INVESTMENT IN MUTUAL FUND FOR RETAIL

INVESTORS

A PROJECT SUBMITTED TO

UNIVERSITY OF MUMBAI FOR PARTIAL COMPLETION OF THE

DEGREE OF

BACHELOR IN MANAGEMENT STUDIES

BY

AMAN YADAV B-54

UNDER THE GUIDANCE OF

MEDHAVI CHAKRABORTY

KANDIVALI EDUCATION SOCIETY’S

B.K. Shroff College of Arts & M.H. Shroff College of Commerce
Bhulabhai Desai Road, Kandivali (West), Mumbai-400067
An Autonomous College NAAC Reaccredited ‘A’ Grade (CGPA 3.27) and ISO 9001:2015 Certified
 CONTENTS

CHAPTER 1 – INTRODUCTION ............................................................................... 4

OBJECTIVES OF THE STUDY .................................................................................................................. 7
METHODOLOGY USED TO COLLECT DATA........................................................................................... 8
SCOPE OF THE STUDY ........................................................................................................................... 9
LIMITATION OF THE STUDY .................................................................................................................. 10

Chapter 2-Literature Overview .............................................................................. 11

HISTORY OF MUTUAL FUNDS IN INDIA: - ............................................................................................ 13
Phase 1. Establishment and Growth of Unit Trust of India - 1964-87: ..................................................................... 13
Phase II. Entry of Public Sector Funds - 1987-1993: ................................................................................................. 13
Phase III. Emergence of Private Sector Funds - 1993-96: ......................................................................................... 14
Phase IV. Growth and SEBI Regulation - 1996-2004:................................................................................................ 14
Phase V. Growth and Consolidation - 2004 Onwards: ............................................................................................. 15
Emerging Issues of the Mutual Fund Industry in India: ............................................................................................ 15
PRESENT POSITION: - ................................................................................................................................................ 16

Chapter 3 CONCEPTUAL FRAMEWORK .............................................................. 18

WHAT IS MUTUAL FUND? ...................................................................................................................... 18
DISTINGUISHING CHARACTERISTICS OF MUTUAL FUND ................................................................. 19
REGULATORY BODY FOR MUTUAL FUNDS ........................................................................................ 21
MUTUAL FUND OPERATION FLOW CHART: - ...................................................................................... 23
TYPES OF MUTUAL FUNDS SCHEMES IN INDIA ................................................................................. 25
SELECTION PARAMETERS FOR MUTUAL FUND ................................................................................. 32
STRUCTURE OF A MUTUAL FUND: ...................................................................................................... 34
HOW RISKY YOUR MUTUAL FUND IS: -................................................................................................ 39
ADVANTAGES OF INVESTING THROUGH A MUTUAL FUND .............................................................. 45
DISADVANTAGES OF MUTUAL FUND .................................................................................................. 47
HOW TO INVEST IN MUTUAL FUNDS? ................................................................................................. 48
OVERVIEW ON MUTUAL FUNDS COMPANIES IN INDIA ............................................................................................... 53
CHAPTER 4 - RECOMMENDATION AND SUGGESTIONS ................................... 60
FINDINGS ................................................................................................................................................. 60
CONCLUSIONS ....................................................................................................................................... 61
RECOMMENDATIONS AND SUGGESTIONS ......................................................................................... 64

BIBLIOGRAPHY & ANNEXURES........................................................................... 67

 INVESTMENT IN MUTUAL FUND FOR RETAIL
INVESTORS
CHAPTER 1 – INTRODUCTION

EXECUTIVE SUMMARY

A mutual fund, as defined in the regulations is a fund established in the form of a trust
to raise monies through the sale of units to the public or a selection of the public under
one or more schemes for investing in securities, including money market instruments.
The income earned through these investments and the capital appreciation realized

are shared by its unit holders in proportion to the number of units owned by them.

A mutual fund represents a vehicle for collective investment. In India, the following
entities are involved in a mutual fund operation.
Sponsor The sponsor of a mutual fund is like the promoter of a company.
Mutual Fund The mutual fund is typically constituted as a trust under the Indian Trust
Act.
Trustees are the internal regulators of the mutual fund entrusted with the job of
protecting the interest of unit holders. Appointed by the sponsor, the trustees are
typically a corporate body.
Mutual fund is a type of financial vehicle made up of a pool of money collected from
many investors to invest in securities like stocks, bonds, money market instruments,
and other assets. Mutual funds are operated by professional money managers, who
allocate the fund's assets and attempt to produce capital gains or income for the
fund's investors. A mutual fund's portfolio is structured and maintained to match the
investment objectives stated in its prospectus.

Mutual funds give small or individual investors access to professionally managed

portfolios of equities, bonds, and other securities. Each shareholder, therefore,
participates proportionally in the gains or losses of the fund. Mutual funds invest in a
vast number of securities, and performance is usually tracked as the change in the
total market cap of the fund—derived by the aggregating performance of the
underlying investments.

Mutual fund industry has seen a lot of changes in past few years with multinational
companies coming into the country, bringing in their professional expertise in
managing funds worldwide. In the past few months there has been a significant
growth phase going on in the mutual fund industry in India. Now investors have a
wide range of Schemes to choose from depending on their individual profiles. Mutual
funds give small or individual investors access to professionally managed portfolios
of equities, bonds, and other securities. Each shareholder, therefore, participates
proportionally in the gains or losses of the fund. Mutual funds invest in a vast number
of securities, and performance is usually tracked as the change in the total market
cap of the fund—derived by the aggregating performance of the underlying
investments.
 OBJECTIVES OF THE STUDY

For successful research engagement a well-defined objective of research is very

crucial. If you want to drive all aspects of your research methodology such as data
collection, design, analysis and recommendation, you need to lay down the
objectives of research methodology. In other words, the objectives of research
should address the underlying purpose

1. To understand the fundamentals and technical of Mutual fund.

2. To understand risk involved while investing in mutual fund.

3. To understand what things to see while investing and how to start investing

4. To study the various Mutual Funds schemes in India

 METHODOLOGY USED TO COLLECT DATA

Data can be classified into two types, namely primary data and secondary data. The
primary importance of data collection in any research or business process is that it
helps to determine many important things about the company, particularly the
performance. So, the data collection process plays an important role in all the
streams. Depending on the type of data, the data collection method is divided into
two categories namely,

• Secondary Data Collection methods

The secondary information is mostly taken from websites, books, journals, etc.

Secondary data collection method is used in my project

This report is based on secondary data. All the data required for this analytical study
has been obtained mainly from secondary sources. The secondary data has been
collected through various journals & websites. Secondary data is based on
information obtained from studies previously performed by various journals
 SCOPE OF THE STUDY

A big boom has been witnessed in mutual fund industry in recent times. A large
number of new players have entered the market and trying to gain market share in
this rapidly improving market

I had a chat with the BAJAJ capital mutual fund executive where I completed and
gathered information regarding project.

The study will help top the preference of the customers which portfolio, mode of
investment, option of getting return and son they prefer. This project will help you to
understand the technical and fundamentals of mutual fund
 LIMITATION OF THE STUDY

Apart from Details about mutual funds it has some limitations due to that all
the details could not be published & displayed. It has been done on the
basis of secondary sources like Journals, Websites & like resources.

Limitations of the study can be pointed out as follows

• Analysis done is limited to the availability of data.

• It is very difficult to evaluate the accuracy of secondary data. Before using

secondary data.

• The quality of internal secondary data may be exaggerated or biased

• Mismatch between purpose collected and purpose used.

• Desired information may be unavailable or out-of-date.

• The conclusions derived from the report cannot be generalized

• This study has not been conducted over an extended period of time
having both market ups and downs. The market state has a significant
Influence on the buying patterns and preferences of investors. For
Example, the Feb & mar, 2008 market fall has sent violent shock waves
across the MF Investor community and is bound to influence the scheme
Preference/selection of the investors. The study has not captured such
Situations.
 Chapter 2-Literature Overview

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 equities, debentures and other securities.
The income earned through these investments and the capital appreciation
realized (after deducting the expenses and profits of mutual fund managers)
is shared by its unit holders in proportion to the number of units owned by
them. Thus, a Mutual Fund strives to meet the investment needs of the
common man by offering him or her opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost. The
small savings of all the investors are put together to increase the buying
power and hire a professional manager to invest and monitor the money.
Anybody with a surplus of as little as a few thousand rupees can invest in
Mutual Funds.
 HISTORY OF MUTUAL FUNDS IN INDIA: -

The Evolution:

The formation of Unit Trust of India marked the evolution of the Indian mutual
fund industry in the year 1963. The primary objective at that time was to
attract the small investors and it was made possible through the collective
efforts of the Government of India and the Reserve Bank of India. The history
of mutual fund industry in India can be better understood divided into
following phases:

Phase 1. Establishment and Growth of Unit Trust of India - 1964-87:

Unit Trust of India enjoyed complete monopoly when it was established in

the year 1963 by an Act of Parliament. UTI was set up by the Reserve Bank
of India and it continued to operate under the regulatory control of the RBI
until the two were de-linked in 1978 and the entire control was transferred in
the hands of Industrial Development Bank of India (IDBI). UTI launched its
first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted
the largest number of investors in any single investment scheme over the
years. UTI launched more innovative schemes in 1970s and 80s to suit the
needs of different investors. It launched ULIP in 1971, six more schemes
between 1981-84, Children's Gift

Growth Fund and India Fund (India's first offshore fund) in 1986, Master
share (India‘s first equity diversified scheme) in 1987 and Monthly Income
Schemes (offering assured returns) during 1990s. By the end of 1987, UTI's
assets under management grew ten times to Rs 6700 crores.

Phase II. Entry of Public Sector Funds - 1987-1993:

The Indian mutual fund industry witnessed a number of public sector players
entering the market in the year 1987. In November 1987, SBI Mutual Fund
from the State Bank of India became the first non-UTI mutual fund in India.
 SBI Mutual Fund was later followed by Can bank Mutual fund, LIC Mutual
Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual
Fund and PNB Mutual Fund. By 1993, the assets under management of the
industry increased seven times to Rs. 47,004 crores. However, UTI
remained to be the leader with about 80% market share

Phase III. Emergence of Private Sector Funds - 1993-96:

The permission given to private sector funds including foreign fund
management companies (most of them entering through joint ventures with
Indian promoters) to enter the mutual fund industry in 1993, provided a wide
range of choice to investors and more competition in the industry. Private
funds introduced innovative products, investment techniques and investor-
servicing technology. By 1994-95, about 11 private sector funds had
launched their schemes.

Phase IV. Growth and SEBI Regulation - 1996-2004:

The mutual fund industry witnessed robust growth and stricter regulation
from the SEBI after the year 1996. The mobilization of funds and the number
of players operating in the industry reached new heights as investors started
showing more interest in mutual funds.

Investor ‘s' interests were safeguarded by SEBI and the Government offered
tax benefits to the investors in order to encourage them. SEBI (Mutual
Funds) Regulations, 1996 was introduced by SEBI that set uniform
standards for all mutual funds in India. The Union Budget in 1999 exempted
all dividend incomes in the hands of investors from income tax. Various
Investor Awareness Programs were launched during this phase, both by
SEBI and AMFI, with an objective to educate investors and make them
informed about the mutual fund industry.

In February 2003, the UTI Act was repealed and UTI was stripped of its
Special legal status as a trust formed by an Act of Parliament. The primary
objective behind this was to bring all mutual fund players on the same level.

UTI was re-organized into two parts:

 1. The Specified Undertaking,

2. The UTI Mutual Fund

Presently Unit Trust of India operates under the name of UTI Mutual Fund
and its past schemes (like US-64, Assured Return Schemes) are being
gradually wound up. However, UTI Mutual Fund is still the largest player in
the industry. In 1999, there was a significant

Growth in mobilization of funds from investors and assets under

management which is supported by the following data:

Phase V. Growth and Consolidation - 2004 Onwards:

The industry has also witnessed several mergers and acquisitions recently,
examples of which are acquisition of schemes of Alliance Mutual Fund by
Birla Sun Life, Sun F&C Mutual Fund and PNB Mutual Fund by Principal
Mutual Fund. Simultaneously, more international mutual fund players have
entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were
29 funds as at the end of March 2006. This is a continuing phase of growth
of the industry through consolidation and entry of new international and
private sector players.

Emerging Issues of the Mutual Fund Industry in India:

• By end of JUNE 2010, Indian mutual fund industry reached more than Rs.
640000 crores.

• 100% growth in the last 6 years.

• Numbers of foreign AMC ‘s are in the queue to enter the Indian markets.

• Our saving rate is over 23%, highest in the world. Only channelizing
these savings in mutual funds sector is required.

• We have approximately 39 mutual funds which is 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 MFs to launch commodity mutual funds.

• Emphasis on better corporate governance.

• Trying to curb the late trading practices.

PRESENT POSITION: -
Mutual funds play vital role in resource mobilization and their efficient
allocation in a transitional economy like India. Economic transition is usually
marked by changes in the financial mechanism, institutional integration,
market regulation, re-allocation of savings and investments, and changes in
the inter-sector relationships. These changes often imply negativity which
shakes investor ‘s confidence in the capital market. Mutual funds perform a
crucial task as efficient alligators of resources in such a transitional period.

Throughout the world, mutual funds have worked as reliable instruments of

change in financial intermediation, development of the capital market, and
growth of the corporate sector. The active
involvement of mutual funds in promoting economic development can also
be seen in their dominant presence in the money and capital markets. Mutual
funds make a significant contribution in vibrating both the markets.

The spread of equity cult has further increased reliance of the corporate
sector on equity financing. The role of mutual funds in the financing of
corporate has substantially increased after the SEBI allowed the corporate
sector to reserve 20% of their public issues for Indian mutual funds.

The percentage share of corporate equity and debentures in the household

investors, together with UTI units, have increased from 3.7% in 1980-81 to
17.2% in 1992-93, while the share of less liquid assets like LIC, PF, and
pension have shown a marginal increase from 25.1% to 27.2% during the
same period. Mutual funds have been the fastest growing institution during
this period in the household savings sector. Growing market complications
and investment risk in the stock market with high inflation have pushed
households further towards mutual funds.
 Chapter 3 CONCEPTUAL FRAMEWORK

WHAT IS MUTUAL FUND?

A Mutual Fund is a vehicle for investing in stocks and bonds. It is not an
alternative investment option to stocks and bonds; rather it pools the money of
several investors and invests this in stocks, bonds, money market instruments
and other types of securities. Buying a mutual fund is like buying a small slice of
a big pizza. The owner of a mutual fund unit gets a proportional share of the
fund's gains, losses, income and expenses.

A Mutual Fund is a body corporate registered with the Securities and Exchange
Board of India (SEBI), that pools up the money from individual/ corporate
investors and invests the same on behalf of the investors /unit holders, in equity
shares, Government securities, Bonds, Call money markets etc., and distributes
the profits. In other words, a mutual fund allows an investor to indirectly take a
position in a basket of assets. A mutual fund pools together sums from individual
investors and invests it in various financial instruments. Each mutual fund has its
own investment objective.

Mutual funds have become one of the most attractive ways for the average
person to invest their money. A mutual fund pools resources from thousands of
investors and then diversifies its investment into many different holdings such
as stock, bonds, and securities in order to provide highly relative safety and
returns.

Each Mutual Fund with different type of schemes is managed by respective Asset
Management Company (AMC). An investor can invest his money in one or more
schemes of Mutual Fund according to his choice and becomes the unit holder of
the scheme. The invested money in a particular scheme of a Mutual Fund is then
invested by fund manager in different types of suitable stock and securities,
bonds and money market instruments. Each Mutual Fund is managed by
qualified professional man, who use this money to create a portfolio which
includes stock and shares, bonds, gilt, money-market instruments or combination
of all.
 DISTINGUISHING CHARACTERISTICS OF MUTUAL FUND

The traditional, distinguishing characteristics of the mutual fund may include the
following:

❖ Investors purchase mutual fund shares from the fund itself (or
through a broker for the fund) instead of from other investors on a
secondary market

❖ The price that investors pay for mutual fund shares is the fund's per
share net asset value (NAV) plus any shareholder fees that the fund
imposes at the time of purchase (such as sales loads).

❖ Mutual fund shares are "redeemable," meaning investors can sell their
shares back to the fund (or to a broker acting for the fund).

❖ Mutual funds generally create and sell new shares to accommodate

new investors. In other words, they sell their shares on a continuous
basis, although some funds stop selling when, for example, they
become too large.

❖ The investment portfolios of mutual funds typically are managed by

separate entities known as "investment advisers" that are registered
with the SEBI.
MAJOR RIGHTS AS A UNIT HOLDER IN A MUTUAL FUND

Some important rights are mentioned below:

❖ Unit holders have a proportionate right in the beneficial ownership of the

assets of the scheme and to the dividend declared.

❖ They are entitled to receive dividend warrants within 42 days of the date
of declaration of the dividend.

❖ They are entitled to receive redemption cheques within 10 working

days from the date of redemption.

❖ 75% of the unit holders with the prior approval of SEBI can terminate AMC of
the fund.

❖ 75% of the unit holders can pass a resolution to wind-up the scheme
 REGULATORY BODY FOR MUTUAL FUNDS

Securities Exchange Board of India (SEBI) is the regulatory body for all the
mutual funds mentioned above. All the mutual funds must get registered with
SEBl. The only exception is the UTI, since it is a corporation formed under a
separate Act of Parliament.

Broad Guidelines Issued by SEBI for a MF: -

SEBI is the regulatory authority of Mutual Funds. SEBl has the following broad
guidelines pertaining to mutual funds:

❖ Mutual Funds should be formed as a Trust under Indian Trust Act and

should be operated by Asset Management Companies (AMCs).

❖ Mutual Funds need to set up a Board of Trustees and Trustee Companies.

They should also have their Board of Directors.

❖ The net worth of the AMCs should be at least Rs.5 crore.

❖ AMCs and Trustees of a Mutual Fund should be two separate and distinct
legal entities

❖ The AMC or any of its companies cannot act as managers for any other fund

❖ AMCs have to get the approval of SEBI for its Articles and Memorandum of
Association

❖ All Mutual Funds schemes should be registered with SEBI.

❖ Mutual Funds should distribute minimum of 90% of their profits among the
investors

There are other guidelines also that govern investment strategy, disclosure
norms and advertising code for mutual funds.
 ROLE OF A FUND MANAGER

Fund managers are responsible for implementing a consistent investment

strategy that reflects the goals and objectives of the fund. Normally, fund
managers monitor market and economic trends and analyze securities in order to
make informed investment decisions. Thus, the role of fund manager is very
crucial.

ACCOUNT STATEMENT

When the units are bought or get allotted a statement will be issued mentioning
the number of units allotted/bought and redeemed by you. The recording of
entries would be similar to the passbook entries in the bank. In mutual fund
terminology it is called Account Statement.

After investing in a mutual fund investor gets an account statement, which

shows his holding and the price at which bought units. The account statement
is computer generated and cannot be traded or transferred. The account
statement shows the: -•S holding details

• Holding details
• The number of units outstanding
• Value of the holdings

All transactions relating to purchase units, redemption of units, dividend,

reinvestment, etc are shown in the account statement.
 MUTUAL FUND OPERATION FLOW CHART: -

WORKING OF MUTUAL FUND: -

A Mutual Fund is a collection of stocks, bonds, or other securities owned by
a group of investors and managed by a professional investment company.
For an individual investor to have a diversified portfolio is difficult. But he can
approach to such company and can invest into shares. Mutual funds have
become very popular since they make individual investors to invest in equity
and debt securities easy. When investors invest a particular amount in
mutual funds, he becomes the unit holder of corresponding units. In turn,
mutual funds invest unit holder ‘s money in stocks, bonds or other securities
that earn interest or dividend. This money is distributed to unit holders. If the
fund gets money by selling some stocks at higher price the unit holders also
are liable to get capital gains.
 TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. thus mutual funds has Variety of
flavors, being a collection of many stocks, an investor can go for picking a mutual
fund might be easy. There are over hundreds of mutual funds scheme to choose
from. It is easier to think of mutual funds in categories, mentioned below.
A). BY STRUCTURE

1. Open - Ended Schemes:

An open-end fund is one that is available for subscription all through
the year. These do not have a fixed maturity. Investors can conveniently buy
and sell units at Net Asset Value ("NAV") related prices. The key feature of
open-end schemes is liquidity.

2. Close - Ended Schemes:

A closed-end fund has a stipulated maturity period which generally
ranging from 3 to 15 years. The fund is open for subscription only during a
specified period. Investors can invest in the scheme at the time of the initial
public issue and thereafter they can buy or sell the units of the scheme on
the stock exchanges where they are listed. In order to provide an exit route
to the investors, some close-ended funds give an option of selling back the
units to the Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit routes is provided
to the investor.

3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of
open-ended and close- ended schemes. The units may be traded on the
stock exchange or may be open for sale or redemption during pre-
determined intervals at NAV related prices.
B). BY NATURE

1. Equity Fund:
These funds invest a maximum part of their corpus into equities
holdings. The structure of the fund may vary different for different
schemes and the fund manager’s outlook on different stocks. The Equity
Funds are sub-classified depending upon their investment objective, as
follows:
• Diversified Equity Funds
• Mid-Cap Funds
• Sector Specific Funds
• Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon; thus, Equity
funds rank high on the risk-return matrix.

2. Debt Funds:
The objective of these Funds is to invest in debt papers.
Government authorities, private companies, banks and financial
institutions are some of the major issuers of debt papers. By investing
in debt instruments, these funds ensure low risk and provide stable
income to the investors. Debt funds are further classified as:
• Gilt Funds: Invest their corpus in securities issued by
Government, popularly known as Government of India debt
papers. These Funds carry zero Default risk but are associated
with Interest Rate risk. These schemes are safer as they invest in
papers backed by Government.

• Income Funds: Invest a major portion into various debt

 instruments such as bonds, corporate debentures and
Government securities.

• MIPs: Invests maximum of their total corpus in debt instruments

while they take minimum exposure in equities. It gets benefit of
both equity and debt market. These scheme ranks slightly high on
the risk-return matrix when compared with other debt schemes.
• Short Term Plans (STPs): Meant for investment horizon for three
to six months. These funds primarily invest in short term papers
like Certificate of Deposits (CDs) and Commercial Papers (CPs).
Some portion of the corpus is also invested in corporate
debentures.

• Liquid Funds: Also known as Money Market Schemes, These

funds provides easy liquidity and preservation of capital. These
schemes invest in short-term instruments like Treasury Bills, inter-
bank call money market, CPs and CDs. These funds are meant for
short-term cash management of corporate houses and are meant
for an investment horizon of 1day to 3 months. These schemes
rank low on risk-return matrix and are considered to be the safest
amongst all categories of mutual funds.

3. Balanced Funds:
As the name suggest they, are a mix of both equity and debt funds.
They invest in both equities and fixed income securities, which are in line
with pre-defined investment objective of the scheme. These schemes
aim to provide investors with the best of both the worlds. Equity part
provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of
investment parameter viz, Each category of funds is backed by an
investment philosophy, which is pre-defined in the objectives of the fund.
The investor can align his own investment needs with the funds objective
and invest accordingly.

C). BY INVESTMENT OBJECTIVE:

Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of
these schemes is to provide capital appreciation over medium to long
term. These schemes normally invest a major part of their fund in equities
and are willing to bear short-term decline in value for possible future
appreciation.

Income Schemes:
Income Schemes are also known as debt schemes. The aim of
these schemes is 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.
Balanced Schemes:
Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn.
These schemes invest in both shares and fixed income securities, in the
proportion indicated in their offer documents (normally 50:50).
Money Market Schemes:
Money Market 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 inter-bank call money.

Load Funds:
A Load Fund is one that charges a commission for entry or exit.
That is, each time you buy or sell units in the fund, a commission will be
payable. Typically, entry and exit loads range from 1% to 2%. It could be
worth paying the load, if the fund has a good performance history.

No-Load Funds:
A No-Load Fund is one that does not charge a commission for
entry or exit. That is, no commission is payable on purchase or sale of
units in the fund. The advantage of a no-load fund is that the entire
corpus is put to work other schemes

Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax
laws prescribed from time to time. Under Sec.88 of the Income Tax Act,
contributions made to any Equity Linked Savings Scheme (ELSS) are
eligible for rebate.

Index Schemes:
Index schemes attempt to replicate the performance of a particular
index such as the BSE Sensex or the NSE 50. The portfolio of these
schemes will consist of only those stocks that constitute the index. The
percentage of each stock to the total holding will be identical to the stocks
index weightage. And hence, the returns from such schemes would be
more or less equivalent to those of the Index.
Sector Specific Schemes:
These are the funds/schemes which invest in the securities of only
those sectors or industries as specified in the offer documents. e.g.,
Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG),
Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors/industries. While these funds may
give higher returns, they are riskier compared to diversified funds.
Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time.
 SELECTION PARAMETERS FOR MUTUAL FUND

• Your objective:
The first point to note before investing in a fund is to find out whether your objective
matches with the scheme. It is necessary, as any conflict would directly affect your
prospective returns. Similarly, you should pick schemes that meet your specific
needs. Examples: pension plans, children’s plans, sector-specific schemes, etc.

• Your risk capacity and capability:

This dictates the choice of schemes. Those with no risk tolerance should go for
debt schemes, as they are relatively safer. Aggressive investors can go for equity
investments. Investors that are even more aggressive can try schemes that invest in
specific industry or sectors.

• Fund Manager’s and scheme track record:

Since you are giving your hard-earned money to someone to manage it, it is
imperative that he manages it well. It is also essential that the fund house you choose
has excellent track record. It also should be professional and maintain high
transparency in operations. Look at the performance of the scheme against relevant
market benchmarks and its competitors. Look at the performance of a longer period,
as it will give you how the scheme fared in different market conditions.

• Cost factor:
Though the AMC fee is regulated, you should look at the expense ratio of the
fund before investing. This is because the money is deducted from your investments.
A higher entry load or exit load also will eat into your returns. A higher expense ratio
can be justified only by superlative returns. It is very crucial in a debt fund, as it will
devour a few percentages from your modest returns.
 NET ASSET VALUE (NAV):

Since each owner is a part owner of a mutual fund, it is necessary to establish the value
of his part. In other words, each share or unit that an investor holds needs to be
assigned a value. Since the units held by investor evidence the ownership of the fund’s
assets, the value of the total assets of the fund when divided by the total number of
units issued by the mutual fund gives us the value of one unit. This is generally called
the Net Asset Value (NAV) of one unit or one share. The value of an investor’s part
ownership is thus determined by the NAV of the number of units held.

Calculation of NAV:

Let us see an example. If the value of a fund’s assets stands at Rs. 100 and it has 10
investors who have bought 10 units each, the total numbers of units issued are 100,
and the value of one unit is Rs. 10.00 (1000/100). If a single investor in fact owns 3
units, the value of his ownership of the fund will be Rs. 30.00(1000/100*3). Note that
the value of the fund’s investments will keep fluctuating with the market-price
movements, causing the Net Asset Value also to fluctuate. For example, if the value
of our fund’s asset increased from Rs. 1000 to 1200, the value of our investors
holding of 3 units will now be (1200/100*3) Rs. 36. The investment value can go up or
down, depending on the markets value of the fund’s assets.
 STRUCTURE OF A MUTUAL FUND:

India has a legal framework within which Mutual Fund have to be constituted. In India
open and close-end funds operate under the same regulatory structure i.e. as unit
Trusts. A Mutual Fund in India is allowed to issue open-end and close-end schemes
under a common legal structure. The structure that is required to be followed by any
Mutual Fund in India is laid down under SEBI (Mutual Fund) Regulations, 1996.

The Fund Sponsor:

Sponsor is defined under SEBI regulations as any person who, acting alone or in
combination of another corporate body establishes a Mutual Fund. The sponsor of the
fund is akin to the promoter of a company as he gets the fund registered with SEBI.
The sponsor forms a trust and appoints a Board of Trustees. The sponsor also appoints
the Asset Management Company as fund managers. The sponsor either directly or
acting through the trustees will also appoint a custodian to hold funds assets. All these
are made in accordance with the regulation and guidelines of SEBI.
 As per the SEBI regulations, for the person to qualify as a sponsor, he
must contribute at least 40% of the net worth of the Asset Management
Company and possesses a sound financial track record over 5 years prior to
registration.

Mutual Funds as Trusts:

A Mutual Fund in India is constituted in the form of Public trust Act, 1882.
The Fund sponsor acts as a settlor of the Trust, contributing to its initial
capital and appoints a trustee to hold the assets of the trust for the benefit of
the unit-holders, who are the beneficiaries of the trust. The fund then invites
investors to contribute their money in common pool, by scribing to “units”
issued by various schemes established by the Trusts as evidence of their
beneficial interest in the fund.
It should be understood that the fund should be just a “pass through”
vehicle. Under the Indian Trusts Act, the trust of the fund has no independent
legal capacity itself, rather it is the Trustee or the Trustees who have the
legal capacity and therefore all acts in relation to the trusts are taken on its
behalf by the Trustees. In legal parlance the investors or the unit-holders are
the beneficial owners of the investment held by the Trusts, even as these
investments are held in the name of the Trustees on a day-to-day basis.
Being public trusts, Mutual Fund can invite any number of investors as
beneficial owners in their investment schemes.

Trustees:
A Trust is created through a document called the Trust Deed that is executed
by the fund sponsor in favor of the trustees. The Trust- the Mutual Fund –
may be managed by a board of trustees- a body of individuals, or a trust
company- a corporate body. Most of the funds in India are managed by
Boards of Trustees. While the boards of trustees are governed by the Indian
Trusts Act, where the trusts are a corporate body, it would also require to
comply with the Companies Act, 1956. The Board or the Trust company as
an independent body, acts as a protector of the of the unit-holders’ interests.
The Trustees do not directly manage the portfolio of securities. For this
specialist function, the appoint an Asset Management Company. They
ensure that the Fund is managed by ht AMC as per the defined objectives
and in accordance with the trust’s deeds and SEBI regulations.

The Asset Management Companies:

The role of an Asset Management Company (AMC) is to act as the
investment manager of the Trust under the board supervision and the
guidance of the Trustees. The AMC is required to be approved and
registered with SEBI as an AMC. The AMC of a Mutual Fund must have a
net worth of at least Rs. 10 Crores at all times. Directors of the AMC, both
independent and non- independent, should have adequate professional
expertise in financial services and should be individuals of high morale
standing, a condition also applicable to other key personnel of the AMC. The
AMC cannot act as a Trustee of any other Mutual Fund. Besides its role as
a fund manager, it may undertake specified activities such as advisory
services and financial consulting, provided these activities are run
independent of one another and the AMC’s resources (such as personnel,
systems etc.) are properly segregated by the activity. The AMC must always
act in the interest of the unit-holders and reports to the trustees with respect
to its activities.
 Custodian and Depositories:
Mutual Fund is in the business of buying and selling of securities in large
volumes. Handling these securities in terms of physical delivery and eventual
safekeeping is a specialized activity. The custodian is appointed by the
Board of Trustees for safekeeping of securities or participating in any
clearance system through approved depository companies on behalf of the
Mutual Fund and it must fulfill its responsibilities in accordance with its
agreement with the Mutual Fund. The custodian should be an entity
independent of the sponsors and is required to be registered with SEBI. With
the introduction of the concept of dematerialization of shares the
dematerialized shares are kept with the Depository participant while the
custodian holds the physical securities. Thus, deliveries of a fund’s securities
are given or received by a custodian or a depository participant, at the
instructions of the AMC, although under the overall direction and
responsibilities of the Trustees.

Bankers:
A Fund’s activities involve dealing in money on a continuous basis primarily
with respect to buying and selling units, paying for investment made,
receiving the proceeds from sale of the investments and discharging its
obligations towards operating expenses. Thus, the Fund’s banker
plays an important role to determine quality of service that the fund gives in
timely delivery of remittances etc.

Transfer Agents:
Transfer agents are responsible for issuing and redeeming units of the
Mutual Fund and provide other related services such as preparation of
transfer documents and updating investor records. A fund may choose to
carry out its activity in-house and charge the scheme for the service at a
competitive market rate. Where an outside Transfer agent is used, the fund
investor will find the agent to be an important interface to deal with, since all
of the investor services that a fund provides are going to be dependent on
the transfer agent.
 HOW RISKY YOUR MUTUAL FUND IS: -

Investors always judge a fund by the return it gives, never by the risk it took.
In any historical analysis of a mutual fund, the return is remembered but the
risk is quickly forgotten. So, a fund manager may have used very high-risk
strategies (that are bound to fail disastrously in the long run), hoping that his
wins will be remembered (as they often are), but the risk he took will soon be
forgotten.

WHAT IS RISK?
Risk can be defined as the potential for harm. But when anyone analyzing
mutual funds uses this term, what is actually being talked about is volatility.
Volatility is nothing but the fluctuation of the Net Asset Value (price of a unit
of a fund). The higher the volatility, the greater the fluctuations of the NAV.
Generally, past volatility is taken as an indicator of future risk and for the task
of evaluating mutual fund; this is an adequate (even if not ideal)
approximation.

Defining Mutual fund risk:

Mutual funds face risks based on the investments they hold. For example, a
bond fund faces interest rate risk and income risk. Bond values are inversely
related to interest rates. If interest rates go up, bond values will go down and
vice versa. Bond income is also affected by the change in interest rates.
Bond yields are directly related to interest rates falling as interest rates fall
and rising as interest rise. Income risk is greater for a short-term bond fund
than for a long- term bond fund.

Similarly, a sector stock fund (which invests in a single industry, such as

telecommunications) is at risk that its price will decline due to developments
in its industry. A stock fund that invests across many industries is more
sheltered from this risk defined as industry risk.
 CALL RISK: -

The possibility that falling interest rates will cause a bond issuer to redeem
or call its high- yielding bond before the bond's maturity date.

COUNTRY RISK: -
The possibility that political events (a war, national elections), financial
problems (rising inflation, government default), or natural disasters (an
earthquake, a poor harvest) will weaken a country's economy and cause
investments in that country to decline.

CREDIT RISK: -

The possibility that a bond issuer will fail to repay interest and principal in a
timely manner. Also called default risk.

CURRENCY RISK: -
The possibility that returns could be reduced for Americans investing in
foreign securities because of a rise in the value of the U.S. dollar against
foreign currencies. Also called exchange- rate risk.

INCOME RISK: -
The possibility that a fixed-income fund's dividends will decline as a result of
falling overall interest rates.

INFLATION RISK: -

The possibility that increases in the cost of living will reduce or eliminate a fund's real
inflation- adjusted returns. Sometimes referred to as "loss of purchasing power."
Whenever inflation sprints forward faster than the earnings on your investment, you
run the risk that you'll actually be able to buy less, not more. Inflation risk also occurs
when prices rise faster than your returns.

INTEREST RATE RISK: -

The possibility that a bond fund will decline in value because of an increase in interest
rates. Changing interest rates affect both equities and bonds in many ways. Investors
are reminded that "predicting" which way rates will go is rarely successful. A diversified
portfolio can help in offsetting these changes.

MANAGER RISK: -
The possibility that an actively managed mutual fund's investment adviser
will fail to execute the fund's investment strategy effectively resulting in the
failure of stated objectives.
MARKET RISK: -
The possibility that stocks fund or bond fund prices overall will decline over
short or even extended periods. Stock and bond markets tend to move in
cycles, with periods when prices rise and other periods when prices fall.

PRINCIPAL RISK
The possibility that an investment will go down in value, or "lose money,"
from the original or invested amount.

Changes in Government Policy

Changes in Government policy especially in regard to the tax benefits may impact
the business prospects of the companies leading to an impact on the investments
made by the fund.
 Investment Risk

The sectoral fund schemes, investments will be predominantly in equities of

select companies in the particular sectors. Accordingly, the NAV of the schemes
are linked to the equity performance of such companies and may be more volatile
than a more diversified portfolio of equities.

Credit Risk

In short, how stable is the company or entity to which you lend your money when you
invest? How certain are you that it will be able to pay the interest you are promised,
or repay your principal when the investment matures?
 HOW RISK IS MEASURED: -
There are two ways in which you can determine how risky a fund is.

STANDARD DEVIATION: -
Standard Deviation is a measure of how much the actual performance of a
fund over a period of time deviates from the average performance. ―Since
Standard Deviation is a measure of risk, a low Standard Deviation is good.

SHARPE RATIO: -
This ratio looks at both, returns and risk, and delivers a single measure that
is proportional to the risk adjusted returns. ―Since Sharpe Ratio is a measure
of risk-adjusted returns, a high Sharpe Ratio is good."
THINGS TO BE SEEN WHILE INVESTING IN MUTUAL FUNDS:
-

1.Don't just look at the NAV, also look at the risk:

Alliance Buy India and Alliance Equity both have 3 stars. That does mean
their NAV is identical. In fact, the NAV of Alliance Equity is 91.66 while that
of Buy India is 16.05.

However, Alliance Buy India took an average risk and delivered an average
return, while Alliance Equity took an above average risk to get the above
average returns. Hence their stars are identical, despite one having a higher
NAV.

2.Higher rating does not mean better returns:

A fund with more stars does not indicate a higher return when compared with
the rest. All it means is that you will get a good return without putting your
money at too much risk.

Birla Equity Plan has a 4-star rating while Alliance Tax Relief '96 has a 2-star
rating. However, the fund with the 2-star rating has a higher NAV (131.96)
than the one with the 4-star rating (39.37).

3.Higher rating does not mean more risk:

Birla Advantage has an NAV of 67.09 while Franklin India Prima has an NAV
of 122.92. This does not necessarily mean that Franklin India Prima is
offering a higher risk since the return is higher. In fact, according to our
ratings, Franklin India Prima is a 5-star fund while (risk is below average)
while Birla Advantage is a 2-star fund (risk is above average).
 ADVANTAGES OF INVESTING THROUGH A MUTUAL FUND

A mutual fund is an entity that pools the money of many investors -- its unit-holders --
to invest in different securities. Investments may be in shares, debt securities, money
market securities or a combination of these. Those securities are professionally
managed on behalf of the unit-holders, and each investor holds a pro-rata share of the
portfolio i.e., entitled to any profits when the securities are sold, but subject to any
losses in value as well.

i) Professional investment management

Mutual funds hire full-time, high-level investment professionals. Funds can afford to
do so as they manage large pools of money. The managers have real-time access to
crucial market information and are able to execute trades on the largest and most
cost-effective scale.

ii) Diversification

Mutual funds invest in a broad range of securities. This limits investment risk by
reducing the effect of a possible decline in the value of any one security. Mutual fund
unit-holders can benefit from diversification techniques usually available only to
investors wealthy enough to buy significant positions in a wide variety of securities.

iii) Low Cost

A mutual fund let's you participate in a diversified portfolio for as little as Rs.5,000/-,
and sometimes less. And with a no-load fund, you pay little or no sales charges to own
them.

iv) Convenience and Flexibility

You own just one security rather than many, yet enjoy the benefits of a diversified
portfolio and a wide range of services. Fund managers decide what securities to trade,
collect the interest payments and see that your dividends on portfolio securities are
received and your rights exercised. It also uses the services of a high-quality custodian
and registrar in order to make sure that your convenience remains at the top of our
mind.

v) Personal Service

One call puts you in touch with a specialist who can provide you with information you
can use to make your own investment choices. They will provide you personal
assistance in buying and selling your fund units, provide fund information and answer
questions about your account status.

vi)Liquidity

In open-ended schemes, you can get your money back promptly at net asset value
related prices from the mutual fund itself.

vii) Transparency

You get regular information on the value of your investment in addition to disclosure
on the specific investments made by the mutual fund scheme.
 DISADVANTAGES OF MUTUAL FUND

1. Costs Control Not in the Hands of an Investor: Investor has to pay investment
management fees and fund distribution costs as a percentage of the value of his
investments, irrespective of the performance of the fund.

2. No Customized Portfolios: The portfolio of securities in which a fund invests is

a decision taken by the fund manager. Investors have no right to interfere in the
decision-making process of a fund manager, which some investors find as a
constraint in achieving their financial objectives.

3. Difficulty in Selecting a Suitable Fund Scheme: Many investors find it difficult

to select one option from the plethora of funds/schemes/plans available.
 How to invest in Mutual funds?

Step one – Identify your investment needs

Your financial goals will vary, based on your age, lifestyle, financial
independence, family commitments, level of income & expenses among
many other factors. Therefore, the first step is to assess your needs. Begin
by asking yourself these questions:

1. What are my investment objectives & need?

Probable answers: I need regular income or need to buy a home or finance

a wedding or educate my children or a combination of all these needs.

2. How much risk i am willing to take?

Probable answer: I can take a minimum amount of risk or I am willing to

accept the fact that my investment value may fluctuate or that there may be
a short-term loss in order to achieve a long-term potential gain.

3. What are my cash flow requirements?

Probable answer: I need a regular cash flow or I need a lump sum amount
to meet a specific need after a certain period or I don ‘t requires a current
cash flow but I want to build my assets for the future.

By going through such an exercise, you will know what you want out of your
investment & can set the foundation for a sound mutual fund investment
strategy.

Step Two- Choose the right Mutual Fund.

Once you have a clear strategy in mind, you now have to choose which
Mutual fund & scheme you want to invest in. The offer document of the
scheme tells you its objectives & provides supplementary details like the
track record of other schemes managed by the same fund manager. Some
factors to evaluate before choosing a particular Mutual fund are:
• The track record of performance over the last few years in relation to the
appropriate yardstick & similar funds in the same category.
• How well the Mutual fund is organized to provide efficient, prompt & personalized
service.

Step Three – Select the ideal mix of schemes

Investing in just one Mutual fund scheme may not meet all your investment
needs. You may consider investing in a combination of schemes that
satisfy your needs.

Investor may decide on the basis of growth & risk levels which may be

categorized as follows Aggressive plans

Moderate

plans

Defensive

plans

Factors considered in this may be

Growth schemes

Income schemes

Balanced

schemes Money

market schemes

Step four –Investment regularly

For most of us, the approach that works best is to invest a fixed amount at
specific intervals, say every month. By investing a fixed sum each month,
you get fewer units when the price is high & more unit’s wen the price is low,
thus bringing down your average cost per unit. This is called rupee cost
 averaging & is a disciplined investment strategy followed by investors all over
the world. With many open-ended schemes offering systematic investment
plans, this regular investing habit is made easy for you.

As per the current tax laws, Dividend/income distribution made by Mutual

Funds is exempt from income tax in the hands of investor. However, in case
of debt schemes dividend/income distribution is subject to dividend
distribution tax. Further there are other benefits available for investment in
Mutual Funds under the provisions of the prevailing tax laws. You may
therefore consult your tax advisor or Chartered Accountant for specific
advice to achieve maximum tax efficiency by investing in mutual funds.

Step Six –Start early

It is desirable to start investing early & stick to a regular investment plan. If
you start now, you will make more than if you wait 7 invest later. The power
of compounding lets you earn income on income & your money multiplies at
compounded rate of return.

Step Seven – The final step

All you need to do now is to get in touch with a Mutual Fund or your advisor
& start investing. Reap the rewards in the years to come. Mutual Funds are
suitable for every kind of investor whether starting a career or retiring,
conservative or risk taking, growth oriented or income seeking.
.
Customer Segments: Preferences

High Net Worth

Institutional Retail
Individual

• Income funds • Opportunistic selection• Equity / Debt / Balanced

Preferred products
based on relative based on advice and
• Money market / Liquid funds
performance of product perception of likely
• Gilt funds
types returns

Parameters for • Performance and capital • Performance • Past performance

selection of scheme protection measures
• Fund perception (brand,• Fund perception (brand,

• Size of the fund (liquidity) research quality, peer parent or sponsors)

feedback)
• Investor service quality levels • Simplicity of structure and

• Risk diversification options

• Fund manager
(multiple funds /
• Risk diversification
• Expense ratio schemes)
(multiple funds /

• Relationship schemes)

Preferred channel for • Own distribution arm, • Banks (Private Banking)• Institutional distributors
purchase
institutional distributors
• Institutional distributors• Agents

• Direct AMC sales force

• Direct AMC sales force • Banks

• Banks
FACTORS AFFECTING INVESTMENT
PATTERN

 Age
 Level of income & expenses
 Needs & greed
 Lifestyle
 Risk appetite
 Financial independence
 Financial goals
 Family commitments
OVERVIEW ON MUTUAL FUNDS COMPANIES IN INDIA

ABN AMRO Mutual Fund:

ABN AMRO mutual fund is promoted by the ABN AMRO banking group, one
of the banking giants in the world with an asset base of over $500 billion.
ABN AMRO Asset Management, a subsidiary of ABN AMRO, manages the
investment management business of the group.

ABN AMRO Asset Management is one of the world's leading asset

management companies with more than 70 years of experience in managing
money for individual customers and institutional clients.

ABN AMRO Asset Management (India) Limited is the AMC to the ABN
AMRO mutual fund. ABN AMRO Bank NV holds 75 per cent stake in the
AMC. As of Aug 2006, the fund has assets of over Rs.4,176 crore under
management.

Birla Sun Life Mutual Fund:

Birla Sunlife Mutual Fund is one of India's leading mutual funds with assets
of over Rs.17,098 crore under management as of Aug 2006. Birla Sun Life
Asset Management Company Limited, the investment manager of Birla
Sun life Mutual Fund, is a joint venture between the Aditya Birla Group and
Sun Life Financial Services, leading international financial services
organization.

Baroda Pioneer Mutual Finds:

Baroda Pioneer Mutual Fund is presently under the management of Baroda
Pioneer Asset Management Company Limited (its AMC). The AMC was set
up in the year 1995, as wholly owned subsidiary of Bank of Baroda. The main
aim behind the establishment of the company was to manage the assets of
Baroda Pioneer Mutual Fund. On 5th October 2007, Bank of Baroda became
party to an agreement with Pioneer Investments (Pioneer Global Asset
Management Spa), a global asset manager.
 HDFC Mutual Fund:
HDFC Mutual Fund has been one of the best performing mutual funds
in the last few years. HDFC Asset Management Company Limited
(AMC) functions as an Asset Management Company for the HDFC
Mutual Fund.

AMC is a joint venture between housing finance giant HDFC and British
investment firm Standard Life Investments Limited. It conducts the
operations of the Mutual Fund and manages assets of the schemes,
including the schemes launched from time to time. As of Aug 2006, the
fund has assets of Rs.25,892 crores under management.

HSBC Mutual Fund:

HSBC is one of the world's leading banking giants and boasts of a 140-
year history in banking services. HSBC operates in more than 70 countries
across the globe and has assets of over $1.2 trillion on the consolidated
group balance sheet. The investment banking and fund management
businesses of the group is handled by HSBC Investments.

HSBC Asset Management India Private Limited acts as the Asset

Management Company to the HSBC Mutual Fund. HSBC Securities and
Capital Markets India Private Limited, an affiliate of the HSBC group, is the
sponsor of the fund and owns 75 percent stake in the AMC. The AMC is
headed by its chairman Niall S Booker, who is also the head of HSBC
Bank in India. The operations of the AMC are headed by Sanjay Prakash,
director and CEO. As of Aug 2006, the fund has assets of over Rs.10,684
crore under management.

ICICI Prudential Mutual Fund:

Prudential ICICI Mutual Fund is the largest private sector mutual fund in
India with assets of over Rs.34,119 crore under management as of Aug
2006. The asset management company, Prudential ICICI Asset
 Management Company Limited, is a joint venture between Prudential Plc.,
Europe's leading insurance company and ICICI Bank, India's premier
financial institution. Prudential Plc. holds 55 per cent of the asset
management company and the balance by
ICICI Bank. In a span of just over six years, Prudential ICICI Asset
Management Company has emerged as one of the largest asset
management companies in the country.

State Bank of India Mutual Fund:

SBI Mutual Fund, India's largest bank sponsored mutual fund, is a joint
venture between the State Bank of India and Societe General Asset
Management, one of the world's top-notch fund management companies.
Over the years, SBI Mutual Fund has carved a niche for itself through
prudent investment decisions and consistent wealth creation. Since its
inception, SBI Funds Management Private Ltd. has launched thirty-two
schemes and successfully redeemed fifteen of them. Throughout this
journey, SBI Mutual Fund has profusely rewarded the 20, 00,000 investors
who have reposed their faith in it. Today, the SBI fund boasts of an expertise
of managing assets over Rs. 13,000 crores and has a diverse profile of
investors actively parking their investments across 28 active schemes. A vast
network of 82 collection branches, 26 investor service centers, 21 investor
service desks and 21 district organizers helps the SBI Mutual Fund to reach
out to their investors.

ING Vysya Mutual Fund:

ING Vysya mutual fund benefits from the vast international experience and
professional expertise of its promoters the ING Group, Dutch insurance and
banking giant. ING, one of the largest financial services groups globally, took
over the former Vysya Bank in India to form ING Vysya Bank. ING
Investment Management (India) Private Limited is the AMC for the mutual
fund with the sponsor of the fund holding a majority stake in the company.
ING Vysya mutual fund strives to provide investors with the most practical
and secure investment opportunities to invest their valuable savings.
 Sahara Mutual Fund:

Sahara Mutual Fund is sponsored by the Sahara India Financial Corporation

Limited (SIFCL), the flagship company of Sahara India Group. Incorporated
in 1987, SIFCL is the First Residuary Non-Banking Company (RNBC) in
India that has been granted certificate of registration by RBI and is a leading
public deposit mobilization company in the Private sector.
Sahara Asset Management Company Private Limited, the AMC of Sahara
Mutual Fund, was incorporated on August 31, 1995.

Tata Mutual Fund:

Tata mutual fund, set up in 1995, is one of the leading private sector funds
in the country and is promoted by the Tata group. The sponsors of the fund
are Tata Sons Limited and Tata Investment Corporation Limited.
Tata Asset Management Limited is the investment manager of the mutual
fund and has F K Karavana of Tata Sons as its chairman. 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. Tata Mutual Fund offers a wide
range of investment products for institutional and individual investors and
as of August 31, 2006, has assets of Rs.
12562.65 crores under management.

Kotak Mahindra Mutual Fund:

Kotak Mahindra mutual fund is one of the leading mutual funds in the country
with assets of over Rs.12,530 crore under management as of Aug 2006. The
fund is promoted by Kotak Mahindra Bank, one of India's leading financial
institutions that offer financial solutions ranging from commercial banking,
stock broking, life insurance and investment banking.

Kotak Mahindra mutual fund launched its schemes in December 1998 and
today manages assets of 4, 34,504 investors in various schemes. Kotak
Mahindra mutual fund was the first fund house in the country to launch a
dedicated gilt scheme investing only in government securities.

Unit Trust of India Mutual Fund:

The setting up of the Unit Trust of India (UTI) in 1963 heralded the birth of
the Indian mutual fund industry. In 1964, UTI mutual fund launched its
flagship scheme US-64 and went on to become a generic term for the mutual
fund sector till the government allowed public sector banks to start mutual
funds in 1987. 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. UTI Mutual Fund remains the
largest fund in the country with assets of over Rs.35,028 crore under
management as of Aug 2006.

Standard Chartered Mutual Fund:

Standard Chartered mutual fund is promoted by banking giant Standard
Chartered and exclusively focuses on debt schemes. The fund started as
ANZ Grind lays Mutual Fund and was later renamed as Standard
Chartered Mutual Fund after the takeover of Grind lays Bank by Standard
Chartered.
Standard Chartered Bank is a truly global bank with employees
representing 80 nationalities. The bank has a strong brand presence in
India and is well entrenched in developing markets of Asia Pacific region.

The sponsor of the fund is Standard Chartered Bank. The AMC of the fund
is Standard Chartered Asset Management Company Private Limited. The
sponsor holds a 75 per cent stake in the company and the balance is held
by Atul Choksey of Apcotex. As of Aug 2006, the fund has assets of over
Rs.15,551 crore under management.
 Escorts Mutual Fund:
Escorts Mutual Fund is promoted by the business conglomerate Escorts
group. Escorts Asset Management Limited acts as the AMC to the mutual
fund. Escorts Mutual Fund usually offers open ended schemes and the fund
category is Equity- balanced fund. The fund is a member of the Escort Group
of Companies, which deals with a number of high growth industries like
construction and material handling equipment, farm machinery, two
wheelers, auto ancillary products and financial Services.

Benchmark Mutual Fund:

Benchmark Mutual Fund offers low-cost innovative products which can bring
good returns at acceptable levels of risk. Quantitative techniques of investing
are employed for finding appropriate places for parking the funds. The
techniques used involve gathering large amounts of financial information
analyzing and transforming it to set a model of investing. With these
quantitative techniques, best can be hoped out of investment.

Canbank Mutual Fund:

Canara Bank made its foray into the mutual fund sector by establishing the
mutual fund arm Can bank Mutual Fund in December, 1987. Canara Bank,
one of the largest public sector banks in the country, is also the sponsor of
the fund.
Can bank Investment Management Services Limited, a wholly owned
subsidiary of the bank, functions as the AMC to the fund. The operations
of the AMC are headed by N R Ramanujan, managing director. As of Aug
2006, the fund has assets of over Rs.3,246 crore under management.
 Total
Market Share of Mutual Fund Companies:
 CHAPTER 4 - RECOMMENDATION AND SUGGESTIONS

FINDINGS

Through this Project the results that was derived are-

•People who under the age group of 36-40 have more experience and are
more interested in investing in Mutual Funds.

•Generally, People employed in Private sectors and Businessman are

more likely to invest in Mutual Funds, than other people working in other
professions.

•Generally, investors whose monthly income is above Rs. 20001-30000 are

more likely to invest their income in Mutual Fund, to preserve their savings
of at least more than 20%.

•People generally like to save their savings in Mutual Fund, Fixed Deposits
and Savings Account.

•Many people came to know about Mutual Fund from Financial Advisors,
Advertisement as well as from their Peer group, and they generally invest
in the Mutual Fund by taking advices from their Legal Advisors.

•Investors generally like to invest in Large Cap Companies like Reliance,

SBI, etc. to minimize their risk.

•The most popular medium of investing in Mutual Fund is through SIP

and moreover people like to invest in Equity Fund though it is a risky
game.

• The main Objective of most of the Investors is to preserve their Income

 CONCLUSIONS

We can infer from the analysis that the concept of mutual fund in India is still
in its growing phase. With the growing importance of mutual fund in other
areas in the country, this place is witnessing the same rate of growth in
mutual funds. Apart from these facts the following are some other important
facts which can easily be inferred from the paper.

❖ Huge opportunities of Mutual funds exist in the India. In short, the

market in this city is a growing market

❖ As because many companies exist in this market, competition is cut to

throat.

❖ Mindsets of the investors are not towards mutual funds. They still think
of investing in traditional investment alternatives. Customers are not
properly educated about the mutual funds.

❖ Few private sectors banks like ICICI, HDFC, UTI, ING VYSYA etc. sell
mutual funds through their branches only.

❖ Specialized agents of mutual funds are rarely seen. Financial advisors

are not seen there who can educate the investors.

❖ Posters, banners or other promotional activities are rarely seen in this

market.

❖ Mutual fund companies do not have aggressive strategies.

❖ Insurance products are and can be the main competitors of mutual funds.

❖ Mutual fund investors are confined to the upper-middle and upper

social class in this market. Upper-lower class and lower-upper class
people are still untouched.
 ❖ More than half of the respondents have wrong perception about the
mutual funds. They feel mutual funds are very risky investment
alternative

❖ Most of the respondents are satisfied with their current return from their
investment. Most of the respondents neither do not want to take risk in
investing their money in mutual funds.

• Mutual Funds now represent perhaps most appropriate investment

opportunity for most investors. As financial markets become more
sophisticated and complex, investors need a financial intermediary who
provides the required knowledge and professional expertise on
successful investing. As the investor always try to maximize the returns
and minimize the risk. Mutual fund satisfies these requirements by
providing attractive returns with affordable risks. The fund industry has
already overtaken the banking industry, more funds being under mutual
fund management than deposited with banks. With the emergence of
tough competition in this sector mutual funds are launching a variety of
schemes which caters to the requirement of the particular class of
investors. Risk takers for getting capital appreciation should invest in
growth, equity schemes. Investors who are in need of regular income
should invest in income plans.

• The stock market has been rising for over three years now. This in turn
has not only protected the money invested in funds but has also to
helped grow these investments.

• This has also instilled greater confidence among fund investors who
are investing more into the market through the MF route than ever
before.
• Reliance India mutual funds provide major benefits to a common man
who wants to make his life better than previous.

• The mutual fund industry as a whole gets less than 2 per cent of
household savings against the 46 per cent that go into bank deposits.
Some fund managers say this only
• indicates the sector's potential. "If mutual funds succeed in chipping
away at bank deposits, even a triple digit growth is possible over the
next few years.
 RECOMMENDATIONS AND SUGGESTIONS

After a thorough study and analysis of the data and information, the following
are the few recommendations and suggestions, if implemented, would
definitely benefit the financial market in India, which is in its booming stage,
in the short run and in the long run as well. Recommendations and
suggestions are normally given when there are some problems or difficulties
lying in the market. Here in this research report recommendations and
suggestions are totally based on the facts, reactions, attitudes, perceptions,
and many other things of the respondents which were received from them
during research work. The recommendation part of this research work has
three parts only, which can push the mutual fund market in India to a higher
level.

Investors are unique, designing general product & awaiting good response is futile.

Service is the key for retention.

MF’s can design products combing insurance & investment benefits catering to
investor needs of safety & protection respectively.

Advertising needs to be done to reach mass retail investors who are not targeted at
all.

Mutual fund can be designed according to the customer goal requirement

Awareness:

Awareness of mutual fund products must be increased in the Bangalore city. The
awareness can be enhanced in the following ways---
Conference or seminars on ―mutual funds‖ can be conducted on regular
basis. This will no doubt increase the awareness of mutual fund in the minds of the
investors.
All the companies must join hands and work together for this.
Customer education:

As the awareness of mutual funds is still lacking in this market, companies should
give focus on
―customer education‖. For this purpose, again the conference and seminars can be
the best way towards educating the customers. Again, free training programme to the
agents can be fruitful.
Government intermediation:

Government must also work together with the mutual fund companies in promoting
the concept of mutual fund in India.

Confidence building activities:

People in this city are not confident in investing their money in mutual funds. Hence
there is a need to do something which will build the confidence in the minds of the
investors.
Hence the confidence building activities must be carried out by the mutual fund
companies. Because most of the people in India think that investing in mutual funds
is a very risky affair. In the following ways the confidence can be increased in the
minds of the people in India.

The present performance of the mutual funds is very good compared with other
investment. And the companies should cash in on this opportunity. The performance
of the mutual funds can be published widely.

Other newspapers and magazines, journals. This will no doubt induce the investors
towards investing in mutual funds.

Case study of the investors who have been benefited in investing in mutual funds
can be published in the newspapers, magazines and journals.

As selling of financial products requires well trained people, the companies must
provide proper training to the agents and financial planners. For this training institute
must be opened in this township.

Continuous brand building activities must be carried out by the companies. For this
purpose, companies should initiate some sort of promotional activities like, ads in
newspapers, magazines, journals.
Educational institutes must start some professional courses on mutual funds and
other finance specialized courses. This will create some sort of awareness about the
mutual funds.

Mutual fund companies must tie up with other financial institute like banks, post office
for reaching to the mass people. Because these financial institutes have tremendous
reach to the mass people in our country. As a result, mutual fund companies can
have easy access to the common people. The companies must go in for this kind of
strategic alliance with other companies as well. Because strategic alliance not only
benefit the companies but help in developing the market also.

For opening of new savings bank account, certain units of mutual funds of a
company (strategic alliance company) can be given at free of cost to the account
holder. This will no doubt make the people more familiar with the concept of mutual
funds.

On buying of one or some life insurance policies, again certain units of mutual fund
can be given at free of cost

Again, each car loan or other kind loan of a certain amount will get the loan taker
certain units of mutual funds absolutely free of cost
 BIBLIOGRAPHY & ANNEXURES

The below list are the links and references from which the project has been
inspired from:

https://www.investopedia.com/terms/m/mutualfund.asp#:~:text=A%20mutual%20f
und%20is%20a,market%20instruments%2C%20and%20other%20assets.
https://www.mutualfundssahihai.com/en
www.moneycontrol.com
ttps://www.indiastudychannel.com/projects/666-a-study-on-mutual-funds-in-
india.aspx
www.utimf.com
www.amfindia.com