A

Summer Internship Report

On

‘‘Mutual Fund : A globally proven investment avenue’’

Submitted in partial fulfillment for the

Award of degree of
Master of Business Administration (2018-2019)

Submitted to:- Submitted by:-

Mr. Reji John Nikhil Yadav
Assistant Professor 17GSOB201022

1
DECLARATION

I hereby declare that the project work entitled Mutual Fund : A globally proven investment
avenue submitted by me for the summer internship during the post graduate program MBA
(DUAL SPECIALISATION) to School of business, Galgotias University, Greater Noida is my
original work and has not been submitted earlier either to Galgotias university or any other
institute/body for the fulfillment of the requirements of any other course of study. I also declare
that no chapter of this project is copied, either in whole or in part from any other document.
Some references have been taken from books, internet and other learning sources, which are duly
mentioned in the bibliography section.

Signature: Signature of the Mentor:

Student Name : Nikhil Yadav Name of the Mentor : Mr. Reji John
Designation : Assistant Professor

Date: Date:

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ACKNOWLEDGEMENT

Before we get into thick of things, I would like to add a few words of appreciation for the people
who have been a part of this project right from its inception. The writing of this project has been
one of the significant academic challenges I have faced and without the support, patience, and
guidance of the people involved, this task would not have been completed. It is to them I owe my
deepest gratitude.
It gives me immense pleasure in presenting this project report on "MUTUAL FUND – A
GLOBALLY PROVEN INVESTMENT AVENUE". It has been my privilege to have a team of
project guide who have assisted me from the commencement of this project. The success of this
project is a result of sheer hard work, and determination put in by me with the help of my project
guide Mr. Dilip Kumar and Mr. Vineet Verma. I also take this opportunity to add a special
note of thanks for Mr. Reji John who undertook to act as my mentor despite her many other
academic and professional commitments. Her wisdom, knowledge, and commitment to the
highest standards inspired and motivated me. Without her insight, support, and energy, this
project wouldn't have kick-started and neither would have reached fruitfulness.
I also feel heartiest sense of obligation to my seniors, who helped me in collection of data &
resource material & also in its processing as well as in drafting manuscript. The project is
dedicated to all those people, who helped me while doing this project.

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Table of Contents
INDEX

SRNO. TOPICS PAGE NO

1. Executive Summary 06
2. About Company : Sharekhan 07
3. Schedule 1 13
4. Schedule 2 14
5. Schedule 3 15
6. Schedule 4 15
7. Schedule 5 16
8. Schedule 6 17
9. Introduction of Mutual Fund 19
10. Advantages and Disadvantages of Mutual Fund 22
11. Types of Mutual Fund Schemes in India 27
12. Net Asset Value : Calculation 32
13. Selection Parameter for Mutual Fund 33
14. Mutual Fund Distribution Channels 34
15. Working of Mutual Fund 35
16. Regulatory Structure 36
17. Mutual Fund in India 36
18. Mutual Fund Companies in India 38
19. Future Prospect of Mutual fund 40
20. My Learning and Experience 41
21. Conclusion 42
22. Bibliography 43

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NEED FOR THE STUDY:

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.
The project study was done to ascertain the asset allocation, entry load, exit load, associated with
the mutual funds. Ultimately this would help in understanding the benefits of mutual funds to
investors.

OBJECTIVE:

 To give an idea about the benefits from Mutual Fund investment.

 To give an idea of the types of schemes available.
 To discuss about the market trends of Mutual Fund investment.
 To study some of the mutual fund schemes.
 To study Mutual Fund Distribution Channels.

 Explore the recent developments in the mutual funds in India.

 To give an idea about the regulations of mutual funds.

LIMITATIONS

 The lack of information sources for the analysis part.

 Though I tried to collect some primary data but they were too inadequate for the purposes
of the study.
 Time and money are critical factors limiting this study.

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  The data provided by the prospects may not be 100% correct as they too have their
limitations.

EXECUTIVE SUMMERY

A mutual fund is a scheme in which several people invest their money for a common financial
cause. The collected money invests in the capital market and the money, which they earned, is
divided based on the number of units, which they hold.

The mutual fund industry started in India in a small way with the UTI Act creating what was
effectively a small savings division within the RBI. Over a period of 25 years this grew fairly
successfully and gave investors a good return, and therefore in 1989, as the next logical step,
public sector banks and financial institutions were allowed to float mutual funds and their
success emboldened the government to allow the private sector to foray into this area.

The advantages of mutual fund are professional management, diversification, economies of

scale, simplicity, and liquidity.
The disadvantages of mutual fund are high costs, over-diversification, possible tax consequences,
and the inability of management to guarantee a superior return.

The biggest problems with mutual funds are their costs and fees it include Purchase fee,
Redemption fee, Exchange fee, Management fee, Account fee & Transaction Costs. There are
some loads which add to the cost of mutual fund. Load is a type of commission depending on the
type of funds.

Mutual funds are easy to buy and sell. You can either buy them directly from the fund company
or through a third party. Before investing in any funds one should consider some factor like
objective, risk, Fund Manager’s and scheme track record, Cost factor etc.

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There are many, many types of mutual funds. You can classify funds based Structure (open-
ended & close-ended), Nature (equity, debt, balanced), Investment objective (growth, income,
money market) etc.

A code of conduct and registration structure for mutual fund intermediaries, which were
subsequently mandated by SEBI. In addition, this year AMFI was involved in a number of
developments and enhancements to the regulatory framework.

The most important trend in the mutual fund industry is the aggressive expansion of the foreign
owned mutual fund companies and the decline of the companies floated by nationalized banks
and smaller private sector players.

Reliance Mutual Fund, UTI Mutual Fund, ICICI Prudential Mutual Fund, HDFC Mutual Fund
and Birla Sun Life Mutual Fund are the top five mutual fund company in India.

Reliance mutual funding is considered to be most reliable mutual funds in India. People want to
invest in this institution because they know that this institution will never dissatisfy them at any
cost. You should always keep this into your mind that if particular mutual funding scheme is on
larger scale then next time, you might not get the same results so being a careful investor you
should take your major step diligently otherwise you will be unable to obtain the high returns.

ABOUT SHAREKHAN

Sharekhan is one of India's largest and leading financial services companies. It is an online stock

trading company of SSKI Group (S.S. Kantilal Ishwarlal Securities Limited) which has been a

provider of India-based investment banking and corporate finance service for over 80 years.

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SSKI caters to most of the prominent financial institutions, foreign and domestic, investing in

Indian equities. It has been valued for its strong research-led investment ideas, superior client

servicing track record and exceptional execution skills.

The key features of sharekhan are as follows:

 You get freedom from paperwork.

 There are instant credit and money transfer facilities.

 You can trade from any net enabled PC.

 After hour orders facilities.

 You can go for online orders over the phone.

 Timely advice and research reports

 Real-time Portfolio tracking.

 Information and Price alerts.

Sharekhan provides assistance and the advice like no one else could. It has created special

information tools to help answer any queries. Sharekhan’s first step program, built specifically

for new investors, is testament to of its commitment to being your guide throughout your

investing life cycle.

SHAREKHAN SERVICES:

The tag line of Sharekhan says that it is your guide to the financial jungle. As per the tag line

there are many amazing services that Sharekhan offers like technical research, fundamental

research, share shops, portfolio management, dial-n-trade, commodities trade, online services,

8
depository services, equity and derivatives trading (including currency trading). With

Sharekhan’s online trading account, you can buy and sell shares at anytime and from anywhere

you like.

With a physical presence in over 300 cities of India through more than 800 "Share Shops" with

more than 3000 employees, and an online presence through Sharekhan.com, India's premier, it

reaches out to more than 8,00,000 trading customers.

A Sharekhan outlet online destination offers the following services:

 Online BSE and NSE executions (through BOLT & NEAT terminals)

 Free access to investment advice from Sharekhan's Research team

 Sharekhan Value Line (a monthly publication with reviews of recommendations, stocks

to watch out for etc)

 Daily research reports and market review (High Noon & Eagle Eye)

 Pre-market Report (Morning Cuppa)

 Daily trading calls based on Technical Analysis

 Cool trading products (Daring Derivatives and Market Strategy)

 Personalized Advice

 Live Market Information

 Depository Services: Demat Transactions

 Derivatives Trading (Futures and Options)

 Commodities Trading

 IPOs & Mutual Funds Distribution

 Internet-based Online Trading: Speed Trade

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Sharekhan has one of the best state-of-art web portals providing fundamental and statistical

information across equity, mutual funds and IPOs. Surfing can be done across 5,500 companies

for in-depth information, details about more than 1,500 mutual fund schemes and IPO data.

Other market related details such as board meetings, result announcements, FII transactions,

buying/selling by mutual funds and much more can also be accessed.

It provides a complete life-cycle of investment solution in Equities, Derivatives, Commodities,

IPO, Mutual Funds, Depository Services, Portfolio Management Services and Insurance. It also

offers personalized wealth management services for High Net worth individuals.

ONLINE SERVICES

The online trading account can be chosen as per trading habits and preferences, that is the classic

account for most investors and speed trade for active day traders. Sharekhan also provides a free

software called “Trade tiger” to all its account holders.

The Classic Account enables you to trade online for investing in Equities and Derivatives on the

NSE via sharekhan.com; it gives access to all the research content and also comes with a free

Dial-n-Trade service enabling to buy shares using the telephone.

Its features are:

 Streaming quotes (using the applet based system)

 Multiple watch lists

 Integrated Banking, demat and digital contracts

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  Instant credit and transfer

 Real-time portfolio tracking with price alerts and, of course, the assurance of secure

transactions.

The Trade Tiger is a next-generation online trading product that brings the power of the broker's

terminal to your PC. It's the perfect trading platform for active day traders. Its features are:

 A single platform for multiple exchange BSE & NSE (Cash & F&O), MCX,

NCDEX, Mutual Funds, IPO’s

 Multiple Market Watch available on Single Screen

 Multiple Charts with Tick by Tick Intraday and End of Day Charting powered with

various Studies

 Graph Studies include Average, Band- Bollinger, Know Sure Thing, MACD, RSI, etc

 Apply studies such as Vertical, Horizontal, Trend, Retracement & Free lines

 User can save his own defined screen as well as graph template, that is, saving the

layout for future use

 User-defined alert settings on an input Stock Price trigger

 Tools available to gauge market such as Tick Query, Ticker, Market Summary,

Action Watch, Option Premium Calculator, Span Calculator

 Shortcut key for FAST access to order placements & reports

 Online fund transfer activated with 12 Banks

 Sharekhan provides you the facility to trade in Commodities through Sharekhan

Commodities Pvt. Ltd. a wholly owned subsidiary of its parent SSKI. It trades on two

major commodity exchanges of the country:

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  Multi Commodity Exchange of India Ltd, Mumbai (MCX) and

 National Commodity and Derivative Exchange, Mumbai (NCDEX).

For trading in any commodity, initial margin of around 10% on any commodity is to be

maintained. Sharekhan has launched its own commodity derivatives micro-site. The site is

available through the Sharekhan home page www.sharekhan.com. Along with the site Sharekhan

has launched several commodity derivatives products (both research and trading) too. The

products have been listed below:

 Commodities Buzz: a daily view on precious metals and agro commodities.

 Commodities Beat: a summary of the days trading activity.

 Traders Corner: Under commodity trading calls, there are two types of trading calls:

 Rapid Fire: (short-term calls for 1 day to 5 days updated daily)

 Medium-term Plays: (medium-term calls for 1 month to 3 months updated

weekly or in between if needed)

 Sharekhan Exclusive: the commodity research reports and analyses (periodical).

 Market Scan: the daily commodity market data and statistics (end of day).

 All these products are both e-mailed as newsletters and published on the commodity

derivatives site.

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Weekly Reports

Schedule 1

In the first week I was brief about the company by my guide Mr.Dilip Kumar. He taught me
about the history of the company, what are the various product and services provided by
sharekhan limited.
He also taught me about the various plans offered for opening a demat account. Mr. Dilip taught

me about trading and investing. I was also taught how to use the software used by the company

for trading which is known as “trade tiger”. The Trade Tiger is a next-generation online trading

product that brings the power of the broker's terminal to your PC. It's the perfect trading platform

for active day traders. Its features are:

 A single platform for multiple exchange BSE & NSE (Cash & F&O), MCX,

NCDEX, Mutual Funds, IPO’s.

 Multiple Market Watch available on Single Screen.

 Multiple Charts with Tick by Tick Intraday and End of Day Charting powered with

various Studies.

 Graph Studies include Average, Band- Bollinger, Know Sure Thing, MACD, RSI,

etc.

 Apply studies such as Vertical, Horizontal, Trend, Retracement & Free lines.

 User can save his own defined screen as well as graph template, that is, saving the

layout for future use.

 User-defined alert settings on an input Stock Price trigger.

 Tools available to gauge market such as Tick Query, Ticker, Market Summary,

Action Watch, Option Premium Calculator, Span Calculator.

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  Shortcut key for FAST access to order placements & reports.

 Online fund transfer activated with 12 Banks.

I was then given a target by Mr. Dilip to open 4 Demat Accounts by the end of the internship
period.

Schedule 2

The second week was more of field work than office work. I was sent out to open the demat
accounts in order to meet my target. I was sent places such as Old Delhi, Noida, Greater Noida
etc. to obtain signatures of interested clients. It was a very good experience explaining to the
client about the stock market, how it works, and so on.

 People who lie under the age group of 36-40 have more experience and are more
interested in investing in Mutual Funds.
 There was a lot of lack of awareness or ignorance.
 Generally, People employed in Private sectors and Businessman are more likely to
invest in Mutual Funds, than other people working in other professions.
 Generally investors whose monthly income is above Rs. 20001-30000 are more likely
to invest their income in Mutual Fund, to preserve their savings of at least more than
20%.
 People generally like to save their savings in Mutual Fund, Fixed Deposits and
Savings Account.
 Many people came to know about Mutual Fund from Financial Advisors,
Advertisement as well as from their Peer group , and they generally invest in the
Mutual Fund by taking advices from their Legal Advisors.
 Investors generally like to invest in Large Cap Companies like Reliance, SBI, etc. to
minimize their risk.
 The most popular medium of investing in Mutual Fund is through SIP and moreover
people like to invest in Equity Fund though it is a risky game.
 The main Objective of most of the Investors is to preserve their Income.

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Schedule 3

The third week had more of Office work than field work. Detailed Information about the
company was given to me, and I was given time to sit in the office and work on my project. The
manager of the branch told me to make feedback calls to the existing customers and to get
references for them. I made more than 150 calls and encountered various kinds of people. While
making these calls I found out how important these feedback calls are. Most of the customers
were unhappy with the fact that they had not receive more of these calls. I was able to help solve
their queries. Some of the customers were very disappointed with the services provided by the
agents from Sharekhan. I was also sent to White field to an existing customer’s house to open a
new account.

The tag line of Sharekhan says that it is your guide to the financial jungle. As per the tag line

there are many amazing services that Sharekhan offers like technical research, fundamental

research, share shops, portfolio management, dial-n-trade, commodities trade, online services,

depository services, equity and derivatives trading (including currency trading). With

Sharekhan’s online trading account, you can buy and sell shares at anytime and from anywhere

you like.

Schedule 4

In this week I mostly sitting in the office and gathering more information for my project. I had
also gone to meet a few customers in Delhi-NCR and I was able to open two demat accounts. My
project was on Mutual Funds.
The first introduction of a mutual fund in India occurred in 1963, when the Government of

India launched Unit Trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the Indian

mutual fund market. Then a host of other government-controlled Indian financial companies
15
came up with their own funds. These included State Bank of India, Canara Bank, and Punjab

National Bank. This market was made open to private players in 1993, as a result of the

historic constitutional amendments brought forward by the then Congress-led government under

the existing regime of Liberalization, Privatization and Globalization (LPG). The first private

sector fund to operate in India was Kothari Pioneer, which later merged with Franklin

Templeton.

A mutual fund is a common pool of money into which investors place their contributions that are
to be invested in accordance with a stated objective. The ownership of the fund is thus joint or
“mutual”; the fund belongs to all investors. A single investor’s ownership of the fund is in the
same proportion as the amount of the contribution made by him or her bears to the total amount
of the fund.
Mutual Funds are trusts, which accept savings from investors and invest the same in diversified

financial instruments in terms of objectives set out in the trusts deed with the view to reduce the

risk and maximize the income and capital appreciation for distribution for the members.

Schedule 5

This is the second last week of our internship in which I learn more about commodity market and
derivative market. Apart from that I learn about online trading through trade tiger, web page &
Sharekhan pro applications. It was a very new experience. Then I gathered more information
regarding mutual funds.
The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vice versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt for
bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in

16
capital protected funds and the profit-bonds that give out more return which is slightly higher as
compared to the bank deposits but the risk involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds
provide professional management, diversification, convenience and liquidity.
That doesn’t mean mutual fund investments risk free.
This is because the money that is pooled in are not invested only in debts funds which are less
riskier but are also invested in the stock markets which involves a higher risk but can expect
higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives
market which is considered very volatile.

Schedule 6

In the last days I targeting to complete my target of account opening and will try to continue and
gain knowledge about Mutual Funds and IPO’s specifically. I am still trying to get the required
data from Sharekhan Ltd. for the completion of the project. In last week I completed my project
about mutual fund and gathered following information.
Financial experts believe that the future of Mutual Funds in India will be very bright. It has been
estimated that by March-end of 2018, the mutual fund industry of India will reach Rs 40,90,000
crore, taking into account the total assets of the Indian commercial banks. In the coming 10 years
the annual composite growth rate is expected to go up by 13.4%.

 100% growth in the last 6 years.

 Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management worldwide.
 Our saving rate is over 23%, highest in the world. Only channelizing these savings in
mutual funds sector is required.
 We have approximately 45 mutual funds companies with different schemes which is
much less than US having more than 800. There is a big scope for expansion.

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  'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing cities.
 Mutual fund can penetrate rurals like the Indian insurance industry with simple and
limited products.
 SEBI allowing the MF's to launch commodity mutual funds.
 Emphasis on better corporate governance.
 Trying to curb the late trading practices.
 Introduction of Financial Planners who can provide need based advice.

Looking at the past developments and combining it with the current trends it can be concluded
that the future of Mutual Funds in India has lot of positive things to offer to its investors.
Mutual Funds now represent perhaps most appropriate investment opportunity for most
investors. As financial markets become more sophisticated and complex, investors need a
financial intermediary who provides the required knowledge and professional expertise on
successful investing. As the investor always try to maximize the returns and minimize the risk.
Mutual fund satisfies these requirements by providing attractive returns with affordable risks.
The fund industry has already overtaken the banking industry, more funds being under mutual
fund management than deposited with banks. With the emergence of tough competition in this
sector mutual funds are launching a variety of schemes which caters to the requirement of the
particular class of investors. Risk takers for getting capital appreciation should invest in growth,
equity schemes. Investors who are in need of regular income should invest in income plans.

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INTRODUCTION OF MUTUAL FUND

The first introduction of a mutual fund in India occurred in 1963, when the Government of

India launched Unit Trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the Indian

mutual fund market. Then a host of other government-controlled Indian financial companies

came up with their own funds. These included State Bank of India, Canara Bank, and Punjab

National Bank. This market was made open to private players in 1993, as a result of the

historic constitutional amendments brought forward by the then Congress-led government under

the existing regime of Liberalization, Privatization and Globalization (LPG). The first private

sector fund to operate in India was Kothari Pioneer, which later merged with Franklin

Templeton.

CONCEPT OF MUTUAL FUND:

A mutual fund is a common pool of money into which investors place their contributions that are
to be invested in accordance with a stated objective. The ownership of the fund is thus joint or
“mutual”; the fund belongs to all investors. A single investor’s ownership of the fund is in the
same proportion as the amount of the contribution made by him or her bears to the total amount
of the fund.
Mutual Funds are trusts, which accept savings from investors and invest the same in diversified
financial instruments in terms of objectives set out in the trusts deed with the view to reduce the
risk and maximize the income and capital appreciation for distribution for the members. A
Mutual Fund is a corporation and the fund manager’s interest is to professionally manage the
funds provided by the investors and provide a return on them after deducting reasonable
management fees.

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DEFINITION:

“A mutual fund is an investment that pools your money with the money of an unlimited number
of other investors. In return, you and the other investors each own shares of the fund. The fund's
assets are invested according to an investment objective into the fund's portfolio of investments.
Aggressive growth funds seek long-term capital growth by investing primarily in stocks of fast-
growing smaller companies or market segments. Aggressive growth funds are also called capital
appreciation funds”.

Why Select Mutual Fund?

The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt for
bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in
capital protected funds and the profit-bonds that give out more return which is slightly higher as
compared to the bank deposits but the risk involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds
provide professional management, diversification, convenience and liquidity. That doesn’t mean
mutual fund investments risk free.
This is because the money that is pooled in are not invested only in debts funds which are less
riskier but are also invested in the stock markets which involves a higher risk but can expect
higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives
market which is considered very volatile.

20
RETURN RISK MATRIX

HIGHIER RISK HIGHER RISK

MODERATE RETURNS HIGHIER RETURNS

Venture
Equity
Capital

Bank FD Mutual
Funds
Postal
Savings
LOWER RISK LOWER RISK
LOWER RETURNS HIGIER RETURNS

21
The graph indicates the growth of assets under management over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

(Source: www.amfiindia.com)

ADVANTAGES OF MUTUAL FUNDS:

If mutual funds are emerging as the favorite investment vehicle, it is because of the many
advantages they have over other forms and the avenues of investing, particularly for the investor
who has limited resources available in terms of capital and the ability to carry out detailed
research and market monitoring. The following are the major advantages offered by mutual
funds to all investors:

1. Portfolio Diversification:
Each investor in the fund is a part owner of all the fund’s assets, thus enabling him to hold a
diversified investment portfolio even with a small amount of investment that would otherwise
require big capital.

22
2. Professional Management:
Even if an investor has a big amount of capital available to him, he benefits from the professional
management skills brought in by the fund in the management of the investor’s portfolio. The
investment management skills, along with the needed research into available investment options,
ensure a much better return than what an investor can manage on his own. Few investors have
the skill and resources of their own to succeed in today’s fast moving, global and sophisticated
markets.

3. Reduction/Diversification Of Risk:
When an investor invests directly, all the risk of potential loss is his own, whether he places a
deposit with a company or a bank, or he buys a share or debenture on his own or in any other
from. While investing in the pool of funds with investors, the potential losses are also shared
with other investors. The risk reduction is one of the most important benefits of a collective
investment vehicle like the mutual fund.\

4. Reduction Of Transaction Costs:

What is true of risk as also true of the transaction costs. The investor bears all the costs of
investing such as brokerage or custody of securities. When going through a fund, he has the
benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit
passed on to its investors.

5. Liquidity:
Often, investors hold shares or bonds they cannot directly, easily and quickly sell. When they
invest in the units of a fund, they can generally cash their investments any time, by selling their
units to the fund if open-ended, or selling them in the market if the fund is close-end. Liquidity
of investment is clearly a big benefit.

23
6. Convenience And Flexibility:
Mutual fund management companies offer many investor services that a direct market investor
cannot get. Investors can easily transfer their holding from one scheme to the other; get updated
market information and so on.

7. Tax Benefits:
Any income distributed after March 31, 2002 will be subject to tax in the assessment of all Unit
holders. However, as a measure of concession to Unit holders of open-ended equity-oriented
funds, income distributions for the year ending March 31, 2003, will be taxed at a concessional
rate of 10.5%.
In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from the Total
Income will be admissible in respect of income from investments specified in Section 80L,
including income from Units of the Mutual Fund. Units of the schemes are not subject to
Wealth-Tax and Gift-Tax.

8. Choice of Schemes:
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

9. Well Regulated:
All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI.

10. Transparency:
You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and
the fund manager's investment strategy and outlook.

24
DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS:

1. No Control Over Costs:

An investor in a mutual fund has no control of the overall costs of investing. The investor pays
investment management fees as long as he remains with the fund, albeit in return for the
professional management and research. Fees are payable even if the value of his investments is
declining. A mutual fund investor also pays fund distribution costs, which he would not incur in
direct investing. However, this shortcoming only means that there is a cost to obtain the mutual
fund services.

2. No Tailor-Made Portfolio:
Investors who invest on their own can build their own portfolios of shares and bonds and other
securities. Investing through fund means he delegates this decision to the fund managers. The
very-high-net-worth individuals or large corporate investors may find this to be a constraint in
achieving their objectives. However, most mutual fund managers help investors overcome this
constraint by offering families of funds- a large number of different schemes- within their own
management company. An investor can choose from different investment plans and constructs a
portfolio to his choice.

3. Managing A Portfolio Of Funds:

Availability of a large number of funds can actually mean too much choice for the investor. He
may again need advice on how to select a fund to achieve his objectives, quite similar to the
situation when he has individual shares or bonds to select.

4. The Wisdom Of Professional Management:

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

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5. No Control:
Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of
somebody else's car

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

7. Buried Costs:
Many mutual funds specialize in burying their costs and in hiring salesmen who do not make
those costs clear to their clients.

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 TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk
tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a
collection of many stocks, an investors can go for picking a mutual fund might be easy. There
are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in
categories, mentioned below.

TYPES OF MUTUAL
FUNDS

BY INVESTMENT
BY STRUCTURE BY NATURE OTHER SCHEMES
OBJECTIVE

Open - Ended Tax Saving

Equity Fund Growth Schemes
Schemes Schemes

Close - Ended
Debt Funds Income Schemes Index Schemes
Schemes

Sector Specific
Interval Schemes Balanced Funds Balanced Schemes
Schemes

Money Market
Schemes

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A). BY STRUCTURE

1. Open - Ended Schemes:

An open-end fund is one that is available for subscription all through the year. These do not have
a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")
related prices. The key feature of open-end schemes is liquidity.

2. Close - Ended Schemes:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years.
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. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one
of the two exit routes is provided to the investor.

3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-ended and close-ended
schemes. The units may be traded on the stock exchange or may be open for sale or redemption
during pre-determined intervals at NAV related prices.

BY NATURE

1. Equity Fund:
These funds invest a maximum part of their corpus into equities holdings. The structure of the
fund may vary different for different schemes and the fund manager’s outlook on different
stocks. The Equity Funds are sub-classified depending upon their investment objective, as
follows:

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  Diversified Equity Funds
 Mid-Cap Funds
 Sector Specific Funds
 Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-
return matrix.

2. Debt Funds:
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers. By
investing in debt instruments, these funds ensure low risk and provide stable income to the
investors. Debt funds are further classified as:
 Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated
with Interest Rate risk. These schemes are safer as they invest in papers backed by
Government.

 Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.

 MIPs: Invests maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market. These
scheme ranks slightly high on the risk-return matrix when compared with other debt
schemes.
 Short Term Plans (STPs): Meant for investment horizon for three to six months. These
funds primarily invest in short term papers like Certificate of Deposits (CDs) and
Commercial Papers (CPs). Some portion of the corpus is also invested in corporate
debentures.

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  Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments like
Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for
short-term cash management of corporate houses and are meant for an investment
horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are
considered to be the safest amongst all categories of mutual funds.

3. Balanced Funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in both equities
and fixed income securities, which are in line with pre-defined investment objective of the
scheme. These schemes aim to provide investors with the best of both the worlds. Equity part
provides growth and the debt part provides stability in returns.

Further the mutual funds can be broadly classified on the basis of investment parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds objective
and invest accordingly.

BY INVESTMENT OBJECTIVE:
Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of these schemes is to provide
capital appreciation over medium to long term. These schemes normally invest a major part of
their fund in equities and are willing to bear short-term decline in value for possible future
appreciation.

Income Schemes:
Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular
and steady income to investors. These schemes generally invest in fixed income securities such
as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

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Balanced Schemes:
Balanced Schemes aim to provide both growth and income by periodically distributing a part of
the income and capital gains they earn. These schemes invest in both shares and fixed income
securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes:

Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate
income. These schemes generally invest in safer, short-term instruments, such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money.

Load Funds:
A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or
sell units in the fund, a commission will be payable. Typically entry and exit loads range from
1% to 2%. It could be worth paying the load, if the fund has a good performance history.

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

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

Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex
or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the

31
index. The percentage of each stock to the total holding will be identical to the stocks index
weightage. And hence, the returns from such schemes would be more or less equivalent to those
of the Index.

Sector Specific Schemes:

These are the funds/schemes which invest in the securities of only those sectors or industries as
specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods
(FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of
the respective sectors/industries. While these funds may give higher returns, they are more risky
compared to diversified funds. Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time.

NET ASSET VALUE (NAV):

Since each owner is a part owner of a mutual fund, it is necessary to establish the value of his
part. In other words, each share or unit that an investor holds needs to be assigned a value. Since
the units held by investor evidence the ownership of the fund’s assets, the value of the total
assets of the fund when divided by the total number of units issued by the mutual fund gives us
the value of one unit. This is generally called the Net Asset Value (NAV) of one unit or one
share. The value of an investor’s part ownership is thus determined by the NAV of the number of
units held.

Calculation of NAV:
Let us see an example. If the value of a fund’s assets stands at Rs. 100 and it has 10 investors
who have bought 10 units each, the total numbers of units issued are 100, and the value of one
unit is Rs. 10.00 (1000/100). If a single investor in fact owns 3 units, the value of his ownership
of the fund will be Rs. 30.00(1000/100*3). Note that the value of the fund’s investments will
keep fluctuating with the market-price movements, causing the Net Asset Value also to fluctuate.

32
For example, if the value of our fund’s asset increased from Rs. 1000 to 1200, the value of our
investors holding of 3 units will now be (1200/100*3) Rs. 36. The investment value can go up or
down, depending on the markets value of the fund’s assets.

SELECTION PARAMETERS FOR MUTUAL FUND

Your objective:
The first point to note before investing in a fund is to find out whether your objective matches
with the scheme. It is necessary, as any conflict would directly affect your prospective returns.
Similarly, you should pick schemes that meet your specific needs. Examples: pension plans,
children’s plans, sector-specific schemes, etc.

Your risk capacity and capability:

This dictates the choice of schemes. Those with no risk tolerance should go for debt schemes, as
they are relatively safer. Aggressive investors can go for equity investments. Investors that are
even more aggressive can try schemes that invest in specific industry or sectors.

Fund Manager’s and scheme track record:

Since you are giving your hard earned money to someone to manage it, it is imperative that he
manages it well. It is also essential that the fund house you choose has excellent track record. It
also should be professional and maintain high transparency in operations. Look at the
performance of the scheme against relevant market benchmarks and its competitors. Look at the
performance of a longer period, as it will give you how the scheme fared in different market
conditions.

Cost factor:
Though the AMC fee is regulated, you should look at the expense ratio of the fund before
investing. This is because the money is deducted from your investments. A higher entry load or

33
exit load also will eat into your returns. A higher expense ratio can be justified only by
superlative returns. It is very crucial in a debt fund, as it will devour a few percentages from your
modest returns.

MUTUAL FUNDS DISTRIBUTION CHANNELS

Investors have varied investment objectives and can be classified as aggressive, moderate and
conservative, depending on their risk profile. For each of these categories, asset management
companies (AMCs) devise different types of fund schemes, and it is important for investors to
buy those that match their investment goals.

Funds are bought and sold through distribution channels, which play a significant role in
explaining to the investors the various schemes available, their investment style, costs and
expenses. There are two types of distribution channels-direct and indirect. In case of the former,
the investors buy units directly from the fund AMC, whereas indirect channels include the
involvement of agents. Let us consider these distribution channels in detail.

Direct channel

This is good for investors who do not need the advisory services of agents and are well-versed
with the fundamentals of the fund industry. The channel provides the benefit of low cost, which
significantly enhances the returns in the long run.

Indirect channel

This channel is widely prevalent in the fund industry. It involves the use of agents, who act as
intermediaries between the fund and the investor. These agents are not exclusive for mutual
funds and can deal in multiple financial instruments. They have an in-depth knowledge about the
functioning of financial instruments and are in a position to act as financial advisers. Here are
some of the players in the indirect distribution channels.

a) Independent financial advisers (IFA):

These are individuals trained by AMCs for selling their products. Some IFAs are
professionally qualified CFPs (certified financial planners). They help investors in choosing
the right fund schemes and assist them in financial planning. IFAs manage their costs
through the commissions that they earn by selling funds.

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 b) Organized distributors:
They are the backbone of the indirect distribution channel. They have the infrastructure and
resources for managing administrative paperwork, purchases and redemptions. These
distributors cater to the diverse nature of the investor community and the vast geographic
spread of the country by establishing offices in rural and semi urban locations.

c) Banks:
They use their network to sell mutual funds. Their existing customer base serves as a
captive prospective investor base for marketing funds. Banks also handle wealth
management for their clients and manage portfolios where mutual funds are one of the
asset classes. The players in the indirect channel assist investors in buying and redeeming
fund units.

They try to understand the risk profile of investors and suggest fund schemes that best suits their
objectives. The indirect channel should be preferred over the direct channel when investors want
to seek expert advice on the risk-return mix or need help in understanding the features of the
financial securities in which the fund invests as well as other important attributes of mutual
funds, such as benchmarking and tax treatment.

WORKING OF MUTUAL FUNDS

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The mutual fund collects money directly or through brokers from investors. The money is
invested in various instruments depending on the objective of the scheme. The income generated
by selling securities or capital appreciation of these securities is passed on to the investors in
proportion to their investment in the scheme. The investments are divided into units and the
value of the units will be reflected in Net Asset Value or NAV of the unit. NAV is the market
value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of
the scheme divided by the number of units outstanding on the valuation date. Mutual fund
companies provide daily net asset value of their schemes to their investors. NAV is important, as
it will determine the price at which you buy or redeem the units of a scheme. Depending on the
load structure of the scheme, you have to pay entry or exit load.

REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA:

The structure of mutual funds in India is guided by the SEBI. Regulations, 1996.These
regulations make it mandatory for mutual fund to have three structures of sponsor trustee and
asset Management Company. The sponsor of the mutual fund and appoints the trustees. The
trustees are responsible to the investors in mutual fund and appoint the AMC for managing the
investment portfolio. The AMC is the business face of the mutual fund, as it manages all the
affairs of the mutual fund. The AMC and the mutual fund have to be registered with SEBI.

MUTUAL FUNDS IN INDIA

In 1963, the day the concept of Mutual Fund took birth in India. Unit Trust of India invited
investors or rather to those who believed in savings, to park their money in UTI Mutual Fund.
For 30 years it goaled without a single second player. Though the 1988 year saw some new
mutual fund companies, but UTI remained in a monopoly position.

36
The performance of mutual funds in India in the initial phase was not even closer to satisfactory
level. People rarely understood, and of course investing was out of question. But yes, some 24
million shareholders were accustomed with guaranteed high returns by the beginning of
liberalization of the industry in 1992. This good record of UTI became marketing tool for new
entrants. The expectations of investors touched the sky in profitability factor. However, people
were miles away from the preparedness of risks factor after the liberalization.
The net asset value (NAV) of mutual funds in India declined when stock prices started falling in
the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative
investments. There was rather no choice apart from holding the cash or to further continue
investing in shares. One more thing to be noted, since only closed-end funds were floated in the
market, the investors disinvested by selling at a loss in the secondary market.
The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal,
the losses by disinvestments and of course the lack of transparent rules in the whereabouts
rocked confidence among the investors. Partly owing to a relatively weak stock market
performance, mutual funds have not yet recovered, with funds trading at an average discount of
1020 percent of their net asset value.
The securities and Exchange Board of India (SEBI) came out with comprehensive regulation in
1993 which defined the structure of Mutual Fund and Asset Management Companies for the first
time.
The supervisory authority adopted a set of measures to create a transparent and competitive
environment in mutual funds. Some of them were like relaxing investment restrictions into the
market, introduction of open-ended funds, and paving the gateway for mutual funds to launch
pension schemes.
The measure was taken to make mutual funds the key instrument for long-term saving. The more
the variety offered, the quantitative will be investors.
Several private sectors Mutual Funds were launched in 1993 and 1994. The share of the private
players has risen rapidly since then. Currently there are 34 Mutual Fund organizations in India
managing 1,02,000 crores.

37
At last to mention, as long as mutual fund companies are performing with lower risks and higher
profitability within a short span of time, more and more people will be inclined to invest until
and unless they are fully educated with the dos and don’ts of mutual funds.
Mutual fund industry has seen a lot of changes in past few years with multinational companies
coming into the country, bringing in their professional expertise in managing funds worldwide.
In the past few months there has been a consolidation phase going on in the mutual fund industry
in India. Now investors have a wide range of Schemes to choose from depending on their
individual profiles.

MUTUAL FUND COMPANIES IN INDIA:

The concept of mutual funds in India dates back to the year 1963. The era between 1963 and
1987 marked the existence of only one mutual fund company in India with Rs. 67bn assets under
management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the end
of the 80s decade, few other mutual fund companies in India took their position in mutual fund
market.
The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank Mutual
Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual
Fund.
The succeeding decade showed a new horizon in Indian mutual fund industry. By the end of
1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started
penetrating the fund families. In the same year the first Mutual Fund Regulations came into
existance with re-registering all mutual funds except UTI. The regulations were further given a
revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India which has now
merged with Franklin Templeton. Just after ten years with private sector players penetration, the
total assets rose up to Rs. 1218.05 bn. Today there are 33 mutual fund companies in India.

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Major Mutual Fund Companies in India

ABN AMRO Mutual Fund Reliance Mutual Fund

Birla Sun Life Mutual Fund Standard Chartered Mutual Fund
Bank of Baroda Mutual Fund Franklin Templeton India Mutual Fund
HDFC Mutual Fund Morgan Stanley Mutual Fund India
HSBC Mutual Fund Escorts Mutual Fund
ING Vysya Mutual Fund Alliance Capital Mutual Fund
Prudential ICICI Mutual Fund Benchmark Mutual Fund
State Bank of India Mutual Fund Canbank Mutual Fund
Tata Mutual Fund LIC Mutual Fund
Unit Trust of India Mutual Fund

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FUTURE PROSPECT OF MUTUAL FUNDS IN INDIA

Financial experts believe that the future of Mutual Funds in India will be very bright. It has been
estimated that by March-end of 2018, the mutual fund industry of India will reach Rs 40,90,000
crore, taking into account the total assets of the Indian commercial banks. In the coming 10 years
the annual composite growth rate is expected to go up by 13.4%.

 100% growth in the last 6 years.

 Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management worldwide.
 Our saving rate is over 23%, highest in the world. Only channelizing these savings in
mutual funds sector is required.
 We have approximately 45 mutual funds companies with different schemes which is
much less than US having more than 800. There is a big scope for expansion.
 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing cities.
 Mutual fund can penetrate rurals like the Indian insurance industry with simple and
limited products.
 SEBI allowing the MF's to launch commodity mutual funds.
 Emphasis on better corporate governance.
 Trying to curb the late trading practices.
 Introduction of Financial Planners who can provide need based advice.

Looking at the past developments and combining it with the current trends it can be concluded
that the future of Mutual Funds in India has lot of positive things to offer to its investors.

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My experience and learning

NICE EXPERIENCE

Good place for freshers

Supportive members

Good atmosphere to work at.

Friendly & adaptable

Learning in the Company

I have learned a lot of things when I worked in Sharekhan as an intern. Before I joined sharekhan
I had very less knowledge about stock market and how it functions. I learned how stocks and
commodities are traded online and how online trading carried out. I was taught how to operate a
software designed for online trading called ‘Trade Tiger’.

I learned how important being punctual to the office was. Interning at sharekhan gave me an
experience of working in a very friendly work environment. All the employees treated me as one
of the employees and not as an intern or a student.

41
CONCLUSION

Mutual Funds now represent perhaps most appropriate investment opportunity for most
investors. As financial markets become more sophisticated and complex, investors need a
financial intermediary who provides the required knowledge and professional expertise on
successful investing. As the investor always try to maximize the returns and minimize the risk.
Mutual fund satisfies these requirements by providing attractive returns with affordable risks.
The fund industry has already overtaken the banking industry, more funds being under mutual
fund management than deposited with banks. With the emergence of tough competition in this
sector mutual funds are launching a variety of schemes which caters to the requirement of the
particular class of investors. Risk takers for getting capital appreciation should invest in growth,
equity schemes. Investors who are in need of regular income should invest in income plans.

The stock market has been rising for over three years now. This in turn has not only protected the
money invested in funds but has also to helped grow these investments.

This has also instilled greater confidence among fund investors who are investing more into the
market through the MF route than ever before.

Reliance India mutual funds provide major benefits to a common man who wants to make his
life better than previous.

The mutual fund industry as a whole gets less than 2 per cent of household savings against the 46
per cent that go into bank deposits. Some fund managers say this only indicates the sector's
potential. "If mutual funds succeed in chipping away at bank deposits, even a triple digit growth
is possible over the next few years.

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BIBLIOGRAPHY

www.google.com
http://www.slideshare.net/hemanthcrpatna/a-project-report-on-comparative-study-of-mutual-
funds-in-india

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