A Project Report On Report On Overview of Mutual Fund Investment in India Submitted by Nidhi Poojary
A Project Report On Report On Overview of Mutual Fund Investment in India Submitted by Nidhi Poojary
A Project Report On Report On Overview of Mutual Fund Investment in India Submitted by Nidhi Poojary
Project ReportOn
SUBMITTED BY
Nidhi Poojary
Roll No.: 33
GUIDE
SUBMITTED TO
UNIVERSITY OF MUMBAI
RAJASTHANI SAMMELAN’S
Malad (West)
Mumbai – 400064.
Mumbai – 400064.
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.
College
External Examiner:
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Date:
DECLARATION
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.
Certified by
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
• Executive Summary
2.1 Introduction 48
• 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:
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.
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.
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.
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
➢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
➢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.
➢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.
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
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.
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.
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.
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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.
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
19
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.
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.
22
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
24
1.11 POINTERS TO MEASURE MUTUAL FUND
PERFORMANCE
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.
E. Rolling return
26
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.
27
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.
➢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.
➢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.
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.
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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.
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."
30
“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.”
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.
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➢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.
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.
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.
36
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
The following are some of the top performing large cap equity funds as of May 16,
2021:
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:
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.
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.
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.
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.
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.
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.
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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.
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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.
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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
48
2.2 OBJECTIVES OF THE STUDY
The study has begun, and various goals have been established. These goals are as
follows:
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.
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 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.
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
Founded 1987
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Area served India
Website sbimf.com
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
• 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
55
Key people Imtaiyazur Rahman (Director&CEO)
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
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CHAPTER 3
3. REVIEW OF LITERATURE
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.
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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.
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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
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 ?
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?
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?
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.
66
6. What is the tenure of your investment ?
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 ?
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?
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?
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?
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?
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?
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?
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?
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.
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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
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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
o Diversification
o Better return and safety
o Reduction in risk and transaction cost
o Regular Income
o Tax Benefit
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
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