COMPARATIVE STUDY OF MUTUAL

FUND OF HDFC AND SBI

Dissertation Submitted to Rajendra College (Autonomous) Balangir in
partial fulfillment of requirements for the award of the Degree
of

MASTER IN COMMERCE
By
NAME: BICKY SHARMA
ROLL NO:PG20COM033

Under the Supervision of:-

GUIDE NAME:SUNITA MAHANANDA

Assistant Professor
DEPARTMENT OF COMMERCE
RAJENDRA UNIVERSITY, BALANGIR

DEPARTMENT OF COMMERCE,
RAJENDRA UNIVERSITY, BALANGIR,
ODISHA

1
 CERTIFICATE

This is to certify that the dissertation entitled “Comparative study of mutual

fund of hdfc and sbi ” is being submitted by Bicky sharma in fulfillment for the award

of MASTER OF COMMERCE to Rajendra College (Autonomous) Balangir is a

record of bonafide work carried out by Sunita mahananda under my guidance and

supervision.

The results embodied in this thesis have not been submitted to any

other College or institute for the award of any degree or diploma.

Signature of the Supervisor Signature of the External Examiner

 DECLARATION

I hereby declare that the research work presented in this dissertation entitled,

“Comparative study of mutual fund of HDFC and SBI ” is original and was

carried out by me under the supervision of Sunita mahananda, Department of

Commerce, Rajendra College (Autonomous), Balangir. The work is original and has

not been submitted for any Degree/Diploma of this or any other University.

Signature of the Candidate

Place :
Date:
Examination Roll No.

Signature of the Supervisor

(With date and seal)

Signature of the Head of the Department/College/Institution

(With date and Seal)

 ACKNOWLEDGEMENT

A successful Dissertation is not the culmination of hard work of just one

person but it is the result of a lot of people. The gratitude cannot be expressed in

words, either written or oral but here I make an attempt to acknowledge those who

have helped me in the successful completion of this dissertation.

In the first place, I am indebted to the Department of Commerce which has

accepted me for Master of Commerce program and provided me with an excellent

opportunity to carry out the present thesis.

This thesis would never be possible without the guidance and support of my

Supervisor sunita mahananda Department of Commerce, Rajendra College

(Autonomous) Balangir, whose kindness and encouragement personified. He has

continuously guided me throughout my research work and I offer whole hearted

gratitude to him for his support.

I also owe my whole hearted gratitude to the feet of my Parents and my elder

brother and sister who always inspired me and their blessings really guide me a lot.

(Bicky Sharma)
CONTENTS
Chapter-1- Introduction

(A) Introduction to project 8

(B)Introduction to mutual funds 9

Meaning
• Types 11
• Mutual fund industry in India
22 (A)History
22 (B)No. Of AMC’S in India 26
• Performance of mutual funds in India 32
• Association of Mutual Funds in India.(AMFI) 35
• Benefits of mutual funds 39
• Drawbacks of mutual funds 42
• Future of mutual funds in India 43
Chapter-2- Objective of study 44
Chapter-3- Research methodology 45
Chapter-4- Comparative Analysis 48
Chapter-5- Inferences drawn 99
Chapter-6- Swot Analysis 104
Chapter-7- Conclusion 105
Chapter-9- Bibliography 109
(A) INTRODUCTION TO PROJECT-

The name of the project is comparative study of mutual fund of HDFC and SBI portfolio of
Selected mutual Fund and Investment Pattern of Investor in India.

A MUTUAL FUND is an investment company designed to pool the funds of smaller

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

For comparative analysis of performance of mutual funds in India I have taken 2 INDIAN
AMC’S EQUITY MUTUL FUND SCHEMES. These are

1. HDFC Equity Fund

2. SBI Equity fund

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

(B) INTRODUCTION TO MUTUAL FUNDS-

MUTUAL FUNDS

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

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

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

The most basic level of diversification is to buy multiple stocks rather than just one stock.
Mutual funds are set up to buy many stocks (even hundreds or thousands). Beyond that, you
can diversify even more by purchasing different kinds of stocks, then adding bonds, then
international, and so on. It could take you weeks to buy all these investments, but if you
purchased a few mutual funds you could be done in a few hours because mutual funds
automatically diversify in a predetermined category of investments (i.e. - growth companies,
low-grade corporate bond )
A MUTUAL FUND is an investment company designed to pool the funds of smaller
investors and place them under professional management. A mutual fund allows small
investors to diversify their portfolios. When a mutual fund is formed, it issues a prospectus
detailing its intended investment strategy, and it is not permitted to deviate from that strategy
without public disclosure. A mutual fund prospectus also details the fees investors will be
charged, which can be substantial. In the US, a mutual fund is regulated by the SEC. A mutual
fund may invest in stocks, bonds, options, futures, currencies, and/or commodities. Although
any specific mutual fund is required to follow a specific investing strategy, the range of
strategies available is wide. A mutual fund such as an index fund may attempt to replicate
market or sector index. A mutual fund may specialize in large-cap, small-cap or even micro-
cap stocks. Investors seeking regular income can invest in a mutual fund that specializes in
government bonds or, for the more aggressive, corporate debt.

STOCKS

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

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

BONDS

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

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

A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in capital market instruments such as
shares, debentures and other securities. The income earned through these investments and the
capital appreciation realized is shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the common man as
it offers an opportunity to invest in a diversified, professionally managed basket of securities
at a relatively low cost. The flow chart below describes broadly the working of a mutual fund

In the working of mutual fund, there are following steps-

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

For organization of mutual fund there is a set criterion which has to be opted.
There are many entities involved and the diagram below illustrates the organizational set up
of a mutual fund:
SPONSORS
The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund
needs to be constituted in the form of a trust and the instrument of the trust should be in the
form of a deed registered under the provisions of the Indian Registration Act, 1908. The
sponsor is required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the
asset management company. The board of trustees manages the MF and the sponsor executes
the trust deeds in favor of the trustees. It is the job of the MF trustees to see that schemes
floated and managed by the AMC appointed by the trustees are in accordance with the trust
deed and SEBI guidelines.

ASSET MANAGEMENT COMPANY

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

BOARD OF TRUSTEES

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

CUSTODIANS

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

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

Equity / Growth Fund

Invest primarily in equity Liquid Funds
and equity related Provide high level of liquidity
instruments. by investing in money market
and debt instruments.
Children's Gift Fund
Children's Gift Fund Debt/ Income Fund
Invest in money market and
debt instruments and provide
optimum balance of yield, ...

Fixed Maturity Plan

Invest primarily in Debt /
Money Market Instruments
and Government Securities...
Mutual Fund Schemes

1. By Structure

• Open - Ended Schemes

• Close - Ended Schemes
• Interval Schemes

2. By Investment Objective

• Growth Schemes
• Income Schemes
• Balanced Schemes
• Money Market Schemes

3. Other Schemes

• Tax Saving Schemes

• Special Schemes
• Index Schemes
• Sector specific schemes

CLOSED ENDED MUTUAL FUND

A closed-end mutual fund has a set number of shares issued to the public through an initial
public offering. These funds have a stipulated maturity period generally ranging from 3 to 15
years.

The fund is open for subscription only during a specified period. Investors can invest in the
scheme at the time of the initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. nice underwritten, closed-end funds
trade on stock exchanges like stocks or bonds. The market price of closed-end funds is
determined by supply and demand and not by net-asset value (NAV), as is the case in open-
end funds. Usually closed mutual funds trade at discounts to their underlying asset value.

OPEN ENDED MUTUAL FUND

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

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

LARGE CAP FUNDS

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

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

MID CAP FUNDS

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

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

EQUITY MUTUAL FUNDS

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

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

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

GROWTH FUNDS

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

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

NO-LOAD MUTUAL FUNDS

Mutual funds can be classified into two types - Load mutual funds and No-Load mutual
funds. Load funds are those funds that charge commission at the time of purchase or
redemption. They can be further subdivided into (1) Front-end load funds and (2) Back-end
load funds. Front-end load funds charge commission at the time of purchase and back-end
load funds charge commission at the time of redemption.
On the other hand, no-load funds are those funds that can be purchased without commission.
No load funds have several advantages over load funds. Firstly, funds with loads, on average,
consistently under perform no-load funds when the load is taken into consideration in
performance calculations. Secondly, loads understate the real commission charged because
they reduce the total amount being invested. Finally, when a load fund is held over a long
time period, the effect of the load, if paid up front, is not diminished because if the money
paid for the load had invested, as in a no-load fund, it would have been compounding over the
whole time period.

EXCHANGE TRADED FUNDS

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

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

VALUE FUNDS

Value funds are those mutual funds that tend to focus on safety rather than growth, and often
choose investments providing dividends as well as capital appreciation. They invest in
companies that the market has overlooked, and stocks that have fallen out of favour with
mainstream investors, either due to changing investor preferences, a poor quarterly earnings
report, or hard times in a particular industry.

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

MONEY MARKET MUTUAL FUNDS

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

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

INTERNATIONAL MUTUAL FUNDS

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

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

SECTOR MUTUAL FUNDS

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

These funds tend to be more volatile than funds holding a diversified portfolio of securities in
many industries. Such concentrated portfolios can produce tremendous gains or losses,

depending on whether the chosen sector is in or out of favour.

INDEX FUNDS

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

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

FUND OF FUNDS

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

(A)HISTORY

GLOBAL HISTORY- Introduced in Belgium in 1822. This form of investment soon

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

HISTORY OF MUTUAL FUND INDUSTRY IN INDIA-

The origin of mutual fund industry in India is with the introduction of the concept of mutual
fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year
1987 when non-UTI players entered the industry. UTI remained the only fund till the
government allowed public sector banks to start mutual funds in 1987. Major PSU banks like
SBI, Canara Bank, Indian Bank and Punjab National Bank started offering their products.
Insurance giants LIC and GIC also started their own mutual fund subsidiaries. They were all
reasonably successful as equity investments gained popularity during the bull market of the
early nineties.

In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality
wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase;
the Assets under Management (AUM) were Rs. 67bn. The private sector entry to the fund
family raised the AUM to Rs. 470 ban in March 1993 and till Putting the AUM of the Indian
Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone,
constitute less than 11% of the total deposits held by the Indian banking industry.
The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the con
April 2004; it reached the height of 1,540 ban Putting the AUM of the Indian Mutual Funds
Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less
than.
11% of the total deposits held by the Indian banking industry.

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

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

From just Rs.25 crore under management in 1965, the total funds managed by the mutual fund
industry stood at over Rs.38,01,210 crore as of january 20022. The industry has matured very
fast over the last few years with a large number of players and diverse product

The mutual fund industry can be broadly put into four phases according to the development of
the sector. Each phase is briefly described as under.
PHASES-FIRST PHASE 1964-87

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

SECOND PHASE - 1987-1993 (ENTRY OF PUBLIC SECTOR

FUNDS)

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

THIRD PHASE - 1993-2003 (ENTRY OF PRIVATE SECTOR

FUNDS)

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

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

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

FOURTH PHASE - SINCE FEBRUARY 2003

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

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

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

From just Rs.25 crore under management in 1965, the total funds managed by the mutual fund
industry stood at over Rs.2,91,000 crore as of September 2006.
(B) NO. OF AMC’S IN INDIA

• ABN Amro Asset Management co. Ltd.

• Benchmark Asset Management co. Ltd.

• Birla Asset Management co. Ltd

• BOB Asset Management co. Ltd

• Canbank Asset Management co. Ltd

• Chola Asset Management co. Ltd

• Deutsche Asset Management co. Ltd

• DSP Asset Management co. Ltd

• Escorts Asset Management co. Ltd

• Fidelity Asset Management co. Ltd

• Franklin Templeton Investments

• HDFC Asset Management co. Ltd

• HSBC Asset Management co. Ltd

• ING Vysya Asset Management co. Ltd

• JM Financial Asset Management co. Ltd

• Kotak Mahindra Asset Management co. Ltd

• LIC Asset Management co. Ltd

• Morgan Stanley Asset Management co. Ltd

• Principal Asset Management co. Ltd

 • Prudential ICICI Asset Management co. Ltd

• Reliance Asset Management co. Ltd

• Sahara Asset Management co. Ltd

• SBI Asset Management co. Ltd

• Standard Chartered Asset Management co. Ltd

• Sundaram Asset Management co. Ltd

• Tata Asset Management co. Ltd

• Taurus Asset Management co. Ltd

• UTI Asset Management co. Ltd

THE MAJOR MUTUAL FUND HOUSES IN INDIA ARE:

HDFC MUTUAL FUND

HDFC Mutual Fund has been one of the best performing funds in recent years. The sponsors
of the fund are housing finance major HDFC and British investment company Standard Life

Investments. The paid up capital of the AMC is Rs. 25.161 crore.

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

The trustee of the fund is HDFC Trustee Company Limited, a subsidiary of HDFC Limited.
The chairman of the board of trustees is Anil Kumar Hirjee, vice chairman of Bombay
Burmah Trading Corporation. Other members of the board include Keki Mistry of HDFC and
James Aird of Standard Life.
The AMC, HDFC Asset Management Company Limited, is owned between HDFC and
Standard Life with HDFC holding slightly more than 50 per cent of the shares. The board of
directors has among its members Alexander Crombie of Standard Life, former head of Kodak
India H Dhanrajgir, former head of BASF India P M Thampi, and Renu S Karnad of HDFC.
The management of the AMC is headed by Milind Barve, managing director.

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

PRUDENTIAL ICICI

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

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

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

FRANKLIN TEMPLETON

One of the largest and most high profile mutual funds in the country, Franklin Templeton has
over Rs.22,102 crore under management as of February 2007. The sponsor of the fund is
Templeton International.
 Templeton is one of the largest mutual funds globally. Its parent company Franklin
Resources and Subsidiaries have over $400 billion under management.

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

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

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

markets fund manager.

DSP MERRILL LYNCH

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

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

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

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

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

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

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

As of February 2007, Fidelity India had over Rs.5,671 crore under its management.
TATA MUTUAL FUND

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

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

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

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

UTI MUTUAL FUND

The most experienced player in the Indian mutual fund industry, UTI was almost a generic
term for mutual fund schemes till the sector opened up. However, the fund house disappointed
most of its investors for a long period starting mid-nineties. From the verge of a collapse, the
government bailed out the fund before restructuring it. After the restructuring, the fund has
recovered some of its stature helped equally by professional management and a booming
market.
The fund's sponsors are public sector financial giants like Life Insurance Corporation, SBI,
Bank of Baroda and Punjab National Bank. The sponsors hold equal stakes in the asset
management company, UTI Asset Management Company Private Limited. The asset
management company has R H Patil, the former managing director of the National Stock
Exchange, as its chairman. The current SEBI chairman M Damodaran was his predecessor.

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

PERFORMANCE OF MUTUAL FUNDS IN INDIA

The year was 1963. Unit Trust of India invited investors or rather to those who believed in
savings, F to park their money in UTI Mutual Fund or 30 years it goaled without a single
second player. Though the 1988 year saw some new mutual fund companies, but UTI
remained in a monopoly position.

The performance of mutual funds in India in the initial phase was not even closer to
satisfactory level. People rarely understood, and of course investing was out of question. But
yes, some 24 million shareholders was accustomed with guaranteed high returns by the
begining of liberalization of the industry in 1992. This good record of UTI became marketing
tool for new entrants. The expectations of investors touched the sky in profitability factor.
However, people were miles away from the praparedness of risks factor after the
liberalization.

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

At last to mention, as long as mutual fund companies are performing with lower risks and
higher profitability within a short span of time, more and more people will be inclined to
invest until and unless they are fully educated with the dos and donts of mutual funds. The
year 1993 was a remarkable turning point in the Indian Mutual Fund industry.

The stock investment scenario till then was restricted to UTI (Unit Trust of India) and public
sector. This year marked the entry of private sector mutual funds, giving the Indian investors a
wider choice of selecting mutual funds. From then on, the graph of mutual fund players has
been on the rise with many foreign mutual funds also setting up funds in India. The industry
has also witnessed several mergers and acquisitions proving it advantageous to the Indian
investors. Are mutual funds emerging as preferred investment option? Are they safe and will
your money be secured with them? Before proceeding to answer these questions, a look at the
February 2006, Indian bull market scenario is worth a mention

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

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

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

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

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

When you exit from the scheme, you will get back the value of the units less the exit load
charges. If you want to switch from one type of mutual fund investment to another, you will
be required to pay the exchange fees. Advisory fees, broker fees, audit fees and registrar fees
are some of the other recurring expenditures that would be charged to you. These expenses
involve administrative and other running costs.

In India, SEBI (The Securities and Exchange Board of India) is the regulating authority that
SEBI formulates policies and regulates the mutual funds to protect the interest of the Indian
investors.
 FACTORS TO BE CONSIDERED BEFORE SELECTING A
MUTUAL FUND

1. Making Risk- adjusted returns comparison. By doing this the investor will know whether
the returns generated by the scheme have been adequately compensated for the extra risk
undertaken by the scheme.

2. The investor depending upon his risk appetite and preferences should sub-classify the
schemes on the basis of the characteristics of the schemes, which may be defensive or
aggressive in nature.

3. Portfolio concentration is also an important factor to be considered. It is always advisable

to choose a scheme, which has a well-diversified portfolio rather than a concentrated
portfolio, as it carries lesser risk.

4. Liquidity of the portfolio is also one of the critical parameters.

5. The corpus size of the scheme is also of importance. A large corpus size firstly denotes
investor’s confidence in the scheme and its fund manger abilities over the years and,
secondly it allows the fund manager to diversify the portfolio, which reduces the overall
market risk.

6. Other factors like turnover rates, low expense ratio, load structure etc of the schemes etc
should also be considered before finally zeroing down on a scheme of your choice.

7. The rankings undertaken by ICRA are an initiative to inform the investors- who does not
have the time or the expertise to undertake the analysis on their own- about the relative
performance of the schemes. It considers all important parameters to arrive at a
comprehensive rank with a view to help investors decide the scheme which may suit their
investment profile.

8. Although much neglected, the due diligence in selection of the right mutual fund scheme
is of utmost importance as an investor cannot move in and out of a particular scheme on a
regular basis, because of the high costs involved, and investments made into a particular
scheme should be looked on a long-term basis as a wealth creation tool.

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 5 EASY STEPS TO INVEST IN MUTUAL
FUNDS

Where to look for if you want to begin savings in Mutual Funds

Mutual funds are much like any other product, in that there are manufacturers who provide
the product and there are dealers who sell them.
Large banks to organized brokerage houses to Individual Financial agents get empanelled
with Mutual Funds to provide advice and assistance to customers who want to buy units.
Mutual funds units can now also be bought over the Internet.
Contacting an Investment advisor in a bank or a brokerage house or an Independent Financial
Advisor is the first step to gathering information.

1. Evaluation: choosing the right mutual fund for you

Each Mutual fund offers a variety of schemes to suit differing needs of investors. The
Bank/ Brokerage house/ Individual Financial Advisor help you make the choice based
on your needs. As an investor one may:
a) For the short term or long term want to invest.
b) Want regular income or growth.
c) Want to target lower risk or higher returns.
d) Be convinced of a particular sector and want to invest in it.
Remember, just like a salesman in a gift shop, your investment advisor can help you
the most if he knows what you are looking for.

2. Purchase
After you have decided to save, you may have to decide among the various
investment and withdrawal options that any fund offers to its investors.
Most of these schemes also offer various options to customize your operation of the
fund to your needs:

Systematic Investment Plan (SIP): Allows you to save a part of your income regularly.
It is also used to reduce risk when investing in schemes targeting aggressive growth.

Systematic Withdrawal Plan (SWP): Allows you to withdraw a part of your

investment regularly. Used when you want to withdraw your investment for a specific
regular payment, like insurance premium payments of monthly/quarterly frequency.

Automatic debit: Saves the hassle of writing a cheque when making an investment.
Your account is debited automatically for the amount invested.

Automatic credit: The reverse of Automatic Debit. It saves the hassle of enchasing a
cheque when withdrawing an investment. Your account is credited automatically with
the amount withdrawn.

Dividend plan: Allows you to get Tax-free dividends from your investment. (As per
current Tax laws).

Growth plan: Allows the income generated from investment to be ploughed back into
Some funds carry an entry load, which is a percentage fee deducted from the amount
invested before investment. Thus a 2.5% entry load will mean that if you invest Rs. 1
lakh in a Rs. 10 per unit IPO, instead of getting 10,000 units, you will be allotted
9,750 units. Check for presence of such loads and the scheme. Used by investor
targeting growth in their investment.

other conditions before investing.

 After deciding the choice of mutual fund, investment and withdrawal, you are ready
to begin your savings. You need to now fill up an application form and attach a
cheque of the value of your investment or mention your account number to have it
automatically debited from your account.

3. Post Purchase Monitoring

Once you have invested in an ongoing fund, expect a period of two to three days
before you receive an account statement on the address mentioned by you in your
application form.
Your account statement indicates your current holding in the scheme that you have
invested. Please ensure that all your details have been correctly captured in account
statement. Please point out any discrepancies to your nearest CAMS investor Service
Centre or the Mutual Fund office. You can request an account statement any time by
calling up your nearest CAMS/ Mutual fund offices usually mentioned on the back of
the account statement.
The transaction slip at the end of the account statement can be used for additional
purchases, redemptions or to intimate the mutual fund on any change in bank
mandates/address. The NAVs of all the open-ended schemes are published at the
fund's website, financial newspapers and
AMFI (Association of Mutual Funds) web-site www.amfiindia.com.

4. Exit
While you should periodically monitor the performance of your investments, we
recommend you do not get swayed by short term considerations in deciding your exit.
If you have invested in a long term fund, you can spare yourself undue worries by not
monitoring the NAV every day or week. Checking the performance once in a while
along with your advisor should be fine. Most mutual funds will provide you with a
toll free number that works from 9 am to 5 am and a website. For specific assistance
you can also use your financial advisors help.

5. Redemption/ Withdrawal
Just submit your completed transaction within the transacted time for the scheme that
you are invested in and deposit the same at the nearest CAMS Investor Service Centre
or the office of the fund. You can either get a direct credit to your bank account or
you can generally collect the cheque at the CAMS Investor Service Centre/ AMC
offices. If you fail to do so then the cheque is couriered to the address mentioned in
your account statement. Most funds take 1-3 days to credit your account with your
redemption proceeds.
In case an exit load is applicable to your withdrawal and you have redeemed a fixed
amount, an additional number of units equivalent to the exit load amount will be
liquidated from your investment. You can check this amount with the mentioned exit
load when you get the account statement using a simple calculator.
ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

With the increase in mutual fund players in India, a need for mutual fund association in India
was generated to function as a non-profit organization. Association of Mutual Funds in India
(AMFI) was incorporated on 22nd August, 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which has been

registered with SEBI. Till date all the AMCs are that have launched mutual fund schemes are
its members. It functions under the supervision and guidelines of its Board of Directors

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a
professional and healthy market with ethical lines enhancing and maintaining standards. It
follows the principle of both protecting and promoting the interests of mutual funds as well as
their unit holders.

THE OBJECTIVES OF ASSOCIATION OF MUTUAL FUNDS

IN INDIA

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It
has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The
objectives are as follows:

This mutual fund association of India maintains a high professional and ethical standards in
all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of conduct which
is followed by members and related people engaged in the activities of mutual fund and asset

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management. The agencies who are by any means connected or involved in the field of capital
markets and financial services also involved in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund
industry.

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

It develops a team of well qualified and trained Agent distributors. It implements a

programme of training and certification for all intermediaries and other engaged in the mutual
fund industry.

AMFI undertakes all India awarness programme for investors inorder to promote proper
understanding of the concept and working of mutual funds.

At last but not the least association of mutual fund of India also disseminate informations on
Mutual Fund Industry and undertakes studies and research either directly or in association
with other bodies.

THE SPONSORERS OF ASSOCIATION OF MUTUAL FUNDS

IN INDIA

BANK SPONSORED

1.SBI Fund Management Ltd.

2.BOB Asset Management Co. Ltd.

3.Canbank Investment Management Services Ltd.

4.UTI Asset Management Company Pvt. Ltd

5.Institutions

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6.GIC Asset Management Co. Ltd.

7.Jeevan Bima Sahayog Asset Management Co. Ltd.

PRIVATE SECTOR INDIAN:-

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

(b) Cholamandalam Asset Management Co. Ltd.

© Credit Capital Asset Management Co. Ltd.

(d) Escorts Asset Management Ltd.

(e) JM Financial Mutual Fund

(f) Kotak Mahindra Asset Management Co. Ltd.

(g) Reliance Capital Asset Management Ltd.

(h) Sahara Asset Management Co. Pvt. Ltd

(i)_Sundaram Asset Management Company Ltd.

(j)Tata Asset Management Private Ltd.

PREDOMINANTLY INDIA JOINT VENTURES:-

1.Birla Sun Life Asset Management Co. Ltd.

2.DSP Merrill Lynch Fund Managers Limited

3.HDFC Asset Management Company Ltd.

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PREDOMINANTLY FOREIGN JOINT VENTURES:-

1.ABN AMRO Asset Management (I) Ltd.

2.Alliance Capital Asset Management (India) Pvt.

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

4.Fidelity Fund Management Private Limited

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

6.HSBC Asset Management (India) Private Ltd.

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

8.Morgan Stanley Investment Management Pvt. Ltd.

9.Principal Asset Management Co. Pvt. Ltd.

10.Prudential ICICI Asset Management Co. Ltd.

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

ASSOCIATION OF MUTUAL FUNDS IN INDIA

PUBLICATIONS

AMFI publices mainly two types of bulletin. One is on the monthly basis and the other is

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41
quarterly. These publications are of great support for the investors to get intimation of the
knowhow of their parked money.

BENEFITS OF MUTUAL FUNDS-

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

UNIVERSAL BENEFITS

AFFORDABILITY

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

DIVERSIFICATION

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

VARIETY

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

PROFESSIONAL MANAGEMENT

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

TAX BENEFITS- Any income distributed after March 31,2002 will be subject to tax
in the assessment of all Unit holders. However, as a measure of concession to Unit holders of
open-ended equity-oriented funds, income distributions for the year ending March 31, 2003,
will be taxed at a concessional rate of 10.5%. In case of Individuals and Hindu Undivided
Families a deduction upto Rs. 9,000 from the Total Income will be admissible in respect of
income from investments specified in Section 80L, including income from Units of the
Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax.

REGULATIONS

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

BENEFITS OF OPEN-ENDED SCHEMES

LIQUIDITY

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

CONVENIENCE- An investor can purchase or sell fund units directly from a fund,
through a broker or a financial planner. The investor may opt for a Systematic Investment

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