Internship Project Report

TABLE OF CONTENTS
CHAPTER CONTENTS PAGE NO.

NO.
1. LITERATURE REVIEW 9-11
2. RESEARCH METHODOLGY 13-17
3. OBJECTIVES OF THE STUDY 19
4. INDUSTRY PROFILE 21-39
5. COMPANY PROFILE 41-50
6. DATA ANALYSIS AND 52-64

INTERPRETATION
7. FINDINGS 66
8. SUGGESTIONS AND 67
CONCLUSIONS
8. LIMITATIONS OF THE STUDY 69
9. QUESTIONNAIRE 71-72
10. BIBLIOGRAPHY 73
D Y PATIL VIDHYAPEETH, PUNE.[Type text]Page 1

Chapter- 1
LITERATURE
REVIEW

LITERATURE REVIEW
Mutual funds attracted the interests of academicians, researchers and financial analysts mostly
since 1986. A number of articles have been published in financial dailies like economic times,
business line and financial express, periodicals like capital market, Business India etc., and in
professional and research journals. Literature Review on performance evaluation of mutual
fund is enormous. Various studies have been carried out in India and abroad to evaluate the
performance of mutual funds schemes from time to time. A few research studies that have
influenced substantially in preparing the thesis are discussed below in this chapter.
2.1 Review of Literature
Jack Treynor (1965) developed a methodology for performance evaluation of

a mutual fund that is referred to as reward to volatility measure, which is defined as
average excess return on the portfolio. This is followed by Sharpe (1966) reward to
variability measure, which is average excess return on the portfolio divided by the
standard deviation of the portfolio.
Sharpe (1966) developed a composite measure of performance evaluation and

imported superior performance of 11 funds out of 34 during the period 1944-63.
Michael C. Jensen (1967) conducted an empirical study of mutual funds in the period
of 1954-64 for 115 mutual funds. The results indicate that these funds are not able to
predict security prices well enough to outperform a buy the market and hold policy.
The study ignored the gross management expenses to be free. There was very little
evidence that any individual fund was able to do significantly better than which
investors expected from mere random chance.
Jensen (1968) developed a classic study; an absolute measure of performance

based upon the Capital Asset Pricing Model and reported that mutual funds did not
appear to achieve abnormal performance when transaction costs were taken into
account.

Carlsen (1970) evaluated the risk-adjusted performance and emphasized that
the conclusions drawn from calculations of return depend on the time period, type of
fund and the choice of benchmark. Carlsen essentially recalculated the Jensen and
Shape results using annual data for 82 common stock funds over the 1948-67 periods.
The results contradicted both Sharpe and Jensen measures.
Fama (1972) developed a methodology for evaluating investment performance

of managed portfolios and suggested that the overall performance could be broken
down into several components.
John McDonald (1974) examined the relationship between the stated fund
objectives and their risks and return attributes. The study concludes that, on an average
the fund managers appeared to keep their portfolios within the stated risk. Some funds
in the lower risk group possessed higher risk than funds in the most risky group.
James R.F. Guy (1978) evaluated the risk-adjusted performance of UK

investment trusts through the application of Sharpe and Jensen measures. The study
concludes that no trust had exhibited superior performance compared to the London
Stock Exchange Index.
Henriksson (1984) reported that mutual fund managers were not able to follow an
investment strategy that successfully times the return on the market portfolio. Again
Henriksson (1984) conclude there is strong evidence that the funds market risk exposures
change in response to the market indicated. But the fund managers were not successful in
timing the market.
Grinblatt and Titman (1989) concludes that some mutual funds consistently realize
abnormal returns by systematically picking stocks that realize positive excess returns.
Richard A. Ippolito (1989) concluded that mutual funds on an aggregate offer

superior returns. But expenses and load charges offset them. This characterizes the efficient
market hypothesis.
Ariff and Johnson (1990) made an important study in Singapore and found that the
performance of Singapore unit trusts spread around the market performance with
approximately half of the funds performing below the market and another half performing
above the market on a risk-adjusted basis.

Cole and IP (1993) investigated the performance of Australian equity trusts. The
study found evidence that portfolio managers were unable to earn overall positive excess risk-
adjusted returns.
Vincent A. Warther(1995) in the article entitled “aggregate mutual fund flows and
security returns” concluded that aggregate security returns are highly correlated with
concurrent unexpected cash flows into MFs but unrelated to concurrent expected flows. The
study resulted in an unexpected flow equal to 1 percent of total stock fund assets corresponds
to a 5.7 percent increase in stock price index. Fund flows are correlated with the returns of
 S Prassanna & S Kumar (2014) mention that the general knowledge & awareness level among
individual investors are so good. Mutual funds are concerning the maximum attention of the investors in
the scenario be it individual or corporate investors.
 Desai & Joshi (2013) note that majority of the mutual fund investors invest in the insurance sector
which emphasizes their demand for safety and security of their funds. Majority of the mutual fund
investors consider balanced funds as a highly important type whereas the least preferred type is the tax
saving funds.
 Singh and Vanita (2002) the findings of the study were that the investors’ preferred to invest in public
sector mutual funds with an investment objective of getting tax exemption and stayed invested for a
period of 3-5 years and the investors evaluated past performance. The study further concludes by stating
that majority of the investors were dissatisfied with the performance of their mutual funds and belonged
to the category who held growth schemes.

CHAPTER -2
RESEARCH
METHODOLOGY

RESEARCH METHODOLOGY
WHAT IS RESEARCH?
Research comprises "creative work undertaken on a systematic basis in order to

increase the stock of knowledge, including knowledge of man, culture and society, and
the use of this stock of knowledge to devise new applications. It is used to establish or
confirm facts, reaffirm the results of previous work, solve new or existing problems,
support theorems, or develop new theories.
TYPES OF RESEARCH METHODS:
The goal of the research process is to produce new knowledge or deepen

understanding of a topic or issue. This process takes three main forms (although, as
previously discussed, the boundaries between them may be obscure):
Exploratory research, which helps to identify and define a problem or question.
Constructive research, which tests theories and proposes solutions to a problem or

question.
Empirical research, which tests the feasibility of a solution using empirical evidence.
The research room at the New York Public Library, an example of secondary research
in progress.
There are two major types of research design: qualitative research and quantitative
research. Researchers choose qualitative or quantitative methods according to the
nature of the research topic they want to investigate and the research questions they
aim to answer:
Maurice Hilleman is credited with saving more lives than any other scientist of the
20th century.
Qualitative research
Understanding of human behaviour and the reasons that govern such behaviour.
Asking a broad question and collecting data in the form of words, images, video etc
that is analyzed and searching for themes. This type of research aims to investigate a
question without attempting to quantifiably measure variables or look to potential
relationships between variables. It is viewed as more restrictive in testing hypotheses

because it can be expensive and time consuming, and typically limited to a single set
of research subjects.[citation needed] Qualitative research is often used as a method of
exploratory research as a basis for later quantitative research hypotheses.[citation
needed] Qualitative research is linked with the philosophical and theoretical stance of
social constructionist.
Quantitative research
Systematic empirical investigation of quantitative properties and phenomena and their

relationships. Asking a narrow question and collecting numerical data to analyze
utilizing statistical methods. The quantitative research designs are experimental,
correlation, and survey. Statistics derived from quantitative research can be used to
establish the existence of associative or causal relationships between variables.
Quantitative research is linked with the philosophical and theoretical stance of
positivism.
The Quantitative data collection methods rely on random sampling and structured data
collection instruments that fit diverse experiences into predetermined response
categories. These methods produce results that are easy to summarize, compare, and
generalize.[citation needed] Quantitative research is concerned with testing hypotheses
derived from theory and/or being able to estimate the size of a phenomenon of interest.
Depending on the research question, participants may be randomly assigned to
different treatments (this is the only way that a quantitative study can be considered a
true experiment). If this is not feasible, the researcher may collect data on participant
and situational characteristics in order to statistically control for their influence on the
dependent, or outcome, variable. If the intent is to generalize from the research
participants to a larger population, the researcher will employ probability sampling to
select participants.
In either qualitative or quantitative research, the researchers may collect primary or

secondary data. Primary data is data collected specifically for the research, such as
through interviews or questionnaires. Secondary data is data that already exists, such
as census data, which can be re-used for the research. It is good ethical research
practice to use secondary data wherever possible.
Mixed-method research, i.e. research that includes qualitative and quantitative

elements, using both primary and secondary data, is becoming more common.

TYPES OF DATA:
There are two different types of data that we use when we are carrying our research
projects. These two different types of data are called Primary and Secondary data
collection.
Primary data: Data collected by the investigator himself/ herself for a specific
purpose.
Examples: Data collected by a student for his/her thesis or research project.
Secondary data: Data collected by someone else for some other purpose (but being
utilized by the investigator for another purpose).
Examples: Census data being used to analyze the impact of education on career choice
and earning.
Some Advantages of using Primary data:
1. The investigator collects data specific to the problem under study.
2. There is no doubt about the quality of the data collected (for the investigator).
3. If required, it may be possible to obtain additional data during the study period.
Some Disadvantages of using Primary data (for reluctant/ uninterested

investigators):
1. The investigator has to contend with all the hassles of data collection-
 deciding why, what, how, when to collect
 getting the data collected (personally or through others)
 getting funding and dealing with funding agencies
 ethical considerations (consent, permissions, etc.)
2. Ensuring the data collected is of a high standard-
 all desired data is obtained accurately, and in the format, it is required in
 there is no fake/ cooked up data
 unnecessary/ useless data has not been included
3. Cost of obtaining the data is often the major expense in studies.

Some Advantages of using Secondary data:
1. The data’s already there- no hassles of data collection
2. It is less expensive
3. The investigator is not personally responsible for the quality of data (“I didn’t do it”)
Some disadvantages of using Secondary data:
1. The investigator cannot decide what is collected (if specific data about something is
required, for instance).
2. One can only hope that the data is of good quality
3. Obtaining additional data (or even clarification) about something is not possible (most
often)
I. Research problem:
To know investor’s behaviour regarding mutual fund as an investment avenue.
II. Research objectives (primary):
To know investor’s behaviour regarding mutual fund as an investment avenue.
III. Research objectives (secondary):

 To identify the objectives of the investors for investing in a mutual fund
 To identify the investment pattern of the investors.
 To find out which scheme is better according to investors
IV. Research plan:
 Data source:
We have used primary source to collect the data regarding investors’ awareness about
the mutual fund as an investment avenue
Research instrument:
Questionnaire was the instrument of collecting data

Sampling plan:
 Sampling unit: all the investors who are occasionally or regularly investing in
financial assets and non-financial assets.
 Sample size: Survey population comprises of the total reputed businessman,
professionals, and individual investors was approx. 70
 Sampling method: In this study as suggested by the company a sample of reputed
businessman, professionals, and individual investors was selected and it was
selected through non-probability, convenience sampling method. Because all
the business, professionals, and individual investors could not be interviewed as
per our requirement but according to their availability and accessibility we meet
them.

Chapter- 3
OBJECTIVES
OF THE STUDY
Need for the study

The main purpose of doing this project was to know about mutual fund and its functioning.
This helps to know in detail about mutual fund industry from its inception stage, growth and
future prospects.
OBJECTIVES:
 To get insight knowledge about mutual funds.

 To know the awareness of mutual fund among different group of investors.
 An attempt has been made to measure various variable’s playing in the minds of
investors in terms of safety, liquidity, returns, services, tax savings.
 To give a brief idea about the benefits available from mutual fund investment.

CHAPTER -3
INDUSTRY
PROFILE
HISTORY OF MUTUAL FUNDS:

Prof K Geert Rouwenhorst in 'The Origins of Mutual Funds', states that the origin of pooled
investing concept dates back to the late 1700s in Europe, when "a Dutch merchant and broker
invited subscriptions from investors to form a trust to provide an opportunity to diversify for
small investors with limited means." The emergence of "investment pooling" in England in
the 1800s brought the concept closer to the US shores.
The enactment of two British laws, the Joint Stock Companies Acts of 1862 and 1867,
permitted investors to share in the profits of an investment enterprise and limited investor
liability to the amount of investment capital devoted to the enterprise. Shortly thereafter, in
1868, the Foreign and Colonial Government Trust was formed in London.
It resembled the US fund model in basic structure, providing "the investor of moderate means
the same advantages as the large capitalists by spreading the investment over a number of
different stocks." More importantly, the British fund model established a direct link with the
US securities markets, helping finance the development of the post-Civil War US economy.
The Scottish American Investment Trust, formed in February 1873, by fund pioneer Robert
Fleming, invested in the economic potential of the US, chiefly through American railroad
bonds. Many other trusts followed them, who not only targeted investment in America, but
led to the introduction of the fund investing concept on the US shores in the late 1800s and the
early 1900s. The first mutual or 'open-ended' fund was introduced in Boston in March 1924.
The Massachusetts Investors Trust, which was formed as a common law trust, introduced
important innovations to the investment company concept by establishing a simplified capital
structure, continuous offering of shares, and the ability to redeem shares rather than holding
them until dissolution of the fund and a set of clear investment restrictions as well as policies.
The stock market crash of 1929 and the Great Depression that followed greatly hampered the
growth of pooled investments until a succession of landmark securities laws, beginning with
the Securities Act, 1933 and concluded with the Investment Company Act, 1940,
reinvigorated investor confidence. Renewed investor confidence and many innovations led to
relatively steady growth in industry assets and number of accounts.
THE MUTUAL FUND INDUSTRY IN INDIA:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India
(UTI) at the initiative of the Reserve Bank of India (RBI) and the Government of India. The
objective then was to attract small investors and introduce them to market investments. Since
then, the history of mutual funds in India can be broadly divided into six distinct phases.
Phase I (1964-87): Growth Of UTI:
In 1963, UTI was established by an Act of Parliament. As it was the only entity offering
mutual funds in India, it had a monopoly. Operationally, UTI was set up by the Reserve Bank
of India (RBI), but was later delinked from the RBI. The first scheme, and for long one of the
largest launched by UTI, was Unit Scheme 1964. Later in the 1970s and 80s, UTI started
innovating and offering different schemes to suit the needs of different classes of investors.
Unit Linked Insurance Plan (ULIP) was launched in 1971. The first Indian offshore fund,
India Fund was launched in August 1986. In absolute terms, the investible funds corpus of
UTI was about Rs 600 crores in 1984. By 1987-88, the assets under management (AUM) of
UTI had grown 10 times to Rs 6,700 crores.
Phase II (1987-93): Entry of Public Sector Funds:
The year 1987 marked the entry of other public sector mutual funds. With the opening up of
the economy, many public sector banks and institutions were allowed to establish mutual
funds. The State Bank of India established the first non-UTI Mutual Fund, SBI Mutual Fund
in November 1987. During this period, investors showed a marked interest in mutual funds,
allocating a larger part of their savings to investments in the funds.
Phase III (1993-96): Emergence of Private Funds:
A new era in the mutual fund industry began in 1993 with the permission granted for the entry
of private sector funds. This gave the Indian investors a broader choice of 'fund families' and
increasing competition to the existing public sector funds. Quite significantly foreign fund
management companies were also allowed to operate mutual funds, most of them coming into
India through their joint ventures with Indian promoters. The private funds have brought in
with them latest product innovations, investment management techniques and investor-
servicing technologies. During the year 1993-94, five private sector fund houses launched
their schemes followed by six others in 1994-95.
Phase IV (1996-99): Growth And SEBI Regulation:

Since 1996, the mutual fund industry scaled newer heights in terms of mobilization of funds
and number of players. Deregulation and liberalization of the Indian economy had introduced
competition and provided impetus to the growth of the industry.
A comprehensive set of regulations for all mutual funds operating in India was introduced
with SEBI (Mutual Fund) Regulations, 1996. These regulations set uniform standards for all
funds. Erstwhile UTI voluntarily adopted SEBI guidelines for its new schemes. Similarly, the
budget of the Union government in 1999 took a big step in exempting all mutual fund
dividends from income tax in the hands of the investors. During this phase, both SEBI and
Association of Mutual Funds of India (AMFI) launched Investor Awareness Programme
aimed at educating the investors about investing through MFs.
Phase V (1999-2004): Emergence of a Large and Uniform Industry:
The year 1999 marked the beginning of a new phase in the history of the mutual fund industry
in India, a phase of significant growth in terms of both amount mobilized from investors and
assets under management. In February 2003, the UTI Act was repealed. UTI no longer has a
special legal status as a trust established by an act of Parliament. Instead it has adopted the
same structure as any other fund in India - a trust and an AMC.
UTI Mutual Fund is the present name of the erstwhile Unit Trust of India (UTI). While UTI
functioned under a separate law of the Indian Parliament earlier, UTI Mutual Fund is now
under the SEBI's (Mutual Funds) Regulations, 1996 like all other mutual funds in India. The
emergence of a uniform industry with the same structure, operations and regulations make it
easier for distributors and investors to deal with any fund house. Between 1999 and 2005 the
size of the industry has doubled in terms of AUM which have gone from above Rs 68,000
crores to over Rs 1,50,000 crores.
Phase VI (From 2004 Onwards): Consolidation and Growth:The industry has lately
witnessed a spate of mergers and acquisitions, most recent ones being the acquisition of
schemes of Allianz Mutual Fund by Birla Sun Life, PNB Mutual Fund by Principal, among
others. At the same time, more international players continue to enter India including Fidelity,
one of the largest funds in the world
CONCEPT OF MUTUAL FUND

As defined by the Association of Mutual Funds in India (AMFI), an apex body of all
registered asset management companies, “Mutual Fund is a trust that pools the savings of a
number of investors who share a common financial goal. Anybody with an investible surplus
of as little as a few thousand rupees can invest in mutual fund units according to their stated
investment objective and strategy.” According to Securities and Exchange Board of India
(SEBI) Regulations 1996, “Mutual Fund means a fund established in the form of a trust to
raise monies through the sale of its units to the public or a section of the public under one or
more schemes for investing in securities, including money market instruments.” As defined by
the mutual Fund Book of Investment Company Institute of the U.S., “A mutual fund is a
financial service organization that receives money from shareholders, invests it, earns returns
on it, attempts to make it grow and agrees to pay the shareholder for the current value of his
investment.”
Mutual fund is a special type of institution that acts as an investment conduit. It is a

professionally managed investment organisation that pools the money of many individual
investors having similar investment objectives. The money thus collected is invested by the
fund manager in different types of securities as shares, debentures, money market instruments
and so on, depending upon the objective of the scheme. Income earned and capital
appreciations thus realised by the schemes are shared by its unit holders in proportion to the
number of units owned by them. Therefore, mutual fund is an investment institution, which
assembles the savings of individuals and institutions and conduit these savings in corporate
securities. Thus, it endows the individual investors, with an opportunity to invest in a
diversified, professionally managed portfolio at a relatively low cost.
Mutual funds mobilise savings, particularly from the small and household sectors, for
investment in capital and money market. Basically, these institutions professionally manage
the funds of individuals and institutions that may not have such high degree of expertise and
sufficient time to deal with the complexities of different investment avenues, legal provisions
associated and impulse and vicissitude of financial markets. Figure 2.1 depicts it’s working.
Mutual Fund operation flow char
ORGANISATION OF MUTUAL FUNDS

In accordance with the provisions of the Indian Trust Act, 1882 every mutual fund shall be
constituted in the form of a trust. SEBI Guidelines, 1992 spell out in clear terms the
establishment norms for mutual funds. It contemplated a three-tier system for managing the
affairs of mutual funds. The three constituents are the sponsoring company, the trustees and
the assets management company (AMC). These three constituents were incorporated in SEBI
Regulations, 1996 for the management of mutual funds. Apart from these three, Custodians
and transfer agents are two more important constituents of mutual funds.
1. SPONSOR
Sponsor of a mutual fund is akin to the promoter of a company as he gets the fund registered
with SEBI. Under SEBI regulations, sponsor is defined as any person who acting alone or in
combination with another body corporate establishes the mutual fund. Sponsor can be Indian
companies, banks or financial institutions, foreign entities or a joint venture between two
entities. As Reliance mutual fund has been sponsored fully by an Indian entity. Whereas,
funds like Fidelity mutual fund and J P Morgan mutual fund are sponsored fully by foreign
entities. ICICI Prudential mutual fund has been set up as a joint venture between ICICI Bank
and Prudential plc. Both sponsors have contributed to the capital of the Asset Management
Company of ICICI Prudential.
SEBI has laid down the eligibility criteria for sponsor as it should have a sound track
record and at least five years’ experience in the financial services industry. SEBI ensures that
sponsor should have professional competence, financial soundness and general reputation of
fairness and integrity in business transactions. At least 40 percent of the capital of AMC has
to be contributed by the sponsor. Also, they identify and appoint the trustees and Asset
Management Company. Sponsors are also free to get incorporated an AMC as well as to
appoint a board of trustees. They, either directly or acting through trustees, will appoint a
custodian to hold the fund assets. To submit trust deed and draft of memorandum and articles
of association of AMC to SEBI is also a duty of sponsor. After the mutual fund is registered,
sponsors technically take a backseat.
ii. TRUSTEES
Under the Indian trust act 1882, a sponsor creates mutual fund trust, which is the main body
in creation of mutual funds. Trustees may be appointed as an individual or as a trustee
company with the prior approval of SEBI. As defined under the SEBI regulations, 1996,
trustees mean board of trustees or Trustee Company who hold the property of mutual fund for

the benefit of 0the unit holders. A Trustee acts as the protectors of the unit holders’ interests
and is the primary guardians of the unit holders’ funds and assets. Sponsor executes and
registers a trust deed in favour of trustees. There must be at least 4 members in the board of
trustees and least two third of them need to be independent. For example, HDFC Trustee
Company Limited is the Trustee of HDFC Mutual Fund vide the Trust deed dated June 8,
2000. It has five board members, of whom three are independent.
Trustees can even dismiss AMC with the approval of the SEBI and in accordance with the
regulations. Under their obligations, trustees must ensure that the transactions of mutual funds
are in accordance with the trust deed and its activities are in compliance with SEBI
regulations. They must ensure that AMC has all the procedures and systems in place, and that
all the fund constituents are appointed. Also, they must ensure due diligence on the part of
AMC in the appointment of business associates and constituents. Trustees must furnish to
SEBI, on half-yearly basis a report on the activities of the AMC.
4. ASSET MANAGEMENT COMPANY (AMC)

Asset Management Company is the body engaged to run the show of a mutual fund. The
sponsor or trustees appoint AMC to manage the affairs of the mutual fund to ensure efficient
management. SEBI desires that AMC must have a sound track record in terms of net worth,
dividend paying capacity, profitability, general reputation and fairness in transactions. AMC
is involved in basically three activities as portfolio management, investment analysis and
financial administration. Therefore, the directors of AMC should be expert in these fields.
SEBI’s regulation for AMC requires that it should have a net worth of at least Rs. 10 crore at
all times and that a company can act as an AMC of one mutual fund only. Also, at least 50
percent of the members of the board of an AMC have to be independent and these can be the
director of another AMC also. Its chairman should be an independent person. AMCs can not
engage in any business other than that of financial advisory and investment management. Its
memorandum and articles of association have to be approved by the SEBI. Statutory
disclosures regarding AMCs operations should be periodically submitted to SEBI. Prior
approval of the trustees is required, before a person is appointed as a director on the board of
AMC. An AMC cannot invest in its own schemes until it is disclosed in the offer document.
Moreover in such investments, AMC will not be eligible for fees also. The appointment of an
AMC can be terminated by the majority of trustees or by 75 percent of unit holders.
iv. CUSTODIAN

SEBI requires that each mutual fund shall have a custodian who is independent and registered
with it. SEBI regulations provide for the appointment of a custodian by trustees of the mutual
fund who are responsible for carrying on the activities of safe keeping of securities and
participating in any clearing system on behalf of mutual fund. Custodian is not permitted to
act as a custodian of more than one mutual fund without the prior approval of SEBI. They
should be independent of the sponsors. As for example, ICICI Bank is a sponsor of ICICI
Prudential Mutual fund. It is also a custodian bank. But it cannot offer its services to ICICI
Prudential Mutual fund, because it is a sponsor of this fund.
v. TRANSFER AGENT
Registrar and transfer (R&T) agents are responsible for creating and maintaining investor
records kept in numbered account called folios and servicing them. They accept and process
investor transactions and also operate investor service centre (ISCs) which acts as an official
point for accepting investor transactions with a fund. As for example, Computer Age
Management Services (CAMS) is the R&T agent for HDFC mutual fund. R&T functions
include issuing and redeeming the units and updating the unit capital account. R&T perform
creating, maintaining and updating the investors’ records and enabling their transactions such
as redemption, purchase and switches. Banking the payment instruments such as drafts and
cheques given by investors and notifying the AMC is also done by them. R&T send statutory
and periodic information to investors and process pay-outs to investors in the form of
dividends and redemptions.
Organisation of Mutual Fund
TYPES OF MUTUAL FUNDS

A wide variety of mutual fund schemes exist according to their investment style that helps in
meeting the financial goal of the investors. These are grouped into three broad categories i.e.,
their operations, investment objective and others.
 CLASSIFICATION BY OPERATIONS
On the basis of operations of mutual funds schemes, they have been classified into open-
ended, close-ended and interval funds. These have been discussed below in detail.
1. OPEN-ENDED FUNDS
An open-ended fund offers its units to the investors for sale and repurchase at all the times at
a price based on the net asset value (NAV) per unit. AMFI booklet has described NAV as the
market value of the asset of the scheme minus its liabilities. It’s per unit value is obtained by
dividing the amount of the market value of the fund’s assets (plus accrued income minus
fund’s liabilities) by the number of units outstanding. Thus, the holders of the units in such
funds can buy or redeem units from the fund itself at any time. The corpus of these funds
changes constantly as investors buy from or sell their units to the fund. Both the value and
number of units fluctuate on a daily basis as the value of the securities and the number of
investors change. The securities in the portfolio are valued at the end of each day. The value
is then divided by number of units in the fund to arrive at a price per unit i.e. their net asset
value. The advantages of this open-ended structure are numerous as these funds are liquid,
convenient, and easy to buy and sell for the investors. Axis Triple Advantage Fund, Birla Sun
Life Basic Industries Fund, IDBI India Top 100 Equity Fund, L&T Contra Fund, Taurus Tax
Shield, Templeton Floating Rate Income Fund, UTI - G-Sec Fund are some of the open ended
mutual funds.
2. CLOSE-ENDED FUNDS
Close-ended funds offer a fixed number of units for a fixed period of subscription to the
investors as declared in their initial public offer (IPO). After subscription period is over, these
funds do not allow investors to buy or redeem units directly from the fund house. However,
many close-ended funds get themselves listed on stock exchange(s) and enable investors to
buy or sell units of these schemes in the same fashion as for the shares of a company. The

fund’s units may be traded above the NAV, called ‘selling at a premium’, or below, called
‘selling at a discount’.
The trading price depends upon a variety of things, as supply and demand and the market’s
perception of the fund’s prospects, much like the price of a stock. Some close-ended funds
provide an exit route to the investors by giving 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 are provided to the investor i.e. either through listing on
stock exchanges or repurchase facility. These mutual funds schemes disclose NAV generally
on weekly basis. Canara Robeco Equity Tax Saver-93, DSP Merrill Lynch Tax Saver Fund,
Tata Life Sciences and Technology Fund, JM Arbitrage Advantage Fund, Kotak Gold ETF
are some of the close ended funds in India.
 CLASSIFICATION BY INVESTMENT OBJECTIVES
In this category, funds differ significantly with one another with respect to their objectives
and the type of securities, comprising their portfolio. Therefore, these funds cater to the risk
and return profile of different type of investors. The following are the portfolio classification
of these funds:
i. GROWTH FUND
The objective of a growth fund is to achieve capital appreciation over medium to long term.
These schemes normally invest a majority of their funds in equities and are willing to bear
short term decline in value for possible future appreciation. Around 80-90 percent of corpus
of these funds is invested in equity and equity linked instruments and the balance in debt and
money market securities. These schemes are not for investors seeking regular income or
needing their money back in the short term but are suitable for long term investors seeking
capital appreciation and ready to bear a medium to high level of risk. These are also known as
“nest eggs” or “long haul” investments. BNP PARIBAS Equity Fund, Canara Robeco
emerging equities, DWS Investment Opportunity Fund, Fidelity Equity Fund, HSBC
Dynamic Fund, Quantum Long-Term Equity Fund are some examples of growth mutual funds
in India
ii. BALANCED FUNDS

The aim of the balanced funds is to provide both capital appreciation and periodic returns
over a long period of time. These funds have reasonable mix of equity and bond in their
portfolio by investing both in shares and fixed income securities in the proportion as indicated
in their offer documents. Normally a balanced fund invests 60 percent out of its net assets in
equity and 40 percent infixed income securities, money market instruments and cash. Their
risk profile is medium to high. These are also called “income–cum–growth” funds and are
ideal for investors seeking for a combination of regular income and moderate growth. HDFC
Balanced Fund, UTI Balanced Fund, Tata Balanced Funds are some of the examples of these
funds in India.
iii. INCOME FUND

Income funds provide regular and steady income to its investors. These funds generally
invests in fixed income securities such as government securities, bonds, corporate debentures,
money market instruments, cash and cash equivalent while at the same time maintains a small
exposure to the equity markets. Such funds are less risky as compared to equity schemes as
they are not affected by the fluctuations in equity markets. Risk profile of income funds is
generally from low to medium however, opportunities of capital appreciation are also limited.
These funds are ideal for investors who need some income to supplement their earnings as
retired people and others with a need for capital stability and regular income. NAV of such
funds are affected because of the change in interest rates in the country. If the interest rates
fall, NAV of such funds are likely to increase in the short run and vice versa. Some of the
examples of Indian income mutual funds are IDFC Capital Protection Oriented Fund, Kotak
Hybrid Fixed Term Plan, Reliance Fixed Horizon Fund, SBI Capital Protection Oriented
Fund etc.
UTI Auto Sector Fund are some of the sector funds in India.
 CLASSIFICATION BASED ON ASSETS INVESTED IN :
There three kinds of mutual funds based on the assets invested in. These are as follows:
A. EQUITY FUNDS:
These are funds that invest only in stocks. As a result, they are usually considered high
risk, high return funds. Most growth funds – the ones that promise high returns over a
long-term – are equity funds. These funds have less tax liability in the long-run as

compared to debt funds. Equity funds can be further classified into types based on the
investment objective into index funds, sector funds, tax-saving schemes and so on.
B. DEBT FUNDS:
These funds invest in debt-market instruments like bonds, government securities,
debentures and so on. These are called debt instruments because they are a kind of
borrowing mechanism for companies, banks as well as the government. Simply put, you
give them money, which the company returns with interest over a period of time. After
which, it matures. Since the interest payments are fixed as well as the return of the
principle amount, debt instruments are considered low-risk, low-return financial assets.
For the same reason, debt funds are relatively safer. They are usually preferred for the
regular interest payments. Debt funds are further classified on the basis of the maturity
period of the underlying assets – long-term and short-term. Some debt funds also invest
in just a single type of debt instrument. Gilt funds are an example of such a fund.
C. HYBRID FUNDS:
These are funds which invest in both equities as well as debt instruments. For this
reason, they are less risky than equity funds, but more than debt funds. Similarly, they
are likely to give you higher returns than debt funds, but lower than equity funds. As a
result, they are often called ‘balanced funds’
 CLASSIFICATION BASED ON SPECIALITY FUNDS:
There are some other types of mutual funds also apart from the above stated classification.
These have been discussed below in detail.
i. INDEX FUNDS
The objective of index funds is to generate capital commensurate with the index it tracks.
This is done by investing in all the stocks comprising the index in approximately the same
weightage that they represent in the specific index. For example, a fund that tracks the BSE
Sensitive Index will invest in the same 30 securities of the index and in the same proportion.
Portfolio of these funds appreciates or depreciates in more or less the same way as index
they have been following. Index funds are suitable for investors, looking for a return
approximately equal to that of an index. Goldman Sachs Nifty BeES 1, HDFC Index Fund -

Sensex Plus Plan, IDFC Nifty Fund–Growth, Reliance Index Fund-Nifty Plan, LIC Nomura MF
Index Fund-Nifty Plan, ICICI Prudential Index Fund, Tata Index Fund-Nifty Plan are some of
the index funds in India.
ii. SECTOR FUNDS
These are a kind of equity scheme restrict their investing to one or more pre-defined
sectors, e.g. technology sector. Since they depend upon the performance of select sectors
only, these schemes are inherently more risky than general schemes. They are best suited
for informed investors, who wish to bet on a single sector.
iii. REGIONAL FUNDS
A regional fund is a mutual fund run by managers who invest in securities from a specified
geographical area, such as Latin America, Europe or Asia. A regional mutual fund typically
owns a diversified portfolio of companies based in and operating out of its specified
geographical area.
iv. TAX SAVING FUNDS
Investors are now encouraged to invest in the equity markets through the Equity Linked
Savings Scheme (ELSS) by offering them a tax rebate. When you invest in such schemes,
your total taxable income falls. However, there is a limit of Rs 1 lakh for tax purposes. The
crutch is that the units purchased cannot be redeemed, sold or transferred for a period of three
years.
However, in comparison with other tax-saving financial instruments like Public Provident
Funds (PPF) and Employee Provident Funds (EPF), ELSS funds have the lowest lock-in
period. An example of ELSS scheme is the Kotak ELSS scheme.

WHY INVEST IN MUTUAL FUNDS?
Professional management: Whenever you invest in mutual funds, your money is managed by financial experts. Investors having no time or skill for
managing their portfolios, should invest in mutual funds. You gain from the expertise of professional managers which otherwise would have been expensive
for an individual investor.
Diversification: Mutual funds extend benefits of diversification across several business sectors and companies. They spread the investments across various
asset classes and industries. Thus, you benefit from asset allocation and diversification, without investing a large sum of money required to build an
individual portfolio.
Liquidity: Most mutual funds are liquid investments. Except the lock-in ones, you can withdraw your money at your own will, subject to the exit load.
Funds usually take 2-3 working days to release your money. They are well integrated with the banking system and the money is transferred directly into
your bank account.
Flexibility: Investors benefit from the flexibility and convenience offered by mutual funds from investing in an array of schemes. They offer systematic
investments and withdrawals to investors in most of the open-ended schemes. You can invest or withdraw funds according to your convenience.
Low transaction cost: Because of the economies of scale, mutual funds incur lower transaction costs and the benefits are passed on to the investors. An
individual is unlikely to enjoy the transaction cost benefit by entering the market directly.
Transparency: Funds provide investors updated information regarding markets and schemes through offer documents, factsheets, annual reports etc.
Well regulated: In India, all mutual funds are monitored and regulated the Securities and Exchange Board of India (SEBI). It protects investor interests. All
mutual funds have to be registered with SEBI to ensure full transparency. A fund must provide exhaustive information about its investments and the quantity
of money invested in each asset class.
Risks involved
Since mutual funds invest across various asset classes, each scheme has different risks depending on the portfolio. Value of investments may decline
because of economic downturns or other events that affect the market. Also, the government may introduce new regulations that may affect a particular
industry or a class of industries. These factors influence mutual fund performance. While diversification can help ease risks by offsetting the losses, at the
same time, it could limit the upside potential provided by holding a single security.
IMPORTANT TERMS
Offer price: It’s the price you pay while investing in a mutual fund scheme. It’s also known as the sale price. It may include a sales load.
Repurchase price: It’s the price at which the mutual fund repurchases the units. The price may include a back-end load. It’s also known as the bid price.
Redemption price: It’s the price at which open-ended mutual funds repurchase the units and close-ended funds redeem units on maturity. Such prices are
related to the NAV.
Front-end/sales load: It’s the charge collected by the scheme at the time of selling the units. Schemes that don’t charge any entry load are called “no load”
schemes.
Back-end/repurchase load: It’s the charge collected by the scheme when it repurchases/buys back the units from the unit holders.
VALUATION AND COST OF INVESTING IN MUTUAL FUNDS
NET ASSET VALUE (NAV)

Net Asset Value is the market value of assets of the scheme minus its liabilities. Per unit NAV is the net asset value of the scheme divided by the number of
8
units outstanding on the Valuation Date . For calculating the mutual fund's NAV, value of the total assets of the mutual fund is subtracted by its liabilities,
and then this amount is divided by the total number of units in the mutual fund. i.e.,
Mutual Fund’s NAV = (Total Assets–Liabilities) / Total number of units

The assets of a mutual fund would consist of its investments and cash whereas its liabilities include operating expenses. NAV for all mutual funds is
calculated every business day called the valuation day. Valuing the mutual fund portfolio employing the current market prices of the securities held by it is
called marking to market. The net assets of the schemes are represented at current market value, and therefore, NAV is the current value of each unit of the
scheme.
Net assets of a scheme go up when there is a realised income or appreciation in the market value of the scheme’s assets. It goes down in cases of realised
loss or depreciation in the value of scheme’s assets. NAV of all mutual fund schemes have to be posted on the website of AMFI every business day till 9
PM. Its value is rounded off to two decimal places for all schemes except for liquid, debt and index funds for which its value is rounded off to four decimal
places.
EXPENSES AND COST OF INVESTING IN MUTUAL FUNDS
The charges that investors pay to buy or sell a mutual fund and ongoing fund operating expenses impact their rate of return. This is due to the fact that fees
are deducted from their investment returns. Many people wrongly assume that the only expense incurred in mutual fund investment is the load fee. With
various advantages offered by mutual funds as liquidity, diversification, and professional management, one additional huge advantage is the complete
disclosure of all the fees. Apart from the load fees and other charges, mutual fund costs are classified into the operation expenses, paid out of the fund's
earnings, and sales charges, that are directly deducted from the capital which investors invest.
i. SCHEME EXPENSES:
Expenses incurred in managing a mutual fund are borne by its investors and are deducted from the market value of investments to arrive at the net assets
value of scheme. SEBI regulates the heads of expenses that can be charged to mutual fund scheme and their maximum value that can be so charged. Any
expense that is not chargeable, or is higher than the regulatory limits, has to be borne by the AMC itself. There are two broad types of expenses incurred by
the mutual fund schemes. First are the initial issue expenses and second are fund running expenses.

Initial Issue Expenses:
Initial issue expenses are incurred at the time of launch of a scheme to meet expenses on advertisement and commission. These are the expenses at the time
of new fund offer (NFO) and cannot be charged to the investors as these have to be borne by the AMC itself.
a. Fund Running Expenses:
Fund running expenses are incurred to manage the money mobilised from the investors. SEBI (Mutual Fund) Regulations have specified the heads of the
expenses that can be charged to the schemes and the maximum expense chargeable (Expense Ratio), as percentage of net assets.
Only certain types of expenses incurred to manage the mutual fund, called as direct expenses can be charged to its schemes. These expenses are
charged on the mutual fund scheme on accrual basis and are reduced from the assets of the scheme before computing their NAV. The costs are deducted
from the income earned by the fund, and are called ‘expense ratio.’ It is an annual fee that is charged to a mutual fund to pay for such expenses as:
Investment management fees, marketing and selling expenses including commission, fees of registrar and transfer agent, trustee fees, custodian fees, audit
fees, costs related to investor communication and costs of statutory disclosures and advertisements.
ii. ENTRY LOAD
An entry load is a sales charge investors pay when they buy units of a mutual fund scheme. In other words, it is a charge collected by a scheme when it sells
its units. This charge reduces the amount of their investment in fund. It is also called as Front-end load or Sales Load. Schemes that do not charge a load are
called ‘No Load’ schemes.
iii. EXIT LOAD
Exit load is imposed on redemptions as this is the charge collected by a scheme when it buys back the units from its unit holders. Investors pay this charge
when they sell mutual fund units. This reduces the amount received by them at the time of redemption. It is also called as ‘Repurchase’ or ‘Back-end’ Load:
iv. CONTINGENT DEFERRED SALES CHARGE (CDSC)

A CDSC is a sales load that investors pay at the time of redeeming their mutual fund units. These are the variable exit load that decreases over time. As per
the regulations laid down by SEBI, a no-load scheme can charge a CDSC. The asset management company is entitled to levy a CDSC not exceeding 4
percent of the redemption proceeds in the first four years after purchase, 3 percent during the second year, 2 percent in the third year and 1 percent in the
fourth year. The mutual funds have been restricted to charge entry and exit loads on investors with effect from August 1, 2009 as follows:
 Investors will not be charged any entry load. Therefore, the purchase price for investors i.e., the sales price for mutual funds should be same as the NAV
of fund.
 Exit loads or CDSC charged to investors in excess of 1 percent is credited back to the scheme.
 Exit load does not vary on the basis of type of investor and is applied uniformly to all the investors in a scheme.
v. Sale Price
It is the price paid by investors at the time of investing in a scheme. Or in other words, it is the purchase price for investors and is also called as ‘Offer
Price’. Sale price may also include a sales load.
vi. REPURCHASE PRICE

It is the price at which units under open-ended schemes are repurchased by the Mutual Fund. Such prices are NAV related.
vii. REDEMPTION PRICE

It is the price at which close-ended schemes redeem their units on maturity. Such prices are also NAV related.

Advantages & Disadvantages of Mutual Funds
Whether you are a seasoned or first-time investor, mutual fund is something you should seriously consider adding to your investment portfolio. However,
you should be aware of the advantages as well as possible pitfalls of this investment tool.
Listed below are the advantages and disadvantages of mutual funds to help you make an informed decision.
Advantages of Mutual Funds
a. Liquidity
Unless you opt for close-ended mutual funds, it is relatively easier to buy and exit a scheme. You can sell your units at any point (when the market is high).
Do keep an eye on surprises like exit load or pre-exit penalty. Remember, mutual fund transactions happen only once a day after the fund house releases that
day’s NAV.
b. Diversification
Mutual funds have their own share of risks as their performance is based on the market movement. Hence, the fund manager always invests in more than one
asset class (equities, debts, money market instruments etc.) to spread the risks. It is called diversification. This way, when one asset class doesn’t perform,
the other can compensate with higher returns to avoid the loss for investors.
c. Expert Management
Mutual fund is favored because it doesn’t require the investors to do the research and fund allocation. An asset manager takes care of it all and makes
decisions on what to do with your investment. He decides whether to invest in equities or debts or to hold them and for how long.
Your fund manager’s reputation in fund management should be an important criterion for you to choose a mutual fund for this reason. The expense ratio
(which cannot be more than 2.25% of the AUM guidelines as per SEBI) includes the fee of the manager too.

d. Less cost for bulk transactions
You must have noticed how price drops with increased volume, when you buy any product. For instance, if a 100g toothpaste costs Rs. 10, you might get a
500g pack for, say, Rs. 40. The same logic applies to mutual fund units as well. If you buy multiple units at a time, the processing fees and other commission
charges will be less compared to when you buy one unit.
e. Invest in smaller denominations
By investing in smaller denominations (SIP), you get exposure to the entire stock (or any other asset class). This reduces the average transactional expenses
– you benefit from the market lows and highs. Regular (monthly or quarterly) investments as opposed to lumpsum investments give you the benefit of rupee-
cost averaging.
f. Suit your financial goals
There are several types of mutual funds available in India catering to investors from all walks of life. No matter what your income is, you must make it a
habit to set aside some amount (however small) towards investments. It is easy to find a mutual fund that matches your income, expenditures, investment
goals and risk appetite.
g. Cost-efficiency
You have the option to pick zero-load mutual funds with less expense ratios. You can check the expense ratio of different mutual funds and choose one that
fits in your budget and financial goals. Expense ratio is the fee for managing your fund. It is a useful tool to assess a mutual fund’s performance.
h. Quick & painless process
You can start with one mutual fund and slowly diversify. These days it is easier to identify and handpick fund(s) most suitable for you. Maintaining and
regulating the funds too will take no extra effort from your side. The fund manager with the help of his team of will decide when, where and how to invest.
In short, their job is to consistently beat the benchmark and deliver you maximum returns.
i. Tax-efficiency
You can invest up to Rs. 1.5 lakhs in tax-saving mutual funds mentioned under 80C tax deductions. ELSS is an example for that. Though a 10% Long Term
Capital Gains (LTCG) is applicable for returns after one year, they have consistently delivered higher returns than other tax-saving instruments like FD in
the recent years.
j. Automated payments
It is common to forget or delay SIPs or prompt lumpsum investments due to any given reason. You can opt for paperless automation with your fund house or
agent. Timely email and SMS notifications help to counter this kind of negligence.
k. Safety
There is a general notion that mutual funds are not as safe as bank products. This is a myth as fund houses are strictly under the purview of statutory
government bodies like SEBI and AMFI. One can easily verify the credentials of the fund house and the asset manager from SEBI. They also have an
impartial grievance redress platform that work in the interest of investors.
l. Systematic or one-time investment
You can plan your mutual fund investment as per your budget and convenience. For instance, starting an SIP (Systematic Investment Plan) on a monthly or
quarterly basis suits investors with less money. On the other hand, if you have surplus amount, go for a one-time lump sum investment.

Disadvantages of Mutual Funds
a. Costs to manage the mutual fund
The salary of the market analysts and fund manager basically comes from the investors. Total fund management charge is one of the main parameters to
consider when choosing a mutual fund. Greater management fees do not guarantee better fund performance.
b. Lock-in periods
Many mutual funds have long-term lock-in periods, ranging from 5 to 8 years. Exiting such funds before maturity can be an expensive affair. A certain
portion of the fund is always kept in cash to pay out an investor who wants to exit the fund. This portion in cash cannot earn interest for investors.
c. Dilution
While diversification averages your risks of loss, it can also dilute your profits. Hence, you should not invest more than 4-5 mutual funds at a time.
As you have just read above, the benefits and potential of mutual funds can certainly override the disadvantages, if you make informed choices. However,
investors may not have the time, knowledge or patience to research and analyze different mutual funds. Investing with ClearTax Save could solve this as we
have already done the homework for you by hand-picking the top-rated funds from the best fund houses in the country.
Top 10 Mutual Fund Houses in India

1. ICICI Prudential Mutual Fund
2. HDFC Mutual Fund
3. Reliance Mutual Fund
4. Birla Sun Life Mutual Fund
5. SBI Mutual Fund
6. UTI Mutual Fund
7. Kotak Mahindra Mutual Fund
8. Franklin Templeton Mutual Fund
9. DSP BlackRock Mutual Fund
10. IDFC Mutual Fund

CHAPTER-4
COMPANY
PROFILE

ICICI PRUDENTIAL ASSET MANAGEMENT COMPANY LTD.
ICICI Prudential Asset Management Company Ltd. is a leading asset management company (AMC) in the country focused on bridging the gap between
savings & investments and creating long term wealth for investors through a range of simple and relevant investment solutions.
The AMC is a joint venture between ICICI Bank, a well-known and trusted name in financial services in India and Prudential Plc, one of UK’s largest
players in the financial services sectors. Throughout these years of the joint venture, the company has forged a position of pre-eminence in the Indian Mutual
Fund industry.
The AMC manages significant Assets under Management (AUM) in the mutual fund segment. The AMC also caters to Portfolio Management Services for
investors, spread across the country, along with International Advisory Mandates for clients across international markets.
The AMC has witnessed substantial growth in scale; from 2 locations and 6 employees at the inception of the joint venture in 1998, to a current strength of
1913 employees with a reach across over 200 locations reaching out to an investor base of more than 3 million investors (As on March 31, 2018). Driven by
an entirely investor centric approach, the organization today is a suitable mix of investment expertise, resource bandwidth and process orientation. The AMC
endeavors to simplify its investor’s journey to meet their financial goals, and give a good investor experience through innovation, consistency and sustained
risk adjusted performance.
SPONSORS:
ICICI Bank is India's largest private sector bank with total consolidated assets of Rs. 11,242.81 billion (US$ 172.5 billion) at March 31, 2018 and profit after
tax of Rs. 67.77 billion (US$ 1.0 billion) for the year ended March 31, 2018. ICICI Bank currently has a network of 4,867 Branches and 14,367 ATMs
across India.
Prudential plc is an international financial services group with significant operations in Asia, US and the UK. The company serves more than 26 million
insurance customers and has £669 billion of assets under management (as at 31 December 2017).
Prudential Corporation Asia (PCA)

Prudential is a leading life insurer that spans 14 markets in Asia, covering Cambodia, China, Hong Kong, India, Indonesia, Korea, Laos, Malaysia, the
Philippines, Singapore, Taiwan, Thailand and Vietnam. Prudential has a robust multi-channel distribution platform..
Eastspring Investments manages investments across Asia on behalf of a wide range of retail and institutional investors, with about half of its assets sourced
from life and pension products sold by Prudential plc. It is one of the region’s largest asset managers with a presence in 10 major Asian markets as well as
distribution offices in the US and Europe. It has USD 188 billion in assets under management (as at 31 December 2017), managing funds across a range of
asset classes including equities and fixed income.
JACKSON NATIONAL LIFE INSURANCE COMPANY

Jackson is one of the largest life insurance companies in the US, providing retirement products and income strategies aimed at the approximately 75 million
baby boomers in the United States. Jackson is also one of the top three providers of variable annuities in the US. Founded over 50 years ago, Jackson has a
long and successful record of providing advisers with the products, tools and support to design effective retirement solutions for their clients.

M&G PRUDENTIAL
M&G is Prudential's UK and European fund management business with total assets under management in excess of £351 bn (as at 31 December 2017).
M&G has been investing money for individual and institutional clients for over 80 years. Today it is one of Europe's largest active investment managers as
well as being a powerhouse in fixed income.
MANAGEMENT TEAM:
 MANAGEMENT:
 Mr. B Ramakrishna - Executive Vice President

 Mr. Raghav Iyengar - Executive Vice President & Head – Retail & Institutional Business
 Mr. Suresh Subramanian – Head Operations
 Mr. Vivek Sridharan - Head of Institutional Business
 Mr. Amar Shah - Head of Retail Business
 Ms. Supriya Sapre - Head of Compliance & Legal
 Mr. Abhijit Shah - Head of Marketing, Digital & Customer Experience
 Mr. Amit Bhosale - Head of Risk Management
 Mr. Nikhil Bhende - Head of Human Resources
 Mr. Adil Bakhshi - Head of Public Relations & Communication
 Mr. Lalit Popli - Head of Information Technology
 INVESTMENT MANAGEMENT
 Mr. S. Naren - Executive Director & Chief Investment Officer

 Mr. Rahul Goswami - Chief Investment Officer– Fixed Income
 Mr. Rahul Rai - Head of Real Estate Business
 Mr. Mrinal Singh - Deputy CIO- Equity
 BOARD OF DIRECTORS: ASSET MANAGEMENT COMPANY
 Ms. Chanda Kochhar - Chairperson (00043617)

 Mr. Suresh Kumar (00494479)
 Mr. N.S. Kannan (00066009)
 Mr. C. R. Muralidharan (02443277)
 Mr. Nimesh Shah (01709631)
 Mr. Guy Strapp (07245108)
 Ms. Lakshmi Venkatachalam (00758451)
 Mr. S. Naren - Executive Director & Chief Investment Officer (07498176)
 Mr. Ved Prakash Chaturvedi (00030839)
 Mr. Dilip Karnik (DIN: 06419513)
 DIRECTORS OF THE TRUSTEE COMPANY
 Mr. M. N. Gopinath - Chairman (00396196)

 Mr. Vinod Dhall (02591373)
 Mr. Sandeep Batra (03620913)
 Mr. Lakshman Kumar Mylavarapu (07618051)
Corporate Social Responsibility Policy:

Corporate Social Responsibility (CSR) is the commitment of companies to provide resources and support activities focused on enhancing economic and
social development. It is the effort made by companies to improve the living conditions of the local area in which they operate and the society at large. The
activities taken up as part of corporate social responsibility reflect the intent to create a positive impact on society without seeking any commensurate
monetary benefits.
CSR has been a long-standing commitment of the ICICI Group (the Group) and forms an integral part of the Group’s activities. ICICI Foundation for
Inclusive Growth (ICICI Foundation) was established in 2008 with a view to significantly expand the ICICI Group’s activities in the area of CSR. Over the
last few years ICICI Foundation has developed significant projects in specific areas, and has built capabilities for direct project implementation as opposed
to extending financial support to other organisations.
The Company’s objective (either directly or through ICICI Foundation) is to pro-actively support meaningful socio-economic development in India and
enable a larger number of people to participate in and benefit from India’s economic progress. This is based on the belief that growth and development are
effective only when they result in wider access to opportunities and benefit a broader section of society.
The Corporate Social Responsibility Policy (CSR Policy) of the Company sets out the framework guiding the Company’s CSR activities. The Policy also
sets out the rules that need to be adhered to while taking up and implementing CSR activities.
In terms of Schedule VII of the Act, the Company’s primary focus areas for CSR activities are:
1. Skill development and sustainable livelihoods
Enabling India’s youth to gain skills that can provide employment is key to realizing the potential of India’s demographic dividend and driving inclusive
growth. Improving employability of the youth from lower-income sections of society is hence an important focus area.
The ICICI Academy for Skills (ICICI Group Initiative) has been set up across the country to provide job-oriented skill training to youth. Several centres
have been set up across the country. In this initiative, ICICI Foundation is also leveraging the skills and training capabilities of large corporates in
developing training modules in their respective domains. ICICI Foundation is also liaising with corporates and businesses to get the trained youth employed,
through a job portal. The Company shall also offer skills in financial literacy to the trained youth.
2. Education
Education represents a critical area of action to realise India’s growth potential as also makes it inclusive, by enabling children from all sections of society to
have access to quality basic education that equips them for taking up higher education or job-oriented skill training. At the same time, India’s institutions of
higher learning also require investment in capacity building to support India’s growing and evolving needs and become global centres of excellence.
The Company, either directly or through not-for-profit entities including ICICI Foundation, shall work with state governments and other not-for-profit
organisations to improve the quality of education in government and municipal schools, which account for the vast majority of school-going children in the
country.
3. Financial inclusion
The Company believes that to improve the overall economic condition of the low-income population and to empower them with means to overcome
adversities or inequalities, access to financial services is an important factor. Increasing the participation of the rural population as well as the urban poor
and migrant workers in the economic mainstream and the formal financial system is imperative for India to leverage its growth potential.
The Company’s initiatives in this area include using various channels like its distributor network, and leveraging technology to spread awareness about
financial services.
4. Health care

The healthcare challenge in India spans a number of dimensions, including access to affordable healthcare for the poor; awareness of health issues and
available facilities/benefits among the less privileged segments of society and specific vulnerable sections of the population, and child malnutrition, which
impairs the capacity of a child to lead a healthy and productive life. Addressing these challenges is essential to achieve the objective of inclusive growth.
The Company shall either directly or tie-up with ICICI Foundation to enhance the availability of affordable healthcare to low income households, improve
health seeking behaviour among low-income and vulnerable groups through higher awareness and improve child nutrition. The Company will support
initiatives to make available clean and safe drinking water.
5. Sanitation
Assuring basic hygiene for one and all in India is a major task. Poor sanitation affects the health of the people of the country. Women are the most affected
by lack of proper sanitation. Majority of the diseases arise due to lack of clean water and sanitation and due to improper solid and liquid waste management.
The Company believes in promoting better human health and improved quality of life among people through improved sanitation measures.
The Company shall either directly or tie-up with ICICI Foundation to improve sanitation levels in various regions through the schools and/or through
participation in ‘Swatch Bharat Mission’ or through any other programme.
6. Support employee engagement in CSR activities
The Company supports the involvement of its employees in CSR activities. The Company will encourage employees to participate in CSR activities of the
Company and ICICI Foundation.
7. Capacity building for corporate social responsibility
ICICI Foundation will promote incubation of expertise for implementing corporate social responsibility initiatives. It will also work towards providing a
platform for organisations engaged in social initiatives, and discussion and thought leadership on critical challenges to inclusive growth. The Company will
support ICICI Foundation in its initiatives that promote individual and corporate philanthropy.
8. Other areas
The Company will continue to provide support to specific needs such as during natural disasters, through financial as well as logistical support.
PRODUCTS:

From identifying the right fund that suits your investment objective, to comparing performances of different funds, this section will tell you all you need to
know about ICICI Prudential Mutual Funds, before investing.
The products are categorized into several parts:
1. Equity mutual funds: Equity schemes endeavor to provide potential for high growth and returns with a moderate to high risk by investing in
shares. Such schemes are either actively or passively (replicate indices) managed and are best suited for investors with a long-term investment
horizon. Under this category certain funds are covered:
(A) ICICI Prudential Blue-chip Fund
(B) ICICI Prudential Value Discovery Fund
(C) ICICI Prudential Long-Term Equity Fund
(D) ICICI Prudential Infrastructure Fund
2. Hybrid mutual funds: Hybrid Schemes or balanced schemes bridge the gap between equity and debt schemes. This category is characterized
by a portfolio that is made up of a mix of equity stocks and bonds and will suit investors looking for debt plus returns with higher levels of
risk than fixed income schemes. Under this category certain funds are covered:
(A) ICICI Prudential Regular savings fund
(B) ICICI Prudential Equity – Debt fund
(C) ICICI Prudential Equity -arbitrage fund
(D) ICICI Prudential Multi Asset fund
3. Debt mutual funds: Debt Funds primarily invests in bonds and other debt instruments and will suit investors who want to optimize current
income assuming low to moderate levels of risk. Under this category certain funds are covered:
(A) ICICI Prudential savings fund
(B) ICICI Prudential floating interest fund
(C) ICICI Prudential corporate bond fund
(D) ICICI Prudential liquid fund
4. Others: Investing in Exchange Traded Funds (ETFs) can be a good way of complementing your existing mutual fund investments. They can
help in diversifying your portfolio at a low cost. An understanding of the features and benefits of various ETFs can help you make smarter
investment choices and reach your life goals. Under this category certain funds are covered:
(A) ICICI Prudential Nifty ETF
(B) ICICI Prudential Sensex ETF
(C) ICICI Prudential Mid cap Select fund
(D) ICICI Prudential Nifty 100 ETF
(E) ICICI Prudential Nifty 30 low vol. ETF
(F) ICICI Prudential NV20 ETF
(G) ICICI Prudential Gold ETF
5. Solution Oriented: Hybrid Schemes or balanced schemes bridge the gap between equity and debt schemes. This category is characterized by
a portfolio that is made up of a mix of equity stocks and bonds and will suit investors looking for debt plus returns with higher levels of risk
than fixed income schemes. Under this category only one fund is there:
(A) ICICI Prudential Child care plan (Gift Plan)

SEBI, in October 2017, announced categories and sub-categories for mutual fund schemes. Here are the different categories
and sub-categories, as defined by SEBI, of the debt, equity, and hybrid schemes of ICICI PRUDENTIAL MUTUAL FUND.
HERE’S A LIST OF OUR DURATION-BASED DEBT MUTUAL FUND SCHEMES* (1-10 YEARS)
The Macaulay Duration is the weighted average term to maturity of the cash flows from a bond. The weight of each cash flow is determined by dividing
the present value of the cash flow by the price. ^The Macaulay Duration of the portfolio of the Scheme would be between 1 year and 4 years under
adverse circumstances. $The Macaulay Duration of the portfolio of the Scheme would be between 1 year and 7 years under adverse circumstances.
Mutual fund investments are subject to market risks, read all scheme related documents carefully. The asset allocation and investment strategy
will be as per Scheme Information Document. *The effective date of the proposed changes in the schemes mentioned in this communication is May
28, 2018 for all schemes except ICICI Prudential Money Market Fund, wherein the changes will be applicable from June 5, 2018.
HERE’S A LIST OF OUR INSTRUMENT-BASED DEBT MUTUAL FUND SCHEMES:

Mutual fund investments are subject to market risks, read all scheme related documents carefully. The asset allocation and investment strategy will be as per
Scheme Information Document. *The effective date of the proposed changes in the schemes mentioned in this communication is May 28, 2018 for all schemes
except ICICI Prudential Money Market Fund, wherein the changes will be applicable from June 5, 2

HERE’S A LIST OF OUR MARKET CAPITALIZATION-BASED EQUITY MUTUAL FUND SCHEMES*
#
For the purpose of identification of companies, communication provided by SEBI/AMFI shall be considered. Currently, as
per SEBI Circular SEBI/HO/IMD/DF3/CIR/P/2017/114 dated October 06, 2017 -
Large Cap companies are defined as - 1st -100th company in terms of full market capitalization;
Mid Cap companies are defined as - 101st -250th company in terms of full market capitalization;
Small Cap companies are defined as - 251st company onwards in terms of full market capitalization
Mutual fund investments are subject to market risks, read all scheme related documents carefully. The asset allocation and
investment strategy will be as per Scheme Information Document. *The effective date of the proposed changes in the schemes
mentioned in this communication is May 28, 2018 for all schemes.

HERE’S A LIST OF OUR STRATEGY-BASED EQUITY MUTUAL FUND SCHEMES*:
HERE’S A LIST OF OUR SECTORAL / THEMATIC EQUITY MUTUAL FUND SCHEMES*:
*FMCG – Fast Moving Consumer Goods

Mutual fund investments are subject to market risks, read all scheme related documents carefully. The asset allocation and investment
strategy will be as per Scheme Information Document. *The effective date of the proposed changes in the schemes mentioned in this
communication is May 28, 2018 for all schemes.
HERE’S A LIST OF OUR HYBRID MUTUAL FUND SCHEMES:

*An Open Ended Income Scheme. Monthly income is not assured and is subject to the availability of distributable surplus.
#
The effective date of the changes mentioned is May 28, 2018.
^
The scheme continues to follow the same investment strategy. The change in name will be applicable from April 30, 2018.
$
The schemes continue to follow the same investment strategy.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.
The asset allocation and investment strategy will be as per Scheme Information Document.

CHAPTER:5
DATA ANALYSIS
&
INTERPRETATIONS

QUESTIONNAIRE ANALYSIS
1. Occupation:
OCCUPATIONS
17% BUSINESS CLASS

STUDENT
6% SERVICE CLASS
44% HOUSEWIFE
PROFESSIONALS
28%
6%
INTERPRETATION:
44% OF THE RESPONDENTS WERE FROM BUSINESS CLASS
5% OF THE RESPONDENTS WERE STUDENTS
28% OF THE RESPONDENTS WERE FROM SERVICE CLASS
6% OF THE RESPONDENTS WERE HOUSEWIVES
17% OF THE RESPONDENTS WERE PROFESSIONALS
2. Which are the investment tools you invest in?

40
35
35
30
25
21
20
15
11
10
5 3
0
BANK FIXED DEPOSITS RBI BONDS MUTUAL FUNDS EQUITIES
INTERPRETATION:
 As per the above diagram 21 out of 70 respondents are investing in bank
fixed deposits, 3 are investing in RBI or government bonds.
 Majority of them are investing in mutual funds as they consider it as a
safer tool to save money for future.
 Only 15% of them are investing in equities as equities mostly give long
term gains ranging from 7-12 years,
3. What is the frequecny of your investment?

Once in a Month
Service class Professionls

Students
INTERPRETATION:
The above data represents that majority of investors who invest once in a
month are professionals such as lawyers, doctors, teachers etc

Once in six months
Housewives Business Class

Professionals
INTERPRETATION:
The data shows above explains that majorly business class prefer to
invest in once in six months as they less prefer to have more number of
transaction that’s they invest in this way. Lumsum amount is being paid
by them.

Once a year
Business class Services

Housewives
INTERPRETATION:
The data shows above explains that majorly business class prefer to invest in
once a year also service class people who are normally paid higher than normal
are covered here. Lumsum amount is being paid by them.
4. Do you invest in mutual funds?

No
35%
Yes
65%
Yes No
INTERPRETATION:
The above figure shows that out of 70 respondents 65% (approx..45 out of 70) of them were
investing in mutual funds. While 35% (approx..25 out of 70) of them were not investing in
mutual funds.
5. If yes, are you aware of various scheme offered by Mutual Funds?

AWARE OF VAROUS SCHEMES
NO 6
FEW 12
YES 27
0 5 10 15 20 25 30
INTERPRETATION:
The above graph displays that not all respondents were aware about the various
schemes in which they were investing their amount out of 70 respondents 27 of them
were aware about the schemes. 12 of them were have having some knowledge about
the schemes while 6 of them of they simply invested their amount without having any
kind of understanding of the schemes.
a) Which type of mutual fund you invest in?

40
36
35
30
30
26 25
25 24
22 22
20
20 18
15 16 15
15
12
10 9
10
0
BUSINESS PROFESSIONALS SERVICE STUDENT HOUSEWIVIES
EQUITY DEBT BALANCED FUND
INTERPRETATION:
There are majorly three types of mutual funds based upon the returns and risk factor. Equity
type of mutual funds contains high risk so accordingly have high returns as compared to debt
and balanced fund. The above level shows that the risk-taking capacity changes as per the
occupation of an individual. The above diagram shows that business class consider highest
level of holding in equities after that they consider debt and then in balanced fund. In the
same way professionals consider to invest less in balanced ,service class consider to invest
more in equity, students prefers to invest more in balanced and housewives also consider to
invest more in balanced funds.
b) Do you know that you can get tax advantage by investing in Mutual
Funds?

tax advantage
45
40
35
30
25 42
20
15
10 15
13
5
0
YES NO NOT SURE
INTERPRETATION:
The above figure explains that 42 60% of the respondents (42 people out of 70people) know
that by investing in mutual funds they are getting tax advantage and 18.57% of the
respondents (13 people out of 70 people) have no idea about tax benefit and 21.43% of the
respondents (15 people out of 70 people) were not sure about the tax advantage.
c) On whose external advice do you invest?

28
21
10
BANK DISTRIBUTOR AGENTS DIRECT INVESTORS C.A.
INTERPRETATION:
The figure shown above displays that 28 people (40%) take external
advice from bank, 21 people (30%) take advice from distributors
among 7 of them (10%) take advice from direct investors, 10 people
(14.28%) believes that agents can give better investment advice and
remaining 4 of them (5.72%) think that C.A. will suggest them in a
proper way.
6. If No,
a) You do not invest in mutual fund because of

70%
60%
50%
40%
30%
20%
60%
10% 23%
0%
10% 5% 2%
INTERPRETATION:
The above diagram shows the different reasons that why people do no invest in mutual funds.
60% were had bad experience in terms of returns and penalties.10% of them are not having
sufficient knowledge 5% of them are having lack of confidence in servicing being provided.
2% of them do not understand which scheme is good for them i.e., difficulties in selection of
schemes and 23% have in-efficient investors advisors because they undertook more than
three advisors for better investment opportunities.
b) If mutual fund offers you steady returns, tax benefits, liquidity,

diversification

MAY BE
NO
YES
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
INTERPRETATION:
Fom the above diagram it can be understood that if mutual fund offers you steady
returns, tax benefits, liquidity, diversification 95% them were ready to invest in
mutual funds. 2% of them still are no ready to invest in mutual funds. 3% of
them ticked may be option so that it can be concluded these benefits can attract
the mutual funds.

C) Would you be interested to know more about mutual fund?
17%
YES
NO
83%
INTERPRETATION:
After filling all the questions in the questionnaire the last question was- Would you be
interested to know more about mutual fund? 83% of the people were interested to know
more about mutual funds while 17% of them were not interested to understand the concept
and working of mutual funds.

CHAPTER-6
FINDINGS &
SUGGESTIONS
FINDINGS
 The investors in Surat are having potential to invest in mutual fund they only
need proper guidance and information about mutual fund.

 Around 50% of the investors invest to maximize their returns and they are
ready to take moderate risks in their investment portfolio.
 Most of the investors give importance to the fact that their investment should
grow over a period of time.
 Knowledge about mutual funds and their various scheme is moderate among
investors.
 Most of the investors give importance to return, tax saving etc.
 Objectives of the investors are to get something in return for their investment
and the risk they are taking.
 Here the objective of the investor between the age 20-35 is to earn the higher
return.
 While the age group above 40 years concentrates on safety and tax saving and
they even take care of the liquidity.
SUGGESTIONS & CONCLUSIONS:
 Mutual fund companies should try to educate the investors to invest in mutual
funds through regular awareness program.

 Mutual fund agencies should spread the information about all the aspects of
investing in mutual funds.
 Make investors aware about the benefits of investing mutual fund with their
investment objective. Retail participation in mutual funds is very low. It is
therefore, required to increase the reach by offering solutions to the investors
based on their needs.

CHAPTER-7
LIMITATIONS OF
THE STUDY
Limitations of the study:

Every research has its own limitation and present research work is no exception to this
general rule the inherent limitations of the study are as under:
 Questionnaire method can be used only when respondents are literate and co-
operative.
 Sampling size was 70 that are not enough to study the awareness of independent
individuals.
 Though I tried to collect some primary data but they were too inadequate for the
purposes of the study.
 As sampling technique is convenient sampling so it may result in personal bias. Every
respondent gives bias answer.
 Time is the main constraint of the research as we have been given project as a well as
study simultaneously.
 Research limited for Surat city only.

CHAPTER- 8
ANNEXURE AND
BIBLIOGRAPHY
ANNEXURE

QUESTIONNAIRE
1. Which are the investment tools you invest in?
o Bank Fixed Deposits
o RBI Bonds
o Mutual Funds
o Equities
o Others (please specify)
2. You primarily invest for (Rank 1-4 according to your preference)

 Returns
 Liquidity
 Savings
 Tax benefit
3. What is the frequency of your investments?

o Once a month
o Once in 6month
o Once a Year
4. Do you invest in Mutual Funds?

 YES
 NO
5. If yes, are you aware of various scheme offered by Mutual Funds?

o Yes
o No
o Few
(a) Which type of Mutual Fund you invest in?

o Debt
o Equity
o Balanced
(b) Do you know that you can get tax advantage by investing in Mutual Funds?
 Yes
 No
 Not sure
(c) On whose external advice do you invest?
o Bank
o Distributor
o Agents
o Direct investments
o C.A.

6. If No,
(A) You do not invest in mutual fund because of
 Bitter past experience
 Lack of knowledge
 Lack of confidence in servicing being provided
 Difficulty in selection of schemes
 In-efficient investor advisors
(B) If mutual fund offers you steady returns, tax benefits, liquidity,
diversification
o Yes
o No
o May be
(C) Would you be interested to know more about Mutual Funds?

 Yes
 No
The information provided by you will be used for academic purpose only & will be kept as
confidential.
1. Name:
2. Age:
3. Gender: Male ( ) Female ( )
4. Occupation: Business ( ) Student( ) Housewife( )
Professional( ) Service( ) Others( )
5. Email ID. :
THANK YOU FOR YOUR VALUABLE TIME
Bibliography
BOOKS

Kumar, S., & Kumar, S. (n.d).’Awareness and knowledge of mutual fund among the
investors with reference to Chennai”2(4), 4-4.doi:2014
Desai, D., & Joshi, M. (n.d).” A Study about Awareness of Mutual Funds among the
investors of Navsari District.”3(1), 13-13.doi: January 2013
Singh, and Vanita (n.d).” Mutual fund investors’ perceptions and preferences – a
survey.”3(1), d.o.i:2002
www.icicipruamc.com
www.amfiindia.com
www.moneycontrol.com
www.valueresearchonline.com
www.google.co.in
www.mutualfundsindia.com
www.investopedia.com

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TABLE OF CONTENTS

CHAPTER CONTENTS PAGE NO.

2. RESEARCH METHODOLGY 13-17

3. OBJECTIVES OF THE STUDY 19

4. INDUSTRY PROFILE 21-39

5. COMPANY PROFILE 41-50

6. DATA ANALYSIS AND 52-64

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2.1 Review of Literature

Jack Treynor (1965) developed a methodology for performance evaluation of

Sharpe (1966) developed a composite measure of performance evaluation and

Jensen (1968) developed a classic study; an absolute measure of performance

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Fama (1972) developed a methodology for evaluating investment performance

James R.F. Guy (1978) evaluated the risk-adjusted performance of UK

Richard A. Ippolito (1989) concluded that mutual funds on an aggregate offer

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Research comprises "creative work undertaken on a systematic basis in order to

TYPES OF RESEARCH METHODS:

The goal of the research process is to produce new knowledge or deepen

Exploratory research, which helps to identify and define a problem or question.

Constructive research, which tests theories and proposes solutions to a problem or

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Systematic empirical investigation of quantitative properties and phenomena and their

In either qualitative or quantitative research, the researchers may collect primary or

Mixed-method research, i.e. research that includes qualitative and quantitative

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Examples: Data collected by a student for his/her thesis or research project.

Some Advantages of using Primary data:

1. The investigator collects data specific to the problem under study.

Some Disadvantages of using Primary data (for reluctant/ uninterested

 deciding why, what, how, when to collect

 getting the data collected (personally or through others)

 getting funding and dealing with funding agencies

 ethical considerations (consent, permissions, etc.)

2. Ensuring the data collected is of a high standard-

 all desired data is obtained accurately, and in the format, it is required in

 there is no fake/ cooked up data

 unnecessary/ useless data has not been included

3. Cost of obtaining the data is often the major expense in studies.

1. The data’s already there- no hassles of data collection

Some disadvantages of using Secondary data:

2. One can only hope that the data is of good quality

To know investor’s behaviour regarding mutual fund as an investment avenue.

II. Research objectives (primary):

To know investor’s behaviour regarding mutual fund as an investment avenue.

III. Research objectives (secondary):

Questionnaire was the instrument of collecting data

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Need for the study

 To get insight knowledge about mutual funds.

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HISTORY OF MUTUAL FUNDS:

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THE MUTUAL FUND INDUSTRY IN INDIA:

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Phase I (1964-87): Growth Of UTI:

Phase II (1987-93): Entry of Public Sector Funds:

Phase III (1993-96): Emergence of Private Funds: