Chapter 1

INTRODUCTION OF MUTUAL FUND

Introduction

For a buyer with an investable surplus, there are several investment options
available in the financial market today. He can make low-risk but low-return
investments in bonds, corporate debentures, and bank deposits. He could buy
stock in organisations where the risk is great and the returns are correspondingly
high. Recent stock market patterns have demonstrated that the typical retail
investor always lost money during gloomy stretches. People started choosing
portfolio managers with knowledge of the stock market to make investments on
their behalf. Thus, a variety of institutions offered wealth management services.
But for a modest investor, they proved to be too expensive. The mutual funds
provide a good haven for these investors.

Concept of mutual funds

A mutual fund is a shared bank account where investors deposit money to be

invested in line with a predetermined goal. As a result, all investors share
ownership of the fund, which is known as "mutual." The ownership of the fund
by a single investor corresponds to the proportion that his or her individual
contribution to the fund's overall value carries. Mutual Funds are trusts that
receive contributions from investors and invest those funds according to the
goals outlined in the trust deed in order to minimise risk and maximise income
and capital appreciation for distribution to the members. A mutual fund is a
business.Since a mutual fund is a company, it is in the interest of the fund
manager to professionally manage the money contributed by investors and to
generate a profit after subtracting appropriate management costs. Giving lower
income groups the chance to easily acquire financial assets is the goal that
Mutual Funds are working to achieve. They primarily serve the demands of
individual investors with limited resources and manage investors' portfolios in a
way that offers prospects for regular income, growth, safety, liquidity, and
diversification.
Definition

Mutual funds are collective savings and investment vehicles where savings of
small (or sometimes big) investors are pooled together to invest for their mutual
benefit and returns distributed proportionately”. “A mutual fund is an
investment that pools your money with the money of an unlimited number of
other investors. In return, you and the other investors each own shares of the
fund. The fund's assets are invested according to an investment objective into
the fund's portfolio of investments. Aggressive growth funds seek long-term
capital growth by investing primarily in stocks of fast-growing smaller
companies or market segments. Aggressive growth funds are also called capital
appreciation funds”.
Why select mutual fund ?

According to the risk return trade-off, if an investor is ready to take on more

risk, he can expect to receive higher returns; conversely, if he opts for lower risk
investments, he will receive lower returns. For instance, suppose an investor
chooses a bank FD. They carry a low risk and a moderate reward. But as he
continues to make investments in
When compared to bank deposits, capital protection funds and profit-bonds
offer a little better rate of return, but the risk is also somewhat higher.
As a result, mutual funds are preferred by investors as their main investment
vehicle. Professional management, diversity, convenience, and liquidity are all
provided by mutual funds. That is not to say that mutual fund investments are
risky.
This is due to the fact that the money is invested in stock markets as well as debt
funds, which carry a higher level of risk but have the potential for bigger
rewards. Since hedge funds are typically traded on the derivatives market,
which is regarded as being difficult extremely volatile, they carry a very high
level of risk
History of mutual fund in india

On the initiative of the Indian government and reserve bank, Unit Trust of India
was established in 1963, marking the beginning of the mutual fund sector in
India. Four main phases can be used to broadly categorise the development of
mutual funds in India.

FIRST PHASE - 1964-87:

A parliamentary act formed Unit Trust of India (UTI) in 1963. It was

established by the Reserve Bank of India and operated under its regulatory and
managerial supervision. The Industrial Development Bank of India (IDBI)
replaced the RBI as the regulatory and administrative authority over UTI in
1978 after it was delinked from the RBI. Unit Scheme 1964 was UTI's inaugural
initiative. UTI managed assets worth Rs. 6,700 crores by the end of 1988.

SECOND PHASE - 1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS):

In 1987, public sector banks, Life Insurance Corporation of India (LIC), and
General Insurance Corporation of India launched non-UTI mutual funds.
(GIC). First non-UTI Mutual Fund to be launched was SBI Mutual Fund in June
1987. This was followed by Canbank Mutual Fund in December 1987, Punjab
National Bank Mutual Fund in August 1989, Indian Bank Mutual Fund in
November 1989, Bank of India in June 1990, and Bank of Baroda Mutual Fund
in June 1990. (Oct 92). While GIC had formed its mutual fund in December
1990, LIC had done so in June 1989.
Assets under administration in the mutual fund sector totaled Rs. 47,004 billion
by the end of 1993.

THIRD PHASE - 1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS):

A new era in the Indian mutual fund market began with the arrival of private
sector funds in 1993, providing Indian investors a greater selection of fund
families. Additionally, the first Mutual Fund Regulations, which required all
mutual funds, with the exception of UTI, to be registered and supervised, were
established in 1993. The first mutual fund in the private sector was registered in
July 1993 under the name Kothari Pioneer, which has now merged with
Franklin Templeton.
In 1996, a revised and more thorough version of the Mutual Fund Regulations
replaced the 1993 SEBI (Mutual Fund) Regulations. The SEBI (Mutual Fund)
Regulations from 1996 govern how the sector currently operates.
With many global mutual funds opening funds in India, the number of mutual
fund firms continued to rise. Additionally, the industry has seen a number of
mergers and acquisitions. There were 33 mutual funds with a combined asset
value of Rs. 1,21,805 crores as of the end of January 2003.
With assets under management of Rs. 44,541 crores, the Unit Trust of India was
far ahead of rival mutual funds.

FOURTH PHASE - SINCE FEBRUARY 2003:

After the Unit Trust of India Act of 1963 was repealed in February 2003, UTI
was divided into two distinct organisations. One is the Specified Undertaking of
the Unit Trust of India, which, as of the end of January 2003, had assets under
management of Rs. 29,835 crores, roughly equivalent to the assets of the US 64
plan, assured return, and a few other schemes. The Specified Undertaking of
Unit Trust of India, which is managed by an administrator and is governed by
Indian laws, is not covered by the Mutual Regulations.
The graph indicates the growth of assets under management over the years

Growth in assets under management

(source :http://www.amfindia.com )
Advantages of mutual fund

Because of the many benefits mutual funds have over other forms and avenues
of investing, particularly for the investor with limited resources in terms of
capital and the ability to conduct in-depth research and market monitoring,
mutual funds are becoming a preferred investment vehicle. The main benefits
that mutual funds provide to all investors are as follows:

1 . Portfolio diversification

Each participant in the fund owns a portion of all the assets of the fund, making
it possible for each investor to own a diverse investment portfolio with a smaller
investment than would otherwise be necessary.

2.professional management

Even if an investor has a significant amount of wealth at his disposal, he still

gains from the fund's professional management expertise when it comes to
managing the investor's portfolio. A significantly higher return is guaranteed
than what an investor can do on his own thanks to the investment management
abilities and the necessary study into the available investment options.
In today's fast-paced, international, and sophisticated markets, few investors
have the knowledge and resources necessary to succeed.

3. Reduction/Diversification Of Risk:

Whether an investor invests directly by making a deposit with a business or a

bank, purchasing shares or debentures on his own or through another source, all
of the risk of potential loss is his. Potential losses are shared with other investors
when investing in a fund pool with other investors. One of the most significant
advantages of a collective investment vehicle like a mutual fund is the risk
reduction.

4. Reduction Of Transaction Costs:

The same is true for transaction costs as it is for risk. All fees associated with
investing, such as brokerage and custody of assets, are borne by the investor.
Through a fund, he can take advantage of economies of scale, whereby funds
with greater volumes incur lower costs that are then passed on to their investors.

5. Liquidity:

Investors frequently hold shares or bonds that they are unable to directly,
readily, or rapidly sell. When someone invests in a fund's units, they can often
withdraw their money at any time by selling their units to the fund, if the fund is
open-ended, or by selling them on the open market, if it is close-ended.
Investing liquidity is unquestionably a major advantage.

6. Convenience And Flexibility:

Many investment services are provided by mutual fund management

organisations that are unavailable to direct market investors. Investors can
quickly move their holdings between schemes, obtain the most recent market
data, and more.

7. Tax Benefits:

After March 31, 2002, all unit holders will be assessed tax on any income
distributed. To make up for this, income distributions for the fiscal year ending
March 31, 2003, will be taxed at a special rate of 10.5% for Unit holders of
open-ended equity-oriented funds.
Individuals and Hindu Undivided Families are eligible to deduct up to Rs. 9,000
from their total income in relation to income from investments listed in Section
80L, including income from Mutual Fund Units. Wealth-Tax and Gift-Tax are
not applied to the units of the schemes.

8. Choice of Schemes:

Mutual Funds offer a family of schemes to suit your varying needs over a
lifetime.
9. Well Regulated:

All mutual funds are registered with SEBI, and their operations adhere to
stringent guidelines created to safeguard investors' interests. SEBI routinely
keeps an eye on Mutual Fund operations.

10. Transparency:

You receive frequent updates on the value of your investment, along with
information on the precise investments made by your plan, the percentage
invested in each asset class, and the investment philosophy and perspective of
the fund manager.

DISADVANTAGES OF INVESTING THROUGH MUTUAL

FUNDS:

1. No control Over Costs:

A mutual fund investor has little influence over the overall costs associated
with investing. While still receiving the fund's expert management and analysis,
the investor continues to pay investment management fees. Even though the
value of his investments is down, fees are still due. An investor in a mutual fund
also pays fund distribution fees that he wouldn't have to pay if he made a direct
investment. This flaw, however, just adds to the cost of using the mutual fund
services.

2. No Tailor-Made Portfolio:

Individual investors can create their own portfolios of shares, bonds, and other
assets by investing on their own additional securities. He leaves this decision up
to the fund management by investing through a fund.
Achieving their goals may be hampered by this for extremely wealthy people or
major business investments. However, the majority of mutual fund managers
assist investors in getting around this limitation by providing family of funds,
which contain a wide variety of various schemes, within their own management
firm. A potential investor can create a portfolio using a variety of investing
plans.
3. Managing A Portfolio Of Funds:

A big selection of funds is actually a bad thing for investors since it gives them
too many options. Similar to the circumstance where he has to choose between
individual shares or bonds, he can once again require help on how to choose a
fund to meet his goals.

4. The Wisdom Of Professional Management:

That's right, this is not an advantage. The average mutual fund manager is no
better at picking stocks than the average nonprofessional, but charges fees.

5. No Control:

Unlike picking your own individual stocks, a mutual fund puts you in the
passenger seat of somebody else's car

6. Dilution:

Mutual funds generally have such small holdings of so many different stocks
that insanely great performance by a fund's top holdings still doesn't make much
of a difference mutual fund's total performance.

7. Buried Costs:

Many mutual funds specialise in burying their costs and in hiring salesmen who
do not make those costs clear to their clients.
INDIA'S TYPES OF MUTUAL FUND SCHEMES

There are many different Mutual Fund Schemes available to meet needs related
to financial situation, risk tolerance, and return expectations, among others.
Consequently, mutual funds come in many varieties. A mutual fund can be
chosen by investors because it is a collection of numerous stocks.
There are hundreds of different mutual fund schemes available. It is simpler to
categorise mutual funds into the following groups.
A).BY STRUCTURE

1. Open - Ended Schemes:

An open-end fund is one that accepts subscriptions all year round. There is no
set maturity for these. At prices that are related to Net Asset Value ("NAV"),
investors can acquire and sell units easily. Liquidity is the main characteristic of
open-end schemes.

2. Close - Ended Schemes:

The specified maturity period for a closed-end fund typically ranges from three
to fifteen years. Only within that time period are subscriptions to the fund
accepted. At the time of the initial public offering, investors can purchase units
of the plan and later sell them on stock exchanges where they are listed. Some
close-ended funds offer the option of selling the units back to the Mutual Fund
through recurring repurchases at NAV-related prices in order to give investors
an exit route. According to SEBI Regulations, the investor must be given access
to at least one of the two exit options.

3. Interval Schemes:

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

1. Equity Fund:

These funds allocate the most percentage of their corpus to equity assets.
Depending on the fund manager's opinion on various companies and the various
schemes, the fund structure may change. The following are the
subclassifications of the equity funds according to their investing goals:
● Diversified Equity Funds
● Mid-Cap Funds
● Sector Specific Funds
● Tax Savings Funds (ELSS)
Equity funds rank highly on the risk-return matrix since equity investments are
geared for a longer time horizon.

2. Debt Funds:

These Funds' goal is to invest in debt-related documents. Some of the primary

issuers of debt papers are government entities, commercial businesses, banks,
and financial organisations. by making investments in debt securities. These
funds guarantee low risk and give investors steady returns. Debt is further
broken down into
Gilt Funds:Their capital should be invested in government securities, also
known as debt securities for the Government of India. These funds have no
default risk, however there is interest rate risk involved. Due to their
investments in government-backed papers, these programmes are safer.
Income Funds:Place a large amount of your money in different debt products,
like bonds, corporate debentures, and government securities.
MIPs : invests the smallest percentage of their entire capital in debt instruments
and has the least amount of equity exposure. It benefits from both the loan and
stock markets. When compared to other debt schemes, this scheme's risk-return
matrix score is a little bit higher.
Short Term Plans : intended for investments with a three- to six-month time
horizon. These funds invest largely in short-term instruments including
commercial papers and certificates of deposits (CDs). Corporate debentures are
another investment option for a portion of the corpus.
Liquid Funds:Money market schemes, as well These funds offer simple
liquidity and capital preservation. These programmes make investments in
short-term securities like Treasury Bills. call the money market among banks. A
CP and CD. These funds have a one- to three-month investment horizon and are
intended for corporate houses' short-term cash management.These investments
have a low risk-return rating and are regarded as the safest among all types of
mutual funds.

3. Balanced Funds:

They are, as their name implies, a combination of equity and debt funds. They
follow the pre-established investment aim of the scheme by investing in both
fixed income and equity instruments. These programmes are designed to
provide investors the best of both worlds. Growth is provided by equity, while
return stability is provided by debt.
Additionally, mutual funds can be generally categorised based on investing
criteria, i.e., Each category of funds is supported by an investment philosophy
that is pre-defined in the fund's objectives. The investor can match his
individual investing requirements with the fund's goal and make investments as
necessary.
C).BY INVESTMENT OBJECTIVE:

Growth Schemes:

Equity schemes are another name for growth schemes. These programmes'
medium- to long-term goal is to provide capital growth. These programmes
typically invest a large portion of their fund in stocks and are prepared to accept
a temporary fall in value in exchange for potential future growth.

income Schemes:

Debt plans are another name for income schemes. These programmes are
designed to give investors a consistent and reliable income. These programmes
often invest in fixed income instruments like corporate debentures and bonds. In
such plans, capital appreciation might be constrained.

Balance scheme :

Balanced Schemes periodically distribute a portion of the income and capital

gains they generate in an effort to provide both growth and income. These
programmes invest in fixed income securities and equities in the proportions
specified in their offer agreements. (normally 50:50).

Money Market Schemes:

Money market schemes seek to offer simple liquidity, capital preservation, and
moderate income. These programmes often invest in safe, short-term financial
products such treasury bills, CDs, commercial paper, and interbank call money.

Load Funds:

One that levies a commission upon entry or departure is a load fund. This means
that a commission will be due each time you buy or sell a unit in the fund. Entry
and exit loads typically vary from 1% to 2%. If the fund has a strong track
record of performance, it can be worthwhile to pay the load.
No-Load Funds:

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

Tax Saving Schemes:

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

Index Schemes:

The success of a certain index, such as the BSE Sensex or the NSE 50, is
replicated through index schemes. These schemes' portfolios will only contain
the stocks that make up the index. Each stock will represent the same proportion
of the total holding as it does in the stock index. As a result, the returns from
these strategies would roughly match those of the Index.

Sector Specific Schemes:

These are the funds or schemes that invest exclusively in the securities of the
industries or sectors listed in the offer documents. Examples include stocks in
pharmaceuticals, software, fast-moving consumer goods (FMCG), and oil. The
performance of the corresponding sectors and industries affects the returns in
these funds. Even while some products could offer better returns, they are
riskier than diversified funds. Investors must monitor the success of certain
sectors and industries and depart at the right time.
NET ASSET VALUE (NAV):

It is vital to determine the value of each owner's share because each owner is a
partial owner of a mutual fund. In other words, a value must be allocated to each
share or unit that an investor owns.
Since the investor's units serve as ownership proof for the fund's assets. The
value of one unit is determined by dividing the total value of the fund's assets by
the total number of units that the mutual fund has issued. The Net Asset Value
(NAV) of one unit or share is what is commonly referred to as this. Thus, the
NAV of the quantity of units possessed determines the worth of an investor's
portion of ownership.

Calculation of NAV:

Here is an illustration. The total number of units issued is 100, and the value of
one unit is Rs. 10.00 (1000/100) if the value of a fund's assets is Rs. 100 and it
has 10 investors who each purchased 10 units. If a single investor actually owns
three units, his ownership stake in the fund is worth Rs. 30.00 (1000/100*3).
Keep in mind that the Net Asset Value will fluctuate along with market price
changes as the value of the fund's investments changes. For instance, if the asset
value of our fund rose from Rs. 1000 to Rs. 1200, the value of our investor's
three units would be worth Rs. 36 (1200/100*3). The investment's value may
increase.
MUTUAL FUND FEES AND EXPENSES

Investors who own mutual funds may be required to pay fees and expenses
related to those funds. There are charges associated with running a mutual fund,
such as shareholder transaction costs, investment advising fees, and marketing
and distribution costs. Investors are charged these expenses in a variety of ways
by funds.

1. TRANSACTION FEES

i) Purchase Fee:

When shareholders purchase shares, certain funds impose this kind of cost on
them.
A purchase charge, which is paid to the fund instead of a broker like a front-end
sales load, is often imposed to cover part of the costs the fund incurred during
the purchase.

ii) Redemption Fee:

When shareholders sell or redeem shares, certain funds impose still another fee
on them. A redemption fee, in contrast to a delayed sales load, is paid to the
fund rather than a broker and is often employed to cover fund expenses related
to a shareholder's redemption.

iii) Exchange fees

Shareholders who trade (transfer) to another fund within the same fund group or
"family of funds" may be charged an exchange fee by some funds.

2. PERIODIC FEES

i) Management fees

Investment portfolio management fees, any other management fees due to the
fund's investment adviser or its affiliates, and administrative fees due to the
investment adviser that are not covered under the "Other Expenses" heading are
all considered management fees. Additionally known as maintenance costs.

ii) Account Fee:

Account fees are costs that some funds charge investors separately for the
upkeep of their accounts. For instance, some funds charge an account
maintenance fee for accounts with values below a specific threshold.

3. OTHER OPERATING EXPENSES

Transaction Costs:

These expenses are incurred when the fund's assets are traded. Transaction costs
are typically greater for funds with a high turnover ratio or for those investing in
less liquid or exotic areas. These costs are typically not stated, in contrast to the
Total Expense Ratio.

LOADS

Definition of a load

A percentage fee assessed on the acquisition or sale of shares is displayed by

load funds as a "Sales Load". A sort of Commission is a load. (remuneration).
Charges may be incurred at the time of purchase, the time of selling, or a
combination of both depending on the type of load a mutual fund exhibits. The
various load kinds are described here.

Front-end load:

This cost, which is paid when shares are purchased, is also known as a sales
charge. This charge, also referred to as a "front-end load," usually goes to the
brokers who sell the fund's shares. Front-end loads lower our investment level.
An illustration. Let's imagine you want to invest Rs. 10,000 in a mutual fund
that has a 5% front-end load. You must pay a sales load of Rs. 500, and the rest
Rs. 9500 will be put in the fund. A front-end load is limited to 8.5% of your
investment under NASD regulations.
Back-end load:

This fee, also referred to as a deferred sales charge, is paid when shares are sold.
This charge, also referred to as a "back-end load," usually goes to the brokers
who sell the fund's shares. The amount of this form of burden will depend on
how long the investor maintains his or her shares, and if the investor holds their
shares long enough, it usually declines to zero.

Level load / Low load:

In that there are no sales fees paid when purchasing the fund, it is comparable to
a back-end load.
If the purchased shares are sold within a certain period of time, a back-end load
instead may be assessed. In contrast to back-end loads, flat loads and low loads
have a shorter time period during which charges are assessed.

No-load Fund:

This indicates that the fund does not impose any sort of sales load, as the name
would imply. However, as was said above, not all shareholder fees constitute
"sales loads." Fees other than sales loads, including as purchase fees,
redemption costs, exchange fees, and account fees, may be assessed by a
no-load fund.
SELECTION PARAMETERS FOR MUTUAL FUND

Your objective

Before investing in a fund, the first thing to consider is whether your goals align
with the plan. Any conflict would negatively impact your potential returns, thus
it is necessary. Likewise, you ought to choose programmes that satisfy your
individual requirements. Examples include pension plans, kid's plans,
industry-specific programs, etc.

Your risk capacity and capability:

The choice of schemes is determined by this. Debt plans are a better option for
those who cannot tolerate risk because they are more secure. Equity investing
are an option for aggressive investors.Even more aggressive investors may try
investing in particular industries or sectors through schemes.

Fund Manager's and scheme track record:

It is crucial that he manages your money well because you are entrusting him
with your hard-earned money. Additionally, it is crucial that the fund firm you
select has a strong track record. In addition, it should conduct business with
utmost professionalism. Examine the scheme's performance in relation to key
industry benchmarks and its rivals. Look at the performance over a longer time
frame to see how the plan performed in various market situation

Cost factor:

Although the AMC charge is regulated, before making an investment you

should consider the expense ratio of the fund. This is so that your investments
don't lose money. Your returns will also be reduced by a higher entry load or
departure load. Only exceptional returns can support a higher expense ratio. As
it will eat up a few percentage points of your meagre earnings, it is vital in a
debt fund.
Mutual funds are rated by Morningstar as well. Numerous financial journals
publish lists of the top-performing mutual funds each year. Naturally, extremely
enthusiastic investors will dash out to buy shares of the best performers from the
previous year. That is a serious error. The best performer from the previous year
is unlikely to hold that position for the current year due to shifting market
conditions. Investors in mutual funds would be wise to take the fund prospectus,
the fund manager, and the state of the market into consideration. Never depend
on the best achievers from the prior year.

Types of Returns on Mutual Fund:

There are three ways, where the total returns provided by mutual funds can be
enjoyed by investors:

● Bond interest and stock dividends both generate income. A fund

distributes almost all of its annual income to its shareholders in the form
of distributions.
● The fund makes a financial gain when it sells securities whose value has
improved. The majority of funds distribute these gains to investors as
well.
● The price of the fund's shares rises if the fund manager does not sell any
of the rising value assets. The shares of your mutual fund can then be sold
for a profit. Additionally, funds typically provide you the option of
receiving a check for distributions or reinvesting the profits to purchase
additional shares.
RISK FACTORS OF MUTUAL FUNDS:

1. The Risk-Return Trade-Off:

The trade-off between risk and return is the most crucial one to comprehend.
Greater returns/losses result from higher risk, while lesser returns/losses result
from lower risk.
The investor must therefore decide how much risk they are willing to accept.
You must first be aware of the many sorts of risks associated with your
investing selection in order to do this.

2. Market Risk:

All securities experience ups and downs in price and yield occasionally. This is
caused by broad external factors that have an impact on the market as a whole.
Whether they are large multinationals or more modest mid-sized businesses, this
is true. Market risk is the term for this. This risk could be reduced with the aid
of a systematic investment plan (SIP) based on the idea of rupee cost averaging
(RCA).

3. Credit Risk:

The credit risk you face is determined by a company's capacity to service its
debt (whether it interest payments or principal repayment) through its cash
flows. Independent rating organisations that grade businesses and their paper,
like CRISIL, quantify this credit risk. The safest grade is "AAA," while a "D"
rating indicates poor credit quality. Having a well-diversified portfolio could
reduce this risk.

4. Inflation Risk:

Things you overhear people saying: "A hundred rupees today is worth more
than a hundred rupees tomorrow."
"Do you remember when a bus ride cost 50 pence?"
Mehangai Ka Jamana Hai.
The main factor is inflation. The gradual decline of purchasing power is
inflation. People sometimes make cautious investment choices in an effort to
protect their wealth, but they often end up with a sum of money that is less
valuable than the principal at the time of the transaction.
When inflation outpaces your investment's return, this occurs. This risk could be
reduced with a well-diversified portfolio that includes some investments in
stocks.

5. Interest Rate Risk:

Interest rates are difficult, if not impossible, to forecast in a free market

economy. Bond and equity values are both impacted by changes in interest
rates. Bond prices rise when interest rates do, and vice versa. In an environment
of rising interest rates, equity may also suffer. Having a well-diversified
portfolio could reduce this risk

6. Political / Government Policy Risk:

Political and governmental decisions can alter the investment environment.

They can influence the environment to favour investment, or the other way
around.

7. Liquidity Risk:

When it becomes difficult to sell the securities one has bought, liquidity risk
develops. Diversification, staggered maturities, and internal risk controls that
favour the acquisition of liquid securities can all help to reduce liquidity risk to
some extent.
 Chapter 2
Working on mutual fund

Investors can contribute money to the mutual fund either directly or through
brokers. Depending on the scheme's goal, the money is invested in a variety of
tools. According to their participation in the scheme, investors receive a portion
of the revenue from the sale of securities or the capital gain on those securities.
The investments are broken up into units, and the value of each unit is reflected
in the unit's Net Asset Value, or NAV. The market value of the scheme's assets
less its liabilities equals the NAV. The net asset value of the scheme divided by
the quantity of outstanding units on the valuation date yields the per-unit NAV.
The daily net asset value of the schemes offered by mutual fund companies is
disclosed to investors. NAV is significant because it establishes the price at
which you may purchase or redeem units in a scheme. You must pay entry or
exit load depending on the scheme's load structure.
STRUCTURE OF A MUTUAL FUND:

India has a legislative framework that mutual funds must be established under.
Both open-end and closed-end funds in India operate under the same legal
framework, namely unit trusts. Under a common legislative framework, an
Indian mutual fund is permitted to issue both open-end and close-end plans. The
SEBI (Mutual Fund) Regulations, 1996 set forth the structure that every Mutual
Fund in India is supposed to adhere to.

The Fund Sponsor:

According to SEBI regulations, a sponsor is any individual who creates a

mutual fund either independently or in collaboration with another corporate
body. As he registers the fund with SEBI, the fund's sponsor is comparable to a
company's promoter. A trust is established by the sponsor, who also names the
trustee board. The Asset Management Company is appointed by the sponsor as
the fund managers as well. A custodian will be chosen by the sponsor to hold
the assets of the funds, either directly or through the trustees. All of these were
created in conformity with SEBI's rules and recommendations.
According to SEBI standards, a sponsor must provide at least 40% of the Asset
Management Company's net worth and have a solid financial history for the five
years preceding registration in order to qualify.
Mutual Funds as Trusts:

In India, a mutual fund is established under the Public Trust Act of 1882. The
fund sponsor serves as the trust's settlor by contributing to its initial capital and
designating a trustee to manage the trust's assets on behalf of the trust's
beneficiaries, who are the unitholders. In order to demonstrate their beneficial
interest in the fund, investors are then invited to put their funds in a common
pool by subscribing to "units" issued by various schemes developed by the
Trusts.
It is important to realise that the fund should just serve as a "pass through"
vehicle. According to the Indian Trusts Act, the trust of the fund does not have
independent legal ability; rather, the Trustee or Trustees are the ones with legal
capacity, and as a result, the Trustees are the ones who take all actions related to
the trusts on its behalf. Even if these investments are held in the name of the
Trustees on a daily basis, in legalese the investors or unit holders are the
beneficial owners of the investments held by the Trusts. Mutual Funds may
accept an unlimited number of investors as beneficial owners in their investment
plans since they are public trusts.

Trustees:

A Trust is established through the execution of a Trust Deed by the fund

sponsor on behalf of the trustees. The Trust, or Mutual Fund, may be managed
by a trust corporation, a corporate entity, or a board of trustees, a group of
people. Boards of Trustees are in charge of the majority of the funds in India.
Where trusts are corporate bodies, the boards of trustees are subject to the
Indian Trusts Act, but they must also abide by the Companies Act of 1956.The
interests of the unit holders are protected by the Board or the Trust company,
both of which are impartial bodies. The portfolio of securities is not directly
managed by the Trustees. They choose an Asset Management Company to do
this specialised duty. They make sure that the Fund is managed by the AMC in
compliance with the stated goals, the trust deeds, and SEBI requirements.
The Asset Management Companies:

Under the direction of the Trustees and the oversight of the board, an Asset
Management Company (AMC) manages the Trust's investments. The AMC
must receive SEBI approval and registration in order to operate. A mutual
fund's AMC is required to maintain a minimum net value of Rs. 10 crores at all
times. Both independent and non-independent directors of the AMC should
have sufficient professional experience in financial services, and both should be
people with excellent morale. This need also applies to other key members of
the AMC staff.AMC is not permitted to serve as a trustee for another mutual
fund. In addition to managing funds, it may also engage in specific activities
like financial consulting and advisory services, so long as they are carried out
independently of one another and the AMC's resources (such as staff, systems,
etc.) are properly segregated for each activity. The AMC is required to
constantly operate in the best interests of the unitholders and to provide regular
updates to the trustees on its operations.

Custodian and Depositories:

The business of buying and selling securities in big quantities is that of mutual
funds.
It need specialised knowledge to handle these securities in terms of physical
delivery and eventual safekeeping. For the purpose of participating in any
clearance system through authorised depository businesses or storing securities
for the Mutual Fund, the custodian is designated by the Board of Trustees, and it
is required to carry out its duties in line with its contract with the Mutual Fund.
The custodian must be registered with SEBI and should be an organisation
separate from the sponsors.Since the notion of dematerialization of shares was
introduced, the custodian now keeps the physical securities while the
dematerialized shares are retained with the Depository Participant. As a result,
distributions of a fund's securities are made or received by a custodian or a
depository participant at the AMC's direction, even if the Trustees have overall
control and responsibility.
Bankers:

A Fund's activities involve dealing in money on a continuous basis primarily

with respect to buying and selling units, paying for investment made, receiving
the proceeds from sale of the investments and discharging its obligations
towards operating expenses.Thus, the Fund's banker is crucial in determining
the level of service the Fund provides, including the timely delivery of
remittances and other services.

Transfer Agents:

The Mutual Fund's units are issued and redeemed by transfer agents, who also
perform other related tasks like preparing transfer documentation and
maintaining investor records. A fund has the option to handle its task internally
and bill the scheme for the service at a price that is competitive with the market.
Since all of the investor services that a fund provides will be dependent on the
transfer agent, the fund investor will find the agent to be an important interface
to deal with where an outside transfer agent is engaged.

REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA:

The SEBI Regulations, 1996, set down the guidelines for mutual fund structures
in India. According to these requirements, mutual funds must have three
structures, including a sponsor trustee and asset management company. The
trustees are chosen by the mutual fund's sponsor. The AMC is chosen by the
trustees to manage the investment portfolio on behalf of the mutual fund
investors. Since it oversees all of the mutual fund's business operations, the
AMC serves as the organisation's public face. Mutual funds and AMCs need to
register with SEBI.
SEBI REGULATIONS:

● 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
● 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
● To safeguard investors' interests, SEBI periodically issued rules to mutual
funds.
● The same set of regulations apply to all mutual funds, whether they are
promoted by public sector or private sector organizations, including those
that are sponsored by foreign organisations. Similar dangers apply to the
programmes started by the mutual funds supported by these
organisations. The regulatory standards for these mutual funds are
uniform, and SEBI monitors and inspects each of them.
● According to SEBI regulations, the board of trustees or trustee business
must include at least two-thirds independent directors who are not
connected to the sponsors.
● Additionally, 50% of the AMC's directors must be independent. Before
launching any plan, mutual funds must first register with SEBI.
● Further SEBI Regulations, among other things, provide that MFs cannot
guarantee returns in any plan and that each scheme is subject to a 20/25
criteria (i.e., a minimum of 20 investors net scheme and a maximum of
25% corpus ownership by one investor).
● Additionally, subject to several limits, SEBI has authorised MFs to
develop programmes related to real estate, options and futures,
commodities, and other topics.
ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI):

A requirement for an Indian mutual fund association to operate as a non-profit

organisation was created by the rise of mutual fund players in India. On August
22, 1995, the Association of Mutual Funds in India (AMFI) was officially
established.
All Asset Management Companies (AMCs) that have registered with SEBI are
under the umbrella of AMFI. All AMCs that have introduced mutual fund
schemes up to this point are its members. It operates under the direction and
rules set forth by its board of directors.
The Indian Mutual Fund Industry has been reduced down to a professional and
healthy market with ethical lines strengthening and sustaining standards thanks
to the Association of Mutual Funds India. It adheres to the tenet of defending
and advancing the interests of mutual funds and the people who own their units.

The Objectives of Association of Mutual Funds in India:

30 AMCs in India are registered with the Association of Mutual Funds of India.
It has certain goals that are set against the directives of its board of directors.
The following are the goals.

It also recommends and promotes the best business practises and code of
conduct, which are followed by members and related people engaged in the
activities of mutual fund and asset management.
This mutual fund association of India upholds high professional and ethical
standards in all areas of industry operation.
The organisations that are in any way associated with or engaged in the
financial services and capital markets are also party to the association's code of
conduct.
In the mutual fund sector, AMFI cooperates with SEBI and operates in
accordance with its rules.
On issues pertaining to the mutual fund industry, the Association of Mutual
Fund of India does represent the Government of India, the Reserve Bank of
India, and other associated entities.
It builds a group of skilled and knowledgeable Agent distributors. It puts in
place a training and certification plan for all intermediaries and other people
working in the mutual fund sector.
In order to encourage appropriate understanding of the concept and operation of
mutual funds, AMFI runs an awareness campaign for investors across all of
India.
The Association of Mutual Funds of India, which I mentioned earlier, also
disseminates information on the mutual fund industry and conducts studies and
research, either independently or in collaboration with other organisations.

AMFI Publications:

The two main bulletin kinds that AMFI produce are. One is conducted on a
monthly basis, the other on a quarterly basis. These publications are a useful
resource for investors to learn more about the whereabouts of their money that
has been parked.
 Chapter 3
Mutual funds in India

The idea of a mutual fund was introduced to India in 1963. Investors were
invited by Unit Trust of India, or more precisely, those who believed in saving,
to place their money in UTI Mutual Fund.
It scored without the aid of a single second player for 30 years. However, there
were several new mutual fund businesses in 1988. IT, however, stayed in a
monopoly position.
In the beginning, the performance of mutual funds in India was far from ideal.
People rarely understood, and investment was obviously out of the question.
However, at the start of the industry's liberalisation in 1992, around 24 million
stockholders had grown accustomed to assured high profits. UTI's track record
became a marketing weapon for potential entrants. In terms of profitability,
investors' expectations reached new heights. However, after the liberalisation ,
people were far from prepared in terms of risk.
When stock prices began to collapse in 1992, the net asset value (NAV) of
mutual funds in India fell. Portfolio switches towards alternative assets were not
permitted under market regulations at the time. There was no other option but to
keep the cash or to continue investing in stocks. Another point to note is that
because only closed-end funds were offered in the market, investors disinvested
by selling at a loss in the secondary market.
Mutual fund performance in India suffered qualitatively. The 1992 stock market
crisis, losses from disinvestments, and, of course, the absence of transparent
regulations in the whereabouts all shook investor confidence. Mutual funds have
failed to recover, owing in part to a relatively lacklustre stock market
performance, with funds trading at an average discount of 1020 percent of their
net asset value.
In 1993, the Securities and Exchange Board of India (SEBI) issued detailed
regulations that for the first time outlined the structure of Mutual Funds and
Asset Management Companies.
The regulatory authority enacted a series of measures to promote transparency
and competition in mutual funds. Some of them included easing market
investment limitations, introducing open-ended funds, and paving the door for
mutual funds to create pension schemes.
The decision was made to make mutual funds the primary tool for long-term
saving.
The greater the variety provided. Investors will be the sure thing.
A number of private sectors Mutual funds were first introduced in 1993 and
1994. Since then, the share of private participants has grown substantially. In
India, there are currently 34 Mutual Fund organisations controlling 1,02,000
crores.
Last but not least. As long as mutual fund firms perform with lower risks and
higher profitability in a short period of time, an increasing number of
individuals will be inclined to invest until and until they are properly educated
on the dos and don'ts of mutual funds.
The mutual fund business has undergone significant changes in recent years,
with foreign corporations entering the country and bringing their professional
knowledge in managing funds globally. In India's mutual fund business, there
has been a consolidation period in recent months. Investors can now choose
from a wide range of Schemes based on their particular characteristics.
MUTUAL FUND COMPANIES IN INDIA:

The concept of mutual funds in India dates back to the year 1963. The era
between 1963
and 987 marked the existence of only one mutual fund company in India with
Rs 67 billion assets
under management (AUM), by the end of its monopoly era, the Unit Trust of
India (UTI). By the end of the 80s decade, few other mutual fund companies in
India took their position in the mutual fund market.
The new entries of mutual fund companies in India were SBI Mutual Fund,
Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank
Mutual Fund, Bank of India Mutual Fund.
The following decade heralded a new era in the Indian mutual fund business. By
the end of 1993, the industry's total AUM was Rs. 470.04 billion. Private-sector
funds began to penetrate fund families. In the same year, the first Mutual Fund
Regulations went into effect, requiring all mutual funds except UTI to be
re-registered. In 1996, the regulations were amended once more
Kothari Pioneer, India's first private sector mutual fund business, has merged
with Franklin Templeton. After ten years of private sector penetration, total
assets reached Rs. 1218.05 billion. In India now, there are 33 mutual fund
companies.

Major Mutual Fund Companies in India

● ABN AMRO Mutual Fund

● Birla Sun Life Mutual Fund
● Bank of Baroda Mutual Fund
● HDFC Mutual Fund
● HSBC Mutual Fund
● ING Vysya Mutual Fund
● Prudential ICICI Mutual Fund
● State Bank of India Mutual Fund
● Tata Mutual Fund
● Unit Trust of India Mutual Fund
● Reliance Mutual Fund
For the first time in the industry's history, Unit Trust of India Mutual Fund has
dropped from first place. Previously, in May 2006, the Prudential ICICI Mutual
Fund was ranked first in terms of total assets.
The UTIMF reclaimed its status as India's largest fund house the following
month.
According to the current pegging order and data supplied by the Association of
Mutual Funds in India (AMFI), the Reliance Mutual Fund has become the
largest mutual fund in India, with a January-end AUM of Rs 39,020 crore.
UTIMF, on the other hand, has risen to second place with an AUM of Rs 37,535
crore. With an AUM of Rs 34,746 million, the Prudential ICICI MF has slid to
third place.
For the first time in the last year, a private sector mutual fund institution has
surpassed the top spot in terms of assets under management. (AUM). AUM in
the Indian fund industry has increased by 64% in the last year to Rs 3.39 lakh
crore.
The total average AUM of the country's 35 fund companies grew to Rs 5,512.99
billion in April, up from Rs 4,932.86 billion in March, according to data
supplied by the Association of Mutual Funds in India (AMFI).
Reliance MF retained its lead as the largest fund house in the country, with a Rs
74.25 billion increase in AUM to Rs 883.87 billion at the end of April.
HDFC MF, the second-largest investment firm, increased its AUM by Rs 59.24
billion to Rs 638.80 billion.Last month, ICICI Prudential and the state-run UTI
MF increased their assets by Rs 46.16 billion and Rs 57.35 billion, respectively.
At the end of April, ICICI Prudential's AUM was Rs 560.49 billion, while UTI
MF's assets were Rs 544.89 billion.
Canara Robeco MF, IDFC MF, DSP BlackRock, Deutsche MF, Kotak Mahindra
MF, and LIC MF were among the major fund houses that reported an increase in
average AUM in April.
 Chapter 4
RELIANCE MUTUAL FUND VS UTI MUTUAL FUND

RELIANCE MUTUAL FUND

The Reliance Mutual Fund (RMF) was formed as a trust under the Indian Trusts
Act of 1882. Reliance Capital Limited is the RMF's sponsor, while Reliance
Capital Trustee Co. Limited is the Trustee. On June 30, 1995, it was registered
as Reliance Capital Mutual Fund, which was modified on March 11, 2004.
Reliance Mutual Fund was established to launch numerous schemes in which
units are offered to the public in order to contribute to the capital market and
provide investors with possibilities to participate in diversified securities.
With an investor base of more than 71.53 Lacs and an average assets under
management (AAUM) of Rs. 88,388 Crs., RMF is one of the top mutual funds
in India.
One of the mutual funds in the nation with the quickest growth is Reliance
Mutual Fund, a unit of the Reliance-Anil Dhirubhai Ambani Group. RMF is
present in 118 cities across the nation and offers investors a well-rounded
variety of products to fulfil different investor requirements.
To generate value for investors, Reliance Mutual strives consistently to
introduce cutting-edge products and customer service initiatives. Reliance
Capital Asset Management Limited, a Reliance Capital Limited subsidiary that
controls 93.37% of RAM's paid-up capital with the remaining paid-up capital
being owned by minority shareholders, manages the Reliance Mutual Fund
schemes.

Sponsor: Reliance Capital Limited.

Trustee: Reliance Capital Trustee Co. Limited.

Investment Manager: Reliance Capital Asset Management Limited.

The Sponsor, the Trustee and the Investment Manager are incorporated under
the Companies Act 1956.
Vision Statement
"To be a globally respected wealth creator with an emphasis on customer care
and a
culture of good corporate governance

Mission Statement
To create and nurture a world-class, high performance environment aimed at
delighting Our customers

The Main Objectives Of The Trust:

● To carry on the activity of a Mutual Fund as may be permitted at law and

formulate and devise various collective Schemes of savings and
investments for people in India and abroad and also ensure liquidity of
investments for the Unit holders;
● To develop Funds thus raised so as to help the Unit holders earn
reasonable returns on their savings and
● To take such steps as may be necessary from time to time to realise the
effects without any limitation
SCHEMES

A) EQUITY/GROWTH SCHEMES:

Growth funds are designed to offer capital growth over the medium to long
term. These plans typically invest a significant portion of their capital in stocks.
These investments have comparatively significant risks. Growth schemes are
beneficial for investors looking for long-term growth and appreciation.

1. Reliance Infrastructure Fund(Open-Ended Equity):

The scheme's primary investment goal is to generate long-term capital

appreciation through investments primarily in equity and equity-related
instruments of companies engaged in the infrastructure (airports, construction,
telecommunication, transportation) and infrastructure-related sectors and which
are incorporated in or have their primary operations in India. The scheme's
secondary goal is to generate steady returns through investments in debt and
money market securities.

Investment Strategy:

The growth potential and other economic aspects of the nation would serve as
the focus for the investment. The Fund invests in equity and equities-related
securities whose principal market is India in order to maximise long-term total
return.

2. Reliance Quant Plus Fund/Reliance Index Fund (Open-Ended Equity):

The Scheme's investment goal is to increase capital by investments in equities

and instruments that are related to equity. The Scheme will invest in an active
portfolio of equities chosen from the S & P CNX Nifty on the basis of a
mathematical model in an effort to achieve capital appreciation. A mutual fund
of investments with a quantitative analysis-based stock picking procedure.
3. Reliance Natural Resources Fund (Open-Ended Equity):

The scheme's primary investment goal is to invest in businesses that are

primarily involved in the discovery, development, production, or distribution of
natural resources in order to seek capital appreciation and provide long-term
growth opportunities. A secondary goal is to invest in debt and money market
securities in order to produce steady returns.
Energy supplies, precious and other metals, forest products, food and
agriculture, and other essential commodities are some examples of natural
resources.

4. Reliance Equity Linked Saving Fund (A 10 Year Close-Ended Equity ):

The scheme's main goal is to produce long-term capital growth from a portfolio
that is heavily invested in stocks while also providing income tax advantages.
The plan may invest in foreign equity shares, instruments that can be converted
into equity shares of domestic or international corporations, and derivatives as
may be allowed by SEBI and RBI regulations.

5. Reliance Equity Advantage Fund (Open-Ended Diversified Equity):

The scheme's primary investment goal is to seek capital appreciation and

provide long-term growth opportunities through investments in a portfolio that
consists primarily of equity and equity related instruments, with a focus on S &
P CNX Nifty stocks. The secondary goal is to produce steady returns through
investments in debt and money market securities.

6. Reliance Equity Fund (Open-Ended Diversified Equity) :

The scheme's main investment goal is to seek to increase capital and provide
opportunities for long-term growth by investing in a portfolio made up of equity
and equity-related securities of the top 100 companies by market capitalization
and of businesses that are accessible in the derivatives segment. The secondary
goal is to produce steady profits by investing in debt and money market assets
from time to time.
7. Reliance Tax Saver (ELSS) Fund (Open-Ended Equity):

The primary objective of the scheme is to generate long-term capital

appreciation from a portfolio that is invested predominantly in equity and equity
related instruments.
Tax Benefits:
• Investment upto Rs 1 lakh by the eligible investor in this fund would enable
you to avail the benefits under Section 80C (2) of the Income-tax Act, 1961.
• Dividends received will be absolutely TAX FREE.
• The dividend distribution tax (payable by the AMC) for equity schemes is also
NIL

8. Reliance Growth Fund (Open-Ended Equity):

The Scheme's main investment goal is to increase capital over the long term by
investing in equities and equity-related securities using a research-based
investment strategy.

9. Reliance Vision Fund (Open-Ended Equity) :

By investing in equities and equity-related securities using a research-based

investment strategy, the Scheme's main investment goal is to generate long-term
capital growth.

10. Reliance Equity Opportunities Fund (Open-Ended Diversified Equity):

The scheme's primary investment goal is to invest in a portfolio of equity

securities and equity-related securities in order to seek capital appreciation and
provide long-term growth opportunities. A secondary goal is to invest in debt
and money market securities in order to produce steady returns.

11. Reliance NRI Equity Fund (Open-Ended Diversified Equity):

The scheme's primary investment goal is to maximise profits by investments in

equities or equity-related derivatives, principally from companies in the BSE
200 Index.
12. Reliance Long Term Equity Fund (Open-Ended Diversified Equity):

The scheme's primary investment goal is to invest in a portfolio of equity and

equity-related securities and derivatives in order to seek long-term capital
appreciation and provide long-term growth opportunities. A secondary goal is to
invest in debt and money market securities in order to produce steady returns.
It is a 36-month close ended diversified equity fund with an automatic
conversion into an open ended scheme on expiry of 36-months from the date of
allotment. It aims to maximise returns by investing 70-100% in Equities
focusing in small and mid cap Companies.

13. Reliance Regular Savings Fund (Open-Ended Equity):

You have the option to invest in debt, equity, or hybrid alternatives through
Reliance Regular Savings Fund, with each option having a relevant investment
goal and strategy. Monthly contributions to the Reliance Regular Savings Fund
start at just Rs. 100.
Your mutual fund enables quick cash withdrawal capabilities on your
investment at any VISA-enabled ATM nearby for the first time in India. The
fund is undoubtedly the clever new method of investing, offering three different
investment alternatives.

B).DEBT/INCOME SCHEMES:

Investors' regular and steady income is the goal of income funds. These types of
investments typically involve fixed income securities including bonds, corporate
debentures, government securities, and money market instruments. These funds
carry less risk than stock plans do. Changes in the equity markets have no
impact on these funds.
However, there are little prospects for capital growth in such products.The
nation's changing interest rates have an impact on the NAVs of these products.
Such funds' NAVs are expected to rise in the short term if interest rates fall and
vice versa. Long-term investors, however, may not be concerned about these
movements.
1. Reliance Monthly Income Plan :

(An Open Ended Fund, Monthly Income is not assured & is subject to the
availability of distributable surplus)The Scheme's primary investment goal is to
produce consistent cash flow so that unitholders can receive regular dividend
payments, and its secondary goal is capital growth.

2. Reliance Gilt Securities Fund - Short Term Gilt Plan & Long Term Gilt
Plan:

(Open-ended Government Securities Scheme) The Scheme's main goal is to

produce the best credit risk-free returns possible through investments in a
portfolio of assets that have been issued and guaranteed by the federal
government and state governments.

3. Reliance Income Fund :

(An Open-ended Income Scheme ) The scheme's main goal is to produce the
best returns possible while assuming reasonable levels of risk. This income
could be supplemented by the portfolio's capital growth. Investments will
therefore mostly be made in debt and money market instruments.

4. Reliance Medium Term Fund :

(An Open End Income Scheme with no assured returns) The Scheme's principal
investing goal is to provide consistent income so that it can pay out regular
dividends to unit holders, and its secondary goal is capital growth.

5. Reliance Short Term Fund :

(An Open End Income Scheme) By investing in fixed income securities with
short maturities, the scheme's main investment goal is to produce steady returns
for participants with little time to participate.
6. Reliance Liquid Fund :

(Open-ended Liquid Scheme) The Scheme's main investing goal is to produce

the best returns possible while maintaining a high level of liquidity and a
reasonable degree of risk. Investments will therefore be made mostly in debt
and money market instruments.

7. Reliance Floating Rate Fund :

(An Open End Liquid Scheme) The scheme's main goal is to provide consistent
income by investing in a portfolio that is primarily made up of floating rate debt
securities. (including floating rate securitised debt and Money Market
Instruments and Fixed Rate Debt Instruments swapped for floating rate returns).
The plan will also invest in fixed-rate debt securities, including fixed-rate
securitized debt, money market instruments, and floating-rate debt instruments
with fixed-return swaps.

8. Reliance NRI Income Fund :

(An Open-ended Income scheme) The Scheme's main investing goal is to

produce the best returns possible while taking reasonable risks. The portfolio's
capital growth may be added to this income. Investments will therefore mostly
be made in debt instruments.

9. Reliance Liquidity Fund :

(An Open - ended Liquid Scheme) The Scheme's investing goal is to produce
the best returns possible while maintaining a high level of liquidity and a low
degree of risk.
Investments will therefore be made mostly in debt and money market
instruments.
10. Reliance Interval Fund :

(A Debt Oriented Interval Scheme) The primary investment objective of the

scheme is to seek to generate regular returns and growth of capital by investing
in a diversified portfolio

11. Reliance Liquid Plus Fund:

(An Open-ended Income Scheme) By making investments in debt securities and

money market instruments, the Scheme seeks to achieve optimal returns while
maintaining reasonable levels of risk and liquidity.

12.Reliance Fixed Horizon Fund-I:

(A closed ended Scheme) The scheme's main investment goal is to invest in a

diverse portfolio in order to seek out regular returns and capital growth.

13. Reliance Fixed Horizon Fund -II:

(A closed ended Scheme.) The primary investment objective of the scheme is to

seek to generate regular returns and growth of capital by investing in a
diversified portfolio.

14. Reliance Fixed Horizon Fund -III:

(A Close-ended Income Scheme.)The scheme's main investment goal is to

invest in a diverse portfolio in order to seek out regular returns and capital
growth.

15. Reliance Fixed Tenor Fund :

(A Close-ended Scheme) The primary investment objective of the Plan is to

seek to generate regular returns and growth of capital by investing in a
diversified portfolio.

16. Reliance Fixed Horizon Fund - Plan C :

(A closed ended Scheme.) The scheme's main investment goal is to invest in a
diverse portfolio in order to seek out regular returns and capital growth.

17. Reliance Fixed Horizon Fund - IV:

(A Close-ended Income Scheme.) The scheme's main investment goal is to

invest in a diversified portfolio in order to seek out regular returns and capital
growth.

18.Reliance Fixed Horizon Fund - V:

(A Close-ended Income Scheme.) The primary investment objective of the

scheme is to seek to generate regular returns and growth of capital by investing
in a diversified portfolio of:
Central and State Government securities and
Other fixed income/ debt securities normally maturing in line with the time
profile of the scheme with the objective of limiting interest rate volatility

19. Reliance Fixed Horizon Fund - VI:

(A Close-ended Income Scheme ) The scheme's primary investment goal is to

invest in a diversified portfolio of: - Central and State Government Securities
and Other Fixed Income/ Debt Securities that typically mature in accordance
with the Time Profile of the Series with the Objective of Limiting Interest Rate
Volatility

20. Reliance Fixed Horizon Fund - VII :

(A Close-ended Income Scheme.) With the aim of reducing interest rate

volatility, the scheme's primary investment objective is to invest in a diversified
portfolio of: - Central and State Government Securities; and Other Fixed
Income/ Debt Securities that typically mature in accordance with the Time
Profile of the Series.
C).SECTOR SPECIFIC SCHEMES:

These are the funds or schemes that invest in the securities of particular
businesses or sectors, such as pharmaceuticals, software, fast-moving consumer
goods, oil stocks, etc. The performance of the corresponding sectors and
industries affects the returns in these funds. Even while some products could
offer better returns, they are riskier than diversified funds.

1. Reliance Banking Fund

Reliance Mutual Fund has an Open-Ended Banking Sector Scheme which has
the primary investment objective to generate continuous returns by actively
investing in equity equity related or fixed income securities of banks.

2. Reliance Diversified Power Sector Fund

An open-ended power sector scheme is Reliance Diversified Power Sector

Scheme.
The Scheme's main investment goal is to actively engage in equities,
equity-linked, or fixed income securities of Power and other connected
companies in order to achieve consistent returns.

3. Reliance Pharma Fund :

An Open-ended Pharma Sector Scheme is Reliance Pharma Fund. The scheme's

main investment goal is to produce steady returns by investing in equity,
equity-linked, or fixed income securities of pharmaceutical companies and other
connected businesses.

4. Reliance Media & Entertainment Fund

An open-ended media and entertainment securities fund is called Reliance
Media & Entertainment Fund.
The Scheme's main investment goal is to produce steady returns by purchasing
stock, equity-linked, or fixed income securities from the media, entertainment,
and other related industries.

D).RELIANCE GOLD EXCHANGE TRADED FUND:

(An open-ended Gold Exchange Traded Fund) Through investments in actual

gold (and gold-related instruments as may occasionally be approved by
regulators), the investment objective is to seek to give returns that nearly
correspond to returns offered by the price of gold.
However, costs and/or other relevant factors may cause the scheme's
performance to deviate from that of domestic gold prices.
UNIT TRUST OF INDIA MUTUAL FUND

The 1963 UTI Act, which was approved by the Parliament, established Unit
Trust of India. It remained the only method for Indian people to invest in the
capital market for more than 20 years. Public sector banks were permitted to
provide mutual funds in the middle of the 1980s. The establishment of the
Regulator SEBI and its promulgation of the MF Regulations in 1993 brought
about the true dynamism and competition in the MF market. Up until 2001, UTI
retained its dominant position. However, a sharp decrease in market indices and
unfavourable investor sentiment following the Ketan Parekh scam raised
questions about UTI's ability to fulfil its promises to investors.
Two additional elements contributed to this, notably that its largest and flagship
plan, US 64, was sold and repurchased at a price other than its true NAV and
that its assured return schemes had guaranteed returns of up to 18% over a
period of up to two decades.

Four institutions, SBI, LIC, BOB, and PNB, each with a 25% ownership stake,
now manage the mutual fund instead of the government. When the new
shareholders actually paid the consideration money to the government at the end
of 2005, UTI's market share had decreased to just under 10%.

A new board was established, and new management was brought in. With the
aid of a reputable international consultant, a systematic analysis of its roles,
responsibilities, and issues was conducted.

UTI has once more established itself as a significant player in the market. Some
of the funds have received prestigious honors, including Lipper's award for Best
Global Infra Fund. UTI has been successful in comparing the best market
compensation to its employee benefits.
Under the SEBI (Portfolio Managers) Regulations, UTI AMC manages
domestic MF Schemes in addition to being a registered portfolio manager.

This company manages two productive funds in which significant foreign

investors actively participate. A Private Equity Infrastructure Fund has also
been established by UTI, HSH Nord Bank of Germany, and Shinsei Bank of
Japan.
Vision:

To be the most Preferred Mutual Fund.

Mission:

The largest, most effective money manager with a global presence;

the best in class customer service provider;
the most favoured employer; the most inventive and best wealth creator; and a
socially responsible organisation with a reputation for excellent corporate
governance

Assets Under Management: UTI Asset Management Co. Ltd

Sponsor:

State Bank of India

Bank of Baroda
Punjab National Bank
Life Insurance Corporation of India

Trustee: UTI Trustee Co. Limited.

Reliability

Transparency requirements at UTIMF have frequently been updated and reset.

To ensure affordable, timely, and effective service, every branch, UFC, and
registrar office is connected to a reliable IT network. With the help of all of
these developments, UTIMF has become a dynamic, adaptable, reorganised ,
efficient, and transparent business that complies fully with SEBI requirements.
SCHEMES
A).EQUITY FUND

1. UTI Energy Fund (Open Ended Fund):

Investment will be made in stocks of those companies engaged in the following

are:
a) Petro sector - oil and gas products & processing
b) All types of Power generation companies.
c) Companies related to storage of energy.
d) Companies manufacturing energy development equipment related ( like petro
and
power)
e) Consultancy & Finance Companies

2. UTI Transportation And Logistics Fund (Auto Sector Fund) (Open

Ended Fund):

Investment Goal: "Capital appreciation through investments in the stocks of

businesses involved in logistics and transportation." 90% or more of the money
will be used to buy equities and securities related to equity. At least 80% of the
funds will be invested in equity and equity-related instruments of businesses
primarily involved in the design, manufacture, distribution, or sale of
transportation equipment, businesses primarily involved in the provision of
transportation services, and businesses involved in logistics. Money market
instruments will receive up to 10% of the funds.

3. UTI Banking Sector Fund (Open Ended Fund):

An open-ended equity fund whose goal is to increase capital by investments in

the equities of institutions and enterprises involved in the banking and financial
services industry
4. UTI Infrastructure Fund (Open Ended Fund):

a closed-end equity fund that invests in the equities of firms in industries

including metals, building materials, oil and gas, power, chemicals, engineering,
etc. in order to offer capital appreciation. The fund will purchase shares of
companies that are a part of the Infrastructure Industries.

5. UTI Equity Tax Savings Plan (Open Ended Fund):

an open-ended equity fund that makes at least 80% of its investments in stock
and securities related to equities. It intends to give members the opportunity to
take advantage of the tax break provided by Section 80C of the IT Act and to
benefit from growth.

6. UTI Growth Sector Fund - Pharma (Open Ended Fund):

open-ended fund that only purchases shares of firms in the Pharma &
Healthcare industry. One of the growth sector funds, this one seeks to invest in
businesses involved in the production and distribution of pharmaceuticals in
bulk, formulations, and healthcare goods and services.

7. UTI Growth Sector Fund - Services (Open Ended Fund):

an open-ended fund that makes equity investments in domestic companies in the

services sector. One of the growth sector funds invests in the stocks of
companies in the service sector, such as banking, finance, insurance, education,
training, telecom, travel, entertainment, hotels, etc., in order to generate capital
growth over time and distribute income.

8. UTI Growth Sector Fund - Software (Open Ended Fund):

a closed-end fund that only purchases stocks from businesses in the software
sector. One of the growth sectors funds seeks to invest in equity shares of
information technology businesses to give investors returns through both capital
growth and regular income distribution.
9. UTI Master Equity Plan Unit Scheme (Close Ended Fund):

The scheme primarily aims at securing for the investors capital appreciation by
investing the funds of the scheme in equity shares of companies with good
growth prospects.

10. UTI Master Plus Unit Scheme (Open Ended Fund):

An open-ended equity fund with the goal of long-term capital growth through
investments in Indian and international markets in derivatives, convertible
debentures, and equity-related securities.

11. UTI Master Value Fund (Open Ended Fund):

An open-ended equity fund that seeks to provide "Capital Appreciation" by

investing in stocks that are now undervalued relative to their future earnings
potential.

12.UTI Equity Fund (Open Ended Fund):

With an objective to invest up to 20% of its funds in debt and money market
instruments with low to medium risk profiles and at least 80% of its funds in
equity and equity-related products with medium to high risk profiles, UTI
Equity Fund is an open-ended equity plan.

13.UTI Top 100 Fund (Open Ended Fund):

An open-ended equity fund with the option to invest up to 50% of its corpus in
PSU stocks and equity-related products is one that accepts investments in equity
shares, convertible and non-convertible debentures, and other capital and money
market instruments. The fund seeks to offer unit holders income distribution and
capital growth.

14. UTI Mastershare Unit Scheme (Open Ended Fund):

An Open-end equity fund aiming to provide benefit of capital appreciation and

income distribution through investment in equity
15. UTI Mid Cap Fund (Open Ended Fund

An open-ended equity fund with the objective to provide 'Capital appreciation'

by investing primarily in mid cap stocks.

16. UTI MNC Fund (Open Ended Fund):

An open-ended equity fund with the goal of investing primarily in the equity
shares of global corporations operating in a range of industries, including
FMCG. manufacturing, engineering, etc.

17. UTI Dividend Yield Fund (Open Ended Fund):

By investing primarily in stock and equity-related securities that offer high

dividend yields, it seeks to deliver medium to long-term capital gains and/or
dividend distribution.

18. UTI Opportunities Fund (Open Ended Fund):

This scheme invests its assets in equity shares and equity-related securities in an
effort to produce capital growth and/or income distribution. The scheme's main
objective is to take advantage of market possibilities by shifting investments
across various industries in response to the dynamically evolving Indian
economy.

19.UTI Equity in Leadership

This scheme invests the funds in equities that are "Leaders" in their respective
industries, sectors, or sub-sectors in an effort to create capital appreciation
and/or income distribution.

20.UTI Contra Fund (Open Ended Fund):

An open ended equity fund with the goal of generating long-term capital growth
and dividend payments by investments in listed stocks and securities related to
the equity market. By concentrating on equities that are currently undervalued
due to emotional & behavioural patterns existing in the stock market, the fund
gives a chance to profit from the influence of irrational investor behaviour.

21.UTI SPREAD Fund (Open Ended Fund):

The scheme's investment goal is to generate capital growth and dividend

payments through arbitrage opportunities resulting from price discrepancies
between the cash and derivative markets by investing primarily in equity and
equity-related securities, derivatives, and debt securities for the remaining
balance. However, there can be no guarantee that the scheme's investment goal
will be accomplished.

22.UTI Wealth Builder Fund (Close Ended Fund):

The scheme's goal is to increase capital over the long term by primarily
investing in a diverse portfolio of equities and equity-related products.

23.UTI Long Term Advantage Fund - Series I (Close Ended Fund):

The investment objective of the scheme is to provide medium to long term

capital appreciation along with income tax benefits

24. UTI India Lifestyle Fund (Close Ended Fund):

The scheme's investment goal is to deliver long-term capital growth and/or

income distribution from a diversified portfolio of equity and equity-related
instruments of businesses that are anticipated to profit from shifting Indian
demographics, the Indian way of life, and rising consumption patterns.
However, there can be no guarantee that the scheme's investment goal will be
realised.

B). INDEX FUND:

1. UTI Master Index Fund (Open Ended Fund):

In order to invest in securities of the companies that make up the BSE sensex at
the same weight as these companies do in the BSE sensex, UTI MIF is an
open-ended passive fund. By minimising tracking error, the fund aims to
minimise performance variance from the sensex.

2. UTI Gold Exchange Traded Fund (Open Ended Fund):

to make an effort to deliver returns that, before costs, roughly resemble the
efficiency and yield of gold. However, racking error may cause the scheme's
performance to deviate from that of the underlying asset. The UTI-Gold ETF's
investment goal cannot be assured or guaranteed to be realised.

3. UTI Sunder (Open Ended Fund):

To provide investment returns that, before expenses, closely correspond to the

performance and yield of the basket of securities underlying the S & P CNX
Nifty Index.

C).ASSETS FUND

UTI Variable Investment Scheme:

Aiming to give investors a product that would enable them to diversify their
risks through an appropriate allocation between debt and equity asset classes
and thereby produce superior risk-adjusted returns through a dynamic asset
allocation process, UTI VIS-ILP is an open ended scheme.

D).BALANCED FUND:

1. UTI Mahila Unit Scheme (Open Ended Fund):

To invest in a portfolio of debt and money market instruments, as well as equity

and equity-related assets, with the goal of generating a respectable income and a
modest rate of capital growth.
The distribution of assets will be Debt: 70% minimum, 100% maximum Equity:
0% to 30% at most.
2. UTI Balanced Fund (Open Ended Fund):

An open-ended balanced fund investing between 40% to 75% in equity /equity

related securities and the balance in debt (fixed income securities) with a view
to generate regular income together with capital appreciation.

3. UTI Retirement Benefit Pension Fund (Open Ended Fund):

The scheme's goal is to offer investors, especially self-employed individuals, a

pension after they reach the age of 58 in the form of periodic cash flows up to
the extent of their holdings' repurchase value through a systematic withdrawal
plan.

4. UTI Unit Link Insurance Plan (Open Ended Fund):

To provide return through growth in the NAV or through dividend distribution

and reinvestment thereof

5. UTI CCP (Children Career Plan) Advantage Fund (Open Ended Fund):

The objective of the scheme is to provide investors, primarily self-employed

persons, with a pension upon reaching the age of 58 in the form of periodic cash
flows up to the extent of the repurchase value of their shares through a
systematic withdrawal plan.

6. UTI Charitable, Religious Trust And Registered Society (Open Ended

Fund):

Open-ended debt-oriented income plan with the goal of investing no more than
30% of the money in equity-related instruments and the remaining amount in
debt and money market investments with low to medium risk profiles. The
programme aims to provide recurring income by meeting the investment needs
of registered societies, charitable, religious, and educational trusts.

E). INCOME FUND (DEBT FUND)

1. UTI Bond Fund (Open Ended Fund):

100% pure open-end debt fund that makes investments in rated government and
corporate debt with low volatility and simple liquidity.

2. UTI Floating Rate Fund STP (Open Ended Fund):

Investing in a portfolio that primarily consists of fixed rate debt/money market

instruments and floating rate debt/money market instruments is intended to
create regular income.

3. UTI Gilt Advantage Fund LTP(Open Ended Fund):

investing in issued sovereign securities in order to achieve credit risk-free

returns a State Government or the Central Government.

4. UTI Gilt Advantage Fund STP (Open Ended Fund):

investing in sovereign securities issued by the Central and/or a State

Government will yield a return free of credit risk.

5. UTI G-SEC STP (Open Ended Fund):

An open-end Gilt-Fund with the declared goal of maintaining the average

maturity of the portfolio at less than three years, with the intention of investing
only in Central Government assets, including call money, treasury bills, and
repos of varied maturities.

6. UTI G-Sec-Investment Plan (Open Ended Fund):

An open-end gilt fund with the goal of investing only in central government
assets, such as call money, treasury bills, and repos of various maturities with a
view to generate credit risk-free return. The necessity to maximise profits and
satisfy the scheme's liquidity requirements must be taken into consideration
when choosing the maturity profile of an investment in government securities.

7. UTI Treasury Advantage Fund (Open Ended Fund):

It seeks to produce profitable returns while maintaining liquidity and capital.

8. UTI Monthly Income Scheme (Open Ended Fund):

There are no guaranteed returns in an open-end debt-oriented investment

strategy. The plan's objective is to periodically distribute any money

9. UTI Mis Advantage Plan (Open Ended Fund):

aims to provide unitholders with regular income distribution through

investments in fixed income securities, equities, and equity-related products

10.UTI Short Term Income Fund (Open Ended Fund):

The goal of the Scheme is to use a portfolio of money market securities and
high quality debt to provide consistent and fair income with little risk and plenty
of liquidity.

11.UTI Capital Protection Oriented Scheme (Open Ended Fund):

The scheme's investment goal is to try to preserve capital through primary

investments in high-quality fixed income securities and secondary investments
in equity and equity-related instruments to increase capital.

F). LIQUID FUND (DEBT FUND:

1. UTI Liquid Cash Plan (Open Ended Fund):

The scheme seeks to generate steady & reasonable income with low risk & high
level of liquidity from a portfolio of money market securities & high quality
debt

2. UTI Money Market Fund (Open Ended Fund):

An open-ended pure debt liquid plan seeking to provide highest possible current
income by investing in a diversified portfolio of short-term money market
securities.
 RELIANCE MUTUAL UTI MUTUAL FUND
FUND
When Established in 1995, Established in 1964.
Started? Currently, number one company First mutual fund company
in in
India India
How they Registered with SEBI as trust By the UTI Act passed by
came into under the Parliament in 1963.
business ? Indian Trusts Act, 1882
Minimum Rs. 500 Rs. 1000
investment.
Investment. Equity Equity
Bank: 8-15% Financial Service: 16-22%
Software: 8-19% Energy: 12-18%
Petroleum Products: 4-8% Consumer goods: 08-14%
Pharmaceuticals: 6-10%
invest in 7-15 sectors which
invest in 12-20 sectors which include:
include: IT, Telecom, Automobile,
Auto, Auto Ancillaries, Finance, Cement Products,
Industrial Capital Goods, Derivatives, Textile, Metals
Telecom-Services, Power, etc
Construction Project, Hotels,
Retailing, Media &
Entertainment, Transportation
etc
Main UTI Dividend yield Fund, Reliance Diversified Fund,
Funds. UTI Opportunity Fund, Reliance Equity Opportunity
Fund,
Reliance Regular Saving
Funds
Type of Equity Fund, Debt Fund, Sector Equity Fund, Index Fund,
fund Specific Fund and Gold Asset Fund, Balanced Fund,
offered Exchange Traded Fund. Debt Fund (Income, Liquid)
Numbers of 106 schemes 107 schemes
schemes
offered
Distributio • Online and internet based •Tie-up with Post offices
n distribution. branches.
• Reliance outlets and branches. •UTI outlets and branches.
Is any other • Life Insurance • UTI Bank
venture? • General Insurance • Pan card
• Broking & Distribution • Bank Recruitment
• Consumer Finance • ULIP
• Private Equity
• Assets Reconstruction.
 Chapter 5
Mutual funds vs other investments

From investors' viewpoint mutual funds have several advantages such as:

● Research and expert management are used to choose high-quality stocks.

● spreading risk among several stocks, whereas the investor is only able to
purchase a small number of equities. Not all of the investor's eggs are in
one basket.
● having the ability to add money in predetermined amounts and smaller
ones, such $100 every month
● the capacity to profit from the stock market, which has typically
outperformed other investment opportunities over the long term.
● Fund managers have the ability to purchase securities in bulk, which
lowers brokerage costs.

However there are some disadvantages with mutual funds such as:

● The professional fund manager's integrity is what the investor must rely
on.
● The costs charged for fund management may be excessive for the services
provided.
● The fund management is not permitted to give investors transaction
savings.
● When an investor's fund loses value, the fund manager is not held
accountable for bad decision-making.
● The fund may have too many transactions, which would raise the charge
or cost to the investor. This is frequently referred to as "Churn and Earn."
● The annual report and prospectus are difficult to grasp.
● Investor mav teel a lost of control of his investment dollars

There mav be restrictions on when and how an investor sells/redeems his

mutual fund shares.
Company Fixed Deposits versus Mutual Funds

The business accepting the deposit uses fixed deposits as collateral for
unsecured borrowings. The fixed deposit programme's credit rating is a sign of
the investment's inherent default risk.
The AMC makes specified investments under a mutual fund scheme using the
funds of the investors in that scheme. The investors in the programme are the
ones who hold and manage these money in trust. However, the channels via
which a corporation deploys its fixed deposit resources are not directly
correlated with the mobilisation of its fixed deposit resources.
The benefits and losses from the mutual fund plan totally pass through to the
investors as a corollary of such a relationship between mobilisation and
investing. Therefore, there can never be a guarantee of yield, unless a
designated guarantor or, to a lesser extent, an investment in a serial gilt scheme,
guarantees a return. The return on a fixed deposit, however, is guaranteed and is
only impacted by the borrower's risk of default.

Both fixed deposits and mutual funds offer liquidity, but subject to some
differences:

In the case of fixed deposits, the borrowing company is the source of liquidity.
In mutual funds, the scheme itself (for open-end schemes) or the market serves
as the liquidity provider. (in the case of closed-end schemes).
There is no market risk associated with the fundamental value at which fixed
deposits are redeemed.
However, the market determines the price at which a scheme's units are
redeemed. The investor may even receive a return that is higher than what he
had anticipated when making the investment if the shares have appreciated in
value during the time period. But he might potentially suffer a setback.
Fixed deposit early withdrawals are usually subject to a fee from the business
that accepted the deposit. If the NAV has increased sufficiently, the investor
may still realise a financial gain on his investment even after paying an exit load
under mutual fund schemes' discretion to impose a penalty on "early" unit
redemptions.
Bank Fixed Deposits verses Mutual Fund:

Company fixed deposits and bank fixed deposits are comparable. The main
distinction is that banks are typically subject to stricter regulation than
businesses. Even more stringent rules governing the Statutory Liquidity Ratio
(SLR) and Cash Reserve Ratio apply to them. (CRR).
While the aforementioned is consoling, bank deposits are also at risk of default.
The government and Reserve Bank of India (RBI) work to prevent bank
failures, despite the political and economic repercussions of bank defaults.
Additionally, the Deposit Insurance and Credit Guarantee Corporation (DICGC)
will guarantee bank savings up to Rs 100,000 as long as the bank has paid the
required insurance payment of 5 paise per year for every Rs 100 of deposits.
The Rs 100,000 deposit cap applies to all deposits made by a depositor in the
same capacity and right across all bank branches.

Bank fixed deposit Mutual fund

Returns Low better
administrative exp . high low
risk low moderate
investment options less more
network High penetration Low but improving
liquidity At a cost better
quality of share Not transparent transparent
interest calculation Quarterly Every Month
i.e. 3rd. 6th 9th 12 th
Guarantor Guarantor is needed Guarantor is not needed
Account Needed. Not Needed.
Bonds and Debentures versus Mutual Funds

Similar to fixed deposits, the bond or debenture's credit rating provides insight
into the investment's potential default risk. Bonds and debentures, however, are
transferable securities as opposed to FD.
While the issuer may offer an early encashment option to an investor (for
instance, through a "put" option), market listings are often the most liquid form
of liquidity.

Implications of this are:

● The liquidity only exists on paper if the security is not traded in the
market. An open-end system with a continual sale/repurchase option is
preferable in this regard.
● Market risk affects the value that the investor would realise in an early
departure. The investor can experience a capital gain or loss. This feature
is comparable to an MF scheme.

A seasoned investor may be able to participate directly in the debt market and
generate great profits. and handling the roles actively. given Indian market
conditions. The majority of investors find it challenging to actively manage
their debt portfolios. Furthermore, even when the transaction value is as large as
RS I crore, it can be challenging to complete deals in the debt market.
Investment in a debt programme would be advantageous in this regard.

Debt securities, such as secured bonds and debentures, may be hypothecated or

mortgaged against specific fixed and/or current assets. If a default occurs in
such a scenario, the specified assets become accessible for fulfilling redemption
obligations. For all intents and purposes, an unsecured bond or debenture is
similar to a fixed deposit in terms of having access to assets.

For the benefit of scheme investors, a custodian holds the investments of a

mutual fund scheme. In order to protect the interests of the scheme's investors,
the securities related to it are ring-fenced.
Equity versus Mutual Funds

Market risk applies to investments in mutual funds and equities.

Gaining value from a stock security held by an investor who doesn't exchange it
on the open market is difficult. The immediate risk of being unable to sell the
investment in the market is, however, eliminated by investing in an open-end
mutual fund. Because the scheme needs to recover its assets in order to pay
investors, there is still an indirect risk. However, the AMC is better equipped to
manage the problem.
The ability to diversify one's portfolio with a minimal investment is another
advantage of equity mutual fund schemes. For instance, by investing just Rs
5,000 in an index fund, an investor can have exposure to the index.

Advantages Of Mutual Funds Over Stocks?

● Starting with the first dollar invested, a mutual fund offers significant
diversification. because a mutual fund may have a large variety of
securities, even hundreds. Because of the diversification, even if one
holding tank fails, the entire value doesn't decrease significantly. You
can't obtain much diversity when buying individual equities unless you
have around $10k.
● Small investments go a lot further in mutual funds than they do in stocks.
In the beginning, you may set up an automatic investing plan with several
fund firms that allows you to contribute as little as $50 per month.
Second, the commissions for buying stocks will be more expensive than
the cost of purchasing a no-load fund (Of course, the fund's various costs,
such commissions, are already deducted from the NAV). Smaller stock
purchases will have relatively large commissions on a percentage basis,
however this is less of an issue now that trades for $10 are more typical.
● You can exit a fund without getting caught on the bid/ask spread.
● Funds provide a cheap and easy method for reinvesting dividends.
● Last but not least, purchasing a fund is essentially hiring a professional to
handle your financial affairs. That expert is (supposedly) keeping an eye
on the markets and the economy in order to alter the fund's holdings as
necessary.
Advantages Of Stock Over Mutual Funds?

● Contrary to the diversification problem, if you only hold one stock and it
doubles in value, your gain is 100%. A mutual fund gains 2% if one of its
50 stocks doubles in value. However, even though the mutual fund is
down 1%, you are down 50% if you only hold one stock and it reduces in
value by half. has two sides.
● Even while some brokerage firms charge if there aren't enough trades, if
you hold your stocks for several years, you won't be hit with an annual
management fee of about 1%.
● You won't unintentionally purchase a tax liability and can pocket your
gains whenever you choose.
● (This is referring to the custom among funds of dispersing capital gains in
the months of November or December each year. For further information,
see the page further down in this FAQ.)
● You can do a covered write option strategy.
● You can structure your portfolio differently from any existing mutual
fund portfolio.
● You can buy smaller cap stocks which aren't suitable for mutual funds to
invest in.
● You have a potential profit opportunity by shorting stocks. (You cannot,
in general, short mutual funds.)
● The argument is offered that the funds have a "herd" mentality and they
all end up owning the same stocks. You may be able to pick stocks better.
Life Insurance versus Mutual Fund

Life insurance is more of a risk-hedging tool than an actual investment choice.

Therefore, comparing life insurance to any other financial product would be
incorrect.
Life insurance products have occasionally offered a return that is higher than a
comparable "safe" fixed return asset in India due to market inefficiencies or
product mispricing; as a result, you are essentially compensated for purchasing
insurance! Such opportunities are not long-term viable.
FUTURE PROSPECT OF MUTUAL FUNDS IN INDIA

According to financial analysts, mutual funds in India have a highly promising

future. Taking into account the entire assets of Indian commercial banks, it has
been predicted that the mutual fund sector in India will reach Rs. 40,90,000
crore by the end of March 2010. The annual composite growth rate is projected
to increase by 13.4% over the next 10 years.

• 100% growth in the last 6 years.

Number of foreign AMC's are in the queue to enter the Indian markets like
Fidelity
Investments, US based, with over US$1trillion assets under management
worldwide.
• Our savings rate is over 23%, highest in the world. Only channelizing these
savings in the mutual funds sector is required.
• We have approximately 29 mutual funds which is much less than US having
more than
800. There is a big scope for expansion.
• 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing
cities.
• Mutual fund can penetrate rurals like the Indian insurance industry with simple
and
limited products.
• SEBI allows the MF's to launch commodity mutual funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.
• Introduction of Financial Planners who can provide need based advice.

The future of mutual funds in India has a lot of positive things to offer to its
investors, according to an analysis of past developments and present trends.
MF JARGON

Net Asset Value (NAV)

The market value of the scheme's assets minus its obligations is its net asset
value. The scheme's net asset value divided by the number of outstanding units
on the valuation date yields the per-unit NAV.

Sale Price

Sale price is the price you pay when you invest in a scheme . Also known as
offer price . It may include a sales load

Repurchase Price

Is the price at which a close-ended scheme repurchases its units and it may
include a back-end load. This is also called Bid Price.

Redemption Price

It is the price at which open-ended schemes repurchase their units and

close-ended schemes redeem their units on maturity. Such prices are NAV
related

Sales Load

It is a charge collected by a scheme when it sells the units. Also called as

'Front-end' load. Schemes that do not charge a load are called "No Load'
schemes

Repurchase or Back-end' Load

It is a charge collected by a scheme when it buys back the units from the unit
holders.
CONCLUSION

Mutual Funds now represent perhaps most appropriate investment opportunity

for most
investors. As financial markets become more sophisticated and complex,
investors need a financial intermediary who provides the required knowledge
and professional expertise on successful investing. As the investor always try to
maximise the returns and minimise the risk. Mutual funds meet these criteria by
offering alluring returns with manageable risks.
In terms of the amount of money managed by mutual funds versus money
deposited with banks, the fund business has already surpassed the banking
sector. Mutual funds are establishing a variety of plans to meet the needs of the
different classes of investors as a result of the fierce rivalry that has emerged in
this industry. Risk-takers should invest in growth and equity plans to increase
their capital. Investors who require consistent income should put money into
income programmes.
Since more than three years ago, the stock market has been increasing. This has
in turn not only helped to increase these assets but also to protect the money that
was put into the funds.
Additionally, fund investors now have more confidence and are investing more
into the market via MFs than ever before as a result.
Major advantages are offered by Reliance India mutual funds to the average
person who wishes to improve his or her quality of life.
Nearly 80% of the market is still under the grip of UTI, the largest mutual fund
in India. Additionally, only 2% of household savings flow to mutual funds
overall, compared to 46% that are deposited in banks. According to some
investment managers, this simply shows the sector's potential.
"Over the next few years, even triple-digit growth is possible if mutual funds are
successful in eroding bank deposits."
BIBLIOGRAPHY

REFERENCE BOOK:

FINANCIAL MARKET AND SERVICES

-Gordon and Natarajan

WEBSITE:

http://www.utimf.com
http://www.reliancemutual.com
http://www.amfiindia.com

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