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A PROJECT REPORT
ON
“MUTUAL FUNDS IS THE BETTER
INVESTMENTS PLAN”
Submitted in partial fulfillment for
MASTER OF BUSINESS ADMIMISTRATION
Programme of
INSTITUTE OF MANAGEMENT TECHNOLOGY
GHAZIABAD
Batch2005-08
Submitted by :-
Under Guidance :-
AKHILESH MISHRA
CA SHARAD CHAUHAN
MBA( Three Year Programme)
Manager Accounts
Batch (2005-2008)
Uttam Sugar Mills Limited
Enrolment No-52102689
Corprote office Noida
Department of Business Management
INSTITUTE OF MANAGEMENT TECHNOLOGY
GHAZIABAD
ACKNOWLEDGEMENT
With regard to my Project with Mutual Fund I would like to thank each and every one
who offered help, guideline and support whenever required.

First and foremost I would like to express gratitude to Manager SBI kanwali
Road Dehradoon and other staffs for their support and guidance in the Project work.. I
am extremely grateful to my guide, CA Sharad Chauhan for their valuable guidance and
timely suggestions. I would like to thank all faculty members of Uttam Sugar Mills
Limited for the valuable guidance& support.

I would also like to extend my thanks to my members and friends for their
support specially .MCA Anuj Panday officer I.T.Uttam Sugar Mills Limited
Sharanpur & Mr. Rajeev Goyal consultant, Sales tax, income tax .And lastly, I would
like to express my gratefulness to the parent’s for seeing me through it all.

AKHILESH MISHRA
CERTIFICATE
This is to certify that Mr. Akhilesh Mishra a student of IMT-CDL Ghazibad has
completed
project work on“MUTUAL FUNDS IS THE BETTER INVESTMENTS PLAN” under my
guidance and supervision.
I certify that this is an original work and has not been copied from any source.

Signature of Guide

Name of Project Guide CA Sharad Chauhan

Date-
 DECLERATION

I hereby declare that this Project Report entitled “THE MUTUAL FUND IS BETTER
INVESTMENT PLAN in SBI Mutual Fund submitted in the partial fulfillment of the
requirement of Master of Business Administration (MBA) of INSTITUTE OF
MANAGEMET TECHNOLOGY, GHAZIABAD is based on primary & secondary
data found by me in various departments, books, magazines and websites & Collected
by me in under guidance of C.A. Sharad Chauhan.

DATE:

AKHILESH MISHRA
MBA (Three Years)
Enrollment No.52102689
EXECUTIVE SUMMARY

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

This Project gave me a great learning experience and at the same time it gave me
enough scope to implement my analytical ability. The analysis and advice presented
in this Project Report is based on market research on the saving and investment
practices of the investors and preferences of the investors for investment in Mutual
Funds. This Report will help to know about the investors’ Preferences in Mutual Fund
means Are they prefer any particular Asset Management Company (AMC), Which
type of Product they prefer, Which Option (Growth or Dividend) they prefer or
Which Investment Strategy they follow (Systematic Investment Plan or One time
Plan). This Project as a whole can be divided into two parts.
The first part gives an insight about Mutual Fund and its various aspects, the
Company Profile, Objectives of the study, Research Methodology. One can have a
brief knowledge about Mutual Fund and its basics through the Project.

The second part of the Project consists of data and its analysis collected through
survey done on 200 people. For the collection of Primary data I made a questionnaire
and surveyed of 200 people. I also taken interview of many People those who were
coming at the SBI Branch where I done my Project. I visited other AMCs in
Dehradoon to get some knowledge related to my topic. I studied about the products
and strategies of other AMCs in Dehradoon to know why people prefer to invest in
those AMCs. This Project covers the topic “THE MUTUAL FUND IS BETTER
INVESTMENT PLAN.” The data collected has been well organized and presented. I
hope the research findings and conclusion will be of use.
CONTENTS

Acknowledgement
Declaration
Executive Summary

Chapter - 1
INTRODUCTION
Chapter - 2
COMPANY PROFILE
Chapter - 3
OBJECTIVES AND SCOPE
Chapter - 4
RESEARCH METHODOLOGY
Chapter - 5
DATA ANALYSIS AND INTERPRETATION
Chapter - 6
FINDINGS AND CONCLUSIONS
Chapter - 7
SUGGESTIONS & RECOMMENDATIONS
BIBLIOGRAPHY
MUTUAL FUNDS
ALL ABOUT MUTUAL FUNDS

 WHAT IS MUTUAL FUND

 BY STRUCTURE

 BY NATURE

 EQUITY FUND

 DEBT FUNDS

 BY INVESTMENT OBJECTIVE

 OTHER SCHEMES

 PROS & CONS OF INVESTING IN MUTUAL FUNDS

 ADVANTAGES OF INVESTING MUTUAL FUNDS

 DISADVANTAGES OF INVESTING MUTUAL FUNDS

 MUTUAL FUNDS INDUSTRY IN INDIA

 MAJOR PLAYERS OF MUTUAL FUNDS IN INDIA

 HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

 CATEGORIES OF MUTUAL FUNDS

 INVESTMENT STRATEGIES
 WORKING OF A MUTUAL FUND

 GUIDELINES OF THE SEBI FOR MUTUAL FUND

 COMPANIES DISTRIBUTION CHANNELS

 DOES FUND PERFORMANCE AND RANKING PERSIST?

 PORTFOLIO ANALYSIS TOOLS

RESEARCH REPORT

 OBJECTIVE OF RESEARCH

 SCOPE OF THE STUDY

 DATA SOURCES

 SAMPLING

 DATA ANALYSIS

 QUESTIONNAIRE
Chapter - 1
Introduction
INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS
ASPECTS.

Mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. This pool of money is invested in accordance with a stated
objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to
all investors. The money thus collected is then invested in capital market instruments
such as shares, debentures and other securities. The income earned through these
investments and the capital appreciations realized are shared by its unit holders in
proportion the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. A
Mutual Fund is an investment tool that allows small investors access to a well-
diversified portfolio of equities, bonds and other securities. Each shareholder
participates in the gain or loss of the fund. Units are issued and can be redeemed as
needed. The funds Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks
may not move in the same direction in the same proportion at the same time. Mutual
fund issues units to the investors in accordance with quantum of money invested by
them. Investors of mutual funds are known as unit holders.
When an investor subscribes for the units of a mutual fund, he becomes part owner of
the assets of the fund in the same proportion as his contribution amount put up with
the
corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual
fund shareholder or a unit holder.
Any change in the value of the investments made into capital market instruments
(such
asshares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV
is defined as the market value of the Mutual Fund scheme's assets net of its liabilities.
NAV of a scheme is calculated by dividing the market value of scheme's assets by the
total number of units issued to the investors.
ADVANTAGES OF MUTUAL FUND
•

Portfolio Diversification
•

Professional management
•

Reduction / Diversification of Risk

•

Liquidity
•

Flexibility & Convenience

•

Reduction in Transaction cost

•

Safety of regulated environment

•

Choice of schemes
•

Transparency
DISADVANTAGE OF MUTUAL FUND
•

No control over Cost in the Hands of an Investor

•

No tailor-made Portfolios
•

Managing a Portfolio Funds

•

Difficulty in selecting a Suitable Fund Scheme

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank. Though the
growth was slow, but it accelerated from the year 1987 when non-UTI players entered
the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement,
both qualities wise as well as quantity wise. Before, the monopoly of the market had
seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The
private sector entry to the fund family raised the Aum to Rs. 470 billion in March
1993 and till April 2004; it reached the height if Rs. 1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the
mutual fund industry can be broadly put into four phases according to the
development of the sector. Each phase is briefly described as under.

First Phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the
Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. 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. The first scheme launched by UTI was Unit
Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under
management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual
fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end
of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

1993 was the year in which the first Mutual Fund Regulations came into being, under
which all mutual funds, except UTI were to be registered and governed. The erstwhile
Kothari Pioneer (now merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996. As at the end of January
2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit
Trust of India with assets under management of Rs.29,835 crores as at the end of
January 2003, representing broadly, the assets of US 64 scheme, assured return and
certain other schemes

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. consolidation
and growth. As at the end of September, 2004, there were 29 funds, which manage
assets of Rs.153108 crores under 421 schemes.
CATEGORIES OF MUTUAL FUND:
Mutual funds can be classified as follow :
 Based on their structure:
•

Open-ended funds: Investors can buy and sell the units from the fund, at any point
of time.
•

Close-ended funds: These funds raise money from investors only once. Therefore,

after the offer period, fresh investments can not be made into the fund. If the fund is
listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley
Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided
liquidity window on a periodic basis such as monthly or weekly. Redemption of units
can be made during specified intervals. Therefore, such funds have relatively low
liquidity.

 Based on their investment objective:

Equity funds: These funds invest in equities and equity related instruments. With

fluctuating share prices, such funds show volatile performance, even losses. However,
short term fluctuations in the market, generally smoothens out in the long term,
thereby offering higher returns at relatively lower volatility. At the same time, such
funds can yield great capital appreciation as, historically, equities have outperformed
all asset classes in the long term. Hence, investment in equity funds should be
considered for a period of at least 3-5 years. It can be further classified as:
i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their portfolio mirrors the benchmark index both in terms of composition
and individual stock weightages.
ii) Equity diversified funds- 100% of the capital is invested in equities spreading
across different sectors and stocks.
iii|) Dividend yield funds- it is similar to the equity diversified funds except that they
invest in companies offering high dividend yields.
iv) Thematic funds- Invest 100% of the assets in sectors which are related through
some theme.
e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector
fund will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
Balanced fund: Their investment portfolio includes both debt and equity. As a result, on

the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal

mutual funds vehicle for investors who prefer spreading their risk across various instruments.

Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds Invest at least 65% in equities, remaining
- in debt.
Debt fund: They invest only in debt instruments, and are a good option for investors

averse to idea of taking risk associated with equities. Therefore, they invest
exclusively in fixed-income instruments like bonds, debentures, Government of India
securities; and money market instruments such as certificates of deposit (CD),
commercial paper (CP) and call money. Put your money into any of these debt funds
depending on your investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large
portion being invested in call money market.
ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and
T-bills.
iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.
iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-

pricing between cash market and derivatives market. Funds are allocated to equities,
derivatives and money markets. Higher proportion (around 75%) is put in money
markets, in the absence of arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term government
securities.
 Typically, such funds invest a major portion of the portfolio in
vi) Income funds LT-
long-term debt papers.
vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with
that of the fund.
INVESTMENT STRATEGIES
1. Systematic Investment Plan: under this a fixed sum is invested each month on a

fixed date of a month. Payment is made through post dated cheques or direct debit
facilities. The investor gets fewer units when the NAV is high and more units when
the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan:under this an investor invest in debt oriented fund and
give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the
same mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund
then he can withdraw a fixed amount each month.
RISK V/S. RETURN:
INTRODUCTION TO SBI MUTUAL FUND
SBI Funds Management Pvt. Ltd. is one of the leading fund houses in the
country with an investor base of over 4.6 million and over 20 years of rich

Chapter – 2
Company Profile
experience in fund management consistently delivering value to its investors.
SBI Funds Management Pvt. Ltd. is a joint venture between 'The State Bank of
India' one of India's largest banking enterprises, and Société Générale Asset
Management (France), one of the world's leading fund management companies
that manages over US$ 500 Billion worldwide.

Today the fund house manages over Rs 28500 crores of assets and has a diverse
profile of investors actively parking their investments across 36 active schemes.
In 20 years of operation, the fund has launched 38 schemes and successfully
redeemed 15 of them, and in the process, has rewarded our investors with
consistent returns. Schemes of the Mutual Fund have time after time
outperformed benchmark indices, honored us with 15 awards of performance
and have emerged as the preferred investment for millions of investors. The
trust reposed on us by over 4.6 million investors is a genuine tribute to our
expertise in fund management.

SBI Funds Management Pvt. Ltd. serves its vast family of investors through a
network of over 130 points of acceptance, 28 Investor Service Centres, 46
Investor Service Desks and 56 District Organizers.SBI Mutual is the first bank-

sponsored fund to launch an offshore fund – Resurgent India Opportunities Fund.

Growth through innovation and stable investment policies is the SBI MF credo.
PRODUCTS OF SBI MUTUAL FUND
Equity schemes
The investments of these schemes will predominantly be in the stock markets
and endeavor will be to provide investors the opportunity to benefit from the
higher returns which stock markets can provide. However they are also exposed
to the volatility and attendant risks of stock markets and hence should be chosen
only by such investors who have high risk taking capacities and are willing to
think long term. Equity Funds include diversified Equity Funds, Sectoral Funds
and Index Funds. Diversified Equity Funds invest in various stocks across
different sectors while sectoral funds which are specialized Equity Funds restrict
their investments only to shares of a particular sector and hence, are riskier than
Diversified Equity Funds. Index Funds invest passively only in the stocks of a
particular index and the performance of such funds move with the movements of
the index.

 Magnum COMMA Fund

 Magnum Equity Fund

 Magnum Global Fund

 Magnum Index Fund

 Magnum Midcap Fund

 Magnum Multicap Fund

 Magnum Multiplier plus 1993

 Magnum Sectoral Funds Umbrella

 MSFU- Emerging Business Fund
 MSFU- IT Fund
 MSFU- Pharma Fund

 MSFU- Contra Fund

 MSFU- FMCG Fund

 SBI Arbitrage Opportunities Fund

 SBI Blue chip Fund

 SBI Infrastructure Fund - Series I

 SBI Magnum Taxgain Scheme 1993

 SBI ONE India Fund

 SBI TAX ADVANTAGE FUND - SERIES I

Debt schemes

Debt Funds invest only in debt instruments such as Corporate Bonds,

Government Securities and Money Market instruments either completely
avoiding any investments in the stock markets as in Income Funds or Gilt Funds
or having a small exposure to equities as in Monthly Income Plans or Children's
Plan. Hence they are safer than equity funds. At the same time the expected
returns from debt funds would be lower. Such investments are advisable for the
risk-averse investor and as a part of the investment portfolio for other investors.
•

Magnum Children’s benefit Plan

•

Magnum Gilt Fund

•

Magnum Income Fund

•

Magnum Insta Cash Fund

•

Magnum Income Fund- Floating Rate Plan

•

Magnum Income Plus Fund

•

Magnum Insta Cash Fund -Liquid Floater Plan

•

Magnum Monthly Income Plan

•

Magnum Monthly Income Plan - Floater

•

Magnum NRI Investment Fund

•

SBI Premier Liquid Fund

BALANCED SCHEMES

Magnum Balanced Fund invests in a mix of equity and debt investments. Hence
they are less risky than equity funds, but at the same time provide
commensurately lower returns. They provide a good investment opportunity to
investors who do not wish to be completely exposed to equity markets, but is
looking for higher returns than those provided by debt funds.
•

Magnum Balanced Fund

COMPETITORS OF SBI MUTUAL FUND
Some of the main competitors of SBI Mutual Fund in Dehradoon are as
Follows:
i. ICICI Mutual Fund

ii. Reliance Mutual Fund

iii. UTI Mutual Fund
iv. Birla Sun Life Mutual Fund

v. Kotak Mutual Fund

vi. HDFC Mutual Fund
vii.Sundaram Mutual Fund
viii. LIC Mutual Fund
ix. Principal
x. Franklin Templeton
AWARDS AND ACHIEVEMENTS
SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award -
8 times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year
2005- 2006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the
Year Award 2007 and 5 Awards for our schemes.
Chapter - 3
Objectives and scope
OBJECTIVES OF THE STUDY
1.To find out the Preferences of the investors for Asset Management
Company.
2.To know the Preferences for the portfolios.
3. To know why one has invested or not invested in SBI Mutual fund
4.To find out the most preferred channel.
5. To find out what should do to boost Mutual Fund Industry.
Scope of the study

A big boom has been witnessed in Mutual Fund Industry in resent times. A large
number of new players have entered the market and trying to gain market share in this
rapidly improving market.

The research was carried on in Dehradoon. I had been sent at one of the branch of
State Bank of India Dehradoon where I completed my Project work. I surveyed on my
Project Topic “A study of preferences of the Investors for investment in Mutual
Fund” on the visiting customers of the SBI Boring Canal Road Branch.

The study will help to know the preferences of the customers, which company,
portfolio, mode of investment, option for getting return and so on they prefer. This
project report may help the company to make further planning and strategy.
Chapter – 4
Research
Methodology
RESEARCH METHODOLOGY

This report is based on primary as well secondary data, however primary data
collection was given more importance since it is overhearing factor in attitude studies.
One of the most important users of research methodology is that it helps in identifying
the problem, collecting, analyzing the required information data and providing an
alternative solution to the problem .It also helps in collecting the vital information that
is required by the top management to assist them for the better decision making both
day to day decision and critical ones.

Data sources:

Research is totally based on primary data. Secondary data can be used only for the
reference. Research has been done by primary data collection, and primary data has
been collected by interacting with various people. The secondary data has been
collected through various journals and websites.

Duration of Study:
The study was carried out for a period of two months, from 30th May to 30th July
2008.
Sampling:
 Sampling procedure:

The sample was selected of them who are the customers/visitors of State Bank if
India, Boring Canal Road Branch, irrespective of them being investors or not or
availing the services or not. It was also collected through personal visits to persons,
by formal and informal talks and through filling up the questionnaire prepared. The
data has been analyzed by using mathematical/Statistical tool.

 Sample size:

The sample size of my project is limited to 200 people only. Out of which only 120
people had invested in Mutual Fund. Other 80 people did not have invested in Mutual
Fund.

 Sample design:
Data has been presented with the help of bar graph, pie charts, line graphs etc.
Limitation:
 Some of the persons were not so responsive.
 Possibility of error in data collection because many of investors may have not
given actual answers of my questionnaire.
 Sample size is limited to 200 visitors of State Bank of India , Boring Canal Road
Branch, Dehradoon out of these only 120 had invested in Mutual Fund. The
sample.
size may not adequately represent the whole market.

Some respondents were reluctant to divulge personal information which can
affect the validity of all responses.
 The research is confined to a certain part of Dehradoon.
Chapter – 5
Data Analysis
&
Interpretation
ANALYSIS & INTERPRETATION OF THE DATA
1. (a) Age distribution of the Investors of Dehradoon
Age Group
<= 30 31-35
36-40
41-45
46-50
>50
No. of
Investors
12
18
30
24
20
16
Interpretation:
12
18
30
24
20
16
05
10
15
20
25
30
35
<=30
31-35
36-40
41-45
46-50
>50
Age group of the Investors
Investorsin
vestedinMut
ualFund
According to this chart out of 120 Mutual Fund investors of Dehradoon the most are
in the age group of 36-40 yrs. i.e. 25%, the second most investors are in the age group
of 41-45yrs i.e. 20% and the least investors are in the age group of below 30 yrs.

(b). Educational Qualification of investors of Dehradoon

Educational Qualification Number of Investors
Graduate/ Post Graduate
88
Under Graduate
25
Others
7
Total
120
71%
23%
6%
Graduate/Post Graduate Under Graduate Others
Interpretation:
Out of 120 Mutual Fund investors 71% of the investors in Dehradoon are
Graduate/Post Graduate, 23% are Under Graduate and 6% are others (under HSC).
c). Occupation of the investors of Dehradoon
.
35
45
30
4
6
0
10
20
30
40
50
Govt.
Service
Pvt.
Service
Business Agriculture
Others
Occupation of the customers
No.ofInvest
ors
Occupation
No. of Investors
Govt. Service
30
Pvt. Service
45
Business
35
Agriculture
4
Others
6
Interpretation:

In Occupation group out of 120 investors, 38% are Pvt. Employees, 25% are
Businessman, 29% are Govt. Employees, 3% are in Agriculture and 5% are in others.

(d). Monthly Family Income of the Investors of Dehradoon.

Income Group
No. of Investors
<=10,000
5
10,001-15,000
12
15,001-20,000
28
20,001-30,000
43
>30,000
32
5
12
28
43
32
05
10
15
20
25
30
35
40
45
50
<=10
10-15
15-20
20-30
>30
Income Group of the Investorsn (Rs. in Th.)
No.ofInvest
ors
Interpretation:
In the Income Group of the investors of Dehradoon, out of 120 investors, 36%
investors that is the maximum investors are in the monthly income group Rs.
20,001 to Rs. 30,000, Second one i.e. 27% investors are in the monthly income group
of more than Rs. 30,000 and the minimum investors i.e. 4% are in the monthly
income group of below Rs. 10,000

(2) Investors invested in different kind of investments.

Kind of Investments
No. of Respondents
Saving A/C
195
Fixed deposits
148
Insurance
152
Mutual Fund
120
Post office (NSC)
75
Shares/Debentures
50
Gold/Silver
30
Real Estate
65
195
148
152
120
75
50
30
65
0
50 100 150 200 250
SavingA/c
Insurance
PostOffice(
NSC)
Gold/Silver
KindsofInve
stment
No.of Respondents
Interpretation: From the above graph it can be inferred that out of 200 people,

97.5% people have invested in Saving A/c, 76% in Insurance, 74% in Fixed Deposits,
60% in Mutual Fund, 37.5% in Post Office, 25% in Shares or Debentures, 15% in
Gold/Silver and 32.5% in Real Estate.

3. Preference of factors while investing

Factors
(a) Liquidity (b) Low Risk (c) High Return (d) Trust
No. of
Respondents
40
60
64
36
20%
30%
32%
18%LiquidityLowRisk High ReturnTrust
Interpretation:
Out of 200 People, 32% People prefer to invest where there is High Return, 30%
prefer
to invest where there is Low Risk, 20% prefer easy Liquidity and 18% prefer Trust
4. Awareness about Mutual Fund and its Operations
67%
33%
YesNo
Response
Yes
No
No. of Respondents
135
65
Interpretation:
From the above chart it is inferred that 67% People are aware of Mutual Fund and its
operations and 33% are not aware of Mutual Fund and its operations.
5. Source of information for customers about Mutual Fund
Source of information
No. of Respondents
Advertisement
18
Peer Group
25
Bank
30
Financial Advisors
62
18
25
30
62
0
10
20
30
40
50
60
70
No.of
Respondents
AdvertisementPeer Group
Bank
Financial
Advisors
Source of Information
Interpretation:

From the above chart it can be inferred that the Financial Advisor is the most
important source of information about Mutual Fund. Out of 135 Respondents, 46%
know about Mutual fund Through Financial Advisor, 22% through Bank, 19%
through Peer Group and 13% through Advertisement.
6.Investors invested in Mutual Fund
Response
No. of Respondents
YES
120
NO
80
Total
200
Yes
60%
No
40%
Interpretation:
Out of 200 People, 60% have invested in Mutual Fund and 40% do not have invested
in Mutual Fund.
7. Reason for not invested in Mutual Fund
Reason
No. of Respondents
Not Aware
65
Higher Risk
5
Not any Specific Reason
10
81%
13%
6%
Not Aware Higher Risk Not Any
Interpretation:
Out of 80 people, who have not invested in Mutual Fund, 81% are not aware of
Mutual
Fund, 13% said there is likely to be higher risk and 6% do not have any specific
reason.
8. Investors invested in different Assets Management Co. (AMC)
Name of AMC
No. of Investors
SBIMF
55
UTI
75
HDFC
30
Reliance
75
ICICI Prudential
56
Kotak
45
Others
70
75
75
56
55
45
30
70
0
20
40
60
80
UTI
Reliance
ICICI
SBIMF
Kotak
HDFC
Others
NameofAMC
No. of Investors
Interpretation:

In Dehradoon most of the Investors preferred UTI and Reliance Mutual Fund. Out of
120 Investors 62.5% have invested in each of them, only 46% have invested in
SBIMF,
47% in ICICI Prudential, 37.5% in Kotak and 25% in HDFC.
9. Reason for invested in SBIMF
Reason
No. of Respondents
Associated with SBI
35
Better Return
5
Agents Advice
15
64%
9%27%Associated with SBIBetter ReturnAgents Advice
Interpretation:
Out of 55 investors of SBIMF 64% have invested because of its association with
Brand SBI, 27% invested on Agent’s Advice, 9% invested because of better return.
10. Reason for not invested in SBIMF
Reason
No. of Respondents
Not Aware
25
Less Return
18
Agent’s Advice
22
38%
28%
34%
Not AwareLess ReturnAgent'sAdvice
Interpretation:
Out of 65 people who have not invested in SBIMF, 38% were not aware with SBIMF,
28% do not have invested due to less return and 34% due to Agent’s Advice.
11. Preference of Investors for future investment in Mutual Fund
Name of AMC
No. of Investors
SBIMF
76
UTI
45
HDFC
35
Reliance
82
ICICI Prudential
80
Kotak
60
Others
75
76
45
35
82
80
60
75
0
20
40
60
80
100
No. of Investors
SBIMF
UTI
HDFC
Reliance
ICICIPrudential
Kotak
Others
NameofAMC
Interpretation:

Out of 120 investors, 68% prefer to invest in Reliance, 67% in ICICI Prudential, 63%
in SBIMF, 62.5% in Others, 50% in Kotak, 37.5% in UTI and 29% in HDFC Mutual
Fund.

12. Channel Preferred by the Investors for Mutual Fund Investment

Channel
Financial Advisor
Bank
AMC
No. of Respondents
72
18
30
60
%

15%25
%
Financial AdvisorBank AMC
Interpretation:
Out of 120 Investors 60% preferred to invest through Financial Advisors, 25%
through
AMC and 15% through Bank.
13. Mode of Investment Preferred by the Investors
Mode of Investment
One time Investment
Systematic Investment Plan (SIP)
No. of Respondents
78
42
65%
35%
OnetimeInvestmentSIP
Interpretation:
Out of 120 Investors 65% preferred One time Investment and 35 % Preferred through
Systematic Investment Plan.
14. Preferred Portfolios by the Investors
Portfolio
No. of Investors
Equity
56
Debt
20
Balanced
44
46%
17%
37%
Equity Debt Balance
Interpretation:
From the above graph 46% preferred Equity Portfolio, 37% preferred Balance and
17%
preferred Debt portfolio
15. Option for getting Return Preferred by the Investors
Option
Dividend Payout
Dividend
Reinvestment
Growth
No. of Respondents
25
10
85
21%
8%
71%
Dividend Payout Dividend ReinvestmentGrowth
Interpretation:
From the above graph 71% preferred Growth Option, 21% preferred Dividend Payout
and 8% preferred Dividend Reinvestment Option.
16. Preference of Investors whether to invest in Sectoral Funds
Response
No. of Respondents
Ye s
25
No
95
Chapter – 6
21
%

79
%
YesNo
Interpretation:
Out of 120 investors, 79% investors do not prefer to invest in Sectoral Fund because
there is maximum risk and 21% prefer to invest in Sectoral Fund.
Findings
 In Dehradoon in the Age Group of 36-40 years were more in
numbers. The second most Investors were in the age group of 41-45
years and the least were in the age group of below 30 years.
 In Dehradoon most of the Investors were Graduate or Post Graduate

and below HSC there were very few in numbers.

Findings and
Conclusion
 In Occupation group most of the Investors were Govt. employees,
the
second most Investors were Private employees and the least were
associated with Agriculture.
 In family Income group, between Rs. 20,001- 30,000 were more in
numbers, the second most were in the Income group of more than
Rs.30,000 and the least were in the group of below Rs. 10,000.
 About all the Respondents had a Saving A/c in Bank, 76% Invested
in Fixed Deposits, Only 60% Respondents invested in Mutual fund.
 Mostly Respondents preferred High Return while investment, the

second most preferred Low Risk then liquidity and the least preferred
Trust.
 Only 67% Respondents were aware about Mutual fund and its

operations and 33% were not.

 Among 200 Respondents only 60% had invested in Mutual Fund
and
40% did not have invested in Mutual fund.
 Out of 80 Respondents 81% were not aware of Mutual Fund, 13%
told there is not any specific reason for not invested in Mutual Fund
and 6% told there is likely to be higher risk in Mutual Fund.
 Most of the Investors had invested in Reliance or UTI Mutual Fund,
ICICI Prudential has also good Brand Position among investors,
SBIMF places after ICICI Prudential according to the Respondents.
 Out of 55 investors of SBIMF 64% have invested due to its

association with the Brand SBI, 27% Invested because of Advisor’s

Advice and 9% due to better return.
 Most of the investors who did not invested in SBIMF due to not
Aware of SBIMF, the second most due to Agent’s advice and rest due
to Less Return.
 For Future investment the maximum Respondents preferred Reliance
Mutual Fund, the second most preferred ICICI Prudential, SBIMF
has been preferred after them.
 60% Investors preferred to Invest through Financial Advisors, 25%
through AMC (means Direct Investment) and 15% through Bank.
 65% preferred One Time Investment and 35% preferred SIP out of
both type of Mode of Investment.
 The most preferred Portfolio was Equity, the second most was
Balance (mixture of both equity and debt), and the least preferred
Portfolio was Debt portfolio.
 Maximum Number of Investors Preferred Growth Option for
returns,
the second most preferred Dividend Payout and then Dividend
Reinvestment.
 Most of the Investors did not want to invest in Sectoral Fund, only

21% wanted to invest in Sectoral Fund.

Conclusion

Running a successful Mutual Fund requires complete understanding of

the peculiarities of the Indian Stock Market and also the psyche of the
small investors. This study has made an attempt to understand the
financial
behavior of Mutual Fund investors in connection with the preferences of
Brand (AMC), Products, Channels etc. I observed that many of people
have fear of Mutual Fund. They think their money will not be secure in
Mutual Fund. They need the knowledge of Mutual Fund and its related
terms. Many of people do not have invested in mutual fund due to lack of
awareness although they have money to invest. As the awareness and
income is growing the number of mutual fund investors are also growing.

“Brand” plays important role for the investment. People invest in those
Companies where they have faith or they are well known with them.
There are many AMCs in Dehradoon but only some are performing well
due to Brand awareness. Some AMCs are not performing well although
some of the schemes of them are giving good return because of not
awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they
are well known Brand, they are performing well and their Assets Under
Management is larger than others whose Brand name are not well known
like Principle, Sunderam, etc.

Distribution channels are also important for the investment in mutual

fund. Financial Advisors are the most preferred channel for the
investment in mutual fund. They can change investors’ mind from one
investment option
to others. Many of investors directly invest their money through AMC
because they do not have to pay entry load. Only those people invest
directly who know well about mutual fund and its operations and those
have time.
Suggestions and Recommendations
 The most vital problem spotted is of ignorance. Investors should be
made aware of the benefits. Nobody will invest until and unless he
is fully convinced. Investors should be made to realize that

Chapter – 7
Suggestions
And
Recommendations
ignorance is no longer bliss and what they are losing by not
investing.
 Mutual funds offer a lot of benefit which no other single option

could offer. But most of the people are not even aware of what actually a
mutual fund is? They only see it as just another investment option. So the
advisors should try to change their mindsets. The advisors should target
for more and more young investors. Young investors as well as persons at
the height of their career would like to go for advisors due to lack of
expertise and time.

 Mutual Fund Company needs to give the training of the Individual

Financial Advisors about the Fund/Scheme and its objective,
because they are the main source to influence the investors.
 Before making any investment Financial Advisors should first

enquire about the risk tolerance of the investors/customers, their need and
time (how long they want to invest). By considering these three things
they can take the customers into consideration.
 Younger people aged under 35 will be a key new customer group
into the future, so making greater efforts with younger customers
who show some interest in investing should pay off.
 Customers with graduate level education are easier to sell to and
there is a large untapped market there. To succeed however, advisors
must provide sound advice and high quality.


Systematic Investment Plan (SIP) is one the innovative products

launched by Assets Management companies very recently in the industry.
SIP is easy for monthly salaried person as it provides the facility of do the
investment in EMI. Though most of the prospects and potential investors
are not aware about the SIP. There is a large scope for the companies to
tap the salaried persons.

BIBLIOGRAPHY
•
NEWS PAPERS
•
OUTLOOK MONEY
•
TELEVISION CHANNEL (CNBC AAWAJ)
•
MUTUAL FUND HAND BOOK
•
FACT SHEET AND STATEMENT
•
WWW.SBIMF.COM
•
WWW.MONEYCONTROL.COM
•
WWW.AMFIINDIA.COM
•
WWW.ONLINERESEARCH ONLINE.COM
•
WWW. MUTUALFUNDSINDIA.COM
Mutual Funds
All About Mutual Funds
Before we understand what is mutual fund, it’s very important to know the area in
which
mutual funds works, the basic understanding of stocks and bonds.
Stocks:Stocks represent shares of ownership in a public company. Examples of public
companies
include Reliance, ONGC and Infosys. Stocks are considered to be the most common
owned
investment traded on the market.
Bonds: Bonds are basically the money which you lend to the government or a
company, and in

return you can receive interest on your invested amount, which is back over
predetermined amounts of time. Bonds are considered to be the most common lending
investment traded on the market. There are many other types of investments other
than stocks and bonds (including annuities, real estate, and precious metals), but the
majority of mutual funds invest in stocks and/or bonds.

What Is Mutual Fund

A mutual fund is just the connecting bridge or a financial intermediary that

allows a group of investors to pool their money together with a predetermined
investment objective. The mutual fund will have a fund manager who is responsible
for investing the gathered money into specific securities (stocks or bonds). When you
invest in a mutual fund, you are buying units or portions of the mutual fund and thus
on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as

compare to others they
are very cost efficient and also easy to invest in, thus by pooling money together in a
mutual fund,
investors can purchase stocks or bonds with much lower trading costs than if they
tried to do it on
their own. But the biggest advantage to mutual funds is diversification, by minimizing
risk &
maximizing returns.

Thus a Mutual Fund is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost. The flow chart below describes broadly the working
of a mutual fund
Unit Trust of India is the first Mutual Fund set up under a separate act,
UTI Act in 1963, and started its operations in 1964 with the issue of
units under the scheme US-64.

Overview of existing schemes existed in mutual fund category

 Wide variety of Mutual Fund Schemes exists to cater to the needs such as
financial position, risk tolerance and return expectations etc. The table below gives an
overview into the existing types of schemes in the Industry.

Type of Mutual Fund Schemes

BY STRUCTURE
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.

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.

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:
•

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.
•

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
provide 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.
•

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.

OTHER SCHEMES
•

Tax-saving schemes offer tax rebates to the investors under tax laws
Tax Saving Schemes:
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 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.

Types of returns
There are three ways, where the total returns provided by mutual funds can be
enjoyed by investors:
•

Income is earned from dividends on stocks and interest on bonds. A fund pays out
nearly all
income it receives over the year to fund owners in the form of a distribution.
•

If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds
also pass on these gains to investors in a distribution.
•

If fund holdings increase in price but are not sold by the fund manager, the fund's
shares
increase in price. You can then sell your mutual fund shares for a profit. Funds will
also
usually give you a choice either to receive a check for distributions or to reinvest the
earnings
and get more shares.

Pros & cons of investing in mutual funds:

For investments in mutual fund, one must keep in mind about the Pros and cons of
investments in mutual fund.
Advantages of Investing Mutual Funds:
1. Professional Management - The basic advantage of funds is that, they are professional
managed,

by well qualified professional. Investors purchase funds because they do not have the
time or the
expertise to manage their own portfolio. A mutual fund is considered to be relatively
less expensive
way to make and monitor their investments.

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

or bonds,

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

3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time,
thus help to
reducing transaction costs, and help to bring down the average cost of the unit for
their investors.
4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate
their
holdings as and when they want.
5. Simplicity - Investments in mutual fund is considered to be easy, compare to other
available
instruments in the market, and the minimum investment is small. Most AMC also
have automatic
purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per
month basis.
Disadvantages of Investing Mutual Funds:
1. Professional Management- Some funds doesn’t perform in neither the market, as their

management is not dynamic enough to explore the available opportunity in the

market, thus many investors debate over whether or not the so-called professionals
are any better than mutual fund or investor himself, for picking up stocks.

2. Costs – The biggest source of AMC income, is generally from the entry & exit load
which they
charge from an investors, at the time of purchase. The mutual fund industries are thus
charging extra
cost under layers of jargon.
3. Dilution - Because funds have small holdings across different companies, high
returns from a few

investments often don't make much difference on the overall return. Dilution is also
the result of a
successful fund getting too big. When money pours into funds that have had strong
success, the
manager often has trouble finding a good investment for all the new money.

- when making decisions about your money, fund managers don't consider
4. Taxes
your personal tax

situation. For example, when a fund manager sells a security, a capital-gain tax is
triggered, which affects how profitable the individual is from the sale. It might have
been more advantageous for the individual to defer the capital gains liability.
Mutual Funds Industry in India

The origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated
from the year 1987 when non- UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvements,
both quality wise
as well as quantity wise. Before, the monopoly of the market had seen an ending
phase, the Assets
Under Management (AUM) was Rs. 67bn. The private sector entry to the fund family
rose the AUM
to Rs. 470 in in March 1993 and till April 2004, it reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is
less than the
deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian
banking
industry.

The main reason of its poor growth is that the mutual fund industry in India is new in
the country.
Large sections of Indian investors are yet to be intellectuated with the concept. Hence,
it is the prime
responsibility of all mutual fund companies, to market the product correctly abreast of
selling.

The mutual fund industry can be broadly put into four phases according to the
development of the
sector. Each phase is briefly described as under.
The major players in the Indian Mutual Fund Industry are:
Major Players of Mutual Funds In India
Period (Last&nbsp1 Week)

Rank
Scheme Name
Date
N AV
(Rs.)
Last 1
Week
Since
Inception
1
JM Core 11 Fund - Series 1 -
Growth
Mar 26
, 2008
8.45
5.12
-94.64
2
Tata Indo-Global Infrastructure
Fund - Growth
Mar 26
, 2008
8.26
5.05
-40.42
3
Tata Capital Builder Fund -
Growth
Mar 26
, 2008
12.44
5.03
15.35
4
Standard Chartered Enterprise
Equity Fund - Growth
Mar 26
, 2008
14.07
5
20.92
5
DBS Chola Infrastructure Fund -
Growth
Mar 26
, 2008
9.01
4.65
-17.17
6

ICICI Prudential Fusion Fund -

Series III - Institutional -
Growth

Mar 26
, 2008
10.2
4.62
23.69
7
DSP Merrill Lynch Micro Cap
Fund - Regular - Growth
Mar 26
, 2008
9.93
4.56
-0.85
8
ICICI Prudential Fusion Fund -
Series III - Retail - Growth
Mar 26
, 2008
10.19
4.51
22.39
9
DBS Chola Small Cap Fund -
Growth
Mar 26
, 2008
6.36
3.75
-81.78
10
Principal Personal Taxsaver
Mar 25
, 2008
124.66 3.44
29.97
11
Benchmark Split Capital Fund -
Plan A - Preferred Units
Mar 26
, 2008
141.51 3.14
13.71
12
ICICI Prudential FMP - Series
33 - Plan A - Growth
Mar 26
, 2008
9.89
2.91
-7.88
13
Tata SIP Fund - Series I -
Growth
Mar 26
, 2008
10.25
2.38
2.39
14
Sahara R.E.A.L Fund - Growth
Mar 25
, 2008
7.64
1.86
-49.52
15
Tata SIP Fund - Series II -
Growth
Mar 26
, 2008
9.93
1.58
-0.94
 A mutual fund is a professionally-managed firm of collective investments that pools
money from
many investors and invests it in stocks, bonds, short-term money market instruments,
and/or other
securities.in other words we can say that A Mutual Fund is a trust registered with the
Securities and
Exchange Board of India (SEBI), which pools up the money from individual /
corporate investors and
invests the same on behalf of the investors /unit holders, in equity shares, Government
securities,
Bonds, Call money markets etc., and distributes the profits.
The value of each unit of the mutual fund, known as the net asset value (NAV), is
mostly calculated
daily based on the total value of the fund divided by the number of shares currently
issued and
outstanding. The value of all the securities in the portfolio in calculated daily. From
this, all expenses
are deducted and the resultant value divided by the number of units in the fund is the
fund’s NAV.

NAV =
Total value of the fund……………….
No. of shares currently issued and outstanding
Advantages of a MF

– Mutual Funds provide the benefit of cheap access to expensive stocks

– Mutual funds diversify the risk of the investor by investing in a basket of assets
– A team of professional fund managers manages them with in-depth research inputs

from investment analysts.

– Being institutions with good bargaining power in markets, mutual funds have access
to
crucial corporate information, which individual investors cannot access.
History of the Indian mutual fund industry:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the
initiative of the Government of India and Reserve Bank. The history of mutual funds
in India can be
broadly divided into four distinct phases.

First Phase – 1964-87

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

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual
fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end
of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase – 1993-2003 (Entry of Private Sector Funds)

1993 was the year in which the first Mutual Fund Regulations came into being, under
which all
mutual funds, except UTI were to be registered and governed. The erstwhile Kothari
Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund registered
in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised
Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund)
Regulations 1996. As at the end of January 2003, there were 33 mutual funds with
total assets of Rs.
1,21,805 crores.
Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into
two separate entities. One is the Specified Undertaking of the Unit Trust of India with
assets under
management of Rs.29,835 crores as at the end of January 2003, representing broadly,
the assets of US
64 scheme, assured return and certain other schemes
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with
SEBI and functions under the Mutual Fund Regulations. consolidation and growth.
As at the end of
September, 2004, there were 29 funds, which manage assets of Rs.153108 crores
under 421 schemes.
Categories of mutual funds:
Mutual funds can be classified as follow:
 Based on their structure :
•

Open-ended funds: Investors can buy and sell the units from the fund, at any point of
time.
•

Close-ended funds: These funds raise money from investors only once. Therefore,
after the offer period, fresh investments can not be made into the fund. If the fund is
listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley
Growth Fund). Recently, most of the New Fund Offers of close-ended funds provided
liquidity window on a periodic basis such as monthly or weekly. Redemption of units
can be made during specified intervals. Therefore, such funds have relatively low
liquidity.

 Based on their investment objective :

Equity funds: These funds invest in equities and equity related instruments. With fluctuating
share prices, such funds show volatile performance, even losses. However, short term
fluctuations in the market, generally smoothens out in the long term, thereby offering higher
returns at relatively lower volatility. At the same time, such funds can yield great capital
appreciation as, historically, equities have outperformed all asset classes in the long term.
Hence, investment in equity funds should be considered for a period of at least 3-5 years. It
can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is
tracked. Their
portfolio mirrors the benchmark index both in terms of composition and individual
stock
weightages.
ii) Equity diversified funds- 100% of the capital is invested in equities spreading
across different
sectors and stocks.
iii) Dividend yield funds- it is similar to the equity diversified funds except that they
invest in
companies offering high dividend yields.
iv) Thematic funds- Invest 100% of the assets in sectors which are related through
some theme.
e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector
fund will invest
in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
Balanced fund: Their investment portfolio includes both debt and equity. As a result, on the
risk-return
ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds
vehicle for investors
who prefer spreading their risk across various instruments. Following are balanced funds
classes:
i) Debt-oriented funds -Investment below 65% in equities.
ii) Equity-oriented funds-Invest at least 65% in equities, remaining in debt.
Debt fund: They invest only in debt instruments, and are a good option for investors
averse to idea of

taking risk associated with equities. Therefore, they invest exclusively in fixed-
income instruments like bonds, debentures, Government of India securities; and
money market instruments such as certificates of deposit (CD), commercial paper
(CP) and call money. Put your money into any of these debt funds depending on your
investment horizon and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a large
portion being invested
in call money market.
ii)Gilt funds ST- They invest 100% of their portfolio in government securities of and
T-bills.
iii)Floating rate funds - Invest in short-term debt papers. Floaters invest in debt
instruments which
have variable coupon rate.
iv)Arbitrage fund- They generate income through arbitrage opportunities due to mis-
pricing between
cash market and derivatives market. Funds are allocated to equities, derivatives and
money markets.
Higher proportion (around 75%) is put in money markets, in the absence of arbitrage
opportunities.
v)Gilt funds LT- They invest 100% of their portfolio in long-term government
securities.
vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in
long-term debt
papers.
vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an
exposure of 10%-
30% to equities.
viii)FMPs- fixed monthly plans invest in debt papers whose maturity is in line with
that of the fund.
Investment strategies:
1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed
date of a

month. Payment is made through post dated cheques or direct debit facilities. The
investor gets fewer units when the NAV is high and more units when the NAV is low.
This is called as the benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan:under this an investor invest in debt oriented fund and give
instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the
same mutual fund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he
can
withdraw a fixed amount each month.
Risk v/s. return:
Working of a Mutual fund:
The entire mutual fund industry operates in a very organized way. The investors,
known as unit
holders,handover their savings to the AMCs under various schemes. The objective of
the investment
should match with the objective of the fund to best suit the investors’ needs. The
AMCs further invest
the funds into various securities according to the investment objective. The return
generated from the
investments is passed on to the investors or reinvested as mentioned in the offer
document.
Mutual Funds

Working
Of
Mutual Fund
Before we understand what is mutual fund, it’s very important to know the area in
which
mutual funds works, the basic understanding of stocks and bonds.
Stocks: Stocks represent shares of ownership in a public company. Examples of public
companies
include Reliance, ONGC and Infosys. Stocks are considered to be the most common
owned
investment traded on the market.
Bonds: Bonds are basically the money which you lend to the government or a
company, and in

return you can receive interest on your invested amount, which is back over
predetermined amounts of time. Bonds are considered to be the most common lending
investment traded on the market. There are many other types of investments other
than stocks and bonds (including annuities, real estate, and precious metals), but the
majority of mutual funds invest in stocks and/or bonds.

What Is Mutual Fund

A mutual fund is just the connecting bridge or a financial intermediary that

allows a group of investors to pool their money together with a predetermined
investment objective. The mutual fund will have a fund manager who is responsible
for investing the gathered money into specific securities (stocks or bonds). When you
invest in a mutual fund, you are buying units or portions of the mutual fund and thus
on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as

compare to others they are very cost efficient and also easy to invest in, thus by
pooling money together in a mutual fund, investors can purchase stocks or bonds with
much lower trading costs than if they tried to do it on their own. But the biggest
advantage to mutual funds is diversification, by minimizing risk & maximizing
returns.

Thus a Mutual Fund is the most suitable investment for the common man as it offers
an opportunity to
invest in a diversified, professionally managed basket of securities at a relatively low
cost. The flow
chart below describes broadly the working of a mutual fund
Overview of existing schemes existed in mutual fund category
 Wide variety of Mutual Fund Schemes exists to cater to the needs such as
financial position, risk tolerance and return expectations etc. The table below gives an
overview into the existing types of schemes in the Industry.
Type of Mutual Fund Schemes
BY STRUCTURE
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.

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.

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
Under this the mutual fund is categorized on the basis of Investment Objective. By
nature the mutual
fund is categorized as follow:
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:
•

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.
•

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.
•

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.

OTHER SCHEMES
•

Tax-saving schemes offer tax rebates to the investors under tax laws
Tax Saving Schemes:
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 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.

PROJECT
ON MUTUAL FUND AKHILESH
MISHRA
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Minakshi Kanodialeft a comment

can anybody send THE MUTUAL FUND REPORT BY AKHILESH KUMAR to my id-
[email protected], PLZ ITS VERY IMPORTANT....
10 / 21 / 2010
Reply

Philemon Famiehleft a comment

read this
05 / 14 / 2010
Reply

baapmaaleft a comment

www.sbilife.co.in is the official website of the SBI Pension Scheme and Retirement
Plans. One of the most popular insurance company in India is SBI Life. SBI Life
Insurance Company Limited is a joint venture between the State Bank of India and BNP
Paribas Assurance. It is registered with a sanctioned capital of Rs. 2000 crores and a
Paid-up capital of Rs. 1000 Crores in that SBI owns 74% and BNP P
04 / 30 / 2010
Reply

nehanarang19left a comment

hi, can anyone send me the soft copy of this project at my mail id-
[email protected]. i will be highly obliged. it is really urgent. thanks in advance
04 / 24 / 2010
Reply

nehanarang19left a comment

hi, can anyone send me the soft copy of this project at my mail id-
[email protected]. i will be highly obliged. it is really urgent. thanks in advance
04 / 24 / 2010
Reply
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