PROJECT REPORT

ON

MUTUAL FUND
BY
Ms.Sneha Yadav
(Year 2023-2024)
Under the Guidance of
Prof. Revati Deshkar
Submitted to
“SAVITRIBAI PHULE PUNE UNIVERSITY”

BACHELOR OF BUSINESS ADMINISTRATION (B.B.A)

BALAJI COLLEGE OF ARTS, COMMERCE & SCIENCE (BCACS)

TATHAWADE PUNE

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 CERTIFICATE

This is to certify that the work incorporated in the project work entitled “Mutual Fund”
submitted for the S.Y.B.B.A in the Subject of

Banking and Finance Ms. Sneha Hiralal yadav was carried out under my supervision and
guidance and accepted for the further submission and viva for the degree.

Seat no.__________ (Student’s Signature)

(Sign of Faculty Incharge)

(Sign of the External examiner)

ACKNOWLEGEMENT

I would like to thank Dr. Revati Deshkar Mam For helping me with this project. She
allowed me to work on this project. Along with that, I would also like to thank Principle Dr.
O. M. Ashtankar Sir wholeheartedly.

I would also thank my parents and friends who helped me in finalizing this Project within a
limited period of Time.

(Student’s Signature)

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Sr. No TITLE Pg. No

1. Introduction to Mutual Fund 5

2. Objective of Mutual Fund 6

3. Background of Mutual Fund 8

4. History of Mutual fund 12

5. Research methodology 13

6. Legal Structure of Mutual Fund in India 14

7. Survey study of Mutual Funds 15

8. Conclusion 17

9. References 22
INTRODUCTION:

Mutual funds have become a very popular way to take some of the risk out of investing in
individual stocks by investors. Mutual funds are a collection of stocks selected by mutual
fund sellers and sold to investors as shares in a fund. There are several types of funds that
you can invest in. Some of the more popular types are technology funds, growth funds,
security funds, and income funds. Mutual funds are very popular because they allow you to
invest in a number of stocks, therefore greatly reducing the risks associated with putting your
money in an individual stock.

Mutual funds have become one of the most attractive ways for the average person to invest
their money. A mutual fund pools resources from thousands of investors and then diversifies
its investment into many different holdings such as stocks, bonds, or government securities in
order to provide high relative safety and returns.

Though not insured like banks, mutual funds generally provide more return than the current
one to two percent obtainable through banks while still being one of the safest ways to grow
your money. There are an endless variety of mutual fund investment choices depending on
the degree of risk you feel comfortable with.

Mutual Funds have emerged as professional intermediaries. Besides providing expertise in

stock market investing, these funds allow investing in small amounts and yet holding a
diversified portfolio to a limit.

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OBJECTIVE OF MUTUAL FUND:

Most people have neither the time nor interest to research and select individual stocks and
bonds for their investment portfolios, and that's where mutual funds come in. Mutual funds
can invest in a variety 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 of well-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 of Assets
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 one of 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 anyone holding them.

Exploring Growth Funds

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-
and-down ride. 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's earnings.
When discussing mutual fund investments, it is important to note the distinction between
closed-end and open-end funds. Whereas there is no limit to the number of open-end fund
shares that can be purchased or distributed, closed-end funds feature a limited number of
shares. Open-end funds are also not traded on the open market, whereas closed-end funds are
traded through standard markets.
Evaluating the Benefits of ETFs
Exchange-traded funds, or ETFs, have become attractive investment opportunities for many
individuals due to the numerous benefits they offer. Thanks to a highly diverse grouping of
assets, ETFs are considered a relatively stable form of investment, and are linked to every
major index today. Compared to mutual funds, ETFs typically feature a lower expense ratio,
making them more affordable for investors.
Identifying Steady Income Opportunities

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.
Gaining 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 getting access to shares in the fast-
growing Chinese market. But international-focused mutual funds have an easier time
investing in these shares. Exposure to overseas stocks and mutual funds may add much-
needed diversification and open the door to additional lucrative opportunities.
Benefitting From 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
less than 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. In 2018, Fidelity even introduced zero-fee index funds.
These funds usually hold every stock or bond in a given asset class, which offers tremendous
diversification at a low cost.

BACKGROUND OF MUTUAL FUND:

Introduction to Mutual Funds History

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A mutual fund is a trust or a pool of investments by investors who share a common financial
goal. This pool is invested in several financial instruments such as shares, debt instruments,
bonds etc. by the company managing that trust. This company is called an Asset
Management Company. Returns so generated are later distributed among the members of the
pool in the ratio of their investments. The AMC invests its money in a manner that while the
returns are maximized, the risks are kept to a minimum level. In India, it is mandatory for
every Asset Management Firm to be registered with the Securities and Exchange Board of
India (SEBI), a body that regulates all securities instruments.

The first company that dealt in mutual funds was the Unit Trust of India. It was set up in
1963 as a joint venture of the Reserve Bank of India and the Government of India. The
objective of the UTI was to guide small and uninformed investors who wanted to buy shares
and other financial products in larger firms. The UTI was a monopoly in those days. One of
its mutual fund products that ran for several years was the Unit Scheme 1964.

The mutual fund industry in India has undergone at least 4 phases. Let us now look at each
phase in brief:

Mutual Funds History: Phase Of Inception (1964-87)

The first phase was marked by the setting up of the UTI. Though it was a collaboration
between the RBI and the Indian Government, the latter was soon delinked from the day-today
operations of the Unit Trust of India. In this phase, the company was the sole operator in the
Indian mutual fund industry. In 1971, the UTI launched the Unit Linked Insurance Plan or the
ULIP. From that year until 1986, UTI introduced several plans and played a very big role in
introducing the concept of mutual funds in India.

When UTI was set up several years ago, the idea was to not just introduce the concept of
mutual funds in India; an associated idea was to set up a corpus for nation-building as well.
Therefore, to encourage the small Indian investor, the government built in several income tax
rebates in the UTI schemes. Not surprisingly, the investible corpus of UTI swelled from 600
crores in 1984 to 6,700 crores in 1988. Clearly, the time had come for the Indian mutual
industry to move into the next phase.
Mutual Funds History: Entry Of Public Sector (1987-1993)
By the end of 1988, the mutual fund industry had acquired its own identity. From 1987, many
public sector banks had begun lobbying the government for starting their own mutual fund
arms. In November 1987, the first non-UTI Asset Management Fund was set up by the State
Bank of India. This AMC was quickly followed by the creation of other AMCs by banks like
Canara Bank, Indian Bank, Life Insurance Corporation, General Insurance Corporation, and
Punjab National Bank.

This opening up of the mutual fund industry delivered the desired results. In 1993, the
cumulative corpus of all the AMCs went up to a whopping Rs. 44,000 crores. Observers of
this industry say that in the second phase, not only the base of the industry increased but also
it encouraged investors to spend a higher percentage of their savings in mutual funds. It was
evident that the mutual fund industry in India was poised for higher growth.

Mutual Fund History: Entry Private Sector Phase (1993-1996)

In the period 1991-1996, the Government of India had realized the importance of the

liberalization of the Indian economy. Financial sector reforms were the need of the hour.
India needed private sector participation for the rebuilding of the economy.

Keeping this in mind, the government opened up the mutual fund industry for private players
as well. The foreign players welcomed this move and entered the Indian market in significant
numbers. In this period, 11 private players –in collaboration with foreign entities- launched
their Asset Management Funds.

Some of the top AMCs in the private sector were:

• ICICI Prudential AMC- This Company is a joint venture between ICICI Bank of India and
Prudential Plc of UK. It manages a corpus of INR 2, 93,000 crores and has an inventory of
more than 1400 schemes.

• HDFC Mutual Fund- Launched in the 1990s, the HDFC Mutual Fund manages more than
900 different kinds of funds.

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• Kotak Mahindra Mutual Fund- This AMC has an asset base of more than Rs. 1,19,000
crores.

It is a joint venture of Kotak Financial Services and the Mahindra Group.

SEBI Interventions and Growth, And AMFI

As the mutual fund industry grew further in the 1990s, the AMCs and the government felt
that it was time for regulation and some control. Investors had to be protected as well as a
level playing ground had also to be laid down. A few years ago, the Indian industry had
suffered a lot because of bank scams and there was a real threat that investors might lose their
monies yet again.

Consequently, the government introduced the SEBI Regulation Act in 1996 which laid down
a set of fair and transparent rules for all the stakeholders. In 1999, the Indian government
declared that all mutual fund dividends would be exempt from income tax. The idea behind
this decision was to spur further growth in the mutual fund industry.

Meanwhile, the mutual fund industry also realized the importance of self-regulation. As a
result, it set up an industry body- the Association of Mutual Funds of India (AMFI). One of
the goals of this body is investor education.

Mutual Funds History: Phase of Consolidation (February 2003 – April 2014)

In February 2003, the Unit Trust of India was split into two separate entities, following the
repeal of the original UTI Act of 1963. The two separated entities were the UTI Mutual Fund
(which is under the SEBI regulations for MFs) and the Specified Undertaking of the Unit
Trust of India (SUUTI). Following this bifurcation of the former UTI and the occurrence of
numerous mergers among different private sector entities, the mutual fund industry took a
step towards the phase of consolidation.

After the global economic recession of 2009, the financial markets across the globe were at
an all-time low and Indian market was no exception to it. The majority of investors who had
put in their money during the peak time of the market suffered great losses. This severely
shook the faith of investors in the MF products. The Indian Mutual Fund industry struggled
to recover from these hardships and remodel itself over the next two years. The situation
toughened up more with SEBI abolishing the entry load and the lasting repercussions of the
global economic crisis. This scenario is evident from the sluggish rise in the overall AUM of
the Indian MF industry.

Mutual Funds History: Phase of Steady Development and Growth (Since May 2014):

Recognizing the lack of penetration of mutual funds in India, especially in the tier II and tier
III cities, SEBI launched numerous progressive measures in September 2012. The idea
behind these measures was to bring more transparency and security for the interest of the
stakeholders. This was SEBI’s idea to ‘re-energize’ the Indian MF Industry and boost the
overall penetration of mutual funds in India.

The measures bore fruit in the due course by countering the negative trend that was set
because of the global financial crisis. The situation improved considerably after the new
government took charge at the center.

Since May ’14, the Indian MF industry has experienced a consistent inflow and rise in the
overall AUM as well as the total number of investor accounts (portfolio).

Currently, all the Asset Management Companies in India manage a combined worth of
around Rs. 23 lac crore of assets. Though this number looks attractive, we still have to go a
long way in order to match the west.

It is estimated that Indians save approximately Rs. 20-30 lakh crore annually. The Indian
mutual fund industry can grow immensely if Indians started parking a higher percentage of
their savings in MFs. Observers say that Indians have begun shifting a part of their savings
from physical assets like gold and land to financial instruments like bonds and silver.
However,
the AMFI and the government need to encourage Indians even more for investments in
mutual funds.

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RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problems. It may

understand as a science of study how research is done scientifically.

Primary Data: A research design is purely and simply the framework of plan for a study that
guides the collection and analysis of data. Primary data-collected through structured
questionnaire will be done.
Analysis tool will be used:

• Percentage

• Graphs & charts

• Table forms

Secondary Data: Secondary data is the data that have been already collected by and readily
available from other sources. Such data are cheaper and more quickly obtainable than the
primary data and also may be available when primary data cannot be obtained at all. The
sources of secondary data are as follows

• Newspapers, News channels, internet-websites, magazines, books-libraries, other projects.

DATA COLLECTION DESIGN

Sample Design is a definite plan to obtain a sample from the sampling frame. The method
which is adopted by the researcher in selecting the unit of sampling from the population is
called sampling design.
Sample Size: It represents how many candidates you have chosen to fill up your
questionnaire.

I had chosen sample of 71 candidates.

Method of Data Collection:-

The data was collected using questionnaire from professionals/Common man like those who
wants invest in mutual funds and other Investment option.

A study on research design which has been made use of is the descriptive research design
which describes the awareness and perception of the population that is being studied.

In this we used the Quantitative research.

Primary data has been collected the information through survey.

Relevance of Study

The scope of project is mainly concentrated on different category of the mutual fund such as
equity funds, debt funds and other funds as well. The project is mainly based on the
preferences of investor in various investment avenue available. The main purpose of doing
this project was to know about mutual fund and its functioning.

This helps to know in details about mutual fund industry right from its inception stage,
growth and future prospects. It also helps in understanding different schemes of mutual
funds. Because my study depends upon prominent funds in India and their schemes like
equity, income, balance as well as the returns associated with those schemes.

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Legal Structure of Mutual Funds in India

SEBI regulates the mutual fund sector in India. However, RBI, as regulator of banks, would
need to authorize the commencement of mutual fund operations by a banking entity. Further,
since it is the regulator of money supply in the economy, it has control over the money
market and foreign exchange market. Measures that it announces for the money market and
foreign exchange market could impact mutual fund operations. Besides such areas of overlap
with other regulators, all regulation of mutual funds is by SEBI.

The guidelines applicable to mutual funds are set out in the SEBI (Mutual Funds)
Regulations, 1996 (“the regulations”). SEBI has prescribed a legal structure with inbuilt
checks and balances in the form of independent agencies for the various critical roles, namely
trusteeship, asset management and custody of investments.

1. Sponsor (Promoter of a Mutual Fund)

Every project needs a promoter, a prime mover who has overall responsibility for the project.
The promoter of a mutual fund is referred to as “Spnsor” As per the regulations, a sponsor
means, “any person who, acting alone or in combination with another body corporate,
establishes a mutual fund.”

A sponsor has to meet the following qualifications prescribed by SEBI:

Sponsor should have a sound track record and general reputation of fairness and integrity in
all business transactions.

Sound track record means:

Carrying on business in financial services for a period of not less than five years.
Having a profit, after providing for depreciation, interest and tax, in three out of the
immediately preceding five years, including in the latest year.

Having a positive net worth in all the immediately preceding five years. (Net worth = paid up
capital plus free reserves, minus miscellaneous expenditure not written off, minus deferred
revenue expenditure, minus intangible assets, minus accumulated losses).

In the immediately preceding year, having a net worth that is more than the capital
contribution of the sponsor in the AMC.

The sponsor has to contribute at least 40 % to the net worth of the AMC. Further, any person
who holds 40 % or more of the net worth of an AMC is deemed to be a sponsor and should,
therefore, meet all the qualifications prescribed for a sponsor.

Sponsor should be a fit and proper person.

Sponsor, or any of its directors, or the principal officer to be employed by the mutual fund
should not be guilty of fraud or convicted of an offence involving moral turpitude or found
guilty of any economic offence.

While meeting the prescribed qualifications makes a person eligible to promote a mutual
fund, the venture cannot be promoted unless SEBI permits it.

2. Trusteeship of Mutual Funds

(1) Trust Deed

A mutual fund has to be constituted in the form of a trust, created through a trust deed.

The trust deed:

Has to contain certain clauses prescribed by SEBI;

Can not contain any clause that:

Limits or extinguishes the obligations and liabilities of the trust with respect to the mutual
fund or its investors; and

Indemnifies the trustees or the AMC for loss or damage caused to the unit holders on account
of negligence or acts of commission or omission;

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Has to be duly registered under the provisions of the Indian Registration Act, 1908; and

Has to be executed by the sponsor in favour of the trustees named in the deed.

(2)Technicalities

Indian companies are governed by the Companies Act, 2013. Limited Liability Partnerships
(LLPs) in India are governed by the LLP Act, 2008. Other Indian partnership firms are
governed by the Indian Partnerships Act, 1932. Similarly, mutual fund trusts in India are
governed by Indian Trusts Act, 1882.

Companies are real entities that are eligible to contract in their own name. Trusts, on the
other hand, are notional entities that are not eligible to contract in their own name. Trusts,
therefore, need to enter into contracts in the name of the trustees.

The Indian Trusts Act, 1881 gives two options for the constitution of trustees:

An individual can be appointed as trustee. When more than one trustee is appointed, they
would together constitute the Board of Trustees.

A company can be appointed as trustee. Such a trustee company, like any company under the
Companies Act, 2013, would have a Board of Directors.

Every trust has beneficiaries, namely the persons for whose benefit the trust has been created
— and trustees, namely the persons who are responsible for protecting the interest of
beneficiaries.

When a trust is created for mutual fund operations, the beneficiaries are the investors who
invest in the various schemes promoted by the mutual fund.

(3)Disqualifications for Trustees

Given the critical role of trustees, the regulations provide stringent disqualifications. A person
cannot be appointed trustee unless she:

Is a person of ability, integrity and standing;

Has not been found guilty of moral turpitude; and

Has not been convicted for any economic offence or violation of any securities laws.

person who does not suffer from these disqualifications is eligible to become a trustee in a
mutual fund. But she can be appointed as a trustee only after the prior approval of SEBI.

(4)Governance

In order to strengthen the trusteeship and avoid potential conflicts of interest, it is provided
that:

Any mutual fund will have a minimum of four trustees.

Two-thirds of the trustees need to be independent trustees, namely persons, who are not
associates of the sponsors, or associated with them in any manner whatsoever.

If consequent to an independent trustee vacating office, the number of independent trustees

falls below the prescribed minimum, another independent trustee has to be appointed to fill
the gap within three months.

Relatives (as defined in the Companies Act) of the sponsor, directors of the sponsor company,
or relatives of associate directors of the AMCs and trustee companies are considered as
“associate”.

Similarly, nominees of companies who are stakeholders in the sponsor company or AMC are
considered to be “associate”.

Persons providing any type of professional service to the mutual fund, asset management
company, trustee company and the sponsors are considered as associate directors.

Also, persons having any material pecuniary relationship with these entities, which in the
judgment of the trustees may affect independence of directors, are treated as associate
directors.

An asset management company, or any of its officers or employees, are not eligible to act as
trustee of any mutual fund.

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No person who has been appointed as trustee of a mutual fund can be appointed as a trustee
of any other mutual fund unless:

The person is an independent trustee; and

The mutual fund where she is already a trustee gives prior approval for the proposed
appointment in the other mutual fund.

(If a company is appointed as a trustee, then its directors can act as trustees of any other trust
provided that the object of the trust is not in conflict with the object of the mutual fund).

A person who is an “associate” in accordance with definition in the Regulations cannot be

appointed as independent director even after she ceases to be an “associate” unless a cooling
off period of three years has elapsed from the date of her disassociation.

The quorum for any meeting of the trustees shall be deemed not to have been reached, unless
at least one independent trustee / director is present.
The auditor for the mutual fund has to be different from the auditor of the AMC.

(5)Obligations of Trustees

Some key obligations of trustees are as follows:

The trustees shall enter into an investment management agreement with the AMC.

Before the launch of any scheme, they shall ensure that the AMC has: Systems in place for its
back office, dealing room and accounting; Appointed all key personnel including fund
managers; Appointed a compliance officer to comply with regulatory requirements and to
redress investor grievances; Appointed auditors and made suitable arrangements to handle the
function of registrars;Prepared a compliance manual and designed internal control
mechanisms including internal audit; and Specified norms for empanelment of brokers and
marketing agents.

They shall be accountable for, and be custodian of, the funds and property of the respective
schemes and shall hold the same in trust for the benefit of the unit holders.
Trustees shall ensure that all activities of the AMC are in accordance with the provisions of
the SEBI regulations.

If they have reason to believe that the conduct of business of the mutual fund is not in
accordance with the regulations or the offer document of the scheme, they shall take
appropriate remedial steps and inform SEBI immediately.
Each trustee shall file the details of her transactions in securities with the mutual fund on a
quarterly basis.

They shall meet at least once every two calendar months, and at least six such meetings shall
be held every year.

The trustees shall not be held liable for acts done in good faith if they have

Terms of Issue

(a) Liquidity provisions, such as listing, re-purchase, redemption.

(b) Aggregate fees and expenses charged to the scheme.

© Any safety net or guarantee provided.

Although the regulations refer to consent of “three-fourths of the unit holders”, in practice it
is not the number of unit holders that is relevant but the unit holding they represent. If the
unit holding of person A is twice that of person B, then A would have twice the number of
votes that B has.

Apart from this requirement of approval of three-fourths of unit holders, those unit holders
who do not give their consent need to be given the option of redeeming their holdings in the
scheme.
The approval of unit holders is, however, not required in the case of open-end schemes if:

The change in fundamental attribute is carried out after one year from allotment of units;

Individual communication is given to unit holders about the proposed change;

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Advertisement is issued in an English daily newspaper having national circulation and in a
newspaper published in the language of the region where the head office of the mutual fund
is situated; and

Unit holders are given an option to exit at the prevailing net asset value, without any exit
load (“load”).

Further, minor changes in the scheme, e.g. change in registrar’s address, may be effected with
the approval of trustees, without the requirement of unit holder approval.

Survey For Mutual Fund

I conducted a survey on SEBI and its’s default. It donates the preference, knowledge and
opinion of customers of SEBI. The further survey is primary Report, which explain the data
in structure form such as pie chart, graphs, etc. This will help us to understand what SEBI
facilities are the customer aware about and what kind of more functions are more preferable.
The following are the survey questions and its analysis:
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Analysis
he survey reveals that 53% investors are not very confident of personal risk assessment while
choosing a mutual fund. It is imperative to understand that each investor has a different risk
appetite based on his/her investment profile, financial goal, and needs.

CONCLUSION
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A mutual fund is a versatile investment choice that can help investors gain profits and build
wealth by tapping into the opportunities presented by the markets. Mutual funds offer plans
for every investor to meet varied short-term and long-term goals.

REFERENCES
https://www.tickertape.in/glossary/mutual-fund-meaning/#:~:text=under%20its
%20control.-,Conclusion,term%20and%20long%2Dterm%20goals.
https://www.religareonline.com/blog/what-is-mutual-fund/
https://www.linkedin.com/pulse/mutual-fund-101-conclusion-priyank-kothari
https://www.slideshare.net/saisri12/mutual-funds-51721502

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