A Study On Mutual Fund Investment In India

Chapter- 1
INTRODUCTION TO INDUSTRY

Vanita Vishram Women’s College of Commerce Page 1

 A Study On Mutual Fund Investment In India

1.1 INTRODUCTION TO MUTUAL FUND

Different investment avenues are available to investors. Mutual funds also offer good
investment opportunities to the investors. Like all investments, they also carry certain risks.
The investors should compare the risks and expected returns after adjustment of tax on
various instruments while taking investment decisions. The investors may seek advice from
experts while making investment decisions. With an objective to make the investors aware of
functioning of mutual funds, an attempt has been made to provide information in question-
answer format which may help the investors in 7 taking investment decision.

1.2 THE ARRIVAL OF MUTUAL FUND IN INDIA

Unit Trust of India was the first mutual fund set up in India in the year 1963. In late 1980s,
Government allowed public sector banks and institutions to set up mutual funds. In the year
1992, Securities and Exchange Board of India (SEBI) Act was passed. The objectives of
SEBI are – to protect the interest of investors in securities and to promote the development of
and to regulate the securities market. As far as mutual funds are concerned, SEBI formulates
policies, regulates and supervises mutual funds to protect the interest of the investors. SEBI
notified regulations for mutual funds in 1993. Thereafter, mutual funds sponsored by private
sector entities were allowed to enter the Capital market. The regulations were fully revised in
1996 and have been amended thereafter from time to time. SEBI has also issued guidelines
through circulars to mutual funds from time to time to protect the interests of investors. All
mutual funds whether promoted by public sector or private sector entities including those
promoted by foreign entities are governed by the same set of Regulations. There is no
distinction in regulatory requirements for these mutual funds and all are subject to monitoring
and inspections by SEBI.

1.3 HISTORY OF MUTUAL FUND

“A MUTUAL FUND IS A POOL OF MONEY THAT IS INVESTED IN
PROFESSIONALLY MANAGED BY AN INVESTMENT MANAGER…

First phase – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of parliament by the Reserve
Bank of India and functioned under the Regulatory and administrative control of the Reserve

Bank of India. In 1987 UTI was de-linked from the RBI and the Industrial Development
Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The
first scheme launched by UTI was Unit Scheme 1984. At the end of 1988 UTI had Rs. 6700
crores of assets under management.

Second phase – 1987- 1993 ( Entry of Public sector funds)

1987 marked the entry of non- UTI public sector mutual funds set up by public sector banks
and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI mutual fund was the first non- UTI Mutual fund established in June 1987
followed by Canbank Mutual fund ( Dec.87), Punjab National Bank mutual fund (Aug

Vanita Vishram Women’s College of Commerce Page 2

 A Study On Mutual Fund Investment In India

89),Indian Bank mutual fund ( Nov 89), Bank of India ( Jun 90), Bank of Baroda mutual fund
( Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund
in December 1990. At the end of 1993, the mutual fund industry had assets under
management of Rs. 47,004 crores.

Third phase – 1993-2003 ( Entry of private sector funds)

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

The 1993 SEBI (mutual fund) Regulations were substituted by a more comprehensive and
revised mutual fund Regulation in 1996. The industry now functions under the SEBI (mutual
fund) Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total
assets of Rs. 1, 21,805 crores.

Fourth phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the specified undertaking of the Unit Trust of
India with asset under management of Rs.29, 835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and certain other schemes.
The second is the UTI Mutual fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the mutual fund Regulations, consolidation and
growth. As the end of September 2004, there were 29 funds, which manage assets of
Rs.153108 crores under 421 schemes.

1.4 MAJOR COMPANIES IN MUTUAL FUND INVESTMENT

There are as many as 44 AMFI (Association of mutual fund in India) registered Fund houses
in India which together offer more than 2,500 mutual fund schemes. The wide array of funds
often makes it a little difficult for investors to choose the best scheme for them.

List of Top Asset Management companies in India and their AUM

Top AMCs AUM (in cr.)

ICICI prudential mutual fund 3,06,173.5
HDFC mutual fund 3,00,793.73
Aditya Birla Sun Life mutual 2,47,794.54
fund
Reliance mutual fund 2,45,581.35
SBI mutual fund 2,18,033.97
UTI Mutual fund 1,54,939.35
Kotak Mahindra mutual fund 1,24,888.06
Franklin Templeton mutual 1,04,140.48
fund

Vanita Vishram Women’s College of Commerce Page 3

 A Study On Mutual Fund Investment In India

DSP BlackRock mutual fund 86,325.70

Axis Mutual fund 77,377.48
IDFC mutual fund 70,173.11
L&T mutual fund 65,931.65
Tata mutual fund 46,977.18
Sundaram mutual fund 34,306.03
Invesco mutual fund 26,217.41
DHFL pramerica mutual fund 23,595.35
LIC mutual fund 20,117.71
Motilal Oswal mutual fund 17,735.47
JM financial mutual fund 16,364.64
Mirae Asset mutual fund 15,756.15
Baroda pioneer mutual fund 13,022.04
Canara Robeco mutual fund 12,539.58
Edelweiss mutual fund 12,100.31
HSBC mutual fund 10,999.27
IDBI mutual fund 10,795.53

1.5 SWOT ANALYSIS

STRENGTHS
Large number of potential customers is base. Government support by way of tax concession
for MF investors Volatility of bank interest rate. Better scope for accessing market
information Offer liquidity to the investors at any time. Offers variety of products to the
investors. The size of the market is large.

WEAKNESS
Poor participation of retail investors Lack of focus under performance Poor service
conditions Distribution network is confines only to metro cities.

OPPORTUNITIES

Huge untapped market in semi-urban and rural areas. High level of savings habit among the
people Liberalized business environment. Using on-line mode of trading systems. Investment
opportunities abound in the international market. Failures of non bank financial company
operations.

THREATS

Increasing competition among the players. High level of volatility in the stock market.
Possibility of more stringent regulations by SEBI, RBI, AMFI, etc., in future.

1.6 INDIAN MUTUAL FUND INDUSTRY: PRESENT TRENDS

The AUM of the mutual fund industry in India has grown at a CAGR of 15.5% over the past
five years, with the equity AUM growing at a CAGR of 17.3%. Rising awareness about

Vanita Vishram Women’s College of Commerce Page 4

 A Study On Mutual Fund Investment In India

benefits of investing in equity markets, growing popularity of ways of investing, such as SIP,
are some of the factors contributing to the increased participation of domestic individual
investors in the Indian mutual fund industry.
The MAAUM of individual investors in the industry has reached 12.9 lakh crores in March
2020 and has recorded a growth of 18.2% since March 2015. The number of individual folios
has increased from 4.14 crores to 8.93 crores in this period. Net inflows into the industry over
the past five fiscal years were 9.46 lakh crores, of which 6.47 lakh crores have been in equity-
oriented schemes.
The monthly SIP flows grew 2.8 times from April 2016 to 8,641 crores in March 2020. The
number of SIP transactions processed in March 2020 was 3.12 crores as compared to 1.01
crores in April 2016. SIPs offer the benefit of regular investing coupled with benefits of rupee
cost averaging and are typically sticky long term inflows and lend visibility and predictability
of AUM growth.

1.7 INDIAN MUTUALFUND INDUSTRY: FUTURE TREND

Mutual fund penetration in the Indian markets is low when compared to its global peers.
However, the long term horizon offers potential to capitalise on financial savings. India has
an assets under management (AUM) to GDP ratio of 12% and this is after China, which has
an AUM to GDP ratio of 13%. The world average AUM to GDP ratio is at 63% with
developed markets such as the US and Canada at 120% and 81%. Crisis during its India
Investment Research Conclave stated that the mutual fund industry is expected to channelize
individual savings going forward. The growth drivers for the Indian mutual fund industry
would be the likely pick-up in the economy, growing investor base, higher disposable
incomes, greater investible surplus, and deeper geographical penetration Better awareness,
ease of investing through digitisation and a gradual pick up in corporate earnings expected to
support growth. Crisis said assets under management (AUM) in equities saw a CAGR growth
rate of close to 13.5% in the decade between March 2010 to March 2020. Additionally, from
the period between March 2020 to March 2025, the AUM is projected to be at 15% CAGR.
Ashu Suyash, MD and CEO of Crisil said, “The mutual fund industry has seen a large rate of growth
over the last 20 years, that growth rate has been a spectacular CAGR of 18%. Despite such a strong
growth rate, the penetration of mutual funds in India continues to remain low, the AUM to GDP
ratio is 12%. It just tells us the strong growth that is still to come for the mutual fund industry.” She
also explained that globally and in India the theme of investment research, data driven platforms,
among others have gained importance.

Vanita Vishram Women’s College of Commerce Page 5

A Study On Mutual Fund Investment In India

Chapter- 2
INTRODUCTION TO COMPANIES

Vanita Vishram Women’s College of Commerce Page 6

 A Study On Mutual Fund Investment In India

2.1 SBI MUTUAL FUND

2.1.1 About of the company
SBI mutual fund was incorporated in 1987 with its corporate head office located in Mumbai,
India. SBIFMPL is a joint venture between the state Bank of India, an Indian sector bank and
Amundi, a European asset management company

2.1.2 Overview of SBI mutual fund in Indian market

SBI mutual fund has completely lived up to its vision statement of being the most trusted and
respected asset Management Company in the country. In the last three decades, it has
demonstrated a robust and consistent track record. Its expert team is highly skilled at
judicious stock selection, insightful research and optimal risk management.
This Mutual Fund Company offers a host of investment solutions - equity schemes, debt
schemes, hybrid schemes, ETFs, Index Funds, etc. It also has solution-oriented offerings that
help in the realization of specific financial goals such as retirement planning, children
education, etc.
With its extensive reach throughout the country (through more than 222 acceptance centers),
it caters to 5.8 million investors and manages assets worth more than 3, 73,000 crores.

2.1.3 Types of SBI mutual fund

Vanita Vishram Women’s College of Commerce Page 7

 A Study On Mutual Fund Investment In India

Fund Category
SBI Blue chip Fund – Equity – Large Cap
Regular (G)
SBI Equity Hybrid fund – Hybrid –Equity-oriented
Regular (G)
SBI Long term Equity Fund Equity – Tax Saving
Regular (G)
SBI Magnum Equity ESG Equity – Large Cap
Fund – Regular (G)
SBI Magnum Mid cap Fund – Equity – Midcap
Regular (G)
SBI Magnum Multi cap Fund Equity – Multi Cap
– Regular (G)
SBI savings Fund Debt – Liquid
SBI Banking and PSU Fund Debt – Ultra Short term
(DD) – Direct Plan
SBI Banking and PSU Fund Debt – Ultra Short term
(G) – Direct Plan

2.1.4Target Market

In 2015, the Employees provident fund of India invested 5000 crores for the first time in a
Mutual fund in India via SBIMF Sensex ETFs or Exchange Traded Funds. As of March
2019, the SBI mutual fund manages assets worth 2.83 lakh crores. In early 2019, it moved
past Aditya Birla and HDFC mutual funds to emerge as the 3rd largest mutual fund body in
India based on Assets under management or AUM. The SBIMF is registered in with the
securities and Exchange Board of India or SEBI. According to the latest reports, the SBI
Bank Mutual Fund has witnessed a 7% growth in AUM in 2019. This is more than any other
competing MF.

2.1.5 SWOT Analysis of SBI Mutual Fund

SWOT ANALYSIS

A type of fundamental analysis of the health of a company by examining its strengths,

weakness, business opportunity, and any threat or dangers it might be exposed.

STRENGTHS

SBI mutual fund is a sponsored by state bank of India which is the more than the 200 years
old, largest lender in the country and having a massive network of over 13000 branches in
India.

 Wide reach : SBI mutual fund strong distribution network throw association banks
over 13000 branches of State bank of India over 2000 branches of association banks

Vanita Vishram Women’s College of Commerce Page 8

 A Study On Mutual Fund Investment In India

and distribution of SBI mutual fund products giving space and visibility for the
products of SBI mutual funds.
 Service : As services place a dominant role in a financial products SBI mutual funds
is providing standard services throw which branches located in over 445 cities.
 Distribution channel strategy : SBI is continuously improving the distribution of its
products. Its online and Internet based access offers a combination of excellence
growth prospects and its retail direct business also saw growth of 27% in 2002 and
15% in 2003.
 Large pool of installed capacities.
 Experienced managers for large number of Genetics.

WEAKNESS

 Technologically little less advanced: SBI mutual fund technology less advanced
comparing to other mutual fund for e.g.: HDFC, RELIANCE, this both companies use
the advanced technologies in the business.
 Less publicity: SBI mutual fund its basically public sector company and SBI mutual
fund use the less amount for advertisement its not using any brand ambassadors so its
not giving high publicity.
 Since it is a asset management company it can‟t quick ever change the market there
minimize the competitors strength of the public.
 Less aggressive
 Comparatively less reach to the investors

OPPORTUNITIES

 State Bank of India‟s great brand image helps SBI mutual fund to increase penetration
in to market, there are possibility for SBI mutual fund to get listed in top 3 AMC of
the country, as it is having all potential to reach top position.
 Increasing in liberalization of government policies in mutual fund industry.

THREATS

 Regulatory framework: due to every changing regulatory framework in India mutual

fund industry is facing the great threat for its inflow and sustainable growth in the
scenario of no entry load it has became very difficult to manage asset management
business.
 Increased competition : with intense competition by so many local players causing
headache to the current markets, In addition to this though multinational brands are
not yet established but still they will soon hit the market. Almost 60 to 70 % of the
revenue is spending on the management and services.
 Lack of sufficient branch offices for speedy delivery of services.

Vanita Vishram Women’s College of Commerce Page 9

 A Study On Mutual Fund Investment In India

2.2 CANARA ROBECO MUTUAL FUND

2.2.1 About the company
Canara Robeco Asset Management Company Ltd.(CRAMC) or Canara Robeco mutual fund
is a joint venture between the now defunct Canbank Mutual fund and Robeco Groep N.V.

2.2.2 Overview of Canara Robeco mutual fund

Canara Robeco mutual fund was established in 1987 December as Canbank Mutual fund and
being the second oldest mutual fund in India it turned out to be the fastest growing
investment platform. The solutions offered by them: thematic and diversified equity schemes,
monthly and hybrid mutual funds, an array of treasury and debt products.

2.2.3 Types of Canara Robeco mutual fund

Fund Category
Canara Robeco Emerging Equity
Equities
Canara Robeco Bluechip Equity
Equity Fund
Canara Robeco Equity Debt Hybrid
Allocation fund
Canara Robeco Tax saver Equity
Canara Robeco consumer Equity
Trends fund
Canara Robeco small cap Equity
fund
Canara Robeco flexi cap fund Equity
Canara Robeco Gilt fund Debt

Vanita Vishram Women’s College of Commerce Page 10

 A Study On Mutual Fund Investment In India

Canara Robeco infrastructure Equity

fund
Canara Robeco Ultra short Debt
term fund
Canara Robeco savings fund Debt
Canara Robeco short Debt
Duration fund
Canara income saver fund Hybrid
Canara Robeco Dynamic Debt
Bond fund
Canara Robeco income Debt
scheme

2.2.4 Target market

Canara Robeco is a Asset management company is a joint venture between Canara Bank and
Robeco, a Dutch asset management company. Canara Robeco is the second oldest mutual
fund in the country and was started in December 1987 as Canara Mutual Fund. Canara
Robeco Mutual Fund presents a wide variety of funds in various different categories such as
equity, debt and hybrid and income. Being a trusted brand, it strongly believes in providing
world class investment services to all its customers. As of June 2018, the Asset Under
Management of the company is Rs.1,337,458.48. The equity shareholding structure
comprises of Canara Bank owning 51% shares and Robeco Group owning 49% shares. Being
one of the oldest mutual fund companies, it has made its mark in the mutual fund industry
through its constant and stable performance across different market capitalization.

2.2.5 SWOT ANALYSIS

STRENGTHS
 Growth in net profit with increasing profit margin
 Company with zero promoter pledge
 FII/FPI or institutions increasing their shareholding
 MFs increased their shareholding last quarter

WEAKNESS
 High interest payments compared to earnings
 Low durability companies
 Risky value
 Downgrade by credit rating agency
 Declining revenue every quarter for the past 2 quarters
 Low Piotroski score companies with weak financials
 Major fall in TTM net profit

Vanita Vishram Women’s College of Commerce Page 11

 A Study On Mutual Fund Investment In India

OPPORTUNITIES
 Brokers upgraded recommendation or target price in the past three month
 Decrease in NPA in recent results
 Stock with low PE ( PE <= 10)

THREATS
 Companies with high market cap, lower public shareholding
 Stock with expensive valuations according to the trendlyne valuation score
 Stocks in downtrend most likely to cross below SMA -200 soon
 Increasing Trend in non – core income

2.3 ICICI PRUDENTIAL MUTUAL FUND

2.3.1 About of the company

ICICI prudential mutual fund is the second largest asset management company in India.
ICICI prudential mutual fund was established in 1993.

2.3.2 Overview of ICICI prudential mutual fund

ICICI prudential Asset Management Company Ltd. is a leading asset management company
(AMC) in the country focused on bridging the gap between savings and investments and
creating long term wealth for Investors through a range of simple and relevant Investment
solutions.

The AMC is a joint venture between ICICI Bank, a well known and trusted name in financial
services in India and prudential Plc, one of UK‟s largest players in the financial services
sectors. Throughout these years of the joint venture, the company has forged a position of
pre-eminence in the Indian mutual fund industry.
The AMC manages significant Assets under management company in the mutual fund
segment. The AMC also caters to portfolio management for clients across international
markets in asset classes like debt, Equity and real estate.

Vanita Vishram Women’s College of Commerce Page 12

 A Study On Mutual Fund Investment In India

The AMC has witnessed substantial growth in scale from 2 locations and 6 employees at the
inception of the joint venture in 1998, to a current strength of 1926 employees with a reach
across over 300 locations reaching out to an investor base of 6.2 million Investors. The
company‟s growth momentum has been exponential and it has always focused on increasing
accessibility for its Investors.
Driven by an entirely Investor centric approach, the organisation today is a suitable mix of
investment expertise, resource bandwidth and process orientation. The AMC endeavours to
simplify its investor‟s journey to meet their financial goals, and give a good investor
experience through innovative consistency and sustained risk adjusted performance.

2.3.3 Types of ICICI prudential mutual fund

Fund Category
ICICI prudential technology Equity
fund
ICICI prudential Sensex Equity
index fund
ICICI prudential all seasons Debt
bond fund
ICICI prudential regular Hybrid
savings
ICICI prudential short term Debt
fund
ICICI prudential credit risk Debt
fund
ICICI prudential ultra short Debt
term fund
ICICI prudential retirement Debt
fund
ICICI prudential very Others
aggressive plan
ICICI prudential constant Debt
maturity Gilt fund
ICICI prudential value Equity
discovery fund
ICICI prudential balanced Hybrid
advantage fund
ICICI prudential bond fund Debt
ICICI prudential cautious Others
plan
ICICI prudential corporate Debt
bond fund

2.3.4 Target market

The ICICI prudential AMC manages the mutual fund segment and portfolio management
services. The fund house manages assets across equities, debt and real estate.

Vanita Vishram Women’s College of Commerce Page 13

 A Study On Mutual Fund Investment In India

The fund house has grown substantially over the period. In the last 22 years from two
locations and six employees in 1998 to over 300 locations and 2062 employees in 2019. It
has over two decades of rich experience in fund Management. Also, the fund house has 4
million plus Investors' trust. Furthermore, it has 68+ mutual fund schemes and assets under
management of INR 3,61,506 Crore ( as on 31st December,2019.) ICICI mutual fund is one
of the leading AMC‟s in the country. Also, ICICI prudential mutual fund has played a
significant role in the CRISIL rating system in India.

2.3.5 SWOT ANALYSIS

STRENGTHS

 Company with no debt

 Increasing revenue every quarter for the past 2 quarters
 Company with zero promoter pledge
 FII/ FPI or institutions increasing their shareholding
 Near 52 week high
 Strong momentum: price about short , medium and long term moving Averages
WEAKNESS

 MFs decreased their shareholding last quarter

 Decline in net profit with falling profit margin
 Decline in quarterly net profit with falling profit margin
 Fall in quarterly revenue and net profit
 Recent results: Declining operating profit margin and net profits
OPPORTUNITIES

 Brokers upgraded recommendation or target price in the past three months

 Positive breakout second resistance ( LTP > R2)
 Decrease in provision in recent results
 RSI indicating price strength
 High volume, High Gain
THREATS

 Recent brokers downgrades in target price

 Stock with high PE (PE > 40)

Vanita Vishram Women’s College of Commerce Page 14

 A Study On Mutual Fund Investment In India

2.4 HDFC MUTUAL FUND

2.4.1 About of the company

HDFC Asset Management Company Ltd., Or HDFC mutual fund is currently the largest
private sector mutual fund and actively managed equity mutual fund in India.

2.4.2 Overview of HDFC Mutual Fund

HDFC Mutual fund is one of India‟s largest and most profitable mutual fund managers with
4.1 trillion in asset under management started in 1999, we were set up as a joint venture
between Housing Development Finance Corporation Limited (HDFC) and Standard Life
Investment Limited (“SLI”). We offer a comprehensive suite of savings and investment
products across classes, which provide income and wealth creation opportunities to our large
retail and institutional customer base of 9.1 million live accounts. We have a dominant
position in equity investments, with the highest market share in actively managed equity-
oriented funds. We serve our customers and distribution partners in over 200 cities through
our network of 224 branches and 1163 employees. We also provide portfolio management
and segregated account services, including discretionary, non –discretionary and advisory
services, to high net worth individuals, family offices, domestic corporate, trusts, provident
funds and domestic and global institutions.

2.4.3 Types of HDFC Mutual fund

Fund Category
HDFC Index fund – Sensex Equity
Plan
HDFC Credit risk debt fund Debt
HDFC money market fund Debt
HDFC Gold fund Fund of funds
HDFC retirement saving fund Hybrid/Equity
HDFC multi Asset fund Debt

Vanita Vishram Women’s College of Commerce Page 15

 A Study On Mutual Fund Investment In India

HDFC life Progrowth Plus Equity

Blue chip Fund
HDFC corporate bond fund Debt
HDFC short term debt fund Debt
HDFC medium term debt Debt
fund
HDFC balanced advantage Hybrid
fund
HDFC low duration Debt
HDFC ultra short term fund Debt
HDFC index fund- Nifty 50 Equity
plan

2.4.4 Target market

HDFC Mutual fund is most profitable asset Management Company in the country as on 31,
March, 2018. The company manage assets worth 3.43 lakh Crores as of 31stMarch 2019.
According to SEBI, its net worth stood at 1,402 Crores, total income at 35,229 Crores profit
at 12,163 Crores in March 2018.
During FY 2018-19, the AMC reported a YoY increase in profit of 61%. They registered a
profit of 930 Crores in March 2019, a 31% YoY growth. For the March 2019 quarter alone,
their profits stood at 276 Crores.
HDFC AMC recorded a 16.2% market share in the actively- managed equity oriented
schemes in FY 2018-19.

2.4.5 SWOT analysis

STRENGTHS

 Right strategy for the right products.

 Superior customer service vs. compatriots
 Great brand image
 Products have required accreditation
 High degree of customer satisfaction
 Good place to work
 Lower response time with efficient and effective services
 Dedicated workforce aiming at making a long term career in the field
WEAKNESS

 Some gaps in range for certain sectors

 Customer service staff need training
 Processes and systems, etc.
 Management cover insufficient
 Sectorial growth is constrained by low unemployment levels and competition for staff
OPPORTUNITIES

 Profit margins will be good

Vanita Vishram Women’s College of Commerce Page 16

 A Study On Mutual Fund Investment In India

 Could extend to overseas broadly

 New specialist applications
 Could seek better customer deals
 Fast track career development opportunities on an industry wide basis.
 An applied research center to create opportunities for developing techniques to
provide added value services.
THREATS

 Legislation could impact

 Great risk involved
 Very high competition prevailing in the industry
 Vulnerable to reactive attack by major competitors
 Lack of infrastructure in rural areas could constrain investment
 High volume / low cost market is intensely competitive

Vanita Vishram Women’s College of Commerce Page 17

A Study On Mutual Fund Investment In India

Chapter- 3
THEORETICAL FRAMEWORK

Vanita Vishram Women’s College of Commerce Page 18

 A Study On Mutual Fund Investment In India

3.1 ABOUT TO MUTUAL FUND

A 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 invested by the fund manager in different types of
securities depending upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned in these investments and the
capital appreciation realized by the scheme is shared by its unit holders in proportion to the
number of units owned by them. Thus a mutual fund is the most suitable investment for the
common man as it offers an opportunity to invest in a surplus of a few thousand rupees can
invest in mutual funds. Each mutual fund scheme has a defined investment objective and
strategy.
A mutual fund is the ideal investment vehicle for today‟s complex and modern financial
scenario. Markets for equity shares, bonds and other fixed income instruments, real estate,
derivatives and other assets have become mature and information driven. Price changes in
these assets are driven by global events occurring in faraway places. A typical individual is
unlikely to have the knowledge, skills, inclination and time to keep track of events,
understand their implications and act speedily.
A draft offers document is to be prepared at the time of the fund, the risk associated, the cost
involved in the process and the board rules for entry into and exit form the fund and other
areas of operation. In India, as in most countries, these sponsors need approval from a
regulator, SEBI in our case, SEBI looks at track records of the sponsor and its financial
strength in granting approval to the find for commencing operations.

Vanita Vishram Women’s College of Commerce Page 19

 A Study On Mutual Fund Investment In India

As per SEBI regulations, mutual funds can offer guaranteed returns for a maximum period of
one year. In case returns are guaranteed, the name of the guarantor and how the guarantee
would be honoured is required to be disclosed in the offer document.
Investments in securities are spread across a wide cross-section of industries and sectors and
thus the risk is reduced. Diversification reduces the risk because all stocks may not move in
the same direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of mutual funds
are known as unit holders.

3.2 What is Mutual Fund?

A 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 capital market instruments such
as shares, debentures and other securities. The income earned through these investments and
the capital appreciation realized is shared by its unit holders in proportion to the number of
units owned by them. Thus mutual fund is 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.

3.3 The Concept of Mutual Fund

A mutual fund uses the money collected from investors to buy those assets which are
specifically permitted by its started investment objective. Thus, an equity fund would buy
equity assets –ordinary shares, preference shares, warrants etc. A bond fund would buy debt
instruments such as debentures, bonds of government securities. It is these assets which are
owned by the Investors in the same proportion as their contribution bears to the total
contributions of all investors put together.

Vanita Vishram Women’s College of Commerce Page 20

 A Study On Mutual Fund Investment In India

A mutual fund is an investment tool that allows small investors access to a well-diversified
portfolio of equities, bonds and other securities. Each shareholder participates in the gain or
loss of the fund; Units are issued and can be redeemed as needed. The funds Net Asset Value
(NAV) is determined each day.

When an investor subscribes to a mutual fund, he or she buys a part of the assets or the pool
of funds that are outstanding at the time. It is no different from buying “shares” of joint stock
Company, in which case the purchase makes the investor a part owner of the company and its
assets. However, whether the investor gets fund shares or units is only a matter of legal
distinction.

3.4 Mutual Fund Operation Flow Chart

Vanita Vishram Women’s College of Commerce Page 21

 A Study On Mutual Fund Investment In India

From the above chart, it can be observed that how the money from the Investors flow and
they get returns out of it. With a small amount of fund, Investors pool their money with the
funds managers. Taking into consideration the market strategy the funds managers invest this
pool of money into reliable securities. With ups and down in market returns are generated and
they are passed on to the investors. The above cycle should be very clear and also effective.
The fund manager while investing on behalf of investors takes into consideration various
factors like time, risk, return, etc. So that he can make proper investment decision.

3.5 CATEGORIES OF MUTUAL FUND

Vanita Vishram Women’s College of Commerce Page 22

 A Study On Mutual Fund Investment In India

Mutual funds can be classified as follow :

Based on their structure :

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

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

Based on their investment objective:

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

 Index funds: In this case a key stock market index, like BSE Sensex or Nifty
is tracked. Their portfolio mirrors the benchmark index both in terms of
composition and individual stock weightages.

 Equity diversified funds: 100% of the capital is invested in equities

spreading across different sectors and stocks.

 Dividend yield funds: It is similar to the equity diversified funds except that
they invest in companies offering high dividend yields.

 Thematic funds: Invest 100% of the assets in sectors which are related
through some theme.
e.g., - As infrastructure fund invests in power, construction, cements sectors
etc.

 Sector funds: Invest 100% of the capital in a specific sector. E.g., A banking
sector fund will invest in banking stocks.

 ELSS: Equity Linked Saving Scheme provides tax benefit to the investors.

 Balanced fund: Their investment portfolio includes both debt and equity. As a
result, on the risk -return ladder, they fall between equity and debt funds. Balanced
funds are the ideal mutual funds vehicle for investors who prefer spreading their risk
across various instruments. Following are balanced funds classes:

Vanita Vishram Women’s College of Commerce Page 23

 A Study On Mutual Fund Investment In India

 Debt-oriented funds: Investment below 65% in equities.

 Equity-oriented funds: Invest at least 65% in equities, remaining in debt.

 Debt fund: They invest only in debt instruments, and are a good option for Investors
averse to idea of taking risk associated with equities. Therefore, they invest
exclusively in fixed-income instruments like bonds, debentures, Government of India
securities, and money instruments such as certificate of deposit, commercial paper
and call money. Put your money into any of these debt funds depending on your
investment horizon and needs.

 Liquid funds: These funds invest 100% in money market instruments, a large
portion being invested in call money market.

 Gilt funds ST: They invest 100% of their portfolio in government securities
of and T-bills.

 Floating rate funds: Invest in short-term debt papers. Floaters invest in debt
instruments which have variable coupon rate.

 Arbitrage fund: They generate income through arbitrage opportunities due to

mis-pricing between cash market and derivatives and money markets. Higher
proportion is put in money markets, in the absence of arbitrage opportunities.

 Gilt funds L T : They invest 100% of their portfolio in long-term government

securities.

 Income fund L T : Typically, such funds invest a major portion of the

portfolio in long-term debt papers.

 MIP : Monthly Income Plans have an exposure of 70-90% to debt and an

exposure of 10% -30% to equities.

 FMP : fixed monthly plans invest in debt papers whose maturity is in line
with that of the fund.

3.6 INVESTMENT STRATEGIES

 Systematic Investment Plan : Under this a fixed sum is invested each month on a
fixed date of a month. Payment is made through post dated cheques or direct debit
facilities. The Investor fewer units when the NAV is high and more units when the
NAV is low. This is called as the benefit of Rupee Cost Averaging ( RCA).

 Systematic Transfer Plan : Under this an investor invest in debt oriented fund and
give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the
same mutual fund.

 Systematic Withdrawal Plan : If someone wishes to withdraw from a mutual fund

then he can withdraw a fixed amount each month.

Vanita Vishram Women’s College of Commerce Page 24

 A Study On Mutual Fund Investment In India

3.7 WHY INVESTOR NEEDS MUTUAL FUND?

Mutual funds offer benefits, which are too significant to miss out. Any investment has to be
judged on the yardstick of return, liquidity and safety. Convenience and tax efficiency are the
other benchmarks relevantin mutual fund investment. In the wonderful game of financial
safety and return are the lows opposite goals and investors cannot be nearer to both at the
same time. The crus of mutual fund investing is averaging the risk. Many investors possibly
don‟t know that considering returns alone, many mutual funds have outperformed a host of
other investment products. Mutual funds have historically delivered yields averaging between
9% to 25% over a medium to long time frame. The duration is important because likewise,
mutual funds returns taste bitter with the passage of time. Investors should be prepared to
lock in their investments preferably for 3 years in an income fund and 5 years in an equity
funds. Liquid funds of course, generate returns even in a short term.

3.8 ADVANTAGES OF MUTUAL FUND

 Professional management –The basic advantage of funds is that, they are

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

 Diversification –purchasing units in a Mutual fund instead of buying individual

stocks or bonds, the Investors risk is spread out and minimised up to certain extent.
The idea behind diversification is to invest in a large number of assets so that a loss in
any particular investment is minimised by gains in others.

 Economics of scale – Mutual fund buy and sell large amounts of securities at a time,
thus help to reducing transaction costs, and help to bring down the average cost of the
unit for their investors.

 Liquidity –Just like an individual stock, mutual fund also allows investors to
liquidate their holdings as and when they want.

 Simplicity –Investments in mutual fund is considered to be easy, compare to other

available instruments in the market, and the minimum investment is small most AMC
also have automatic purchase plans whereby as little as ₹ 2000. Where SIP start with
just ₹50 per month basis.

 Well-Regulated – All mutual funds are registered with SEBI and they function within
the provisions of strict regulations designed to protect the interests of investors. The
operations of mutual funds are regularly monitored by SEBI.

 Affordability –Investors individually may lack sufficient finds to invest in high grade
stocks. A mutual fund because of its large Corpus allows even a small investor to take
the benefit of its investment strategy.

 Transparency –You get regular information on the value of your investment in

addition to disclosure on the specific investments made by your scheme, the

Vanita Vishram Women’s College of Commerce Page 25

 A Study On Mutual Fund Investment In India

proportion invested in each class of assets and the fund manager‟s investment strategy
and outlook.

 Choice of schemes –Mutual fund offers a family of schemes to suit your varying
needs over a lifetime.

3.9 DIS -ADVANTAGES OF MUTUAL FUND

 Professional management – Some funds don‟t perform in neither the market, as

their management is not dynamic enough to explore the available opportunity in
the market, thus many investors debate over whether or not the so-called
professionals are any better than mutual fund or investor himself, for picking up
stocks.

 Costs- The biggest source of AMC income is generally from the entry and exit
load which they change from Investors, at the time of purchase. The mutual fund
industries are thus charging extra cost under layers of jargon.

 Dilution –Because funds have small holdings across different companies, high
returns from a few investments often don‟t make difference on the overall return.
Dilution is also the result of a successful fund getting too big . When money pours
into funds that have strong success, the manage often has trouble finding a good
investment for all the money.

3.10 MUTUAL FUND RISK

Mutual fund faces risks based on the investments they hold. For example, a bond fund
faces interest rate risk and income risk. Bond values are inversely related to interest rate.
If interest rates go up, bond values will go down and vice versa. Bond income is also
affected by the changes in interest rates. Bond yields are directly related to interest rates
falling as interest rates fall and rising as interest rates.
Similarly, a sector stock fund is at risk that its price will decline due to development in its
industry. A stock fund that invests across many industries is more sheltered from this risk
defined as industry risk.
Followings are glossary of some risks to consider when investing in mutual fund :-

COUNTRY RISK: - The possibility that political events ( a war, national election),
financial problems ( rising inflation, government default), or natural disasters will weaken
a country‟s economy and cause investments in that country to decline.

MARKET RISK: - The possibility that the stock fund or bond fund prices overall will
decline over short or even extended periods, stock and bond markets tend to move in
cycles, with periods when prices rise and other periods when prices fall.

Vanita Vishram Women’s College of Commerce Page 26

 A Study On Mutual Fund Investment In India

GRAPH 3.10:- RISK RETURNS REWRAD IN MUTUAL FUND

This graph shows risk and returns impact on various mutual funds. There is a direct
relationship between risk and return, i.e., schemes with higher risk also have potential to
provide higher returns.

3.11 ASSOCIATION OF MUTUAL FUND IN INDIA

Association of mutual funds in India (AMFI) :- Association of mutual funds in India was
incorporated on 22nd August, 1995. AMFI is an apex body of all Asset Management
Companies (AMC) which has been registered with SEBI.

Vanita Vishram Women’s College of Commerce Page 27

 A Study On Mutual Fund Investment In India

AMFI has brought down the Indian mutual fund industry to a professional and healthy market
with ethical lines enhancing and maintaining standards. It follows the principle of both
protecting and promoting the interests of mutual funds as well as their unit holders.

Objectives of AMFI

 It recommends and promotes the top class business practices and code of conduct.
 AMFI interacts with SEBI and works according to SEBI guidelines in the mutual
fund industry.
 AMFI represent the Government of India, the RBI and other related bodies on
matters relating to the mutual fund industry.
 It develops a term of well qualified and trained agent distribution. AMFI
undertakes all India awareness programme.

Proof of address ( any of the following) :- Latest telephone bill, latest electricity bill,
passport, latest bank passbook/bank account statement, latest Demat account statement, voter
id, driving licence, ration card , rent agreement.

Offer document: - An offer document is issued when the AMCs make New Fund Offer. It is
advisable to every investor to ask for the offer document and read it before investing. An
offer document consists of the following:

Standard offer document for mutual funds (SEBI Format)

 Summary Information
 Glossary of Defined Terms
 Risk Disclosure
 Legal and Regulatory compliance
 Express
 Condensed financial information of schemes
 Constitution of the mutual fund
 Investment objectives and policies
 Management of the fund
 Offer Related information

Loads:

Entry load/ front -End load (0-2.25%) – It is the commission charged at the time of buying
the fund to cover the cost of selling, processing etc. But w.e.f 2010 this has been stopped.

Exit load/ Back load (0.25 –2.25%) – It is the commission or charged paid when an investor
exits from a mutual fund, it is imposed to discourage withdrawals. It may reduce to zero with
increase in holding period.

Vanita Vishram Women’s College of Commerce Page 28

A Study On Mutual Fund Investment In India

Chapter- 4
REVIEW OF LITERATURES

Vanita Vishram Women’s College of Commerce Page 29

 A Study On Mutual Fund Investment In India

1.Sehdev R and Ranjan P (2014) in the article “A study on Investor‟s perception towards
mutual fund investment” from Scholars Journal of Economics, Business and Management
have mentioned that mostly people are prefer balanced funds and debt funds. After that
people look for Equity diversified and Sector funds. The factors responsible for investors‟
preference for mutual funds as an investment option are benefits and transparency, returns,
redemption period, Liquidity and Institutional Investor‟s activity. For information on mutual
funds people are mostly depending on internet rather than any other media channel.

2.Reshma Raja mini (2020) conducted the study to identify the various information source
that had influenced the selection of choice of funds. This money collected is further invested
into varied kind of securities. This study has revealed that under the prevalent market
condition, income and open ended schemes are more preferred that growth and close ended
schemes. To know the investment preferences in mutual funds with respect to other
investment opportunities and impact in investment with regard to demographic profile. The
survey method was used for collecting data using questionnaire and simple percentage
method. Which can help trigger the growth of this mode of finance sector which can thereby
help promote the individual , economic goals of the country.

3.Tarak Paul (2012) studied to assess the gap between expectations and experiences of
mutual fund of around 260 investor in Guwahati city. He has found out that there is a
significant gap between the Mutual fund investors expectations and experiences. The study
also find out the opinion of the investors and perception has been studied relating to various
issues like type of mutual funds schemes ,level of satisfaction , awareness of investors ,high
return etc. Instated of the agents regular awareness campaign should be conducted by the
companies. The main risk before mutual fund industry is to convert the potential investors
into the reality investors. All this will lead to the overall growth and development of the
mutual fund industry.

4.Dr. B. Ravi Kumar and R. Padma malini(2017) have done prediction of increase in
investment in mutual funds by small and medium investors. The growth in number of
schemes offered by Indian mutual funds from 403 schemes in 2002-03 to 1294 schemes in
2011-12 has shown the inclination of investors towards mutual funds . A structured
questionnaire has been developed to collect first hand and secondary information from the
respondents. Data has been gathered by using simple random sampling techniques. Investors
can invest in a mutual fund that matches their investment objective and analyse the fund
based on various criteria such as risk prevailing in the market , variations occur in the return
etc. Risk appetite of an investor plays an important role in the section of mutual funds.

5.Ms.shalini Goyal (2013) studied focus on the entire journey of mutual fund industry in
India. A mutual fund is a managed group of owned securities of several corporations . Funds
are ranked based upon their performance as a whole and performance against their peers by
such companies as Morningstar which has an industry recognised rating system for mutual
funds .hence mutual fund organisations are needed to upgrade their skills and technology.
Success of mutual fund however would bright depending upon the implementation of
suggestions . We are of the view that the investor needs to adopt two crucial skills for
successful investing.

Vanita Vishram Women’s College of Commerce Page 30

 A Study On Mutual Fund Investment In India

6.Satheesh Kumar rangasamy (2016) researched on performance of selected mutual funds

with reference to Indian context. The main tools used for the study are simple average
method , standard deviation, ranking method and simple comparative analysis . To help the
retail investors in decision making in selected categories in mutual fund schemes . This study
helped the investigator in understanding the different categories of mutual fund, the nature of
the market and the best performing mutual fund from a selected pool of mutual fund. It is
very relevant in today‟s financial market context and will form basis for the performance
evaluation of the mutual funds in further also.

7.Bhasker Biswas (2012)investigate out performance and under performance of diversified

funds by studying the performance of some ten best and ten worst performing diversified
equity mutual funds for the period from 2009 to 2012 selected diversified equity funds have
been analysed through arithmetic mean return, risk analyzed by standard deviation ,beta
measures for market sensitivity of portfolio.

8.Sharma R and Pandya N K (2013) in the article “Investing in Mutual Fund: Anoverview”
from Asian Research Journal of Business Management mentioned that still number of people
are not clear about functioning of Mutual Funds, as a result so far they have not made a firm
opinion aboutinvestment in mutual funds. As far existing investors, return potential and
liquidity have been perceived to bemost attractive. There is a lot of scope for the growth of
mutual funds in India. People should takedecision based on performance of Mutual fund
rather thanconsidering whether it is private sector or public sector.

9.Jani D and Jain R (2013)in an article “Role of Mutual Funds in IndianFinancial System as
a Key Resource Mobilizer” from Abhinav Journal (International Monthly Referred Journal of
Research in Management & Technology) have reiterated that since fundamentals of Indian
economy are relatively strong, the economy will be on a successful path in the coming year.
As economy grows, Mutual Funds are going to be key resource mobilizer for Indian financial
system.Indian Mutual Fund industry is going to observe goodgrowth rate in near Future.

10.Prof. V. Vanaja and Dr. R. Karrupasamy (2013), have done a Study on the
Performance of select Private Sector Balanced Category Mutual Fund Schemes in India. This
study of performance evaluation would help the investors to choose the best schemes
available and will also help the AUM‟s in better portfolio construction and can rectify the
problems of underperforming schemes. The objectives of the study is to evaluate the
performance of selected private sector balanced schemes on the basis of returns and
comparison with bench marks and also to appraise the performance of different category of
fund using risk adjusted measures as suggested by Sharpe, Treynor and Jensen.

Vanita Vishram Women’s College of Commerce Page 31

 A Study On Mutual Fund Investment In India

Gap analysis

From the analysis of above review of literatures it was found that a various researcher was
included a public sector mutual funds in Indian Financial system and someone found that
private sector mutual funds investment only . However, none of these studies provide a both
private and public sector mutual funds. In this research project found this gap.

Vanita Vishram Women’s College of Commerce Page 32

A Study On Mutual Fund Investment In India

Chapter- 5
RESEARCH METHODOLOGY

Vanita Vishram Women’s College of Commerce Page 33

 A Study On Mutual Fund Investment In India

5.1 Problem definition

The research was aimed to compare the public sector and private sector mutual funds
investment in India.

5.2 Objectives

Primary objective
 To identify the factors affecting investors perception and choice of public
sector and private sector mutual funds.
Secondary objective
 To evaluate the factors affecting investors perception and the choice of public
sector and private sectors mutual funds.
 To study some mutual funds banks and their funds.

5.3 Nature of the research

Nature of research is divided into two types

Basic research
Basic research is called “PURE RESEARCH” or “ FUNDAMENTAL RESEARCH” is a type of
scientific research with the aim to improving scientific thoery for better understanding and prediction
of natural or other phenomena.

Applied research
Applied research seeks to solve the specific problem or provides innovative solutions to issue affecting an
Individual, group and society.

The nature of this project report is “Basic Research” as it is conducted to expand the
knowledge and understanding by either developing or testing theory. Basic research is also
known as fundamental or pure research.

5.4 Types of research design

Meaning of research design

“Research design is the plan, structure and strategy of investigation conceives so as to obtain
answers to research questions and to control variances.”

1. Exploratory research

Exploratory research is used to investigate a problem which is not clearly defined. It is

conducted to have a better understanding of the existing problems, but will not provide
conclusive results.

Vanita Vishram Women’s College of Commerce Page 34

 A Study On Mutual Fund Investment In India

2. Descriptive research

Descriptive research describes a population situation, or phenomenon that is being studies. It

focuses on answering the how, what, when and where questions.

3. Casual research

Casual research is also known as exploratory research is conducted in order to identify the
extent and nature of cause- and- effect relationships.

The types of research design in this project report is of „Exploratory research' design. To
explore or search through a problem or situation to provide insight and understanding. To
identify alternative course of action and establish priorities for further research.

5.5 Scope of research

The report help us to understand the perception of the customers and helps to know in details
about what factors will lead to the growth of mutual funds in India. It can help a lot of
financial institutions and asset management company (AMC) to design the mutual fund
schemes according to their target audiences requirements.

5.7 Data collection

There are two types of data collection in research methodology.
Primary data
Primary data are those data which are collected specifically for the purpose of current
Research project for the first time by researcher and from the target population.

Secondary data
Secondary data are those data which has already been collected for a purpose other
than current research project for by someone else or even by researcher and has
some relevance and utility for current research irrespective of objective.

As this report is prepared by taking the figures from the annual reports of various
banks so it is a ‘secondary data’ as secondary data are those data which has already
been collected.
Sources of secondary data
 Annual investment report
 Relevant website

5.7 Sample Design
A. sample size
Sample size refers to the number of participants or observations included in a study.
The size of the sample collected from the population is “four” public sector and private sector
mutual funds investment companies
Public sector mutual fund investment companies:

Vanita Vishram Women’s College of Commerce Page 35

 A Study On Mutual Fund Investment In India

SBI Blue chip mutual fund

Canara Robeco Blue chip mutual fund
Private sector mutual fund investment banks:
ICICI prudential Blue chip fund
HDFC Life Progrowth Plus Blue chip Fund

B. Sampling frame
The sampling frame defines a set of elements from which a researcher can select of the target
population.
The sample are collected from the “mutual fund investment” therefore the sampling of frame is
mutual fund investment banks of in India.

C. Sample Elements

Element sampling, or direct element sampling, is a sampling method whereby every unit ( I.e,
person, organisation, group, company etc.) has an equal opportunity chance of being selected
to be included in the research sample.

There are four elements in the sample namely SBI Blue chip fund
Canara Robeco Blue chip mutual fund
ICICI prudential Blue chip fund
HDFC Life Progrowth Plus Blue chip Fund

5.8 Tools for Data Analysis

Researcher has used Various analysis . Various frequency distributions, simple percentage
analysis, ratio analysis.

Sharpe ratio

Sharpe ratio is the measure of risk adjusted return of a financial portfolio. A portfolio with a
higher Sharpe ratio is considered superior relative to its peers.

Formula of Sharpe ratio

Sharpe ratio = Rp – Rf / S.D

Rp = return of portfolio

Rf = risk free rate

S.D. Standard Deviation

Vanita Vishram Women’s College of Commerce Page 36

 A Study On Mutual Fund Investment In India

Expense ratio

The expense ratio states how much you pay a fund as a percentage of your investment every
year to manage your money.

Formula of expense ratio

Expense ratio = Total expenses ÷

Expense
Average ratioof= the
value Total
portfolio
expenses ÷
Average value of the
portfolio

Simple percentage analysis

Simple percentage analysis refers to a special kind of rates, percentage are used in making
comparison between two or more series of data. A percentage is used to determine
relationship between the series. Percentage = No. of Respondents X 100 Total number.

5.9 Time period

The time period of the study is 5 years that is from 2016- 2020 . mutual funds investment in
banks five years data has been taken for the report.

5.10Limitation of the study

 The study is based on exploratory research methodology and can have sample
bias.
 The behavioral attitude of the customers might have effect on the preferences
of the customers toward mutual funds and can deviate the results sightly from
actual results.
 Research is confined to only Indian sub – continent and might vary as we
move towards the west, due to investment and Saving patterns.

Vanita Vishram Women’s College of Commerce Page 37

 A Study On Mutual Fund Investment In India

Chapter- 6.
DATA ANALYSIS AND INTERPRETATION

Vanita Vishram Women’s College of Commerce Page 38

 A Study On Mutual Fund Investment In India

6.1 Net Asset Value

The performance of a particular scheme of a mutual fund is denoted by net Asset Value. In
simple words, NAV is the market value of the securities held by the scheme. Mutual funds
invest the money collected from investors in securities market. Since market value of
securities changes every day, NAV of a scheme also varies on day to day basis.

Net Asset Value = Assets – Liabilities ÷ Total number

Of units

Public sector mutual funds companies

6.1.1SBI Blue-chip Fund

Net Asset Value of SBI Blue chip fund

month 2016 2017 2018 2019 2020

January 19.95 20.43 26.77 25.29 28.37
February 19.18 21.42 25.46 24.99 28.01
March 18.26 21.65 25.22 25.62 26.66
April 19.52 22.79 25.48 26.78 19.85
May 20.17 23.19 26.63 27.02 22.23
June 21.02 23.66 26.11 27.72 24.03
July 21.37 23.75 25.44 27.12 25.36
August 22.41 24.88 26.62 25.96 25.86
September 22.73 24.83 26.91 26.02 27.31
October 21.89 24.66 24.86 26.85 27.36
November 21.71 25.57 24.44 28.46 28.97
December 21.55 25.41 24.63 28.14 31.71

Interpretation

Net Asset Value is varies on day to day basis. When share price is fluctuated same as NAV is
changed. In SBI Blue-chip Fund value is based on net asset value. In September ,2016 , NAV
value is 22.73 that day mutual fund value is decrease and February,2016, NAV value is 19.18
that day mutual fund Value is increase . In 2017 net asset value is day by day increases .
26.70 NAV value in January 2018 and then decreases in three month and therefore increase a
value of mutual fund. In 2019 ,average value of NAV is 26.66. The lowest value of NAV is
19.85 in April 2020. And highest value of NAV is 31.71 in December 2020 at SBI Bluechip
Fund. Net asset value is helps to invest in mutual funds.

Vanita Vishram Women’s College of Commerce Page 39

 A Study On Mutual Fund Investment In India

6.1.2 Canara Robeco Blue chip fund

Net Asset Value of Canara Robeco Blue chip fund

month 2016 2017 2018 2019 2020

January 16.16 17.36 22.54 23.54 27.22
February 15.76 18.93 23.51 23.55 27.18
March 15.89 19.07 22.49 23.24 26.62
April 16.05 19.92 22.22 24.81 20.79
May 16.72 20.49 23.16 24.78 23.13
June 17.02 20.86 23.13 25.56 24.17
July 17.62 20.81 23.07 25.64 25.33
August 18.31 21.91 24.63 25.38 26.41
September 19.16 21.81 24.79 24.18 27.62
October 19.26 21.52 23.44 25.45 28.24
November 19.12 22.32 22.49 26.49 29.82
December 17.57 21.86 23.37 26.81 31.29

Interpretation

Net asset value is helps to finding return value of mutual fund. In April 2016 NAV value is
16.05 and October 2016 NAV Value is 19.26 .In 2017 ,average NAV value is 20.57 than
increase average NAV value
23.22 in 2018. March 2019, NAV value 23.24, when 1000 number of units value is 23240.
In 2020, NAV value is very fluctuated.

Private sector mutual funds companies

6.1.3 ICICI prudential Blue chip mutual fund
Net Asset Value of ICICI prudential Blue chip mutual fund

month 2016 2017 2018 2019 2020

January 13.72 62.78 69.46 100.47 101.13
February 13.82 63.91 69.05 95.72 102.61
March 13.87 63.72 68.51 95.16 97.05
April 14.14 65.15 69.61 102.61 67.59
May 14.24 65.47 70.06 100.38 73.96
June 14.26 66.67 72.09 103.49 79.72
July 14.44 67.41 69.37 101.68 84.58
August 14.68 68.35 66.64 93.86 91.31
September 14.81 68.44 70.11 91.15 99.72
October 15.01 68.42 67.88 96.12 100.48
November 23.91 69.22 69.89 101.21 100.64
December 23.89 68.96 70.01 101.38 115.02

Vanita Vishram Women’s College of Commerce Page 40

 A Study On Mutual Fund Investment In India

Interpretation

Net asset value of ₹13.72 in January ,2016 is better than a fund with a NAV of ₹ 23.91 in
November,2016.In 2017 ,average NAV value of a year is ₹66.54.A value of NAV is ₹
102.61 in April,2019 and a lowest NAV value is ₹ 91.15 in September,2019. As with stocks,
mutual fund investors believe that the best mutual funds are those with lower NAVs.

HDFC Life Progrowth plus Blue chip Fund

Net Asset Value of HDFC Life Progrowth plus Blue chip Fund

month 2016 2017 2018 2019 2020

January 11.11 12.36 13.22 53.88 35.56
February 11.18 12.43 13.13 50.91 32.94
March 11.24 12.47 13.28 51.85 33.24
April 11.41 12.56 13.44 52.02 35.06
May 11.49 12.63 13.33 49.33 34.57
June 11.56 12.73 13.26 48.62 35.53
July 11.65 12.82 14.06 53.57 37.28
August 11.81 12.93 14.75 48.91 38.42
September 11.91 13.02 18.25 47.42 41
October 12.05 12.98 19.12 48.84 39.63
November 12.13 13.14 18.08 51.61 40.58
December 12.31 13.18 20.03 51.81 45.36

Interpretation

The NAV value is helps to analyze a mutual fund Value in the current market. In 2016, the
lowest NAV value is 11.11 and highest NAV value is 12.31. The average NAV value in 2017
is ₹ 12.77. A Comperation between last two years NAV value is very fluctuated. It is
common for investors to believe that a fund with a net asset value of ₹ 32.94 is better than a
fund with a NAV of ₹45.36.

RATIO ANALYSIS

6.2.1 Sharpe ratio

Sharpe ratio is the measure of risk adjusted return of a financial portfolio. A portfolio with a
higher shape ratio is considered superior relative to its peers. Sharpe ratio is a measure of
excess portfolio return over the risk free rate relative to its standard deviation.
Sharpe ratio = Rp – Rf /standard deviation
Rp = Return of portfolio
Rf = Risk free rate

Vanita Vishram Women’s College of Commerce Page 41

 A Study On Mutual Fund Investment In India

SD= standard deviation of portfolio‟s excess return

Last five year combine data of public and private sector mutual funds companies

mutual fund investment sharpe

companies Rp Rf SD ratio

SBI Blue chip fund 14.64% 5.51% 22.83% 0.40%

Canara Robeco Blue chip fund 17.99% 0.45% 23.09% 0.45%
ICICI prudential Blue chip fund 15.50% 6.63% 21.12% 0.42%
HDFC Life Progrowth Plus Blue chip Fund 15.60% 7.50% 23.14% 0.35%

Sharpe ratio of mutual fund investment banks

0.50%

0.45%

0.40%

0.35%

0.30%

0.25%

0.20%

0.15%

0.10%

0.05%

0.00%
1 2 3 4

Series1

Interpretation

The Sharpe ratio adjusts a portfolio‟s past performance or expected future performance for
the excess risk that was taken by the investor. SBI Blue chip fund Sharpe ratio is 0.40% and
Canara Robeco Blue chip fund Sharpe ratio is 0.45% .so that Canara Robeco Blue chip fund
investors gain a high return than SBI Blue chip fund investors. An ICICI prudential Blue chip
fund Sharpe ratio is 0.42% that ratio is under 1.0, it is considered sub -optimal. HDFC Life
Progrowth Plus Blue chip fund return value is low than other funds. A higher Sharpe ratio is
good when compared to similar portfolio or funds with lower returns.

Vanita Vishram Women’s College of Commerce Page 42

 A Study On Mutual Fund Investment In India

6.2.2 Expense ratio

Expense ratio indicates how much the fund charge in terms of percentage annually to
manage your investment portfolio.

Formula of expense ratio

Expense ratio = Total expenses / Average value of the portfolio

Last five year combine data of public and private sector mutual funds companies

Mutual fund investment Total expenses Average value of the Expense ratio
companies portfolio
SBI Blue chip fund 522965.6 298837.5 1.75

Canara Robeco Blue 606230 334933.70 1.81

chip fund
ICICI prudential Blue 637224 370479.07 1.72
chip mutual fund
HDFC Blue chip fund 490380 265070.27 1.85

1.9

1.85

1.8

1.75

1.7

1.65
1 2 3 4

Series1

Interpretation

In this table, Analysis a expense ratio of public sector and private sector mutual funds
companies. NAV is calculated after deducting expense ratio. Expense ratio is based on total
expenses and average value of the portfolio .SBI Bluechip fund expense ratio is 1.75so that
this fund expense is 1.75%. Canara Robeco Bluechip fund expense ratio is 1.81 and ICICI

Vanita Vishram Women’s College of Commerce Page 43

 A Study On Mutual Fund Investment In India

prudential Blue chip fund expense ratio is 1.72. Canara Robeco Blue chip fund investment
expense is more than ICICI prudential Blue chip fund. 1.85% expenses in the HDFC Life
Progrowth Plus Blue chip Fund. This ratio is help to analyze which fund is best in market.

6.3 Alpha ,Beta and standard deviation

Alpha
Alpha is a measure of an investments performance on a risk – adjusted basis. It takes the
volatility of a security or fund portfolio and compares it‟s risk adjusted performance to a
benchmark index.

Beta
Beta denotes the sensitivity of the mutual fund towards market movements. It is the measure
of the volatility of the mutual fund portfolio to the Market.

Standard deviation
In mutual fund, it tells you how much the return from your mutual fund portfolio is starling
from the expected return, based on the funds historical performance.

Last five year combine data alpha beta and standard deviation of public and private
sector mutual fund companies

Mutual funds Alpha Beta Standard

investment deviation
companies
SBI Blue
chip mutual -1.69 1.00 18.68
fund
Canara
Robeco Blue 3.10 0.88 16.52
chip fund
ICICI
prudential 0.51 0.94 17.47
Blue chip
fund
HDFC Life
Progrowth -3.09 1.01 23 14
Plus Blue
chip Fund

Vanita Vishram Women’s College of Commerce Page 44

 A Study On Mutual Fund Investment In India

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
1 2 3 4

-5.00%

alpha beta standard deviation

Interpretation

An alpha is 1 means the fund has outperformed it‟s benchmark index by 1%. SBI Blue chip
fund alpha value is -1.69% . It means this fund volatility is high. Canara Robeco Blue chip
fund alpha value is 3.10 is more volatility than ICICI prudential Blue chip fund. A beta of
less than 1.00 indicates that the investment will be less volatile in market. Canara Robeco
Blue chip fund beta value is 0.88 so this fund investment volatility is less. SBI Blue chip fund
and HDFC Life Progrowth Plus Blue chip Fund are beta value is greater than 1 so , that
indicates investment will be more volatile. Standard deviation is shown a historical
performance of fund. HDFC Life Progrowth Plus Blue chip fund s.d. value is 23.14 more
than other funds. ICICI prudential Blue chip fund standard deviation value is 17.47 . It is
helps to analyse a expected return.

6.4 Public and private sector mutual funds companies investment allocation in
different sectors

6.4.1 SBI Blue chip mutual fund

sectors percentage

financial 36.95%
construction 11.82%
automobile 10.54%
technology 10.06%

Vanita Vishram Women’s College of Commerce Page 45

 A Study On Mutual Fund Investment In India

energy 6.93%
healthcare 6.47%
FMCG 5.31%
engineering 4.16%
communication 2.18%
metals 1.82%
cons durable 1.76%
chemicals 0.67%
services 0.36%

0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0

Series1 Series2

Interpretation

Mutual fund investors use sector funds to increase exposure to certain industry sectors they
believe will perform better than other sectors.SBI Bluechip fund investors investment to
allocate by different sectors. 36.95% investment in finance sector. Mutual fund investment
11.82% in construction and 10.54% automobile . A investment divided into many different
sectors to purpose of high return.

6.4.2 Canara Robeco Blue chip mutual fund

sectors percentage
financial 35.65%
technology 13.71%
construction 7.02%
energy 6.28%
FMCG 5.43%

Vanita Vishram Women’s College of Commerce Page 46

 A Study On Mutual Fund Investment In India

healthcare 5.20%
automobile 4.94%
cons durable 4.80%
chemicals 4.18%
communication 2.52%
services 2.14%
metals 1.46%
engineering 1.03 %

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

Interpretation

In this chart ,Canara Robeco Blue chip fund is allocated investors investment into different
sectors. In finance sector allocation of funds is 35.65%. Technology sector 13.71% ,
construction sector 7.02% , FMCG sector 5.43% and so on. A Canara Robeco Bluechip
mutual fund is less investment in 1.03% into engineering sector.

Vanita Vishram Women’s College of Commerce Page 47

 A Study On Mutual Fund Investment In India

6.4.3 ICICI prudential Blue chip fund

sectors percentage
Financial 34.74%
technology 13.30%
energy 13.13%
construction 6.71%
automobile 6.13%
communication 5.29%
FMCG 4.58%
services 3.96%
metals 3.59%
healthcare 3.48%
chemicals 0.38%
cons durable 0.32%
engineering 0.13%
others 0.03%

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

percentage

Vanita Vishram Women’s College of Commerce Page 48

 A Study On Mutual Fund Investment In India

Interpretation

A mutual fund investment companies are expected high return so that they are invest a fund
allocated by different sectors. Many sectors are given a high return. ICICI prudential Blue
chip fund is allocated 34.74% to cash. And 13.33% investment in research and development
sector. In service sector 3.96% allocated. In community sector 3.59 % investment .In
chemical, cons durable , engineering and other sectors investment in 0.86%. A allocation is
help to analyzed a value of fund.

6.4.4 HDFC Life Progrowth Plus Blue chip Fund

sectors percentage
financial 20.08%
technology 9.12%
FMCG 8.97%
energy 7%
automobile 4%
services 3.63%
chemicals 2.67%
healthcare 2.51%
metals 2.47%
communication 2.40%
cons durable 1.48%
construction 0.81%
engineering 0.52%
textiles 0.19%

0.25

0.2
0.15

0.1
0.05
0

Series1 Series2

Vanita Vishram Women’s College of Commerce Page 49

 A Study On Mutual Fund Investment In India

Interpretation

HDFC Life Progrowth Plus Blue chip Fund Is allocated 36.95% into cash. In construction
sector 11.82% investment. 10.54% investment allocated into automobile industry sectors.
FMCG sector and energy sector are allocated 5.31% and 6.93%.In communication sector
allocated 2.18% investments. Allocation of different sectors to help a increase gain.

Vanita Vishram Women’s College of Commerce Page 50

A Study On Mutual Fund Investment In India

Chapter- 7.
FINDINDS AND SUGGESTIONS

Vanita Vishram Women’s College of Commerce Page 51

 A Study On Mutual Fund Investment In India

FINDINGS

 Generally, people employed in private sectors and businessman are more likely to
invest in mutual funds, than other people working in other professions.
 People like to save their savings in mutual fund.
 There are as many as Association of mutual funds in India registered fund houses in
India which together offer more than 2500 mutual fund scheme.
 Investors generally like to invest in large cap companies like SBI, ICICI ,etc. to
minimize their risk.
 The entry of private sector funds, a new era started in Indian mutual fund industry.
 Mutual funds can be a higher risk investment but the returns are generally greater than
in any other investment.
 A main expectation of mutual fund investment is gain a high returns.
 Net asset value is help to analysis a value of mutual fund.

SUGGESTION TO MUTUAL FUND INVESTMENT

Understand the purpose of Investment : The first point to analysed before investing in a
fund is to find out whether objective matches with the scheme. If there is a mismatch in the
scheme the investors would be affected with the probable returns. For example, the schemes
that invest in large cap stocks is not suitable for conservative investors. He should first try to
invest in small and midcap funds. Similarly he should pick up schemes that will specify his
investment. Examples pension plans. Children’s plan sector specific schemes. There are the
schemes from where he can invest for the future.

Low risk Tolerance: The Investors with low risk tolerance should invest in small and
midcap schemes as they are relatively safer when compared to schemes like equity.
Aggressive investors can go for equity investment and can opt for schemes that invest in
specific industry or sector.

Track record: Investors should go through schemes track record-performance against

relevant market benchmark and its competitors.

Period of Investment: To get good returns on their investments the Investors should hold
their returns for longer periods that is for 3 years to 5 years in order the schemes to generate
good

Cost factors: Though the AMC is regulated. One should look at the expense ratio of the fund
before investing. This is because money is deducted from the returns. A higher entry load and
exit load will eat into the returns. So you have to look at the cost factors before investing.

Vanita Vishram Women’s College of Commerce Page 52

A Study On Mutual Fund Investment In India

Chapter 8
CONCLUSION

Vanita Vishram Women’s College of Commerce Page 53

 A Study On Mutual Fund Investment In India

 Mutual funds represent perhaps most appropriate investment opportunity for most
investors.
 As financial markets become more sophisticated and complex, investors need a financial
intermediary who provides the required knowledge and professional expertise on
successful investing.
 SBI Blue chip fund and ICICI prudential Blue chip fund are two of the best mutual funds
in the large cap category.
 Canara Robeco Blue chip fund is a moderate risk, long term investment with the potential
of high future gains.
 HDFC Life Progrowth Plus Blue chip Fund is investment in large cap equities and equity
related instruments.
 Therefore, the investors have to think and choose the best alternative of investment.
 In case of mutual funds, the scheme which matches the need and objective of investor is
very much essential to think. Longer the term of investment in mutual fund will give
higher the return.
 “ If mutual funds succeed in chipping away at bank deposits, even a triple digit growth is
possible over the next few years.”

Vanita Vishram Women’s College of Commerce Page 54

A Study On Mutual Fund Investment In India

Chapter:- 9

BIBLOGRAPHY

Vanita Vishram Women’s College of Commerce Page 55

 A Study On Mutual Fund Investment In India

REFERENCE BOOKS

 S.kevin (2015), Security Analysis and Portfolio Management, second Edition, Asoke
k. Ghosh publication, Delhi.
 Sundar Sankar (2003), Indian Mutual Funds Handbook 5th Edition : A Guide for
Industry Professionals and Intelligent Investors, vision Books publication, New Delhi.
 Dr. Baxis Patel and Rajesh Desai (2019), The book of Research Methodology, First
Edition, Sangharsh publication, New Delhi
RESEARCH PAPERS

 Reshma Raju Mini(2020), “A study on performance of mutual funds in India”,

International journal of scientific and technology research, volume 9, Issue 01,
January,2020, pp – 67- 101.
 Dr.B.Ravi Kumar & R.Padma Malini(2017) “ Awareness of Mutual Fund investment
among the Investors- An Empirical study”, International journal of applied and
advanced scientific research, volume 2, Issue 1,2017, pp- 65-70.
 Tarak Paul (2012) “ Influence of Mutual Fund cost experience on Investors‟ mental
accounting, volume 4, Issue 9, pp – 153-160.
 Ms.Shalini Goyal (2013) “ A Study on mutual fund in India”, International journal of
scientific & Engineering Research, volume 4, Issue 5, May 2013.
 Satheesh Kumar Rangasamy (2016) “ A Comparative study on performance of
selected mutual fund with reference to Indian Context”, Assian Journal of research in
social science and Humanities, volume 6, Issue 5, May 2016, pp- 96-107.
 Bhasker Biswas (2012) “ Investigation of Our performance and underperformance of
some selected diversified equity fund schemes in Indian Mutual fund industry”,
International journal of marketing, financial services& management research, volume
3, Issue 2, February,2012, pp- 94-106.
 Sharma R &Pandya NK (2013) “ Growth of mutual fund industry in India”,
International journal of Research in finance & marketing, volume 7, Issue 6, 2013,
pp- 213-216.
 Jani D & Jain R (2013), “ A Study of Investors Attitude towards Mutual Fund in
Kathmandu city”, Journal of Advanced Academic Research, volume 4, Issue 1, 2013,
pp- 71-109.
 Prof. V. Vanaja and Dr. R. Karuppasamy(2013), “ A Study on the performance of
selected private sector Balanced category mutual fund schemes in India”, volume 2,
Issue 12, pp- 162-254.

WEBLOGRAPHY

 https://www.amfiindia.com/net-asset-value/nav-history
 https://sbi.co.in
 https://www.canararobeco.com
 https://www.icicipruamc.com
 https://www.hdfcfund.com
 https://www.sebi.gov.in

Vanita Vishram Women’s College of Commerce Page 56

 A Study On Mutual Fund Investment In India

 https://www-moneycontrol-com
 https://www.fincash.com

Vanita Vishram Women’s College of Commerce Page 57

A Study On Mutual Fund Investment In India

Chapter- 10
ANNEXTURE

Vanita Vishram Women’s College of Commerce Page 58

A Study On Mutual Fund Investment In India

Vanita Vishram Women’s College of Commerce Page 59

A Study On Mutual Fund Investment In India

Vanita Vishram Women’s College of Commerce Page 60

A Study On Mutual Fund Investment In India

Vanita Vishram Women’s College of Commerce Page 61

A Study On Mutual Fund Investment In India

Vanita Vishram Women’s College of Commerce Page 62

 A Study On Mutual Fund Investment In India

Canara Robeco bank balance sheet

Vanita Vishram Women’s College of Commerce Page 63

A Study On Mutual Fund Investment In India

ICICI Bank balance sheet

Vanita Vishram Women’s College of Commerce Page 64

A Study On Mutual Fund Investment In India

Vanita Vishram Women’s College of Commerce Page 65

A Study On Mutual Fund Investment In India

Vanita Vishram Women’s College of Commerce Page 66

A Study On Mutual Fund Investment In India

HDFC Bank balance sheet

Vanita Vishram Women’s College of Commerce Page 67

A Study On Mutual Fund Investment In India

Vanita Vishram Women’s College of Commerce Page 68

A Study On Mutual Fund Investment In India

Vanita Vishram Women’s College of Commerce Page 69