ABSTRACT

In Indian capital market, provides various investment avenues to the investors, to help them
to invest in various industries and to ensure the profitable return. Among various financial
products, mutual fund ensures the minimum risk and maximum return to the investors,
Growth and developments of various mutual funds products in the Indian capital market has
proved to be one of the most catalytic instruments in generating momentous investment
growth in the capital market. This research paper focused attention on number of factors that
highlights Investor’s perception about mutual fund. The study of the research is on Investor
behaviour towards mutual funds.

This study, deals with the equity, debt and hybrid mutual funds has been offer for investment
by the various fund houses in India. This study mainly focused on the performance of
selected equity large cap, debt and hybrid mutual fund in terms of risk – return relationship.
This research paper focused attention on number of factors and analysis on financial
performance that highlights investor’s perception about mutual fund. The statistical
parameters such as (Alpha, Beta, Standard deviation, R-squared, Sharpe ratio). The findings
of this research study will be help full to investor for his future investment decisions.

INTRODUCTION

Mutual fund is a pool of money collected from investors and is invest according to certain
investment options. A mutual fund is a trust that pools the saving of investors who share a
common financial goal. A mutual fund is create when investors put their money together. It
is, therefore, a pool of investor’s fund. The money thus collected is then invest in capital
market instruments and the capital appreciations realized are share by its unit holders in
proportion to the no. of units owned by them. The most important characteristics of a fund
are that the contributors and the beneficiaries of the fund are the same class of people namely
the investors.

HISTORY

The origin of mutual fund industry in India is with the introduction of the concept of mutual
fund by UTI in the year 1963. However, the growth was slow, but it accelerated from the
year 1987 when non-UTI players entered the industry. 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 amending phase; the Assets under Management (AUM)
were Rs.67 bn. The private sector entry to the fund family raised the AUM to Rs.470 bn. In
March 1993 and until April 2004; it reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds industry into comparison, the total of its 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 intellectual with the concept.
Hence, it is the prime responsibility of all mutual fund companies, to market the product
correctly a breast of selling.

First Phase – 1964-87

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the
Reserve Bank of India and function under the Regulatory and administrative control of the
Reserve Bank of India. In 1978, UTI was de-link from the RBI and the Industrial
Development Bank oc 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)

1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks
and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987
followed by Mutual Fund (December 1987), Punjab National Bank Mutual Fund (August
1989), Indian Bank Mutual Fund (November 1989), Bank of India (June 1990), Bank of
Baroda Mutual Fund (October 1992), LIC established its mutual fund in June 1989 while
GIC set up its Mutual Fund in December 1990. At the end of 1993, the mutual fund industry
had assets under management of Rs.47,004 crores.

Third Phase – 1994-2003 (Entry of Private Sector Funds)

With the entry o 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 first
Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to
be registered and governed. The erstwhile Kothari Pioneer 13 (now merged with Franklin
Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI
(Mutual Fund) Regulations were substitute 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 the industry has witnessed several merhgers and
acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of
Rs 121805 crore. The Unit Trust of India with Rs 44,541 crores of assets under the
management was way ahead of other mutual funds.

Fourth Phase – since February