Project report for finance Published on 07 May, 2015

1. SUMMER TRAINING PROJECT REPORT
ON
‘STUDY OF MUTUAL FUND’
S.I.P., NOIDA
SUBMITTED FOR PARTIAL FULFILLMENT OF THE DEGREE OF
MASTER OF BUSINESS
ADMINISTRATION
[2014-2015]
By
CHAURASIA DIPESH RAMDULARE
(Roll No.: 1368670033)
EXTERNAL SUPERVISOR INTERNAL SUPERVISOR
Amitabh Ghosh RAJNISH KHARE
HR Manager ASSIATANT PROFESER
Mahindra Finance Ltd., AIAM, GRATER NOIDA
ACCURATE INTITUTE OF ADVANCE MANAGEMENT, GRATER NOIDA
(Affiliated to UPTU and Approved by AICT
1

2. Accurate Institute of Advanced
Management
(Affiliated to UPTU and Approved by AICTE)
______________________________________
Date:
HEAD OF MBA PROGRAM’S CERTIFICATE
Certified that the Summer Training Project Report titled “STUDY OF MUTUAL FUNDS
(MAHINDRA FINANCE” is carried out by Mr. CHAURASIA DIPESH RAMDULARE,
Roll No.1368670033, a student of MBA –III semester at Accurate Institute of Advanced
Management, Greater Noida, under the supervision of –Shaurabh Chandra HR Manager
(Designation) MAHINDRA FINANCE.
This is an original work carried out by the said student to the best of my knowledge and I
recommend for the submission of this summer Training Project Report to Uttar Pradesh
Technical University, Lucknow in the partial fulfillment of the award of MBA Dagree.
Prof.(Dr.) Amar Kr. Saxena
Director,AIAM,Greater Noida.
Plot No. 49, Knowledge Park-3, Greater NOIDA-201306 (UP), Phone: 0120-2328235,
Fax: 0120-2320355 E. Mail.: info@accurate.in, Web: http//www.aiam.in
2

3. DECLARATION
To,
The Director,
Accurate Institute of Advance Management,
Plot No.-49, Knowledge Park 3
Greater Noida
Utter Pradesh – 201308.
Respected Sir,
I hereby declare that this project report entitled “STUDY OF MUTUAL FUNDS
(MAHINDRA FINANCE)" is written and submitted by me under the kind guidance
of Mr. Amitabh Ghosh, HR Manager, Industry Guide and Mr. RAJNISH KHARE,
Asst.Prof, AIAM, Gr. Noida (U.P.). The findings and interpretations in the report are based
on both primary and secondary data collection. This project is not copied from any source or
other Project submitted for similar purpose.
DATE:
PLACE: Greater Noida
ROLL NO.: 1368670033
Signature of student
3

4. PREFACE
The learning process of classroom is incomplete without any practical field experience. It is
because of the reason that our Institute like any other, has provision for practical training, so
practical training is vital. Accordingly we had our training with MAHINDRA
FINANCE.
This 8 weeks training gave us an insight into the working of an organization and learn how
some of the important concepts that we have been studying as a student of management are
applicable in the field. The project is a sincere attempt to focus on the subject in a lucid
manner. I sincerely attempted to effort to carry out study in deep on subject.
During this period we had the opportunity to observe the company’s performance, place in
the industry, its products, pricing, advertisement, promotions and its good will through our
market survey. It is hoped that this study will provide valuable information in various issues
related to MAHINDRA FINANCE, oriented industries.
CHAURASIA DIPESH RAMDULARE
Roll no.:- 1368670033
4

5. ACKNOWLEDGEMENT
With immense please we are presenting “STUDY OF MUTUAL FUNDS
(MAHINDRA FINANCE)” Project report as part of the curriculum of ‘Master of
Management Studies’. We wish to thank all the people who gave us unending support.
I express my profound thanks to Director and Prof. Amar Sexena,
project guide and all those who have indirectly guided and helped us in
preparation of this project.
We also like to extend our gratitude to all staff and our colleagues of College of
Management, who provided moral support, a conductive work environment and the much-
needed inspiration to conclude the project in time and a special thanks to my parents who
are integral part of the project.
Thanking you.
Accurate Institute of Advance Management
Knowledge Park 3, Greater Noida
5

6. CONTENT
Title Page
Chapter 1 INTRODUCTION OF THE STUDY
Chapter 2 MUTUAL FUNDS
1. Introduction Of Mutual Fund
2. Objective Of The Study
3. Methodology Of The Study
4. Financial System In India.
Chapter 3 MUTUAL FUNDS – AS INVESTMENT
1. Advantages Of Mutual Fund
Chapter 4 HISTORY OF MUTUAL FUND
1. Performance Of Mutual Fund
Chapter 5 RESEARCH METHODOLOGY
1. Data Collection Kind of Research
Chapter 6 CONCLUSIONS, SUGGESTIONS & LIMITATION
Chapter 7 REFERENCES
6

7. 7

8. MUTUAL FUND HAS BECOME AN IMPORTANT
Intermediary between household and financial market particularly the equity
market. Mutual fund industry in India is the fastest growing sector in the
financial services industry.
Over the last 5 years period the money invested by FIIs was Rs. 38,964cr by
mutual funds, yet MF’s collectively made an annualized return of 34% while it
was 30% in case of FIIs.
Total Assets under Management in India as of today is $92b.Volatile markets
and year end accounting considerations have shaved 6% off in March, but
much of that money should flow back in April. The next five years will see the
Indian Assets Management business grow at least 33% annually says a study a
study by Mckinsey.
8

9. This project can be divided into two parts. First part contains information
regarding mutual funds and systematic investment plan, which provide
knowledge about mutual funds and systematic investment planning, and how
mutual fund is necessary for common man? How mutual fund industry helping
common man to enjoy booming Indian economy?
All these information are collected through secondary data like ness papers,
magazines, internet etc. Second part of this project contains marketing research
in which collection of direct information from common man involve. That
shows knowledge about the mutual fund industry.
Next part of the project is most important which summaries the project and
explain cope and requirements of market. It also contains certain
recommendation which can help mutual fund industry to attract investors.
9

10. 10

11. COMPANY PROFILE
The US $6 billion Mahindra Group is among the top 10 industrial houses in
India. Mahindra & Mahindra is the only Indian company among the top tractor
brands in the world.
Mahindra’s Farm Equipment Sector has recently won the Japan Quality
Medal, the only tractor company worldwide to be bestowed this honor, It also
holds the distinction of being the only tractor company worldwide to win the
Deming prize. Mahindra is the market leader in multi-utility vehicles in India.
It made a milestone entry into the passenger car segment with the Logan.
The group has a leading presence in key sectors of the Indian economy
including the financial services, trade and logistics, automotive components,
information technology, and infrastructure development
With over 62 years of manufacturing experience, the Mahindra Group has built
a strong base in technology, engineering, marketing and distribution which are
key to its evolution as a customer centric organization. The Group employs
11

12. over 50,000 people and had several state-of-the –art facilities in India and
overseas.
Mahindra & Mahindra has entered into partnerships with international
companies like Renault SA France, and International Truck and Engine
Corporation, USA. Forbes has ranked the Mahindra Group in its Top 200 list
of the World’s Most Reputable companies and in the Top 10 list of Most
Reputable Indian Companies. Mahindra has recently been honored with the
Bombay Chamber Good Corporate Citizen Award for 2006-07.
12

13. MAHINDRA & MAHINDRA
FINANCIAL SERVICES LTD.
Overview:
• A Subsidiary of Mahindra & Mahindra Ltd, it is one of the leading non
banking finance companies focused on rural and semi urban sector.
• CRISIL has assigned AA+ rating to the company’s long term debt
reflecting a high degree of safety.
• MMFSL finances purchase of utility vehicles, tractors, cars and
commercial vehicles. The company’s goal is to be the preferred provider
of financing services in the rural and semi urban areas of India
• A company has 436 branches covering 25 states and 2 union territories.
• Assets under Management have increased from Rs 7,919 crores year on
year basis.
• MMFSL recorded total revenues of INR 12,268 million & PAT of INR
1’770 million for the year ends March 31, 2008 and had total Assets of
INR 70,218 million as of march 31, 2008.
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14. DIVERSIFIED PRODUCT PORTFOLIO
• Started financing non M&M Vehicle.
• Commenced insurance broking business through MIBL
• Commenced financing commercial vehicles
• Commenced mutual fund distribution business
• Commenced financing two-wheeler on pilot basis
• Plans to enter housing loans and personal loans business; Children’s
higher Education, Medical treatment,
• Consumer durable, House furniture ,
• Agriculture Needs; Exotic Holiday or just squash a Temporary Cash
requirement .
14

15. 15

16. MUTUAL FUNDS
“A Mutual fund is a company that brings together money from many people
and invests it in stocks, bonds or other assets. The combined holding of stocks,
bonds or other assets the fund owns are known as it portfolio. Each investor in
the fund owns shares, which represents apart of these holding……”
................. (U.S. securities exchange commission).
A mutual fund is a trust that pools the saving of a number of investors who
shares a common financial goal. The money thus collected is then invested in
capital market instruments such as shares, debenture and other securities.
The income earned through these investments and the capital appreciations
realized are shared by its unit holders in proportion to the number of units
owned by them. Thus mutual fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.
Mutual funds are financial intermediaries, which collect the savings of small investors and invest
them in a diversified portfolio of securities to minimise risk and maximise returns for their
participants.
16

17. Mutual funds have given a major fillip to the capital market - both primary as well as
secondary. The units of mutual funds, in turn, are also tradable securities. Their price
is determined by their net asset value (NAV) which is declared periodically.
The operations of the private mutual funds are regulated by SEBI with regard to their
registration, operations, administration and issue as well as trading. There are
various types of mutual funds, depending on whether they are open ended or close
ended and what their end use of funds is an open-ended fund provides for easy
liquidity and is a perennial fund, as its very name suggests.
A closed-ended fund has a stipulated maturity period, generally five years.
A growth fund has a higher percentage of its corpus invested in equity than in fixed
income securities, hence the chances of capital appreciation (growth) are higher. In
growth funds, the dividend accrued, if any, is reinvested in the fund for the capital
appreciation of investments made by the investor.
An Income fund on the other hand invests a larger portion of its corpus in fixed
income securities in order to pay out a portion of its earnings to the investor at
regular intervals.
17

18. A balanced fund invests equally in fixed income and equity in order to earn a
minimum return to the investors. Some mutual funds are limited to a particular
industry; others invest exclusively in certain kinds of short-term instruments like
money market or government securities.
18

19. INTRODUCTION
19

20. CONCEPT OF MUTUAL FUNDS
Encarta Encyclopedia defines mutual funds as forms of management Investment Company
that combines the money of its shareholders and invests those funds in a wide variety of
stocks, bonds and money market instruments. The latter include short – term investments
such as government bonds and securities, commercial papers, certificates of deposit, etc.
Mutual funds provide the investor with professional management of funds and
diversification of investment.
Mutual fund units are investment vehicles that provide a means of participation in the stock
market for people who have neither the time, nor the money, nor perhaps the expertise to
undertake direct investment in equities successfully. On the other hand, they also provide a
route into specialist markets where direct investment often demands both more time and
more knowledge than an investor may possess.
The price of units in any mutual fund is governed by the value of the underlying securities.
The value of an investor’s holding in a unit can therefore, like an investment in shares, go
down as well as up.
Mutual fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in various capital market
instruments. Each mutual fund has a specific investment objective and tries to meet that
objective through active portfolio management.
20

21. Major Types of Mutual Fund Schemes As Per Asset Class
EQUITY SCHEMES
Equity schemes invest primarily in shares. Depending on the scheme objective of
investment could be in:
• Growth stocks where earnings growth is expected to be attractive.
• Momentum stocks that go up or down in line with the market.
• Value stocks where the fund manager is of the view that current valuation in the
market.
• Do not reflect intrinsic value, or
• Income stocks that earn high return through dividends
DEBT OR INCOME SCHEMES
Gilt schemes invest in government securities. Apart from being the most liquid securities in
the debt market, govt. securities are eligible for liquidity support. Since the issuer is the
governments of India/States these funds have little risk of default and hence offer better
protection of principal.
Bond schemes invest in bonds issued by the government or any other issuer, also by private
companies, banks, financial institutions and other entities such as infrastructure
companies/utilities. By investing in debt, these funds target low risk and stable income for
the investor as their key objective.
Debt funds are largely considered as income funds as they do not target capital appreciation,
look for high current income and therefore distribute a substantial part of their surplus to the
investors.
21

22. Scope of the Study
Mutual funds normally invest in a well diversified portfolio or securities. Each investor in a
fund is a part owner of the fund’s entire asset. This enables him to hold a diversified
investment portfolio even with a small amount of investment that would otherwise require
big capital.
Even if an investor has big amount of capital available to him, he benefits from the
professional management skills brought in by the fund in the management of the investor’s
portfolio. The investment management skills along with the needed research into available
investment options, ensure a much better than what an investor can manage on his own.
Diversification reduces the risk of loss, as compared to investing directly in one or two
shares or debentures or other instruments.
A direct investor bears all the costs of investing such as brokerage or custody of securities.
When going through a fund, he has the benefit of economies of scale; the funds pay lesser
costs because of larger volumes a benefit on to its investors.
Even often, investors hold shares or bonds they cannot directly, easily and quickly sell.
Investing in a mutual fund is much more liquid. The investor can liquidate the investments
by selling its units to the fund if open ended, or selling them to market if it is close-ended.
Investors can even transfer their holdings from one scheme to the other, get updated market
information and so on. For equity – diversified schemes the risk and return measures can be
calculated and the comparison between various schemes can be made that fall under
different asset management companies.
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23. Objective of the study
The main objective of the study was to analyze in detail and compare the performance of
different equity diversified schemes across various AMC and also to take a note of the
budget announcements and their impact on the mutual fund industry.
The following are the specific objectives of the study: -
♦ To study the investors’ perception towards Mutual Fund as an investment avenue.
♦ To make a comparative analysis of twenty equity – diversified mutual fund schemes
across various asset management companies on the basis of risk and return measures
of performance.
♦ To analyse various features of the schemes under consideration
♦ To understand the impact of Budget announcements of last two years on the mutual
fund industry.
♦ To assess new developments taking place in the mutual fund industry.
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24. Methodology of the Study
The project has been carried out to compare the different equity diversified schemes with
few having growth option and few with dividend option which fall under various asset
management companies.
For any study to be conducted a set pattern of steps is required to be carried out.
First: To communicate with the people in the organization to have their opinion on
“Mutual Funds – as Investment Avenue” .Thereby, from this a conclusion about investors’
perception can be drawn.
Second: Various tables, charts and diagrams are used for precise understanding of the
topic under study. Use of various performance measures is done.
Third: The data can be collected from various sources which would be required to be
analyzed before findings are resulted and conclusions are drawn.
Fourth: Expert’s guidance will have to be taken from the top management to derive to a
meaningful conclusion from the finding.
Fifth: A financial report will have to be prepared successfully, accomplishing all the
objectives mentioned above.
24

25. Financial System in India
25
Financial Assets
Deposits
Insurance Policies
Pension Funds
Units
Financial Intermediaries
Banks/ Insurance
Financial Institutions
Mutual Funds
Financing Companies
Pension Funds
Investment
inGovernment
Business
Consumption
Financial Markets:
Capital Markets
 Secondary
 Primary
Money Markets
Financial Assets
Shares
Debentures
Units
Investors:
Individuals
Business
Government
Invest
throug
h
Investment
Cycle
Invest
Directly
Direct
Investment
Channelized
Investment

26. CONCEPT OF MUTUAL FUNDS
Encarta Encyclopedia defines mutual funds as forms of management Investment Company
that combines the money of its shareholders and invests those funds in a wide variety of
stocks, bonds and money market instruments. The latter include short – term investments
such as government bonds and securities, commercial papers, certificates of deposit, etc.
Mutual funds provide the investor with professional management of funds and
diversification of investment.
Mutual fund units are investment vehicles that provide a means of participation in the stock
market for people who have neither the time, nor the money, nor perhaps the expertise to
undertake direct investment in equities successfully. On the other hand, they also provide a
route into specialist markets where direct investment often demands both more time and
more knowledge than an investor may possess.
The price of units in any mutual fund is governed by the value of the underlying securities.
The value of an investor’s holding in a unit can therefore, like an investment in shares, go
down as well as up.
Mutual fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is then invested in various capital market
instruments. Each mutual fund has a specific investment objective and tries to meet that
objective through active portfolio management.
26

27. EMERGENCE OF MUTUAL FUNDS
The history of Mutual Funds dates back to 1830 when William I established first such fund
in Belgium. Almost 40 years later, foreign and colonial government trust was established in
England in 1868 followed by Massachusetts Investor’s Trust, Boston, USA in 1924 (which
is working till today). Slow growth had been the result of 1926 great depression which
shock the world economy negatively affecting the public interest in stocks, and therefore in
funds. Moreover, to revive the same a formal attempt was made by forming Investment
Company Act, 1940 to regulate the functioning of mutual funds. In 1960s, the industry
finally grabbed the investor’s attention due to Jack Dreyfus’s Fund’s good performance and
clever advertising. Market collapse of 1969-90 finally crossed $2000 billion mark in 1994.
By the same time total assets managed by the mutual funds the world over had crossed a
startling figure by 2000 A.D. Americans also believe that by the turn of the century they can
expect to have more money in mutual funds than in saving bank accounts.
Emergence of mutual funds in India, Unit Trust of India (UTI) established the first mutual
fund in 1964. In 1987, public sector banks like SBI and CANARA BANK made an entry by
floating different schemes. In 1989, Life Insurance Corporation of India floated LIC Mutual
Fund.
Mutual Fund industry in India received a boost when it was thrown open to private sector in
1993 and foreign mutual funds making an opening in 1994.
27

28. MUTUAL FUND MILESTONES IN INDIA
Year Milestones
1964 A concept arrives. India’s first mutual fund launches US 1994
1987 End of a monopoly. UTI’s stranglehold ends as Public sector banks join
the funds bandwagon. SBI and Canara Bank float Mutual Fund
1989 Financial Institutions jump into fray with launch of LIC mutual fund
1993 Threat of competition. The industry is thrown open to private sector.
Kothari pioneer MF sets a hot pace
1994 Foreign MF arrives. Its Morgan mania.
1998 Mutual Funds in troubled waters. Funds under perform index. US – 64
Flop show
2000 Shakeout imminent. Myth about safety and liquidity of investment in UTI
broken
2001 US – 64 to be redeemed as per pre – determined rate scheme.
Charitable Institutions allowed keeping their surplus money in mutual
funds.
Committee formed to evolve benchmark for performance appraisal of
debt schemes by SEBI and AMFI.
2002 SEBI to control UTI also.
2003 Fund of Funds floated
2004 Mutual Funds allowed to invest in overseas securities
28

29. MUTUAL FUNDS – AS INVESTMENT
An Investment Preference Order
Highest Risk Outright Speculation
High Risk
Aggressive Growth
Aggressive Income
Average Risk
Growth and Income
Low Risk
Conservative Income and Reasonable
Stability
Lowest Risk
Maximum Safety and Stability
29

30. The diagram on the previous page indicates what role the mutual fund has to play or what
service gap they try to fill for the investors. Because an average investor is basically
interested in the achievement of two prime objectives, i.e. Income and Growth / Capital gain
concerning investment made by an investor. In any event, its- wise to keep the familiar
investment diagram in mind.
Mutual funds go long way in achievement of the objectives like growth income, stable
income, etc. as a large base of capital is created due to pooling of funds by small investors,
hence a diversified portfolio of securities is created which obviously reduces risk to the
minimum. Professionals who provide expert supervision for managing such funds manage
the funds. The framework of rules given by SEBI provides liquidity and safety to mutual
fund investment.
Why to do investment in Mutual Funds?
A proven principle of sound investment is – do not put all eggs in one basket. Investment in
mutual funds is beneficial as: -
Firstly, they help in pooling of funds and investing in large basket of shares of different
companies. Thus by investing in diverse companies, mutual funds can protect against
unexpected fall in value of investment.
 Secondly, an average investor does not have enough time and resources to develop
professional attitude towards their investment. Here, professional fund managers engaged by
mutual funds take desirable investment decisions on behalf of investors so as to make better
utilization of resources.
 Thirdly, investment in mutual funds is comparatively more liquid because investor can
sell units in open market and can approach mutual fund to repurchase the units at declared
Net Asset Value depending upon different type of scheme.
 Fourthly, investors can avail tax – rebates by investing in different tax-savings schemes
floated by these funds, approved by the Government.
 Lastly, operating cost is minimized per head because of large size of investible funds,
thereby releasing more net income for investors.
30

31. In general terms the advantages of Mutual Funds can be enlisted and explained as appended.
ADVANTAGES OF MUTUAL FUNDS
 Professional Management
Most mutual funds pay topflight professionals to manage their investments. These managers
decide what securities the fund will buy and sell.
 Diversification
The best mutual funds design their portfolios so individual investments will react differently
to the same economic conditions. For example, economic conditions like a rise in interest
rates may cause certain securities in a diversified portfolio to decrease in value. Other
securities in the portfolio will respond to the same economic conditions by increasing in
value. When a portfolio is balanced in this way, the value of the overall portfolio should
gradually increase over time, even if some securities lose value.
 Liquidity
It's easy to get your money out of a mutual fund.
 Low cost
Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for
Index Funds are less than that, because index funds are not actively managed. Instead, they
automatically buy stock in companies that are listed on a specific index.
 Regulatory oversight
Mutual funds are subject to many government regulations that protect investors from fraud.
The mutual funds have various benefits over and above what are mentioned like
transparency, flexibility, choice of schemes, tax benefits and also well regulated.
31

32. APART FROM ALL THE BENEFITS STATED HERE MUTUAL FUNDS MAY
ALSO HAVE FEW LIMITATIONS THAT MAY NOT FOR EVERYONE: -
 Fees and commissions
All funds charge administrative fees to cover their day-to-day expenses. Some funds also
charge sales commissions or "loads" to compensate brokers, financial consultants, or
financial planners.
 Management risk
When you invest in a mutual fund, you depend on the fund's manager to make the right
decisions regarding the fund's portfolio. If the manager does not perform as well as you had
hoped, you might not make as much money on your investment as you expected. Of course,
if you invest in Index Funds, you forego management risk, because these funds do not
employ managers.
 No Guarantees
No investment is risk free. If the entire stock market declines in value, the value of mutual
fund shares will go down as well, no matter how balanced the portfolio. Investors encounter
fewer risks when they invest in mutual funds than when they buy and sell stocks on their
own. However, anyone who invests through a mutual fund runs the risk of losing money.
 Taxes
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70
percent of the securities in their portfolios. If your fund makes a profit on its sales, you will
pay taxes on the income you receive, even if you reinvest the money you made.
32

33. Which Parties are Involved?
1. Investors
Every investor, given the financial position and personal disposition, has a certain
inclination to take risk (risk profile). The hypothesis is that by taking an incremental risk (of
losing capital, wholly or partly), it would be possible for the investor to earn an incremental
return.
Mutual fund is a solution for investors who lack time, the inclination or the skills to actively
manage their investment risk in individual securities. They can delegate his role to mutual
fund, while retaining the right and the obligation to monitor their investments in the scheme
(which, in turn, invests in individual securities).
In the absence of a mutual fund option, the moneys of such “passive” investors would lie
either in bank deposits or other “safe” investment options, thus depriving them of the
possibility of earning a better return.
2. Trustees
Trustees are the people within a mutual fund organization who are responsible for ensuring
that investors’ interest in a scheme are properly taken care of.
In return for their services, they are paid trustee fees, which are normally charged to the
scheme.
3. Asset Management Company (AMC)
AMCs manage the investment portfolios of schemes. An AMC’s income comes from
management fees it charges the schemes it manages. Some countries provide for
performance based management fees as well.
In order to management fee, an AMC has naturally to employ people and bear all the
establishment costs that are related to its activity, such as for premises, furniture, computers
and other assets, software development, communication costs, etc. These are to be met out
of the management fee earned.
So long as the income through management fees more than covers it expenses, an AMC is
economically viable.
Given the nature of its activity, a certain minimum establishment and infrastructure is
necessary for an AMC’s functioning. Since costs cannot be reduced below a base level,
33

34. every AMC needs to have a reasonable corpus of assets under management (AUM), below
which it is not viable.
The break even level of AUM is a function of cost structure of the AMC and distribution of
assets between its different types of schemes since debt schemes and index schemes
generally yield a lower management fees.
4. Distributors
Distributors earn a commission for bringing investors into the schemes of a mutual fund.
This commission is an expense for the scheme, although there are occasions when an AMC
may choose to bear cost, wholly or partly.
Depending on the financial and physical resources at their disposal, the distributors could
be:
 Tier I distribution who have their own or franchised network reaching out to investors
all across the country; or
 Tier II distributors who are generally regional players with some reach within their
region; or
 Tier III distributors who are small and marginal players with limited reach.
5. Registrars
An investor holding in mutual fund schemes is typically tracked by the schemes Registrar
and Transfer agent (R&T).
Some AMCs prefer to handle this role in house, i.e. on their own instead of appointing an
R&T. The Registrar or AMC as the case may be maintains an account of the investor’s
investments in and disinvestments from the schemes. Requests to invest more money into a
scheme, or to redeem money against existing investments in a scheme are processed by the
R&T.
6.Custodian / Depository
The custodian maintains custody of the securities in which the scheme invests – as distinct
from the registrar who tracks the investment by investors in the scheme. This ensures an
ongoing independent record of the investments of the scheme. The custodian follows up on
various corporate actions, such as rights, bonus and dividends declared by investee
companies.
34

35. The mutual fund industry in India started in 1963 with formation of unit trust
of India, at the initiative of the govt. of India and reserve bank. The history of
mutual funds in India can be broadly divided into four distinct phases:
FIRST PHASE: 1964 – 1987
UTI was established on 1963 by an act of parliament. It was setup by RBI and
functioned under the regulatory and administrative control of the RBI.
In 1978 UTI was de-linked from the RBI and industrial development bank of
India (IDBI) took over the regulatory and administrative control in place of
RBI. The first schemed launched by UTI was unit scheme 1964. At the end of
the 1988 UTI had Rs.6700 cr. of assets under management.
Second phase: 1987 – 1993 (entry of public sector funds)
The year 1987 marked the entry of non UTI, public sector mutual funds setup
by public sector banks and life insurance Corporation of India and general
Insurance Corporation of India. SBI mutual fund was the first Non and UTI
mutual fund established in June 1987 followed by Can bank mutual fund (Dec
87), PNB mutual fund (august 89), Indian bank mutual fund (Nov 89), Bank of
India (June 90), Bank of Baroda mutual fund (Oct 92). LIC established its
mutual fund in June 1989 while GIC had setup its mutual funds in Dec 1990.
At the end of 1993, the mutual fund industry had assets under management of
Rs. 47,004 cr.
35

36. Third phase: 1993 – 2003 (entry of private sector funds)
With the entry of private sector funds in 1993 a new era started in the
Indian mutual fund, except UTI were to be registered and governed. The
erstwhile KOTHARI PIONEER (now merged in FRANKLIN TEMPLETON)
was a first private sector mutual fund registered in July 1993. The 1993 SEBI
regulations were substituted by a more comprehensive and revised mutual fund
a regulation in 1996. The industry now functions under the same SEBI
regulation 1996.
Fourth phase: since Feb 2003
In Feb 2003, following the repeal of the UTI act 1963 UTI was bifurcated
into two separate entities. One is the specified undertaking of the UTI of India
with assets under management of Rs. 29,835 cr. As, the end of Jan 2003,
representing broadly, the assets of US 64 scheme, assured return and certain
other schemes. The specified undertaking of UTI, functioning under an
administrator and under the rules framed by the govt. of India and does not
come under the preview of the mutual fund regulations. The second is the UTI
mutual fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions
36

37. HISTORY OF MUTUAL FUNDS
The modern mutual fund was first introduced in Belgium in 1822. This form of
investment soon spread to Great Britain and France. Mutual funds became popular in the
United States in the 1920s and continue to be popular since the 1930s, especially open-
end mutual funds. Mutual funds experienced a period of tremendous growth after World
War II, especially in the 1980s and 1990s.
Performance of Mutual Funds in India
The year was 1963. Unit Trust of India invited investors or rather to those who believed in
savings, to park their money in UTI Mutual Fund.
For 30 years it existed without a single second player. Though the 1988-year saw some
new mutual fund companies, but UTI remained in a monopoly position.
The performance of mutual funds in India in the initial phase was not even closer to
satisfactory level. People rarely understood, and of course investing was out of question.
But yes, some 24 million shareholders was accustomed with guaranteed high returns by
the beginning of liberalization of the industry in 1992. This good record of UTI became
marketing tool for new entrants. The expectations of investors touched the sky in
profitability factor. However, people were miles away from the preparedness of risks
factor after the liberalization.
The Assets Under Management of UTI was Rs. 67bn. by the end of 1987. Let me
concentrate about the performance of mutual funds in India through figures. From Rs.
67bn. the Assets Under Management rose to Rs. 470 bn. in March 1993 and the figure had
a three times higher performance by April 2004. It rose as high as Rs. 1,540bn.
The net asset value (NAV) of mutual funds in India declined when stock prices started
falling in the year 1992. Those days, the market regulations did not allow portfolio shifts
into alternative investments. There was rather no choice apart from holding the cash or to
further continue investing in shares. One more thing to be noted, since only closed-end
funds were floated in the market, the investors disinvested by selling at a loss in the
secondary market.
37

38. The performance of mutual funds in India suffered qualitatively. The 1992 stock market
scandal, the losses by disinvestments and of course the lack of transparent rules in the
where about rocked confidence among the investors. Partly owing to a relatively weak
stock market performance, mutual funds have not yet recovered, with funds trading at an
average discount of 1020 percent of their net asset value.
The supervisory authority adopted a set of measures to create a transparent and
competitive environment in mutual funds. Some of them were like relaxing investment
restrictions into the market, introduction of open-ended funds, and paving the gateway for
mutual funds to launch pension schemes.
The measure was taken to make mutual funds the key instrument for long-term saving. The
more the variety offered, the quantitative would be investors.
How is the performance of Mutual Funds?
How are mutual funds doing?
Category Annual Return %
Equity-Diversified 31.65
Equity-ELSS 29.88
Equity-Index 40.07
Funds Of Funds 32.23
Sectoral-Auto 19.36
Sectoral-Bank 34.29
Sectoral-Basic 19.33
Sectoral-FMCG 12.73
Sectoral-Healthcare 12.65
Sectoral-Infrastructure 39.28
Sectoral-Media and Entertainment 57.47
Sectoral-Pharma 8.36
38

39. Sectoral-Power 50.57
Sectoral-Services 40.49
Sectoral-TMT 56.19
FOF 11.20
Gilt 5.30
Income 7.08
Liquid 6.52
MIP 8.88
Balanced 20.81
FOF 24.39
39

40. MUTUAL FUNDS INDUSTRY – IMPACT OF
UNION BUDGET 2006 – 07 AND 2007-08
 Key Announcements included…….(2006-07)
⇒ Ceiling on aggregate investments by mutual funds in overseas instruments to be
raised from $ 1 billion to $ 2 billion with removal of requirement of 10%
reciprocal shareholding.
⇒ Limited number of qualified Indian mutual funds to be allowed to invest,
cumulatively up to $ 1 billion, in overseas exchange traded funds.
⇒ An investor protection fund to be setup under the aegis of SEBI.
⇒ RBI’s anonymous electronic order matching trading module (NDS-OM) on its
Negotiated Dealing System to be extended to qualified mutual funds, provident
funds and pension funds.
⇒ Steps to be taken to create a single, unified, exchange-traded market for
corporate bonds.
⇒ Increase of 25 per cent, across the board, on all rates of STT.
⇒ Investments in fixed deposits in scheduled banks for a term of not less than five
years included in section 80C of the Income tax Act.
⇒ Limit of Rs.10, 000 in respect of contribution to certain pension funds removed in
section 80CCC subject to overall ceiling of Rs.100, 000.
⇒ Definition of open-ended equity-oriented schemes of mutual funds in the Income
tax Act aligned with the definition adopted by SEBI.
⇒ Open-ended equity-oriented schemes and close-ended equity oriented schemes to
be treated on par for exemption from dividend distribution tax.
40

41. IMPLICATIONS FOR
THE MUTUAL FUNDS INDUSTRY
The Union Budget 06 moved on predictable and there were some sops for the mutual fund
industry as well. The dividends from MF units’ continue to be tax-free for its investors.
Debt-oriented Mutual Funds schemes continue to pay distribution tax amounting to 12.5
percent on the dividends declared, while equity-oriented mutual funds schemes will not be
required to pay distribution tax. Long-term capital gains tax on equity funds remains nil
while for debt
funds it would be taxed at the prevailing rates- 10% without indexation or 20% with
indexation. The limit on FII investment in corporate debt would be raised from $0.5bn to
$1.5bn, which is expected to encourage the investments in debt market. Open-ended equity-
oriented schemes and close-ended equity oriented schemes would now be treated on par for
exemption from dividend distribution tax.
The ceiling on aggregate investment by mutual funds in overseas instruments would be
raised from $1billion to $2billion and the requirement of 10% reciprocal share holding
would be removed and a limited number of qualified Indian mutual funds to invest,
cumulatively up to $1 billion, in overseas exchange traded funds would be allowed. Mutual
Fund investment abroad is currently restricted in companies that have a holding of at least
10% in a listed Indian company. This will enable Indian investors to invest in global equity
markets with a wider choice of stocks to permit greater diversification and the convenience
of dealing with an Indian mutual fund.
However, now, investors would have to bear the brunt of increased rate of securities
transaction tax. The Investments in fixed deposits in scheduled banks for a term of not less
than five years has been included in section 80C of the Income tax Act, thereby making
them more attractive to the general public, which may affect debt-oriented mutual fund
schemes.
Union Budget 2007-08 & the Mutual Fund industry
41

42. The 2007-08 budget presented by the Finance Minister was also a low impact budget,
compared with the last year, whose fundamental message was for overall growth of the
economy and a positive emphasis to be put on agricultural and rural development, as well as
education, which will certainly give a long term boost to the growth of the economy. The
reduction in fiscal deficit is also a positive step and the government will also increase
spending on education by 34%.
Markets have seen a major correction over the last few trading sessions. On 28th the
markets was hit hard from both sides, internally as well as externally. The budget had a few
shockers when the dividend distribution tax was hiked, and on the other side the global
market saw major meltdown with the Asian market were beaten the most, Chinese markets
alone lost around 9% over the day. The Indian markets could not sustain the beating it got
from both ends and saw the maximum decline witnessed in the last eight months. The
market was around 200 points down after the markets opened for the day. But the
announcement of the FM to hike dividend distribution tax saw another fall of more than 300
points which the markets was not able to recover till the end of the day. Among the major
sectors Cement is clearly the most hit, and to some extent IT services also got hit, because
of bringing both the sector under MAT.
The announcement of MAT of 11.3 % on IT companies was misinterpreted by the market
on the budget day, by responding in negative, but saw some recovery, in the next trading
day when markets realized that MAT can be used as a deferred tax asset by IT companies
post FY 2010 to offset taxes, Secondly SEZs are still MAT free. Hence the impact is not
severe as was thought on the budget day. Secondly, as per Finance Minister FBT on ESOP
is still under notification.
The Indian Mutual Fund industry also suffered on announcement of the hike in dividend
distribution tax. The DDT for the money market and liquid mutual funds has been proposed
to be brought at par at 25%. Currently the rate is 12.5% for retail investor and 23% for
institutional investors. The FM said that this was being done to restrict the arbitrage
opportunities used by these schemes.
Another proposal put up by the Finance Minister was for Mutual Funds to play a bigger role
in infrastructure development by launching and operating dedicated infrastructure funds
42

43. which would directly invest into core sector projects. The Indian Mutual Fund industry
already have schemes which are sector specific and invest into infrastructure sector through
equities. Now after this particular proposal Mutual Funds can directly invest into
infrastructure projects.
FM also allowed delivery based short selling for institutional participants. Mostly in all
developed countries short selling is allowed. In India, till recently only the retail investors
were allowed to enjoy this. Along with FII, Mutual Fund houses are also allowed for
delivery based short selling
FM has proposed to bring the asset management services offered by individuals under the
service tax bracket. The individuals who provide investment fund management advisory
services will now have to pay service tax. The managers will have to register themselves
with the Central Excise department and have to pay service tax, if their service fee is more
than Rs.8 lakh per annum.
Along with the above the FM also proposed for the retail investor to invest abroad through
Mutual Funds. Currently the industry has quite a few mutual fund schemes which invest
dedicatedly abroad. A few more schemes invest partially abroad.
On a whole, the budget other than the DDT hike for the liquid and the money market mutual
funds and the infrastructure funds didn’t have much in store for the Mutual Fund industry.
To summarize, the Budget will sustain high economic growth through larger investments,
increased savings and building of manpower capabilities.
43

44. Different types of Mutual Funds Schemes
Before having a glimpse of total number of market players of mutual funds industry in
India, knowledge about classification of mutual fund schemes is necessary.
As per Operational Classification: -
A. Open – ended Scheme
In this scheme the size of the fund is not predetermined as entry to or exit from the fund is
open to investor who can buy or sell its securities to the fund at any time. This characteristic
imparts greater liquidity to the units of these funds along with the pre-determined
repurchase price based on declared Net Asset Value. Portfolio mix of such schemes consists
of actively traded securities in the market, preferably equity shares. As investors can
anytime withdraw from the fund, therefore, the management of such funds is quite tedious.
B. Close – ended Scheme
This scheme has deposit redemption date unlike open-ended scheme. These fund have fixed
capital base and traded among the investors in secondary market. The forces of demand and
supply, hence determine their price. Price is free to deviate from its net asset value.
Management of such funds is comparatively easier because manager can evolve long – term
investment plans depending upon the life of the scheme.
44
Mutual Fund Schemes
 Return Based
Income Scheme
Growth Scheme
Conservative Scheme Open – ended Scheme 
 Investment Based
Equity Scheme
Bond Scheme
Balanced Scheme
 Sector Based
Real Estate Scheme
Industry Specific
Other Schemes
 Leveraged Based
Leverage Scheme Close – ended Scheme 
Non-Leveraged
 Other Funds
Gilt Funds
Each portfolio - based scheme
is either Open- ended or
Close - ended
Portfolio Classification Operational
Classification

45. As per portfolio classification: -
(a) Return – Based Classification
1) Income Funds
These are for investors who are more concerned about regular returns from investments.
2) Growth Fund
Here the objective is to achieve an increase in value of investment through capital
appreciation and not regular income.
3) Conservative Funds
These funds aim at giving reasonable rate of return in addition to capital appreciation.
(b) Investment – based Classification
1) Equity funds
These funds invest in the equity shares of companies and undertake greater risk associated
with it. This gives good rate of return in rising market.
2) Bond funds
These funds provide greater security to investors by investing in bonds, debentures, etc.
Investment here has no chance of appreciation.
3) Balanced funds
These funds work out a balance in the mix of equity shares and bonds. Trends in the market
will determine which proportion of the mix is to be increased.
(c) Sector – based Classification
These are the funds / schemes that invest in the securities of only those sectors or industries
as specified in the offer documents. E.g. Pharmaceuticals, Software, Fast Moving Consumer
Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the
performance of the respective sectors / industries. Investors need to keep a watch on the
performance of those sectors / industries and must exit at an appropriate time. They may
also seek advice of an expert.
(d) Leverage – based Classification
Here concept of leverage is made use of by borrowings funds from market as well as
investing along with fund investments thereby making leverage benefits available to mutual
fund investor, i.e. giving good return to investors from the income earned by investing
borrowed funds.
(e) Index – based Classification
45

46. Index funds replicate the portfolio of a particular index such as the BSE Sensitive index,
S&P NSE 50 index (Nifty). These schemes invest in the securities in the same weightage
comprising of an index. NAVs of such schemes would rise or fall in accordance with the
rise or fall in the index, though not exactly by the same percentage due to some factors.
Necessary disclosure in this regard is made in the offer document of the mutual fund
scheme. There are also exchange traded index funds launched by the mutual funds that are
traded on the stock exchanges.
(f) Gilt Fund
These funds invest exclusively in government securities. Government securities have no
default risk. NAVs of these schemes also fluctuate due to change in interest rates and other
economic factors as are the case with income or debt – oriented schemes.
Apart from this generalized kind of classifications there are types of mutual funds that
are having focus on particular strategy while investing.
 Value stocks
Stocks from firms with relative low Price to Earning (P/E) Ratio, usually pay good
dividends. The investor is looking for income rather than capital gains.
 Growth stock
Stocks from firms with higher low Price to Earning (P/E) Ratio, usually pay small
dividends. The investor is looking for capital gains rather than income.
 Based on company size, large, mid, and small cap
Stocks from firms with various asset levels such as over $2 Billion for large; in between
$2 and $1 Billion for mid and below $1 Billion for small.
 Income stock
The investor is looking for income, which usually come from dividends or interest. These
stocks are from firms that pay relative high dividends. This fund may include bonds that
pay high dividends. This fund is much like the value stock fund, but accepts a little more
risk and is not limited to stocks.
46

47. 47

48.  Index funds
The securities in this fund are the same as in an Index fund such as the Dow Jones
Average or Standard and Poor's. The number and ratios or securities are maintained by the
fund manager to mimic the Index fund it is following.
 Enhanced index
This is an index fund, which has been modified by either adding value or reducing
volatility through selective stock-picking.
 Stock market sector
The securities in this fund are chosen from a particular marked sector such as Aerospace,
retail, utilities, etc.
 Defensive stock
The securities in this fund are chosen from a stock, which usually is not impacted by
economic down turns.
 International
Stocks from international firms.
 Real estate
Stocks from firms involved in real estate such as builder, supplier, architects and
engineers, financial lenders, etc.
 Socially responsible
This fund would invest according to non-economic guidelines. Funds may make
investments based on such issues as environmental responsibility, human rights, or
religious views. For example, socially responsible funds may take a proactive stance by
selectively investing in environment-friendly companies or firms with good employee
relations. Therefore the fund would avoid securities from firms who profit from alcohol,
tobacco, gambling, etc.
48

49.  Balanced funds
The investor may wish to balance his risk between various sectors such as asset size,
income or growth. Therefore the fund is a balance between various attributes desired.
 Tax efficient
Aims to minimize tax bills, such as keeping turnover levels low or shying away from
companies that provide dividends, which are regular payouts in cash or stock that are
taxable in the year that they are received. These funds still shoot for solid returns; they
just want less of them showing up on the tax returns.
 Convertible
Bonds or Preferred stock, which may be converted into common stock.
 Mutual funds of mutual funds (Fund Of Funds)
This funds that specializes in buying shares in other mutual funds rather than individual
securities.
Capital Protected Schemes
A capital protected scheme is a kind of balanced scheme, where a part of the initial issue
proceeds is invested in gilts that would mature to a value equivalent to the unit capital of
the scheme. Thus, the investor’s capital is protected. The remaining issue proceeds
(excess over what is required to be invested in gilts for capital protection) is invested in
risky investments.
In the worst-case scenario, it may happen that an investment does not grow. But the
principal amount invested is covered by maturity proceeds from the investment in gilt
securities.
49

50. ENHANCED INDEX FUNDS
The enhanced index fund is a managed index fund that seeks to beat the performance of
its benchmark index by at least 0.1 %, but not more than 2%. If the index fund’s
performance were to exceed this 2% cap, it would then be considered an equity mutual
fund.
Basic Terms used with respect to Mutual Funds
 Net Asset Value
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The
per unit NAV is the net asset value of the scheme divided by the number of units
outstanding on the Valuation Date.
 Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include
a sales load.
 Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a back-
end load. This is also called Bid Price.
 Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended schemes
redeem their units on maturity. Such prices are NAV related.
 Sales Load
Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load.
Schemes that do not charge a load are called ‘No Load’ schemes.
 Repurchase or ‘Back-end’ Load
Is a charge collected by a scheme when it buys back the units from the unit holders.
50

51. LEGAL STRUCTURE OF MUTUAL FUNDS IN
INDIA
SEBI regulates the mutual fund sector in India. Earlier, Reserve Bank of India (RBI) was
responsible for regulating Money Market Mutual funds (MMMFs), but even this
responsibility now rests with SEBI.
Sponsor
Every project needs a promoter, a prime mover who has overall responsibility for the
project. The promoter of a mutual fund is referred to as sponsor. As per the regulations, a
sponsor means “any person who acting alone or in combination with another body
corporate, establishes a mutual fund”.
⇒ Qualifications for a sponsor: -
Sponsor should have a sound track record and general reputation of fairness and integrity
in all business transaction.
Sound track record means: -
 Carrying on business in financial services for a period of not less than five years.
 Having a profit, after providing for depreciation, interest and tax, in three out of
the immediately preceding five years, including in the fifth year.
 Having a positive net worth in all the immediately preceding five years.
 In the immediately preceding year, having a net worth that is more than the
capital contribution of the sponsor in the AMC.
Sponsor should be a fit and proper person.
Sponsor, or any of its directors, or the principal officer to be employed by the mutual fund
should not be guilty of fraud or convicted of an offense involving moral turpitude or
found guilty of any economic offence.
51

52. Trusteeship
Trust Deed
A mutual fund has to be constituted in the form of a trust, created through
a trust deed. The trust deed:
• Has to contain certain clauses prescribed by SEBI
• Cannot contain any clause that:
 Limits or extinguishes the obligations and liabilities of the trust with
respect to the mutual fund or its investors;
 Indemnifies the trustees or the AMC for loss or damage caused to
the unit holders on account of negligence or acts of commission or
omission;
• Has to be duly registered under the provisions of the Indian Registration Act, 1908;
and
• Has to be executed by the sponsor in favour of the trustees named in the deed.
Some Key Obligations of Trustees
 The trustees shall enter into an investment management agreement with
the AMC.
 Before the launch of any scheme they shall ensure that the AMC has:
 Systems in place for its back office, dealing room and accounting;
 Appointed all key personnel including fund managers;
 Appointed a compliance officer to comply with regulatory requirements and to
redress investor grievances;
 Appointed auditors and registrars;
52

53.  Prepared a compliance manual and designed internal control mechanisms
including internal audit; and
 Specified norms for empanelment of brokers and marketing agents.
 They shall be accountable for, and be custodian of, the
funds and property of the respective schemes and shall hold the same in trust for the
benefit of the unit holders.
 Trustees shall ensure that all activities of the AMC are in
accordance with the provisions of the SEBI regulations.
 They shall call for details of transactions in securities by the
key personnel of the AMC.
 They shall abide by the prescribed code of conduct.
 The trustees shall be discerning in the appointment of
directors on the board of the AMC.
Asset Management Company
Appointment and Termination
It is obligatory for every mutual fund to have an AMC to manage the mutual fund and
operate its schemes. The actual appointment could be made either by the sponsor or, if so
authorized by the trust deed, the trustees.
The appointment can be terminated by a majority of the trustees or by 75% of the unit
holders. Any change in appointment of the AMC is, however, subject to prior approval of
SEBI and the unit holders.
Qualifications for AMC
AMCs need to fulfil the following conditions:
 Existing AMCs should have a sound track record (net worth and profitability), and
general reputation for fairness and integrity in transactions;
 The AMC has to be a fit and proper person;
 Key personnel of the AMC should not have been found guilty of moral turpitude or
convicted of economic offence or violation of any securities laws nor should they have
53

54. worked for any AMC or mutual fund or any intermediary during the period when its
registration has been suspended or cancelled at any time by SEBI; and
 The AMC should have a net worth of not less than Rs. 10 crore (Net Worth = Paid up
capital plus free reserves minus miscellaneous expenditure not written off minus
deferred revenue expenditure minus intangible assets minus accumulated losses)
Maintenance of Investor Records
The AMC can either handle the registrar and transfer (R&T) work-in-house, or it can
appoint a SEBI – approved R&T agent.
If handled in-house, the AMC can charge the schemes competitive market rates for the
service. If the AMC proposes to charge higher than the competitive market rates, then
prior approval of the trustees is to be obtained and reasons for such higher rates has to be
disclosed in the annual accounts.
Custody of Investments
The mutual fund shall appoint a custodian to carry out the custodial services for the
schemes of the fund and inform SEBI about the appointment within 15 days.
The mutual fund shall enter into a custodian agreement with the custodian. The
agreement, the service contract, terms and appointment of the custodian shall be after
prior approval of the trustees.
If the sponsor or its associates hold 50% or more of the voting rights of the share capital
of the custodian, or where 50% or more of the directors of the custodian represent the
interest of the sponsor or its associates, then such custodian will not be appointed for a
mutual fund constituted by the same sponsor or any of its associate or subsidiary
company.
THE AMFI CODE OF ETHICS
One of the objects of the Association of Mutual Funds in India (AMFI) is to promote the
investors’ interest by defining and maintaining high ethical and professional standards in the
mutual fund industry. In pursuance of this objective, AMFI had constituted a Committee
under the Chairmanship of Shri A. P. Pradhan with Shri S. V. Joshi, Shri C. G. Parekh and
Shri M. Laxman Kumar as members. This Committee, working in close co-operation with
54

55. Price Waterhouse–LLP under the FIRE Project of USAID, has drafted the Code, which has
been approved and recommended by the Board of AMFI for implementation by its
members. I take opportunity to thank all of them for their efforts.
The AMFI Code of Ethics, “The ACE” for short, sets out the standards of
good practices to be followed by the Asset Management Companies in their
operations and in their dealings with investors, intermediaries and the public. SEBI
(Mutual Funds) Regulation 1996 requires all Asset Management Companies and Trustees
to abide by the Code of conduct as specified in the Fifth Schedule to the Regulation. The
AMFI Code has been drawn up to supplement that schedule, to encourage standards
higher than those prescribed by the Regulations for the benefit of investors in mutual fund
industry.
55

56. PERCEPTION OF INVESTORS
TOWARDS MUTUAL FUNDS
 Preference for different investment avenues
There are different attributes of various investment avenues that influence the choice of
a particular investment avenue. The most important of various attributes of an
investment are – Safety, Liquidity, Reliability, Tax Benefit and Return received over it.
The median ranks can be obtained to scale ranging from 1 to 5 i.e. 1-most important and
5-least important investment avenue for investors.
Table: Preference for Different Investment Avenues (Median values)
Investment
Avenue
Safety Liquidity Reliability Tax
Benefit
High
Return
Real estate 2 4 3 5 2
Shares/
Debentures
4 2 3 5 2
Mutual
Funds
4 2 3 2 4
Fixed
Deposits
1 2 3 4 4
Post-office
Schemes
2 4 3 2 4
PPF 2 4 2 3 4
UTI Schemes 4 2 3 2 4
Gold 1 2 3 5 4
LIC Policy 2 4 3 2 4
NSC, NSS 2 4 3 1 4
The above data in the table is representing attitude of general investors category.
Factors influencing choice of mutual fund
56

57. There are a number of factors that affect the decision to choose a particular mutual fund
for making investment.
The six important factors can be enlisted as below: -
1. Past record of the organization
2. Growth Prospects
3. Credit Rating
4. Market Speculations
5. Disclosure of Adequate Information
6. Early Bird Incentives
Options expected from a Mutual Fund
i. Repurchase Facility
ii. Easy Transferability
iii. Prompt Service
iv. Information Adequacy
v. Lock in Period
vi. Grievance Redressal
vii. Investor Right Adherence
viii. Cost Effective
ix. Management
Sources of Mutual Fund Information
1. Bankers
2. Brokers / Professional / Financial Advisor
3. Friend’s Advice
57

58. MUTUAL FUNDS – EXPENSES,
NET ASSET VALUE AND LOADS
Initial Issue Expenses
Mutual funds are a “pass through” vehicle. This, therefore, means that the incomes and
expenses of the fund (schemes) would ultimately be credited or charged to the investors.
As a measure of investor protection, the regulation prescribe a limit on the initial issue
expenses – 6 percent of the resources mobilized in the initial public offer (IPO).
The initial expenses cover: -
 SEBI filing fees and other regulatory expenses related to bringing the issue to the
market.
 Printing expenses for offer document, forms, brief information memorandum, etc.
 Scheme advertising (but not general corporate advertising) and conference expenses.
 Marketing expenses including commission to distributors
 Bank charges
The 6 percent limit is a cap. The AMC can even choose not to charge any issue expense to
the scheme. This happens quite often in debt schemes, where the AMC prefers to bear the
expense, rather than let the scheme performance take a hit on account of the expenses.
Deferred Load
Suppose a new scheme is launched with a unit capital of Rs.100 crore and issue expenses
are Rs.6 crore. If the AMC chooses to recover the entire initial expense from the scheme,
there are two options to make accounting entry for this: -
• One option is to treat the entire Rs. 6 crore as an immediate expense. This means that the
scheme would start with a loss of Rs. 6 crore – not a very appealing proposition to the
AMC as well as to the scheme’s investors.
• Another option is to defer the recovery of issue expenses.
58

59. It can be argued that the initial issue expenses are incurred to get subscriptions into a
scheme, which is likely to continue for a period of time. Therefore, AMCs are given the
liberty to defer the impact of the initial issue expenses over a period.
Under the regulation: -
 The maximum deferral period in the case of open – ended schemes is 5 years.
 For close – ended scheme, the maximum deferral period is equivalent to the tenor of the
scheme.
Net Asset Value
In order to calculate the NAV of a scheme, each asset and liability of the scheme needs to
be valued:
NAV = Value of all assets minus value of liabilities other than to the unit
holders
It can also be calculated as: Unit capital plus reserves
There is a significant element of subjectivity in the valuation of assets. SEBI, through its
valuation norms, has been trying to ensure some degree of standardization in the manner in
which different AMCs handle this subjectivity.
Perspectives on NAV:
1. Conservative and Aggressive NAV
The NAV of an open – end scheme is a key determinant of how much a person has to pay
for each unit that he proposes to buy, as well as the amount he would recover if she sells a
unit. Therefore, it is imperative to ensure fairness in calculation of NAV.
If the money that an investor would recover on selling the units is determined by this
“conservative NAV”, then an exiting investor will recover lesser than what is really due.
Concomitantly, a new investor will pay lesser than what she ought to pay for buying new
units. Thus, it would penalize on exiting investor, while benefiting new investor.
The reverse is an aggressive NAV, where investments are over-valued and expenses are
under – provided. In this situation, an investor exiting from the scheme would take away
more than what is due, thus penalizing the investors who choose to continue in the scheme.
Thus, it would penalize new investors, while benefiting exiting investors.
59

60. Normal temptation for funds is towards an aggressive NAV because:
 It helps the scheme show better performance for the period; and
 Management fees are calculated on the basis of Net Asset Value
An aggressive NAV is like inflating the closing stock figure in the balance sheet of a
manufacturing company. This closing stock also becomes the opening stock for the next
period. Therefore, to sustain the performance, it will have to inflate the closing stock in the
next period also.
Neither a conservative NAV nor an aggressive NAV is fair. Fairness to unit holders comes
out of a fair NAV. This is equally applicable to a closed – end scheme, where the units
would be traded in the market place on the basis of the NAV declared by the scheme.
2. Historic NAV and Forward NAV
If the sale and re-purchase of units are affected on the basis of the previous day’s NAV, then
it is called historical NAV basis. The danger in this is that if an investor can sell or re-
purchase units after trading has commenced the next day, then investor is able to benefit
from that is not factored into the historical NAV. This would be unfair to the other investors
in the scheme.
An alternative for the mutual funds is to effect sale and re-purchase of units on the basis of
the next succeeding NAV (forward NAV basis). While this would be fair to the other
investors in the scheme, an investor seeking to offer his units for re-purchase would not
know how much he would recover until the end of the day. Similarly, a prospect desirous of
investing a certain amount would not, at the time of effecting the transaction, know how
many units she would be allotted.
Mutual fund schemes mostly transact on the basis of forward NAV. Investors are given the
choice to define their re-purchase instruction in number of units or the value of units. Thus,
an investor knows precisely, either the number of units or the value of the units that she
would be offering for re-purchase.
Cut – off Time
If the mutual fund sell units at today’s NAV and invests the money in the market tomorrow,
there is a fear that the market would have changed during the gap. If the market falls before
60

61. the fund manager invests the money, then all the unit holders in the scheme benefit. If on the
other hand, the market gains before the fund manager has invested the money, then the unit
holders in the scheme suffer.
It is, therefore, important for fund managers of schemes to adjust their investment positions
the same day, in line with sales and re-purchases of units during the day.
Thus, in order to facilitate timely investment, mutual funds generally set a cut off time for
their schemes. Transaction requests received until the cut -off time are effected on the basis
of same day forward NAV. Other transaction requests ar
Religare Enterprises Limited group comprises of Religare Securities Limited, Religare
Commodities Limited, Religare Finvest Limited and Religare Insurance Broking Limited,
which deal in equity, commodity and financial services business.
Religare is driven by ethical and dynamic process for wealth creation. Based on this, the
company started its endeavor in the financial market.
Religare Enterprises Limited (A Ranbaxy Promoter Group Company) through Religare
Securities Limited, Religare Finvest Limited, Religare Commodities Limited and Religare
Insurance Broking Limited provides integrated financial solutions to its corporate, retail and
wealth management clients. Today, this group provides various financial services, which
include Investment Banking, Corporate Finance, Portfolio Management Services, Equity &
Commodity Broking, Insurance and Mutual Funds.
Religare is proud of being a truly professional financial service provider managed by a
highly skilled team, who have proven track record in their respective domains. More than
3000 highly skilled professionals who subscribe to Religare philosophy and are spread
across its country- wide branches manage Religare operations.
Today, the group have a growing network of more than 300 branches and more than 580
business partners spread across more than 300 cities/towns in India and a fully operational
international office at London. However, our target is to have 500 branches and 1000
business partners in India and 7 International offices by March 2008.
Unlike a traditional broking firm, Religare group works on the philosophy of partnering for
wealth creation. We not only execute trades for our clients but also provide them critical and
timely investment advice. The growing list of financial institutions with which Religare is
61

62. empanelled as an approved broker is a reflection of the high- level service standard
maintained by the company.
MUTUAL FUNDS OPERATION FLOW CHART
Passed back to Pool their money with
Invest in
Generates
62
Investors
Return Fund Manager
Securities

63. 2.2 GENESIS OF MUTUAL FUNDS
The goal of security industry is to create a nation of shareholding capitalists to make
every man and woman a participant in the corporate activities. A small investor is
unsophisticated so far as corporate investment is concerned. With the limited
resources, he cannot buy shares of ‘blue chip companies’. He may not, in the most
cases get allotment of the shares, applied for, in the Primary Market. On the other
hand, he will get full allotment of some dud shares. His investments would, therefore,
be not balanced and diversified. He is not thereby able to minimize his risks by
spreading his limited funds over different industries. He has limited access to price
sensitive information of the stock exchanges.
He may not even know the developments that take place in the share markets and
corporate bodies. ‘Mutual Funds’ have come to a boon to the small investors and they
have emerged as the popular medium through which small and medium investors can
reap the benefits of good investing. The Institution of Mutual Funds collectively
manages the funds from different small investors. It mobilizes savings from the public
and provides them attractive returns, security and liquidity by investing in Capital
Market.
Mutual Funds emerged in the UK and US as ‘investment management institutions’ in
the early Twentieth century, during the 1920s. The origin of Mutual Funds may
however be traced back to the days ancient Greek where ‘merchants’ banded together
to take shares in the commercial undertakings. Similar arrangements existed in Rome
63

64. and Europe also when merchants in colonial America used to take shares in voyages
which when completed would be liquidated and assets divided among themselves.
The Scottish American Investment Trust was formed in 1873 to hold portfolio of
American Railroads bonds shares in trust were issued to the interested citizens of
Dundee. Most of these schemes were a closed type and the shares were sold and
purchased at the market rates and the ‘law of demand’ and supply set the price
The concept of Mutual Fund was experimented in the US from 1920s and the
institutional business was becoming popular in the late 1940s. As the financial climate
during the early 1980s enhanced the competitiveness of certain investment products
the Mutual Funds Industry responded to investors demand by increasing the number
and type of Mutual Funds
In the UK, during the 1920s ‘the accepting houses’ emerged as a major force in the
business of investment management agencies. Investment management has its genesis
in the deployment of the large fortunes made by some of the Victorian merchant
bankers. But only in 1950, the accepting houses rapidly built up on their existing skills
and knowledge to deal with increasing capital. The investment trust was superseded
by the Unit Trust as small savers means of access to professional managemen
The foundation for the Mutual Fund operation in India was laid by the Parliament in
1963 with the enactment of the Unit Trust of India (UTI) Act. At that time, the then
Finance Minister Mr. T.T. Krishnamachari, who initiated the Act, made it clear to the
Parliament that “UTI would provide an opportunity for the middle and lower income
groups to acquire without much difficulty, property in the form of shares or units.
This institution is intended to cater mainly to the needs of individuals whose means are
small.’
The statement of objects and reasons to the Unit Trust of India Act brings out
critically the objects and rule of Mutual Fund. The statement stated:
‘The question of establishing an institution in the public sector for carrying on the
business which is transacted by Unit Trust of India or Mutual Funds in other countries
has been under consideration for sometimes. It is now proposed to establish such an
64

65. institution to be known as the Unit Trust of India with an initial capital of five crores
of rupees.
65

66. The unit Trust of India will encourage saving by providing for various classes of
investors the facility of investing their money in units of the Trust. The Trust will
invest the initial capital and the capital obtained by the sale of the units in shares and
other securities and will distribute every year not less than 90 per cent of the net
income accruing to the unit holders. It is expected that the risk of losses or
depreciation on account of the investment will be reduced or eliminated as a result of
the proposed arrangement. The Trust will also be in.
66

67. MEANING OF
SYSTEMATIC INVESTMENT PLAN (SIP)
When we all strive to organize and systematic our activities, then why not do the
same with investments. SIP is a way to invest in regular and disciplined manner while
taking care of volatility, systematic is the word that describes you, organized well
manner planned in all your activities. Whether it is earning, saving or spending every
thing is done in a disciplined manner.
One never had enough money or sometimes it was shortage of time. If this is the
case then its time you had a look at the SIP of mutual funds .A SIP is nothing but a
planned investment program which takes a small sum of money from people and in
invests it in a mutual fund at regular interval. The minimum amount can be as small as
Rs. 500 and the frequency of investment is usually monthly or quarterly.
This simple program has a number advantage.
First if saving is an arduous task for the person, then SIP can do this for. Money
deducted from the account (Through post dated cheques) and invested is money one can
not spend. And a rupee saved is a rupee earned.
Even if each investment is small, over time this can add up to a neat kitty. And
the power of compounding can do wonders in due course of time, a small amount can
grow into a significant amount More importantly a sip does away with the need or effort
to time the market.
When the market is falling person may feel then it may decline further and that investor
should wait a while. Often stock market recover, notice the opportunity is lost.
When market are rising it is scary to invest money is not better should wait for a
correction and then make an investment. But if the correction does not come about then
even this opportunity is missed. And if markets are going nowhere then what is the point
in investing at all.
So trying to find out which is the best time to invest can be tough task. And
that’s why it is said that the timing the market is futile. If one could take advantage of
67

68. the ups and downs that markets encounter, it would be great and this is where SIP fits in.
By the process of regular investing one gets to invest in the high as well as the lows, and
this help in averaging out the volatility in the market.
Thus, an SIP imparts discipline to investing, whether it is the regular act of saving or
investing, an SIP does both automatically. While there are certain benefits of an SIP
please remember it is no wonder drug that cures all investment related ailments.
An SIP does not guarantee returns or positive returns. I one opt for an SIP in a
falling market and the market continues to fall, then their investment will suffer a loss on
the whole.
An SIP can be useful for a debt funds well …to help build a pool of savings. It can
be though of something similar to a recurring deposit where a part of your savings is
automatically deducted from account. Overall, and SIP is a simple device that helps you
to save and invest in a disciplined manner without having to time the mark
SIP is a process of consecutive investment in capital market through mutual fund: -
The short of investment plan, to some extent, reduces the risk of market
fluctuation since it is invested in stretched time but over all risk remains in full source .
As the inherent nature of capital market your investment may or may not grow and even
it can reach far below your initial investment .But recurring deposit in any Bank assures
you a fixed sum at its maturity.
Though it is not high enough but it is fully risk free. In view of the frequent volatility in
the equity markets, systematic investment plan are seen as the best option to invest in
equity schemes.
Undoubtedly, SIP is reasonably a good avenue for retail investors It insulates them from
extreme volatility. It helps protecting downside risk .On the other hand it enforces the
disciplined approach of saving in an investor’s mentality
68

69. Under an SIP option, one can invest fixed amounts at a regular frequency. It prompts
investors to take a disciplined approach of saving instead especially for the salaried
class. There are two statistical forces in SIP which work for investors: rupee cost
averaging and power of compounding.
Investors will get fewer units when the price is high and vice versa. SIP averages out the
cost, while the rupee cost averaging does not assure investors profit.
It has worked out well for millions of investors through out the world. The power of
compounding acts over along term. If an investor invests Rs 1,000 every month in such
funds, it would give better returns over 5 years as against 3 years
For Example:
Franklin India Bluechip: - Fund gives 32.82 per cent returns in 5 years as against 22.05
per cent in 3 yrs.
Franklin India Prima Plus gives 35.92 per cent in 5 years as against 25.24 per cent.
Franklin India Prima Fund yields 28.84 percent against 8.21 percent.
Actually, the returns on SIP depend on market conditions.
Investors avoid participation in equity markets because of the fear of volatility impacting
their returns. An SIP offers investors the safety of mitigating volatility risk, thus
encouraging participation in the equity markets.
If an investor has the discipline to invest during difficult periods, such investments
usually deliver the best value over the long term.
For an SIP between 1997 and 2006, 70-75 per cent of wealth creation was attributable to
investments during lackluster phases in the market
69

70. KOTAK 30 performance as on 30, 2008
SIP Returns-
1 year 3 year 5 year
Amount Invest Rs60,000 Rs180,000 Rs 3,00,000
Investment value Rs63753 Rs2,85,881 Rs809602
XIRR 11.86% 32.53% 41.02%
Record Date Dividend Per Unit Rs
28-Feb-2008 6.00
11-Jan-2008 6.00
20-July-2007 3.00
27-Dec-2006 5.50
27-Dec-2005 1.00
3-Jun-2005 1.00
5-Nov-2004 1.50
31-Jan-2004 5.00
20-Oct-2003 2.00
28-Dec-2001 1.00
70

71. DEBATABLE VIEW
There can be little debate that SIP promotes traits that are invaluable to
financial planning –
Regular investing that makes market timing redundant
Rupee cost averaging that beats investing lump-sum
Some demerits relevant with SIP: -
Despite the pros, investors would be well advised to note some demerits
associated with SIP, Although its not like the negatives bring down the entire
structure on which the argument for SIP is based on the other hand they are
significant too.
1- Exit is not as cheap as people thought:-
Most SIP investors probably are not aware that there is an exit load slapped on
premature redemption since the entry load is waived off on SIP, in a lot of
cases 12 month is the minimum time period for which investors have to be
invested to escape without an entry load .
So investor assure that they can redeem the entire amount in the 13month after
investment
While this assumption is flawed, it is not necessarily the investor who is to be
blamed. Often, investment agent in there enthusiasm to promote SIP forget to
mention exactly how the redemption schedule for SIP works.
71

72. Redemption schedule:
Cheque date sip no. earliest redemption
1-Jan-07 sip1 1-Jan-o8
1-Feb-2007 sip2 1-Feb-08
1-Mar-07 sip3 1-Mar-08
1-Apr-07 sip4 1-Apr-08
The earliest redemption of Sip1 can be made only in the 13th
month since the
cheque date Likewise in the 14th
month, the investor can redeem SIP2, Notice
each sip has minimum investment time frame of 12 months not just SIP1 .So
one go without incurring a sales load, you will be able to do only in June 2008.
Rupee-cost averaging does not always work:-
How many time we have heard elaborate presentation and seen fancy tables
and graph that show how rupee-cost averaging one very important reason to
take SIP rout to mutual fund investing.
However, rupee cost-averaging does not always work. It certainly does not
work in a rising market. This is because a market that shows a consistently
rising trend will ensure that every subsequent Sip in and equity fund is at a
higher NAV than the previous SIP.
72

73. WHEN RUPEE-COST AVERAGING FAILS
Cheque NAV Rs SIP amount Rs No. of units
Date
1-Aug-08 11.72 1,000 85.3
1-Sep-08 12.53 1,000 79.8
1-Oct-08 14.03 1,000 71.3
1-Nov-08 14.12 1,000 70.8
1-Jan-08 18.68 1,000 53.5
Average NAV 14.48
It is obvious that the SIP mode of investing wasn’t such a great idea.
Rupee-cost averaging did not work its charm for the investor who had the
option to enter the equity fund through a one-time, lump-sum investment on at
least four occasions from August1, 2007 till Nov1, 2007 to beat the average
NAV of Rs 14.48, but yet choose the SIP way. If he had taken the opportunity
to enter lump-sum on any one of these occasions he would have been better
off than opting for the SIP route
73

74. Of course, that is not to say that rupee-cost averaging is a failure, but it works
particularly well if you have taken an SIP over a longish time horizon of 12-18
months to benefit from a falling market.
The exit load could really pinch one:-
Some investors opt, for SIP thinking that despite the drawback it is
however a smart way to invest as opposed to one time lump-sum investment.
This right but SIP work best only if you last clients to go in for SIP because the
entry load is waived off. Their argument is that since the entry load is waived
off, then even if the client withdraws prematurely, the 2.00% exit load
(approximately) is not really damaging as it’s just a charge for not paying the
entry load. This argument is flawed because the entry and exit loads are
charged on different amounts.
For example from the above real life illustration it’s easy to understand how
the exit, load can be particularly high on premature redemptions from an SIP.
Take the first SIP at an NAV of Rs11.72 .
If the investor had entered one time at that level at 2.00% entry load it would
have cost him Rs0.23(2% of Rs11.72) But since he has opted for the SIP rout
let us understand how a premature redemption work for him. Say, the investor
wants to redeem his units by January1, 2008 because the NAV has climbed
significantly and he wants to capitalize on the opportunity. He will be slapped
with a 2.00% exit load since the entry load was waived off on the SIP.
However, the 2.00% exit load will be calculated on Rs18.68, which amount to
Rs0.37. Compare this with the Rs0.23 he would have had to pay if he had
entered lump-sum.
74

75. Of course, these illustrations are on hindsight and the investor has no way to
know this in advance. That is understandable and as we have outlined we are
not out to debunk SIP. However, SIP need to be promoted by the investment
agent/distributor community after explaining all the merits and demerits to the
investor so as to enable him to take an informed decision.
75

76. TOP 25 MUTUAL FUND ACROSS ALL CATEGORIES
COMPANY SCHEME
Reliance Mutual Fund + Reliance Liquid Fund –Treasury
Plan –institutional Option plan-
Dividend –Monthly
DBS Chola Mutual Fund. +DBS Chola Monthly Income Plan-
Regular –Growth.
UTI Mutual Fund +Gold Exchange Traded Fund-
Growth.
Benchmarch Mutual Fund. +Gold Benchmark Exchange
Traded Scheme –Growth
Kotak Mahindra Mutual Fund. +Kotak Gold ETF-Growth
Canara Rebeco Mutual Fund +Canara Robeco Income –Bonus &
Dividend and Growth
Canara Rebeco Mutual Fund Canara Robeco Gilt PGS -Growth
And Dividend.
76

77. EQUITY LINKED TAX SAVING SCHEME
Enjoy Tax Benefits:- These scheme are becoming more popular as traditional ways of tax saving
becoming less intresting with declining intrest rates.
WHO SHOULD INVESTMENT:- Equity linked saving scheme is an ideal way to save on tax
as well as staying invested in equity mutual funds.
HOW THEY PERFORMED:- In last one year and above these fund have given above average
returns to keep you more & more interested in saving tax as well as counting return on your
investment.
Absolute Return (in %) as on May 18, 2008
Equity Tax
saving
Assets size
Rs(cr)
NAV 1 year 2year 3year
SBI MagnumTax
gain (G****)
3,561.99 53.81 16.5 59.5 157.6
77

78. 1- Diversification:- Mutual fund reduces the risk by investing in all the investor.
Instead of putting all your`money in one sector or company its better to invest in
various good performing sectors as one reduces the risk of getting involved in a
particular company which may perform or may not.
WHO SHOULD INVEST:- This is an ideal category for those who want to
participate in stock market & knows that risk involved in stock market with lesser
amount of risk than stock markets.
HWO THEY PERFORMED:-Though the short term out look is volatile in long-term
equity diversified fund have outperformed other categories & stock market with
lesser amount of risk than stock market.
Equity Diversified Assets
size(cr)
NAV 1 year 2 year 3year
Reliance RSF
Equity*****
692.03 23.31 44.3 100.4 ------
ICICI Pru
Infrastructure*****
4,682.85 28.64 39.4 109.4 -------
DSP ML India
TIGER-RP(G)*****
3,880.59 43.99 21.3 75.4 202.9
Tata Infrastructure
*****
2,646.58 33.68 34.3 80.6 201.5
DETAIL OF COMMONLY USED INVESTMENT OPTIONS AVAILABLE FOR
INVESTORS
78

79. 79

80. RESEARCH METHODOLOGY
The marketing research process involves certain step wise activities which
are here in a defined order.
 Define the Problem and Research Objectives.
 Develop the Research Plan
 Collect the Information
 Analyze the information.
 Present the findings.
80

81. 81

82. QUESTIONNAIRE
Name: - Mr. /Ms. ………………………………..
Gender: - Male……… Female: -…………
Address: - ………………………………….
Contact No: -……………………………….
E-mail: -………………………………
 What is your occupation?
 Where are you employed/Types of company?
 Annual income slab.
 Investment horizon.
 For you saving should be.
 Where do you invest your saving?
 Do you know about mutual fund?
 Class of mutual funds.
 According to you investment in mutual funds are
 Would you like to invest in mutual fund.
 Criteria for selecting a particular mutual fund.
 In which sector would you prefer to invest?
82

83.  Know Mahindra Finance as a?
83

84. FINDINGS
There is great opportunity for Mutual Fund companies as there is a rise in a
number of people who want to invest in share market but do not have time and
knowledge to do so, also these people wants to take less risk.
The survey shows that significant part of the investment portfolio of the retail
investors consists of Mutual Fund Scheme. But still, Insurance and Post Office
Scheme have a significant share because of the safety factor associated with
them.
With booming market and falling interest rate of bank deposits, people see
mutual funds as an attractive financial tool which provide a high return rate at
lower risk as compared to equity market.
Most of the investors prefer Mutual Fund route for equity investment than
direct stock market investment.
Young people these days are particularly more interested in mutual funds
because they see mutual fund as safe bet .Also these people have large
disposable incomes and risk taking capability too. According to the study of
major part of the investors are showing interest in the Equity Based Schemes to
meet out their need for capital appreciation.
84

85. The bad part is people are still ignorant about mutual funds and different
schemes about mutual funds. Hence it is very necessary to educate them
about mutual funds.
Another significant finding of the study is that investors are lured by the
returns Mutual Funds are showing. However at the same time they want to
minimize their risk.
The investment horizon, which is most liked by the investors, is 2 to3 years.
An investor equity fund portfolio largely depends on his/income level and
age.
85

86. 86

87. RECOMMENDATIONS
The retail investor base is increasing at a faster pace but there is a lack of
information about the suitable investment modes among the investors. There is
a need of proper awareness programs to keep the investors updates about the
latest investment opportunities.
India is passing through a tremendous growth phase with an average
growth rate of 7-8% per annum. With this growth in each and every funds but
are apprehensive towards the risks associated with them. Well diversified
equity schemes should be introduced to minimize the volatility of the funds.
It has been seen that there is a major increase in the percentage of young
investors who have large amount of disposable income with them and want to
invest, these types off prospective clients should be tapped at an early stage.
Small town, villages are still untapped and can also act as a business area
of very huge potential.
Now, even co-operative society can invest up to 10% of their capital in
mutual funds which open the door to new and very important client base. More
flexible option can be provided to investor like Systematic Investment Plan
(SIP) and switching options. Hedging options are also prevailing these days.
87

88. Professional management of Mutual Fund is a value added feature of
Mutual Fund schemes. AMCs should utilize this feature to attract retail
investment.
88

89. CONCLUSIONS
In my project I have taken a good experience by how a company, survive
in the market. It was really wonderful working with a brand known as the
Mahindra group.
I was guided by this group in an excellent way to get know how about the
corporate world and how to tackle with the clients, how to interact with them.
With their full support and help I completed my project with a great
success. I am concluding my project with my best understanding and finding
which I found during this project.
 People generally not aware of mutual funds the relate mutual fund with
stock market.
 In this way they expect high return like stock market.
 Mostly people want to invest for resourceful life.
 People wise to for short term to medium term time horizon.
 People invest in mutual fund on the basis of return and mostly prefer
 To go with some brand names of AMC’s.
 People mind set is to earn maximum return in short term while it should
be minimized.
 People generally prefer SIP. Because of it’s services as amount deducted
from account automatically.
89

90.  SIP also easy to manage because it is a low amount which is not heavy
to investor pocket.
90

91. REFERENCES
 AMFI Book
 www.amfiindia.com
 www.nseindia.com
 www.valueresearchonline.com
 NCFM Book.
 www.google.com
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92. 92