulation, was split into two parts,
UTI Mutual Fund (UTI MF) and a specified undertaking of UTI or UTI-I. UTI MF was brought
under SEBI regulations while UTI-I was kept under direct government control since its schemes
offered guaranteed returns.

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From just Rs.25 crore under management in 1965, the total funds managed by the mutual fund
industry stood at over Rs.2,91,000 crore as of September 2006. The industry has matured very
fast over the last few years with a large number of players and diverse product

The mutual fund industry can be broadly put into four phases according to the development of
the sector. Each phase is briefly described as under.

PHASES-FIRST PHASE 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had
Rs.6,700 crores of assets under management.

SECOND PHASE - 1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS)

Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Can bank Mutual
Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov
89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in
1990. The end of 1993 marked Rs.47,004 as assets under management.

THIRD PHASE - 1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS)

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With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year
in which the first Mutual Fund Regulations came into being, under which all mutual funds,
except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged
with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting
up funds in India and also the industry has witnessed several mergers and acquisitions. As at
the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.
The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead
of other mutual funds.

FOURTH PHASE - SINCE FEBRUARY 2003

This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the
Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on January
2003). The Specified Undertaking of Unit Trust of India, functioning under an administrator
and under the rules framed by Government of India and does not come under the purview of
the Mutual Fund Regulations

Private sector players were allowed into the industry in 1993 after SEBI was established as the
market regulator. A host of private banks and international fund houses started their operations
and investors could chose from many innovative products. SEBI brought out comprehensive
guidelines for establishment and management of mutual funds in 1996.

In 2003, the Unit Trust of India, which was not under SEBI regulation, was split into two parts,
UTI Mutual Fund (UTI MF) and a specified undertaking of UTI or UTI-I. UTI MF was brought

23
under SEBI regulations while UTI-I was kept under direct government control since its schemes
offered guaranteed returns.

From just Rs.25 crore under management in 1965, the total funds managed by the mutual fund
industry stood at over Rs.2,91,000 crore as of September 2006.

(B) NO. OF AMC’S IN INDIA

 ABN Amro Asset Management co. Ltd.
 Benchmark Asset Management co. Ltd.
 Birla Asset Management co. Ltd
 BOB Asset Management co. Ltd
 Canbank Asset Management co. Ltd
 Chola Asset Management co. Ltd
 Deutsche Asset Management co. Ltd
 DSP Asset Management co. Ltd
 Escorts Asset Management co. Ltd
 Fidelity Asset Management co. Ltd
 Franklin Templeton Investments
 HDFC Asset Management co. Ltd
 HSBC Asset Management co. Ltd
 ING Vysya Asset Management co. Ltd

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 JM Financial Asset Management co. Ltd
 Kotak Mahindra Asset Management co. Ltd
 LIC Asset Management co. Ltd
 Morgan Stanley Asset Management co. Ltd
 Principal Asset Management co. Ltd
 Prudential ICICI Asset Management co. Ltd
 Reliance Asset Management co. Ltd
 Sahara Asset Management co. Ltd
 SBI Asset Management co. Ltd
 Standard Chartered Asset Management co. Ltd
 Sundaram Asset Management co. Ltd
 Tata Asset Management co. Ltd
 Taurus Asset Management co. Ltd
 UTI Asset Management co. Ltd

THE MAJOR MUTUAL FUND HOUSES IN INDIA ARE:

HDFC MUTUAL FUND

HDFC Mutual Fund has been one of the best performing funds in recent years. The sponsors of
the fund are housing finance major HDFC and British investment company Standard Life
Investments. The paid up capital of the AMC is Rs. 25.161 crore.

Standard Life is one of the better known investment companies in the UK. The company offers
pension fund management, money market funds and private equity among other products. The
Standard Life group has a history of over 175 years and has over $190 billion in assets under
management globally.

The trustee of the fund is HDFC Trustee Company Limited, a subsidiary of HDFC Limited.
The chairman of the board of trustees is Anil Kumar Hirjee, vice chairman of Bombay Burmah

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Trading Corporation. Other members of the board include Keki Mistry of HDFC and James
Aird of Standard Life.

The AMC, HDFC Asset Management Company Limited, is owned between HDFC and
Standard Life with HDFC holding slightly more than 50 per cent of the shares. The board of
directors has among its members Alexander Crombie of Standard Life, former head of Kodak
India H Dhanrajgir, former head of BASF India P M Thampi, and Renu S Karnad of HDFC.
The management of the AMC is headed by Milind Barve, managing director.

In 2003, HDFC Asset Management Company took over the asset management business of
Zurich India Mutual Fund. Subsequently, all the schemes of Zurich Mutual Fund in India had
been transferred to HDFC Mutual Fund and renamed as HDFC schemes.

PRUDENTIAL ICICI

Prudential ICICI is the largest private sector mutual fund in the country with assets of over
Rs.43,281 crore under management as of February 2007. The sponsors of the fund are
Prudential Plc, one of the largest insurance companies in Europe, and ICICI Bank, the second
largest Indian bank.

Prudential group has assets of over $300 billion under management globally. Apart from the
main insurance operations, the group also owns fund management firm M&G and internet bank
Egg.

In all, 55 per cent of the asset management company, Prudential ICICI Asset Management
Company, is held by Prudential Plc and the balance by ICICI Bank. There are reports that ICICI
Bank is trying to acquire a 6 per cent stake in the AMC from Prudential and gain majority
control.

FRANKLIN TEMPLETON

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One of the largest and most high profile mutual funds in the country, Franklin Templeton has
over Rs.22,102 crore under management as of February 2007. The sponsor of the fund is
Templeton International.

Templeton is one of the largest mutual funds globally. Its parent company Franklin
Resources and Subsidiaries have over $400 billion under management.

The trustee of the fund is Franklin Templeton Trustee Services Private Limited. The board of
directors of the trustee includes Gregory McGowan and Stephen Dover of Templeton and
Bharat Doshi of the Mahindra group.

Franklin Templeton Asset Management Private Limited acts as the fund manager. A majority
of 75 per cent of the asset management company's equity is held by Templeton and the balance
by the Raheja group. The board of directors of the company has Gregory Johnson, president of
Franklin Templeton USA as its chairman. Deepak Satwalekar of HDFC and Rajan Raheja are
the other prominent members.

The fund management is headed by Mark Mobius, who is also a director of the AMC. Rated as
one of the best fund managers in the world, Mark Mobius is probably the best known emerging
markets fund manager.

DSP MERRILL LYNCH

One of the more prominent private mutual funds in the country, DSP Merrill Lynch has over
Rs.13,638 crore under its management as of February 2007. The sponsor of the fund is DSP
Merrill Lynch Limited, one of India's largest investment bankers. DSP Merrill Lynch is a joint
venture between domestic stock brokerage DSP and Merrill Lynch. The US financial services
major Merrill Lynch holds 40 per cent stake in the joint venture.

Merrill Lynch is one of the largest investment banks in the world and ranks 53rd on the Fortune
500 list of largest American companies with revenues of over $32 billion. The company is one
of the best known names on Wall Street and has assets of over $500 billion under its
management worldwide.

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DSP Merrill Lynch Trustee Company Private Limited is the trustee of the fund and is owned
between Merrill Lynch, DSP Merrill Lynch and Hemendra Kothari of DSP.

FIDELITY INDIA

A recent entrant into the Indian mutual fund industry, Fidelity launched its first domestic fund
in April this year. However, Fidelity has been managing India specific funds for overseas
investors for over 10 years now. Its exposure to Indian markets through such funds stands at
over $2.5 billion at present, which makes Fidelity one of the largest FIIs investing in the
country.

Globally, Fidelity is the grand daddy of all mutual funds with assets of over $1.2 trillion under
management. In the US alone it has over $850 billion under management and accounts for 3 to
5 per cent of the daily trading volumes on the New York stock exchange. Privately owned
Fidelity is the best known brand in the fund management business and its flagship fund
Magellan is probably the best known fund among American investors.

The sponsor of the fund is Fidelity International Investment Advisors. The trustee is Fidelity
Trustee Company Private limited and has Ann Stock of Fidelity Investments and former TRAI
chairman Justice S S Sodhi on its board among others.

The AMC of the fund is Fidelity Fund Management Private Limited. Simon Haslam of Fidelity
International, former Castrol India CEO Ramesh Savoor and former CEO of Bank of America
Arun Duggal are among the directors of the company. Fidelity International Investment
Advisors holds 75 per cent stake in the AMC. Arun Mehra, who was earlier with Fidelity UK,
heads fund management.As of February 2007, Fidelity India had over Rs.5,671 crore under its
management.

TATA MUTUAL FUND

Promoted by the Tata group, Tata MF is one of the better known private sector funds in the
country. The fund has over Rs.14,198 crore under its management as of February 2007. The
sponsors of the fund are Tata Sons Limited and Tata Investment Corporation Limited.

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The trustee of the fund is Tata Trustee Company Private Limited. The board of trustees is
headed by former HLL chief S M Data as chairman. J N Godrej of Godrej & Boyce and Ishaat
Hussain of Tata Sons are also on the board of trustees. Tata Sons and Tata Investment
Corporation hold equal stakes in the trustee company.

The AMC, Tata Asset Management Limited, has F K Karavana of Tata Sons as its chairman.
Other directors include A R Gandhi of Tata Sons and former executive director of IMF, S S
Marathe. The management of the AMC is headed by Ved Prakash Chaturvedi, managing
director. Tata Sons holds a majority stake in the AMC with the balance being held by Tata
Investment Corporation.

Fund management of equity schemes is headed by S Sankaranarayanan and that of debt funds
by Murthy Nagarajan.

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UTI MUTUAL FUND

The most experienced player in the Indian mutual fund industry, UTI was almost a generic term
for mutual fund schemes till the sector opened up. However, the fund house disappointed most
of its investors for a long period starting mid-nineties. From the verge of a collapse, the
government bailed out the fund before restructuring it. After the restructuring, the fund has
recovered some of its stature helped equally by professional management and a booming
market.

The fund's sponsors are public sector financial giants like Life Insurance Corporation, SBI,
Bank of Baroda and Punjab National Bank. The sponsors hold equal stakes in the asset
management company, UTI Asset Management Company Private Limited. The asset
management company has R H Patil, the former managing director of the National Stock
Exchange, as its chairman. The current SEBI chairman M Damodaran was his predecessor.

The fund management team is headed by A K Sridhar, chief investment officer. The company
employs four different registrars for its various schemes. Associate company UTI Technology
Consultants and Karvy Computershare act as registrars and transfer agents for majority of the
schemes. Citibank, HDFC Bank and Stock Holding Corporation are the fund's cu stodians.

PERFORMANCE OF MUTUAL FUNDS IN INDIA

The year was 1963. Unit Trust of India invited investors or rather to those who believed in
savings, F to park their money in UTI Mutual Fund or 30 years it goaled without a single second
player. Though the 1988 year saw some new mutual fund companies, but UTI remained in a
monopoly position.
The performance of mutual funds in India in the initial phase was not even closer to satisfactory
level. People rarely understood, and of course investing was out of question. But yes, some 24
million shareholders was accustomed with guaranteed high returns by the begining of
liberalization of the industry in 1992. This good record of UTI became marketing tool for new
entrants. The expectations of investors touched the sky in profitability factor. However, people
were miles away from the praparedness of risks factor after the liberalization.

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The Assets Under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate
about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets
Under Management rose to Rs. 470 bn. in March 1993 and the figure had a three times higher
performance by April 2004. It rose as high as Rs. 1,540bn. The net asset value (NAV) of mutual
funds in India declined when stock prices started falling in the year 1992. Those days, the
market regulations did not allow portfolio shifts into alternative investments. There were rather
no choice apart from holding the cash or to further continue investing in shares. One more thing
to be noted, since only closed-end funds were floated in the market, the investors disinvested
by selling at a loss in the secondary market.
The performance of mutual funds in India suffered qualitatively. The 1992 stock market
scandal, the losses by disinvestments and of course the lack of transparent rules in the where
about rocked confidence among the investors. Partly owing to a relatively weak stock market
performance, mutual funds have not yet recovered, with funds trading at an average discount
of 1020 percent of their net asset value.
The supervisory authority adopted a set of measures to create a transparent and competitve
environment in mutual funds. Some of them were like relaxing investment restrictions into the
market, introduction of open-ended funds, and paving the gateway for mutual funds to launch
pension schemes. The measure was taken to make mutual funds the key instrument for long-
term saving. The more the variety offered, the quantitative will be investors.

At last to mention, as long as mutual fund companies are performing with lower risks and higher
profitability within a short span of time, more and more people will be inclined to invest until
and unless they are fully educated with the dos and donts of mutual funds. The year 1993 was
a remarkable turning point in the Indian Mutual Fund industry. The stock investment scenario
till then was restricted to UTI (Unit Trust of India) and public sector. This year marked the entry
of private sector mutual funds, giving the Indian investors a wider choice of selecting mutual
funds. From then on, the graph of mutual fund players has been on the rise with many foreign
mutual funds also setting up funds in India. The industry has also witnessed several mergers
and acquisitions proving it advantageous to the Indian investors. Are mutual funds emerging as
preferred investment option? Are they safe and will your money be secured with them? Before

31
proceeding to answer these questions, a look at the February 2006, Indian bull market scenario
is worth a mention

For the first time ever, stock market indices in India are at a record high. The Bombay Stock
Exchange closed above the 10,000-mark for the first time ever, an ecstatic event in the history
of the Stock exchange. Market savvy Indian investors have been busy transacting across sectors
such as banking automobile, sugar, consumer durable, fast moving consumer goods (FMCG)
and pharmaceutical scripts. And, the Union Finance Minister, Mr.P.Chidambaram, has
responded positively and advised investors to take informed decisions or invest through mutual
funds.

Mutual funds are not considered any more as obscure investment opportunities. The mutual
funds assets have registered an annual growth rate of 9% over the past 5 years. Considering the
current trend and the relative positive response of the Indian economy, a much bigger jump is
on the anvil.

With the Sensex on a scorching bull rally, many investors prefer to trade on stocks themselves.
Mutual funds are more balanced since they diversify over a large number of stocks and sectors.
In the rally of 2000, it was noticed that mutual funds did better than the stocks mainly due to
prudent fund management based on the virtues of diversification

Different Indian mutual funds allow investors various solutions ranging from retirement
planning and buying a house to planning for child's education or marriage. Tax-wise stocks and
mutual funds work similarly since long-term capital gains from both stocks and equity-oriented
mutual funds are tax-free.

Well, what are the charges, fees and expenses associated with investing in Indian mutual funds?
At the time of entry into a mutual fund, you have to pay an additional charge or entry load along
with the value of units purchased

When you exit from the scheme, you will get back the value of the units less the exit load
charges. If you want to switch from one type of mutual fund investment to another, you will be
required to pay the exchange fees. Advisory fees, broker fees, audit fees and registrar fees are

32
some of the other recurring expenditures that would be charged to you. These expenses involve
administrative and other running costs.

In India, SEBI (The Securities and Exchange Board of India) is the regulating authority that
SEBI formulates policies and regulates the mutual funds to protect the interest of the Indian
investors.

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 a 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

33
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 SEBIs guidelines in the mutual fund
industry.

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

It develops a team of well qualified and trained 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 awarness programme for investors inorder 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 informations on
Mutual Fund Industry and undertakes studies and research either directly or in association with
other bodies.

THE SPONSORERS OF ASSOCIATION OF MUTUAL FUNDS IN INDIA

BANK SPONSORED

1.SBI Fund Management Ltd.

2.BOB Asset Management Co. Ltd.

3.Canbank Investment Management Services Ltd.

4.UTI Asset Management Company Pvt. Ltd

5.Institutions

6.GIC Asset Management Co. Ltd.

7.Jeevan Bima Sahayog Asset Management Co. Ltd.

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PRIVATE SECTOR INDIAN:-

(a) BenchMark Asset Management Co. Pvt. Ltd.

(b) Cholamandalam Asset Management Co. Ltd.

© Credit Capital Asset Management Co. Ltd.

(d) Escorts Asset Management Ltd.

(e) JM Financial Mutual Fund

(f) Kotak Mahindra Asset Management Co. Ltd.

(g) Reliance Capital Asset Management Ltd.

(h) Sahara Asset Management Co. Pvt. Ltd

(i)_Sundaram Asset Management Company Ltd.

(j)Tata Asset Management Private Ltd.

PREDOMINANTLY INDIA JOINT VENTURES:-

1.Birla Sun Life Asset Management Co. Ltd.

2.DSP Merrill Lynch Fund Managers Limited

3.HDFC Asset Management Company Ltd.

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PREDOMINANTLY FOREIGN JOINT VENTURES:-

1.ABN AMRO Asset Management (I) Ltd.

2.Alliance Capital Asset Management (India) Pvt. Ltd.

3.Deutsche Asset Management (India) Pvt. Ltd.

4.Fidelity Fund Management Private Limited

5.Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.

6.HSBC Asset Management (India) Private Ltd.

7.ING Investment Management (India) Pvt. Ltd.

8.Morgan Stanley Investment Management Pvt. Ltd.

9.Principal Asset Management Co. Pvt. Ltd.

10.Prudential ICICI Asset Management Co. Ltd.

11.Standard Chartered Asset Mgmt Co. Pvt. Ltd.

ASSOCIATION OF MUTUAL FUNDS IN INDIA PUBLICATIONS

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

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BENEFITS OF MUTUAL FUNDS-

There are numerous benefits of investing in mutual funds and one of the key reasons for its
phenomenal success in the developed markets like US and UK is the range of benefits they
offer, which are unmatched by most other investment avenues. We have explained the key
benefits in this section. The benefits have been broadly split into universal benefits, applicable
to all schemes, and benefits applicable specifically to open-ended schemes.

AFFORDABILITY

A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the
investment objective of the scheme. An investor can buy in to a portfolio of equities, which
would otherwise be extremely expensive. Each unit holder thus gets an exposure to such
portfolios with an investment as modest as Rs.500/-. This amount today would get you less than
quarter of an Infosys share! Thus it would be affordable for an investor to build a portfolio of
investments through a mutual fund rather than investing directly in the stock market.

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DIVERSIFICATION

The nuclear weapon in your arsenal for your fight against Risk. It simply means that you must
spread your investment across different securities (stocks, bonds, money market instruments,
real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.).
This kind of a diversification may add to the stability of your returns, for example during one
period of time equities might underperform but bonds and money market instruments might do
well enough to offset the effect of a slump in the equity markets. Similarly the information
technology sector might be faring poorly but the auto and textile sectors might do well and may
protect your principal investment as well as help you meet your return objectives

VARIETY

Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways:
first, it offers different types of schemes to investors with different needs and risk appetites;
secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both
debt and equity. For example, an investor can invest his money in a Growth Fund (equity
scheme) and Income Fund (debt scheme) depending on his risk appetite and thus create a
balanced portfolio easily or simply just buy a Balanced Scheme.

PROFESSIONAL MANAGEMENT

Qualified investment professionals who seek to maximise returns and minimise risk monitor
investor's money. When you buy in to a mutual fund, you are handing your money to an
investment professional who has experience in making investment decisions. It is the Fund
Manager's job to (a) find the best securities for the fund, given the fund's stated investment
objectives; and (b) keep track of investments and changes in market conditions and adjust the
mix of the portfolio, as and when required.

TAX BENEFITS- Any income distributed after March 31,2002 will be subject to tax in the
assessment of all Unit holders. However, as a measure of concession to Unit holders of open-
ended equity-oriented funds, income distributions for the year ending March 31, 2003, will be
taxed at a concessional rate of 10.5%. In case of Individuals and Hindu Undivided Families a

38
deduction upto Rs. 9,000 from the Total Income will be admissible in respect of income from
investments specified in Section 80L, including income from Units of the Mutual Fund. Units
of the schemes are not subject to Wealth-Tax and Gift-Tax.

REGULATIONS

Securities Exchange Board of India (SEBI), the mutual funds regulator has clearly defined
rules, which govern mutual funds. These rules relate to the formation, administration and
management of mutual funds and also prescribe disclosure and accounting requirements. Such
a high level of regulation seeks to protect the interest of investors.

BENEFITS OF OPEN-ENDED SCHEMES

LIQUIDITY

In open-ended mutual funds, you can redeem all or part of your units any time you wish. Some
schemes do have a lock-in period where an investor cannot return the units until the completion
of such a lock-in period.

CONVENIENCE- An investor can purchase or sell fund units directly from a fund, through

a broker or a financial planner. The investor may opt for a Systematic Investment Plan (“SIP”)
or a Systematic Withdrawal Advantage Plan (“SWAP”). In addition to this an investor receives
account statements and portfolios of the schemes.

FLEXIBILITY - Mutual Funds offering multiple schemes allow investors to switch easily
between various schemes. This flexibility gives the investor a convenient way to change the
mix of his portfolio over time

TRANSPARENCY

Open-ended mutual funds disclose their Net Asset Value (“NAV”) daily and the entire portfolio
monthly. This level of transparency, where the investor himself sees the underlying assets
bought with his money, is unmatched by any other financial instrument. Thus the investor is in

39
the know of the quality of the portfolio and can invest further or redeem depending on the kind
of the portfolio that has been constructed by the investment manager.

DRAWBACKS OF MUTUAL FUNDS

Mutual funds have their drawbacks and may not be for everyone:

NO GUARANTEES:

No investment is risk free. If the entire stock market declines in value, the value of mutual fund
shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer
risks when they invest in mutual funds than when they buy and sell stocks on their own.
However, anyone who invests through a mutual fund runs the risk of losing money.

FEES AND COMMISSIONS:

All funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge sales commissions or "loads" to compensate brokers, financial consultants, or financial
planners. Even if you don't use a broker or other financial adviser, you will pay a sales
commission if you buy shares in a Load Fund.

TAXES:

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent
of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes
on the income you receive, even if you reinvest the money you made.

MANAGEMENT RISK:

When you invest in a mutual fund, you depend on the fund's manager to make the right decisions
regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you
might not make as much money on your investment as you expected. Of course, if you invest
in Index Funds, you forego management risk, because these funds do not employ managers.

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FUTURE OF MUTUAL FUNDS IN INDIA
December 2008, Indian mutual fund industry reached Rs 2,50,537 crore. It is estimated that by
2010 March-end, the total assets of all scheduled commercial Banks should be Rs 40,90,000
crore.

The annual composite rate of growth is expected 13.4% during the rest of the decade. In the
last 5 Years we have seen annual growth rate of 9%. According to the current growth rate, by
year 2010, mutual fund assets will be double.

Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity Investments,
US based, with over US$1trillion assets under management worldwide. our saving rate is over
23%, highest in the world. Only channelizing these savings in mutual funds sector is required.

We have approximately 29 mutual funds which is much less than US having more than 800.
There is a big scope for expansion and 'C' class cities are growing rapidly. Today most of the
mutual funds are concentrating on the 'C’class cities. Soon they will find scope in the growing
cities.

Mutual fund can penetrate rural like the Indian insurance industry with simple and limited
product. SEBI allowing the MF's to launch commodity mutual fundse,emphasis on better
corporate governance trying to curb the late trading practices. Introduction of Financial
Planners who can provide need based advice.

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