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Final Project

Name College Internship Company Company Guide Internship Coordinator

Santosh Rajpurohit G I H M (Pondicherry University) HDFC Mutual Fund Mr. Himanshu Verma Mr. Anish Vasant

Special Thanks

Mr. Shaurya Pratap Singh – College Director • Ms. Shipra Singh – College Coordinator • Mr. Amit Doshi – Branch Manager HDFC AMC • Ms. Prathna Dave – Manager HDFC AMC

PREFACE
For any management course, summer training is essential and important part of curriculum of MBA degree. It is an exposure to corporate environment and help MBA aspirants to get acquainted with organizational norms, procedure, practices, ethics, and culture. It also gives an insight of actual functioning of the organization. It helps the student to understand and to correlate with theoretical 1

aspect with practical reality. It was the great experience with HDFC AMC during summer project which has helped me to improve my communication and interpersonal skills and also give me the better understanding of the subject.

ACKNOWLEDGEMENT
Pondicherry University is outstanding among the Central Universities in India. Teaching and research are its primary functions as in other Central Universities. Pondicherry University believes in creating and disseminating knowledge and skills in core and frontier areas through innovative educational programs, research, consulting and publishing and developing a new age of professionals 2

with a high level of competence and deep sense of ethics and commitment to the code of professional conduct. I Santosh Rajpurohit the students of MBA Batch 2010-12 program is required to undertake Summer Internship Programmer in order to fulfill the requirements of the MBA course as per the assignments given by the Pondicherry university. SIP contains detailed information regarding the activities done. This SIP gives a clear-cut idea about practical field that how theoretical knowledge is different from practical aspects & how can I use my knowledge to solve these problems. However I have collected following Company, Customers and Competitors data during my SIP. I extend my sincere thanks to all the staff members of HDFC AMC for providing a very hospitable and helpful work environment and making my summer training an exciting and memorable event I also acknowledge heart felt gratitude for all those people who have made available tons of information required for our Project. The successful accomplishment of any task is incomplete without acknowledging the contributing personalities who both assisted and inspired and lead us to visualize the things that turn them into successful stories for our successors. I thank the Almighty God for his grace bestowed on us throughout this project. Last, but not the least, I would like to thank my Parents and all my Friends for their wholehearted direct and indirect support and encouragement.

INSIDE

Introduction of Mutual Fund 3

       

Company Details Growth of HDFC Mutual Fund History of Mutual Fund Organization of Mutual fund Research on Mutual fund Types of Mutual fund Conclusion Bibliography

INTRODUCTION

The significant outcome of the government policy of liberalization in industrial and financial sector has been the development of new financial instruments. These new instruments are expected to impart greater competitiveness, flexibility and 4

The investment habit of the small investors particularly has undergone a sea change. in India and abroad. particularly the small investors. I have attempted to study various need expectations of small investors from different types of mutual funds available in the Indian market and identify the risk return perception with the purchase of Mutual Funds. frequent fluctuations in the secondary market and the inherent attitude of the Indian small investors to avoid risk. Mutual funds combine various elements of liquidity. COMPANY PROFILE 5 . Increasing number of players from public as well as private sectors has entered in to the market with innovative schemes to cater to the requirements of the investors. In this context.efficiency to the financial sector.based equity investments to all types of investors. Growth and development of various mutual fund products in Indian capital market has proved to be one of the most catalytic instruments in generating momentous investment growth in the capital market. For all investors. prioritization. preference building and close monitoring of mutual funds are essential for fund managers to make this the strongest and most preferred instrument in Indian capital market for the coming years. liquidity and return. The Indian financial system in general and the mutual fund industry in particular continue to take turn around from early 1990s. These is a substantial growth in the mutual fund market due to a high level of precision in the design and marketing of variety of mutual fund products by banks and other financial institution providing growth. mutual funds have provided a better alternative to obtain benefits of expertise. Mutual Funds are taking their place. During this period mutual funds have pooled huge investments for the corporate sector. With the decline in the bank interest rates. return and security in making themselves as the best possible alternative for the small investors in Indian market.

CDC. HDFC provides financial assistance to individuals.HDFC Asset Management Company Limited (AMC) Vision To be a dominant player in the Indian mutual fund space recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests. training and consultancy. sales services and valuation). 92000 shareholders and 50000 deposit agents. bonds and deposits. ADB and KFW. housing finance remains the dominant activity. 1200000 depositors. HDFC currently has a client base of over 800000 borrowers. Promoted by HDFC was the 1st life insurance company in the private sector to be granted a Certificate of Registration(on October 23. domestic term loans from banks and insurance companies. Of course activities. HDFC has received the highest rating for its bonds and deposits program for the 9th year in succession. 2000) by the Insurance Regulatory and Development Authority to transact life insurance business in India. Sponsors Housing Development Financial Corporation Limited (HDFC) HDFC was incorporated in 1977 as the first specialized housing finance institution in India. Standard Life Investment Limited 6 . IFC (Washington). corporate and developers for the purchase or construction of residential housing. HDFC Standard Life Insurance Company Limited. property identification. USAID. It also provide property related services (e.g. HDFC raises funds from international agencies such as the World Bank.

2000. 169. as amended from time to time. With the global assets under management of approximately US$186. Ireland. 1999. 1956 is the Trustee to the Mutual Fund vide the Trust deed dated June 8.45 billion as at March 31. 3rd Floor. Mumbai . Standard Life Investment Limited is one of the world’s major investment companies and is responsible for investing money on behalf of five million retail and institutional clients worldwide. China. 2000. Standard Life Investment Limited manages a diverse portfolio covering all the major markets world-wide. H. Canada.400 020. In 1998. 2005. HDFC asset Management Company (AMC) HDFC AMC was incorporated under the Companies Act. The registered office of the AMC is situated at Ramon House. on December 10.T. which includes a range of private and public equities. With its headquarters in Edinburgh. A company incorporated under the Companies Act. Churchgate. 7 . HDFC Trustee Company Limited is a wholly owned subsidiary of HDFC Limited. Standard Life Investment Limited became the dedicated investment management company of The Standard Life Group and is owned 100% by the Standard Life Assurance Company. HDFC Trustee Company Ltd. USA. Backbay Reclamation. and was approved to act as an Asset Management Company for the Mutual Fund by SEBI on July 3. 1956.The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. Standard Life Investment Limited has an extensive and developing global presence with operations in the United Kingdom. In order to meet the different needs and risk profiles of its clients. government and company bonds. property investments and various derivative instruments. Parekh Marg. Korea and Hong Kong.

75. HDFC Equity Fund (HEF). The present share holding pattern of AMC is as follows: Particulars HDFC Standard Life Investment Limited % of the paid up share capital 50. 2003.In terms of the Investment Management Agreement. HDFC Floating Rate Income Fund (HFRIF). HDFC Income Fund (HIF). On obtaining the regulatory approvals. HDFC Liquid Fund (HLF). HDFC High Interest Fund (HHIF). The AMC is also managing the respective Plans of HDFC Fixed Investment Plan. HDFC Children's Gift Fund (HDFC CGF). HDFC Growth Fund (HGF).10 49. a closed ended Income Scheme. HDFC Balanced Fund (HBF). The AMC is managing 18 open-ended schemes of the Mutual Fund viz. the Sponsor of Zurich India Mutual Fund. had decided to divest its Asset Management business in India. the Schemes of Zurich India Mutual Fund has now migrated to HDFC Mutual Fund on June 19. The AMC had entered into an agreement with ZIC to acquire the said business. the Trustee has appointed HDFC Asset Management Company Limited to manage the Mutual Fund. following a review of its overall strategy. HDFC Prudence Fund (HPF). HDFC Index Fund. HDFC Top 200 Fund. The AMC has obtained 8 . HDFC Short Term Plan (HSTP). (HT200). HDFC Capital Builder Fund (HCBF). HDFC Tax Plan 2000 (HTP). HDFC Sovereign Gilt Fund (HSGF) and HDFC Cash Management Fund (HCMF).90 Zurich Insurance Company (ZIC).161 crore. The paid up capital of the AMC is Rs. HDFC TaxSaver (HTS). HDFC Gilt Fund (HGILT). subject to necessary regulatory approvals.

2000 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations. 1993. The Certificate of Registration is valid from January 1. . The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the Mutual Fund. 2003.registration from SEBI vide Registration No. 2001 to December 31. 9 .PM / INP000000506 dated December 22.

debentures and other securities. analytical skills and therefore their funds are lacking proper management and diversification to get market-linked return with flexibility as well as liquidity. Whatever other instruments can do. These kinds of investors should prefer mutual funds to channelise their funds properly. The money thus collected is then invested in capital market instruments such as shares. mindsets and risk taking ability. in each case wants money to grow. diversification. The flow chart below describes broadly the working of a mutual fund. professionally managed basket of securities at a relatively low cost. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. The Situation could vary as per age groups. Mutual funds are indeed the best tool for wealth creation. A security that gives small investors access to a well-diversified portfolio of equities. Each shareholder participates in the gain or loss of the fund. bonds and other securities. financial instrument’s nature. flexibility. liquidity and a chance to get market linked returns. Most of the investors don’t have sufficient knowledge about different investment options. market information. mutual funds can do too – and more efficiently. but the solution. 10 .What exactly is a Mutual Fund? A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Shares are issued and can be redeemed as needed. Mutual Funds are the unique instrument that offers an individual professional management. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified.

while others have decided to close shop by either selling off or merging with others. While UTI has always been a dominant player on the bourses as well as the debt markets. In the current year mobilization till now have exceeded Rs300bn. Funds have shifted their focus to the recession free sectors like pharmaceuticals. Product innovation is now passé with the game shifting to performance delivery in fund management as well as service. and even the regulators have become more mature and responsible. which averaged at less than Rs100bn per annum over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. New players have come in. FMCG and technology sector. In spite of the stiff competition and losing market share. Those directly associated with the fund management industry like distributors. Funds collection. 11 . Funds performances are improving. UTI still remains a formidable force to reckon with. The industry is also having a profound impact on financial markets. by their selection criteria for stocks have forced corporate governance on the industry. Last six years have been the most turbulent as well as exiting ones for the industry. the new generations of private funds which have gained substantial mass are now seen flexing their muscles.MUTUAL FUND INDUSTRY Alone UTI with just one scheme in 1964 now competes with as many as 400 odd products and 34 players in the market. Fund managers. registrars and transfer agents. a system of risk-reward has been created where the corporate sector is more transparent then before. Total collection for the current financial year ending March 2000 is expected to reach Rs450bn. By rewarding honest and transparent management with higher valuations.

India is at the first stage of a revolution that has already peaked in the U. The basic fact lies that banks cannot be ignored and they will not close down completely. It is just that Mutual Funds are going to change the way banks do business in the future. Recent figures indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits rose by only 17%. Mutual funds are now also competing with commercial banks in the race for retail investor’s savings and corporate float money. 12 .What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than public sector mutual funds. The collection in the first half of the financial year 1999-2000 matches the whole of 1998-99. The Financial Express September 99) This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets.604. boasts of an Asset base that is much higher than its bank deposits. In India. The coming few years will show that the traditional saving avenues are losing out in the current scenario.S.34 crore during the first nine months of the year as against a net inflow of Rs.40 crore in the case of public sector funds. (Source: Thinktank. Indeed private MFs saw a net inflow of Rs. The U. mutual fund assets are not even 10% of the bank deposits. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. which improves liquidity and reduces risk. but this trend is beginning to change. The power shift towards mutual funds has become obvious. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way. 7819.S. Their role as intermediaries cannot be ignored.

LIC in 1989 and GIC in 1990.1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963.47. Bank of India (Jun 90). 004 as assets under management. Indian Bank Mutual Fund (Nov 89).6. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 87). Punjab National Bank Mutual Fund (Aug 89). Each phase is briefly described as under. The end of 1993 marked Rs. 13 .HISTORY & BACKGROUND Four Phases Of Mutual Fund In India The mutual fund industry can be broadly put into four phases according to the development of the sector.1987-1993 (Entry of Public Sector Funds) Entry of non-UTI mutual funds. Bank of Baroda Mutual Fund (Oct 92). 700 crores of assets under management. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. First Phase . Second Phase .

541 crores of assets under management was way ahead of other mutual funds. 1. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs. The Unit Trust of India with Rs. with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions.29. As at the end of January 2003. giving the Indian investors a wider choice of fund families.44. a new era started in the Indian mutual fund industry. functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The Specified Undertaking of Unit Trust of India. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. 14 .1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993.Third Phase . 835 crores (as on January 2003). except UTI were to be registered and governed. Fourth Phase . 1993 was the year in which the first Mutual Fund Regulations came into being. under which all mutual funds.805 crores. The number of mutual fund houses went on increasing. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. Also. It was bifurcated into two separate entities.21.since February 2003 This phase had bitter experience for UTI. there were 33 mutual funds with total assets of Rs.

As at the end of September. sponsored by SBI.153108 crores under 421 schemes. 2004. there were 29 funds. 000 crores of AUM and with the setting up of a UTI Mutual Fund. It is registered with SEBI and functions under the Mutual Fund Regulations.76. which manage assets of Rs. BOB and LIC. conforming to the SEBI Mutual Fund Regulations. GROWTH IN ASSETS UNDER MANAGEMENT 15 . With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. the mutual fund industry has entered its current phase of consolidation and growth. and with recent mergers taking place among different private sector funds. PNB.The second is the UTI Mutual Fund Ltd.

By Structure: Open-ended Funds An open-end fund is one that is available for subscription all through the year. some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. The fund is open for subscription only during a specified period. They are open for sale or redemption during pre-determined intervals at NAV related prices.TYPES OF MUTUAL FUNDS Mutual fund schemes may be classified on the basis of its structure and its investments. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. These do not have a fixed maturity. 16 . Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. Closed-ended Funds A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. In order to provide an exit route to the investors. The key feature of open-end schemes is liquidity. Interval Funds Interval funds combine the features of open-ended and close-ended schemes.

certificates of deposit. Balanced Funds The aim of balanced funds is to provide both growth and regular income. 17 . Income Funds are ideal for capital stability and regular income. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. have outperformed most other kind of investments held over the long term. or fall equally when the market falls. Such schemes normally invest a majority of their corpus in equities. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. Growth Funds The aim of growth funds is to provide capital appreciation over the medium to long-term. commercial paper and inter-bank call money. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time. It has been proven that returns from stocks. Such schemes generally invest in fixed income securities such as bonds. the NAV of these schemes may not normally keep pace. Money Market Funds The aim of money market funds is to provide easy liquidity. In a rising stock market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods. preservation of capital and moderate income. These are ideal for investors looking for a combination of income and moderate growth. These schemes generally invest in safer shortterm instruments such as treasury bills.By Investment Objective:Income Funds The aim of income funds is to provide regular and steady income to investors. corporate debentures and government securities.

Investments made in Equity Linked Savings Schemes (ELSS) and pension Schemes are allowed as deduction u/s 88 of the Income Tax Act. 2000 and the amount is invested before September 30. Other Schemes:Tax saving Schemes These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. 1961. a commission will be payable. provided the capital asset has been sold prior to April 1. 2000. The Act also provides opportunities to investors to save capital gains u/s 54EA by investing in Mutual Funds. 18 . no commission is payable on purchase or sale of units in the fund. No-Load Funds: A no-Load Fund is one that does not charge a commission for entry or exit. It could be worth paying the load. Special Schemes: Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document.Load Funds: A Load Fund is one that charges a commission for entry or exit. each time you buy or sell units in the fund. The investment of these funds is limited to specific industries like InfoTech. FMCG and Pharmaceuticals etc. if the fund has a good performance history. Typically entry and exit loads range from 1% to 2%. The advantage of a no load fund is that the entire corpus is put to work. That is. That is.

 Index Schemes Index Funds attempt to replicate the performance of a particular index such as the BSE Sense or the NSE 50  Sectoral Schemes Sect oral Funds are those. which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings. 19 .

securities. Investors put their saving as an investment in mutual fund.PROCESS OF MUTUAL FUND In the above graph shows how Mutual Fund works and how investor earns money by investing in the Mutual Fund. The fund manager passes beck return to the investor. who is a person who takes the decisions where the money should be invested in securities according to the scheme’s objective. These securities generate returns to the fund manager. The fund manager. Bonds and Commercial Paper etc. Securities include Equities. Govt. Debentures. 20 .

Receive unit certificates or statements of accounts confirming the title within 6 weeks from the date of closure of the subscription or within 6 weeks from the date of request for a unit certificate is received by the Mutual Fund. financial position and general affairs of the scheme. Receive information about the investment policies.Mutual Funds – Organization There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund: Organization of a Mutual Fund Rights of a Mutual Fund Unit holder A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds) Regulations is entitled to: 1. 21 . 2. investment objectives.

22 . Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase.3. c. Inspect the documents of the Mutual Funds specified in the scheme's offer document. Approve or disapprove any change in the fundamental investment policies of the scheme. 4. b. The dissenting unit holder has a right to redeem the investment. Wind up the schemes. Change the Asset Management Company. 5. which are likely to modify the scheme or affect the interest of the unit holder. Vote in accordance with the Regulations to:a.

Many funds provide anytime withdrawal enabling a big investor to take maximum benefits. Moving up in the risk spectrum. Even some of the debt funds have generated superior returns at relatively low level of risk. mutual funds are better placed to absorb the fluctuations in the prices of the securities as a result of interest rate variation and one can benefits from any such price movement. They can manage the maturity of their portfolio by investing in instruments of varied maturity profile. • The benefits listed so far are essentially for the small retail investor but the industry can attract investments from institutional and big investors as well. Sector funds provide an edge and generate good returns if the particular sector is doing well. • Moreover. • Apart from liquidity.Why should one invest in mutual funds……? • One can avail of the benefits of better returns with added benefits of anytime liquidity by investing in open-ended debt funds at lower risk. the funds provide very good post-tax returns on year-to-year basis. • Mutual funds specialize in identification of stocks through dedicated experts in the field and this enables them to pick stocks at the right movement. there are many people who 23 . In nutshell we can say that these funds have delivered more than what one expects of debt avenues such as post office schemes or bank fixed deposits. • Liquid funds offer liquidity as well as better return than banks and so attract investors. • One can minimize his risk by investing in mutual funds as the mutual fund managers analyze the companies’ financials more minutely than an individual can do as they have the expertise to do so. On an average debt funds have posted returns over 10 percent over one year horizon.

they can invest in equity as well as in good quality debt thereby reducing risk and providing the investor with better returns than he could otherwise manage.would like to take some risk and invest in equity funds/capital market. 24 . This not only diversifies the portfolio and helps in generating returns from a number of sectors but reduces the risk as well. However. An investor can see different kinds of funds where in he can get maximum benefit with utmost care. returns appetite. return grid that shows how and where an investor can invest according to his risk. Armed with the expertise of investment techniques. Here is the risk. • Investing through MF route enables an investor to invest in many good stocks and reap benefits even through a small investment. a good investment consultants and counselors will can investors take informed decision. since their appetite for risk is also limited. This limits him from diversifying his portfolio as well as benefiting from multiple investments. • Next problem is that of our funds or money. One might consider investing in a combination of schemes to achieve your specific goals. • Investing in just one Mutual Fund scheme may not meet all investment needs. balanced funds provide an easy route of investment. For these investors. they would rather have some exposure to debt as well. A single person can’t invest in multiple high-priced stocks for the sole reason that his pockets are not likely to be deep enough. Through identification of the right fund might not be an easy task.

you may miss the upturns as well. 26 in 1995. may win over the “hare”. Then. Source: RBI report on Currency and Finance). (Consumer price index for urban non-manual employees has grown by 9. Investing without a clear plan of action: Many people neglect to take the time to think about their needs and long-term financial goals before investing. Determine your investment goals. Unfortunately. Even in the investment field. this often results in falling short of their expectations.100 now that you could back in 1980. 25 . growth. people tend to forget the impact of inflation will have on investment in long-term. select mutual fund with objective similar to yours. the “tortoise” that is more patient. or a combination of these. While past performance does not necessarily guarantee future performance. If you keep transferring investments in response to downturns in prices. This means that the buying power of rupee has decreased. The value of Rs. depending on your age and your tolerance for risk. Meddling with your account too often: You should have clear understanding of your investments so that you are comfortable with their behavior. you can not buy as much for Rs. Losing sight of inflation: While may be aware of the fact that the cost of goods and services are rising. 3. 1.35% per annum between 1980-81 and 1994-95. You should decide whether you are interested in rice stability. your understanding of the behavior of various investments over a time can help prevent you from becoming shortsighted about your long-term goals. 2.You have to keep in mind that will eat into your savings faster than you can imagine.100 in 1980 was down to Rs.Common investment mistakes that people can make Knowing about some investment mistakes people can make.

Most people these days have too many bills to pay every month. The sooner you start. we often relate this concept to stocks and bonds. 26 . if you do not place long-term investing among your top priorities. 5. Regardless of age or income. you do not have to rely on the success of just one investment. While we know that we should not “put all our eggs in one basket”. most of us do not appreciate the importance of diversification. When you spread your holdings around. the less you have to save every month to reach your financial goals. Take the time to discuss the importance of diversifying investments among different assets categories and industries. Do not put all your eggs into one basket. diversify: When it comes to investing.4. Investing too little too late: People do not “pay themselves first”. you may not be able to meet your financial goals. and planning for your future often takes a backseat.

BENEFITS OF MUTUAL FUND Benefits of Mutual Funds Mutual funds serve as a link between the saving public and the capital markets. The major advantages offered by mutual funds to all investors are: Professional Management Mutual Funds provide the services of experienced and skilled professionals. They mobilize savings from the investors and bring them to borrowers in the capital markets. backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. Today mutual funds are fast emerging as the favorite investment vehical because of the many advantages they have over other forms and avenues of investing. This diversification reduces the risk because seldom do 27 .

Variety Mutual funds offer a tremendous variety of schemes. Mutual Funds save your time and make investing easy and convenient. the units can 28 . secondly it offers an opportunity to investors to invest sums across a variety of schemes. In closed-end schemes. Return Potential Over a medium to long-term. the investor gets the money back promptly at net asset value related prices from the Mutual Fund. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries. This variety is beneficial in two ways: first.all stocks decline at the same time and in the same proportion. Low Cost Mutual Finds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage. Liquidity In open-end schemes. an investor can invest his money in a Growth Fund ( equity scheme) and Income Fund (Debt scheme) depending on his risk appetite and thus creates balanced portfolio easily or simply just buy a Balanced scheme. both debt and equity. For example. it offers different types of schemes to investors with different needs and risk appetites. Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. delayed payments and follow up with brokers and companies. custodial and other fees translate into lower costs for investors.

the proportion invested in each class of assets and the fund manager's investment strategy and outlook. However. Flexibility Through features such as regular investment plans. Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme. as a measure of concession to unit holders of open- 29 . Tax Benefits Any income distributed after March 31. 2002 will be subject to tax in assessment of all unit holders. Affordability Investors individually may lack sufficient funds to invest in high-grade stock. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. regular withdrawal plans and dividend reinvestment plans.be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. Choice of schemes Mutual Funds offer a family of schemes to suit your varying needs over a lifetime. Regulations All Mutual Funds are registered with SEBI and they function within the provision of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI. you can systematically invest or withdraw funds according to your needs and convenience.

DRAWBACKS OF INVESTING IN MUTUAL FUNDS Potential loss Unlike a bank deposit. it also limits the larger gains if a single security increases dramatically in value. Also.5%. They can not made tailor made portfolio. In case of Individuals and Hindu Undivided Families a deduction up to Rs 9000 from the Total income will be admissible in respect of income from investments specified in Section 80L.2003. the fund does not guarantee any minimum percentage of return. 30 . No tailor made portfolio Mutual fund portfolios are created and marked by AMCs. income distributions for the year ending March 31. The Diversification Penalty While diversification reduces the risk of loss from holding a single security. Units of the schemes are not subject to Wealth-Tax and Gift-Tax. in to which investors invest. including income from units of the Mutual Fund.will be taxed at a concessional rate of 10. the investment in a mutual fund could fall in value. diversification does not protect the unit holders totally from an overall decline in the market. Apart from a few assured returns schemes. as the fund is nothing bur a portfolio of different securities.ended equity-oriented funds.

Regulations also prescribed disclosure requirements. The rules for the formation. 1998 and 1999. administration and management of mutual funds in India were clearly laid down. The regulations were thoroughly reviewed and re-notified in December 1996. 1996 have been further amended in 1997. with over US$1trillion assets under management worldwide. The revised guidelines tighten the accounting and disclosure requirements in line with recommendations of The Expert Committee on Accounting Policies. Some facts for the growth of mutual funds in India  100% growth in the last 6 years. 31   . The SEBI (Mutual Funds) Regulations. The UTI was regulated by a special Act of Parliament while funds promoted by public sector banks were subject to RBI Guidelines of July 1989. Net Asset Values and Pricing of Mutual Funds. Our saving rate is over 23%. highest in the world. all mutual funds are regulated by SEBI. US based.MUTUAL FUND REGULATION There was no uniform regulation of the mutual funds industry till a few years ago. The Securities & Exchange Board of India (SEBI) was formed in 1993 as a capital market regulator. Today. One of its responsibilities was to regulate the mutual fund industry and it came up with comprehensive regulations for the industry in 1993. Only channelizing these savings in mutual funds sector is required. Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity Investments. Efforts have been made to bring UTI schemes under SEBI's ambit with the result that all schemes. with the exception of Unit 64. are now regulated by the capital market regulator.

are Co. 'B' and 'C' class cities are growing rapidly. Bank sponsored mutual finds are jointly regulated by SEBI and RBI permission. We have approximately 29 mutual funds which is much less than US having more than 800. SEBI allowing the MF's to launch commodity mutual funds. they have to send periodic report to the roc and the co law board is the appellate authority.s they are regulated by the department of co affairs. 32 . except offshore funds. Since the AMC and trustee co. Trying to curb the late trading practices. RBI regulates money and govt. Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. There is a big scope for expansion.      Legal and Regulatory Framework Mutual funds are regulated by the SEBI (Mutual Fund) regulations. Listed mutual funds are subject to the listing regulations of stock exchanges. Emphasis on better corporate governance. If there is a bank sponsored find. securities in which mutual fund invest. it cannot provide a guarantee without RBI permission. SEBI is the regulator of all funds. 1996.

AMFI has created code for mutual funds. as they are the same as the trust and cant sure themselves.Investors cannot sue the trust. AMFI is not yet a SEBI registered SRO. UTI is governed by the UTI act. AMFI aims at increasing investor awareness about mutual finds. SROs cannot do any legislation on their own. SROs are the second tier in the regulatory structure. 33 . UTI can borrow as well as lend and also engage in other financial services activities. 1963 and is voluntarily under SEBI regulations. encouraging best practices and bringing about high standards of professional behavior in the industry. AMFI is an industry association of mutual funds. All stock exchanges are SROs.

Association of Mutual Funds in India (AMFI) With the increase in mutual fund players in India. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August. a need for mutual fund association in India was generated to function as a non-profit organisation. 1995. It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. 34 . It functions under the supervision and guidelines of its Board of Directors. The objectives of Association of Mutual Funds in India The Association of Mutual Funds of India works with 30 registered AMCs of the country. The objectives are as follows: This mutual fund association of India maintains a high professional and ethical standards in all areas of operation of the industry. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association. AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders. Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. Till date all the AMCs are that have launched mutual fund schemes are its members.

At last but not the least association of mutual fund of India also disseminate information’s on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry. AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds. the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. Association of Mutual Fund of India do represent the Government of India. 35 . It develops a team of well-qualified and trained Agent distributors.

For Example. The latter type of funds are preferred by corporate’s who want to hedge their exposure to the commodities they deal with. based fund invests a fixed percentage of it’s corpus in Gold. Principal.S. One important reason for it is that most major players already have presence here and hence these big names would hardly like to get left behind. There will be a large number of offers from various asset management companies in the time to come.FUTURE SCENARIO The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few years as investor’s shift their assets from banks and other traditional avenues. close down or merge with stronger players in three to four years. specific stocks on various bourses around the world. For instance. short –term and long-term U. In the private sector this trend has already started with two mergers and one takeover. Old Mutual etc. Some of the older public and private sector players will either close shop or be taken over.S. treasuries etc. In the U. Some like real estate funds and commodity funds also take an exposure to physical assets. are looking at Indian market seriously.S. Permanent Portfolio Fund. Here too some of them will down their shutters in the near future to come. Silver. Swiss francs. Some big names like Fidelity. a conservative U. But this does not mean there is no room for other players. a cable manufacturer who needs 100 tons of Copper in the month of January could buy an equivalent amount of copper by investing in a copper fund. Out of ten public sector players five will sell out. most mutual funds concentrate only on financial funds like equity and debt. The market will witness a flurry of new players entering the arena. 36 .

the Canada based Dundee mutual fund is planning to launch a gold and a real estate fund before the year-end. but in India only the tip of the iceberg has been explored.S. 37 .S.In U.). so that the mutual funds can implement the changes that are required to trade in Derivatives. SEBI is working out the norms for enabling the existing mutual fund schemes to trade in Derivatives. In developed countries like the U. apart from bullion funds there are copper funds. The mutual fund industry is awaiting the introduction of DERIVATIVES in the country as this would enable it to hedge its risk and this in turn would be reflected in it’s Net Asset Value (NAV).In India. Importantly. many market players have called on the Regulator to initiate the process immediately. In the near future India too will concentrate on financial as well as physical funds.A there are funds to satisfy everybody’s requirement. precious metal funds and real estate funds (investing in real estate and other related assets as well.A.

Schemes that do not charge a load are called ‘No Load’ schemes. Redemption Price Redemption price is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. It may include a sales load. Repurchase Price Repurchase price is the price at which a close-ended scheme repurchases its units and it may include a back-end load. NET ASSETS VALUE (NAV) The performance of a particular scheme of mutual fund is denoted by Net Assets Value (NAV). Net Asset Value is the market value of the securities held by the scheme.DIFFERENT TERMS Sale Price Sale price is the price you pay when you invest in a scheme. Also called.Mutual fund invest the money collected from the investors in securities markets. In simple word. This is also called Bid Price. The NAV per unit is the 38 . Since market value of securities changes every day. NAV of a scheme also varies on day to day basis. Also called Offer Price. Sales Load Sales load is a charge collected by a scheme when it sells the units. Such prices are NAV related. ‘Front-end’ load.

then the NAV per unit of the fund is Rs.10 each to the investors. The net assets value (NAV) is the actual value of one unit of a given scheme in any given business day. 39 . The NAV reflect the liquidation value of the funds investments on that particular day after accounting for all expenses. Thus. So NAV is equals toMarket / fair value of schemes (+) Receivables (+) Accrued income (+) Other assets (-) Accrued expenses (-) Payables (-) Other liability (/) Number of unit outstanding. It is calculated by deducting all liabilities except unit capital of the fund from the realizable value of all assets and dividing it by number of units outstanding.market vale of securities of a scheme divided buy the total no of units of the scheme of any particular date. Similarly. 20 . "other assets" includes any income due to the fund but not received as on the valuation date (for example. for example management fees payable to the AMC. 200 lakhs and mutual fund has issue 10 lakhs units of Rs. "other liabilities" includes expenses payable by the fund. SEBI requires that all expenses and incomes are accrued up to the valuation date and considered for NAV computation. For example if the market value if securities of a mutual fund scheme is Rs. NAV is required to be disclosed by the mutual funds on a regular basis –daily of weeklydepending on the type of scheme. Here. dividend announced by a company but yet to be received).

NAVPS is the value of a single unit of a mutual fund. It is important to consider both these factors when buying a mutual fund because the price that the fund investors pay is based on them. This figure is affected by both its underlying value and market forces.Net Asset Value . Calculated by dividing the total net asset value of the fund by its number of outstanding shares. 2. The value of a mutual fund share. the total value of the fund's portfolio less liabilities. A fundamental analysis indicator that gives an estimate of the value of a fund's shares after all assets are sold and all liabilities are paid off. In other words. 40 . In the context of mutual funds. Notes: The NAV is usually below the market price because the current value of the fund’s assets is higher than the historical financial Net Asset Value Per Share . The NAVPS is usually below the market price per share because the current value of the fund's assets is higher than the value appearing on the historical financial statements used in the NAVPS calculation.NAV 1. the book value of assets less liabilities. 2.NAVPS 1. Notes: 1. In terms of corporate valuations. Financial statements used in the NAV. The NAV is usually calculated on a daily basis. 2.

The value of each changes depending on the performance of the fund.to. The AMC and its directors are answerable to the Trustees and must submit quarterly reports to them on AMC activities. The AMC should also be approved and registered with the SEBI as an AMC. This is where the role of an Asset Management Company comes into play. 41 . Normally. Each unit represents one undivided share in the assets of a scheme. Directors of the AMC should have adequate professional experience in financial services and should be individuals of high moral standing. Asset Management Company (AMC) Making decisions regarding investment of the money of the unit holders is a tricky affair. this is specified for tax saving schemes. They also have to make required disclosures to the investors in areas such as calculation of NAV and repurchase price.date information. Lock in period: Lock-in-period is the minimum period for which investment made in new units of a scheme cannot be redeemed. One of the other objectives of forming an AMC is that of bringing about transparency in the working of a mutual fund. People at the helm of affairs need to have knowledge about investment alternatives and should also have up.Unit Unit means the interest of the holders in a scheme. The AMC has to act as the investment manager of the Trust under the Board supervision and direction of the Trustees.

) against which the investor provides post-dated cheques. the cheques are realized by the mutual fund and. quarterly. irrespective of whether the market is rising. Systematic investments plan: Under these plans. etc. It carries an additional advantage of Rupee Cost Averaging. additional units at the prevailing NAV are allotted to the investor. over a period of time.Systematic transfer plan: This is a plan offered by some funds under which an investor may choose to transfer a specified amount from their investments in one scheme of the fund to another scheme of the same fund at periodic intervals (usually monthly or quarterly). This is highly convenient for a person who has a regular source of income and wishes to allocate a portion of the same towards savings. the average unit costs will always be less than average market price per unit. the investor gives a mandate to the mutual fund to allot fresh units at specified intervals (monthly. By investing a fixed amount at regular intervals. one ends up buying more units when the price is low. falling or fluctuating. 42 . As a result. On the specified dates. The investor does not need to spend time and effort in evaluating investments in each time interval and probably ensures that the surplus funds do not remain idle. and fewer units when the price is high.

Develop the ability to differentiate profitable and non-profitable customer for organization. First time experience of tracing the activities of the competitors in order to provide competitive edge to My SIP Company. Knowledge with regards to getting the information from all employees Practical exposures from the view point of dealing with people form business prospective by offering them my company’s products. 43 .Conclusion Following were my learning at HDFC Mutual Fund: • • • • • Exposure to the financial market as a whole in practical world with respect to financial management as a subject in our academics.

bseindia.amfiindia.com www.com www.in www.BIBLIOGRAPHY WEBSITES www.rbi.com www.investopedia.org. SECURITY ANALYSIS AND PORTFOLIO MANAGEMENT STATISTICS FOR MANAGEMENT BY V.google.com www.com BOOKS INVESTMENT MANAGEMENT .BHALLA BY LEVIN & RUBIN 44 .hdfcfund.K.