A COMPARATIVE ANALYSIS OF MUTUAL FUND SCHEMES

‘A project submitted to

University of Mumbai for partial fulfilment of the degree of

Master of Commerce – Semester III

Under the Faculty of Commerce

(Advanced Accountancy)

By

Miss Priti Ramaswami Joharapuram

Roll No: 13

Under the Guidance of Ms. Jyoti Langote

SIR SITARAM &LADY SHANTABAI PATKAR COLLEGE OF ARTS & SCIENCE

AND
V.P. VARDE COLLEGE OF COMMERCE & ECONOMICS (Autonomous)
S.V ROAD, GOREGAON (WEST), MUMBAI-400104

2022-23

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 A COMPARATIVE ANALYSIS OF MUTUAL FUND SCHEMES

A project submitted to

University of Mumbai for partial fulfilment of the degree of

Master of Commerce – Semester III

Under the Faculty of Commerce

(Advanced Accountancy)

By

Miss Priti Ramaswami Joharapuram

Roll No: 13

Under the Guidance of Ms. Jyoti Langote

SIR SITARAM &LADY SHANTABAI PATKAR COLLEGE OF ARTS & SCIENCE

AND
V.P. VARDE COLLEGE OF COMMERCE & ECONOMICS (Autonomous)
S.V ROAD, GOREGAON (WEST), MUMBAI-400104

2022-23

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SIR SITARAM &LADY SHANTABAI PATKAR COLLEGE OF ARTS & SCIENCE
AND
V.P. VARDE COLLEGE OF COMMERCE & ECONOMICS (Autonomous)
S.V ROAD, GOREGAON (WEST), MUMBAI-400104

CERTIFICATE

This is to certify that Miss Priti Ramaswami Joharapuram has worked and duly completed
her Project Work for the degree of Master in Commerce under the Faculty of Commerce in the
subject of Advanced Accountancy and her project is entitled,
“A COMPARATIVE ANALYSIS OF MUTUAL FUND” under my supervision.
I further certify that the entire work has been done by the learner under my guidance and that
no part of it has been submitted for any Degree or Diploma of any University.
It is her own work and facts reported by her personal findings and investigations.

Ms. Jyoti Langote

(Mentor/Internal Examiner)

(External Examiner) Dr. Trisa Joseph

(In-charge Principal)

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 DECLARATION BY LEARNER

I, Kumari Priti Ramaswami Joharapuram, here by, declare that the work embodied in this
project work titled “A COMPARATIVE ANALYSIS OF MUTUAL FUND” forms my own
contribution to the research work carried out under the guidance of Ms. Jyoti Langote is a
result of my own research work and has not been previously submitted to any other University
for any other Degree/Diploma to this or any other University.

Where ever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography.

I hereby further declare that all the information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Priti Ramaswami Joharapuram

Certified By: Ms. Jyoti Langote

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 ACKNOWLEDGEMENT

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

I would like to acknowledge the following as being idealistic channels and fresh dimensions
in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me a chance to do this
project.

I would like to thank my In-charge Principal, Dr. Trisa Joseph, for providing the necessary
facilities required for completion of this project.

I take this opportunity to thank our Coordinator, Ms. Jyoti Langote, for her moral support and
guidance.

I would also like to express my sincere gratitude towards my project guide, Ms. Jyoti Langote
whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

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

Priti Ramaswami Joharapuram

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 INDEX
Chapter No. Particular Page no.
TITLE OF THE PAGE 1-2

CERTIFICATE 3

DECLARATION 4

ACKNOWLEDGMENT 5

EXECUITVE SUMMARY 7-8

1 INTRODUCTION 8-24
1.1 DEFINITION OF MUTUAL FUND
1.2 HISTORY OF MUTUAL FUNDS
1.3 WHY SELECT MUTUAL FUND?
1.4 ADVANTAGES OF MUTUAL FUND
1.5 DISADVANTAGES OF MUTUAL FUND
1.6 MUTUAL FUND FEES AND EXPNESES
2 RESEARCH METHODOLOGY 25-26

3 PARAMAETERS AND CRITERIA FOR SELECTING THE BEST 27-29

MUTUAL FUND
4 WORKING OF MUTUAL FUNDS 30-35
4.1 STRUCTURE OF MUTUAL FUND IN INDIA
4.2 REGUKATORY BODY IF MUTUAL FUNDS IN INDIA
5 TYPES OF MUTUAL FUNDS SCHEMES IN INDIA 36-40

6 MUTUAL FUNDS IN INDIA 41-43

7 COMPARATIVE ANALYSIS OF MUTUAL FUND IN INDIA 44-57

(Reference to HDFC Mutual Fund & SBI Mutual Fund)
8 DATA ANALYSIS AND INTERPRETATION 58-62
9 LITERATURE REVIEW 63-64
10 SUGGESTION 65-66
11 CONCLUSION 67
BIBLIOGRAPHY 68
ANNEXURE 69-71

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 EXECUTIVE SUMMARY

A Mutual fund is a scheme in which several people invest their money for a financial clause. The collected
money is invested in Capital markets & the money which they earned, is divided based on the number of units
which they hold.

The Mutual fund Industry was started in India in a small way with the UTI creating what was effectively a
small savings division within the RBI. This was fairly successful for the next 25 years as it gave investors
good returns. Due to this RBI gave a go ahead to Public sector banks & financial institution to start Mutual
Funds in India and their success gave way to Private sector Mutual Funds.

The advantages of Mutual Funds are Portfolio Diversification, Liquidity, Professional Management, Ease of
Companies, Less Risk, Low Transaction cost, Transparency, and so on.

The Disadvantages of Mutual Funds are Cost, Index Does Better, Fees, No Control over Investments,
Profitability of High returns reduced significantly, and Personal Tax situation is not considered.

Mutual Funds have to follow specific rules and regulation which are prescribed by the SEBI. AMFI is the apex
body of all the Asset Management companies and is registered with SEBI. Association of Mutual Funds India
has brought down the Mutual Fund Industry to a professional and healthy market with ethical lines enhancing.

There are many types of mutual funds in India. You can classify on the basis of BY STRUCTURE ( Open
Ended Schemes, Close-Ended Schemes & Interval Schemes), BY NATURE (Equity Fund, Debt Fund,
Balanced Fund) , BY INVESTMENT OBJECTIVE (Growth Schemes, Income Schemes, Balanced Schemes
& Money Market Schemes), OTHER SCHEMES (Tax Saving Schemes, Index Schemes, Sector Specific).

Mutual Funds are very easy to buy and sell. You can buy mutual funds directly from company or a broker.
Before Investing in Mutual Fund, one has to look at all the factors like performance of the mutual funds from

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last 5 years, the returns given by mutual funds from last 5 years & the company’s net worth has to be
considered.

There are two types of Mutual Funds in India Public Sector Mutual Fund & Private Sector Mutual Fund. In
Public Sector Mutual Funds there are UTI Mutual Fund, State bank of India Mutual Funds, Bank of Baroda
Mutual Funds & In Private Sector Mutual Funds are HDFC Mutual Fund, ICICI Prudential Mutual Fund,
Reliance Mutual Fund etc...

The Most trend of Mutual Funds is the aggressive expansion of Mutual Funds. Nowadays there is lot of
Competition within the Mutual Fund as there are lot of Public Sector & Private Sector mutual funds have
entered the industry.

Returns Comparison has been done between two Mutual Fund Companies like HDFC Mutual Fund & SBI
Mutual Fund. In this comparison we had taken both small and midcap companies. In which they have invested
the investors’ money and how the returns for the 5 years has been done. It gives an idea how you can and
where you can invest.

“Mutual Funds are Subject to Market Risk. Please read the offer document before Investing”

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 CHAPTER 1-

INTRODUCTION

Mutual fund is the pool of the money, based on the trust who invests the savings of a number of investors who
shares a common financial goal, like the capital appreciation and dividend earning. The money thus collect is
then invested in capital market instruments such as shares, debentures, and foreign market. Investors invest
money and get the units as per the unit value which we called as NAV (Net Asset Value).

Mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in
diversified portfolio management, good research team, professionally managed Indian stock as well as the
foreign market, the main aim of the fund manager is to taking the scrip that value and future will rising, then
fund manager sell out the stock. Fund manager concentration on risk- return trade off, where minimize the risk
and maximize the return through diversification of the portfolio. The most common features of the mutual
fund unit are low cost.

Most open-end mutual funds continuously offer new shares to investors. It is also known as open ended
investment company. It is different from close ended companies.

Investment in securities are spread across a wide cross section of industries and sectors thus the risk is reduced.
Diversification reduces the risk because not all stocks may move in the same direction in same proportion at
the same time. Mutual funds issues units to the investors in accordance with quantum of money invested by
them.

Investors of mutual fund are known as “unit holder”. The profits and losses are shared by the investors in
proportion to their investment. The mutual fund comes out with different schemes that varies from time to
time.

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1.1 DEFINITION OF MUTUAL FUNDS

“A mutual fund is a pool of money from numerous investors who wish to save or make money just like you.
Investing in a mutual fund can be a lot easier than buying and selling individual stocks and bonds on your
own. Investors can sell their shares when they want”.

“A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a
company that brings together a group of people and invest their money in stocks, bonds, and other securities.
Each investor owns shares, which represent a portion of the holdings of the fund.”

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1.2 HISTORY OF MUTUAL FUNDS

Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s, Government
allowed public sector banks and institutions to set up mutual funds. In the year 1992, Securities and Exchange
Board of India (SEBI) Act was passed. The objectives of SEBI are - to protect the interest of investors in
securities and to promote the development of and to regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the
interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds
sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised
in 1996 and have been amended thereafter from time to time.

There are four phases in which Mutual Funds have evolved.

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 and
administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end
of 1988 UTI had Rs.6,700 crores of assets under management.

SECOND PHASE – 1987-1993 (Entry of Public Sector Funds):

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance
Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first
non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National
Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in
December 1990.

At the end of 1993, mutual fund industry had assets under management of Rs47, 004 crores.

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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 am more
comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations in 1996. The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions.
As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit
Trust of India with Rs. 44, 541 crores of assets under management was way ahead of other mutual funds.

FOURTH PHASE – since February 2003 in February 2003:

Following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into separate entities. One is the
Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores at the
end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other
schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the
rules framed by Government of India and does not come under the purview of Mutual Fund Regulations. The
second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and
functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had March
2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different
private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.

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Note:

Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specific Undertaking of the Unit Trust of India
effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust
of India has therefore been excluded from the total assets of industry as a whole from February 2003 onwards.

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1.3 Why select mutual fund?

1. Built-in diversification:

When you buy a mutual fund, your money is combined with the money from other investors, and allows
you to buy part of a pool of investments. A mutual fund holds a variety of investments which can make it
easier for investors to diversify than through ownership of individual stocks or bonds. Not all investments
perform well at the same time. Holding a variety of investments may help offset the impact of poor
performers, while taking advantage of the earning potential of the rest. This is known as diversification.

2. Professional management

You may not have the skills and knowledge to manage your own investments or want to spend the time.
Mutual funds allow you to pool your money with other investors and leave the specific investment
decisions to a portfolio manager. Portfolio managers decide to where to invest the money in the fund, when
to buy and sell investments.

3. Easy to buy and sell

Mutual funds are widely available through banks, financial planning firms, investment credits, credit
unions and trust companies. You can sell your fund units or shares at almost any time if you need to get
access to your money. But you may get back less than you invested.

4. A wide range of funds to choose from

Mutual funds can be used to meet a variety of financial goals. For example,

• A young investor with a stable income and many years to invest may feel comfortable taking more risk
to achieve greater potential return. They may invest in an equity fund.
• A mid-career investor trying to balance risk and return more moderately could invest in a balanced
mutual fund that may buy a mix of stocks and bonds.
• An investment approaching retirement might be less comfortable with risk and more interested in fixed
income investments. They may invest in a bond fund.

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1.4 ADVANTAGES OF MUTUAL FUND

Portfolio Diversification:

Investing in a diversified portfolio can be very expensive. The nice thing about mutual funds that they
allow anyone to hold a diversified portfolio. The reason why investors invest in a diversified portfolio is
because it increases the expected returns while minimizing the risk.

Expert Management:

Mutual fund is favoured because it doesn’t require the investors to do the research and asset allocation. A
fund manager takes care of it all and makes decisions on what to do with your investment. He/she decides
whether to invest in equities or debt. He/she also decide whether to hold them or not 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 1.05% of the AUM guidelines
as per SEBI) includes the fee of the manager too.

Invest in smaller denominations:

By investing in smaller denominations (SIP), you get expose 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 and quarterly) investments as opposed to lumpsum investments give you the benefit of rupee-
cost averaging.

Suit your financial goals:

There are several types of mutual funds available in 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 mutual fund that matches your income, expenditures, investment goals and
risk appetite.

Quick & painless process:

You can start with one mutual fund and slowly diversify. These days it is easier to identify and handpick
funds 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 will decide when, where and how to invest. In short, their
job is to consistently beat the benchmark and deliver you maximum returns.

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Tax-efficiency:

You can invest up to Rs. 1.5 lakh 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 in excess
of Rs 1 lakh after one year, they have consistently delivered higher returns other than tax saving
instruments like FD in the recent years.

Automated payments:

It is common to forgot or delay SIPs or prompt lump sum 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.

Liquidity:

Another nice advantage to mutual funds is that the assets are liquid. In financial language, liquidity
basically refers to converting your assets to cash with relative ease. Mutual funds are considered liquid
assets since there is high demand for the many of the funds in the marketplace.

Professional Management:

Mutual funds do not require a great deal of time or knowledge from the Investor because they are managed
by professional managers. They can be a big help to inexperienced investor who is looking to maximize
their financial goals.

Ease of Companies:

Mutual funds are also convenient because they are easy to compare. This is because many mutual fund
dealers allow the investor to compare the funds on metrics such as level of risk, return price. Because
Information is easily available, the Investor is able to make wise decisions.

Less Risk:

Investors acquire a diversification portfolio of securities even with a small investment in a mutual fund.
The risk in diversified portfolio is lesser than investing in 2 or 3 securities.

Low Transaction Cost:

Due to economies of scale of mutual funds pay lesser transaction cost. The benefits are passed on to
investors.

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Transparency:

Funds provide investors with updated information pertaining to market & schemes. All material facts are
disclosed to the investor as requires by regulator.

Safety:

Mutual funds industry is a part of well-regulated investment environment where interest of the investors
is protected by the regulators. All funds are registered with SEBI & complete transparency is followed.

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) or 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.

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1.5 DISADVANTAGES OF MUTUAL FUNDS

Cost

The downside of mutual funds is that they have a high cost associated with them in relation to the returns they
produce. This is because investors are not only charged for the price of the fund but they will often face
additional fees. Depending on the fund commission charges can be significant. You will need to pay fee that
will go towards the fund manager.

Index Does Better

In some cases, the stock Index may outperform the mutual fund. However, this is not always the case as it
depends in large part on the mutual fund the investor has invested in, as well as the skill set of fund manager.
Therefore, it is a good idea to do your research before investing in fund. It is historical data indicates that is
consistently underperformed compared to an index, then it is not wise investment.

Fees

The fees that charged will be depend on the type of mutual fund purchased. If a fund is risker and more
aggressive, the management fee will tend to be higher. In addition, the investor will also be required to pay
taxes, transaction fess as well as other costs related maintain the fund.

No Control over Investments

You have absolutely no control over what the Fund manager does with your money. You can’t advise him on
how your money is to be invested. You only sit back and hope for the best.

Profitability of High returns reduced significant

A mutual fund contains a diversified basket of securities. If a single security outperforms by a significant
margin the impact will be limited. Don’t Expect your investment to grow and give you profit Overnight. There
will also be downward fall in the limits of the fund.

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Personal Tax situation is not considered

When you invest in a Mutual Fund, your money is pooled together with others and your personal tax situation
is not considered while making Investment decisions. The most you can do is to choose between growth fund.

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.

Dilution

While diversification averages your risks of loss, it can also dilute your profits. Hence, you should not invest
in more than 7-9 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 Clear Tax
could solve this as we have already done the homework for you by hand-picking the top-rated funds form the
best fund houses in the country.

High Expense Ratio and Sales Charges

If you’re not paying attention to mutual fund expense ratios and sales charges, they can get out of hand. Be
very cautious while investing in funds with expense ratios higher than 1.20%, as they are considered to be on
the higher cost end. Be wary of 12b-1 advertising fees and sales charges in general. There are several good
fund companies out there that have no sales charges. Fees reduce overall investment returns.

Management abuses

Churning, turnover, and window dressing may happen if your manager is abusing his or her authority. This
includes unnecessary trading, excessive replacement, and selling the loses prior to quarter-end to fix the books.

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Poor Trade Execution

If you place your mutual fund trade anytime before the cut-off time for same day NAV, you’ll receive the
same closing price NAV for your buy or sell on the mutual fund. For investors looking for faster execution
times, maybe because of short investment horizons, day trading, or timing the market, mutual funds provide a
weak execution strategy.

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1.6 Mutual Fees and Expenses

Mutual fund fees and expenses are charges that may be incurred by investors who hold mutual funds.
Operating a mutual fund involves costs, including shareholder transaction costs, investment advisory fees, and
marketing and distribution expenses. Funds pass along these costs to investors in several ways.

Some funds impose “shareholder fees” directly on investors whenever they buy or sell shares. In addition,
every fund has regular, recurring, fund-wide, “operating expenses”. Funds typically pay their operating
expenses out of fund assets – which mean that investors indirectly pay these costs. Although they may seem
negligible, fees and expenses can substantially reduce an investors earning when the investment is held for a
long period of time.

Transaction fees

Purchase fee

Purchase fee- A type of fee that some funds charge their shareholders when they buy shares. Unlike a front-
end sales load, a purchase fee is paid to the fund (not to a Stockbroker) and is typically imposed to defray
some of the fund’s costs associated with the purchase.

Redemption fee

Redemption fee-another type of fee that some funds charge their shareholders when they sell or redeem shares.
Unlike a deferred sales load, a redemption fee is paid to the fund (not a Stockbroker) and is typically used to
defray fund costs associated with a shareholder’s redemption.

Exchange fee

Exchange fee-a fee that some funds impose on shareholders if they exchange (transfer) to another fund within
the same “family of funds”.

Management fee

Management fees are fees that are paid out of fund assets to the fund’s investment adviser for investment
portfolio management, any other management fees payable to the fund’s investment adviser or its affiliates,

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and administrative fees payable to the investment adviser that are not included in the “Other Expenses”
category. They are also called as maintenance fees.

Account fee

Account fees are fess that some funds separately impose on investors in connection with the maintenance of
their accounts. For example, some funds impose an account maintenance fee on accounts whose value is less
than a certain dollar amount.

Distribution and service fee

Distribution and service fees are fees paid by the fund out of fund assets to cover the costs of marketing and
selling fund shares and sometimes to cover the costs of providing the shareholder services. They are also called
12b-1 fees after section 12 of the Investment Company Act 1940. “Distribution fees” include fees to
compensate brokers and others who sell fund shares and to pay for advertising, printing and mailing of
prospectus to new investors, and the printing and mailing of sales literature. “Shareholder Service Fees” are
fees paid to persons to respond to investor inquiries and provide investors with information about their
investments, shareholder Servicing Fees can be paid inside or outside of a Rule 12b-1 Plan.

Other operating expenses

Transaction costs

These costs are incurred in the trading of the fund’s assets. Funds with a higher turnover ratio, or investing in
illiquid or exotic markets usually face higher transaction costs. Unlike the Total Expense Ratio these costs are
usually not reported.

Loads

Definition of a load

Load funds exhibit a “Sales Load” with a percentage charge levied on purchase or sale of shares. A load is a
type of commission. Depending on the type of load a mutual fund exhibit, charges may be incurred at time of
purchase, time of sale, or a mix of both. The different types of loads are outlined below.

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Front-end Load

Often associated with class ‘A’ shares of a mutual fund. Also known as Sales Charge, this is a fee paid when
shares are purchased. Also known as a “front-end load”, this fee typically goes to the brokers that sell the
funds shares. Front-end loads reduce the amount of your investment. For example, let’s say you have $1000
and want to invest in a mutual fund with a 5% front-end load. The $50 sales load you must pay comes off the
top, and the remaining $950 will be invested in the fund. The maximum sales load under the Investment
Company Act of 1940 is 9%. The maximum sales load under NASD Rules is 81/2 %.

Back-end Load

Associated with class “B” mutual fund shares. Known as a Contingent Deferred Sales Charge (CDSC or
sometimes Deferred Sales Charge), this is a fee paid when shares are sold. Also known as a “back-end load”,
this fee typically goes to the Stockbrokers that sell the funds shares. Back-end loads start with a fee about 5 to
6 percent, which incrementally discounts for each year that the investors own the funds shares. The rate at
which fee declines is disclosed in the prospectus. The amount of this type of load will depend on how long the
investor holds his or her shares and typically decreases to zero if the investor holds his or her shares long
enough.

Level load/Low load

It’s similar to a back-end load in that no sales charges are paid when buying the fund. Instead, a back-end load
may be charged if the shares purchased are sold within a given time frame. The distinction between level loads
and low loads as opposed to back-end loads, is that this time frame where charges are levied is shorter.

No-load fund

Associated with Class “C” Shares. As the name implies, this means that the fund does not charge any type of
sales load. But, as outlined above, not every type of shareholder fee is a “sales load”. A no-load fund may
charge fees that are not sales loads, such as purchase fees, redemption fees, exchange fees, and account fees.
Class “C” shares have the highest annual expense charges.

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 CHAPTER 2-
RESEARCH METHODOLOGY

1) Research Design:

a) Problem Defining: In a competitive market there are multiple mutual funds working in the Indian
market. It is necessary to know mutual fund as the performance of the mutual fund decides the future
of Mutual Fund Company. In my study I have compared returns of 5 years of the two mutual funds
that is HDFC Mutual Funds & SBI Mutual Funds.

b) Types of Research: This research is qualitative and analytical in nature. Qualitative research talks
about the quality of the research work & analytical research is concerned with determining validity of
hypothesis of facts collected.

c) Data Collection Design:

1) Sources of Data

Primary Data: I have used questionnaire as primary source for collecting data for my study.

Secondary Data: I have collected secondary data from various mutual fund books, from various
mutual fund websites.

2) Sampling: It represents the whole population. It is a process of choosing samples from whole
populations. I have chosen some people who have invested in Mutual funds.

3) Sampling Size: It represents how many candidates you have chosen to fill up your questionnaire. I had
chosen sample of 20 candidates.

4) Sampling Technique: Questionnaire sampling is something that is sent to the candidates who want
to invest in mutual funds. By Questionnaire you can understand peoples taste & preferences so it
is easy to convince.

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 5) Data Interpretation: Data Interpretation is that in which we analyses the whole collected data &
try to give it in simple words that is understandable.

Objective of the Study of Mutual Funds

The objective of the study is to analyses, in detail the growth pattern of the mutual funds industry in India and
to evaluate performance of different schemes floated by most preferred Mutual Funds in public and private
sector.

The Main Objectives of this project:

• To Study about the Mutual Funds in India

• To Study about returns of the Mutual Funds
• To give brief Idea about mutual funds available in India
• To give an idea about the schemes available
• To study market trends in mutual funds.
• To study some mutual fund companies and their funds
• To give idea about the regulation of mutual fund
• To study about mutual fund schemes

Many individuals own mutual funds today. Indeed, mutual fund industry is very big. It comprises of many
investors’ financial assets, whether for retirement or taxable saving purposes. To a large extent, mutual funds
are investment vehicle for the majority households in India.

The overall study of my project is to know which companies provide better returns HDFC Mutual funds &
SBI Mutual Funds and also calculate their returns from last 5 years. We have to examine carefully all the
possibility while calculating the returns. I am doing my Project on “Small & Midcap companies”. We have to
make comparison so it is very useful for investors to make a decision.

LIMITATIONS

• The lack of information sources for the analysis part.

• Though I tried to collect some primary data but they were too inadequate for the purpose of the study.
• Time and money are critical factors limiting this study.
• The data provided by the prospects may not be 100% correct as they too have their limitations.
• The study is limited to selected mutual fund scheme.

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 CHAPTER 3-
PARAMETERS AND CRITERIA FOR SELECTING THE BEST
MUTUAL FUNDS

Each individual investor is unique in his investment decisions. They may be driven by various decisions and
motives to choose a mutual fund to invest into. When choosing to invest in mutual fund plans, the investors
must carefully look into select parameters and criteria for choosing the best plan which suits them the best. It
becomes very important to align one’s financial position, financial objectives and risk appetite with the mutual
fund plan that they choose to invest in.

Let us look at some of the parameters and criteria for choosing a mutual fund plan that may help meet the
above objectives of mutual fund investment.

a) Investment Objective

It is important to assess the objective of investing in mutual funds. Any investment made is done for a fixed
period of time. Investments may range from short to mid to long-term and hence require a thoughtful approach
while choosing one. The investment objective may help assess the risk factor that one may be willing to take
over the period of investment made. An investment objective helps in deciding the macro-level selection of
the mutual fund types. Choosing to invest in long-term or short-term plans or a mix of both can have an
instrumental impact on your investment decision.

b) Consistency in Performance

Consistency in the performance of the mutual fund plans gives investor a heads-up on how good a mutual fund
plan is over a past period of time. The previous 1 year, 3 years or 5 years performance of the mutual fund may
suggest how consistent or fluctuating has the mutual fund been in the market conditions.

c) The Outlook for the Economy

It is highly unlikely that the assessment of the economic outlook, present or in foreseeable future, may help in
making an exact prediction of a mutual funds’ performance in the present situation or in the coming future.
Nevertheless, a judgemental approach is a must to have an informed mind about the overall outlook for the
economy. There are various factors that affect the economy ranging from government decisions to industrial
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and market performances. It is matter of anticipation and hence the most advisable option is to diversify the
investments keeping in mind the short-term and long-term objectives.

d) Asset Under Management

The confidence of the investor in any particular mutual fund scheme is substantiated and further solidified
through assessment of the net asset of a mutual fund scheme. This confidence grows over time and helps in
choosing the right schemes that have seen a good market performance and stay ahead of other schemes in the
growth cycle. The flagship mutual fund schemes with high asset under management are generally managed
by the best and experienced fund managers.

e) Expense Ratio

The expense ratio is an important consideration while choosing a scheme as they are known to take away a
substantial chunk of the returns. As per industry standards, an expense ratio of 1.5% is a viable deal. Good
performing schemes with high expense ratio may not affect adversely either. However, in an event of the bad
performance, the same expense ratio may adversely impact the returns.

f) Exit Load

The mutual fund schemes are time bound. In an event of early withdrawal from the scheme before maturity
period, the investor is required to pay an exit load. Financial needs of an individual are unpredictable and in
case of emergency, one may be required to withdraw from mutual fund schemes prematurely to gain liquidity
of assets. It is advisable to avoid schemes with stringent exit load and choose schemes with minimal exit load
to minimize its impact on the returns earned. The given parameters and criteria for choosing the best mutual
schemes to suit ones’ investment decisions and objective may help in selecting the most appropriate schemes
to construct a balanced portfolio. The well informed choice of plans of schemes, when aligned with investment
objectives, may help gain returns over the period of time. Nevertheless, it is an advice worth remembering that
as with all other investment options, mutual funds too, are subject to market risks that cannot be overlooked
but can surely be contained to an extent. The parameters and criteria for selecting the best mutual funds are
aimed at meeting all those objectives.

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RISK FACTORS OF MUTUAL FUNDS

a. Market Risk

We would all have seen that one-liner in all advertisement that Mutual Funds are subject to Market Risk.

Market Risk is basically a risk which may result in losses for any investor due to a poor performance of the
market. There are lot of factors which affect the market. A few examples are a natural disaster, inflation,
recession, political unrest, fluctuation of interest rates. Market risk is also known as systematic risk.
Diversifying a person’s portfolio won’t help in these scenarios. The only thing which the investor can do is
wait for the storm to calm.

b. Concentration Risk

Concentration generally means focusing on one thing. Concentrating a huge amount of a person’s investment
in one particular scheme is not a good option. Profits will be huge if lucky, but losses will be more. Best ways
to minimize the risk is by diversifying the portfolio. Concentrating and investing heavily in one sector is also
very risky. The more diverse the portfolio, the lesser the risk is.

c. Interest Rate Risk

Interest rate changes depending upon the credit available with lender and demand from borrowers. They are
inversely related to each other. Increase in the interest rates during the investment may result in a reduction of
a price of securities.

For example, an individual decides to invest Rs 100 with a rate of 5% for a period of x years. If the interest
rate changes due to changes in the economy and it become 6 %, the individual will no longer be able to get
back the Rs 100 he invested owing to the fact that the rate is fixed. The only option here is reducing the market
value of the bond. If the interest rate reduces to 4% on the other hand, the investor can sell it at a price above
the invested amount.

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d. Liquidity Risk

Liquidity risk refers to the difficulty to redeem an investment without incurring a loss in the value of the
instrument. It can also occur when a seller is unable to find a buyer for the security.

In mutual funds, like ELSS, the lock-in period may result in liquidity risk. Nothing can be done during the
lock-in period. In yet another case, Exchange traded funds (ETFs) might suffer from liquidity risk. As you
may know, ETFs can be bought and sold on the stock exchange like shares.

Sometimes due to lack of buyers in the market, you might be unable to redeem your investments when you
need them most. The best way to avoid this is to have a very diverse portfolio and making fund selection
diligently.

e. Credit Risk

Credit risk basically means that the issuer of the scheme is unable to pay what was promised as interest.
Usually, agencies which handle investments are rated by rating agencies on this criteria. So, a person will
always see that a firm with a high rating will pay less and vice-versa.

Mutual Funds, particularly debt funds, also suffer from credit-risk. In debt funds, the fund manager has to
incorporate only investment -grade securities. But sometimes it might happen that to earn higher returns, the
fund manager may include lower credit-rated securities.

This would increase the credit risk of the portfolio. Before investing in a debt fund, have a look at the credit
ratings of the portfolio composition.

f. The Risk-Return Trade Off

The most important relationship to understand is the risk-return trade-off. Higher the risk greater the
returns/loss and lower the risk lesser the returns/loss.

Hence it is up to you, the investor to decide how much risk you are willing to take. In order to do this, you
must first be aware of the different types of risks involved with your investment decisions.

g. Political / Government Policy Risk

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

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 CHAPTER 4
WORKING OF MUTUAL FUNDS

HOW DO MUTUAL FUNDS WORK?

In simple words, a mutual fund is a collective fund where individuals of the same mind pool in money to invest
in a chosen asset class. This gives you the ability to invest in an asset class which you could probably not
afford alone or not be able due to lack of knowledge, experience and information.

This collected money is then managed by an expert who decides when and where the entire amount or part of
money is to be invested to make profits!

So, the expert called the fund manager, is similar to a well-informed individual who makes his own
investments in equity or debt markets to make money. The only difference here is that the fund manager is
handling a lot more money belonging to different people. Therefore, the role of a fund manager is vital, as he
is the one deciding on where the money is to be invested to make it grow for investors.

However, this expert management of money comes with a small annual fee. The total profit made is then
returned to the investors, depending on their share in the entire pool of money.

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4.1 STRUCTURE OF MUTUAL FUND IN INDIA

The structure of Mutual Funds in India is a three-tier one. There are three distinct entities involved in the process – the
sponsor (who creates a Mutual Fund), trustees and the asset management company (which oversees the fund
management). The structure of Mutual funds has come into existence due to SEBI (Securities and Exchange Board of
India) Mutual Fund Regulations, 1996. Under these regulations, a Mutual Fund is created as a Public Trust. We will
look into the structure of Mutual Funds in a detailed manner.

The Fund Sponsor:

The Fund Sponsor is the first layer in the three-tier structure of Mutual Funds in India. SEBI regulations say
that a fund sponsor is any person or any entity that can set up a Mutual Fund to earn money by fund
management. This fund management is done through an associate company which manages the investment of
the fund. A sponsor can be seen as the promoter of the associate of the company. A sponsor has to approach
SEBI to seek permission for a setting up a Mutual Fund. Once SEBI agrees to the inception, a Public Trust is
formed under the Indian Trust Act, 1882 and is registered with SEBI. Trustees are appointed to manage the
trust and asset management company is created complying with the Companies Act, 1956. There are eligibility
criteria given by SEBI for the fund sponsor. The sponsor must have experience in financial services for a
minimum of five years with a positive Net worth for all the previous years. The net worth of the sponsor in
the immediate last year has to be greater than the capital contribution of the AMC. The sponsor must show
profits in at least three out of five years which includes the last year as well. The sponsor must have at least
40% share in the worth of the asset management company. Any entity that fulfils the above criteria can be
termed as a sponsor of the Mutual Fund.

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Trust and Trustees:

Trust and trustees form the second layer of the structure of Mutual Finds in India. A trust is crested by the
fund sponsor in favour of the trustees, through a document called a trust deed. The trust is managed by the
trustees and they are answerable to the investors. They can be seen as primary guardians of fund and assets.
Trustees can be formed by two ways – a Trustee Company or a Board of Trustees. The trustees work to monitor
the activities of the Mutual Fund and check its compliance with SEBI (Mutual Fund) regulations. They also
monitor the systems, procedures, and overall working of the asset management company. Without the trustees’
approval, AMC cannot float any scheme in the market. The trustees have to report to SEBI every six months
about the activities of the AMC.

Asset Management Companies:

Asset Management Companies are the third layer in the structure of Mutual Funds. The asset management
company acts as the fund manager or as an investment manager for the trust. A small fee is paid to the AMC
for managing the fund. The AMC is responsible for all the fund-related activities. It initiates various schemes
and launches the same. The AMC is bound to mange funds and provide services to the investor. It solicits
these services with other elements like brokers, auditors, bankers, registrars, lawyers, etc. and works with
them. To ensure that there is no conflict between the AMCs, there are certain restrictions imposed on the
business activities of the companies.

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Other Components in the Structure of Mutual Funds

Custodian:

A custodian is responsible for the safekeeping of the securities of the Mutual Fund. They manage the
investment account of the Mutual Fund, ensure the delivery and transfer of the securities. They also collect
and track the dividends & interests received on the Mutual Fund investment.

Registrar and Transfer Agents (RTAs):

These are the entities who provide services to Mutual Funds. RTAs are more like the operational arm of Mutual
Funds. Since the operations of all Mutual Fund companies are similar, it is economical in scale and cost
effective for all the 44 AMCs to seek the services of RTAs. CAMS, Karvy, Sundaram, Principal, Templeton,
etc are some of the well-known RTAs in India. Their services include:

• Processing investors’ application

• Keeping a record of investors’ details
• Sending out account statements to the investors
• Sending out periodic reports
• Processing the payouts of the dividends
• Updating the investor details i.e., adding new members and removing those who have withdrawn from
the fund.

Auditor:

Auditors audit and scrutinise record books of accounts and annual reports of various schemes. Each AMC
hires an independent auditor to analyse the books so as to keep their transparency and integrity intact.

Brokers:

AMC users the services of brokers to buy and sell securities on the stock market. The AMCs uses research
reports and recommendations from many brokers to plan their market moves. The three-tier structure of the
Mutual Fund is in place keeping the fiduciary nature of the Mutual Funds in mind. This structure of Mutual
Funds is in line with the international standards and thus there is a proper separation of responsibilities and
functioning of each constituent of the structure.

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4.2 Regulatory Body of Mutual Funds in India

SEBI (Securities & Exchange Board of India)

As far as Mutual funds are concerned, SEBI (Securities & Exchange Board of India) formulates policies and
regulates the mutual funds to protect the interest of the investor.

In January 1993, SEBI prescribed registration of mutual funds integrity in business transactions and financial
soundness while granting permission. This would curb excessive growth of mutual funds protect investor’s
interest by registering only the sound promotes with proven track record & financial strength.

The offer documents of the schemes launched by mutual funds and the scheme particulars are required to be
vetted by SEBI. A standard format for mutual fund prospectuses is being formulated.

Mutual funds have been required to adhere to a code of advertisement. SEBI has introduced change in the
Securities Control and Regulations Act governing the mutual funds. The mutual funds which have in the
market for last 5 years are allowed to assure a maximum return of 12 percent only, for one year.

The current SEBI guidelines on Mutual Funds prescribe a minimum start-up of Rs.50 crore for an open-ended
scheme, and Rs.20 crore for close-ended scheme, failing which application money has to be refunded. AMFI
(Association of Mutual Funds in India) have appealed to regulatory authority of India for scrapping the
minimum requirement.

Also 50% of the directors of AMC must be independent. All mutual funds are required to be registered under
SEBI before they launch any scheme.

The transparent and well understood declaration or Net Asset Value (NAVs) of mutual fund schemes is an
important issue in providing investors with information as to the performance of the fund. SEBI has warned
some mutual funds earlier of unhealthy market.

Trustees shall immediately report to the Board of any special development in the mutual fund.

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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 the Indian Mutual Fund Industry to a professional and healthy
market with ethical lines enhancing.

The Objectives of Association of Mutual Funds in India.

The Association of Mutual Fund of India with 30 registered AMCs of the country. It has certain defined
objectives with the guidelines of its board of directors. The objectives are as follows:

• The mutual fund association of India maintains 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 relate people engaged in the activities of mutual fund and asset management
including agencies connected or involved in the field of capital markets and financial services.
• To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all
matters concerning the mutual fund industry.
• To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the
Mutual Fund Industry.
• To undertake nationwide investor awareness programme so as to promote proper understanding of the
concept and working of mutual funds.
• To Dessisimate information on Mutual Fund Industry and to undertake studies and research directly
and/or in association with other bodies.
• To regulate conduct of distributors including disciplinary actions (cancellation of ARN) for violation
of code of conduct.
• To protect Interest of Investor / Unit holder.

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 CHAPTER 5

TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

A) BY STRUCTURE

➢ Open-Ended – This scheme allows investors to buy or sell units at any point in time. This does not
have a fixed maturity date. Investors can conveniently buy & sell units at Net Asset Value related
Prices. The key feature of Open-Ended scheme is liquidity.

➢ Close-Ended – A closed- end fund has a fixed number of shares outstanding and operates for a fixed
duration (generally ranging from 3 to 15 years). The fund would be open for subscription only during
a specified period and there is an even balance of buyers and sellers, so someone would have to be
selling in order for you to be able to buy it. Close-end funds are also listed on the stock exchange so it
is traded just like other stocks on an exchange or over the counter. Usually, the redemption is also
specified which means that they terminate on specified dates when the investors can redeem their units.

➢ Interval – Interval schemes combine the features of open-ended and close-ended funds. The units may
be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals
at NAV-related prices. Fixed maturity plans, or FMPs are examples of these types of schemes.

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B) BY NATURE

➢ Equity Fund – Equities are a popular mutual fund category amongst retail investors. They invest the
funds into Equity holdings. The structure of the fund may vary different schemes and the manager’s
outlook on different stocks. These funds are sub-classified depending on Investment objective such as

a) Diversified Equity Funds

b) Mid-Cap Funds
c) Sector Specific Funds
d) Tax Savings Funds (ELSS)

➢ Debt Funds – Debt funds are mutual funds that invest in fixed income securities like bonds and
treasury bills. Gilt fund, monthly income plans (MIPs), short term plans (STPs), liquid funds, and fixed
maturity plans (FMPs) are some of the investment options in debt funds. Apart from these categories,
debt funds include various funds investing in short term, medium term and long term bonds.

➢ Balanced Funds – This scheme allows investors to enjoy growth and income at regular intervals.
Funds are invested in both equities and fixed income securities; the proportion is pre-determined and
disclosed in the scheme related offer document. These are ideal for the cautiously aggressive investors.

C) BY INVESTMENT OBJECTIVE

➢ Growth Schemes – Growth schemes are known as equity schemes. The main aim of these schemes is
to provide capital appreciation over medium to long term. These schemes normally invest a major part
of funds in Equities & look for capital appreciation.

➢ Income Scheme – Income Scheme are also known as debt schemes. The aim of the scheme is to
provide regular and steady income to the investor. These Schemes invest in fixed income securities
such as bonds & corporate debentures. In such schemes capital appreciation may be limited.

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 ➢ Balance Scheme – This scheme allows investors to enjoy growth and income of at regular intervals.
Funds are invested in both equities and fixed income securities; the proportion is pre-determined and
disclosed in the scheme related offer document. These are ideal for the cautiously aggressive investors.

➢ Money Market Scheme – This is ideal for investors looking to utilize their surplus funds in short term
instruments while awaiting better options. These schemes invest in short-term instruments such as
treasury bills, certificate of Deposit, commercial paper & Intercompany call money and seek to provide
reasonable returns for the investors.

D) OTHER SCHEMES

➢ Tax Saving Schemes – As the name suggests, this scheme offers tax benefits to its investors. The
funds are invested in equities thereby offering long-term growth opportunities. Tax saving mutual
funds (called Equity Linked Savings Schemes) has a 3 year lock-in period.

➢ Index schemes – Index schemes is a widely popular concept in the west. These follow a passive
investment strategy where your investments replicate the movements of benchmark indices like Nifty,
Sensex etc.

➢ Sector Specific Schemes - Sectoral funds are invested in a specific sectors like infrastructure. IT,
pharmaceuticals, etc. or segments of the capital market like large caps, mid-caps, etc. This scheme
provides a relatively high risk – high return opportunity within the equity space.

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Comparison between FD, Bonds Mutual Fund- features

Organization of Mutual Funds.

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The graph indicates the growth of assets under management over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

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 CHAPTER 6
MUTUAL FUNDS IN INDIA

The mutual fund industry in India began in 1963 with the formation of the Unit Trust of India (UTI) as an
initiative of the Government of India and the Reserve bank of India. Much later, in 1987, SBI Mutual Fund
became the first non-UTI mutual fund in India.

The year 1963 heralded a new era of Mutual funds in India. His marked by the entry of private companies in
the sector. After the Securities and Exchange Board of India (SEBI) Act was passed in 1992, the SEBI Mutual
Fund Regulations came into being in 1996. Since then, the Mutual fund companies have companies have
continued to grow exponentially with foreign institutions setting shop in India, through joint ventures and
acquisitions.

As the industry expanded, a non-profit organization, the Association of Mutual Funds in India (AMFI), was
established on 1995. Its objective is to promote healthy and ethical marketing practices in the Indian mutual
fund Industry. SEBI has made AMFI certification mandatory for all those engaged in selling or marketing
mutual fund products.

Major Mutual Fund Companies in India

Public Sector Mutual Funds

• Bank of Baroda Mutual Fund

• State Bank of India Mutual Fund
• LIC Mutual Fund
• UTI Mutual Fund
• Canara Bank Mutual Fund

Private Sector Mutual Fund

• Birla Sun Life Mutual Fund

• HDFC Mutual Fund
• HSBC Mutual Fund

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 • ICICI Prudential Mutual Fund
• Tata Mutual Fund
• Standard Chartered Mutual Fund
• Morgan Stanley Mutual Fund
• Alliance Capital Mutual Fund
• Franklin Templeton Mutual Fund
• Reliance Mutual Fund
• DSP Blackrock Mutual Fund

These above are the various Mutual Funds in India which has given a good return.

Net Asset Value (NAV)

The Net Asset Value (NAV) of a mutual fund is the price at which the units of a mutual fund are bought and
sold. It is the market value of the fund after deducting its liabilities. The value of all units of a mutual fund
portfolio are calculated on a daily basis, from this all expenses are then subtracted. The result is then divided
by the total number of units the resultant value is the NAV. NAV is also sometimes referred to as Net Book
Value or book Value.

NAV indicates the market value of the units in a fund. So, it helps an investor keep track of the performance
about the mutual fund. An investor can calculate the actual increase in the value of their investment by
determining the percentage increase in the mutual fund NAV. NAV, therefore, gives accurate information
about the performance about the mutual fund.

Calculation of NAV

Mutual fund assets usually fall under two categories – securities & cash. Securities, here, include both bonds
& stocks. Therefore, the total asset value of a fund will include its stocks, cash and bonds at market value.
Dividends and interest accrued and liquid assets are also included in total assets

The formula for calculating NAV:

NAV of a mutual funds = (Assets of the Funds – Liabilities of the Funds)

Number of outstanding units of the fund

The mutual itself and/or certain accounting firms calculate the NAV of a mutual fund. Since, mutual funds
depend on stock markets, they are usually declared after the closing hours of the exchange.

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All mutual funds are required to publish their NAV at every business day as per SEBI guidelines.

NAV is obtained after subtracting the expense ratio of a fund. This expense ratio is the total of all expenses
made by the mutual fund annually, including the operating expenses and the management fees, distribution
and marketing fees, transfer agent fees, custodian fees and audit fees.

Example of calculation of NAV

As an example, assume there are two investors X and Y who have invested in a mutual fund which decided to
issue out units at Rs 1/-
X invests Rs 100/- and Y invests Rs 200/-.
The total corpus of the mutual fund will be Rs 100 + Rs 200 = Rs 300/- and X will get 100 units and Y will
get 200 units.
Now suppose the mutual fund manager invests smartly over a year and makes the investment grow and the
corpus becomes Rs 800/-.

The NAV will be calculated as

NAV of a mutual funds = (Assets of the Funds – Liabilities of the Funds)

Number of outstanding units of the fund

= [Rs 800/- 0] / 300 = 2.67
= the NAV is 2.67
= So, X’s value of investments will be 100 units * 2.67 = Rs 267/- and
= Y’s value of investments will be 200 units * 2.67 = Rs 534/-.
As per the regulator SEBI’s guidelines, all mutual funds are required to publish the NAV of their schemes at
least once a week and in two leading newspaper.

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 CHAPTER 7
COMPARATIVE ANALYSIS OF MUTUAL FUND IN INDIA
(Reference to HDFC Mutual Fund & SBI Mutual Fund)

A) HDFC MUTUAL FUND

HDFC Mutual Fund has been constituted as s trust in accordance with the provisions of the Indian Trust Act,
1882, as per the terms of the trust deed dated June 8, 2000 with Housing Development Finance Corporation
Limited (HDFC) and Standard Life Investments Limited as the Sponsors / Settlers and HDFC Trustee
Company Limited, as the Trustee. The Trust Deed has been registered under the Indian Registration Act, 1908.
The Mutual Fund has been registered with SEBI, under registration code MF/044/00/6 on June 30, 2000.

HDFC Asset Management Company (AMC)

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on
December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund
by SEBI vide its letter dated July 3, 2000.

In terms of the Investment management Agreement, the trustee has appointed HDFC Asset Management
Company Limited to manage the mutual funds. As per the terms of the Investment Management Agreement,
the AMC will conduct the operations of the Mutual Fund and manage assets of the schemes, including the
schemes launched from time to time.

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Funds Managed by HDFC Mutual Fund.

• Equity Fund
• Balanced Fund
• Income Fund

Achievement of HDFC

• HDFC Asset Management Company (AMC) is the first AMC in India to have been assigned the
CRISIL Fund House – 1 rating.
• This is the highest fund governance and process quality which reflect the highest governance levels
and fund management practices at HDFC AMC.
• It is only fund house to have been assigned this rating for 2 years in succession.

INVESTMENT OBJECTIVE

To provide long term capital appreciation by investing predominantly in Small-Cap and Mid-Cap companies.
Current Expense Ratio 1.73% On the first 100 crores daily net assets
(Effective date 28th June 2014) On the next 300 crores daily assets 2.25%
On the next 300 crores daily assets 2.00%
On the balance of the net assets 1.75%

Plan Date NAV Date NAV Amount

Direct Dividend Plan 17-Oct 2022 14.09

Direct Growth Plan 17-Oct 2022 754.61

Dividend Plan 17-Oct 2022 523.75

Growth Plan 17-Oct 2022 191.61

\
Product Labelling
The product is suitable for investors who are seeking:
• Investment predominantly in equity and equity related instruments for Small-Cap and Mid-Cap
Companies.
• Investors should consult their financial advisers if in doubt about whether the product is suitable for
them

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 • Investors should understand that their principal will be at very high risk.

Comparing Returns of Mutual Fund for Last 5 years

Investment Info

Investment Objective: The investment objective of the scheme is to generate long-term capital growth from
an actively managed portfolio of equity and equity-related securities including equity derivatives.

As per the above chart you can see HDFC Mutual Fund id open-ended. Its average asset size is 13,284.30
crores. HDFC introduced Small Cap Fund in 2008. Since it has given good returns.

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Portfolio Holdings of the HDFC Mutual Funds

Asset Under Management Movement

The below graph shows the Variation in the assets under management

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Asset Allocation of Mutual Funds

The below diagram shows how much Equity has contributed to the Mutual Funds

Top Sector holding and Percentage allocation

Market Capitalization

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From the above chart you can see that market capitalization of small cap is 80.30% as compared to large cap
3.80% and mid-cap 8.40%.

HDFC Mutual Fund NAV

The mutual fund NAV denotes a price at which units of a mutual fund can be bought or sold. The market value
of a fund’s holdings, less expenses is the net asset value. Per unit NAV is calculated by dividing the net asset
value of the mutual fund schemes by the number of units outstanding on the valuation date.

The below NAV calculation shows the returns of HDFC Mutual Funds with the help of the graph

HDFC Small Cap Fund Growth

Performance Analysis of HDFC Mutual Fund

RETURN (%)
FUND NAME AUM (₹ CR)
1M 3M 6M 1Y 3Y 5Y SINCE INCEPTION

HDFC Small Cap Fund 13,879.91 -1.71 11.15 1.28 -2.23 26.14 13.64 14.95

Fund Performance as per different years

HDFC Small Cap Fund – Growth Small Cap Fund 2 -0.58% 62.17% 19.30% -10.06% -8.38%

All returns are compounded annualized for a period greater than 1 year, and absolute for a period of 1 year or
less. Performance on SIP returns as of 16/10/2022. Statistical ratios are of a period of 3-year as of 16/10/2022.
SIP purchases are assumed to be on the 1st of every month. Expense ratio is as disclosed at monthly frequency.

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 B) SBI Mutual Fund

The SBI mutual fund Private Ltd is a joint venture between “The State Bank of India” and Societe Generale
Asset management (France). The fund manages over 42,100 crores of assets and has a diverse profile of
Investors actively parking their investments across 38 active schemes.

At SBI Mutual Fund we know that every investor has unique financial goals and requires different sets of
products. This is why we have a wide range of schemes that fulfills every kind of Investor requirement. Each
scheme is managed by devising a different strategy which is reflective of the investors profile and carries with
different risks and rewards.

Vision: “To be the most preferred and the largest fund house for all asset classes, with a consistent track record
of excellent returns and best standards in customer service, product innovation, technology and HR practices.”

SBI Funds Management has emerged as one of the largest player in India advising various financial
institutions, pension funds, and local and international asset management companies.

SBI Funds makes one of the largest investment management firms in India, managing investment mandates
of over 5.4 million investors.

EQUITY FUNDS & SCHEMES

The Primary objective of the equity asset class is to provide capital growth/ appreciation by Investing in the
equity & equity related instrument companies over medium & long-term.

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There are range of Schemes available which fulfill Every Kind of Investor Requirements. Each Scheme
Provides different strategy which is reflective of the investors profile and carries with it different risks and
rewards.

1) Equity Schemes
2) Debt/Income Schemes
3) Liquid Scheme
4) Hybrid Schemes
5) Fixed Maturity Plans
6) Exchange Traded Schemes

We would be looking at only Equity Schemes. Below are the Equity Schemes.
Equity / Growth Funds

1) SBI Magnum Midcap Fund

2) SBI Large & Midcap Fund
3) SBI Magnum Global Fund
4) SBI Magnum Equity ESG Fund
5) SBI Bluechip Fund
6) SBI Multicap Fund
7) SBI Flexicap Fund
8) SBI Focused Equity Fund

Sectoral Funds

1) SBI Banking & Financial Services Fund

2) SBI Infrastructure Fund
3) SBI Magnum COMMA Fund
4) SBI PSU Fund
5) SBI Healthcare Opportunities Fund

Thematic Funds

1) SBI Consumption Opportunities Fund

2) SBI Equity Minimum Variance fund
3) SBI Magnum Equity ESG Fund

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ELSS Fund
1) SBI Long term Equity Fund
2) SBI Long Term Advantage Fund – Series II
3) SBI Long Term Advantage Fund – Series III
4) SBI Long Term Advantage Fund – Series IV

But we will be only comparing the Funds in SBI Large & Midcap funds.

SBI Large & Midcap fund is an open ended equity scheme and primarily invests in Large and Midcap equity
and Equity related securities of the companies in the large and midcap segments. The portfolio will comprise
of maximum of 30 stock.

This Product is suitable to the investor who are seeking:

• Long term capital appreciation

• Investing in diversified portfolio comprising predominantly large cap and mid cap companies
• Investors should consult their financial advisers if in doubt whether the product is suitable for them.

Objectives of the Schemes

The scheme aims to provide investors with opportunities for long term capital appreciation by investing in
diversified portfolio comprising predominantly large cap and mid cap companies. There can be no assurance
the invest objective of the scheme will be realized.

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Investment in Asset Backed securities (Securitized Debt) will not exceed 40% of the net assets of the
scheme. The scheme will not invest in foreign securitized Debt.

Comparing Returns of SBI Mutual Fund for Last 5 years

Investment Info

Investment Objective: The scheme aims to provide investors with opportunities for long term capital
appreciation by investing in diversified portfolio comprising predominantly large cap and mid cap
companies. There can be no assurance the invest objective of the scheme will be realized.

As per the above chart you can see SBI Mutual Fund id open-ended. Its average asset size is 7,399.67 crores.
SBI introduced Large & Midcap Cap Fund in 1993. Since it has given good returns.

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Performance of the SBI Mutual Fund

Portfolio Holding of the SBI Mutual Fund

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Asset Under Market Movement

Asset allocation

Top Sector Holding & Asset Portfolio

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Market Capitalization

From the above chart you can see that market capitalization of large cap is 34.20% as compared to mid cap
3.80% and small cap 17.90%.

SBI Mutual Fund NAV

The mutual fund NAV denotes a price at which units of a mutual fund can be bought or sold. The market value
of a fund’s holdings, less expenses is the net asset value. Per unit NAV is calculated by dividing the net asset
value of the mutual fund schemes by the number of units outstanding on the valuation date.

SBI Large & Midcap Fund

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Performance Analysis of SBI Mutual Fund

Performance of the fund on last 5 years

All returns are compounded annualized for a period greater than 1 year, and absolute for a period of 1 year or
less. Performance on SIP returns as of 16/10/2022. Statistical ratios are of a period of 3-year as of 16/10/2022.
SIP purchases are assumed to be on the 1st of every month. Expense ratio is as disclosed at monthly frequency.

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 CHAPTER 8
DATA ANALYSIS AND INTERPRETATION

From the above diagram, it can be said that 85% of the respondents are from the age group of 18-25 years,
whereas 15% people 26-45 years.

From the above chart it can be interpreted that 50% of the respondents work in private sector and 15% have
their own business sector and 35% of them opted for others option where there were majority of students.

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This pie chart shows 80% of annual income of respondents is from 10000 to 50000 whereas 20% of the
respondents have annual income from 50000 to 1 lakh.

This diagram helps to interpret that some of the respondents i.e., 7 out of 20 said that they don’t in mutual
fund, where as 65% of them said they invest in mutual fund.

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This research result says that, 65% of people invest their mutual fund for the time duration of 0-1 year, whereas
15% of the respondents invest for a time duration of 1-2 years, 20% of them invest for 2 years and above.

From this diagram I can conclude that majority of the respondents that is 60% of them opt to invest in the
Public Mutual Fund, and the rest of them that is 40% went for Private Funds.

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This chart says that, 55% of the respondents came to know about the mutual funds from their friends and
peers, and 25% of them came to know about mutual funds from others as they mentioned, whereas 15% of
them came to know from their family and relatives and rest 5% of the respondents came to know from their
company employees.

From the above chart, we can conclude that, 45% of the people opted to invest in the mutual funds of others,
whereas 20% of them opted to invest in Axis and HDFC Mutual for each, where 10% of them opted to invest
in Kotak Mahindra, and 5% of the respondents opted for ICICI.

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This pie chart help us interpret that 55% of the people consider low risk factor while investing in the Mutual
Fund, 30% of them consider the high return factor, whereas 10% of them consider liquidity, and rest 5%
consider company reputation.

I can interpret from the responses that 30% of the people think that the most alluring future of the mutual fund
is return and safety, 20% said that tax benefit and regular income is the future of mutual fund, and 15% of
them said that reduction in risk and transaction cost and diversification is the future of mutual fund.

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 CHAPTER 9

LITERATURE REVIEW

Dr. K. Veeraiah and Dr. A. Kishore Kumar (Jan 2014), conducted a research on Comparative Performance
Analysis of Select Indian Mutual Fund Schemes. This study analyses the performance of Indian owned mutual
funds and compares their performance. The performance of these funds analyzed using a five year NAVs and
portfolio allocation. Findings of the study reveals that, mutual funds out perform naiive investment. Mutual
funds as a medium-to-long term investment option are preferred as a suitable investment option by investors.

Prof. V. Vanaja and Dr. R. Karrupasamy (2013), have done a study on performance of select Private Sector
Balanced Category Mutual Fund Schemes in India. This study of performance evaluation would help the
investors to choose the best schemes available and will also help the AUM’s in better portfolio construction
and can rectify the problems of underperforming schemes. The objective of the study is to evaluate the
performance of select Private sector balanced schemes on the basis of returns and comparison with their bench
marks and also to appraise the performance of different category of funds using risk adjusted measures.

Dr. Ranjit Singh, Dr. Anurag Singh and Dr. H. Ramananda Singh (August 2011), have done research on
Positioning of Mutual Funds among Small Town and Sub-Urban Investors. In the recent past the significant
proportion of the investment of the urban investor is being attracted by the mutual funds. This has led to the
led to the saturation of the market in the urban areas. In order tot increase their investor base, the mutual fund
companies are exploring the opportunities in the small town and sub-urban areas. But marketing the mutual
funds in these areas requires the positioning of the products in the minds of the investors in a different way.
The product has to be acceptable to the investors, it should affordable to the investors, it should be made
available to them and at the same time the investors should be aware of it. The present paper deals with these
issues. It measures the degree of influence on acceptability, affordability, availability and awareness among
the small town and sub-urban investors on their investment decisions.

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Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel (Jul 2012), have done a Comparative Study On
Performance Evaluation of Mutual Fund Schemes Of Indian Companies. In this paper the performance
evaluation of Indian mutual funds is carried out through relative performance index, risk-return analysis. The
data used is daily closing NAV’s. The source data is website of Association of Mutual Funds in India (AMFI).
The study period is 1st January 2007 to 31st December, 2011. The results of performance measures suggest
that most of the mutual fund given positive return during 2007 to 2011.

Rashmi Sharma and N. K. Pandya (2013) have done an overview of Investing in Mutual Fund. In this paper,
structure of mutual fund, comparison between investments in mutual fund and other investment options and
calculation of NAV etc. have been considered. In this paper, the impacts of various demographic factors on
investors’ attitude towards mutual fund have been studied. For measuring various phenomena and analyzing
the various factors responsible for investment in mutual funds.

Dr. Ashok Khurana and Kavita Panjawani (Nov,2010), have analyzed Hybrid Mutual Funds. Mutual fund
returns can be compared using Arithmetic mean & Compounded Annual Growth Rate. Risk can be analyzed
by finding out Standard Deviation. Beta while performance analysis is based on Risk-Return adjustment. Key
ratios like Sharpe ratio and Treynor ratio are used for Risk-Return analysis. Funds are compared with a
benchmark, industry average, and analysis of volatility and return per unit to find out how well they are
performing with respect to the market. Value at Risk analysis can be done to find out the maximum possible
losses in a month given the investor had made an investment in that month. Based on the quantitative study
conducted company a fund is chosen as the best fund in the Balance fund growth schemes.

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 CHAPTER 10

SUGGESTION

Suggestion to the Mutual Fund Investor

• Understand the purpose of investment: The first point to analyze before investing in a fund is to find
out whether objective matches with the scheme. If there is a mismatch in the scheme the investors
would be affected with the probable returns. For example the schemes that invest in large cap stocks
is not suitable for conservative Investors. He should first try to invest in small & midcap funds.
Similarly, he should pick up schemes that will specify his investments. Examples pension plans,
Children’s plan sector specific schemes. These are the schemes from where he can invest for the future.

• Low Risk Tolerance: The Investors with low risk tolerance should invest in small & midcap schemes
as they are relatively safer when compared to schemes like equity. Aggressive investors can go for
equity investments and can opt for schemes that invest in specific industry or sector.

• Track Record: Investor should go through track record, performance against relevant market
benchmarks and its competitors.

• Period of Investments: To get returns on their investments the investor should hold their returns for
longer periods that is for 3 years to 5 years in order the schemes to generate good returns.

• Cost Factors: Though the AMC is regulated, one should look at the expense ratio of the fund before
investing. This is because money id deducted from the returns. A higher entry load or exit load will eat
into the returns. So, you have to look at the cost factors before investing.

• Points to be considered while departing from the scheme: Investor should sell or redeem or repurchase
the proceeds within 10 days of redemption or repurchase. Most funds charge exit load when the period
of exit is less than 6 months. You should sell your funds when one funds is taken over by other fund.
You may also Exit when your expenses on your scheme has increased.

• Diversification: The most the amount the investors invest, the greater is the ability to afford
diversification amount different asset classes and investment styles. Asset allocation is the way in
which one gives weightage to each asset classes. Each Asset class has its own characteristic in terms
of fluctuation.

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• Continuous Monitoring: Investors should continuously monitor their portfolio and revise by updating
according to market position, that their returns can be maximized.

• Other factors to be considered while investing: Investors should look for top performing assets and
focus on funds latest performance. A common mistake nowadays investors do is they buy latest
schemes which has no previous history as they give good returns. One should look at the NAV while
buying the funds so that good NAV can give you good returns.

• Starting small for Small time investor: First time mutual fund investors are advised to go small on their
investments. Investors should invest in small & midcap companies and wait for the returns and more
they satisfied they should go for diversification of the funds.

• Taxing Saving Funds: When markets are up it is advisable to invest in tax saver, which are giving good
returns compare too many other schemes.

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 CHAPTER 11

CONCLUSION

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

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

This has instilled greater confidence among fund investors who are investing more into the market through
mutual funds route than ever before.

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 BIBLIOGRAPHY

WEBSITE

• www.sbimf.com
• www.hdfcmf.com
• www.icraanalytics.com
• www.moneycontrol.com
• www.amfiindia.com

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 ANNEXURE

QUESTIONAIRE

Personal Details

a) Name:

b) Email id:

1) What is you age ?

i. 18-25

ii. 26- 45

iii. 45 & above

2) What is you occupation?

i. Government sector

ii. Private sector

iii. Business

iv. Others

3) What is your income?

i. 10,000 to 50,000

ii. 50,000 to 1 lakh

iii. 1 lakh & above

4) Do you invest in mutual fund?

i. Yes

ii. No

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5) What is the time duration of your investment?

i. 0-1 year

ii. 1- 2 years

iii. 2 years & above

6) In which kind of mutual fund would you like to invest?

i. Private

ii. Public

7) From where you have come to know about fund schemes?

i. Family and relatives

ii. Friends and peers

iii. Company employee

iv. Others

8) with which company due you have invested in mutual fund?

i. HDFC

ii. ICICI

iii. AXIS

iv. KOTAK MAHINDRA

v. OTHERS

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9) While investing your money, which factor you prefer most?

i. Liquidity

ii. Low risk

iii. High return

iv. Company reputation

10) What future of mutual fund allure you the most?

i. Diversification

ii. Better return & safety

iii. Reduction in risk and transaction cost

iv. Regular income

v. Tax benefit

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