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A Project Report On Report On Overview of Mutual Fund Investment in India Submitted by Nidhi Poojary

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A

Project ReportOn

Report On Overview Of Mutual Fund Investment In India

SUBMITTED BY

Nidhi Poojary

Roll No.: 33

T.Y.B.M.S. SEMESTER – VI PROJECT

GUIDE

DR./PROF. . Kinjal Sanghavi

SUBMITTED TO

UNIVERSITY OF MUMBAI

RAJASTHANI SAMMELAN’S

Ghanshyamdas Saraf College


Of Arts & Commerce

Affiliated to University of Mumbai

Reaccredited by NAAC with ‘A’ GradeS.V.Road,

Malad (West)

Mumbai – 400064.

A.Y. 2021 – 2022


RAJASTHANI SAMMELAN’S

Ghanshyamdas Saraf College

Of Arts & Commerce

Affiliated to University of Mumbai

Reaccredited by NAAC with ‘A’ Grade

S.V.Road, Malad (West)

Mumbai – 400064.

A.Y. 2021 – 2022

CERTIFICATE

This is to certify that Mr. /Ms. Nidhi Jayakar Poojary , Roll no: 3 3 , has worked and duly
completed her/his Project Work for the degree of Bachelor of Management Studies under the
Faculty of Commerce in the subject of Finance and her/his project is entitled,
“Overview Of Report On Mutual Fund Investment In IndiaTitle name“ under my
supervision.

I further certify that the entire work has been done by the learner under my guidance and that
no part of it has been submitted previously for any Degree or Diploma of any University.

It is her/his own work and facts reported by her/his personal findings and investigations.

Name & Signature of:

Project Guide: Principal:


Date:

College
External Examiner:
Seal
Date:
DECLARATION

I, the undersigned, Miss/Mr. Nidhi Jayakar Poojary , a student of Ghanshyamdas Saraf


College of Arts & Commerce,
Malad (West) T.Y.B.M.S. SEMESTER – VI hereby declare that the work embodied in this
project work titled “Overview Of Report On Mutual Fund Investment In IndiaTitle
name“, forms my owncontribution to the research work carried out under the guidance of
Dr./Prof. (Project Guide Name) is a result of my own research work and has not been
previously submitted to any other University for any other Degree/Diploma to this or any
other University.

Wherever reference has been made to previous works of others, it has been clearly indicated
as such and included in the bibliography.

I, hereby further declare that all information of this document has been obtained and
presented in accordance with academic rules and ethical conduct.

Name and Signature of the student

Certified by

Name and Signature of the Guiding Teacher


ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous and the depth isso
enormous.

I would like to acknowledge the following as being idealistic channels and freshdimensions
in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me chance to dothis
project.

I would like to thank my Principal Dr. Ashwat Desai for providing the necessary facilities
required for completion of this project.

I take this opportunity to thank our Vice-Principal (SFD) Dr. Lipi Mukherjee and
Course Coordinator Prof. Prajna Shetty for their moral support and guidance.

I would also like to express my sincere gratitude towards Dr./Prof. Kinjal Sanghavi
whose guidance and care made the project successful.

I would like to thank my College Library, for having provided various reference books and
magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped mein
the completion of the project especially my Parents and Peers who supported me
throughout my project.
INDEX

Sr. No. Topic Page Number

• Executive Summary

1. 1.1 Introduction 1-2


1.2 Definition 2
1.3 History
3.8
1.4 Concept 8
1.5 Characteristics
9
1.6 Features 9-11
1.7 Function 11-12

1.8 Advantage And Disadvantages 12-16


1.9 Investment Objective Of Mutual Fund
16-18
1.10 The Way And The Types To Invest In Mutual 18-24
Fund
1.11 Pointers To Measure Mutual Fund 24-28
Performance
1.12 Rules And Regulations Of Mutual Fund In 28-33
India

1.13 How To Reduce Risk While Investing In


33-34
Mutual Fund
1.14 Recent Trend Of Mutual Fund 34-39

1.15 How To Select The Top Performing Mutual 40-44


Fund In India
1.16 Opportunity And Challenge 45
1.17 Growth Of Mutual Fund Industry Expected
46-47
In India
2. Research methodology

2.1 Introduction 48

2.2 Objective Of The Study 49

2.3 Scope Of The Study 49-50

2.4 Limitation Of The Study 50

2.5 Method Of Data Collection 51

2.6 Design Of Sampling 51

2.7 Tabulation Of Data 51

3. Literature Review 58-60

4. Data Analysis and Interpretation 61-77

5. Conclusion and Suggestions 78-80

6. Case Study/ Article (Optional)

• Bibliography/References

• Appendix
CHAPTER NO. 1

1.1 Introduction

The Indian financial system is composed of four fundamental parts: the financial
market, financial institutions, financial services, and financial instruments. All of them
are crucial to the efficient transmission and distribution of funds. The primary goal of
the Indian financial system is to effectively serve the capital market. Under the second
wave of reforms, the Indian stock market has grown enormously. The LPG concept
was the beginning of the first generation of changes in 1991. (Liberalization,
Privatization, Globalization)
After 1997, the second generation of reforms began, and they are still in progress
today. These include changes to industrial investment, fiscal policy, export-import
policy, public sector, financial sector, foreign investment through institutional
investors, and banking sector reforms. India's post-independence economic
development model was defined by a mixed economy, with the public sector
predominating and operations in the private industrial sector subject to intermittent
emaciation. Our financial system has grown astronomically in terms of both its
financial and geographical reach during the past twenty years.
A mutual fund is a type of collective investment vehicle that pools and collects money
from a number of people and uses that money to buy stocks, bonds, government
securities, and other financial products like money market instruments. Professional
fund managers invest the funds raised by mutual fund schemes in securities including
such equities and bonds.
In order to minimize risk and optimize income and capital appreciation for
distribution to members, mutual funds are trusts that accept savings from investors
with similar financial goals. The interests of the fund manager are to professionally
manage the money contributed by investors and to offer a return on that money after
subtracting fair management costs.

1
In simple words, Mutual fund is a mechanism for pooling the resources by issuing
units to the investors and investing funds in securities in accordance with objectives
as disclosed in offer document. 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
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.
The investor's funds would be invested by the investment manager in assets that are
permitted or defined by the schemes' stated goals. A debt fund would invest in bonds,
debentures, gifts, etc., whereas an equity fund would invest in equity and securities
related to equity.
Because mutual funds offer expert management, diversification, ease, and liquidity,
investors choose them as their preferred method of investing.

1.2 Definition

"A mutual fund is an investment that combines your funds with the funds of an
unlimited number of other participants. You and the other investors receive shares
of the fund in exchange. The assets of the fund are placed into the fund's
investment portfolio in accordance with an investment objective”

According to SEBI, "Mutual funds are a method for pooling resources by issuing
units to investors and investing funds in securities in accordance with goals as
indicated in offer documents."

2
1.3 History

Among Indian investors, mutual fund investments are the most common. In the past,
people invested in things like gold, real estate, fixed deposits, etc. to increase their
wealth. But with the introduction of mutual funds, people switched away from the
conventional form of investing and instead began to put their hard-earned cash in the
financial markets.
AMC (Asset Management Company), a business that invests in a variety of financial
instruments like gold, bonds, and stocks, manages mutual funds by providing
reasonable return to investors with lower risk.
Mutual funds have a history that dates back to the nineteenth century, when they were
introduced in Europe, particularly in the United Kingdom. In 1868, Robert Fleming
established the first investment trust, the Foreign and colonial investment trust, which
promised to manage the finances of Scotland's moneyed classes by spreading the
investment across a variety of stocks. This investment trust, and subsequent
investment trusts established in the United Kingdom and the United States, resembled
today's closed - ended mutual funds. Massachusetts investor's trust established the first
mutual fund in the United States in March 1924. This was the case with the open-
ended mutual fund.

The 1929 stock market crash, the Great Depression, and the outbreak of World War II
all slowed the mutual fund industry's growth. In the 1950s and 1960s, product and
service innovations increased the popularity of mutual funds. In 1940, the first
international stock mutual fund was introduced in the United States. In 1976, the first
tax - exempt municipal bond funds emerged and in 1979, the first money market
mutual funds were created. The international bond fund debuted in 1986, followed by
the arm funds in 1990. This industry experienced significant growth in the 1980s and
1990s, when the number of mutual funds, schemes, assets, and shareholders increased
significantly. In the US the mutual fund industry registered s ten – fold growth the
eighties. Since 1996, mutual fund assets have exceeds bank deposits. The mutual fund
industry and the banking industry virtually rival each other in size.

3
A mutual fund is a type of investment company that pools assets from investors and
invests them in stocks, bonds, or money market instruments on a collective basis.
According to K. Geert Rouwenhost in the Origins Mutual Funds, investment company
concepts date back to Europe in the late 1700s, when "a Dutch Merchant and Broker
Invited subscriptions from investor with limited means." The emergence of
"investment Pooling" in England in the 1800s brought the concept closer to the United
States. The passage of two British laws, the Joint Stock Companies Acts of 1862 and
1867, allowed investors to share in an investment enterprise's profits while limiting
investor liability to the amount of investment capital devoted to the venture. Perhaps
most notably, the British fund model established a direct link with U.S. Securities
markets, assisting in the financing of the post-Civil War U.S. economy. The Scottish
American Investment Trust, founded on February 1, 1873 by fund pioneer Robert
Fleming, invested in the United States' economic potential, primarily through
American railroad bonds. Many other trusts followed, not only focusing on
investments in America, but also introducing the fund investing concept to American
shores in the late 1800s and early 1900s.

Nov. 1925. All of these funds were open-ended and had a redemption feature.
Similarly, they possessed almost all of the characteristics of a good modern Mutual
Fund - such as sound investment policies and restrictions, open end ness, self -
liquidating features, a published portfolio, a simple capital structure, excellent and
professional fund management and diversification, and so on - and thus they are the
honored grand - parents of today's funds. Prior to these funds, all of the initial
investment firms were closed - ended. As a result, while the basic concept of
diversification and professional fund management were chosen by the United States
of America from England Investment Companies, "The Mutual Fund is an American
Creation."
Because of their exclusive feature, open - ended Mutual Funds rapidly became very
popular. By 1929, the United States had 19 open-ended Mutual Funds with total
assets of $ 140 million. However, the 1929 stock market crash, followed by the Great
Depression of 1930, devastated the United States Financial Market as well as the
Mutual Fund Industry. This called for stricter regulation of mutual funds and the
financial sector. As a result, in order to protect the interests of ordinary investors, the

4
United States government enacted various Acts, including the Securities Act of 1933,
the Securities Exchange Act of 1934, and the Investment Companies Act of 1940.

As a result of these measures, the Mutual Fund Industry began to develop quickly,
with total net assets increasing from $ 448 million in 1940 to $ 2.5 billion in 1950.
During the period 1940-1951, the number of shareholder accounts increased from
296000 to more than one million. "As a result of renewed interest in the mutual fund
industry, they grew at an 18% annual compound rate, peaking in the late 1960s."
The history of mutual funds in India began in 1963, with the establishment of the Unit
Trust of India (UTI). The Government of India initiated this with the assistance of the
Reserve Bank of India (RBI). The Unit Scheme 1964, India's first mutual fund
scheme, was launched by UTI in 1964.
The history of mutual funds in India can be divided into several distinct periods. We'll
arrange them as follows:

The first phase (1963 – 1987): Initiation Phase


With the formation of UTI in 1963, the mutual fund industry was established during
this period. It is the country's first mutual fund. The establishment was made possible
by the Reserve Bank of India and the Indian government. Later that year, in 1971, the
AMC launched the ULIP scheme (Unit Linked Insurance Plan). Since then, AMC has
launched a number of mutual fund plans that have helped the mutual fund's growth.
The overall goal of introducing mutual funds in India was to raise investor awareness
of financial markets, increase financial literacy among Indian investors, and
demonstrate how they can grow their wealth by investing in the equity market. Until
1998, UTI had an AUM of Rs. 6700 crores.

The second phase (1987-1993): Public Sector Phase

As the economy expanded in 1987, other players from the public sector entered the
market. SBI Mutual Fund was the first Non-UTI Mutual Fund to be established in
November 1987. This was followed by
▪ LIC Mutual Fund,

5
▪ Canbank Mutual Fund,
▪ Indian Bank Mutual Fund,
▪ GIC Mutual Fund,
▪ Bank of India Mutual Fund,
▪ and PNB Mutual Fund.
From 1987 to 1993, the AUM nearly seven folded, rising from Rs. 6,700 crores to
Rs. 47,004 crores. During this time, investors invested a large portion of their
earnings in mutual funds.

The third phase (1993 – 2003): Private Sector Phase


With the introduction of private sector funds in 1993, a new era in the Indian mutual
fund industry began, providing Indian investors with a broader range of fund families.
Also in 1993, the first Mutual Fund Regulations were enacted, under which all mutual
funds, except UTI, were to be registered and governed. In July 1993, the former
Kothari Pioneer (now merged with Franklin Templeton) was the first private sector
mutual fund to be registered.

SEBI interventions and growth, and AMFI


In 1996, the SEBI (Mutual Fund) Regulations of 1993 were replaced by a more
comprehensive and revised Mutual Fund Regulations.
As the mutual fund industry grew further in the 1990s, the AMCs and the government
felt that it was time for regulation and some control. Investors had to be protected as
well as a level playing ground had also to be laid down. A few years ago, the Indian
industry had suffered a lot because of bank scams and there was a real threat that
investors might lose their monies yet again.
Consequently, the government introduced the SEBI Regulation Act in 1996 which
laid down a set of fair and transparent rules for all the stakeholders. In 1999, the
Indian government declared that all mutual fund dividends would be exempt from
income tax. The idea behind this decision was to spur further growth in the mutual
fund industry.
Meanwhile, the mutual fund industry also realized the importance of self-regulation.
As a result, it set up an industry body- the Association of Mutual Funds of India
(AMFI). One of the goals of this body is investor education.

6
The number of mutual fund houses has grown, with many foreign mutual funds
establishing funds in India, and the industry has seen several mergers and
acquisitions.
There were 33 mutual funds with a total asset value of Rs. 1,21,805 crores as of the
end of January 2003. With Rs. 44,541 crores in assets under management, the Unit
Trust of India was far ahead of other mutual funds.

The fourth phase (February 2003 – April 2014)


Following the repeal of the Unit Trust of India Act 1963 in February 2003, UTI was
divided into two distinct organizations.
The first is the Specified Undertaking of Unit Trust of India (SUUTI), which operates
under the Indian government's administrator and regulations. The Mutual Fund
Regulations have no authority over it.
The second is the UTI Mutual Fund, which was spun off from Unit Trust of India and
began operating under SEBI MF regulations on February 1, 2003.
That after the global economic downturn in 2009, global financial markets were at an
all-time low, as was India. The majority of investors who put their money in at the
peak of the market suffered massive losses. For more than two years, the Indian
mutual fund industry struggled to recover from these setbacks and reinvent itself.
Furthermore, the situation deteriorated due to SEBI's elimination of entry load and the
effects of the global economic crisis. This scenario is reflected in the slow growth of
the Indian mutual fund industry's overall AUM.

Existing growth of mutual fund (Since May 2014)


Although mutual funds are not widely used in India, particularly in tier II and tier III
towns, SEBI initiated a number of progressive initiatives in September 2012. These
initiatives were intended to increase security and transparency for the benefit of all
parties. To "re-energize" the Indian MF Industry and increase the overall penetration
of mutual funds in India, SEBI came up with this plan.
The actions were successful in reversing the downward trend that the global financial
crisis had started in due time. As the center's new government took office, things
significantly got better.

7
By reversing the detrimental trend created by the global financial crisis, the actions
showed results in due time. As the new government at the Centre assumed control,
things significantly improved.
The entire AUM and the total number of investor accounts in the Indian MF business
have consistently increased since May 2014. (Portfolio).
A total of over Rs. 23 lakh crore worth of assets are being managed by all Indian asset
management firms. We still have a long way to go before we can compete with the
west, even though this number appears promising.
Indians are expected to save between 20 and 30 lakh crore rupees yearly. If Indians
began to invest a larger portion of their savings in mutual funds, the industry could
expand significantly. Indians, according to experts, have started moving some of their
wealth away from tangible assets like gold and land and into financial products like
bonds and silver.
Yet, the AMFI and the government need to promote mutual fund investments among
Indians much more.

1.4 Concept Of Mutual Fund

A mutual fund is a trust that pools the savings of a group of investors who all have the
same financial goal. The funds raised are then invested in capital market instruments
such as shares, debentures, and other securities. The income generated by these
investments, as well as the capital gains realised, are distributed to unit holders in
proportion to the number of units owned. Thus, a mutual fund is the best investment
for the average person because it allows them to invest in a diverse, professionally
managed basket of securities at a low cost. The flow chart below depicts the general
operation of a mutual fund:

8
1.5 Characteristics of mutual fund

The important characteristics of mutual fund are :


1. Mutual fund shares are purchased from the fund itself (or through a broker for the
fund) rather than from other investors on a secondary market such as the New York
Stock Exchange or the Nasdaq Stock Market.
2. The price that investors pay for mutual fund shares is equal to the fund's per share
net asset value (NAV) plus any shareholder fees levied at the time of purchase (such
as sales loads)
3. To accommodate new investors, mutual funds typically create and sell new shares.
In other words, they sell their shares continuously, though some funds stop selling
when they become too large, for example.
4. The investment portfolios of mutual funds typically are managed by separate
entities known as "investment advisers".

1.6 Features of mutual fund

➢Professional management
Professional fund managers run mutual funds, keeping a careful eye on the markets
and continuously choosing investments based on the fund's stated goal. As a result,
once you start investing in mutual funds, you won’t need to bother about stock
research or selection.

➢Liquidity

Certain debt securities with a short maturity of up to 91 days are purchased by


liquid mutual funds. They offer high liquidity as indicated by their name and
do not have a lock-in period. Additionally, liquid funds are less riskier
investments than growth funds because of their quick maturity term.

➢Low cost

9
Investors pay a tiny fee to mutual funds known as the cost ratio. Operating costs
including management, administration, and other fees are charged through the
expense ratio.

➢Ease of purchase

While you can invest easily via offline methods, buying and selling mutual
funds online has significantly simplified the lives of investors. You are not
required to go to the office of a mutual fund business. Simply go to the asset
management company's website. Online investing is possible after comparing
the fund house's various mutual fund offerings. The entire procedure is simple,
practical, and quick.

➢Tax benefit
Under Section 80C of the Income Tax Act, 1961, mutual funds—also known as
Equity Linked Savings Schemes (ELSS)—are excellent tools for reducing one's
taxable income. If you invest your money in certain types of investments, this
section enables you to deduct certain expenses from your taxable income.

➢Diversification
Reduced risk in mutual fund investments is the ultimate goal of diversification.
Some financial tools have a better track record than their rivals. This is dependent
on elements like the current interest rates, the state of the market, and the
performance of the currency market. Diversification does not entirely eliminate
hazards, it is crucial to remember this. It can only lessen how much of an impact
the loss has on the investing portfolio.
One method of distributing the risks is to invest in mutual funds that invest in a
variety of assets. Exchange-traded funds, for instance, can assist in lowering your
exposure to the items in your portfolio that make up a certain index.

➢Flexibility

Mutual funds' flexibility is one of its primary characteristics. You have two
options for your initial investment: a sizable lump payment or recurring little

10
investments in the form of a SIP, starting as little as Rs. 500 per month
(Systematic Investment Plan). Systematic Investment Plan is the abbreviation
for this. By investing a small sum on a regular basis throughout time, at a set
frequency, it is a wise strategy to invest in mutual funds.

1.7 Functions Of Mutual Fund

A mutual fund is a collection of funds that is professionally managed by a


fund manager. A trust that invests money in stocks, bonds, money market
instruments, and other securities after collecting funds from a number of
participants who have similar investing goals. The following list includes
mutual fund functions.

➢NFO (New Fund Offer)


A new fund offer (NFO) is the initial subscription offer made by asset
management businesses for a new scheme (AMCs). In order to generate
money from the general public for the purchase of securities such as shares,
gov't bonds, etc., a fresh fund offer is introduced to the market. Due to its
newness on the market, investing in an NFO will be less expensive than doing
so in existing funds. Check the minimum subscription quantity, investment
cost, fund objectives, reputation of the fund houses, etc. if you're considering
investing in an NFO release.

➢Pooling of money
Mutual fund providers solicit money from prospective investors once the NFO
is released in order to purchase holdings in a range of stocks, bonds, and other
securities. Now, investors can purchase the mutual fund shares they desire.

➢Investment in securities
The fund manager of a mutual fund chooses the portfolio and makes
investments in a variety of instruments, such as bonds, shares, etc., based on
the fund's strategy.

11
Mutual funds are a safer option than investing in stocks or other options. This
is as a result of the specialist fund manager's extensive analysis of the
economy, sector, and business before making any decisions.
The fund manager can select securities that best meet the fund's strategy and
guarantee the highest return for its investors by using an examination of this
level.

➢Return on fund
When a mutual fund earns a return, the money is either given to investors or
reinvested in the holdings of the fund.

You receive returns in the form of dividends if you select a dividend fund. But
if you invest in growth funds, the fund management puts the profits back into
the portfolio to boost clients' wealth.

You can therefore draw the conclusion that one of mutual funds' roles is to
channel and maximize investor wealth.

1.8 Advantages and Disadvantages

Advantages
Mutual Funds are professionally run businesses or initiatives that pool client funds
and invest them in securities such as stocks, bonds, and derivatives markets. The
following benefits are available to investors who invest in mutual funds:-
1. Professional management
The investor makes use of the expertise of seasoned and qualified professionals who
are supported by a committed investment research team that evaluates the
performance and future prospects of businesses and chooses appropriate assets to
meet the scheme's goals.

2. Diversification

12
Mutual Funds make investments in a variety of businesses in a wide range of
sectors and industries. Because not all equities often decrease at the same time and
in the same proportion, diversification lowers risk. A mutual fund is used to
accomplish this diversification.

3. Convenient Administration

By investing in a mutual fund, you can cut down on paperwork and avoid several
issues, including faulty deliveries, late payments, and follow-up with brokers and
businesses. With mutual funds, investment is quick, simple, and convenient.

4. Return Potential

Over medium to long-term, Mutual Funds have the potential to provide a higher
return as they invest in a diversified basket of selected securities.

5. Liquidity

Investors in open-end plans can receive their money back at net asset value right
away. Closed-ended schemes allow investors to sell their units at the current
market price on a stock exchange or take advantage of the direct buyback option
that some close-ended and interval schemes offer from time to time at prices that
are based on NAV.

6. Low Cost

Due to the advantages of scale in brokerage, custodial, and other fees, which
translate into lower costs for investors, mutual funds are a considerably less
expensive alternative to invest than directly investing in the capital markets.

13
7. Transparency

Investors can receive regular updates on the value of their investments in addition
to disclosures regarding the precise investments made in the scheme, the
percentage invested in each asset class, and the investment philosophy and
outlook of the fund management.

8. Flexibility

An investor can consistently invest or withdraw money in accordance with his


demands and convenience thanks to features like regular investment plans, regular
withdrawal plans, and dividend reinvestment plans.

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. Choice Of Schemes

Mutual Funds provide a variety of plans to meet an investor's changing demands


throughout their career. For instance, growth schemes are perfect for investors
with a long-term vision who seek growth over time. The best option for consistent
income and capital stability is an income fund. Investors seeking for a mix of
income and moderate growth should consider balanced funds. For corporate and
individual investors looking for a short-term place to deposit their excess cash,
money market funds are suitable.

11. Affordability

14
Because of their extensive corpus, mutual funds enable even small investors to
indirectly profit from investments in shares of a large corporation, which an
individual investor may not be able to accomplish because of a lack of finances.

DISADVANTAGES

The mutual fund has restrictions on the funds in addition to benefits for investors. The
fund manager did not always make money; in certain cases, they might even have lost
money. The fund has its own investment strategy that involves holding, selling, and
buying units at specific times.

1. Tax Issues

A mutual fund cannot ensure decreased tax obligations, despite the fact that the
returns on investment are relatively significant.
Generally speaking, taxes are high, especially when there have been recent gains.

2. Fluctuation Return

Unlike fixed income investments like bonds and treasury bills, which experience
price fluctuations independently of the stocks that make up the fund, mutual funds
experience price fluctuations in tandem with the stocks that make up the fund.
This means that, like many other investments, there is always a chance that the
value of a mutual fund will decrease.

3. Investors Issues

A mutual fund requires a deep and long term analysis of the amount of investment
and its potential investment areas. If the company funds manager changes
regularly, it may adversely affect the returns on investment.

15
4. Over Diversification

Many mutual fund investors have a tendency to overdiversify, despite the fact that
it's one of the secrets to effective investment. The goal of diversity is to lessen the
risks that come with holding a single security; however, when investors buy a
large number of closely linked funds, they end up over diversifying and lose some
of the benefits of diversification.

5. High Cost And Risk

Although expert management is offered to investors through mutual funds, there


is a fee. Several costs are frequently included in funds, which lower the final
payout. Shareholder fees and yearly running costs are the two types of fees that
apply to mutual funds. The shareholders who buy or sell the funds are directly
responsible for paying the shareholder fees, which take the form of loading and
redemption costs. The operational costs for yearly funds are assessed as an annual
percentage, often between 1 and 3 percent. Regardless of the fund's success, these
fees are charged to investors in mutual funds. Market risks or asset risks might
affect mutual funds. A poorly diversified investment may result in significant
losses.

1.9 Investment Objectives of the Mutual Fund

Retirement planning and medical expenses are two things that many of us plan for
during our working lives. I'd like to list a few mutual fund investment objectives
below to assist readers in making an investment decision.

Goal-Based Investing:
This is the primary investment goal of mutual funds. As previously stated, one can
budget for future expenses and invest accordingly. Many fund complexes provide
Target Date Funds or customised Fund of Funds, which basically allocate assets to

16
equity and bond MF9s. The difference between the two is that target date funds
are non-discretionary, which means that investors can only invest in one of the
available plans and cannot choose the exposure based on their needs. Funds of
Funds can be dynamic and invest according to a target asset mix suitable for
investors after considering their risk profile and liabilities, among other things.
However, as the holder approaches the target date, the mix will be rebalanced.
The basic rule is to invest more money in equities and allocate more money to
debt mutual funds as a holder grows older; for example, at 30 years old, an
investor should invest 30% in debt and 70% in equities (this is a thumb rule).

Investment Growth:
The Investment Growth model is included in many mutual funds' investment
objectives. Investors who are nearing retirement and seeking aggressive returns
can do so by taking on some additional risk. This objective is met by mutual funds
that invest in fast-growing companies such as small caps or companies with
positive stock price trends (price momentum), among other things.

Tax Savings:
One of the most popular investment objectives of mutual funds is tax savings. The
majority of wealthy clients, institutional investors, and corporations want to
minimise their tax liabilities. Taxes can reduce returns, making them negative or
insignificant. Few products can assist investors in gaining the 8tax alpha9, citing
the importance of after-tax returns. These products are created by combining MFs,
Index funds, or ETF9s with stocks or bonds. An investment manager who
understands the long and short-term tax implications typically manages 20
individual accounts. Tax alpha gains drive buying and selling.

Tax outgo can thus be optimised to produce overall gains in An account by taking
appropriate exposures.
• Marketability/Liquidity: Many of the investments we've discussed are
relatively illiquid, which means they can't be quickly sold and converted into cash.
However, achieving a certain level of liquidity necessitates the sacrifice of a
certain level of income or the potential for capital gains.

17
• Income: The safest investments are those with the lowest rate of income return
or yield. If investors want to increase their yields, they must inevitably sacrifice
some level of safety. As the yield rises, so does the risk.
Fund Types
There are three basic types of mutual funds. Equity funds invest exclusively in
stock. Fixed-income funds invest in bonds, and money market funds invest in
Treasury bills and short-term, liquid, high-quality securities. All mutual funds are
made up of one or more of these three asset classes. Funds are sometimes named,
ostensibly, for their objective and have catchy names such as Global, International,
Growth and Overseas. Evaluate the prospectus rather than drawing a conclusion
from the fund's title.

1.11 THE WAY AND THE TYPE TO INVEST IN MUTUAL


FIND

Mutual funds typically place advertisements in newspapers announcing


the launch date of new schemes. Investors can also contact mutual fund
agents and distributors located throughout the country for additional
information and application forms. Forms can be deposited with mutual
funds through the services of agents and distributors. Mutual fund units
are now distributed by post offices and banks. However, investors
should be aware that the mutual funds schemes marketed by banks and
post offices should not be regarded as their own, and no guarantee of
returns is provided by them.
Banks and post offices' only role is to assist in the distribution of
mutual fund schemes to investors. Investors should not be swayed by
commissions/gifts offered by agents/distributors in exchange for
investing in a specific scheme. On the other hand, they must consider
the mutual fund's track record and make an objective decision.

▪ One time investments

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The amount that must be invested all at once is referred to as a one-
time investment. The investor must pay the entire amount at once. The
minimum amount is Rs. 5000 and the maximum amount is determined
by the investor. This investment is generally preferred for the
businessman who can pay all at once.

▪ Systematic investment plan (SIP)


Systematic Investment Plan refers to the amount that must be invested
in equal monthly installments. For all equity and balanced schemes, the
investor must pay a minimum of Rs. 1000 monthly for a period of six
months. And Rs. 500 per month for Tax Saver schemes for a period of
12 months. The investor must invest a minimum of Rs. 6000 and a
maximum of their choice. This type of investment is typically preferred
by salaried individuals.
Types of mutual fund scheme

There are many different types of mutual funds available that are
made to fit various investor objectives. The following factors can
be used to categories mutual funds:

1. BY STRUCTURE
a) Open- ended scheme
b) Close- ended scheme
c) Interval scheme

2. BY INVESTMENT OBJECTIVES
a) Growth scheme
b) Income scheme

3. OTHER SCHEMES
a) Tax saving schemes
b) Index schemes

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c) Sector specific schemes

1. STRUCTURED SCHEME
a) Open ended scheme
An open-ended fund or scheme is one that is constantly available for
purchase and subscription, according to the Securities and Exchange
Board of India (SEBI). Liquidity is an important characteristic of open-
ended funds. Furthermore, there is no set maturity time for these funds.
The Net Asset Value (NAV), which is announced every day, can be easily
used by investors to buy and sell units. Please note that an open-ended
fund is NOT obliged to keep selling/issuing new units at all times, and
may stop issuing further subscription to new investors. On the other hand,
an open-ended fund rarely denies to its investor the facility to redeem
existing units.

b) Closed ended schemes


An equity or debt fund that is closed ended has a fixed number of units
issued by the fund manager at inception. Investors are not permitted to
purchase or redeem units of a closed ended fund after the NFO (New Fund
Offer) period expires. These funds have a predetermined maturity period
and are introduced by an NFO. They are then traded like stocks in the
market. The fund's actual price is determined by its Net Asset Value,
although the trading price may vary depending on the supply and demand
for its units. A closed ended fund, to put it simply, "closes" after the debut
period and continues to operate until maturity. This gives the fund
manager more flexibility to pursue the fund's investing objectives.

c) Interval Schemes
These plans include the advantages of both closed-ended and open-ended
plans. They may be sold or redeemed at set intervals at NAV-based values,
or they could be traded on the stock exchange.

20
2. BY INVESTMENT OBJECTIVE
a) Growth scheme
These plans, also known as equity schemes, aim to invest the majority of
their capital in stocks and only a minor percentage in money market
instruments. Over the long term, these plans could offer greater returns.
These plans are vulnerable to value swings, particularly in the near term,
because they invest in equities.

b) Income scheme
These schemes, also known as debt schemes, invest in debt instruments
such government securities, corporate bonds, and debentures. When
compared to equity plans, the prices of these schemes tend to be more
stable, and the majority of the returns to investors come from dividends or
consistent capital growth. These plans are perfect for conservative
investors or people who are not able to handle bigger stock risks, like
retired people. They do, however, have a higher price fluctuation risk
compared to money market schemes, and a higher credit risk compared to
Gilt funds.

c) Balanced scheme
These plans are frequently referred to as hybrid plans. These investments
are made in both debt and equity. Balanced schemes, which invest in a mix
of this kind, aim to achieve the goals of income and moderate capital
appreciation and are best for long-term, cautious investors.

3. OTHER SCHEMES
a) Tax saving schemes
By providing a tax credit, Equity Linked Savings Schemes (ELSS)
encourage investors to make investments in the equity markets. Purchased
Units cannot be transferred, pledged, redeemed, or switched out until three
years have passed after the date the respective Units were allocated.
Subject to such conditions and limitations, as prescribed under Section 88
of the Income Tax Act of 1961, the Scheme is subject to the Securities and
Exchange Board of India (Mutual Fund) Regulations, 1996 and the

21
notifications issued by the Ministry of Finance (Department of Economic
Affairs), Government of India regarding ELSS.

b) Index schemes
An Index's main function is to monitor the performance of the market
overall or of a particular market segment. A useful benchmark for
assessing the performance of mutual funds is an index. Instead of
participating in a specific fund, some investors prefer to invest in the
market as a whole. These investors are content with the results that the
markets have announced. Some investors feel comfortable investing in a
fund that they believe is a good representation of the entire market because
it is impractical to invest in each and every stock in the market in
proportion to its size. For these investors, Index Funds are introduced and
run.

c) Sector specific schemes


Investments are typically made in certain designated industries, such as
"Real Estate," through sector-specific schemes. In addition to investing
directly in real estate, specialized real estate funds may also fund and lend
to real estate developers, purchase their stock in housing finance
businesses, or even purchase their securitized assets.

SEBI REGISTERED MUTUAL FUND:

Sr. No. Name of Mutual Fund


1. FORTIS Mutual fund
2. Alliance Capital Mutual fund
3. ALG Global Investment Group Mutual fund
4. Benchmark Mutual fund
5. Baroda Pioneer Mutual fund

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6. Birla Mutual fund
7. Bharti AXAMutual fund
8. Canara Robeco Mutual fund
9. CRB Mutual fund (Suspended)
10. DBS Chola Mutual fund
11. Deutsche Mutual fund
12. DSP Blackrock Mutual fund
13. Edelweiss Mutual fund
14. Escorts Mutual fund

23
15. Franklin Templeton Mutual fund
16. Fidelity Mutual fund
17. Goldman Sachs Mutual fund
18. HDFC Mutual fund
19. HSBC Mutual fund
20. ICICI Securities Mutual fund
21. IL & FS Mutual fund
22. ING Mutual fund
23. ICICI Prudential Mutual fund
24. IDFC Mutual fund
25. JM Financial Mutual fund
26. JP Morgan Mutual fund
27. Kotak Mahindra Mutual fund
28. LIC Mutual fund
29. Morgan Stanely Mutual fund
30. Mirae Asset Mutual fund
31. Principal Mutual fund
32. Quuantum Mutual fund
33. Reliance Mutual fund
34. Religare AEGON Mutual fund
35. Sahara Mutual fund
36. SBI Mutual fund
37. Shriram Mutual fund
38. Sundaram BNP Paribas Mutual fund
39. Taurus Mutual fund
40. Tata Mutual fund
41. UTI Mutual fund

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1.11 POINTERS TO MEASURE MUTUAL FUND
PERFORMANCE

There are 7 ways to measure mutual fund performance


This is correct because the performance of mutual funds is determined by the
performance of the stock market. This is due to the fact that the money we put into
mutual funds is eventually invested in the stock market by the mutual fund houses.
So, if you ignore a mutual fund's performance before purchasing it, you may be
making a mistake. Before making any type of investment, it is critical to conduct a
mutual fund performance evaluation so that you can make informed decisions.
It should also be noted that past performance of mutual funds does not predict future
performance. Mutual fund investments cannot provide guaranteed returns. Hence, it
has become important to look beyond the returns of previous years to assess a mutual
fund.
Another question that may arise is how frequently one should evaluate the
performance of a mutual fund. Ideally, mutual fund performance should be evaluated
every four to six months. If you believe that all of the research and analytics are
taking up too much of your time, you can always seek advice from a professional
financial advisor who will guide you in the right direction.

Let's take a look at some of the most important metrics for evaluating the performance
of a mutual fund –
A. Alpha
The financial ratio known as alpha represents the returns generated by the
mutual fund over and above the returns generated by the benchmark index.
The fund's Alpha value of 0 indicates that it performed in line with the
benchmark. A negative Alpha value indicates that the fund underperformed its
benchmark. A figure greater than zero, on the other hand, indicates that the
fund outperformed.
For example, if a mutual fund generates a 12% annual return while the
benchmark index grows at 9%, the Alpha value would be 3.

25
As a result, the Alpha value is regarded as a metric that indicates the value that
a fund manager adds or subtracts from the returns of a portfolio.

B. Beta
Beta is another statistical metric used to evaluate the performance of mutual
funds. The beta value of a portfolio indicates its proclivity to fluctuate in
response to market movements. A beta value of one indicates that the mutual
fund is as volatile as its benchmark, while a value greater than one indicates
that the fund is more volatile. A value less than one indicates that the fund
reacted less than its benchmark.

C. Expense ratio

The expense ratio basically means the fee charged by the mutual fund houses for
managing your mutual fund. It includes management fees, distribution fees,
transaction charges and various other charges.

Essentially, the expense ratio may seem small to you in the beginning but over
time, you realize that you have ended up paying a huge sum from your corpus
towards the expense ratio. Since this ratio impacts your take-home returns, it must
be considered carefully while doing a performance evaluation of mutual funds.

D. Do a comparison of similar fund


It is pointless to compare two different funds. As a result, one must compare
mutual funds in similar categories and investigate various aspects such as the
mutual fund's risk and historical returns. To accomplish this, one can compile
a list of comparable funds and compare them on a regular basis. There are
several free mutual fund screener tools available online that can be used to
research peer funds.

E. Rolling return

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Rolling Returns are the average annual returns for a given timeframe, with
returns taken into account until the last day of the period. It also shows the
fund's relative and absolute performance at regular intervals.

Rolling Returns are a good way to see how the fund performed over time.

F. Sharpe’s ratio
Developed by Nobel laureate economist William Sharpe, the Sharpe ratio
measures risk-adjusted performance. It is calculated by subtracting the risk-
free rate of return (U.S. Treasury Bond) from the rate of return for an
investment and dividing the result by the investment's standard deviation of its
return.

The Sharpe ratio tells investors whether an investment's returns are due to
wise investment decisions or the result of excess risk. This measurement is
useful because while one portfolio or security may generate higher returns
than its peers, it is only a good investment if those higher returns do not come
with too much additional risk. The greater an Sharpe ratio, the better its risk-
adjusted performance

G. R Square
R-squared is a statistical measure that represents the proportion of a fund's or
security's movements that can be explained by movements in a benchmark
index. The benchmark for fixed-income securities and bond funds is the US
Treasury Bill. The benchmark for equities and equity funds is the S&P 500
Index.
R-squared values range between 0 and 100. A mutual fund with an R-squared
value between 85 and 100 has a performance record that is closely correlated
to the index, according to Morningstar. A fund with a rating of 70 or lower is
unlikely to outperform the index.
Mutual fund investors should avoid actively managed funds with high R-
squared ratios, which are commonly referred to as "closet" index funds by
analysts. In such cases, it makes little sense to pay higher fees for professional
management when an index fund can achieve the same or better results.
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H. Consider market and economic cycle Think
about the market and economic cycles.

External factors such as market and economic cycles must be considered when
evaluating mutual funds because they have a significant impact on the actual
performance of mutual funds. Only evaluating internal factors is insufficient
because a thorough examination of all other factors determines how the mutual
funds will perform in the future.

It is best to consult with investment advisors for guidance on the external


factors that influence mutual fund performance.

1.12 RULES AND REGULATION OF MUTUAL FUND IN INDIA

➢SEBI

In India, the mutual funds are regulated by the capital market. All mutual
funds must register with SEBI in order to operate. All mutual fund operations,
including investments, accounts, fees, etc., are subject to SEBI standards.
Money Market Mutual Funds of Registered Mutual Funds will henceforth be
subject to SEBI regulation under the 1996 (Mutual Fund) Regulations, it was
recently declared.

➢RBI

Since banks in India are within the regulatory purview of the RBI, banks' held
funds are subject to both the regulatory oversight of the RBI and SEBI. The
RBI has oversight authority over all businesses that conduct business in the
money markets.

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➢MINISTRY OF FINANCE (MOF)

The Ministry of Finance is ultimately in charge of regulating both the RBI and
the SEBI and serves as the final arbiter of any significant disagreements about
the latter's rules.

➢COMPANY LAW BOARD

Company Low Board is the name of the company registrar. Businesses


registered under the Companies Act of 1956 include AMCs of Mutual Funds,
which are obligated to answer to the regulatory bodies established by the
Companies Act.

➢STOCK EXCHANGE

The SEBI oversees the self-regulatory groups that make up stock exchanges.
AMCs frequently list closed-end funds on stock markets and trade them
similarly to schemes.

➢OFFICE OF PUBLIC TRUST

The Indian Trust Act of 1882 governs mutual funds as public trusts. The
position of public trustee, which in turn reports to the Charity commissioner,
is responsible for holding the Board of Trustees or the Trustees Corporation
accountable.

MUTUAL FUND AND CAPITAL MARKET


The Indian Institute of Capital Market (IICM) also functions as a center for raising
investor awareness through research and turning, and it offers specialized consultancy
in the securities industry. The IICM's primary goals are to educate and develop
professionals for the securities industry in India and other developing countries.

29
The primary market, which the mutual fund industry refers to as the NFO New Fund
Offer, is concerned with issue management. According to the mutual fund industry,
the primary is known as the NFO New Fund Offer. All Asset Management Companies
(AMCs) are issuing all of the funds through the NFO, and each NFO came with
specific investment objectives, style of investment, and allocation criteria. The
secondary market, which we discussed with relation to mutual funds, is the other area
of the capital market. In the secondary market, investors sell their units when the
market is in a bullish phase. In contrast, during the bear period, investors would either
buy or wait for a sale for a portion of the time.

ROLE OF AMFI (Association Of Mutual Fund In India):

The Association of Mutual Funds in India (AMFI) is committed to the growth of the
Indian mutual fund industry along professional, ethical, and moral lines. It also works
to improve and maintain standards in all areas with the goal of safeguarding and
advancing the interests of mutual funds and the people who own their units.
AMFI working group on Best Practices for sales and marketing of Mutual Funds
under the Chairmanship of Shri B. G. Daga, Former Executive Director of Unit Trust
of India with Shri Vivek Reddy of Pioneer ITI, Shri Alok Vajpeyi of DSP Merrill
Lynch, Shri Nikhil Khattau of Sun F & C and Shri Chandrashekhar Sathe, Formerly
of Kotak Mahindra Mutual Fund has suggested formulation of guidelines and code of
conduct for intermediaries and this work has been ably done by a subgroup consisting
of Shri B. G. Daga and Shri Vivek Reddy.

ROLE OF RBI
A mutual fund scheme that invests in securities in the same proportion as an index of
securities is referred to as an index fund scheme." A mutual fund may lend and
borrow securities in accordance with the framework relating to short selling and
securities lending and borrowing specified by the Board." A mutual fund may enter
into short selling transactions on a recognised stock exchange, subject to the
framework relating to short selling and securities lending and borrowing specified by
the Board." "Provided, however, that the investment and advisory fees in the case of
an index fund scheme shall not exceed three-fourths of one percent (0.75%) of the
weekly average net assets."
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“Provided further that in case of an index fund scheme, the total expenses of the
scheme including the investment and advisory fees shall not exceed one and one half
percent (1.5%) of the weekly average net assets.” Every mutual fund shall buy and
sell securities on the basis of deliveries and
shall in all cases of purchases, take delivery of relevant securities and in all cases of
sale, deliver the securities: Provided that a mutual fund may engage in short selling of
securities in accordance with the framework relating to short selling and securities
lending and borrowing specified by the Board: Provided further that a mutual fund
may enter into derivatives transactions in a recognized stock exchange, subject to the
framework specified by the Board.”

TAX PLANNING AND MUTUAL FUND:


Investors in India prefer tax-saving mutual fund schemes because it allows them to
save money. Section 88 of the Income Tax Act provides tax exemptions for tax-
saving mutual funds and equity-linked savings schemes (ELSS). This is one of the
reasons why Indian investors include tax-saving mutual fund schemes in their
portfolios. Tax-saving mutual fund schemes are one of the most important types of
mutual funds in India for investors to consider. There are several companies in India
that provide tax-saving mutual fund schemes.

SEBI GUIDANCE OF MUTUAL FUND


Mutual funds play the role of trust investment in India, with some of the formalities
laid down by the SEBI to be established for setting up a mutual fund. Under the
Indian Trust Act of 1882, the trustee company is represented by a board of directors
as the trustee sponsor of the mutual fund. The AMC and custodians are appointed by
the Board of Directors. The trustees reached an agreement with AMC and the
custodian. Each scheme is launched by inviting the public to invest in it via offer
documents.
Depending on the scheme's specific objective, it may open for further sale and
repurchase of units; similarly, depending on the scheme's specific objective, the
scheme may be wound up after a specific time period.
1. The sponsor has to register the mutual fund with SEBI
2. To be eligible to be a sponsor, the body corporate should have a sound track record
and a general reputation of fairness and integrity in all his business transactions.
31
Means of sound track records
➢The corporation has been in the financial services industry for at least five
years.
➢Having a positive net worth in the five years preceding the registration
application.
➢Its net worth in the previous year was greater than its contribution to the
AMC's capital.
➢Making a profit in three of the previous five years, including the fifth.
3. The sponsor should own at least 40% of the AMC's net worth.
4. A party that is not eligible to be a sponsor may not own 40% or more of the AMC's
net worth.
5. The trustees, the AMC, and the custodian must be appointed by the sponsor.
SEBI must approve the trust deed and the trustees' appointment.
7. An AMC or its officers or employees may not be appointed as trustees of a mutual
fund.
8. At least two-thirds of the business should be independent of the sponsor.
9. Only an independent trustee may be appointed as a trustee of more than one mutual
fund; such appointment may be made only with the prior approval of the fund for
which the individual is already a trustee.

Launching of schemes
A scheme must be approved by the trustees before it can be launched, and a copy of
its offer documents must be filed with the SEBI.
➢Every application form for scheme units must be accompanied by a
memorandum containing key scheme information.
➢The offer document must contain sufficient information to allow investors to
make informed investment decisions.
➢All advertisements for a scheme must be submitted to SEBI within seven days
of the issue date and must disclose the scheme's investment objective.
➢The offer documents and advertisements must not contain any misleading
information, statements, or opinions.
➢The initial offering period for any mutual fund scheme should not be longer
than 45 days, with the exception of equity linked saving schemes.

32
➢A comparison between two schemes cannot be carried out in an advertisement
unless the schemes are comparable and all relevant information about the
schemes is provided.
➢All advertisements must include the name of the sponsor, the trustees, and the
fund's AMC.
➢The risk factors must be disclosed in all advertisements.
➢All advertisements must state that investing in mutual funds involves market
risk and that the fund's objectives cannot be guaranteed.
➢When a scheme is open for subscription, no advertisement stating that the
scheme is subscribed or oversubscribed may be issued.

1.13 How To Reduce Risk While Investing In Mutual Fund:

➢Any investment we make is fraught with danger. In fact, we get a return on


our investment solely because we take the risk of parting with our funds at the
outset in exchange for higher values later on. Partitioning is a risk in and of it.
➢William Sharp, a well-known economist and Nobel Prize winner, attempted to
divide the total risk involved in any type of investment into two categories:
systematic (Systematic) risk and unsystematic (Unsystematic) risk.
➢The risk that exists in the system is referred to as systemic risk. Inflation,
recession, war, political situation, and so on are all examples of systematic
risk.
➢Inflation reduces the real rate of return on all investments. For example, if the
return on a fixed deposit is 8% and inflation is 6%, the real rate of return on
the fixed deposit is reduced by 6%.
➢Similarly, if returns from the equity market are 18% and inflation is still 6%,
equity returns will be reduced by the rate of inflation. Because inflation exists
in the system, there is no way to avoid the risk of inflation.
➢Economic cycles, war, and political situations all have an impact on all types
of investments. These are also present in the system, and there is no way to
avoid them. It's similar to learning to walk.

33
➢Anyone who wants to learn to walk must first fall; it is impossible to learn to
walk without first falling.
➢Similarly, anyone who wishes to invest must first confront systematic risk; no
investment can be made without facing systematic risk.
➢Unsystematic risk is another type of risk. Because this risk does not exist in the
system, it is not applicable to all types of investment. Unsystematic risk is
linked to a specific type of investment.
➢If we invest in the stock market and the market falls, only our equity
investment is affected; if we have a fixed deposit in a specific bank and the
bank fails, we only lose the money we have invested in that bank.
➢While there is no way to avoid risk entirely, we can always reduce the impact
of risk.
➢Diversification can help to mitigate the impact of unsystematic risk. The
impact of unsystematic risk is reduced when our investment is spread across
multiple asset classes.
➢If we have fixed deposits in several banks, even if one of them fails, our entire
fixed deposit investment is not lost.
➢Similarly, if our equity investment is in Tata Motors, HLL, or Infosys,
negative news about Infosys will only affect our investment in Infosys; all
other stocks will be unaffected.
➢We should invest on a regular basis to mitigate the impact of systematic risk.
We average out the impact of risk by investing on a regular basis.
➢As an investment vehicle, mutual funds provide us with the benefits of
diversification and averaging.
➢Because mutual fund portfolios contain multiple securities, bad news about a
single security will have little impact on the overall portfolio.
➢We can benefit from rupee cost averaging by investing in mutual funds on a
regular basis.
➢As an investment vehicle, mutual funds help to reduce both systematic and
unsystematic risk.

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1.14 RECENT TREND OF MUTUAL FUND

India is in the early stages of a revolution that has already reached its apex in
the United States. The United States has a much larger asset base than its bank
deposits. In India, mutual fund assets account for less than 10% of bank
deposits, but this is changing. This is compelling a large number of banks to
adopt the concept of narrow banking, in which deposits are held in Gilts and
other assets, improving liquidity and lowering risk. The simple fact is that
banks cannot be ignored and will not go out of business. Their role as go-
betweens cannot be overlooked. It's just that Mutual Funds will change the
way banks operate in the future.

BEST MUTUAL FUND TO INVEST IN INDIA

A mutual fund is a popular investment option for individuals. In India, there


are thousands of mutual funds in which an investor can invest. However,
determining the top ten mutual funds or the best mutual fund is difficult. So, if
you're looking for the best mutual fund, consider your risk tolerance and the
time horizon of your goals. Your willingness and ability to take risks is
reflected in your risk profile. As a result, a risk-taking individual may invest in
high-risk funds that are not suitable for a risk-averse investors.

1. What are Best Mutual Funds?


Mutual funds are classified into several types. We can categorise mutual funds
based on their underlying assets, such as equity, debt, or gold, into equity
mutual funds, debt mutual funds, and hybrid funds. These funds have varying
risk profiles and investment goals.

As a result, there is no single mutual fund that is best for everyone. The best
mutual fund/s for you will be those that are appropriate for your investment
objectives, risk tolerance, and time horizon.

Assume you are building an investment portfolio for your child's higher
education after 15 years. In this case, equity mutual funds may be the best
35
option for you if you are investing for the long term. However, equity mutual
funds are divided into sub-categories such as large cap funds, mid-cap funds,
and small-cap funds. Depending on your risk tolerance, you can choose to
invest in a large cap fund or a small cap fund. A small-cap fund is riskier than
a large cap fund because the latter invests primarily in large companies that
are market leaders with strong financial positions. Large corporations are
better able to weather business cycle downturns than small corporations.

You might also have more than one goal. If your second goal is to buy a sedan
in the next three years, then investing in equity funds for this goal might not be
the best option. Debt mutual funds that are relatively less volatile than equity
funds may help you achieve your goal of buying a sedan.

2. Top Performing Mutual Funds to Invest In India

Mutual funds are divided into three types based on their equity exposure: equity
funds, debt funds, and hybrid/balanced funds. A mutual fund is classified as an equity
fund if its equity exposure exceeds 65%. If not, it is classified as debt. A hybrid
mutual fund is one that invests in both equity and debt securities.

Top 10 Equity funds in India:

Fund Name 3 Year Returns 5 Year


Returns
Aditya Birla Sun Life India
14.70% 26.88%
Opportunities Fund
Edelweiss Greater China
Equity Off-shore Fund - 22.66% 25.89%
Direct Plan - Growth
Edelweiss Greater China
21.61% 24.74%
Equity Off-shore Fund
TATA Digital India Fund -
26.03% 22.85%
Direct Plan - Growth

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ICICI Prudential
28.47% 22.82%
Technology Fund - Direct
Plan – Growth
DSP World Mining Fund
21.32% 22.73%
Direct Plan - Growth
DSP Natural Resources
and New Energy Fund - 14.48% 22.46%
DirectPlan - Growth
SBI Magnum Comma Fund
17.11% 22.08%
-Direct Plan - Growth
DSP World Mining Fund 20.66% 22.04%
SBI Small Cap Fund –
14.71% 21.90%
Direct Plan - Growth

Top 10 Indian Debt Funds

The following are some of the top performing large cap equity funds as of May 16,
2021:

Fund Name 3 Year Returns 5 Year


Returns
Aditya Birla Sun Life Digital
India Fund - Direct Plan -
27.12% 23.32%
Growth
ICICI Prudential Multicap
8.46% 12%
Fund - Dividend
Nippon India Gilt Securities
11.36% 10.41%
Fund - Direct Plan - Growth

37
IDFC Government
Securities Fund -
12.40% 10.34%
Constant Maturity Plan -
Direct Plan - Growth
SBI Magnum Medium
Duration Fund - Direct
10.13% 10.21%
Plan –Growth
IDFC Government
SecuritiesFund -
12.14% 10.12%
Investment Plan -
Direct Plan - Growth
DSP Natural Resources
andNew Energy Fund
11.93% 10.08%
Direct Plan - Growth
ICICI Prudential All
Seasons Bond Fund -
10.16% 9.97%
Direct Plan -Growth
SBI Magnum Constant
Maturity Fund - Direct
10.81% 9.96%
Plan -Growth
SBI Magnum Gilt Fund -
10.87% 9.87%
Direct Plan - Growth

38
Top 10 Indian Hybrid Funds

The following are some of the top performing large cap equity funds as of May 16,
2021:

Fund Name 3 Year Returns 5 Year


Returns
HDFC Balanced Fund 10.83% 18.70%
HDFC Retirement Savings
Fund- Equity Plan -Direct
11.98% 17.01%
Plan-Growth
Tata Retirement Savings
Fund
9.25% 15.97%
Progressive Direct Plan
Growth
HDFC Retirement Savings
Fund - Hybrid Equity Plan -
11.90% 15.96%
Direct Plan - Growth ICICI
Prudential Thematic
Advantage Fund (FOF) -
14.53% 15.79%
Direct Plan - Growth
Mirae Asset Hybrid – Equity
13.33% 15.68%
Fund - Direct Plan - Growth
ICICI Prudential Equity &
Debt Fund - Direct Plan –
12.56% 15.35%
Growth
Canara Robeco Equity
Hybrid Fund - Direct Plan –
13.58% 15.08%
Growth
Principle Hybrid Equity
8.83% 14.85%
Fund-Direct Plan - Growth
DSP Equity & Bond Fund
12.68% 14.57%
Direct Plan - Growth

39
1.15 How to Select the Top Performing Mutual funds in India

We're all curious about the best mutual funds to invest in right now. This section will
discuss some of the factors that can assist you in determining the top ten best mutual
funds to invest in today.

• Goals of Investing

Any investment should be made only after a thorough examination of your life
goals. Once you've determined your requirements, compare them to the
objectives of a mutual fund scheme to see if investing in them will help you
meet your financial objectives. Mutual funds, like individuals, have specific
investment objectives, and it is up to the investors to determine whether their
objectives are aligned with the mutual fund scheme in which they will invest.
One of the goals of equity mutual funds, for example, is to create wealth. As a
result, equity mutual funds are ideal for investors seeking long-term wealth
creation in order to achieve long-term goals such as building a retirement
corpus. In this case, investing in equity funds rather than debt funds would be a
better choice because equities have the potential to generate higher returns than
debt funds. As a result, if you primarily invest in debt funds to build a
retirement corpus, you will not be able to accumulate the same retirement
corpus as you could with equity funds.

As a result, in order to make an informed decision, the fund's investment


objective must be compatible with the investor's goals and risk tolerance.
Equity funds are the best mutual funds to invest in for the long term. Opt for a
growth mutual fund option to easily reach your long-term goals, as the fund’s
returns will compound over time.

In the scheme information document, you will find all the relevant details,
such as the asset allocation and objectives.

• Fund's History

40
The fund's history provides a record of the fund's performance over time,
including market ups and downs. This demonstrates the fund's tenacity in the
face of volatile market conditions.
Because newly launched mutual funds and funds that are open for subscription
lack a track record, it is difficult to predict their returns and performance across
market cycles. The best mutual fund to invest in is one that has a long track
record of delivering consistent returns across market cycles. It also provides
evidence of well-researched investment strategies.

• Expense to Income Ratio


The expense ratio is expressed as a percentage of the fund's assets and is
charged by the fund house along with other charges for managing the assets of
a fund. The net return earned by the investor will be the mutual fund returns
minus the expense ratio. If an investor's expense ratio is high, his or her
returns will be lower. As a result, when selecting a fund, an investor should
look for a scheme with a lower expense ratio than its peers in the category.

• Fund Manager’s Performance

The fund manager is in charge of managing the fund. It’s crucial to look at the
fund manager’s track record.
An investor should monitor the fund’s performance during times of rise and
corrections in the market. They can also look at the performance of the
different schemes managed by the fund manager.

• Examine the fund's consistency.


Top performing mutual funds in India have a track record of outperforming
the market over a three to five-year period. In terms of performance, these
funds would have outperformed their benchmark and peer funds. You must
look at the fund's performance over the previous business cycles. Examine the
fund's performance, particularly during market downturns. A top-performing
fund's performance is less affected by market fluctuations than the average
fund. However, past results do not guarantee future outcomes.

41
You can also look at the historical NAV of Mutual Funds and the most recent
NAV of Mutual Funds to get a sense of the mutual fund's track record.

• Examine the financial ratios


Financial ratios such as alpha and beta can be used to identify India's top-
performing mutual funds.
Mutual fund returns are inextricably linked to risk. A return is an increase in
the overall value of the capital invested. Risk is defined as the uncertainty that
surrounds an investment and refers to the possibility of receiving no or
negative returns due to a variety of factors. As a result, any investor must
evaluate the risk-return potential, which financial ratios have made possible.
The Sharpe and Alpha ratios provide critical information. The Sharpe ratio
calculates the excess return on each unit of risk taken by the fund. As a result,
funds with a higher Sharpe ratio are seen as superior to funds with a lower
Sharpe ratio. The additional mutual fund returns earned by the fund manager
over the benchmark is called alpha. Funds having a higher Alpha are seen to
be superior.

4. Best SIP Mutual Funds


The Systematic Investment Plan (SIP) is a popular and straightforward method of
investing in mutual funds. SIP is similar to a pre-set investment with a fixed
frequency, usually once a month. The mutual fund investment will take place
automatically after you set the SIP mandate.

Here is a list of the top five SIP mutual funds:

5. How Tax is applied on Best Mutual Funds in India

When you invest in mutual funds, you can earn income in two ways: capital gains and
dividends. Dividends are currently added to your total income, and the amount of tax
on the dividend is determined by your current tax bracket.

42
Capital gains are profits earned after redeeming mutual fund units. The capital gains
tax on India's top performing mutual funds will vary depending on the type of mutual
fund and the time period of investment.

For tax purposes, equity funds are mutual funds that invest at least 65% of their assets
in equity and equity-related instruments. Non-equity funds include debt funds and
gold funds that do not have a minimum allocation of 65% to equities.

If you redeem it after one year, the capital gains are considered Long Term Capital
Gains (LTCG), and any amount above Rs. 1 lakh is taxed at 10%.

When it comes to non-equity funds, such as debt funds, STCG are the gains you
receive when you sell your debt fund units before three years. In this case, the gains
from mutual funds are added to your total income and taxed according to your current
tax bracket.

If you hold non-equity funds for more than three years, the gains will be considered
LTCG and taxed at 20% after indexation. Visit Mutual Fund Taxation for more
information.

If you own a hybrid mutual fund, the tax on capital gains will be determined by the
underlying asset. If the fund invests in equities for 65% of its portfolio, gains from the
hybrid fund are taxed similarly to those from an equity fund. However, if it has less
than a 65% allocation to equities, it will be taxed as a debt fund.

6. Who Should Invest in Best Mutual Funds?

Mutual funds that give high returns on a consistent basis across market cycles are
considered the best performing mutual funds in India as as they have shown the
potential to earn better returns.

Achievement of financial objectives:

43
Investors who want to achieve their investment objectives should invest in top mutual
funds that meet their requirements. Investing in top mutual funds that have
consistently outperformed their peers in terms of returns will help investors reach
their objectives faster.
People who want to invest on a regular basis:
SIP allows you to invest in top mutual funds on a regular basis, such as monthly,
weekly, or quarterly. You can achieve your investment goals by investing in the best
SIP mutual fund. You can begin investing in mutual funds through SIP with as little
as Rs.100 per month in any of India's best SIP plans.
Better returns than traditional savings options:
Traditional savings options provide a fixed interest rate. However, because it is almost
risk-free, the returns on these savings options are also low. Mutual funds, on the other
hand, cannot guarantee returns. It can, however, generate higher returns than
traditional saving options such as bank fixed deposits.
Furthermore, the risk-return profiles of various types of mutual funds differ. So, if
you want to invest in high-yielding mutual funds, you may have to be willing to take
on more risk.
Professional money management
Fund managers are individuals who manage mutual funds. Their job is to pick the best
stocks or debt instruments to help the fund generate high returns and meet its goals.
Individuals seeking expert fund management can therefore invest in these top mutual
funds.
Diversification:
Depending on the type of fund, the best performing mutual funds invest in a basket of
securities that aid in diversification, regardless of the amount invested. Diversification
reduces the negative impact on the overall portfolio of a single (or a few) investment
security's poor performance.

It assists investors in achieving consistent investment returns and smoother portfolio


performance. As a result, investors can expect to earn higher average returns.

44
1.16 MUTUAL FUND IN INDIA : OPPORTUNITIES AND
CHALLENGES

The Indian mutual fund industry is operating in an economic environment that has
changed rapidly over the last three years. The industry hit a high point when its AUM
doubled from Rs. 3.6 trillion in FY2007 to Rs. 6.13 trillion in FY2010, representing a
16.2% annual growth rate. Since then, the Indian economy (along with the emerging
economies) has experienced a slowdown, the most severe of which is occurring as
this report is written. From an average GDP growth rate of 8-9% between 2008 and
2011, the Indian economy is now growing at a mediocre 4.8% in Q2 2013.
With the value of the Indian rupee falling precipitously, the mutual fund industry is
now operating in a volatile global economic environment. However, there are
compelling reasons to believe that the Indian mutual fund industry has not yet reached
its global apex, and that if appropriate measures are implemented, the industry can
resume its previous growth trajectory. One of the most significant challenges
confronting the mutual fund industry is a lack of healthy participation from a large
portion of the country. To demonstrate this lack of participation, we first aggregated
AUMs from each district in India. We then ranked all of India's districts in descending
order of gross domestic product (GDP) and partitioned this list into 10 parts. s. The
top 60 districts formed the first decile followed by the second decile and so on. We
then aggregated the AUMs and GDPs for each of these deciles and took the ratio of
these two figures. The AUM/GDP ratio is one of the best indicators of how much of
the yearly income in a given district is being invested into mutual funds. While the
figure of rupees 7.5 trillion of AUM may sound impressive on paper, this figure is
marred by a sharp divide in terms of investment in the first decile of districts and the
rest of the country.

45
1.17 Growth of Mutual Fund Industry Expected in India in the
Current Year and the Forthcoming Years

The mutual fund industry has evolved dramatically in recent years. The most
significant change is that it has become much more competitive. Previously, India had
only a few fund houses. There are now hundreds of them, all attempting to get their
product to market as quickly as possible.

The Indian mutual fund industry has changed dramatically in recent years. The most
significant change is that the government began its journey in 2021 by introducing a
new tax regime for mutual fund companies. The new system aims to improve industry
openness, transparency, and accountability by making it more difficult for people to
cheat or misrepresent their financial information.

Another significant change is how technology is altering the way funds are managed.
Human managers used to oversee the performance of a mutual fund's portfolio and
make changes based on what they saw happening in the market. They can now use
algorithms to track how much money each member has invested in various funds and
make decisions based on what they believe will happen with those funds in the future.

It is estimated that by 2022, there will be approximately 1.88 crore registered mutual
fund investors in India, compared to 1.86 crore households with an annual income of
more than Rs 10 lakh. In comparison to previous years, the number of mutual funds
available is also increasing at an exponential rate.

A few years ago, all of the leading financial institutions, such as HDFC MF and ICICI
Prudential MF, offered only three major funds, whereas today there are nearly 50
different schemes available, with each financial institution offering a wide range of
products under various categories such as equity funds, balanced funds, and so on,
making it difficult for investors to choose from among them.

Despite the increased competition among mutual funds over the years, their
performance has been consistently good over time, and investors have benefited
greatly from them.

46
The industry has grown rapidly in recent years, with an annual growth rate of nearly
40%. This rate is expected to remain around 30% in 2022.
The primary driver of this expansion is an increase in investor demand for financial
products. This has resulted in an increase in the number of people investing their
money in mutual funds that have been able to meet this demand.
In addition to this, there is also an increased demand for equity-oriented mutual funds
as people become interested in investing more money into stock markets. This trend is
expected to continue into 2022 as well with no significant changes expected in terms
of investment options available on exchanges or other methods by which investors can
invest their money into stocks.

47
CHAPTER NO. 2
RESEARCH METHODOLOGY

2.1 INTRODUCTION

“Risk comes from not knowing what you are doing”


Mutual funds are investments that pool money from investors. A mutual fund can
appear to be complicated or intimidating. Mutual fund investing has grown in
popularity as one of the safest, simplest, most convenient, and profitable
investments. A mutual fund portfolio is designed and managed to meet the
investment process's stated objectives. Mutual fund investment has numerous
advantages that make it one of the most profitable investment options. People
who invest in mutual funds consider the risk and return associated with mutual
fund schemes.
Investors may find it difficult to analyse funds by considering the factors
mentioned in relation to the schemes if they understand their perception of mutual
funds. As investors, we can either manage our finances by investing in funds with
the intention of reaping future benefits.
A mutual fund investor invests his money based on the risk involved; the most
common problem encountered when investing in mutual funds is losing money.
Mutual funds are vulnerable to market volatility. It includes credit risk, interest
rate risk, price risk, and economic risk.
People pretend to invest in mutual funds based on these risk factors. Investors
must think twice before investing and must analyse the risks involved before
proceeding with the investment process. Thus, investing in mutual funds has an
impact on investors' preferential needs and is predictable in terms of future
investment rates, as well as the growth and risk factors involved.

48
2.2 OBJECTIVES OF THE STUDY

The study has begun, and various goals have been established. These goals are as
follows:

1. To gain knowledge about mutual funds.


2. Research and analyse investor knowledge of mutual funds.
3. To investigate investors' perceptions of mutual funds.
4. To assess investor satisfaction with mutual funds.
5. To suggest possible remedies for future plans.
6. To examine the existing status of mutual fund industry in India.
7. To find out the impact of Equity funds in growth of capital market in
India.
8. To evaluate the impact of Debt funds in growth of capital market in India. 9.
To study the relationship between Balance funds investment and growth of
capital market in India.
10. To analyze and compare the performance of selected Equity, Balance and
Debt Mutual Funds.

2.3SCOPE OF THE STUDY

➢This paper's investigation primarily focuses on investors' attitudes towards


mutual fund schemes and their future growth.
➢It also focuses on the risk factor involved, which discourages investors
from investing in mutual funds. As a result, the study provides a
comprehensive picture of investors' intentions regarding mutual funds,
including risk analyses, various schemes in which they have invested,
profit earned, and losses incurred.

49
➢The purpose of this study is to assess the growth of the mutual fund market.
It also focuses on understanding different people's perspectives on mutual
fund investments.
➢It also aims to comprehend different people's perspectives on mutual fund
investments.
➢The research study is the study that covers mutual fund innovations and
developments from across India. The research also looks at developments
both inside and outside of organizations.
➢The current study aims to investigate investors' knowledge and perceptions
of mutual funds in India. It entails comprehending the fundamental
concept of mutual funds, various mutual fund schemes, investment
alternatives, factors influencing investment, investor expectations
regarding mutual funds, and investor preferences for various mutual fund
schemes.

2.4 LIMITATION OF THE STUDY

Data was collected and interpreted with the utmost reliability and consistency for
the research work, but due to the prejudices of a few respondents, certain
limitations of the study are as follows:
1. The study is limited to 100 participants. 2.
Time constrain in completing the project.
3. The questionnaire responses are influenced by investors' beliefs and prejudices.
5. The current study is limited to information gathered about Mutual Fund
investors via questionnaire.
6. The obtained results may not reflect local constituency understanding.

50
2.5 Method of Data Collection

The data for the study is gathered in two ways:


- Primary Method - A questionnaire is designed to collect real-time data.
The questionnaire includes a mix of open-ended, closed-ended, and likert scale
questions to gain a better understanding of respondents' perspectives, as well as
the ability to study the data for further analysis.
Secondary Method - Financial reports, websites, news, online articles, and books
are used to discover previously unknown information and to gain a thorough
understanding of the core topic.

2.6 DESIGN OF SAMPLING

The sampling design used for the purpose of study is Stratified Random
Sampling. Wherein responses are collected from random respondents and then
sorted into two homogeneous groups, namely mutual fund -investors and non-
mutual fund -investors, in order to gain a better understanding of both groups.

2.7 TABULATION OF DATA

The data was collected through a questionnaire and tabulated.


The data has been classified on the basis of gender, age, and educational
qualification, and occupation, number of dependents, total monthly income and
income savings ration held by the respondents.

51
COMPETITIVE LANDSCAPING

The report provides an overview of mutual fund companies in India. We would like to
present detailed financial performance profiles of a few major corporations. The
following are some of the major market players at the moment:
Mutual Fund SBI
ICICI Prudential Mutual Fund
Aditya Birla Sun Life Mutual Fund
Edelweiss Mutual Fund
UTI Mutual Fund
SBI Mutual fund

1. SBI MUTUALFUND:

The mutual fund industry in India began in 1963 with the Unit Trust of India (UTI), a
joint initiative of the Government of India and the Reserve Bank of India. SBI Mutual
Fund, which debuted in 1987, was India's first non-UTI mutual fund.
State Bank of India decided to sell 37% of its stake in its mutual fund arm, SBI Funds
Management Private Limited (SBIFMPL), which has been appointed as the Asset
Management Company of the SBI Mutual Fund, in July 2004.
Type Private company

Industry Mutual Fund

Founded 1987

Headquarters Mumbai, India

52
Area served India

Mr. Vinay M. Tonse (CEO & MD)

Mr. Denys de Campigneulles (Deputy


Key people CEO)

Products Mutual Fund

Rs. 4,56,497.93 crore (October –


AUM
December2020)
Number of employees 1000–1200

Website sbimf.com

2. ADITYA BIRLA SUN LIFE:

Aditya Birla Sun Life Asset Management Company Ltd. (ABSLAMC),


formerly known as Birla Sun Life Asset Management Company Limited, is
a securities and exchange board of India-registered investment management
firm. It is a collaboration between India's Aditya Birla Capital and Canada's

53
Sun Life Financial Inc. Sector-specific equity schemes, fund of fund
schemes, hybrid and monthly income funds, debt and treasury products, and
offshore funds are all available from the company.
Type Private

Industry Financial services

Founded 1994 in India

Headquarters Mumbai, Maharashtra, India

Areas served 26 countries

Key people A. Balasubramanian (CEO)

Services • Life, health, vehicle, travel


insurances

• Investment management

• Mutual fund
Owners Aditya Birla Capital
(51%)
Sun Life Financial Inc.(49
%)
Website mutualfund.adityabirlacapital.c
om

54
3. UTI ASSET MANAGEMENT COMPANY:

UTI Mutual Fund was established on 1 February 2003 as a Securities and Exchange
Board of India (SEBI) registered mutual fund from the former Unit Trust of India (UTI).
As of September 2017, UTI Mutual Fund was the oldest and largest mutual fund in India,
with over 10 million investor accounts across its 230 domestic schemes/plans. LIC, Bank
of Baroda, Punjab National Bank, State Bank of India, and T.Rowe Price now own it.
UTI Mutual Fund has a nationwide distribution network that stretches across the entire
country. It has over 48000 AMFI/NISM certified Independent Financial Advisors and
174 Financial Centers in its distribution network.
Formerly Unit Trust of India

Type Public company


Industry Mutual fund
Founded Unit Trust of India Act 1963, UTI Repeal Act
2002.
Headquarters Mumbai, Maharashtra, India

55
Key people Imtaiyazur Rahman (Director&CEO)

Products • Mutual Funds

• National Pension System

• Private Equity anddebt


Number of 1,365+ (2019)
employees
Website www.utimf.com

4. ICICI PRUDENTIAL MUTUAL FUND:

ICICI Prudential Mutual Fund is India's second largest asset management firm. The
ICICI Prudential Mutual Fund was founded in 1993.
Products and services include: The AMC manages significant assets under management
(AUM) across asset classes in the Mutual Fund segment. The AMC also provides
Portfolio Management Services and a Real Estate Division to investors throughout the
country, as well as International Advisory Mandates to clients in international markets.

Type Public
Industry Mutual Funds

56
Founded 1993
Headquarters Mumbai, India
Area served India

Key people • Mr. Nimesh Shah(MD & CEO)

• Mr. S. Naren (CIO)


Products Mutual Fund, Portfolio Management
Services, Advisory Services, Real
EstateInvestments
AUM 305,739 crore (US$43 billion)(31
March 2018)
Number of 2000–2500
employees
Website www.icicipruamc.com

57
CHAPTER 3
3. REVIEW OF LITERATURE

Komal B.Sharma (2020) attempted to assess the performance of selected debt


mutual fund schemes in India, as well as to investigate the risk and return
component of these mutual funds. According to the performance analysis of the
selected five Debt funds, investors should consider statistical parameters such as
alpha, beta, and standard deviation when investing in mutual funds, in addition to
NAV and Total Return, to ensure consistent performance of mutual funds.
Mr.SangisettiManoj and Mr.Bondu Avinash (2020) attempted to determine the
impact of the Covid-19 pandemic on the mutual fund industry, as well as the
fluctuation of Net Asset Value and its performance. The goal of this study is to
evaluate the performance of mutual funds from various mutual fund houses in
India that fall into the Large Cap fund category. According to the findings of this
study, prior to Covid-19, the majority of large cap funds provided good returns,
and the market satisfied the majority of investors in terms of returns. When it
comes to the outbreak of the Covid-19 pandemic, the index values for all funds
plunged. Some reasons for negative returns could be the fall of stock markets,
negative market moments, a lack of savings, and negative sentiments among the
majority of capital market participants.
N. Bhagyasree and Mrs. B. Kishori (2016) assessed the performance of 30 open
ended schemes of Indian mutual funds in order to assess the risk-return
relationship and market volatility of the chosen mutual funds. Sharpe, Treynor,
and Jensen's measure was used to evaluate the historical performance of the
selected schemes, and the results will help investors make better investment
decisions. The study's findings revealed that 14 of the 30 sample mutual fund
schemes outperformed the benchmark return. All the schemes have represented
positive returns.
According to Sehdev R and Ranjan P (2014), in the article "A study on
Investor's perception towards mutual fund investment" published in Scholars
Journal of Economics, Business, and Management, most people prefer balanced

58
funds and debt funds. People then look for equity diversified and sector funds.
Benefits and transparency, returns, redemption period, liquidity, and institutional
investor activity are the factors driving investors' preference for mutual funds as
an investment option. People rely on the internet more than any other media
channel for information on mutual funds.
Preeti Sehgal Chawla and Dr. Vikas Choudhary (2014) The purpose of the
research was to examine and compare the performance of Selected Diversified
Equity Mutual Funds in India. This study provides some insights on mutual fund
performance to help common investors make rational investment decisions when
allocating their resources to the appropriate mutual fund scheme. The
performance of sample mutual fund schemes was assessed using return and risk
analysis, as well as risk-adjusted performance measures such as the Sharpe ratio
and Treynor ratio.
Dr.JoityTomer and Prof.Nisar Ahmad Khan (2014) set out to answer the
question, "What are the problems with mutual funds in India?" and "Are mutual
funds' prospects in India promising?" With these questions in mind, the researcher
conducted the research with the goals of studying the growth, development, and
regulations of the mutual funds industry in India, as well as identifying the factors
responsible for the problems and prospects of the mutual funds industry in India.
According to the findings of this study, the problems with mutual funds in India
are low awareness, low participation, and low penetration, as well as regulatory
issues. While the prospects state that mutual funds will tap a larger portion of
domestic savings in the coming years, rising corporate earnings and maturing
capital markets will also play a key role in accelerating the growth of the mutual
funds industry.
Ms. Shilpi Pala and Prof. Arti Chandani (2013) conducted research on the top
ten equity mutual fund schemes in various categories. This was done in order to
identify the top performing mutual fund house in the Equity Mutual Fund
category. It was discovered by comparing the CAGRs of all equity mutual funds
over three and five years. The best mutual fund was determined through research
of various types of equity and debt mutual funds.

59
Sharma R and Pandya N K (2013) stated in the article "Investing in Mutual
Fund: An Overview" from Asian Research Journal of Business Management that
a large number of people are still unsure about how Mutual Funds work, and as a
result, they have not formed a firm opinion about investing in mutual funds.
Existing investors consider return potential and liquidity to be the most appealing.
Mutual funds have a lot of room for growth in India.
People should base their decisions on the performance of mutual funds rather than
whether they are in the private or public sectors.
Singh B K (2012), in an article titled "A study on investors' attitudes towards
mutual funds as an investment option" published in the International Journal of
Research in Management, emphasised the importance of raising public awareness
about mutual funds. There is a strong need to educate people on the benefits of
investing in mutual funds. Existing investors believe that the benefits provided by
mutual funds, such as return potential and liquidity, are the most appealing,
followed by flexibility, transparency, and affordability.
Divya K. (2012) suggested in the International Journal of Marketing and
Technology article "A Comparative Study on Evaluation of Selected Mutual
Funds in India" that investment managers whose performance falls below the
benchmark index should reconsider their investment strategy and asset allocation.
To generate superior performance, investing styles should be redesigned in
response to market ups and downswings. To improve the efficiency and
popularity of mutual funds, the regulator should establish standard benchmarking
criteria that asset management firms can use.
Debasish, Sathya Swaroop ( 2009 ) This study compares the returns earned by
the sample mutual fund schemes to market portfolio returns to distinguish the
winners from the losers. The findings have broad implications in that the equity-
based open-ended mutual fund schemes of Franklin Templeton and UTI provide
relatively better returns to investors than the other schemes used in the study.
Furthermore, the study concludes that in times of high stock market volatility,
mutual funds are the best source of investments with assured and adequate
returns, provided the mutual funds are chosen wisely.

60
CHAPTER 4
4. DATA ANALYSIS AND INTERPRETATION

Meaning:
Data analysis is the methodical application of statistical and/or logical
techniques to describe and illustrate, condense and recapitulate, and
evaluate data.
Various analytic procedures "provide a way of drawing inductive
interferences from data and distinguishing the signal (the phenomenal
of interest) from the noise (statistical fluctuations) present in the data,"
according to Shamoo and Resnik (2003).
While data analysis in qualitative research can include statistical
procedures, analysis is frequently an ongoing interactive process in
which data is continuously collected and analysed almost
simultaneously.

61
1. Annual income

Interpretation:
In the above table and chart, it is shown that 45.7% respondents have annual
income upto 1 lakh, 40% of respondents havZe 2-5 lakh annual income and
14.3% respondents have more than 5 lakh annual income.

62
2. Occupation

Sr. No. Occupation No. of respondents in %


1. Businessman 41%
2. Government employees 8.6%
3. Private employees 24.8%
4. Professionals 11.4%
5. Housewife 1.8%
6. Students 12.4%

Interpretation:
In the above chart and table, it is shown that majority of the respondents are
student which is 41%, 11.4 % of respondents are professional and 12.4%
respondents are running business, while 24.8% respondents are private
employees and 8.6% are government employees.

63
3. Which type of investment you prefer the most ?

Sr. no Particulars No. of respondents in %


1. Insurance 60%
2. Mutual Funds 79%
3. Fixed Deposit 47.6%
4. Gold/Silver 11.4%
5. Shares/Debentures 25.7%

Interpretation:
In the above table and chart, it is shown that respondents preferences
regarding investment options. 79% of respondents prefer Mutual fund
investment which is more as compared to other investment options,60%
prefer Insurance , 47.5% wants to invest in Fixed deposit and 11.4% in
gold. The remaining respondents prefer stock market.

64
4. Do you regularly invest in mutual fund?

Sr. No Particulars No. of respondents in %


1. Yes 40%
2. No 22.9%
3. May be 37.1%

Interpretation:
In the above table and chart, the respondents were asked about their
investment in mutual fund and 40% of them responded with Yes.

65
5. If not investing in mutual fund then why?

Sr. No Particulars No. of respondents in %


1. Not aware of the Mutual fund 6.2%
2. Higher risk 17.2%
3. Not any specific reason 75.9%

Interpretation:
In the above table and chart, the respondents were asked about their reasons
for not investing in mutual fund and 75.9% of them responded with not any
specific reasons, 17.2% respondents with higher risk and rest of them were
not aware of the mutual fund.

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6. What is the tenure of your investment ?

Sr. No Particulars No. of respondents in %


1. 5 years 14.3%
2. 4 years 14.3%
3. 3 years 14.3%
4. 2 years 30.5%
5. 1 years 22.9%

Interpretation:
In the above table and chart, it is shown that 30.5% of respondents would
like to invest for 1 years and the other 14.3% would like to invest for 5, 4, 3
years of tenure.

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7. What feature of mutual fund allure you most ?

SR. No Particulars No. of respondents in %


1. Diversification 21.9%
2. Better return and safety 27.6%
3. Reduction in risk and transaction 12.4%
cost
4. Regular income 15.2%
5. Tax benefit 21%

Interpretation:
According to the above table and chart, the most appealing feature chosen by
respondents is better return and safety (27.6%), followed by regular income
(15.2%), diversification (21.9%), tax benefits (21%), and reduction in risk
and transaction cost (12.4%). In order to achieve their goal, mutual funds
may choose to invest in a variety of equities, as well as debt and money
market instruments.

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8. Which mode of investment in mutual funds you prefer?

Sr. No Particulars No. of respondents in %


1. Lump sum 18.1%
2. Systematic Investment Plan (SIP) 61%
3. Others 21%

Interpretation:
As shown in the above chart and table that 61% of respondents have
preferred Systematic Investment Plan (SIP), 18.7% of respondents have
preferred lump sum mode of investment, 21% respondent choose other mode
of investment in mutual fund.

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9. While investing your money, how these factors affect your

decision?

Interpretation:
As shown in the above chart by ranking them on a scale of 1-5 with 1
representing strong influence and 5 representing minimal influence while
investing money how these effect the decision of respondents.

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10.Which are the primary sources of your knowledge about
mutual funds as an investment option?

Interpretation:
As shown in the above chart by ranking them on a scale of 1-5 with 1
representing strong influence and 5 representing minimal influence, which
represents the primary sources of knowledge about Mutual Funds as an
investment option for the respondents.

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11.From where do you purchase mutual fund?

Sr. No Particulars No. of respondents in %


1. Directly from the AMC 29.5%
2. Brokers 42.9%
3. Other Sources 27.6%

Interpretation:
The respondents were asked that from where do they purchase mutual fund
in which the responses were 29.5% respondent purchase directly from the
AMC, 42.9% from brokers and 27.6% respondent purchase from other
sources.

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12.What is your primary investment purpose in mutual fund?

Sr. No Particulars No. of respondents in%


1. Retirement planning
2. Future education of
student
3. Wealth creation
4. Others

Interpretation:
As shown in the above chart and table to know the primary goal of investors
and the responses are 41.9% of respondents goal is to invest in retirement
planning, 27.6% of people wants to invest for future education of student,
where as 53.5% of respondents wants to invest in wealth creation and 41%
respondents invest in others

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13.How much percentages of your earnings you trade in mutaul
funds?

Sr. No Particulars No. of respondent in %


1. 5% 44.8%
2. 10% 39%
3. 15%
4. More than 15%

Interpretation:
44.8% of the respondents are trading 5% of their earnings , 39% are trading
10% earnings, 10.5% are trading 15% and 5.7% are trading above 15% of
their earnings. Investors should not be worried about the short-term
fluctuation in returns while investing in equity funds. You should choose the
right mutual fund.

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14.Which type of company you prefer for investment?

Sr. No Particulars No. of respondents in %


1. Public 42.9%
2. Private 46.9%
3. MNC 10.2%

Interpretation:
The respondents were asked that in which kind of mutual fund would they
like to invest and the responses were 42.9% Public and 46.9% Private, while
10.2% respondents invested in MNC. It is observed that Public mutual funds
tend to operate with lower risk levels.

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15.What kind of services are provided by your mutual fund
company?

Sr. No Particulars No. of respondents in %


1. Financial planning 32.7%
2. Wealth management 38.8%
3. Investment banking 28.6%

Interpretation:
The respondents were asked that in what kind of services are provided by
mutual fund company and the responses were 32.7% services by financial
planning , 38.8% by wealth management and 28.6% services provided by
investment banking.

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16.Are you satisfied with the services provided by your company?

Sr. No Particulars No. of respondents in %


1. Yes 53.1%
2. No 8.2%
3. May be 38.8%

Interpretation:
As shown in the above chart, the question regarding that the services
provided by the company gives satisfaction or not. 53.1% of the people
responded with 'Yes', 8.2% with No and 38.8% of respondents are not sure.

77
CHAPTER 5
5 . CONCLUSION AND SUGGESSIONS

Conclusion
A mutual fund is a trust that pools the savings of a group of investors who all
have the same economic goal. They are investment vehicles that can be used to
invest in asset classes such as stocks or bonds. Professional fund managers
manage it. It offers risk diversification. Advantages of

The benefits of investing in mutual funds include risk reduction, liquidity,


affordability, convenience, flexibility, and variety. Customers must identify the
best MF management companies as well as the appropriate schemes among the
various schemes offered by the MFs. Using primary research data, it was
discovered that the majority of mutual fund investors were males between the
ages of 40 and 49 who worked in the private sector.
The primary reason for this discovery is that in Indian society, mostly in all
households, decisions regarding investment and finance have been made by male
members of the family for many years, and this trend is still visible in the majority
of families. As a result, companies should target middle-aged men in order to
ensure that more and more investors invest in their company.
Furthermore, it was discovered that one of the primary reasons for investors to
invest in mutual funds is that mutual funds offer a variety of tax advantages.
Investing in mutual funds provides tax benefits under Section 80C of the Income
Tax Act of 1961. Investors who want to save money on taxes prefer to invest in
mutual funds and other securities. According to the study's findings, the majority
of investors prefer to invest in open-ended schemes because they give them the
flexibility to buy or redeem the fund at any time. Most respondents prefer to
invest in public sector mutual funds because they believe that investing in public
sector mutual funds is more safe and secure than investing in private sector
mutual funds because public sector mutual fund companies are owned and

78
controlled by the government, so there are fewer chances of fraud and funds are
transparent.
The study was also able to identify various parameters that an investor considers
before investing his money in any type of security, whether managed by the
government or private companies. The major motivator for an investor to invest in
mutual funds is the tax deduction when filing income tax returns, followed by the
mutual fund's security and liquidity. Furthermore, the relationship between
demographic variables such as investor gender and age and investor perception of
mutual funds has been studied. According to the findings of the study, there is a
significant relationship between gender and investor perception of mutual fund
returns.
Furthermore, there is a significant relationship between age and investor
perception of higher tax shelter provided by mutual funds. Thus, in order to
encourage mutual fund investment, companies must focus on investor preferences
and demographics, and develop new and innovative schemes that are not only
beneficial to existing and potential investors, but also profitable to the company.
Furthermore, the study revealed that the mutual fund industry has a lot of potential
in the coming years because it has been growing rapidly in recent years and is
expected to continue doing so. As a result, there is a good chance that people will
invest their savings in mutual funds. In general, the results of this study add to
both theory and practice.

Suggestions
• Financial advisors are the primary source to influence investors, so mutual
fund companies should educate them on the mutual fund schemes and their
goals.

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• The mutual fund sector must also assist people in maximizing the use of their
savings by assisting them in mobilizing them. By emphasizing the benefits
and returns of such investments, the businesses must work to increase the
amount of money invested in moderately to highly risky investments.
• Some investors recommended informing investors via SMS once every two
weeks of the fund values of their mutual fund investments. The investors will
benefit from having access to the most recent information about various funds.
• To entice more investors to invest in their mutual funds, the mutual fund
industry should raise awareness of the schemes.
• The investor should monitor the scheme's performance as well as that of other
respectable schemes that are readily available on the market for a closed
comparison.

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6.1 BIBLIOGRAPHY

• https://groww.in/
• https://www.moneycontrol.com/
• https://economictimes.indiatimes.com/definition/mutual-fund
• https://www.sbimf.com/
• https://www.sbimf.com/en-us/lists/schemeannualreports
• https://mutualfund.adityabirlacapital.com/
• https://www.edelweissmf.com/
• https://www.amfiindia.com/research-information/mf-history
• https://www.utimf.com/
• https://economictimes.indiatimes.com/mf/mf-news/mutual-fund-industry-aum-rises-5-7-per-
cent-in-2022-amfi/articleshow/96882465.cms
• https://www.rbi.org.in/
6.2 APPENDIX

QUESTIONNAIRE

2. Age*

o 18 - 25
o 25 - 35
o 35 - 45
o More than 45

3. Annual Income*

o Upto 1 Lakh
o 2-5 Lakh
o More than 5 Lakh

4. Occupation
*
o Businessman
o Government Employee
o Private Employee
o Professional
o Housewife
o Student

5. Which type of investment you prefer the most?


*
▪ Insurance
▪ Mutual Funds
▪ Fixed Deposit
▪ Gold/Silver
▪ Shares/Debentures

6. Do you regularly invest in mutual funds?


*
o Yes
o No
o Maybe

7. If not invested in Mutual Fund then why?

o Not aware of Mutual Fund


o Higher risk
o Not any specific Reason

8. What is the tenure of your investment?


*
o 5 Years
o 4 Years
o Years
o Years
o 1 Year
9. What feature of the mutual funds allure you most?*

o Diversification
o Better return and safety
o Reduction in risk and transaction cost
o Regular Income
o Tax Benefit

10. Which mode of investment in mutual funds you prefer?


*
o Lumpsum
o Systematic Investment Plan (SIP)
o Others

11. While investing your money, how these factors affect your decision?*
Corresponding to your choices how would you rate their influence on your Mutual Fund purchase
decision. Please rank them on a scale of 1-5 with 1 representing strong influence and 5
representing minimal influence.
1
2
3
4
5
Liquidity
High Risk
Professional Management
Diversification
Brand Image
Price
Risk
2. Which are the primary sources of your knowledge about Mutual Funds as an Investment
option?*
Corresponding to your choices how would you rate their influence on your Mutual Fund purchase
decision. Please rank them on a scale of 1-5 with 1 representing strong influence and 5
representing minimal influence.
1
2
3
4
5
Television
Internet
Newspaper and journals
Friends and relatives
Sale

13. From where do you purchase mutual funds?*

o Directly from the AMC


o Brokers
o Other Sources

14. What is your primary investment purpose in mutual funds?


*
▪ Retirement Planning
▪ Future Education of Student
▪ Wealth Creation
▪ Others
15. How much percentage of your earnings you trade in mutual funds?
*
o 5%
o 10%
o 15%
o more than 15%

16. Which type of company you prefer for investment?*

o Public
o Private
o MNC

17. What kind of services are provided by your mutual fund company?*

o Financial Planning
o Wealth Management
o Investment Banking

18. Are you satisfied with the services provided by your company ?*

o yes
o no
o may be

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