Reliance Mutual Fund

Bachelor of Management Studies

Semester Ⅵ

Submitted

In Partial Fulfilment of the Requirements

For the Award of Degree of

Bachelor of Management Studies

By

Prem Gautam Gaikwad

Roll No:2

Laxman Devram Sonawane College

of Commerce

Kalyan, Maharashtra 421301.

 DECLARATION

I, Prem Gautam Gaikwad the student of T.Y.B.M.S.

Semester V (2016- 2017) hereby declare that I have completed the
project on ______________.

The information submitted is true and original to the best of my

knowledge.

Prem. G. Gaikwad
Roll No:2
Laxman Devram Sonawane College of Commerce
Kalyan, Maharashtra 421301.
 CERTIFICATE

This is to certify that Mr./Ms. Prem Gautam Gaikwad,

Roll No:2 of Third Year B.M.S., Semester Ⅵ (2016- 2017)
has successfully completed the project on Mutual Fund under
the guidance of Nikita Srivastav.
 ACKNOWLEDGEMENT

 To list who all have helped me is difficult because they are so
numerous and the depth is so enormous.

 I would like to acknowledge the following as being idealistic

channels and fresh dimensions in the completion of this project.

 I take this opportunity to thank the University of Mumbai for giving

me chance to do this project.

 I would like to thank my Principal, __________for providing the

necessary facilities required for completion of this project.

 I take this opportunity to thank our Coordinator_______________,

for her moral support and guidance.

 I would also like to express my sincere gratitude towards my project

guide _____________ whose guidance and care made the project
successful.

 I would like to thank my College Library, for having provided

various reference books and magazines related to my project.

 Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my
Parents and Peers who supported me throughout my project.
 INDEX

Chapter Name of the Topic Page No.

No.
1 INTRODUCTION
1.1 Introduction to the topic
1.2 Need for the study
1.3 Statement of the problem
1.4 Objectives of the study
1.5 Research Methodology
1.6 Limitation of the study
2 HISTORY OF MUTUAL FUND
3 COMPANY PROFILE
4 FUNCTIONING OF MUTUAL FUND
5 ANALYSIS & INTERPRETATION
6 CONCLUSION
7 SUGGESTIONS & RECOMMENDATIONS
8 BIBLIOGRAPHY
9 QUESTIONNAIRE
 CHAPTER 1
INTRODUCTION

1.1 Introduction to the topic

A Mutual Fund is a trust that pools the money of several investors and manages
investments on their behalf. Legally it is like any other company you know of.
Hence, the Fund is also called a Mutual Fund company. The fund company
takes your money and like you from other new investors. This is added to the
money that’s already invested with the fund.
The Fund Collects this money from investors through various schemes. Each
scheme is differentiated by its objective of investment or in other words, a
broadly defined purpose of how the collected money is going to be invested,
based on these broad purpose’s schemes are classified into a dozen or so
categories.
When you buy into a scheme of mutual fund you are holding units of the
scheme. Buying units is like owing shares of a schemes. The total money
collected through a scheme constitute the fund’s assets.
Investing and managing the collected money is a difficult task. The fund
company delegates this to a company of professional investors, usually experts
who are known for smart stock picks. This company is the Assets Management
Company and the fund company usually delegates the job of investment
management for a fee.
The income earned through these investments and the capital appreciation
realized by the scheme is shared by its unit holders in proportion to the number
of units owned by them.

Mutual Fund Operation Flow Chart

 Mutual Fund Organization

There are many entities Involved and the diagram below illustrates the
organizational set up of a mutual fund.

1.2 NEED FOR THE STUDY

  100% growth in the last 6 years.
 Numbers 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 37 mutual funds which are much less than US
having more than 800. There is a big scope for expansion.
 'B' and 'C' class cities are growing rapidly. Today most of the mutual
funds are concentrating on the 'A' 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 products.
 SEBI allowing the MF's to launch commodity mutual funds.
 Emphasis on better corporate governance.
 Trying to curb the late trading practices.
 Introduction of Financial Planners who can provide need based advice.

The Indian mutual funds business is expected to grow significantly in the

coming years due to a high degree of transparency and disclosure standards
comparable to anywhere in the world, though there are many challenges that
need to be addressed to increase net mobilization of funds in this sector, as said
by Mr. A.P. Kurian, Chairman of the Association of Mutual Funds of India
(AMFI).

Indian Mutual fund industry exhibited 200% growth in the last 10 yrs from
Rs.470 billion to Rs1400 billion in terms of assets under management (AUM).
The Mutual Funds industry is expected to jump sharply from its present share of
6% of GDP to 40% in the next 10yrs provided the country’s growth rate is
consistently above 6%. The growing investor preference for mutual funds has
resulted in the assets under management of mutual funds growing 8-folds in last
5 yrs. Number of foreign AMC's are in the queue to enter the Indian markets
like US based Fidelity Investments, with over US$1trillion assets under
management worldwide. Our saving rate is over 23%, highest in the world.
Only channeling these savings in mutual funds sector is required. There is a big
scope for expansion as we have 37 mutual funds which are much less than US
having more than 800.

1.3 STATEMENT OF THE PROBLEM

One of the lucrative investment avenues available for investors is mutual fund
nowadays. The problem at hand was to study and measure the awareness level
of people regarding mutual funds in the city. To find out Investors’ awareness
about Mutual funds and Promotion of SIP plan. The study includes analysis of
the investors on the basis of their investment objectives, age etc.

It also examined the position of MF among investment avenues available for the
investors and the past performances of various schemes from the active AMCs
in Indian market on the basis of NAV & time. So that it can help the advisors as
well as investors to choose the correct portfolio.
1.4 OBJECTIVES OF THE STUDY

The major objective of the study was to determine the awareness about benefits
of Mutual funds and to impart information, knowledge and the functioning of
mutual funds among financial advisors.

Following are the specific objectives:

 To know the awareness of mutual funds among Indian investors.

 To evaluate the position of Mutual Fund among investment avenues

available for the investors in Indian market.

 To promote the SIP Scheme (Systematic Investment Plan).

 To come up with recommendations for investors and mutual fund

companies in India based on the above study.

1.5 Research Methodology

Research Methodology is a way to systematically solve the research problem. It
may be understood as a science of studying how research is done scientifically.
One can also define research as a scientific and systematic search for pertinent
information on a specific topic.

Research design:
Research design facilitates the smooth sailing of the various research
operations, thereby making the research as possible, yielding maximal
information with minimal expenditure of efforts.

Sampling Design
1) Type of Universe: The first step in developing any sample design is to
clearly define the set of objects, technically called the Universe, to be
studied. The Universe for this project was the Investors in the City of
Pune.

2) Sampling Unit: The sampling unit for this project was the Investors
working in the business areas, employees, students.

3) Size of Samples: Due to the time, the sample size was restricted to 30
investors.

4) Period of study: the project study was conducted in the time period of two
months i.e., from June 1st to July 31st ,2008.

Collection of Data
The methods used for the collection of data were:
1) The Interview Technique
2) The Observation Method

DATA SOURCES
After identifying and defining the research problems and determining specific
information required solving the problem, the researcher task is to look for the
type and sources of the data, which may yield the desired results. There are two
types of data available to researcher, these are
1. Primary data
2. Secondary data

Primary Data are generated when particular problem in hand is investing by

researcher employing a mail questionnaire, telephonic surveys and personal
interview.

Secondary Data on the other hand includes that data which is collated from
some earlier research work and is applicable or usable in the study, the
researcher has presently undertaken.

1.6 LIMITATIONS OF THE STUDY

Every research is incomplete without its own limitations. In this research too
there were some limitations. They are:
 Results are just an indication of the present scenario and may not be

applicable in the future.

 As the study was conducted only in Gwalior (M.P.) only, so it can be said

that the study was regionally biased.

 Since sampling was done under the simple random sampling method,

where easily approachable respondents were picked up. So this may not

represent the whole universe.

 Lack of time on the part of respondents for filling up the questionnaire.

 Respondents may fill the partially correct information in questionnaire.

 CHAPTER NO. 2
HISTORY OF MUTUAL FUND

History of Mutual fund

First Phase- 1964-87

Unit Trust of India (UTI) was established in 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)

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 Canbank 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
established its mutual fund in June 1989 while GIC had 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 - 1993-2003 (Entry of Private Sector Funds)

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

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI
was bifurcated into two separate entities. One is the Specified Undertaking of
the Unit Trust of India with assets under management of Rs. 29,835 crores as at
the end of January 2003, representing broadly, the assets of US 64 scheme,
assured return and certain other schemes. 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.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It
is registered with SEBI and functions under the Mutual Fund Regulations. With
the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.
76,000 crores of assets under management and with the setting up of a UTI
Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with
recent mergers taking place among different private sector funds, the mutual
fund industry has entered its current phase of consolidation and growth.

Fifth Phase (Current)- Since May 2014

Taking cognisance of the lack of penetration of MFs, especially in tier II and
tier III cities, and the need for greater alignment of the interest of various
stakeholders, SEBI introduced several progressive measures in September 2012
to "re-energize" the Indian Mutual Fund industry and increase MFs’ penetration.
In due course, the measures did succeed in reversing the negative trend that had
set in after the global melt-down and improved significantly after the new
Government was formed at the centre.
Since May 2014, the Industry has witnessed steady inflows and increase in the
AUM as well as the number of investor folios (accounts).
The Industry’s AUM crossed the milestone of ₹10 Trillion (₹10 Lakh
Crore) for the first time as on 31st May 2014 and in a short span of two
years the AUM size has crossed ₹15 lakh crore in July 2016.
The overall size of the Indian MF Industry has grown from ₹ 3.26 trillion as on
31st March 2007 to ₹ 15.63 trillion as on 31st August 2016, the highest AUM
ever and a five-fold increase in a span of less than 10 years!!
In fact, the MF Industry has more doubled its AUM in the last 4 years from ₹
5.87 trillion as on 31st March, 2012 to ₹ 12.33 trillion as on 31st March,
2016 and further grown to ₹ 15.63 trillion as on 31st August 2016.
The no. of investor folios has gone up from 3.95 crore folios as on 31-03-2014
to 4.98 crore as on 31-08-2016.
On an average 3.38 lakh new folios are added every month in the last 2 years
since Jun 2014.
 CHAPTER NO 3
COMPANY PROFILE
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.
Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with
Average Assets under Management (AAUM) of Rs. 1, 18,973 Crores and an
investor count of over 74 Lakh folios. (AAUM and investor count as of May
2010).
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 wellrounded portfolio of products to meet varying investor requirements and
has presence in 159 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."

 Sponsor
Reliance Capital Limited 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 Mutual Fund (RMF)
has been sponsored by Reliance Capital Ltd (RCL).
The promoter of RCL is AAA Enterprises Private Limited. Reliance Capital
Limited is a Non-Banking Finance Company. Reliance Capital Limited is one
of the India’s leading and Page | 29 fastest growing financial services
companies, and ranks among the top three private sector financial services and
banking companies, in terms of net worth.
Reliance Capital has interests in asset management and mutual funds, life and
non-life insurance, private equity and proprietary investments, stock broking
and other activities in the financial services sector. The net worth of RCL is Rs.
6086 crores as on March 31, 2008. Given below is a summary of RCL’s
financials:

Reliance Capital Ltd. has contributed Rupees One Lac as the initial contribution
to the corpus for the setting up of the Mutual Fund. Reliance Capital Ltd. is
responsible for discharging its functions and responsibilities towards the Fund
in accordance with the Securities and Exchange Board of India (SEBI)
Regulations.
  The Asset Management Company
Reliance Capital Asset Management Ltd.
Reliance Capital Asset Management Ltd. (RCAM) is an unlisted Public Limited
Company incorporated under the Companies Act, 1956 on February 24, 1995.

Vision Statement: “To be a globally respected wealth creator, with an emphasis

on customer care and a culture of good corporate governance”.
Mission Statement: “To create and nurture a world-class, high performance
environment aimed at delighting their customers”.

Pursuant to this IMA, RCAM is authorized to act as Investment Manager of the

Mutual Fund. The net worth of the Asset Management Company based on
audited accounts as on March 31, 2009 is Rs. 841.32 Crore.
INVESTMENT OBJECTIVES OF THE SCHEMES
 Reliance Monthly Income Plan aims to generate regular income in order
to make regular dividend payments to unit holders and the secondary
objective is growth of capital.

 Reliance Income Fund aims to generate optimal returns consistent with

moderate levels of risk. This income may be complemented by capital
appreciation of the portfolio. Accordingly, investments shall
predominantly be made in Debt and Money Market Instruments.

 Reliance Medium Term Fund aims to generate regular income in order to

make regular dividend payments to unit holders and the secondary
objective is growth of capital.

 Reliance Liquid Fund aims to generate optimal returns consistent with

moderate levels of risk and high liquidity. Accordingly, investments shall
predominantly be made in Debt and Money Market Instruments.

 Reliance Liquidity Fund aims to generate optimal returns consistent with

moderate levels of risk and high liquidity. Accordingly, investments shall
predominantly be made in Debt and Money Market Instruments.
 Reliance Short Term Fund aims to generate stable returns for investors
with a short term investment horizon by investing in fixed income
securities of a short term maturity.

 Reliance Gilt Securities Fund aims to generate optimal credit risk free
returns by investing in a portfolio of securities issued and guaranteed by
the Central Government and State Governments.

 Reliance Floating Rate Fund aims to generate regular income through

investment in a portfolio comprising substantially of Floating Rate Debt
Securities (including floating rate securitized debt and Money Market
Instruments and Fixed Rate Debt Instruments swapped for floating rate
returns).

 Reliance Regular Savings Fund Debt Option: The primary investment

objective of this plan is to generate optimal returns consistent with
moderate level of risk. This income may be complemented by capital
appreciation of the portfolio. Accordingly investments shall
predominantly be made in Debt & Money Market Instruments.

 Reliance Regular Savings Fund Equity Option: The primary investment

objective is to seek capital appreciation and or consistent returns by
actively investing in equity / equity related securities.
Reliance Regular Savings Fund Hybrid Option: The primary investment
objective is to generate consistent return by investing a major portion in
debt & money market securities and a small portion in equity & equity
related instruments.

 Reliance Growth Fund aims to achieve long term growth of capital by

investment in equity and equity related securities through a research
based investment approach.

 Reliance Vision Fund aims to achieve long term growth of capital by

investment in equity and equity related securities through a research
based investment approach.
 Reliance Banking Fund aims to generate continuous returns by actively
investing in equity / equity related or fixed income securities of banks.

 Reliance Pharma Fund aims generate consistent returns by investing in

equity / equity related or fixed income securities of Pharma and other
associated companies.

 Reliance Index Fund-Sensex Plan aims to replicate the composition of the

Sensex, with a view to endeavor to generate returns, which could
approximately be the same as that of Sensex.

 Reliance Index Fund-Nifty Plan aims to replicate the composition of the

Nifty, with a view to endeavor to generate returns, which could
approximately be the same as that of Nifty.

 Reliance NRI Equity Fund aims to generate optimal returns by investing

in equity and equity related instruments primarily drawn from the
Companies in the BSE 200 Index.

 CUSTODIAN

Deutsche Bank, AG
Deutsche Bank AG, the Custodian shall, inter alia:
 Provide post-trading and custodial services to the Mutual Fund.
 Keep Securities and other instruments belonging to the Scheme in safe
custody.
 Ensure smooth inflow/outflow of securities and such other instruments as
and when necessary, in the best interests of the unit holders.
 Ensure that the benefits due to the holdings of the Mutual Fund are
recovered.
 Be responsible for loss of or damage to the securities due to negligence
on its part on the part of its approved agents.

 REGISTRAR

M/s. Karvy Computershare Pvt. Limited

The Registrar is responsible for carrying out diligently the functions of a
Registrar and Transfer Agent and will be paid fees as set out in the
agreement entered into with it and as per any modification made thereof
from time to time.

 TRUSTEE

Reliance Capital Trustee Co. Limited

Reliance Capital Trustee Co. Limited (RCTC), a company incorporated

under the Companies Act, 1956, has been appointed as the Trustee to the
Fund vide the Trust Deed dated April 25, 1995 executed between the
Sponsor and the Trustee.

CHAPTER NO 4
FUNCTIONING OF MUTUAL FUND
WHAT IS MUTUAL FUND?

Mutual fund is a trust that pools the savings of a number of investors who
share a common financial goal. This pool of money is invested in accordance
with a stated objective. The joint ownership of the fund is thus “Mutual”, i.e. the
fund belongs to all investors. 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 appreciations realized
are shared by its unit holders in proportion the number of units owned by them.
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. A Mutual Fund is an investment tool that
allows small investors access to a well-diversified portfolio of equities, bonds
and other securities. Each shareholder participates in the gain or loss of the
fund. Units are issued and can be redeemed as needed. The fund’s Net Asset
value (NAV) is determined each day.
Investments in securities are spread across a wide cross-section of industries
and sectors and thus the risk is reduced. Diversification reduces the risk because
all stocks may not move in the same direction in the same proportion at the
same time. Mutual fund issues units to the investors in accordance with
quantum of money invested by them. Investors of mutual funds are known as
unit holders.

When an investor subscribes for the units of a mutual fund, he becomes part
owner of the assets of the fund in the same proportion as his contribution
amount put up with the Corpus (the total amount of the fund). Mutual Fund
investor is also known as a mutual fund shareholder or a unit holder.
Any change in the value of the investments made into capital market
instruments (such as shares, debentures etc) is reflected in the Net Asset Value
(NAV) of the scheme.
NAV is defined as the market value of the Mutual Fund scheme's assets net of
its liabilities. NAV of a scheme is calculated by dividing the market value of
scheme's assets by the total number of units issued to the investors.
NAV = Market Value of the scheme / Number of unit-holders
Where, Numerator=Market value of investment + receivables +other Accrued
Income + Other Assets- Accrued Expenses-Other Payables-Other Liabilities.

 SET-UP OF MUTUAL FUNDS:

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset
Management Company (AMC) and custodian. The trust is established by a
sponsor or more than one sponsor who is like promoter of a company. The
trustees of the mutual fund hold its property for the benefit of the unit holders.
Asset management company (AMC) approved by SEBI managers the fund by
making investments in various schemes of the in its custody. The trustees are
vested with the general power of superintendence and direction over AMC.
They monitor the performance and compliance of SEBI regulations by the
mutual fund.
SEBI regulations require that at least two thirds of the directors of trustee
company or board of trustees must be independent i.e., they should not be
associated with the sponsors. Also, 50% of the directors of AMC must be
independent. All mutual funds are required to be registered with SEBI before
they launch any scheme. The performance of a particular scheme of a mutual
fund is denoted by Net Asset Value (NAV).
 MUTUAL FUND STRUCTURE
In India, the following are involved in mutual fund operations: the sponsor, the
mutual fund, the trustees, the asset management company, the custodian, and
the registrars and transfer agents.

 Fund Sponsor:
The sponsor of a mutual fund is like the promoter of a company. The sponsor
may be a bank, a financial institution, or a financial service company. It may be
Indian or foreign. The sponsor is responsible for setting up and establishing the
mutual fund. The sponsor is the settler of the mutual fund trust. The sponsor
delegates the trustee functions to the trustees.

 Mutual fund:
The mutual funds constituted as a trust under the Indian trust act, 1881, and
registered with SEBI.

 Trustees:
A trust is a notional entity that cannot contract in its own name. so, the trust
enters into contracts in the name of the trustees. Appointment by the sponsor,
the trustees can be either individuals or a corporate body. Typically, it is the
latter. The trustees appoint the asset management company (AMC), secure
necessary approval, periodically monitor how the AMC functions, and hold the
properties of the various schemes in trust for the benefits of investors.

 Asset Management Company:

It also referred to as the investment manager, is a separate company appointed
by the trustees to run the mutual fund. The AMC should have a certificate from
SEBI to act as portfolio manager under SEBI rules and regulations, 1993.

 Custodian:
The custodian handles the investment back office operations of a mutual fund. It
looks after the receipt and delivery of securities, collection of income,
distribution of dividends, and segregation of assets between schemes. The
sponsor of a mutual fund cannot act as its custodian.

 Registrars and Transfer Agents:

The registrars and transfer agents handle investor related services such as
issuing units, redeeming units, sending fact sheets and annual reports, and so on.
Some funds handle such functions in house, while others outsource it to be
SEBI approved registrars and transfer agents like KARVY and CAMS. The
legal structure and organization of mutual funds as laid down by SEBI
guidelines is as follows.
 CLASSIFICATION OF MUTUAL FUNDS

1) Return based classification:

The investors of the mutual fund schemes are made to enjoy a good
return in form of regular dividends or capital appreciation or a
combination of these both.

 Income Funds
Income funds are floated for the interest of investors who want to
maximize current income. These funds distribute periodically the income
 earned by them, in the form of either a constant income at relatively low
risk or in the form of maximum income possible with higher risk by the
use of leverage.
 Growth Funds
These Schemes have the objective to achieve an increase in the
value of the underlying investments through capital appreciation,
and they invest in Growth oriented securities.

 Conservative Funds
These funds offer a blend of good average returns and reasonable
capital appreciation. These funds are very popular and are ideal for
the investors who want both growth and income from their
investment.

2) Investment Based Classification:

Mutual funds may also be classified on the basis of the kind of securities
that they invest in.
 Equity Funds:
Equities are a high risk-high return asset class; the same risk profile
spills over to equity funds as well. However investors must take
note of the fact that a large number of variations exist within the
'high risk' equity funds segment. For example a sector fund would
be on the relatively higher scale in the risk-return paradigm when
compared to an index fund, which simply tracks the movements in
a chosen benchmark index. These funds invest most of their
investible shares in equity shares of companies and undertake Page
| 44 the risk associated with the investment in equity shares. In a
developed market, Equity funds can be of different categories.
For example, ‘Blue Chip’, FMCG, PSUs, etc.

The equity funds category can be further differentiated as follows:

 Market capitalization-based funds
Market capitalization is defined as the number of shares issued
by a company multiplied by the price of each share. Companies
are generally divided into the large cap, mid cap and small cap
segments respectively on the basis of their market
capitalization. Some diversified equity funds are launched with
the mandate to invest in stocks from one or more of the stated
segments i.e. the company's market capitalization becomes the
governing force.
 Opportunities funds
Fund managers handling opportunities funds have perhaps the
most flexible investment mandates. Opportunities funds can
invest in stocks across market segments, sectors and some are
even permitted to invest a significant portion of their corpus in
debt. As the name suggests, the idea is to seek opportunities for
clocking gains from any sector/market segment.

 Theme-based funds
Theme based funds are fairly similar to sector funds, however
the differentiating factor is the level of diversification they
offer. Instead of concentrating on stocks from a single
sector/industry, their focus lies on a specific theme like globally
competitive Indian companies or multinational corporations
operating in India. In terms of diversification and risk profiles,
these companies tread the path between a sector fund and a
conventional diversified equity fund.

 Index funds
Index funds are launched with the mandate of tracking
benchmark indices like the BSE Sensex or S&P CNX Nifty.
These funds invest in stocks from the index in the same Page |
45 proportion as the benchmark, thereby offering investors the
opportunity to capture the growth in the chosen index. Index
funds are generally more popular in developed markets where
actively managed funds find it difficult to outperform the
benchmark indices as markets are relatively better researched;
also their expenses (fees, charges) tend to be lower vis-à-vis
actively managed funds.

 Fund of Funds
A regular mutual fund invests in equities, bonds and fixed
income securities depending on its objective. Fund of Funds
(FoF) extend this concept by investing in units of other mutual
fund schemes. By investing in more than one mutual fund they
take diversification to a new level For example an FoF could
invest in five top performing equity funds and offer a highly
diversified portfolio to the investor. Similarly others could
invest in equity and debt funds simultaneously, thereby offering
a portfolio that is diversified across asset classes. On the
flipside, FoF investors must be wary of higher expenses on
account of overlapping of costs. FT India Life Stage Fund is the
example of a FoF.
  Conventional diversified equity funds
We have used the term "conventional" diversified equity funds
at various places during the course of this discussion. This is
not a variant; instead these are equity funds in their purest form
and might seem rather lack luster in the present scenario.
Typically, a diversified equity fund invests in a number of
equity/ equity related instruments from various sectors thereby
enabling investors to benefit from diversification. HDFC
Equity Fund and Sundaram Growth Fund can be classified as
conventional diversified equity funds.

 Debt Funds:
These Funds have their portfolio comprising of bonds and
debentures (Debt Instruments). These funds are considered to be
very secure with a steady income.

 Long-term debt funds

Long-term debt funds are conventional debt/bond funds that
have been in existence for as long as equity funds. Investors
prefer to invest in debt funds for the same reasons they choose
to invest in equity funds viz. they get benefits of diversification
across debt instruments and the services of a professional fund
manager. In fact, for retail investors, debt funds are one of the
most important avenues for investing in debt securities like
corporate bonds and government securities, chiefly because
individual transactions in debt are of a very high value (running
in millions of rupees) and beyond most retail investors. This is
unlike equities for instance, where retail investors can invest on
their own in smaller lots.
Debt funds invest across a range of debt/fixed income
securities. The corpus of long-term debt funds comprises
mainly of corporate bonds and government securities (gilts/G-
secs).
When these securities have a residual maturity of at least 12
months, they are classified as long-term debt or longer-dated
paper. Debt funds also invest in shorter-dated paper like
treasury bills, certificate of deposit (CDs) and commercial
paper to name a few.

 Short-term debt funds

There is a category of investors who have two critical needs
that short-term debt funds help achieve. One – they want to be
invested for the short-term - less than 6 months. Two - over this
time frame, they are looking at preserving capital with a return
 that is superior to that of a fixed deposit of a comparable
tenure. The reason why short-term debt funds can preserve
capital better than long term debt funds is because they are
invested in debt instruments of a shorter tenure.

 Liquid funds:
Liquid funds invest in very short-term debt instruments maturing in
30-45 days. Typically this includes Treasury bills and call money.
Liquid funds serve needs quite similar to that of short-term debt
funds, only difference is that liquid fund investors have an even
shorter investment time frame, at times as short as one day. If
investors are looking at being invested for more than a month, they
can consider short-term debt funds for a marginally higher return.

 Gilt Funds:
 Long-term gilt funds:
A long-term government securities and invests primarily in
government paper (gilt/GSec) with a residual maturity of over
12 months. Gilt funds have a higher risk profile than
conventional debt funds because their investments are limited
to a particular segment of the debt market and they cannot
diversify across other segments like corporate bonds.

 Short-term gilt funds:

A short-term gilt fund invests primarily gilts of a shorter tenure
(less than 12 months). The rationale for investing in short-term
gilt funds is similar that of short-term debt funds. The reason
investors choose short-term gilt funds over short-term debt
funds is because gilts can provide a higher capital appreciation
vis-à-vis bonds.

 Dynamic debt funds:

Dynamic debt funds attempt to combine the benefits of debt funds
and gilt funds. They can invest across corporate bonds and gilts
without any restrictions. They are distinct from conventional debt
funds that invest in gilts and corporate bonds because these funds
usually maintain a cap on their gilt investments. Dynamic debt
funds tend to increase their gilt investments in times of economic
stability as gilt prices tend to have a more lucrative spread (i.e.
difference between the buy and sell prices). Investments in
dynamic debt funds should be made with a time frame of at least
12 months.
 Floating rate funds:
 Long-term floating rate funds
Floating rate funds invest in debt instruments that have their
coupon rates adjusted at periodic intervals. These instruments
are called 'floating rate instruments'. The floating rate paper is
benchmarked against a reference point like the MIBOR
(Mumbai Inter-bank Page | 48 Offered Rate) for instance.
Changes in the MIBOR are a cue for the coupon rate on the
floating rate paper to be reset accordingly.

 Short-term floating rate funds

Short-term floating rate funds work on the same lines as long-
term floating rate funds except that they invest in floating rate
paper of shorter tenure (less than 12 months). If investors are
looking to be invested across a shorter time frame of 1-6
months, short-term floating rate funds should be preferred over
their long-term counterparts. Templeton Floating Rate Fund
(Short Term) is an example of a short-term floating rate fund.

 Fixed Maturity Plans (FMP):

Fixed maturity plans (FMPs) are another 'invention' that became a 'necessity'
to counter interest rate instability, a problem that has become acute over the
last two years. Typically, FMPs are close-ended funds. They invest across debt
instruments to arrive at a pre-determined yield, Pre-determined because the
yield is announced beforehand to investors. So FMPs have defined investment
tenure. The benefit of investing in FMP is that the investor knows in advance
the return that he will generate on his investment. FMPs have investment
tenures ranging from less than a year to more than 10 years.

 Monthly Income Plan (MIP):

As a mutual fund category, monthly income plans (MIPs) are a relatively
recent phenomenon. MIPs are hybrid funds that invest predominantly in debt
instruments with a small portion of assets invested in equities. The equity
component is expected to act as a 'kicker' that will make the MIP outperform a
conventional debt fund. The rationale for a hybrid product like an MIP came
to the fore because debt funds weren't adding a lot of value to the risk-averse
investor's portfolio. So we had MIPs being launched that gave the fund
manager a mandate to invest 5-30% of assets in equities. Conventional MIPs
invest about 5- 15% of assets in equities with their aggressive counterparts
investing as high as 20-30% in equities. Several fund houses have two distinct
MIPs catering to different investor groups
3) Balanced Fund:
These funds have their portfolio consisting of a balanced mix of equity
and bonds. The composition of these funds may vary depending upon the
outlook of the market. Balanced funds invest their corpus in both equity
and debt instruments in a predetermined ratio, say 60:40. An aggressive
balanced fund would typically hold a higher portion of its assets in
equities maybe as high as 70% of the total assets. On the other hand, a
'disciplined' balanced fund would maintain a conservative equity
allocation during most times.

4) Sector Based Funds:

There are funds that invest in a specified sector of economy and they
specialize in the said sector. However, they run the risk of not being able
to diversify. Sector based funds are aggressive growth funds which make
investments on the basis of assessed bright future for a particular sector.
The specialty of sector funds rather oddly lies in the fact that they go
against the very grain of mutual fund investing i.e. holding a diversified
portfolio. That is why you will find some Asset Management Companies
that swear against sector funds. Sector funds are launched with the
intention of capitalizing on opportunities in a single sector.

5) Commodity Funds:
It will invest directly in commodities or through shares of the commodity
companies or through commodity futures contract .Most common
example of such fund is preciousmetal fund, Gold funds invest in Gold,
Gold futures or shares of gold mines.

6) Exchange Traded Funds:

It combines the best features of open end and closed structure. It tracks a
market index and trades like a stock on the stock market. ETFs are not the
index funds.

7) Real Estate Funds:

It can invest in real estate, Fund real estate developers, Buy shares of
housing finance companies, Buy securitized assets.
 Classification II

A. Based on their investment objective:

 Growth Schemes: Aim to provide capital appreciation over the

medium to long term. These schemes normally invest a majority of
their funds in equities and are willing to bear short term decline in
value for possible future appreciation. These schemes are not for
investors seeking regular income or needing their money back in
the short term. Ideal for:  Investors in their prime earning years.
 Investors seeking growth over the long term.

 Income Schemes: Aim to provide regular and steady income to

investors. These schemes generally invest in fixed income
securities such as bonds and corporate debentures. Capital
appreciation in such schemes may be limited.
Ideal for:
1. Retired people and others with a need for capital stability
and regular income.
2. Investors who need some income to supplement their
earnings.

 Money Market / Liquid Schemes: Aim to provide easy liquidity,

preservation of capital and moderate income. These schemes generally
invest in safer, short term instruments such as treasury bills,
certificates of deposit, commercial paper and interbank call money.
Returns on these schemes may fluctuate, depending upon the interest
rates prevailing in the market.
Ideal for:
o Corporate and individual investors as a means to park
their surplus funds for short period or awaiting a more
favourable investment alternative.
 B. Other Schemes:

 Capital Protection Oriented Schemes:

Capital Protection Oriented Schemes are the schemes that endeavour to protect the
capital as the primary objective by investing in high quality fixed income securities
and generate capital appreciation by investing in equity/equity related instruments as a
secondary objective. The first Capital Protection Oriented Fund in India, Franklin
Templeton Capital Protection Oriented Fund opened for subscription on October 31,
2006.

 Gold Exchange Traded Fund (GETF):

Gold Exchange Traded Fund offers investors an innovative, cost efficient and secure
way to access the gold market. Gold Exchange Traded Fund are intended to offer
investors a means of participating in the gold bullion market by buying and selling
units on the Stock Exchanges, without taking physical delivery of gold. The first Gold
ETF in India, Benchmark GETF, opened for subscription on February 15, 2007 and
listed on the NSE on April 17, 2007.

 Quantitative Funds:
A quantitative fund is an investment fund that selects securities based on quantitative
analysis. The managers of such funds build computer based models to determine
whether or not an investment is attractive. In a pure "quant shop" the final decision to
buy or sell is made by the model. However, there is a middle ground where the fund
manager will use human judgment in addition to a quantitative model. The first Quant
based Mutual Fund Scheme in India, Lotus Agile Fund opened for subscription on
October 25, 2007.

 Funds Investing Abroad

With the opening up of the Indian economy, Mutual Funds have been permitted to
invest in foreign securities/ American Depository Receipts (ADRs) / Global
Depository Receipts (GDRs). Some of such schemes are dedicated funds for
investment abroad while others invest partly in foreign securities and partly in
domestic securities. While most such schemes invest in securities across the world
there are also schemes which are country-specific in their investment approach.
Advantages of Mutual Fund

 Liquidity:
Unless you opt for close-ended mutual funds, it is relatively easier
to buy and exit a mutual fund scheme. You can sell your units at
any point (when the market is high). Do keep an eye on surprises
like exit load or pre-exit penalty. Remember, mutual fund
transactions happen only once a day after the fund house releases
that day’s NAV.

 Diversification:
Mutual funds have their share of risks as their performance is based
on the market movement. Hence, the fund manager always invests
in more than one asset class (equities, debts, money market
instruments, etc.) to spread the risks. It is called diversification.
This way, when one asset class doesn’t perform, the other can
compensate with higher returns to avoid the loss for investors.
 Less cost for bulk transactions:
You must have noticed how price drops with increased volume
when you buy any product. For instance, if a 100g toothpaste costs
Rs.10, you might get a 500g pack for, say, Rs.40. The same logic
applies to mutual fund units as well. If you buy multiple units at a
time, the processing fees and other commission charges will be less
compared to when you buy one unit.

 Invest in smaller denominations:

By investing in smaller denominations (SIP), you get exposure to
the entire stock (or any other asset class). This reduces the average
transactional expenses – you benefit from the market lows and
highs. Regular (monthly or quarterly) investments, as opposed to
lumpsum investments, give you the benefit of rupee cost averaging.

 Expert Management:
A mutual fund is favoured because it doesn’t require the investors
to do the research and asset allocation. A fund manager takes care
of it all and makes decisions on what to do with your investment.
He/she decides whether to invest in equities or debt. He/she also
decide on whether to hold them or not and for how long.
Your fund manager’s reputation in fund management should be an
essential criterion for you to choose a mutual fund for this reason.
The expense ratio (which cannot be more than 1.05% of the
AUM guidelines as per SEBI) includes the fee of the manager too.
 Cost-efficiency:
You have the option to pick zero-load mutual funds with fewer
expense ratios. You can check the expense ratio of different mutual
funds and choose the one that fits in your budget and financial
goals. Expense ratio is the fee for managing your fund. It is a useful
tool to assess a mutual fund’s performance.

 Quick & painless process:

You can start with one mutual fund and slowly diversify. These
days it is easier to identify and handpicked fund(s) most suitable for
you. Tracking mutual funds will not take any extra effort from your
side. The fund manager, with the help of his team, will decide
when, where and how to invest. In short, their job is to beat the
benchmark and deliver you maximum returns consistently.

 Tax-efficiency:
You can invest up to Rs 1.5 lakh in tax-saving mutual funds which
is covered under Section 80C of the Income Tax Act, 1961. Though
a 10% tax on Long-Term Capital Gains (LTCG) is applicable for
returns above Rs.1 lakh after one year, they have consistently
delivered higher returns than other tax-saving instruments like FD
in recent year.

 Suit your financial goals:

There are several types of mutual funds available in India catering
to investors from all walks of life. No matter what your income is,
you must make it a habit to set aside some amount (however small)
towards investments. It is easy to find a mutual fund that matches
your income, expenditures, investment goals and risk appetite.
 Automated payments:
It is common to forget or delay SIPs or prompt lumpsum
investments due to any given reason. You can opt for paperless
automation with your fund house or agent. Timely email and SMS
notifications help to counter this kind of negligence.

 Safety:
There is a general notion that mutual funds are not as safe as bank
products. This is a myth as fund houses are strictly under the
purview of statutory government bodies like SEBI and AMFI. One
can easily verify the credentials of the fund house and the asset
manager from SEBI. They also have an impartial grievance
redressal platform that works in the interest of investors.

 Systematic or one-time investment:

You can plan your mutual fund investment as per your budget and
convenience. For instance, starting a SIP (Systematic Investment
Plan) on a monthly or quarterly basis suit investor with less money.
On the other hand, if you have surplus amount, go for a one-time
lumpsum investment.
Disadvantages of Mutual Fund

 Costs to manage the mutual funds:

The salary of the market analysts and fund manager comes from
the investors. Total fund management charge is one of the first
parameters to consider when choosing a mutual fund. Higher
management fees do not guarantee better fund performance.

 Lock-in periods:

Many mutual funds have long-term lock-in periods, ranging from

five to eight years. Exiting such funds before maturity can be an
expensive affair. A specific portion of the fund is always kept in
cash to pay out an investor who wants to exit the fund. This portion
cannot earn interest for investors.
 Dilution:

While diversification averages your risks of loss, it can also dilute

your profits. Hence, you should not invest in more than seven to
nine mutual funds at a time.
As you have just read above, the benefits and potential of mutual
funds can undoubtedly override the disadvantages, if you make
informed choices. However, investors may not have the time,
knowledge or patience to research and analyse different mutual
funds. Investing with Clear Tax could solve this as we have already
done the homework for you by handpicking the top-rated funds
from the best fund houses in the country.
TAX SAVING ON MUTUAL FUND
There are two types of Tax-saving funds,
1) Equity-linked savings schemes (ELSS)
2) Pension funds

Equity-linked savings schemes (ELSS):

ELSS schemes are basically diversified equity schemes, which have a three-
year lock-in. Investments here—subject to a maximum of Rs 10,000—receive a
tax rebate of 0 to 20 per cent depending on the income slab. As these are equity
instruments they have the maximum risk-return potential among all asset
classes. What this means is that return has a propensity to vary with great
intensity. Although an average tax-saving mutual fund delivered 16.36 per cent
in 2002, the range of returns was extreme. Thus, in that year, the best tax-saving
fund delivered 42.61 per cent and the worst was down 3.16 per cent. The best
way to overcome the vagaries of stock markets is to diversify. Diversification
can be across funds and, more importantly, across time periods. By investing
regularly every year in these funds one can set up a long-term systematic
investment plan.

Pension funds:
The other route for saving taxes is pension funds, even though there are
currently only two such funds in operation, Franklin Templeton's Templeton
India Pension Fund and UTI's Retirement Benefit Plan. Introduced for the first
time in 1997, pension funds are hybrid schemes, which have a debt orientation,
and carry the same tax benefit as ELSS.
From the tax point of view, bonus units are conceptually similar to dividend
stripping, but somewhat more complex. Bonus units that a fund issue is deemed
to have been acquired at zero cost. Thus, whenever they are sold, the entire sale
price is treated as capital gains. However, at the time of issue of bonus, the
NAV of the fund drops in a proportion that is identical to the ratio at which
bonus funds are issued. This fall in the NAV is a capital loss as far as the
original units are concerned and it is here that tax benefits can be realized. The
original units can be sold off with a capital loss, which can be used to set off
other capital gains. The bonus units carry a high tax liability though since you
will pay taxes on the entire sale price.
Here's an example. Suppose you hold 10,000 units of a fund whose NAV is Rs
15. You made the purchase less than a year ago at an NAV of Rs 12. If today
you decide to sell these units, you will fetch Rs 1.5 Lakh, out of which Rs
30,000 will be short-term capital gain. On this, you are likely to pay a tax of Rs
9,000—30 per cent of gains.

 Tax Benefits of Mutual Fund

 ELSS (Equity linked saving scheme)

 year lock in period
 Minimum investment of 90% in equity markets at all times
 So ELSS investment automatically leads to investment in equity
shares
 Open or closed ended
 Eligible under Section 80 C up to Rs.1 Lakh allowed
 Dividends are tax free
 Benefit of Long term Capital gain taxation
Tax Rules for Mutual fund Investors:

Particulars Individuals Corporate NRI*

DIVIDEND (In the hands of investors)

Equity Schemes Tax Free Tax Free Tax Free
Debt Schemes Tax Free Tax Free Tax Free

DIVIDEND DISTRIBUTION TAX (by the scheme)

Equity Schemes Nil Nil Nil
Debt Schemes 12.5% + 10% 20% + 10% 12.5% + 10%
surcharge + 3% cess surcharge + 3% cess surcharge + 3%
=14.163% =22.66% cess =14.163%
Money Market & Liquid 25% + 10% surcharge + 3% cess = 28.325%
Schemes

LONG TERM CAPITAL GAINS

Equity Schemes Nil
Debt Schemes 10% Without Indexation Or 20% With Indexation, Whichever is
lower + 10% surcharge + 3% cess
Without Indexation 11.33%
With Indexation 22.66%

SHORT TERM CAPITAL GAINS

Equity Schemes 15% Flat + 10% surcharge + 3% cess = 16.995%
Debt Schemes 30% + 10% + 3% = 33.99%

Note: The short term/long term capital gain tax will be deducted at the time of redemption of
units in case of NRI investors only. **STT @ 0.25% will be deducted on equity funds at the
time of redemption and switch to the other schemes. ^^ assuming highest tax slab rate.

RISKS ASSOCIATED WITH MUTUAL FUNDS

The most important relationship to understand is the risk-return trade-off.

Higher the risk greater the returns/loss and lower the risk lesser the returns/loss.
Hence it is up to you, the investor to decide how much risk you are willing to
take. In order to do this you must first be aware of the different types of risks
involved with your investment decision.

 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.

 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. An ‘AAA’ rating is considered the safest
whereas a ‘D’ rating is considered poor credit quality. A well-diversified
portfolio might help mitigate this risk.

 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.

 POLITICAL RISK:

Changes in government policy and political decision can change the investment
environment. They can create a favourable environment for investment or vice
versa.

 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. You have been reading about diversification above, but what is
it? 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.

INVESTMENT STRATEGIES IN MUTUAL FUNDS

1. Systematic Investment Plan (SIP):

 under this a fixed sum is invested each month on a fixed date of a month.
Payments are made through post dated cheques or direct/auto debit
facilities. The investor gets fewer units when the NAV is high and more
units when the NAV is low. This is called as the benefit of Rupee Cost
Averaging (RCA).

2. Systematic Transfer Plan (STP):

under this an investor invests in debt oriented fund and gives instructions
to transfer a fixed sum, at a fixed interval, to scheme of the same mutual
fund.

3) Systematic Withdrawal Plan (SWP):

if someone wishes to withdraw from a mutual fund then he can withdraw
a fixed amount each month.
 CHAPTER 5
ANALYSIS AND INTERPRETATION

Profile of the Respondents:

Gender Male 75
Female 25
Age <30 Years 25
30-40 Years 28
40-50 Years 15
50-60 Years 20
>60 Years 12
Occupation Service 60
Business 10
Student 15
Professional 5
Retired 10
Income Level < 2 Lacs 20
2-5 Lacs 60
5-8 Lacs 13
8-12 Lacs 5
>12 Lacs 2
Savings Yearly 5% 36
5%-10% 24
10%-15% 26
15%-20% 11
>20% 3
Education <=8 Standards 5
<=12 Standards 15
Graduate 55
Post Graduate 20
Doctorate & Others 5
Marital Status Married 65
Single 35

1. What is your primary objective for your investment?

  15% investors are more interested in tax benefit in their primary objective for
Investment.
 15% investors look for aggressive growth in their primary objective for investment.
 10% investors look for Conservative growth in their primary objective for
investment.
 35% investors look for Growth and Income both in their primary objective for
investment.
 15% investors look for Regular Income in their primary objective for Investment.

 10% investors look for Preservation of principal in their primary objective for
Investment.

So the majority of respondents look for Growth and Income as a primary

objective for investment.

2. Do you know about the Mutual Funds?

Knowledge
about Mutual Fund

 There are 33% investors have knowledge about MFs.

  There are 67% investors don’t have knowledge about MFs.

So the majority of respondents don’t know about MFs.

3. Do you know that mutual fund is related to share market?

Relationship between Mutual fund and Stock Exchange

  50% investors have knowledge about the relationship of MFs and Stock
exchange.
 30% investors don’t have knowledge about the relationship of MFs and
Stock exchange.
 20% investors ticked no idea.

So the majority of respondents know about the relationship of MFs and

Stock exchange.

4. If yes, which company/companies?

 Mutual Fund’s Company

So the majority of respondents have invested in Reliance Mutual Fund.

5. If Reliance Mutual Fund; what are the reasons?

Reason for Selecting Reliance Mutual Fund

So the majority of respondents believe that past performance is the main & the
most important reason to invest in Mutual fund.

6. Why do you prefer investment in mutual fund to other investment avenue?

 Reason for Investment in Mutual Fund

So the majority of respondents prefer Mutual fund because of better returns

over a long period of time & in Tax efficiency.

7. what is your Primary objective? *Age Cross-tab

 Interpretation:
 35% respondents prefer Growth & Income option and that group belong to
the age group of 30-40 years.
 25% respondents belong to the age group of less than 30 years and those
respondents prefer two kind of objective in their investment i.e.
preservation of principle and regular income.

8. What is your primary objective for your investment? * Income level Crosstab

Interpretation:

60% of the investment comes from the 2-5 lakhs per annum income level group of
respondents. These respondents prefer regular income, growth & income,
conservative growth and also aggressive growth as their primary objective for
investment.

9. What is your primary objective for your investment? *

 Occupation Cross-tab

Interpretation:

 35% respondents prefer growth & income as their primary objective of

investment and that falls under service sector based respondents.
 Service sector based respondents prefer only preservation of principle,
regular income and growth & income as their primary objective for their
investment.

10.Do you know about the Mutual Funds? * Age Cross-tab

Interpretation:

67% of respondents are not aware about the mutual funds, functioning of it and
the benefits of it. Most of them fall under the 30-40 years and in this age group out
of 28% respondents 20% are not aware about mutual fund’s benefits.

11.What is your primary objective for your investment?

 Interpretation:

65% respondents are married and they prefer growth & income, conservative
growth, aggressive growth and tax benefits also as their primary objective for
investment.

12.Why do you prefer investment in mutual fund to other investment

avenue?

Interpretation:

The main reason to invest in mutual fund are lack of expertise in stock market,
better returns over a long period of time and liquidity believed by the service
sector based respondents.

13.What kind of investment schemes you prefer in Mutual Fund?

Interpretation:

Service sector based respondents prefer growth schemes. Businessmen prefer

ELSS schemes.
 CHAPTER 6

SUMMARY
OF
FINDINGS, SUGGESTIONS
AND
RECOMMENDATIONS

FINDINGS:
 Majority of respondents look for growth & income as a primary
objective for investment.
 Majority of respondents don’t know about MFs.
 Majority of respondents know about the relationship of MFs & Stock
Exchange. Majority of respondents never invested in MFs.
 Majority of respondents have very less knowledge about MFs.
 Majority of respondents have invested in Reliance Mutual Fund.
 Majority of respondents believe that Past Performance is the main &
the most important reason to invest in Reliance MF.
 Majority of respondents prefer MF because of Better returns over a
long period of time & its Tax efficiency.
 Majority of the respondents prefer suggestions from friends/relatives
while selecting any investment in mutual funds.
 Majority of respondents prioritize their investment according to the
returns of investment avenues.
 Majority of respondents prefer fixed deposits as the most preferred
investment avenue because of the less risk & more security in
nationalized banks.

RECOMMENDATIONS AND SUGGESTIONS:

 Customer education of the salaried class individuals is far below

standard. Thus, Asset Management Company’s need to create
awareness so that the salaried class people become the prospective
customer of the future.
 Early and mid earners bring most of the business for the Asset
Management Company’s. Asset Management Company’s thus
needed to educate and develop schemes for the person’s who are at
the late earning or retirement stage to gain the market share.

 Return’s record must be focused by the sales executives while

explaining the schemes to the customer. Pointing out the brand
name of the company repeatedly may not too fruitful.

 The target market of salaried class individual has a lot of scope to

gain business, as they are more fascinated to Mutual Funds than the
self employed.

 Schemes with high equity level need to be targeted towards self

employed and professionals as they require high returns and are
ready to bear risk.

 Salary class individuals are risk averse and thus they must be
assured of the advantage of “risk – diversification” in Mutual
Funds.

 There should be given more time & concentration on the Tier-3

distributors.

 The resolution of the queries should be fast enough to satisfy the

distributors.

 Time to time presentation/training classes about the products

should be there.

 There should be more number of Relationship Managers (RM) in

different regions because one RM can handle a maximum of 100
distributors efficiently and also to cover untapped market.

 Regular activities like canopy should be done so as to get more

interaction with the distributors.
 CHAPTER 7
BIBLIOGRAPHY
PRIME REFFERENCE
Fact Sheet of the Reliance Mutual Fund
Mutual Fund Mentor Pocket books of Reliance Mutual Fund
Company Website- www.reliancemutual.com
“EDGE”- The Learning Academy of Reliance Mutual Fund

OTHER WEBSITES
www.ici.org
www.google.co.in
www.amfiindia.com
www.books.global-investor.com
www.moneycontrol.com
www.nseindia.com
www.jmfinancial.com
www.valueresearchonline.com
www.bseindia.com
www.rbi.org.in
www.economictimes.indiatimes.com
www.yahoofinance.com
www.mutualfundsindia.com
www.investopedia.com
www.wikipedia.org
www.thehindu.com
www.indiastudychannel.com
www.oppapers.com
www.sebi.gov.in
www.managemetparadise.com
www.scribd.com
www.ssrn.com
www.citehr.com
Questionnaire