PROJECT REPORT ON

MUTUAL FUNDS IN INDIA

SUBMITTED BY
PRIYANKA RAWAT

MASTER OF COMMERCE IN BANKING AND FINANCE SEMESTER – IV

UNDER THE GUIDANCE OF

PROF. SWAGATIKA NANDA

DEPARTMENT OF COMMERCE

VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY

UNIVERSITY OF MUMBAI

ACADEMIC YEAR

2022-2023

1
 VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY
(Affiliated to Mumbai University)

Certificate
This is to certify that.

Mrs Priyanka Rawat of M. Com.in Banking and Finance, Semester IV has

undertaken & completed the project work titled Mutual Funds in India

during the academic year 2022-23 under the guidance of Mr Swagatika Nanda
submitted on to this college in fulfilment of the curriculum of Master of
Commerce in banking and finance semester.

This is a Bonafede project work & the information presented is True & original to the best
of our knowledge and belief.

PROJECT COURSE EXTERNAL PRINCIPAL

GUIDE CO-ORDINATOR EXAMINER

2
 ACKNOWLEDGMENT

I hereby acknowledge all those who directly or indirectly helped me in drafting this
project report. It would not have been possible for me to complete the task without
their help and guidance.

First of all, I would like to thank the Principal Dr. Rohini Kelker, the Vice Principal Prof.
Vijay Gawde, and our Project in charge Prof. Swagatika Nanda who gave me the
opportunity to do this project work. They also conveyed the important instructions from
the university time to time. I am very much obliged to Prof. Swagatika Nanda for giving
guidance for completing the project.

Last but not the least; I am thankful to the University of Mumbai for offering the project
in the syllabus. I must mention my hearty gratitude towards my family, other faculties
and friends who supported me to go ahead with the project.

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 DECLARATION

I PRIYANKA RAWAT, student of M.Com. BANKING AND FINANCE. In

Semester IV, Vidyalankar School of Information Technology, hereby declare that
I have completed the project on Mutual Funds in India in academic year 2022-23.
The information submitted is true and original to the best of my knowledge.

Signature of student

PRIYANKA RAWAT

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 EXECUTIVE SUMMARY

There are myriad choices available to the investor of today. Investment avenues are galore.
There are different investment vehicles such as stocks and bonds. We, however, need to invest
carefully, and work out various investment options and decide on how to make the best of our
investment in terms of monetary benefits.

Mutual Funds constitute a part of a wide spectrum of financial services involving management
of funds by investing in various financial instruments on behalf of various individuals among
others. Individuals interested in investing in these financial instruments provide the money to
the mutual funds that do the requisite research and invest it appropriately. Mutual funds, in its
modern version, owe their origin to “Foreign and colonial Government Trust” that collected
funds in 1886, for their colonial expansion of the British Empire. The concept of Mutual Funds
caught up in the United States in the 1920s, and a few decades later caught up in our country.
In countries like the US, Japan, the UK, Germany and Italy, Mutual Funds continue to be one
of the most important avenues for investment. Mutual Funds are the ideal investment vehicle
for today’s complex and modern financial scenario. Markets for equity shares, bonds,
derivatives and other assets have become mature and information driven. A typical individual
is not likely to have the knowledge, skills, inclination and time to keep track of and understand
the causes and implications of price changes and trends.

A Mutual Fund appoints professionally qualified and experienced managers who carry out
each function in a way to increase the returns on the money invested by the people. The last
few years have been very exciting for the Mutual Funds industry in India. New players have
come in, while others have decided to close shop by either selling off or merging with others.
Product innovation is now passé with the game shifting to performance delivery in fund
management as well as service.

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In a few years Mutual Fund has emerged as a tool for ensuring one’s financial wellbeing.
Mutual Funds have not only contributed to the India growth story but have also helped families
tap into the success of Indian Industry. As information and awareness is rising more and more
people are enjoying the benefits of investing in mutual funds. The main reason the number of
retail mutual fund investors remains small is that nine in ten people with incomes in India do
not know that mutual funds exist. But once people are aware of mutual fund investment
opportunities, the number who decide to invest in mutual funds increases to as many as one in
five people. The trick for converting a person with no knowledge of mutual funds to a new
Mutual Fund customer is to understand which of the potential investors are more likely to buy
mutual funds and to use the right arguments in the sales process that customers will accept as
important and relevant to their decision.

This Project gave me a great learning experience and at the same time it gave me enough scope
to understand the Indian Mutual Fund industry.

This project can be divided into two parts. The first part gives an insight about Mutual Fund
and its various aspects. One can have a brief knowledge about Mutual Fund and its basics
through the Project. The second part gives a complete brief of the Mutual Fund Industry in
India and its future with an analysis of various problems faced by it and the plausible solutions.

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 CONTENTS

SERIAL PARTICULARS PAGE NUMBER

NUMBER

1 8-9
Mutual fund – An Introduction
2 History of Mutual Funds 10

3 11
Mutual Funds Industry In India.
4 Meaning of Mutual Funds. 12-13

5 14-17
Mutual Funds: Fund Objective
6 Basics of Mutual Funds. 18

7 Different Plans that Mutual Funds Offer. 19-20

8 Best Tax-Savings mutual funds 2010. 21-22

9 Securities and Exchange Board Of India- SEBI. 23-24

10 Functions & Objectives of SEBI. 25-29

11 Working of Mutual fund. 30

12 Pros and Cons Of Investing in Mutual funds. 31-32

13 Types of Mutual Funds. 33-36

14 Investment Strategy, Guide to Investment Strategy 37-39

15 Fund Strategy. 40-51

16 Equity Linked Saving Scheme 52-53

17 Top 10 Tax Saving mutualFunds (ELSS). 54

18 Types of ELSS. 55-60

19 SBI Mutual Fund 61-63

20 Case Studies-Nevo CaseStudies. 64-65

21 66-68
Mutual Fund VS Equity Fund
22 Mutual Funds-Conclusion 68-70

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 INTRODUCTION – OVERVIEW OF MUTUAL FUNDS

A Mutual Fund is a trust that pools the savings ofa number of investors who share a common
financial goal. The money thus collected is invested by the fund manager in different types of
securities depending upon the objective of the scheme. The income earned through these
investments and the capital appreciations realized by the scheme are shared by its unit holders
in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable
investment for the common man as it offers an opportunity to invest in a diversified,
professionally managed portfolio at a relatively low cost. The small savings of all the investors
are put together to increase the buying power and hire a professional manager to invest and
monitor the money. Anybody with an investible surplus of as little as a few thousand rupees
can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and
strategy.

mutual funds make it easy and less costly for investors to satisfy their need for capital growth,
income and/or income preservation. Mutual fund brings the benefits of diversification and
money management to the individual investor, providing an opportunity for financial success
that was onceavailable only to a select few.

8
Understanding Mutual funds is easy as it's such astraightforward concept. A mutual fund is a
company that pools the money of many investors and its shareholders to invest in a variety of
different securities.

Investments may be in stocks, bonds, money market securities or some combination of these.
Those securities are professionally & efficiently managed on behalf of the shareholders, and
eachinvestor holds a pro rata share of the portfolio -- entitled to any profits when the securities
are sold, but subject to any losses in value as well A mutual fund, by its very nature, is
diversified -- its assets are invested in many different securities. Beyond that, there are many
different types of mutual funds with different objectives and levels of growth potential,
furthering your odds to diversify.

The schemes could be added to the portfolio with online updates for monitoring the
performance of your investments in Mutual Funds. The comprehensive search, which gets you
the fund matching your criteria.

The comparison of various schemes of different Mutual Funds based on the critical and most
sought after investment criteria.

The analysis of different schemes and theoutlook for the same.

List of new launches in the marketprovided continuously.

Basically, Mutual funds are trusts that are formed to mobilize the savings from the people and
pool them together to invest within the securities markets. The main advantage of mutual funds
is that they are professionally managed. And the generalidea is for investors to contribute small
amounts into units in the various schemes, which in turn isdeployed in the various markets.
This way, any investor who is not in a position to directly invest in the markets can take
advantage of this route.

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 CHAPTER 2 - HISTORY OF MUTUAL FUNDS

The history of Mutual Funds has evolved overthe years and it is sure to appear as something
very interesting for all the investors of the world. In present world, mutual funds have become
a main form of investment because of its diversified and liquid features. Not only in the
developed world, but in the developing countries also, different types of mutual funds are
gaining popularity very fast in a tremendous way.

There is an ambiguity about the fact that when and where the Mutual Fund Concept was
introduced for the first time. According to some historians, the mutual funds were first
introduced in Netherlands in 1822. In 1822, that idea was further developed. In 1822, the
concept

of Investment Diversification was properlyincorporated in the mutual funds. In fact,

the Investment Diversification is the mainattraction of mutual funds as the

small investors are also able to allocate their little Funds in a diversified way to lower Risks.
After 1822 in Netherlands, the Mutual Funds Concept came in Switzerland in 1849 and
thereafter in Scotland in the 1880s. After being popular in Great Britain and France, Mutual
fund concept traveled to U.S.A in the 1890s. In 1920s and 1930s, the Mutual Fund popularity
reached a new high. There was a record investment done inmutual funds. But, before 1920s,
the mutual funds were not like the modern day mutual funds.

The modern day mutual funds came into existence in 1924, in Boston. Massachusetts Investors
Trust introduced the Modern Mutual Funds and the funds were available from 1928. At
present this Massachusetts Investors Trust is known as MFS Investment Management
Company.

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 CHAPTER 3 - MUTUAL FUNDSINDUSTRY IN INDIA

The origin of mutual fund industry in India is withthe introduction of the concept of mutual
fund byUTI in the year 1963. Though the growth was slow, it accelerated from the year 1987
whennon-UTI players entered the industry. In the past decade, Indian mutual fund industryhad
seen dramatic improvements, both quality wise as well as quantity wise. Before, the monopoly
of the market had seen an ending phase; the Assets under Management (AUM) were Rs. 67bn.
The private sector entry to the fund family raised the AUM to Rs. 470 bn in March 1993 and
till April 2004; it reached the height of 1,540 bn.

First Phase - 1964-87

Unit Trust of India (UTI) was established in 1963by an Act of Parliament. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of the
Reserve Bank of India. The first scheme launchedby UTI was Unit Scheme 1964. At the end
of 1988 UTI had Rs.6, 700 crores of assets under management.

Second Phase - 1987-1993 (Entry ofPublic Sector Funds)

Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Can bank Mutual
Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov
89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in
1990. Third Phase - 1993-2003 (Entry of Private Sector Funds)

with the entry of private sector funds in 1993, anew era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. The erstwhile Kothari
Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993. Fourth Phase - since February 2003

This phase had bitter experience for UTI. It was bifurcated into two separate entities. The
Specified Undertaking of Unit Trust of India, functioning under an administrator and under
therules framed by Government of India and does not come under the purview of the Mutual
Fund Regulations.
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 CHAPTER 4 - MEANING OF MUTUAL FUNDS

Mutual funds are basically investment funds where the investment companies collect money
from the investors and invest the same in variousstocks of different companies and government
bonds.

Mutual funds are also affected by the market fluctuations and different mutual funds have
different prices which vary as per the variations in the stock market. But the key advantage of
mutual funds is that they are less risky than stocks because the investment in mutual funds is
generally diversified. The investors have the option of selling off their units or their share in
the mutual fund as and when they wish. There are certain types of stocks where there may be
acertain lock in period or a fixed duration during which the sale may not be allowed. Investors
of mutual funds prefer to sell their units when the prices of the same have increased to more
than the purchase price and at a time when they are sure to make profits. While investing in
mutual funds the investors need to check where the mutual fund is investing the money
because there may be some funds that invest only in stocks while some may invest only in
fixed income securities and there may be some other fund which invests partly in stocks and
partly in securities.

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

A mutual fund is one of the investment instruments, where you provide your money to afund
house and authorize them to invest and manage your money. In return, the fund house pays
back through dividends/bonus. This is similar to Fixed deposit, where bank pay you interest
for the fixed deposit. Never invest, because your neighbor is doing so or, someone says that he
is making a fortune from mutual funds.

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There can be different type -

Equity Oriented (High Risk, High return): Gofor this, if you can take high risk. This type of
fund usually put your 100% money in Equity market, which is very much volatile.

Hybrid/Balanced fund [Medium risk, Avg Return]: this type of fund invest your money in both
Equity market and Govt Bonds in 50-50ratio.

Bond MF [Low risk, Return greater than Bank Fixed deposit]: These funds put money in Govt
bonds, RBI bonds etc., which are generally backedup for insured return.

Depending on your risk appetite and earning aswell as family liabilities, you must carefully
choose the mf for a nice return.

The name "Mutual Fund" itself reveals to you that it is invested mutually. The point is
investment is not made individually but on behalf of everyone participating in it.

The process involved here is:

You along with your partners pools your moneytogether.

You then use the help of an "investment manager" to manage your funds and earn returns from
your investments. He acts like a financial adviser to you and helps you in deciding where and
where not to invest.

With the advice given by your manager, youinvest in that fund which is governed by the "Asset
Management Company (AMC)".

AMC controls all the mutual funds and everyonepurchases from it.

There are mainly two types of mutual funds –

1.Equity based

2.Debt based

An equity fund invests in equities more commonly known as stocks of companies. This
involves the highest risk but gives you highest returns
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 CHAPTER-5:MUTUAL FUNDS: FUND OBJECTIVES

A fund tells you what it wants to achieve and how it plans to do it.

Each mutual fund has an investment objective — a goal or financial result it wants to realize.
And each fund manager has an investment style, which is the approach he orshe follows in
making investments to achieve the fund's goal.

Most fund objectives fit into one of several broadcategories, such as growth in value, current
income, or a combination of growth and income. For example, a growth fund selects
investments that seem likely to increase in value over time. An income fund, on the other hand,
targets investments that it expects to generate revenue, such as stock dividends.

Most people have neither the time nor interest toresearch and select individual stocks and
bonds for their investment portfolios, and that's where mutual funds come in. Mutual funds
are composed of stocks, bonds and other assets, giving you diversification, which means a
decline in value in any one stock or bond won't significantly hurt your overall return. A handful
ofwell-chosen mutual funds or index funds can offer a diversified portfolio that allows the
individual investor to spend his or her time on other pursuits. Thousands of mutual funds are
available that can satisfy the objectives of different types of investors.

Diversification

Investors are often advised that they shouldn't "put all their eggs in one basket." Investors who
have too high of a percentage of their assets in one or two stocks can be severely affected if
oneof the companies goes belly-up. Most financial experts say investors should have at least
15 stocks in their portfolios. It takes a lot of time and effort to keep up with that many
companies. Conversely, mutual funds hold a number of stocks, which gives investors instant
diversification and protects them from a sharp decline in any one holding.

Growth

Some mutual fund investors are looking for rapid growth in the value of their funds. Stocks
have historically offered the best long-term returns of any asset class, though it can be an up-
14
and-downride. Stock funds that are labeled "growth" typically invest in companies with bright
prospects, while "value" funds target stocks that seem inexpensive compared with the
company'searnings.

Income

Other fund investors care more about receiving income from their investments. Numerous
stock funds invest in companies with high dividend payouts. Bond funds also can provide
steady income, as can funds that invest in real estate investment trusts, or REITs. All these
income- focused funds pass the yields along to their investors, usually on a monthly or
quarterly basis. Yields of 3 percent to 7 percent are often available with income-oriented
mutual funds.

International Exposure

Some large international firms offer their shares on U.S. markets, but others don't. For example,
individual investors can have a hard time gettingaccess to shares in the fast-growing Chinese
market. But international-focused mutual funds have an easier time investing in these shares.
Because half the world's corporate value is outside the U.S., it's important to have some
exposure to overseas stocks, and mutual fundsare the easiest way to get this.

Low Fees

Stock picking can be expensive thanks to broker commissions, but many "no-load" mutual
funds are available that don't charge investors anything. Many other funds charge investors
lessthan 1 percent a year for operational fees.

Investors looking for especially inexpensive funds might consider index funds, which charge
fees as low as 0.1 percent per year. These funds usually hold every stock or bond in a given
asset class, which offers tremendous diversification at a low cost.

The Fund's Objective

When a stock mutual fund defines its investmentobjective, it is identifying a specific type of
stock.

— though not individual stocks — that will be thecore of its portfolio.

15
Sometimes the objective is quite broad. For example, the manager of a fund whose objective
is long-term growth may look for a range of companies whose current market capitalization is
small — less than $2.3 billion — because he or she believes they have the potential to increase
significantly in value over several years.

Other times, the objective may be quite focused and reflect social, political, or religious
interests. For example, some socially conscious funds buy stock in companies whose products
and services are acceptable to investors who want to avoid tobacco, firearms, gambling, or a
range of other activities. Others, called green funds, buy only the stocks of environmentally
friendly companies.

HANDLING CAPITAL

The money you invest in a mutual fund is called your capital. If this base amount increases in
value, the growth is called capital appreciation. Every mutual fund, especially those whose
objective is capital appreciation, carries some riskthat the value of your investment will shrink.
Thispossibility is known as the risk to capital.

Your capital may be at risk for one of

two reasons:

The fund's underlying investments

maydrop in value.

The fund might have to sell

investments at a loss to meet its
obligation to buy back shares from
investors who want to sell.

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Investing Style

Many funds share an investment objective, such as long-term growth or growth and income.
But those funds are likely to produce different results,both in the short term and over longer
periods.

That's because the managers who make the fund's buy and sell decisions follow.
Different investment styles.

For example, one manager might pursue capital appreciation by buying undervalued stocks
in mature companies whose prices are low because their products or services are out of favor
with investors, or they have had management or otherproblems. The manager's expectation is
that some or all of the prices will rebound and increase the value of the fund. This style is
described as value investing.

Another manager seeking similar results might concentrate on stocks issued by new or small
companies, or those in a certain sector of the economy. While these stocks are likely to be
more volatile, carry more risk, and perhaps be less expensive than others, the manager
anticipates they will continue to increase in value.This style is described as growth investing.

While both investment styles can produce strongresults in certain markets, they rarely do so at
the same time. In the same vein, neither investment style can prevent losses in a down market.

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 CHAPTER 6 - BASICS OF MUTUAL FUND

The article mentioned below, is for the investors who have not yet started investing in mutual
funds, but willing to explore the opportunity and also for those who want to clear their basics
for what is mutual fund and how best it can serve asan investment tool. A mutual fund is a
portfolio, or collection, of individual securities (some combination of stocks, bonds, or money
market instruments) managed according to a specific objective spelled out in the fund's
prospectus. A mutual fund allows investors to pool their money,then the fund invests it on their
behalf.

Unlike individual stocks, whose value fluctuates minute by minute, mutual funds are priced at
theend of each day the market is open, based on what the securities in the portfolio are worth.
Theprice per share, or net asset value (NAV).

A mutual fund is a company that pools money from investors and invests the money in stocks,
bonds and other securities. The income earned from it is shared by its unit holders based on
the number of units owned by them. The performance of the mutual fund in India suffered
quantitatively in the 1990s. A set of measures to create a transparent and a competitive
environment in mutual funds led to a variety of new schemes for its investors.

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 CHAPTER 7 - DIFFERENT PLANS THATMUTUAL FUNDS OFFER.

To cater to different investment needs, Mutual Funds offer various investment options. Some
ofthe important investment options include:

Growth Option

Dividend is not paid-out under a Growth Option and the investor realizes only the capital
appreciation on the investment (by an increase inNAV).

Dividend Payout Option

Dividends are paid-out to investors under the Dividend Payout Option. However, the NAV of
the mutual fund scheme falls to the extent of the dividend payout.

Dividend Re-investment Option

Here the dividend accrued on mutual funds is automatically re-invested in purchasing

additionalunits in open-ended funds. In most cases mutual funds offer the investor an option
of collecting dividends or re-investing the same.

Retirement Pension Option

Some schemes are linked with retirement pension. Individuals participate in these options for
themselves, and corporates participate for their employees.

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Insurance Option

Certain Mutual Funds offer schemes that provide insurance cover to investors as an added
benefit.

Systematic Investment Plan (SIP)

Here the investor is given the option of preparing a pre-determined number of post-dated
chequesin favor of the fund. The investor is allotted units on a predetermined date specified in
the offer document at the applicable NAV.

Systematic Withdrawal Plan (SWP)

As opposed to the Systematic Investment Plan, the Systematic Withdrawal Plan allows the
investor the facility to withdraw a pre-determinedamount / units from his fund at a pre-
determined interval. The investor's units will be redeemed at the applicable NAV as on that
day.

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 CHAPTER 8 - BEST TAX SAVINGS MUTUAL FUNDS 2010

Investment in ELSS Mutual Funds is considered to be one of the best option to save tax
because of many reasons like low expenses, short lock-in period of 3 years, high liquidity and
high growth in the long term. Year 2008 and 2009 had been extremely volatile. Still, many
mutual funds havedelivered positive return in the past 3 years. To select mutual funds is not a
herculean task, but it should not be whimsical decision either. To do ourpart, we have come
out with a list of 5 Best Tax Saving ELSS Mutual Funds in which investors should invest this
season.

Following are the Top 5 funds in alphabeticalorder:

Birla Sun Life Tax Relief 2010

3 Years Return – 7.90%

5 years return – 22.21%

Return since Inception – 32.80%

Canara Robeco Can Equity Tax Saver

3 Years Return – 17.33%

5 years return – 28.62%

Return since Inception – 15.82%

HDFC Tax Saver

3 Years Return – 10.01%

5 years return – 26.60%

Return since Inception – 35.58%

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ICICI Prudential Tax Plan

3 Years Return – 9.44%

5 years return – 24.55%

Return since Inception – 18.99%

SBI Magnum Tax Gain Scheme 93

3 Years Return – 7.14%

5 years return – 31.43%

Return since Inception – 12.21%

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 CHAPTER 9 - SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

What does Securities And Exchange Board Of

India - SEBI Mean?

The regulatory body for the investment market

in India. The purpose of this board is to
maintain stable and efficient markets by
creating and enforcing regulations in the
marketplace.

Securities and Exchange Board of India (SEBI) was first established in 1988 as a non-
statutory body for regulating the securities market. It became an autonomous body on 30
January 1992 and was accorded statutory powers with the passing of the SEBI Act 1992 by
the Parliament of India. SEBI has its headquarters at the business district of Bandra Kurla
Complex in Mumbai and has Northern, Eastern, Southern and Western Regional Offices
in New Delhi, Kolkata, Chennai, and Ahmedabad respectively. It has opened local offices
at Jaipur and Bangalore and has also opened offices
at Guwahati, Bhubaneshwar, Patna, Kochi and Chandigarh in Financial Year 2013–2014.
Controller of Capital Issues was the regulatory authority before SEBI came into existence; it
derived authority from the Capital Issues (Control) Act, 1947.

The SEBI is managed by its members, which consists of the following:

 The chairman is nominated by the Union Government of India.

 Two members, i.e., Officers from the Union Finance Ministry.
 One member from the Reserve Bank of India.
 The remaining five members are nominated by the Union Government of India, out
of them at least three shall be whole-time members.
After the amendment of 1999, collective investment schemes were brought under SEBI
except nidhis, chit funds and cooperatives.

23
Investopedia explains Securities AndExchange Board Of India - SEBI

The Securities and Exchange Board of Indiais similar to the U.S. SEC. The SEBI is relatively
new (1992) but is a vital component inimproving the quality of the financial markets inIndia,
both by attracting foreign investors and protecting Indian investors.

Formed April 12, 1988; 35 years

ago (Established)
January 30, 1992; 31 years
ago (Acquired Statutory Status)[1]

Type Regulatory agency

Headquarters Mumbai, Maharashtra

Employees 867+ (2020)

 Ms. Madhabi Puri

Agency
executive Buch, Chairperson

Parent Ministry of Finance, Government of

department India
Child agencies  Forward Markets Commission
 Association of Mutual Funds of
India
 National Securities Depository
Limited
 Central Depository Services
Limited
Website www.sebi.gov.in/sebiweb/

24
 CHAPTER 10 - FUNCTIONS &OBJECTIVES OF SEBI

Functions of SEBI

Securities and Exchange Board of India (SEBI) was first established in the year 1988 as a non-
statutory body for regulatingthe securities market. It became an autonomous body in 1992 and
more powerswere given through an ordinance. Since then it regulates the market through its
independent powers.

SEBI is the nodal agency which protects the interests of an investor in the India market.
Otherwise regulation of the capital markets is primarily the responsibility of the Securities and
Exchange Board of India (SEBI), which is locatedin Bombay. Some of the major functions of
SEBIare:

“SEBI is expected to regulate the business instock exchanges and any other securities markets.

“Registering and regulating the working of collective investment schemes, including mutual
funds, is a responsibility of SEBI.

“SEBI is responsible for prohibiting fraudulent and unfair trade practices relating tosecurities
markets.

25
“Prohibiting insider trading in securities, withthe imposition of monetary penalties, on erring
market intermediaries.

“Regulating substantial acquisition of sharesand takeover of companies.

" Calling for information from, carrying out inspection, conducting inquiries and audits of the
stock exchanges and intermediaries and self-regulatory organizations in the securities market.
Keeping this in mind, SEBI has issued a new set of comprehensive guidelines governing issue
of shares and other financial instruments and has laid down detailed norms for stock-brokers
and sub-brokers, merchant bankers, portfolio managers and mutual funds.

“To promote investor's education and training of intermediaries of securities markets.

Fraudulent and Unfair Trade Practices Keeping in mind the role of SEBI as the

principal agency looking after the investor's interests , it is vested with powers to take action
against the practices relating to securities market manipulation and misleading statements to
induce sale/purchase of securities.

Regulates Capital Market

26
Functions of Securities and Exchange Board of India (SEBI)

To meet the three objectives SEBI performs the three main functions: namely, Protective
Functions, Developmental Functions, and Regulatory Functions.

1. Protective Functions
The functions performed by SEBI to protect the interest of investors and provide safety of
investment are protective functions. The functions performed by SEBI as protective
functions are as follows:

i) Check a Price Rigging

Manipulation of price of securities to inflate or depress the market price of securities is
known as Price Rigging. SEBI, through protective functions prohibits these kinds of
practices as it can cheat and defraud the investors.

ii) Prohibits Insider Trading

Any person who is connected with the company such as promoters, directors, etc., is an
insider. They have all the sensitive information about the company which can affect the price
of the securities. However, this sensitive information is not available to the people at large,
and if the insiders use this privileged information to make profit, it is known as Insider
Trading. SEBI protects the interest of investors, keep a strict check on the insiders when they
buy securities of the company and takes strict actions against them on insider trading.

For example, the directors of a company know that the company will be issuing Bonus
Shares to the shareholders at the end of the financial year and they use this information to

27
make profit by purchasing shares from the market. This purchase of shares by the directors
will be considered insider trading.

iii) SEBI prohibits fraudulent and unfair trade practices

SEBI does not allow the companies to make any statement that can mislead the people and
induce the sale or purchase of securities by any other person.

iv) Educate Investors

SEBI undertakes various steps to educate the investors so that they can easily evaluate the
securities of different companies and select the most profitable security.

v) SEBI under protective functions, promotes fair practices and code of conduct in the
security market.
To do so, SEBI takes the following steps:

It has issued guidelines for the protection of the interest of debenture holders wherein the
company cannot change the terms in the mid-term.
It empowers investigating cases of insider trading and also has provisions for imprisonment
and a stiff fine.
It has also stopped the practice of making preferential allotments of shares that are unrelated
to market prices.

2. Developmental Functions
SEBI performs developmental functions to promote and develop the activities in stock
exchange and to increase the business in stock exchange. The functions performed by SEBI
under developmental functions are as follows:

i) It promotes the training of intermediaries in the securities market.

28
ii) It tries to promote the activities of the stock exchange. To do so, it adopts a flexible and
adaptable approach in the following ways:

SEBI has given permission for internet trading through registered stock brokers.
In order to reduce the cost of issue, SEBI has also made underwriting optional.
Lastly, it has permitted initial public offer of primary market through stock exchange.
3. Regulatory Functions
SEBI performs regulatory functions to regulate the business in stock exchange. The
functions performed by SEBI under regulatory functions are as follows:

To regulate the intermediaries like underwriters, brokers, etc., SEBI has framed a set of rules
and regulations and a code of conduct.
It also conducts inquiries and audits of stock exchanges.
SEBI registers and regulates the working of mutual funds, etc.
SEBI has brought the intermediaries under regulatory purview and has made private
placement more restrictive.
SEBI regulates the takeover of companies.
Ultimately, it registers and regulates the working of stock brokers, share transfer agents, sub-
brokers, merchant brokers, trustees, and everyone who is associated with the stock exchange
in any manner.

29
 CHAPTER 11 - WORKING OF MUTUAL FUND

Regulatory Authorities

To protect the interest of the investors, SEBI formulates policies and regulates mutual funds.
It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time.
MF, either promoted by public or by private sector entities including one promoted byforeign
entities is governed by these Regulations.

SEBI approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. The custodian, registered with SEBI, holds the
securities of various schemes of the fund in its custody.

According to SEBI Regulations, two thirds of the directors of a Trustee Company or board of
trustees must be independent.

The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual
funds that the mutual funds function within the strict regulatory framework. Its objective is to
increasepublic awareness of the mutual fund industry.
30
AMFI is also engaged in upgrading professionalstandards and in promoting best industry
practices in diverse areas such as valuation, disclosure, transparency etc.

CHAPTER 12 - PROS & CONS OF INVESTING IN MUTUAL FUNDS

For investments in mutual fund, one must keep inmind about the Pros and cons of investments
in mutual fund.

Advantages of Investing MutualFunds:

Professional Management - The basic advantage of funds is that, they are professionally
managed, by well qualified professional. Investors purchase funds because they do not have
the time or the expertise to manage their own portfolio. A mutual fund is considered to be a
relatively less expensive way to make and monitor their investments.

Diversification - Purchasing units in a mutual fund instead of buying individual stocks or

bonds, the investors risk is spread out and minimized up to certain extent. The idea behind
diversification is to invest in a large number of assets so that a loss in any particular investment
is minimized bygains in others.

Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus
helping to reducing transaction costs, and help to bring down the average cost of the unit for
theirinvestors.

Liquidity - Just like an individual stock, mutual fund also allows investors to liquidatetheir
holdings as and when they want.

Simplicity - Investments in mutual fund is considered to be easy, compared to other available

instruments in the market, and the minimum investment is small. Most AMC also have
automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per
month basis.

31
Disadvantages of Investing MutualFunds:

Professional Management- Some funds don’t perform in neither the market, as their
management is not dynamic enough to explorethe available opportunity in the market, thus
many investors debate over whether or not the so-called professionals are any better than
mutual fund or investor himself, for picking up stocks.

Costs – The biggest source of AMC income is generally from the entry & exit load which they
charge from investors, at the time of purchase. The mutual fund industries are thus charging
extra cost under layers of jargon.

Dilution - Because funds have small holdings across different companies, high returns from a
few investments often don't make much difference to the overall return. Dilution is also the
result of a successful fund getting too big. When money pours into funds that have had strong
success, the manager often has trouble finding a good investment for all the new money.

Taxes - when making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a capital-gain tax
is triggered, which affects how profitable the individual is from the sale. It might have been
more advantageous for the individual to defer thecapital gains liability.

32
 CHAPTER 13 - TYPES OF MUTUALFUNDS

Mutual funds are popular investments because of their ease, flexibility and diversification
benefits. The best part of mutual funds is that they provide investment opportunities for all
kinds of investors. Currently, there are over 44 registered mutual funds in India, offering
different schemes to satisfy the dynamic needs of diverse investors.

The different types of mutual funds available can be classified broadly based on structure,
asset class, and investment goals. Going a step further, funds can also be categorized based on
risk.

1. Structure of Mutual Funds

Based on the ease of investment, mutual funds can be:

• Open-ended funds:
These funds do not limit when or how many units can be purchased. Investors can enter or exit
throughout the year at the current net asset value. Open-ended funds are ideal for investors
seeking liquidity.

• Close-ended funds:
Close-ended funds have a pre-decided unit capital amount and also allow purchase only during
a specified period. Here, redemption is bound by the maturity date. However, to facilitate
liquidity, schemes trade on stock exchanges.

• Interval funds:
A cross between open-ended and close-ended funds, interval mutual funds permit transactions

33
at specific periods. Investors can choose to purchase or redeem their units when the trading
window opens up.

2. Mutual Fund Asset Class

Depending on the assets they invest in, mutual funds are categorized under:
• Equity funds:
Equity funds invest money in company shares, and their returns depend on how the stock
market performs. Though these funds can give high returns, they are also considered risky.
They can be categorized further based on their features, like Large-Cap Funds, Mid-Cap
Funds, Small-Cap Funds, Focused Funds, or ELSS, among others. Invest in equity funds if
you have a long-term horizon and a high-risk appetite.

• Debt funds:
Debt funds invest money into fixed-income securities such as corporate bonds, government
securities, and treasury bills. Debt funds can offer stability and a regular income with relatively
minimum risk. These schemes can be split further into categories based on duration, like low-
duration funds, liquid funds, overnight funds, credit risk funds, gilt funds, among others.

• Hybrid funds:
Hybrid funds invest in both debt and equity instruments so as to balance out debt and equity.
The ratio of investment can be fixed or varied, depending on the fund house. The broad types
of hybrid funds are balanced or aggressive funds. There are multi asset allocation funds which
invest in at least 3 asset classes.

• Solution-oriented funds:
These mutual fund schemes are for specific goals like building funds for children’s education
or marriage, or for your own retirement. They come with a lock-in period of at least five years.

34
• Other funds:
Index funds invest based on certain stock indices and fund of funds are categorized under this head.

3. Mutual Funds based on Investment Goals

You can also choose a fund based on your financial objective:

• Growth funds:
Funds that invest primarily in high-performing stocks with the aim of capital appreciation are
considered growth funds. These funds can be an attractive option for investors seeking high
returns over a long period.

• Tax-saving Funds (ELSS):

Equity-linked saving schemes are mutual funds that invest mostly in company securities.
However, they qualify for tax deductions under Section 80C of the Income Tax Act. They
have a minimum investment horizon of three years.

• Liquidity-based funds:
Some funds can be categorized based on how liquid the investments are. Ultra-short-term and
liquid funds are ideal for short-term goals, while schemes like retirement funds have longer
lock-in periods.

• Capital protection funds:

These funds invest partially in fixed income instruments and the rest in equities. This could
ensure capital protection, i.e., minimal loss, if any. However, returns are taxable.

• Fixed-maturity funds (FMF):

These funds route money into debt market instruments, which have either the same or a similar
maturity period as the fund itself. For instance, a three-year FMF will invest in securities with

35
a maturity of three years or lower.

• Pension Funds:
Pension funds invest with the idea of providing regular returns after a long period of
investment. They are usually hybrid funds that give low but have potential to provide steady
returns in future.

4. Risk appetite
Investors may also choose to invest in mutual funds depending on their individual risk appetite.
Very-low-risk and low-risk funds are usually short-term investments (liquid or ultra-liquid
funds) that attempt to hedge market risk. However, the returns they generate are also low.

Medium-risk funds, like hybrid funds, invest a portion in debt instruments to balance risk while
high-risk funds have large equity exposure. Usually, the higher the risk, the more the
possibility of high returns.

Every mutual fund must disclose its risk exposure via a risk-o-meter that investors can check
to decide if it lines up with their risk capacity.

Takeaway
Understanding different mutual fund categories can make it simpler for you to align with
individual financial goals. As an investor, you can compare your needs with the fund objective
and invest accordingly to make the most of your money.

Use the SIP calculator online to calculate your returns and your monthly investments for
mutual fund investment options.

36
 CHAPTER 14 - FUND STRATEGY

How to Build a Mutual Fund

Stick with stock funds. As long as you have five or more years until you need the money,
stock funds will likely provide you with superior returns over any other investment. But you
have

to be patient. In the short term, the market is very volatile, so don't fret when the market drops
10 percent in a week, or your account seems to be worth a lot less than it was last month. Over
five, ten, or 20 years, you'll come out much further ahead by sticking with stock funds.

Think big. When you invest in the big Americancompanies, companies like

Microsoft, Intel, AT&T, and General Electric; you don't have to worry much about whether
they willbe going out of business any time soon. What's more, these industry leaders have
generated outsized returns for their shareholders over the past decades. Bigger isn’t always
better, of course, but “large-cap” stock like these providingplenty of solid returns (over the
long-term, of course). Invest in these stocks by buying a large cap stock fund.

Think international. The world is a big place and getting smaller as we build telephone lines
and Internet connections and satellites that sendsignals all around the world. Still, somehow,
the stock markets in other countries always tend to go down when the U.S. market is up, and
vice versa. You can take advantage of this trend by including some global stocks in your
portfolio along with big American stocks. You can do this by buying a fund specializing in
large international stocks.
37
Think small, too. Every big company once started out as a small company. If you can buy
good companies when they're small, you'll benefit as they get to be big and successful
companies.

Trouble is, lots of small companies just get smaller and eventually go out of business. So if
you own big and little companies in your portfolio, in the long-term, things will more than
balance out in your favor. Do this by buyinga small cap stock fund.

Put it all together. Large cap stock fund. Smallcap stock fund. Large cap international fund .

Divide your portfolio into three and put a third ineach. Now you've got a diversified portfolio
in which at least one sector will be doing okay (or better than okay) nearly all of the time.

Consider index funds. The Standard & Poor's 500 is one of the best known stock market
indexes, made up of 500 big American companies from all industries. An S&P 500 index fund
simplyinvests in the 500 stocks in that fund -- the fund's advisors don't try to pick stocks that
will beat the market. Index funds always match the performance of the market (or of the sector
that the index tracks), so you don't ever have to worry about your index fund dogging the
market.As a bonus, these funds have low expenses (the fees that the fund's managers take off
the top) and that increases your returns.

Avoid overlapping. Sometimes people think that if one large cap fund is good, two or three
are better. When you buy several funds of one type, more likely than not you'll just end up
owning roughly the same set of stocks. Not only will youprobably not increase your overall
returns, but you’ll also create more work for yourself by having to track additional funds.

38
Choose one good fund of each type in your portfolio and, as long as they continue to perform
well, stick with them.

Consider asset allocation funds. Don't want tobe bothered with choosing one fund of each
type? Asset allocation funds are "funds of funds," or mutual funds those themselves own
several fundsof different types. Bear in mind that you'll pay for this convenience, however.
These funds generallycarry higher expenses and, more often than not, load.

Avoid bond funds. If you have five years until you withdraw your investment (like for
retirement), then bonds might be appropriate forperhaps 10 to 20 percent of your portfolio, and
increasing to perhaps 40 percent (at most) when you are at retirement age. The problem that
most people have is that they think bonds are "safe" -- but bond returns are still volatile, and
will give you a lower rate of return than stocks over time.

39
 CHAPTER 15 - EQUITY-LINKEDSAVING SCHEME

An equity-linked saving scheme (ELSS) is a great investment option that offers the twin
benefits of tax saving and capital gains. Earlier, investors had to spread their investments
across different instruments such as PPF, ELSS, NSC and infrastructure bonds. But now, it’s
possible to invest the entire limit of Rs 100,000 available under Sec 80C in ELSS. According
to the new Income Tax Act, Sec 80C investments in ELSS areallowed as deduction from the
total income, up to maximum Rs100, 000 in a financial year.

ELSS schemes have a three-year lock-in period, which works to the investors’ benefit as the
fund manager can have a portfolio of stocks that can out-perform over a period of time. When
it comes to Tax Saving and ELSS Funds I prefer to invest in funds where I get maximum
dividend and that way I do not need to invest myfull amount and also get the Tax benefit of
full amount invested. Read how if you still have not read – Full tax saving without investing
one lac. Now many people ask me about how to know thedividend history of funds and so for
them I have Dividend History of Mutual Funds.

So now using the methods discussed in the abovetwo articles I would list some of the best Tax
Saving funds. The list of funds I have selected are based on criteria of consistent dividend for
a longer period of time.

40
Birla Sun Life Tax Relief 96

Best Dividend ever by any Tax saver fund I knowoff.

Record Date Rate of Dividend

Jun 27, 2008 50 %

Mar 25, 2008 200 %

Mar 16, 2007 500 %

Jan 19, 2007 260 %

Dec 8, 2006 250 %

41
Principal Personal TaxSaver

One more best dividend Tax saver fund I knowoff. Principal Personal TaxSaver has probably
given the best dividend in the most difficult time.

Record Date Rate of Dividend

Mar 25, 2008 400 %

Feb 26, 2008 200 %

Dec 31, 2007 110 %

Oct 30, 2007 110 %

Mar 13, 2006 100 %

42
SBI Magnum Tax gain

Yet another fund by SBI Mutual Fund house whichhas very good track record when it comes
to return as well as dividend.

Record Date Rate of Dividend

May 29, 2009 28 %

Feb 15, 2008 110 %

Mar 2, 2007 110 %

Mar 10, 2006 150 %

Jun 10, 2005 102 %

43
HDFC Tax Saver

Not into one of the best dividend rate like above funds but very consistent when it comes to
dividend and also return of this fund is also worthinvesting.

Record Date Rate of Dividend

Mar 6, 2009 50 %

Mar 7, 2008 80 %

Mar 8, 2007 75 %

Mar 17, 2006 75 %

Feb 17, 2005 50 %

44
Canara Robeco Equity Tax Saver

Not as good as above ones, but best when itcomes to return of the fund.

Record Date Rate of Dividend

Mar 28, 2008 30 %

Mar 15, 2007 60 %

Mar 16, 2006 40 %

Mar 18, 2005 25 %

Mar 26, 2004 15 %

45
Apart from the above old funds I also expect some good returns for some of the new tax saving
funds which till date have not recorded good dividend but that is may be because of the current
market situation for last one year or so and so they deserve mentioning.

Fidelity Tax Advantage

Record Date Rate of Dividend

Mar 13, 2008 15 %

DSP Blackrock Tax Saver

Record Date Rate of Dividend

Feb 29, 2008 36 %

46
Kotak Tax Saver

Record Date Rate of Dividend

Feb 8, 2008 35 %

Feb 20, 2007 30 %

Why should one invest ELSS?

Lock-in for three years helps in stayinginvested over a long period

Investments in equity over a long-termdelivers better returns

Tax savings and high returns

Through SIPs, one can invest smallamount of Rs 500 in ELSS every month.

47
SIP – Systematic Investment Plan route for ELSS

One of the best ways to invest in ELSS is to save and invest on a regular basis. A Systematic

Investment Plan (SIP) in ELSS gives the best combination of investments available to

investors. The minimum investment in an ELSS through the SIP route can be as small as Rs

500.

SIP helps an investor take advantage of the fluctuations in the stock markets by rupee cost

averaging. Rupee cost averaging can be explained with the help of the following example. If

Rs 1,000 is invested a month at a price of Rs 20 a unit, the investor will have bought 50 units

(1,000/20). But at a price of Rs 10 per unit, he will have bought 100 units (1000/10). Investing

a fixed sum regularly means averaging out the cost, as the investor gets fewer units when the

price goes up and more when the price goes down.

An SIP ensures that an investor buys more when the markets are falling and less when it's

peaking. But if an investor backs out when the markets are falling, he won't be buying and this

will not get him to average his price, the primary reason behind the success of investing

throughthe SIP route.

48
In the current volatile market, starting an SIP would be beneficial to an investor as he can take

the benefit of highs as well as the lows and can average out his purchases. The returns of a few

top performing ELSS through SIP, recommended by ICICI direct are given in the table below.

Systematic Investments Plan (SIP) in ELSS

This is very beneficial for an investor as one caninvest as low as Rs.500/- per month in ELSS
through Systematic Investment Plan.

The theory of SIP is that it makes sure that the investor buys more when the market is declining
and buys less when the market value is rising.

The main reason behind the success of SIP route is that is an investor does not want to buy
whenthe market is falling, he can back out from the market, and this will not get the investor
to average his price.

Investor who has faith in SIP always lands up inprofit. As a human psychology, one will not
buywhen the market is falling and he might end up buying more when the market is at peak.
This results in him buying at high rate and selling at low rate and thus he ends up in loss. So
one should continue with SIP irrespective of the market rise and fall.

Risks in ELSS Funds

Mutual Fund Problem - The Fund Manageris a human being and can do mistakes. He might
not always select best stocks.

Commissions - Fund Manager is trying to

help the investor so obviously he will charge some commission. Even if the Fund Manager
makes the investor invest in the best funds, the investor has to pay high commissions and thus
reducing the profits.
49
A Fund Manager cannot perform better

than the market. He might miss out on one year and if that happens to be the last year, maturity
money will be reduced. Investor might invest fewer amounts every year but he has to pay
commission to the Fund manager and there is noguarantee that he will perform better next year.

Apart from the Fund Manager the Investoralso has to learn the market changes. He should be
able to do profit and loss calculations.

Investor might land up in the worst performing ELS Scheme. In that case the investor might
not be interested in tax savings and capital gain; he would want his principal amount to be
given back. There is always a risk involved when the market goes down.

Five ELSS which are booming are:

 Franklin India Tax shield

 HDFC Long Term Advantage(Earlier HDFC Tax plan 2000)

 HDFC Tax Saver

 Prudential ICICI Tax Plan

 Sundaram TaxSaver

50
Advantages of ELSS over NSC and PPF

Maturity period of NSC is 6 years and PPF is 15years while that of ELSS is 3 years. So with a
lesser lock-in period, one can withdraw the amount

Earning potential is very high as it is equity linkedscheme.

Investor gains money during the lock-in periodand he also have the option of dividend.

Systematic Investment Plan is a part of ELSS.

Accident death cover insurance is covered insome ELSS funds.

NSC and PPF gives return of 8% and ELSS gives return

51
 CHAPTER 16 - TOP 10 TAX SAVINGMUTUAL FUNDS (ELSS)

Fund Name 3Y Returns Expense Ratio

Mirae Asset
Tax Saver Fund 27.1% 1.64
(G)

DSP Tax Saver

26.3% 1.78
Fund (G)

Union Tax
saver ELSS Fund 26.2% 2.57
(G)
Bank of India
Tax Advantage 27.7% 2.37
Fund (G)
Canara Robeco
Equity Taxsaver 25.4% 2.01
fund (G)

Kotak Tax
26.5% 1.58
Saver Scheme (G)

Bandhan Tax
Advantage ELSS 34.8% 1.85
Fund (G)

52
Fund Name 3Y Returns Expense Ratio

PGIM India
ELSS Tax Saver 27.7% 2.51
Fund (G)

Quant Tax
41.6% 2.32
Plan (G)

Nippon India
Tax Saver ELSS 27.6% 1.73
Fund (G)

Tata India Tax

24.3% 1.9
Savings Fund (G)

UTI Long
Term Equity 23.1% 1.92
Fund (G)

SBI Long Term

27.6% 1.87
Equity Fund (G)

ICICI
Prudential Long
Term Equity 24.6% 1.81
Fund Tax Saving
(G)
Mahindra
Manulife ELSS 27.0% 2.46
Fund (G)
HDFC
TaxSaver fund 27.9% 1.75
(G)

Taurus Tax
22.3% 2.45
Shield fund (G)

Quantum Tax
24.3% 1.79
Saving Fund (G)

53
Fund Name 3Y Returns Expense Ratio

Motilal Oswal
Long Term 25.1% 1.97
Equity Fund (G)

Invesco India
20.8% 2.06
Tax Plan (G)

CHAPTER 17 - TYPES OF ELSS

1. Growth Option
Under the growth option, the investor gets the gains only at the time of redemptions.
Appreciation in the total NAV of the ELSS mutual fund multiplies the profits. Investors are
not entitled to benefits in the form of dividends. Mutual fund returns are subject to market
risks, and so are the returns from ELSS funds.

2. Dividend Option
Under the dividend option, the investor is entitled to get timely dividends. Dividends are
declared only when there are excessive profits. According to the budget 2020, the dividends
are taxed in the hands of the investors. The investors are supposed to pay the tax on dividends
based on their income tax slab.

3. Dividend Reinvestment Option

Under this option, the investor can choose to reinvest dividends received into the same scheme.
This option is favorable when the markets are doing well and are likely to continue in the same
way.

Upon choosing the type of ELSS fund, the investor can invest either through a lump sum
amount or SIPs. ELSS mutual funds are suitable for small investors as well, who wish to invest
small and regular amounts to save tax. However, if an investor has a lump sum amount, they
can also invest the entire amount in the top ELSS funds.
54
 CHAPTER 18 - SBI MUTUALFUND

SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the country with an

investor base of over 4.6 million and over 20 years of rich experience in fund management

consistently delivering value to its investors. SBI Funds Management Pvt. Ltd. is a joint

venture between 'The State Bank of India' one of India's largest banking enterprises, and

Société Générale Asset Management (France), one of theworld's leading fund management

companies that manages over US$ 500 Billion worldwide.

Today the fund house manages over Rs 28500 crores of assets and has a diverse profile of

investors actively parking their investments across 36 active schemes. The trust reposed onus

by over 4.6 million investors is a genuine tribute to our expertise in fund management.

SBI Funds Management Pvt. Ltd. serves its vast family of investors through a network of over

130 points of acceptance, 28 Investor Service Centers, 46 Investor Service Desks and 56

District Organizers.SBI Mutual is the first bank-sponsored fund to launch an offshore fund –

Resurgent India Opportunities Fund.

55
PRODUCTS OF SBI MUTUAL FUND

Equity schemes:

The investments of these schemes will predominantly be in the stock markets and endeavor
will be to provide investors the opportunity to benefit from the higher returns which stock
market can provide.

Magnum COMMA Fund

Magnum Equity Fund

Magnum Global Fund

Magnum Index Fund

Magnum Midcap Fund

Magnum Multicap Fund

Magnum Multiplier plus 1993

Magnum Sectoral Funds Umbrella

MSFU- Emerging Business Fund

MSFU- IT Fund

MSFU- Pharma Fund

MSFU- Contra Fund

MSFU- FMCG Fund

SBI Arbitrage Opportunities Fund

56
SBI Blue chip Fund

SBI Infrastructure Fund - Series I

SBI Magnum Tax gain Scheme1993

SBI ONE India Fund

SBI TAX ADVANTAGE FUND -SERIES I

Debt schemes

Debt Funds invest only in debt instruments such as Corporate Bonds, Government Securities
and Money Market instruments either completely avoiding any investments in the stock
markets asin Income Funds or Gilt Funds or having a small exposure to equities as in Monthly
Income Plans or Children's Plan. Hence they are safer than equity funds. At the same time the
expected returns from debt funds would be lower.

Magnum Children’s benefit Plan

Magnum Gilt Fund

Magnum Income Fund

Magnum Insta Cash Fund

Magnum Income Fund- Floating RatePlan

Magnum Income Plus Fund

Magnum Insta Cash Fund -Liquid Floater Plan

Magnum Monthly Income Plan

Magnum Monthly Income Plan-Floater

Magnum NRI Investment Fund

SBI Premier Liquid Fund

57
BALANCED SCHEMES

Magnum Balanced Fund invests in a mix ofequity and debt investments. Hence they are less
risky than equity funds, but at the same time provide commensurately lower returns.

COMPETITORS OF SBI MUTUAL FUND

Some of the main competitors of SBI Mutual Fund in Dehradun are as Follows:

ICICI Mutual Fund

Reliance Mutual Fund

UTI Mutual Fund

Birla Sun Life Mutual Fund

Kotak Mutual Fund

HDFC Mutual Fund

Sundaram Mutual Fund

LIC Mutual Fund

Principal

Franklin Templeton

58
Equity mutual funds invest more than 65% of the funds in equities and equity related

instruments. The chart below is regarding the performance comparison of the equity schemes

available in SBI Mutual Funds. After the performance is analyzed, the schemes are sorted out

based on the performance for the past 1 year. From the data, an investor can choose the best

scheme which are consistently performing for the past 6 months and 3 years. This would help

one to invest in the best SBI scheme.

59
PERFORMANCE CHART OF SBI EQUITYMUTUAL FUND AS ON SEPT,2010

60
 CHAPTE R- 20 CASE STUDIE S

John Hancock Mutual Funds Financial Information Portal

John Hancock Mutual Funds (JH Funds), a subsidiary of Manulife, manages more than $50
billion in variety of open- and closed-end mutual funds and various other investment
instruments. In 2004, Manulife acquired John Hancock, and, during its analysis of the various
acquired business units, decided that it wanted to elevate JH Funds, then ranked in the high
teens among

U.S. mutual fund providers in terms of assets under management, to a top-ten provider. Seizing
leadership in the online marketing of mutual funds was a prominent part of its plan.

JH Funds had been an early pioneer in online mutual fund marketing, going live with
jhfunds.com in 1999. That website ran on ATG Dynamo, using an Oracle database and
Interwoven Team site as a content management system. Dynamo had mostly failed to gain
acceptance as a web development platform, andthe site's look and feel were showing their age.

Requirements

JH Funds decided to undertake a complete rewrite of the site, with the following goals:

Simpler, more intuitive site navigation

A new, fresher look and feel

A full-site search function

Cleaner integrations with third-partycontent

Migration to a Manulife-standard webplatform

61
Improved content management to give business users more control and allow for moreup-to-
date content

Most importantly, the new site had to be up and running within 8 months, by June of the
following year; so that it could help JH Funds' sales staffs achieve their goals for that fiscal
year. Quality could not be compromised, but cost was flexible.

Nevo's Solution

JH Funds had already selected a design agencyfor the project, Toronto-based Teehan+

Lax (T+L). Nevo immediately set about working with its staff and with JH Funds marketing
to conduct full requirements gathering, teasing out the details that T+L's designs necessarily
glossedover. In parallel, Nevo began building an implementation team and performing design
work, selecting technology platforms, laying out core components like site authentication, and
refining the content management system integration strategy.

Based on its experience with ASP.NET 2.0's betaversion, Nevo recommended using the newly-
released development platform, while it suggested moving to SQL Server 2000, as SQL Server
2005, while in full release, was not yet a Manulife standard. While JH Funds was hesitant to
continue using Team site as a CMS, together with Nevo it decided to hold that component
constant amid all the other change.

Nevo's site component strategy was to use standard ASP.NET components wherever possible,
digging deep into the code to provide customization hooks where necessary. Site
authentication was a particularly thorny issue, as JH Funds wanted to unify authentication and
site navigation across three logical sites, one each for the public, JH Funds partners, and JH
Funds staff.

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The original jhfunds.com stored many of its pages wholesale in a content management system,
depending on content authors to formatit properly. The new system wherever possible stored
snippets of text in a database and formatted the text in code, removing formattingresponsibility
from business users that lacked web page authoring expertise.

Nevo staffed a team of 1 lead, 2 senior developers, and 2 junior developers, dependingon JH
Funds staff for database design and testing. We believed that this staffing level was optimal,
even ignoring cost; the coordination overhead of additional developer would have actually
slowed the work. To meet JH Funds' tight time constraints, Nevo recommended and won
approval for deferring some pieces of functionality to a second phase, including the integration
of a site search engine.

Results

The redesigned site went live on schedule in Junewith the deferred functionality following just
a few months later, in October. T+L's clean designs impressed everyone involved in the project,
and,with Nevo's concerted effort to produce a site faithful to their vision, jhfunds.com went
on to win numerous awards, including an Outstanding Website award from the Web Marketing
Association and 5 different "best" awards from the Mutual Fund Education Alliance.

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 CHAPTER 20 - MUTUAL FUND V/S EQUITY FUND

A mutual fund entity is a company that specializes in investment that pools together the
resources of more than one person together creating a sort of network. After they gather these
individuals together they invest the moneyaccording to a ‘prospectus’ which will contain the
goals of their fund members. Some of these funds can specialize in investments of different
types such as currency or FOREX Trading, stocks,or bonds.

Mutual funds are basically tradable securities thatcan be sold and bought freely on the stock
market at the current face value that these securities are invested in.While on the other hand
Equity Investments are different from

Mutual Investment funds. Private Equity, an assetthat contains securities and other holding that
cannot be publicly traded on the stock market. These types of investments don’t usually come
from public hands, but from private money that either invests that money into the company,
or even acquires it outright (which is form of Strategic Acquisition). Although the above is the
basic term for Equity Investment, there is a possibility that Equity Investment can mean
something else in a different country.

There are several types of equity Investments that I will only go briefly over so

that you get the basic understanding on some ofthe Equity Investments that you could possibly
have the chance to invest in.

Venture Capitalists like to invest in newer and promising companies rather than ones that have
been fully established. The most famous probably in Venture Capital Investment in those
Technology based company in Silicon Valley.

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There are many other ways to invest your time, and money. A Real Estate purchase from
stressing seller (e.g. thru foreclosure investment strategy ) could be considered a leveraged
buyout. Both these types of general investments are generally not available for public trade.

For both of these investments the risk that comes out of each investment depends on the type.
For example someone investing in venture capital willbe at a higher risk then a leveraged
buyout.

More on Investment:

Understanding Common Types of Private Equity

Conducting Extensive Research BeforeMaking Equity Investments

Equity Investment – Investing in CommonStock or Preferred Stocks

Investing into the Future of PromisingEnterprise with Private Equity

Advantages of Having a Private EquityFund

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 Chapter 21 - Conclusion

A mutual fund brings together a group of people and invests their money instocks, bonds, and

other securities.

The advantages of mutuals are professional management, diversification, and economies of

scale, simplicity and liquidity.

Fund are selected on quantitative parameters like volatility, FAMA Model, risk adjusted

returns, and rolling return coupled with a qualitative analysis of fund performance and

investment styles through regular interactions / due diligence processes with fund managers.

The mutual fund industry in India has prospereddue to transparency and disclosures. Most fund

houses come out with a fund fact sheet for eachscheme every month..

A fund house normally comes out with various publications which contain the scheme’s

objectives, fund manager’s commentary on the portfolio, market outlook, etc. The aim is to

helpan investor take an informed decision to invest, stay invested or redeem out of the fund. It

is upto the investor i.e. you, to make the best use of it.

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Mutual funds are a method for investors to diversify risk and to benefit from professional

money management. The prospectus identifies key information about the fund including its

operating boundaries and its costs. The fund manager operates within those boundaries and is

a critical to achieving strong results within those boundaries. They provide much needed

impetusto direct and indirect support to the corporate sector. Above all, mutual funds have

given a newdirection to the flow of personal savings and enabled small medium investors in

remote rural and semi rural area to reap the benefits of stock markets investments. Indian

mutual funds are thus playing a very crucial development role in allocating resources in the

emerging market economy.

A perceptible change is sweeping across the mutual fund landscape in India. Factors such as

changing investors need and their appetite for risk, emergence of internet as a powerful

servicing platform and above all the growing commoditization of mutual fund products are

acting as major catalysts putting pressure on industry players to formulate strategies to stay

the course. In the changed scenario today product innovation is increasingly becoming one of

the key determinants of success. Building andsustaining a powerful brand is also becoming an

issue of paramount importance. Distribution has taken a whole new mode like banks, post

offices and co-branded credit cards are bound meaning with the introduction of automated

trading clearing and settlement system.

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The Indian Mutual Fund industry is set for a future of sustained growth over the next decade

with increasing participation from the retail segment. We can expect the industry to mature

further and become a synonym to savings, as is the case in some of the developed countries.

Theretail potential is substantial and the various stakeholders can make specific interventions

to unlock it. The key drivers to growth for the various players, in addition to demonstrated

track record, will be investor education, distribution strength and branding / positioning.

However, each player will need to develop its own unique growth path and have the specific

levers – products, distribution, branding – optimized to the journey that it wants to traverse.

Also, while the players need to gear up for the sustained growth scenario, it is equally important

for the industry participants to build insufficient defense mechanisms in their armory to ensure

survival under the potential scenarios of downturn.

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SOURCES AND REFERENCES

Websites of :

Association of Mutual Funds in IndiaReserve Bank of India

Securities and Exchange Board of IndiaCensus India

IIMS Dataworks

Planning Commission of India International Forum for Investor Education Investment

Company Institute

Cerulli Associates

Monitor Group

Nomura Institute of Capital Markets Research Press reports from:

http://www.economictimes.com http://www.livemint.com http://www.moneycontrol.com
http://www.theindiastreet.com http://www.mutualfundsindia.com

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THANK-YOU

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