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presentation by: Divesh Bhatia Gagandeep Singh
Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. .A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Buying a mutual fund is like buying a small slice of a big pizza. debentures and other securities. professionally managed basket of securities at a relatively low cost. .The money thus collected is then invested in capital market instruments such as shares.MUTUAL FUND . 2 .CONCEPT .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.
Companies Act. .All MFs should be registered with the SEBI. and the SEBI. 3 . 1956). 1963. the RBI.Overall the working of MFs is mainly governed by UTI Act. 1882. 1956. 1956. . (and not as a company under the Companies Act.Overall regulation of MF is done by the MoF of the Government of India.MF proposed by a sponsor has to be set up as a trust under the Indian Trust Act. Securities Contract Act. 1882.REGISTRATION OF MUTUAL FUND . . Indian Trust Act.
MECHANICS OF MUTUAL FUND 4 .
Before.In the past decade. Indian mutual fund industry had seen a dramatic improvements. .MUTUAL FUNDS INDUSTRY IN INDIA . 67bn.The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. finance minister Shri T Krishnaswami gave the idea of mutual funds .Though the growth was slow. but it accelerated from the year 1987 when non-UTI players entered the industry.In 1963. both quality-wise as well as quantity-wise. . the Assets Under Management (AUM) was Rs. 5 . the monopoly of the market had seen an ending phase. .
. 6 . the total of it is less than the deposits of SBI alone. it reached the height of 1.540 bn.Putting the AUM of the Indian Mutual Funds Industry into comparison. constitute less than 11% of the total deposits held by the Indian banking industry. 470 bn in March 1993 and till April 2004.The private sector entry to the fund family rose the AUM to Rs.The development of mutual fund industry can be broadly put into four phases. . .
By Structure: Open .Ended Schemes. These do not have a fixed maturity.Ended Schemes. risk tolerance and return expectations etc. Close .TYPES OF MF SCHEMES IN INDIA Wide variety of Mutual Fund Schemes exist to cater to the needs such as financial position. and Interval Schemes An open-end fund is one that is available for subscription all through the year. The key feature of open-end schemes is liquidity. Being open ended means that at the end of every day. the investment management company sponsoring the fund issues new shares to investors and buys back shares from investors wishing to leave the fund. 7 . The term Mutual fund is the common name for an open-end investment company. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices.
The fund is open for subscription only during a specified period. 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. 8 .A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years.
Such schemes normally invest a majority of in equities. have outperformed most other kind of investments held over the long term. It has been proved that returns from stocks. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time. Income Funds The aim of income funds is to provide regular and steady income to investors. corporate debentures and Government securities. Such schemes generally invest in fixed income securities such as bonds. 9 .By Investment Objective Growth Funds The aim of growth funds is to provide capital appreciation over the medium to long term.
Money Market Funds The aim of money market funds is to provide easy liquidity.Balanced Funds The aim of balanced funds is to provide both growth and regular income. commercial paper and inter-bank call money. 10 . certificates of deposit. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities. These schemes generally invest in safer short-term instruments such as treasury bills.
Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act. 11 . 1961.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.
and Tax benefits Convenient administration 12 .ADVANTAGES OF MUTUAL FUNDS Economies of scale of operations Minimisation of risk (Diversification of portfolio) Expert and professional management Low brokerage and transaction costs High return potential (Good portfolio performance) Liquidity Flexibility Wide choice of schemes.
SHORTCOMINGS OF MUTUAL FUNDS Mutual funds have their drawbacks and may not be for everyone: • No Guarantees • Fees and commissions • Taxes • Externally managed • No Minimum return • More number of schemes (confused) 8/24/2012 13 .
Fixed deposits .Equity shares . .Term loans .Government securities 14 .Bridge finance.Debentures .Preference shares .INVESTMENT AVENUES OF MFs .
Transparency in fund accounting .CHOOSING A MUTUAL FUND .Past Performance .Investor service 15 .Ability of the fund manager .Global linkages .Investment Objective .