A PROJECT REPORT

ON

“A STUDY OF MUTUAL FUNDS AS INVESTMENT

AVENUE” AT
R G WEALTH MANAGEMENT

SUBMITTED TO
SAVITRIBAI PHULE
PUNE UNIVERSITY

BY

DIVYA ANIL AHUJA

UNDER THE GUIDANCE OF

PROF SUVARNA MATALE

IN PARTIAL FULFILLMENT OF
MASTER OF BUSINESS ADMINISTRATION
(MBA)

SGMSPM’S
SHARAD CHANDRA PAWAR
INSTITUTE OF MANAGEMENT

YEAR 2021 - 2022

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2
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 DECLARATION

I, the undersigned, hereby declare that the project report entitled “A Study of Mutual Funds as
Investment Avenue at R G Wealth Management” written and submitted by me to the
Savitribai Phule Pune University, Pune in partial fulfillment of the requirement for the award of
degree of Masters of Business Administration under the guidance of Prof. Suvarna Matale
mam, this is my original work and conclusion drawn therein are based on material collected by
myself. The conclusion and recommendation written in this project are based on the data collected
by me while preparing this report.

Place: SPIOM, OTUR DIVYA AHUJA

(Research Student)
Date:

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 ACKNOWLEDGEMENT

I take this opportunity and privilege to express my deep sense of gratitude to Prof. SUVARNA
MATALE, SPIOM, Otur, Pune and SIP Guide, for valuable suggestions regarding the summer
internship project and constant source of inspiration during this project work. I would like to
express my immense gratitude towards the company guide Mr. Abhishek Chandram. I wish to
express a special thanks to all teaching and non-teaching staff member of SPIOM, Otur, Pune for
their continues support.

Place: SPIOM, PUNE DIVYA AHUJA

(Name of the student)
Date:

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 INDEX

S.NO. CONTENTS PAGE NO.

1 Introduction

10
1.1 Objectives of Study
1.2 Scope of the study
1.3 Limitations of the study

2 Company Profile
2.1 Company Profile 14
2.2 Vision, Mission, and Achievement

3 Introduction of Mutual Funds.

3.1What is Investment
3.2 Investment Avenue 17
3.3 Introduction to Mutual Funds
Why Select Mutual Funds

4 4.1 Why Select Mutual Funds

4.2 History of Mutual Funds in India
26
4.3 Advantages of Mutual Funds
4.4 Disadvantages of Mutual Funds
4.5 Types of Mutual Funds Scheme
5 5.1 Working of Mutual Funds.
5.2 Structure of Mutual Funds
5.3 SEBI Regulations 43
5.4 Objectives of Mutual Funds
6 6.1 Mutual Fund in India
6.2 Mutual Fund Companies in India 61

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 EXECUTIVE SUMMARY
There are a large number of investment available today. To make our lives easier
we would classify or group them. In India, numbers of investment avenues are
available for the investors. Some of them marketable and liquid able while others
are non-marketable and some of them also highly risky while others are almost risk
less. The people has to choose Proper Avenue among them, depending upon his
specific needs, risk preferences, and expected. Some of the investment avenues can
be broadly categorized such has bank deposits, Fixed Deposits, PPF, NSC, post
office saving, Govt. Securities, Equity Share Market, Life Insurance, Corporate
Bonds and debentures, Real Estate, Gold and silver. A number of investment
avenues in India depend on the size of investment and financial objectives. These
avenues of investments should be wisely selected by an investor as we all know that
saving and investing are the sole pillars of financial stability.

A mutual fund is a scheme in which several people invest their money for a
common financial cause. The collected money invests in the capital market and the
money, which they earned, is divided based on the number of units, which they
hold.

The mutual fund industry started in India in a small way with the UTI Act creating
what was effectively a small savings division within the RBI. Over a period of 25
years this grew fairly successfully and gave investors a good return, and therefore in
1989, as the next logical step, public sector banks and financial institutions were
allowed to float mutual funds and their success emboldened the government to
allow the private sector to foray into this area

The advantages of mutual fund are professional management, diversification, and

economies of scale, simplicity, and liquidity.

The disadvantages of mutual fund are high costs, over-diversification, possible tax
consequences, and the inability of management to guarantee a superior return.

A code of conduct and registration structure for mutual fund intermediaries, which
were subsequently mandated by SEBI. In addition, this year AMFI was involved in
a number of developments and enhancements to the regulatory framework.

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 CHAPTER 1:
INTRODUCTIO
N

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 Introduction

A mutual fund is a professionally managed investment fund that pools money

from many investors to purchase securities. The term is typically used in the United
States, Canada, and India, while similar structures across the globe include the SICAV
in Europe ('investment company with variable capital') and open-ended investment
company (OEIC) in the UK.
Mutual funds are often classified by their principal investments: money market funds, bond
or fixed income funds, stock or equity funds, or hybrid funds.[1] Funds may also be
categorized as index funds, which are passively managed funds that track the performance
of an index, such as a stock market index or bond market index, or actively managed funds,
which seek to outperform stock market indices but generally charge higher fees. Primary
structures of mutual funds are open-end funds, closed-end funds, unit investment trusts.
Open-end funds are purchased from or sold to the issuer at the net asset value of each share
as of the close of the trading day in which the order was placed, as long as the order was
placed within a specified period before the close of trading. They can be traded directly with
the issuer.[2]
Mutual funds have advantages and disadvantages compared to direct investing in
individual securities. The advantages of mutual funds include economies of scale,
diversification, liquidity, and professional management.[3] However, these come with
mutual fund fees and expenses.
Mutual funds are regulated by governmental bodies and are required to publish
information including performance, comparison of performance to benchmarks, fees
charged, and securities held. A single mutual fund may have several share classes by
which larger investors pay lower fees.
Hedge funds and exchange-traded funds are not mutual funds, and each is targeted
at different investors, with hedge funds being exclusively available to high net worth
individuals.

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 OBJECTIVE OF THE STUDY
● The main objective of the study is to find out the investor‟s preference towards
various investment avenues like fixed deposits, post-office schemes, bonds /
debentures, share market, mutual funds and insurance.
● To give a brief idea about the benefits available from Mutual Fund investment.
● To know the preference of common investors for investment in India
● To give an idea of the types of schemes available.
● To discuss about the market trends of Mutual Fund investment.
● To study some of the mutual fund schemes.
● To study some mutual fund companies and their funds.
● Observe the fund management process of mutual funds.
● Explore the recent developments in the mutual funds in India.
● To give an idea about the regulations of mutual funds

SCOPE OF THE STUDY

□ Study of layout of plant.

□ This study helps me to get the reality check of the market where the actual
comparison between the classroom knowledge and the real situation can be done. By
just learning theory and facing actual situations its concepts and practices might
vary.
□ This study helps to understand the different concepts of inventory management.
□ This study helps to understand and know about production process of needle valve.
□ General observation at shop floor where all the machines are kept for the production

LIMITATIONS OF THE STUDY

Time will be the biggest constraint but all the effort will be made to get all the relevant information
Required for the study.
Management information is very confidential so R G Wealth Management do not give the authority to
Access all the information.

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 CHAPTER 2:
COMPANY PROFILE

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Company Profile

R G Wealth Management is a leading Financial Advisor based in Pimpri-Chinchwad, Pune whose

comprehensive and practical approach to Wealth Management has built many trustworthy
associations with individual professionals, business people, Corporate bodies, Trusts and
Institutions due to our skills to scrutinize and recognize the Investment Requirements of our
clients.

As Financial Advisor We build, improve, and preserve individual capital through independent,
personalized financial plans. We identify the necessities of each client.

We carefully listen to our clients and fully understand the concerns that are of the utmost essential
to them.

We work hard and have put ourselves in a position to provide cost-effective, resourceful and
practical Financial Planning & Investment Solutions that adds multiple advantages to the
investor‟s portfolios based in Pune, PCMC and the nearby area.

We focus on supporting our client‟s requirements related to Financial Planning and help them in
meeting their way of life and monetary goals.

Our first financial goal is to help you to reach your objectives, and our procedure begins with
understanding you as an investor and your individual, professional, business or family goals based
on your investment.

R G WEALTH MANAGEMENT SERVICES

● Financial Planning
● Mutual Fund
● Tax Planning
● Insurance Planning
● Retirement Planning
● Home loan

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How R G WEALTH MANAGEMENT Help You?

1- Expertise
As Financial Planners we possess expertise in investing and managing Finances than most people,
so we can guide you in selecting better options than you might make on your own.

2- Accountability
We help you in keeping track of observing you out of making emotional decisions about your
finance, like buying a stock that‟s been increasing rapidly or selling all your stock funds when the
market falls.

3- Advice
We as a financial advisors make suggestions about the best policies to improve your finances, from
what investments to make to what insurance plan to choose.

4- Development
As your lifecycle surrounding change, we can help you modify your financial plan so that it
continuously fits your present situation.

5- Act
Many individuals don‟t take the steps to accomplish their finances because they‟re too caught or
too confused about what to do. Working with us means reliably in every step in financial planning.

Vision
We works on one vision “You Grow, We Grow”. We know that money tree grow with proper
caring and patience, So we are totally committed to grow client‟s investment with our vast
experience and true advice.
We believe in 2 key mantras:
● “Protection and Growth”.
● To protect our client investment from odds and to grow it to achieve clients goals.

Mission
At Assets Banking, our mission is to see our client satisfaction By providing : “ One stop solution
for all assets Class “ . We work for our clients 24×7 to achieve this mission. It are our Endeavour
to nurture a truly personal relationship with you. And thus we bring to you assets banking beyond
the ordinary. As our client you deserve nothing but the best.

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 Chapter 3:
Introduction to Mutual Funds

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Chapter-1

What Is Investment?
The money you earn is spent and the rest saved for meeting future expenses. Instead
of keeping the saving idle you may like to use savings in order to get returns on it in
the future. This is called investment.

Why should
one invest?

One needs to
invest to:

● Earn return on your idle resources

● Generate a specified sum of money for a specific goal in life

● Make a provision for an uncertain future

One of the important reasons why one needs to invest wisely is to meet the cost of
inflation. Inflation is the rate at which the cost of living increases. The cost of living
is simply what it costs to buy the goods and services you need to live. Inflation
causes money to lose value because it will not buy the same amount of good or a
service in the future as it does now or did in the past.

When To Start Investing:

The sooner one start investing the better. By investing early you allow your
investments more time to grow, whereby the concept of compounding increases
your income, by accumulating the principal and interest or dividend earned on it,
year after year. The three golden rules for all investor are:

● Invest early

● Invest regularly

● Invest for long term and not short term

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 Investment Options Available:
There are a large number of investment available today. To make our lives easier
we would classify or group them. In India, numbers of investment avenues are
available for the investors. Some of them marketable and liquid able while others
are non-marketable and some of them also highly risky while others are almost
risk less. The people has to choose Proper Avenue among them, depending upon
his specific needs, risk preferences, and expected. Investment avenues can broadly
categories under the following heads.

1. Bank and fixed deposits

2. PPF

3. NSC

4. Post office savings

5. Government securities

6. Equity share market

7. Mutual funds

8. Life insurance

9. Corporate bonds and debentures

10. Real estate

11. Gold/Silver

A number of investment avenues in India depend on the size of investment and

financial objectives. These avenues of investments should be wisely selected by an
investor as we all know that saving and investing are the sole pillars of financial
stability.

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INVESTMENT AVENUES:
1. Saving Account
A savings account is an interest-bearing deposit account held at a bank or other
financial institution. Though these accounts typically pay a modest interest rate,
their safety and reliability make them a great option for parking cash you want
available for short-term needs These accounts are one of the most popular deposit
for individual accounts. Their account provided cheque facility and a lot of
flexibility for deposits and withdrawal of funds from the account.

2. Bank Fixed Deposit:

A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which
provides investors a higher rate of interest than a regular savings account, until the
given maturity date. It may or may not require the creation of a separate account. It
is known as a term deposit or time deposit in India. For a fixed deposit is that the
money cannot be withdrawn from the FD as compared to a recurring deposit or a
demand deposit before maturity The interest rate varies between 4 and 7.50 percent.
The tenure of an FD can vary from 7, 15 or 45 days to 1.5 years and can be as high
as 10 years.

3. Public Provident Fund (PPF):

The Public Provident Fund is a savings-cum-tax-saving instrument in India,
introduced by the National Savings Institute of the Ministry of Finance in 1968. The
aim of the scheme is to mobilize small savings by offering an investment with
reasonable returns combined with income tax benefits. The scheme is fully
guaranteed by the Central Government. Eligibility: Individuals who are residents of
India are eligible to open their account under the Public Provident Fund, and are
entitled to tax-free returns.

4. National Saving Certificate:

National Savings Certificates, popularly known as NSC, is an Indian Government
Savings Bond, primarily used for small savings and income tax saving investments
in India. It is part of the postal savings system of Indian Postal Service (India Post).
These can be purchased from any Post Office in India by an adult (either in his/her
own name or on behalf of a minor), a minor, a trust, and two adults jointly. The
NSC has a maturity period of 5 years. The NSC rate of interest is 7.9% per annum
compounded half-yearly but payable at maturity. That means, your investment of
Rs. 100,000 will yield you Rs. 144,231 after 5 years.

5. Post Office Savings:

Post Offices across India offer multiple savings schemes, some of which offer high
interest to customers. They are Post office Monthly Income Scheme Account, 5-
Year Post Office Recurring Deposit Account, Senior Citizen Savings Scheme,
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 year Public Provident Fund Account, and Sukanya Samriddhi Accounts. All these
schemes are completely risk-free, and you do not need to have large sum of money
to start investing in these post office schemes. Some schemes offer tax-saving
benefits and some gives tax-free returns. So you need to find out some schemes as
per your requirements.

6. Government Securities:
A government security is a bond or other type of debt obligation that is issued by a
government with a promise of repayment upon the security's maturity date.
Government securities are usually considered low-risk investments because they are
backed by the taxing power of a government.

7. Equity share market:

A stock market, equity market or share market is the aggregation of buyers and
sellers of stocks (also called shares). The securities traded in the equity market can
be either be public stocks, which are those listed on the stock exchange, or privately
traded stocks. Equity market is one of the most likely areas but at the same time is
also a place where an investor can earn high rates of return that will push up the
return of the entire portfolio. Investment in equities can be made directly by the
purchase of share from market.

8. Mutual funds:
Mutual funds are basically investment vehicles that comprise the capital of different
investors who share a mutual financial goal. A fund manager manages the pool of
money that is collected from various investors and invests the money into a variety
of investment options such as company stocks, bonds, and shares.

9. Life insurances:
Life Insurance is a protection product which forms an integral part of an
individual‟s financial plan. Life insurance provides monetary cover against the life
of the insured. Since the value of the human life cannot be assessed, Insurance
companies provide the monetary cover is in terms of sum assured by the insured at
the time of taking the policy. Life insurance substitutes for the loss of income in the
event of the death of the wage earner. In case of the death of the insured person, the
sum assured is paid to the dependent of the deceased. The sum assured depends on
many parameters like age of the insured, current earnings, health condition of the
persons and many other parameters as specified by the insurance companies. Based
on the information provided by the individual, insurance companies will calculate
the premium payable by the insured.

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INTRODUCTION OF MUTUAL FUND
There are a lot of investment avenues available today in the financial market for
an investor with an investable surplus. He can invest in Bank Deposits, Corporate
Debentures, and Bonds where there is low risk but low return. He may invest in Stock
of companies where the risk is high and the returns are also proportionately high. The
recent trends in the Stock Market have shown that an average retail investor always
lost with periodic bearish tends. People began opting for portfolio managers with
expertise in stock markets who would invest on their behalf. Thus we had wealth
management services provided by many institutions. However they proved too costly
for a small investor. These investors have found a good shelter with the mutual funds.
CONCEPT OF MUTUAL FUND

A mutual fund is a common pool of money into which investors place their
contributions that are to be invested in accordance with a stated objective. The
ownership of the fund is thus joint or “mutual”; the fund belongs to all investors. A
single investor‟s ownership of the fund is in the same proportion as the amount of the
contribution made by him or her bears to the total amount of the fund.
Mutual Funds are trusts, which accept savings from investors and invest the same in
diversified financial instruments in terms of objectives set out in the trusts deed with
the view to reduce the risk and maximize the income and capital appreciation for
distribution for the members. A Mutual Fund is a corporation and the fund manager‟s
interest is to professionally manage the funds provided by the investors and provide a
return on them after deducting reasonable management fees.
The objective sought to be achieved by Mutual Fund is to provide an opportunity for
lower income groups to acquire without much difficulty financial assets. They cater
mainly to the needs of the individual investor whose means are small and to manage
investors portfolio in a manner that provides a regular income, growth, safety,
liquidity and diversification opportunities for a small investors.
DEFINITION

”Mutual funds are collective savings and investment vehicles where savings of
small(or sometimes big) investors are pooled together to invest for their mutual benefit
and returns distributed proportionately”.
“A mutual fund is an investment that pools your money with the money of an
unlimited number of other investors. In return, you and the other investors each own
shares of the fund. The funds assets are invested according to an investment objective
into the funds portfolio of investments. Aggressive growth funds seek long-term
capital growth by investing primarily in stocks of fast-growing smaller companies or
market segments. Aggressive growth funds are also called capital appreciation funds”.

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Chapter 2
Why Select Mutual Fund?

The risk return trade-off indicates that if investor is willing to take higher risk
then correspondingly, he can expect higher returns and vise versa if he pertains to
lower risk instruments, which would be satisfied by lower returns. For example, if an
investors opt for bank FD, which provide moderate return with minimal risk. But as he
moves ahead to invest in capital protected funds and the profit-bonds that give out
more return which is slightly higher as compared to the bank deposits but the risk
involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual
funds provide professional management, diversification, convenience and liquidity.
That doesn‟t mean mutual fund investments risk free.
This is because the money that is pooled in are not invested only in debts funds which
are less risky but are also invested in the stock markets which involves a higher risk
but can expect higher returns. Hedge fund involves a very high risk since it is mostly
traded in the derivatives market which is considered very volatile.
RETURN RISK MATRIX

Venture
Equity

HIGHER RISK
MODERATE HIGHER RISK
HIGHER RETURN

Postal Savings Mutual Funds

Bank FD
LOWER RISK LOWER RETURNS
LOWERRISK
HIGHER RETURN

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

FIRST PHASE – 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set
up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from
the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory
and administrative control in place of RBI. The first scheme launched by UTI was
Unit Scheme 1964. At the end of 1988 UTI hadRs.6,700 crores of assets under
management.

SECOND PHASE – 1987-1993 (ENTRY OF PUBLIC SECTOR FUNDS)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug89), 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 inDecember1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47,004crores.

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 industry, giving the Indian investors a wider choice of fund families. Also, 1993
was the year in which the first Mutual Fund Regulations came into being, under which
all mutual funds, except UTI were to be registered and governed. The erstwhile
Kothari Pioneer (now merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996. The industry now functions under the
SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual

2
funds setting up funds in India and also the industry has witnessed several mergers
and acquisitions. As at the end of January 2003, there were 33 mutual funds with total
assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets
undermanagement was way ahead of other mutual funds

FOURTH PHASE – SINCE FEBRUARY2003:

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit
Trust of India with assets under management of Rs.29,835 crores as at the end of
January 2003, representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of India and does
not come under the purview 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 under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores
of assets under management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking
place among different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth. As at the end of September, 2004, there
were 29 funds, which manage assets of Rs.153108 crores under 421schemes.

The graph indicates the growth of assets under management over the
years. GROWTH IN ASSETS UNDER MANAGEMENT

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ADVANTAGES OF MUTUAL FUNDS:

If mutual funds are emerging as the favorite investment vehicle, it is because of

the many advantages they have over other forms and the avenues of investing,
particularly for their investor who has limited resources available in terms of capital
and the ability to carry out detailed research and market monitoring. The following are
the major advantages offered by mutual funds to all investors:
1. Portfolio Diversification:
Each investor in the fund is a part owner of all the fund‟s assets, thus enabling him to
hold a diversified investment portfolio even with a small amount of investment that
would otherwise require big capital.
2. Professional Management:
Even if an investor has a 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 return than what an
investor can manage on his own. Few investors have the skill and resources of their
own to succeed in today‟s fast moving, global and sophisticated markets.
3. Reduction/Diversification Of Risk:
When an investor invests directly, all the risk of potential loss is his own, whether he
places a deposit with a company or a bank, or he buys a share or debenture on his own
or in another from. While investing in the pool of funds with investors, the potential
losses are also shared with other investors. The risk reduction is one of the most
important benefits of a collective investment vehicle like the mutual fund.
4. Reduction Of Transaction Costs:
What is true of risk as also true of the transaction costs? Theinvestor 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 passed on to its investors.
5. Liquidity:
Often, investors hold shares or bonds they cannot directly, easily and quickly sell.
When they invest in the units of a fund, theycan generally cash their investments any
time, by selling their units to the fund if open-ended, or selling them in the market if
the fund is close-end. Liquidity of investment is clearly a big benefit.
6. Convenience and Flexibility:
Mutual fund management companies offer many investor services that a direct market
investor cannot get. Investors can easily transfer their holding from one scheme to the
other; get updated market information and so on.

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 DISADVANTAGES-

1. Managing a Portfolio of Funds:

Availability of a large number of funds can actually mean toomuch choice for the
investor. He may again need advice on how to select a fund to achieve his objectives,
quite similar to the situation when he has individual shares or bonds to select.
2. The Wisdom of Professional Management:
That‟s right, this is not an advantage. The average mutual fund manager is no better at picking
stocks than the average nonprofessional, but charges fees.
3. No Control:
Unlike picking your own individual stocks, a mutual fund puts you in the passenger
seat of somebody else‟s car
4. Dilution:
Mutual funds generally have such small holdings of so many different stocks that
insanely great performance by a funds top holding still doesn‟t make much of a
difference in mutual funds total performance.
5. Buried Costs:
Many mutual funds specialize in burying their costs and in hiring salesmen who do
not make those costs clear to their
clients.

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 TYPES OF MUTUAL FUNDS SCHEMES IN INDIA

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. thus mutual funds has Variety of
flavors, Being a collection of many stocks, an investors can go for picking a mutual
fund might be easy. There are over hundreds of mutual funds scheme to choose from.
It is easier to think of mutual funds in categories, mentioned below.

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A) BY STRUCTURE

1. Open - Ended Schemes:

An open-end fund is one that is available for subscription all through the year. These
do not have a fixed maturity. Investors can conveniently buy and sell units at Net
Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
2. Close - Ended Schemes:

A closed-end fund has a stipulated maturity period which generally ranging from 3
to15years. The fund is open for subscription only during a specified period. Investors
can invest in the scheme at the time of the initial public issue and thereafter they can
buy or sell the units of the scheme on the stock exchanges where they are listed. In
order to provide an exit route to the investors, some close-ended funds give an option
of selling back the units to the Mutual Fund through periodic repurchase at NAV
related prices. SEBI Regulations stipulate that at least one of the two exit routes is
provided to the investor.
3. Interval Schemes:

Interval Schemes are that scheme, which combines the features of open-ended and
close ended schemes. The units may be traded on the stock exchange or may be open
for sale or redemption during pre-determined intervals at NAV related prices.

B) BY NATURE

1. Equity Fund:
These funds invest a maximum part of their corpus into equities holdings. The
structure of the fund may vary different for different schemes and the fund manager‟s
outlook on different stocks. The Equity Funds are sub-classified depending upon their
investment objective, as follows:
• Diversified Equity Funds
• Mid-Cap Funds
• Sector Specific Funds
• Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high
on the risk-return matrix.

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2. Debt Funds:

The objective of these Funds is to invest in debt papers. Government authorities,

private companies,
banks and financial institutions are some of the major issuers of debt papers. By
investing in debt instruments, these funds ensure low risk and provide stable income to
the investors. Debt funds are further classified as:

• Gilt Funds: Invest their corpus in securities issued by Government, popularly

known as Government of India debt papers. These Funds carry zero Default risk
but are associated with Interest Rate risk. These schemes are safer as they invest
in papers backed by Government.

• Income Funds: Invest a major portion into various debt instruments such as
bonds, corporate debentures and Government securities.

• MIPs: Invests maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market.
These scheme ranks slightly high on the risk-return matrix when compared with
other debt schemes.

• Short Term Plans (STPs): Meant for investment horizon for three to six months.
These funds primarily invest in short term papers like Certificate of Deposits
(CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested
in corporate debentures.

• Liquid Funds: Also known as Money Market Schemes, These funds provides
easy liquidity and preservation of capital. These schemes invest in short-term
instruments like Treasury Bills, inter-bank call money market, CPs and CDs.
These funds are meant for short-term cash management of corporate houses and
are meant for an investment horizon of 1day to 3 months. These schemes rank
low on risk-return matrix and are considered to be the safest amongst all
categories of mutual
funds

2
C) BY INVESTMENT OBJECTIVE:

1. Growth Schemes:

Growth Schemes are also known as equity schemes. The aim of these schemes is to
provide capital appreciation over medium to long term. These schemes normally
invest a major part of their fund in equities and are willing to bear short-term decline
in value for possible future appreciation.
2. Income Schemes:
Income Schemes are also known as debt schemes. The aim of these schemes is to
provide regular and steady income to investors. These schemes generally invest in
fixed income securities such as bonds and corporate debentures. Capital appreciation
in such schemes may be limited

3. Balanced Schemes:

Balanced Schemes aim to provide both growth and income by periodically distributing
apart of the income and capital gains they earn. These schemes invest in both shares
and fixed income securities, in the proportion indicated in their offer documents
(normally 50:50).
4. Money Market Schemes:

Money Market Schemes aim to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer, short-term instruments,
such as treasury bills, certificates of deposit, commercial paper and inter-bank call
money.
5. Load Funds:

A Load Fund is one that charges a commission for entry or exit. That is, each time you
buy or sell units in the fund, a commission will be payable. Typically entry and exit
loads range from 1% to 2%. It could be worth paying the load, if the fund has a good
performance history.
6. No-Load Funds:

A No-Load Fund is one that does not charge a commission for entry or exit. That is,
no commission is payable on purchase or sale of units in the fund. The advantage of a
no load fund is that the entire corpus is put to work.

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RISK FACTORS OF MUTUAL FUNDS:

1. The Risk-Return Trade-Off:

The most important relationship to understand is the risk-return trade-off. Higher their
sk greater the returns / loss and lower the risk lesser the returns/loss.
Hence it is up to you, the investor to decide how much risk you are willing to take. In
order to do this you must first be aware of the different types of risks involved with
your investment decision.
2. Market Risk:

Sometimes prices and yields of all securities rise and fall. Broad outside influences
affecting the market in general lead to this. This is true, may it be big corporations or
small ermid -sized companies. This is known as Market Risk. A Systematic
Investment Plan (“SIP”) that works on the concept of Rupee Cost Averaging (“RCA”)
might help mitigate this risk.
3. Credit Risk:

The debt servicing ability (may it be interest payments or repayment of principal) of a

company through its cash flows determines the Credit Risk faced by you. This credit
risk is measured by independent rating agencies like CRISIL who rate companies and
their paper. A„AAA‟ rating is considered the safest whereas a „D‟ rating is
considered poor credit quality. A well-diversified portfolio might help mitigate this
risk.

4. Inflation Risk:

The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of
times people make conservative investment decisions to protect their capital but end
up with a sum of money that can buy less than what the principal could at the time of
the investment. This
happens when inflation grows faster than the return on your investment. A well-
diversified portfolio with some investment in equities might help mitigate this risk.

4. Interest Rate Risk:

In a free market economy interest rates are difficult if not impossible to predict.
Changes in interest rates affect the prices of bonds as well as equities. If interest rates
rise the prices of bonds fall and vice versa. Equity might be negatively affected as well
in a rising interest rate
environment.

2
 Chapter-3

STRUCTURE OF MUTUAL FUNDS

3
WORKING OF MUTUAL FUNDS

1
INVESTOR

2
4 FUND MANAGER
RETURN

3
SECURITIES

The mutual fund collects money directly or through brokers from investors. The
money is invested in various instruments depending on the objective of the scheme.
The income generated by selling securities or capital appreciation of these securities is
passed on to the investors in proportion to their investment in the scheme. The
investments are divided into units and the value of the units will be reflected in Net
Asset Value or NAV of the unit. NAV is the market value of the assets of the scheme
minus its liabilities. The per unit NAV is thenet asset value of the scheme divided by
the number of units outstanding on the valuation date. Mutual fund companies provide
daily net asset value of their schemes to their investors. NAV is important, as it will
determine the price at which you buy or redeem the units of a scheme. Depending on
the load structure of the scheme, you have to pay entry or exit load.

STRUCTURE OF A MUTUAL FUND

India has a legal framework within which Mutual Fund have to be constituted. In India
open and close-end funds operate under the same regulatory structure i.e. as unit
Trusts. A Mutual Fund in India is allowed to issue open-end and close-end schemes
under a common legal structure. The structure that is required to be followed by
any
3
Mutual Fund in India is laid down under SEBI (Mutual Fund) Regulations, 1996.

The Fund Sponsor

Sponsor is defined under SEBI regulations as any person who, acting alone or in
combination of another corporate body establishes a Mutual Fund. The sponsor of the
fund is akin to the promoter of a company as he gets the fund registered with SEBI.
The sponsor forms a trust and appoints a Board of Trustees. The sponsor also appoints
the Asset Management Company as fund managers. The sponsor either directly or
acting through the trustees will also appoint a custodian to hold funds assets. All these
are made in accordance with the regulation and guidelines of SEBI.
As per the SEBI regulations, for the person to qualify as a sponsor, he must contribute
at least40% of the net worth of the Asset Management Company and possesses a
sound financial track record over 5 years prior to registration.

Mutual Funds as Trusts

A Mutual Fund in India is constituted in the form of Public trust Act, 1882. The Fund
sponsor acts as a settlor of the Trust, contributing to its initial capital and appoints a
trustee to hold the assets of the trust for the benefit of the unit-holders, who are the
beneficiaries of the trust. The fund then invites investors to contribute their money in
common pool, by scribing to “units” issued by various schemes established by the

3
Trusts as evidence of their beneficial interest in the fund.
It should be understood that the fund should be just a “pass through” vehicle. Under
the Indian Trusts Act, the trust of the fund has no independent legal capacity itself,
rather it is

The Trustee or the Trustees who have the legal capacity and therefore all acts in
relation to the trusts are taken on its behalf by the Trustees. In legal parlance the
investors or the unit- holders are the beneficial owners of the investment held by the
Trusts, even as these investments are held in the name of the Trustees on a day-to-day
basis. Being public trusts, Mutual Fund can invite any number of investors as
beneficial owners in their investment schemes.

Trustees
A Trust is created through a document called the Trust Deed that is executed by the
fund sponsor in favour of the trustees. The Trust- the Mutual Fund – may be managed
by a board of trustees- a body of individuals, or a trust company- a corporate body.
Most of the funds in India are managed by Boards of Trustees. While the boards of
trustees are governed by the Indian Trusts Act, where the trusts are a corporate body,
it would also require to comply with the Companies Act, 1956. The Board or the Trust
company as an independent body, acts as a protector of the of the unit-holders
interests. The Trustees do not directly manage the portfolio of securities. For this
specialist function, the appoint an Asset Management Company. They ensure that the
Fund is managed by AMC as per the defined objectives and in accordance with the
trusts deed sand SEBI regulations.

The Asset Management Companies

The role of an Asset Management Company (AMC) is to act as the investment
manager of the Trust under the board supervision and the guidance of the Trustees.
The AMC is required to be approved and registered with SEBI as an AMC. The AMC
of a Mutual Fund must have a net worth of at least Rs. 10 Crores at all times. Directors
of the AMC, both independent and non- independent, should have adequate
professional expertise in financial services and should be individuals of high morale
standing, a condition also applicable to other key personnel of the AMC. The AMC
cannot act as a Trustee of any other Mutual Fund. Besides its role as a fund manager,
it may undertake specified activities such as advisory services and financial
consulting, provided these activities are run independent of one another and the
AMC‟s resources (such as personnel, systems etc.) are properly segregated by the
activity. The AMC must always act in the interest of the unit-holders and reports to the
trustees with respect to its activities.

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Custodian and Depositories
Mutual Fund is in the business of buying and selling of securities in large volumes.
Handling these securities in terms of physical delivery and eventual safekeeping is a
specialized activity. The custodian is appointed by the Board of Trustees for
safekeeping of securities or participating in any clearance system through approved
depository companies on behalf of the Mutual Fund and it must fulfill its
responsibilities in accordance with its agreement with the Mutual Fund. The custodian
should be an entity independent of the sponsors and is required to be registered with
SEBI. With the introduction of the concept of dematerialization of shares the
dematerialized shares are kept with the Depository participant while the custodian
holds the physical securities. Thus, deliveries of a fund‟s securities are given or
received by a custodian or a depository participant, at the instructions of the AMC,
although under the overall direction and responsibilities of the Trustees.

Bankers
A Fund‟s activities involve dealing in money on a continuous basis primarily with
respect to buying and selling units, paying for investment made, receiving the
proceeds from sale of the investments and discharging its obligations towards
operating expenses. Thus the Fund‟s banker plays an important role to determine
quality of service that the fund gives in timely delivery of remittances etc.

Transfer Agents
Transfer agents are responsible for issuing and redeeming units of the Mutual Fund
and provide other related services such as preparation of transfer documents and
updating investor records. A fund may choose to carry out its activity in-house and
charge the scheme for the service at a competitive market rate. Where an outside
Transfer agent is used, the fund investor will find the agent to be an important
interface to deal with, since all of the investor services that a fund provides are going
to be dependent on the transfer
agent.

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REGULATORY STRUCTURE OF MUTUAL FUNDS IN INDIA

The structure of mutual funds in India is guided by the SEBI. Regulations,

1996.Theseregulations make it mandatory for mutual fund to have three structures of
sponsor trustee and asset Management Company. The sponsor of the mutual fund and
appoints the trustees. The trustees are responsible to the investors in mutual fund and
appoint the AMC for managing the investment portfolio. The AMC is the business
face of the mutual fund, as it manages all the affairs of the mutual fund. The AMC and
the mutual fund have to be registered with SEBI.

SEBI REGULATIONS
As far as mutual funds are concerned, SEBI formulates policies and regulates
the mutual funds to protect the interest of the investors.
SEBI notified regulations for the 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 to the 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. The risks associated with the schemes launched by the mutual
funds sponsored by these entities are of similar type. There is no distinction in
regulatory requirements for these mutual funds and all are subject to
monitoring and inspections by SEBI.
SEBI Regulations require that at least two thirds of the directors of trustee
company or board of trustees must be independent i.e. they should not be
associated with the sponsors.
Also, 50% of the directors of AMC must be independent. All mutual funds are
required to be registered with SEBI before they launch any scheme.
Further SEBI Regulations, inter-alia, stipulate that MFs cannot guarantee

3
 returns in any scheme and that each scheme is subject to 20 : 25 condition [I.e.
minimum 20 investors per scheme and one investor can hold more than 25%
stake in the corpus in that one scheme]
Also SEBI has permitted MFs to launch schemes overseas subject various
restrictions and also to launch schemes linked to Real Estate, Options and Futures,
Commodities, etc.

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

With the increase in mutual fund players in India, a need for mutual fund association
in India was generated to function as a non-profit organisation. Association of Mutual
Funds in India (AMFI) was incorporated on 22nd August, 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which has been
registered with SEBI. Till date all the AMCs are that have launched mutual fund
schemes are its members. It functions under the supervision and guidelines of its
Board of Directors.
Association of Mutual Funds India 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.

The Objectives of Association of Mutual Funds in India

This mutual fund association of India maintains high professional and ethical
standards in all areas of operation of the industry.
It also recommends and promotes the top class business practices and code of
conduct which is followed by members and related people engaged in the
activities of mutual fund and asset management. The agencies who are by any
means connected or involved in the field of capital markets and financial
services also involved in this code of conduct of the association.
AMFI interacts with SEBI and works according to SEBIs guidelines in the
mutual fund industry.
Association of Mutual Fund of India do represent the Government of India, the
Reserve Bank of India and other related bodies on matters relating to
the Mutual Fund Industry.
It develops a team of well qualified and trained Agent distributors. It
implements a programmed of training and certification for all intermediaries
and other engaged in the mutual fund industry.

3
 Chapter-4

MUTUAL FUNDS
IN INDIA

3
MUTUAL FUNDS IN INDIA

In 1963, the day the concept of Mutual Fund took birth in India. 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 goaled 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 were 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 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.
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 whereabouts 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 securities and Exchange Board of India (SEBI) came out with comprehensive
regulation in 1993 which defined the structure of Mutual Fund and Asset Management
Companies for the first time.
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
scheme.

3
Major Mutual Fund Companies in India

DSP ASSET MANAGEMENT COMPANY

DSP Mutual Fund was set up as a trust under the Indian Trust Act, 1882. The
sponsors to the Fund are DSP ADIKO Holdings Pvt. Ltd and DSP HMK Holdings
Pvt. Ltd. DSP Investment Managers Pvt. Ltd. (formerly known as DSP BlackRock
Investment Managers Pvt. Ltd. is the asset management company to the Fund. DSP
Trustee Pvt. Ltd. ("formerly known as DSP BlackRock Trustee Company Pvt.
Ltd.”) acts as the trustee to the Fund.DSP
Group, headed by Mr. Hemendra Kothari, is one of the oldest and most respected
financial services firms in India. The firm commenced its stock broking business in
the 1860s and the family behind the group has been very influential in the growth and
professionalization of capital markets and money management business in India. It is
one of the oldest financial firm in India more than 150 years. The family behind DSP
Group also consisted of a founding member of the Bombay Stock Exchange.

JM ASSET MANAGEMENT COMPANY

JM Financial Asset Management Limited, the Asset Management Company of JM

Financial Mutual Fund is sponsored by JM Financial Limited. JM Financial Asset
Management Limited started operations in December 1994 with a simultaneous
launch of three funds-JM Liquid Fund (now JM Income Fund), JM Equity Fund and
JM Balanced Fund. Today, JM Financial Mutual Fund offers a bouquet of funds
that caters to the diverse needs of both its institutional and individual investors. The
mission is to manage risk effectively while generating top quartile returns across all
product categories. The fund believes that to cultivate investor loyalty, and must
provide a safe haven for their investments.

LIC ASSET MANAGEMENT COMPANY

LIC Mutual Fund was established on 20th April 1989 by LIC of India. Being an
associate company of India's premier and most trusted brand, LIC Mutual Fund is
one of the well- known players in the asset management sphere. With a systematic
investment discipline coupled with a high standard of financial ethics and corporate
governance, LIC Mutual Fund is emerging as a preferred Investment Manager
amongst the investor fraternity Mutual Fund endeavours to create value for its
investors by adopting innovative and robust investment strategies, catering to all
segments of investors. LIC Mutual Fund believes in providing delight to its
customers and partners by way of superior investment experience and unparalleled
service thereby truly bring them Khushiyaan, Zindagi Ki.

3
UTI ASSET MANAGEMENT COMPANY

UTI mutual Fund is a professionally managed company led by Board of Directors

and a dedicated and experienced management team. For purposes of the
SEBI Mutual Fund Regulations, there are four sponsors such as State Bank of India,
Life Insurance Corporation of India, Punjab National Bank and Bank of Baroda,
each of which has the Government of India as a majority shareholder. T. Rowe
Price Group, Inc., a global asset management company, is the major shareholder.
They have a national footprint and offer schemes through a diverse range of
distribution channels. As their distribution network includes 163 UTI Financial
Centres, 273 Business Development Associates and Chief Agents (46 of whom
operate Official Points of Acceptance and 33 other OPAs.

CANARA ROBECO ASSET MANAGEMENT COMPANY

Canara Robeco, are India‟s second oldest asset management company, in existence
since 1993, it is known as Canra bank Mutual Fund. In 2007, Canara Bank
partnered with Robeco group by way of a joint venture and the mutual fund was
renamed as Canara Robeco Mutual
Fund. Robeco group was founded in 1929 in Rotterdam, is a pure play asset
manager. Robeco group has an active investment style and is known as a global
leader in sustainable investing. With a presence in 17 countries and over 909
employees, Robeco group has investment centers in key cities Subsequently, in
2007, Canara Bank partnered with Robeco (now a part of ORIX Corporation,
Japan) and the mutual fund was renamed as Canara Robeco Mutual Fund.
Since then, it has consistently been one of the fastest growing mutual funds in
India in terms of AUM.

KOTAK MAHINDRA ASSET MANAGEMENT COMPANY

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned

subsidiary of Kotak Mahindra bank Limited (KMBL), is the Asset Manager for
Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December
1998 and has approximately 7.5 Lac investors in various schemes. KMMF offers
schemes catering to investors with varying risk - return profiles and was the first
fund house in the country to launch a dedicated gilt scheme investing only in
government securities. The company is present in 76 cities and has 79 branches.
The group has a net worth of Rs.7,911 crore and employs around 20,000 employees
across its various businesses, servicing around 7 million customer accounts through
a distribution network of 1,716 branches, franchisees and satellite offices across
more than 470 cities and towns in India and offices in New York, California, San
Francisco, London, Dubai, Mauritius and Singapore.

4
BNP PARIBAS ASSET MANAGEMENT COMPANY

The BNP Paribas Asset Management is the investment management arm of BNP
Paribas, one of the world‟s major financial institutions. Since 2002, BNP Paribas
Asset Management has been a major participant in sustainable and responsible
investing. It is a recognized asset manager with EUR 421 billion in assets under
management and advisory. It has a presence in more than 30 countries on 5
continents i.e. Europe, APAC, North America, Latin America, and EEMEA with
more than 3,000 employees and more than 530 investment professionals, each team
specialising in a particular asset class.

ADITYA BIRLA SUN LIFE ASSET MANAGEMENT COMPANY

It is established in 1994, Aditya Birla Sun Life AMC Limited, is a joint venture
between the Aditya Birla Capital Limited and Sun Life AMC Investments Inc. It is
primarily the investment manager of Aditya Birla Sun Life Mutual Fund, a
registered trust under the Indian Trusts Act, 1882. Additionally, it has various other
business lines such as Portfolio Management Services, Real Estate Investments and
Alternative Investment Funds. The Portfolio Management Service is a highly
customized service designed to seek consistent long-term results by adopting a
research based, methodical approach to investing. The Real Estate Investment
Advisory business is a platform that enables investors to access 'Real Estate
Investments' opportunities meant for investors on a private placement basis. Aditya
Birla Capital, through its subsidiaries and joint ventures, manages aggregate assets
worth Rs. 3,000 plus billion and has a lending book of over Rs. 619 billion as of
June 30th, 2019

SBI MUTUAL FUND

SBI Mutual Fund is one of India‟s largest and oldest MFs. The SBI Mutual Fund is
a Joint Venture between one of India‟s largest and most profitable banks, the State
Bank of India, and Amundi, which is a French asset management company. SBI
Mutual Fund was set up on June 29, 1987 and was incorporated on February 7,
1992. It was India‟s second Mutual Fund after the Unit Trust of India started
operations in 1963. In July 2004, the SBI decided to divest 37% of the Fund and
roped in Amundi as a partner. It was the first Indian Mutual Fund player to launch
a
„Contra‟ fund, called the SBI Contra Fund. SBI Mutual Fund is the first in India to
launch an ESG Fund. An acronym for Environment, Social and Governance, the
fund provides resources for sustainable investment in major markets. 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.

4
ICICI PRUDENTIAL MUTUAL FUND

ICICI Prudential is the leading Asset Management company in the country focused
on bringing the gap between saving and investment and creating long wealth for
investor throughout a range of simple and relevant investment solutions. It is a joint
venture between ICICI Bank, a well-known trusted bank in financial services in
India and Prudential Plc, a UK‟s largest player in financial services sector. The
AMC has witnessed the substantial growth in scale; from 2 location and 6
employees at the inception of JV in 1998, to a current strength of 2062 employees
with a reach of over 300 locations reaching out to an investor base of more than 4
million investor. The company momentum has been exponential and it has always
focused on increasing accessibility of its investors. The AMC endeavors to simply
its investor‟s journey to meet its financial goals, and give a good investor
experience through innovation, consistency and sustained risk adjusted
performance.

NIPPON LIFE INDIA ASSET MANAGEMENT COMPANY

Nippon India Mutual Fund has been established as a trust under the Indian Trusts
Act, 1882. Nippon Life Insurance Company is the Sponsor and Nippon Life India
Trustee Ltd is the Trustee. Nippon India Mutual Fund has been registered with the
Securities & Exchange Board of India (SEBI) on June 30, 1995. Nippon India
Mutual Fund was earlier known as Reliance Mutual Fund. The name of Mutual
Fund was changed from Reliance Mutual Fund to Nippon India Mutual Fund
effective September 28, 2019. The main objectives are To carry on the activity of a
mutual fund as may be permitted by law, and formulate and devise various
collective schemes of saving and investment for people in India and abroad, and
also insure liquidity of investments for the units holders and also to deploy funds
thus raised so as to help the unit holders reasonable return on their saving.

HDFC ASSET MANAGEMENT COMPANY

HDFC AMC is India‟s largest and most profitable mutual fund manager with
₹3.8trillion in assets under management. Started in 1999, They were set up as a
joint venture between Housing Development Finance Corporation Limited and
Standard Life Investments Limited. During FY18-19 we carried out an initial public
offering, and became a publicly listed
company in August 2018. Currently, 20% of the company is owned by the public.
HDFC Asset Management Company is the investment manager to the schemes of
HDFC Mutual Fund. They offer a comprehensive suite of savings and investment
products across asset classes, which provide income and wealth creation
opportunities to the large retail and institutional customer base of 9.4 million live
accounts. They work with diverse sets of distribution partners which helps us
expand

4
our reach. We currently have over 70 thousand empanelled distributors which
include independent financial advisors, national distributors and banks. We serve our
customers and distribution partners in over 200 cities through our network of 220
branches and 1221 employees.

INVESCO INDIA ASSET MANAGEMENT COMPANY

Invesco Asset Management (India) aims to serve investment needs of individual

investors, corporate and institutions through mutual funds and sub-advised
portfolios. It has an average asset base of over Rs. 25,664.50 crores. It has AUM of
Rs.954.8 billion around the globe. It has a product portfolio which is managed by
individually focused management teams to create optimum balance and results.
They are committed to providing financial care and top- class service. They
subscribe to sustainable business models and processes that factor in the dynamism
of the business in fast changing market scenarios. Investors can expect best-in- class
investment products that will leverage on the expertise and global resources of
Invesco. It has portfolio managers, analysts and researchers across North America,
Asia-Pacific and Europe and on-the-ground presence of more than 20 countries,
serving clients in more than 120 countries and having More than 7,000 employees
worldwide.

IDFC ASSET MANAGEMENT COMPANY

It was established in 2000, they manage client investment assets of over Rs. 1
trillion for over 1 million investor folios representing leading institutions, body
corporates, family- offices and individual clients. They are promoted by IDFC Ltd,
a widely held publicly listed company originally set up by the Government of India
as India‟s premier infrastructure finance company. IDFC AMC is today one of
India‟s Top 10 asset managers by AUM, with a seasoned investment team and
deep, on-the-ground presence across over 46 cities, and serving clients across over
280 towns in India. They offer investment opportunities in Equity, Fixed Income,
Liquid Alternatives such as India Equity Hedge Conservative and India Equity
Hedge Tactical, Portfolio management services.

BARODA PIONEER ASSET MANAGEMENT COMPANY

Baroda Asset Management India Limited, investment manager to Baroda Mutual

Fund, is a wholly owned subsidiary of Bank of Baroda and is positioned to serve the
varied asset management needs of investors in India through a range of equity, debt
and money market offerings. In 2008, Pioneer Global Asset Management acquired
51% stake in the AMC, which was renamed as Baroda Pioneer Asset Management
Company Ltd. and PGAM became a co-sponsor of the Mutual Fund. The joint
venture had Rs. 30 crores in AUM in June 2008 which grew to Rs. 12,159 crores in

4
 Chapter-5

MUTUAL FUND VS. OTHER INVESTMENT AVENUE

4
 MUTUAL FUNDS VS. OTHER INVESTMENTS

From investors 'view point’ mutual funds have several advantages such as:

Professional management and research to select quality securities.

Spreading risk over a larger quantity of stock whereas the investor has limited
to buy only a hand full of stocks. The investor is not putting all his eggs in
one basket.
Ability to add funds at set amounts and smaller quantities such as $100 per month.
Ability to take advantage of the stock market which has
generally outperformed other investment in the long run.
Fund manager are able to buy securities in large quantities thus
reducing brokerage fees.

However there are some disadvantages with mutual funds such as:

The investor must rely on the integrity of the professional fund

manager. Fund management fees may be unreasonable for the services
rendered.
The fund manager may not pass transaction savings to the investor.
The fund manager is not liable for poor judgment when the investor's
fund loses value.
There may be two many transactions in the fund resulting in higher fee/cost
to the investor - This is sometimes call "Churn and Earn".
Prospectus and Annual report are hard to understand.
Investor may feel a lost of control of his investment dollars.

There may be restrictions on when and how an investor sells/redeems his

mutual fund shares.

4
Company Fixed Deposits versus Mutual Funds

Fixed deposits are unsecured borrowings by the company accepting the deposit.
Credit rating of the fixed deposit program is an indication of the inherent default
risk in the investment.
The moneys of investors in a mutual fund scheme are invested by the AMC in
specific investments under that scheme. These investments are held and managed in-
trust for the benefit of scheme's investors. On the other hand, there is no such direct
correlation between a company's fixed deposit mobilization , and the avenues where
these resources are deployed.
A corollary of such linkage between mobilization and investment is that the
gains and losses from the mutual fund scheme entirely flow through to the investors.
Therefore, there can be no certainty of yield, unless a named guarantor assures a
return or, to a lesser extent, ifthe investment is in a serial gilt scheme. On the other
hand, the return under a fixed deposit is certain, subject only to the default risk of the
borrower.
Both fixed deposits and mutual funds offer liquidity, but subject to some differences:

The provider of liquidity in the case of fixed deposits is the borrowing

company. In mutual funds, the liquidity provider is the scheme itself (for open-end
schemes) or the market (in the case of closed-end schemes).
The basic value at which fixed deposits are uncashed is not subject to a market
risk. However, the value at which units of a scheme are redeemed depends on the
market. If securities have gained in value during the period, then the investor can even
earn a return that is higher than what he anticipated when he invested. But he could
also end up with a loss.
Early encashment of fixed deposits is always subject to a penalty charged by
the company that accepted the fixed deposit. Mutual fund schemes also have the
option of charging penalty on "Carly" redemption of units (through by way of an 'exit
load'.) If the NAV has appreciated adequately, then even after the exit load,
the investor could eam a capital gain on his investment.

Bank Fixed Deposits verses Mutual Fund:

Bank fixed deposits are similar to company fixed deposits. The major
difference is that banks are generally more stringently regulated than companies. They
even operate under stricter requirements regarding Statutory Liquidity Ratio (SLR)
4
 and Cash Reserve Ratio (CRR).
While the above are causes for comfort, bank deposits too are subject to default
risk. However, given the political and economic impact of bank defaults, the
government as well as Reserve Bank of India (RBI) try to ensure that banks do not
fail.
Further, bank deposits up to Rs 100,000 are protected by the Deposit Insurance
and Credit Guarantee Corporation (DICGC), so long as the bank has paid the required
insurance premium of 5 paise per annum for every Rs 100 of deposits. The monetary
ceiling of Rs 100,000 is for all the deposits in all the branches of a bank, held by the
depositor in the same capacity and right.

BANKS MUTUAL FUNDS

Returns Low Better
Administrative exp. High Low
Risk Low Moderate
Investment options Less More
Network High penetration Low but improving
Liquidity At a cost Better
Quality of assets Not transparent Transparent
Interest calculation Quarterly Every Month

i.e. 3rd 6th 9th& 12th.

Guarantor Guarantor is needed. Guaran tor is not needed.

Account Needed. Not Needed.

Bonds and Debentures versus Mutual Funds

As in the case of fixed deposits, credit rating of the bond / debenture is an

indication of the inherent default risk in the investment. However, unlike FD, bonds
and debentures are transferable securities.
While an investor may have an early encashment option from the issuer (for
instance through a "put" option), generally liquidity is through a listing in the market.

4
Implications of this are:
● If the security does not get traded in the market, then the liquidity remains on
paper. In this respect, an open-end scheme offering continuous sale / re-
purchase option is superior.
• The value that the investor would realize in an early exit is subject to market risk.
The investor could have a capital gain or a capital loss. This aspect is similar to a
MF scheme.
It is possible for a professional investor to earn attractive returns by directly
investing in the debt mark et, and actively managing the positions. Given the market
realities in India, it is difficult for most investors to actively manage their debt
portfolio. Further, at times, it is difficult to execute trades in the debt market even
when the transaction size is as high as Rs 1 crore. In | this respect, investment in a debt
scheme would be beneficial.
Debt securities could be backed by a hypothecation or mortgage of identified
fixed and / or current assets (secured bonds / debentures). In such a case, if there is a
default, the identified assets become available for meeting redemption requirements.
An unsecured bond / debenture is for all practical purposes like a fixed deposit, as far
as access to assets is concerned.
The investments of a mutual fund scheme are held by a custodian for the bene
fit of investors in the scheme. Thus, the securities that relate to a scheme are ring-
fenced for the benefit of its investors.

Equity versus Mutual Funds

Investment in both equity and mutual funds are subject to market risk.

An investor holding an equity security that is not traded in the market place
has a problem in realizing value from it. But investment in an open-end mutual fund
eliminates this direct risk of not being able to sell the investment in the market. An
indirect risk remains, because the scheme has to realize its investments to pay
investors. The AMC is however in a better position to handle the situation
Another benefit of equity mutual fund scheme is that they give investors the
bene fit of portfolio diversification through a small investment. For instance, an
investor can take an exposure to the index by investing a mere Rs 5,000 in an index
fund.

4
Advantages Of Mutual Funds Over Stocks?
A mutual fund offers a great deal of diversification starting with the very first
dollar invested, because a mutual fund may own tens or hundreds of different
securities. This diversification helps reduce the risk of loss because even if any
one holding tanks, the overall value doesn't drop by much. If you're buying
individual stocks, you can't get much diversity unless you have $10K or so.

Small sums of money get you much further in mutual funds than in stocks.
First, you can set up an automatic investment plan with many fund companies
that lets you put in as little as $50 per month.

You can exit a fund without getting caught on the bid/ask spread.

Funds provide a cheap and easy method for reinvesting dividends.

Last but most certainly not least, when you buy a fund you're in essence hiring
a professional to manage your money for you. That professional is
(presumably) monitoring the economy and the markets to adjust the fund's
holdings appropriately.

Advantages Of Stock Over Mutual Funds

The opposite of the diversification issue: If you own just one stock and it
doubles, you are up 100%. If a mutual fund owns 50 stocks and one doubles, it
is up 2%. On the other hand, if you own just one stock and it drops in half, you
are down 50% but the mutual fund is do wn 1%. Cuts both ways.

If you hold your stocks several years, you aren't nicked a 1% or so

management fee every year (although some brokerage firms charge if there
aren't enough trades).

You can take your profits when you want to and won't inadvertently buy a tax
liability. (This refers to the common practice among funds of distributing
capital gains around November or December of each year.

You can do a covered write option strategy. (See the article on options on
stocks for mon more details.) You can structure your portfolio differently from
any existing mutual fund portfolio.

You can buy smaller cap stocks which aren't suitable for mutual funds to invest in.

You have a potential profit opportunity by shorting stocks. (You cannot, in

general, short mutual funds.)
4
 LITERATURE RIVIEW

Review of literature is very important to give better understanding and insight

necessary to develop a broad conceptual framework in which a particular problem can
be examined. It helps in the formation of specific problem and helps acquaint the
investigator to what is already known in relation to the problem under review and it
also provides a basis for assessing the feasibility of the research. Review of
literature is important to a scholar in order to know what has been established and
documented as there are critical summaries of what is already known about a
particular topic. Therefore a review of literature helps in relating the present study to
the previous ones in the same field.
The review of some of the literature related to the performance of mutual fund is
shown below:-
Gupta and Jain (2008) on the basis of an all-India survey of 1463 households found
the preferences of investors among the major categories of financial assets, such as
investment in shares, indirect investment through various types of mutual fund
schemes, other investment types such as exchange-traded gold fund, bank fixed
deposits and government savings schemes. The study provides interesting information
about how the investors‟ attitude towards various investment types are related to their
income and age, their portfolio diversification practices, and the over-all quality of
market regulation as viewed by the investors themselves.
Jasmeen (2009) has found in her study, „Investment Choice of Individual Investors‟
that majority investors preferred low risk investment but considerable number have
gone for high risk investments. This could be possible because of awareness created
among Indian individual investors regarding investment climate and infused
confidence among investors by being ethical and transparent. The study also indicated
that the association between profile of respondents‟ age, gender, religion,
qualification, income and profession and the risk taken while making investment is not
significant.
Aparna Samudra and Bhurghate (2012) carried out a study to understand the
investment behavior among the middle class investors from Nagpur. The study was
carried out to examine the preference of the investment instruments and investment
pattern of the middle class households along with the objective of 52 investment. The
investment options considered for the study were Bank deposits, shares, mutual funds,
real estate, Kisan Vikas Patrika and post office deposits. A sample size of 300
households was used for the study. Statistical tools like percentage and mean were
used for carrying out the analysis. The study found that bank deposit was the most
preferred investment option followed by life insurance Investment in provident fund
and post office deposit were at the third and fourth place.

5
 RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problems. It may

understand as a science of study how research is done scientifically.
Primary Data: A research design is purely and simply the framework of plan for a
study that guides the collection and analysis of data. Primary data-collected through
structured questionnaire will be done.
Analysis tool will be used:
• Percentage
• Graphs & charts
• Table forms

Secondary Data: Secondary data is the data that have been already collected by and
readily available from other sources. Such data are cheaper and more quickly
obtainable than the primary data and also may be available when primary data cannot
be obtained at all. The sources of secondary data are as follows
• Newspapers, News channels, internet-websites, magazines, books-libraries, other projects.

DATA COLLECTION DESIGN

Sample Design is a definite plan to obtain a sample from the sampling frame. The
method which is adopted by the researcher in selecting the unit of sampling from the
population is called sampling design.
Sample Size: It represents how many candidates you have chosen to fill up your
questionnaire. I had chosen sample of 71 candidates.
Method of Data Collection:-
The data was collected using questionnaire from professionals/Common man like those
who wants invest in mutual funds and other Investment option.

A study on research design which has been made use of is the descriptive research design
which describes the awareness and perception of the population that is being studied.

In this we used the Quantitative research.

Primary data has been collected the information through survey.

5
 DATA ANALYSIS AND INTERPRETATION

Age wise Distribution of Respondent

Age of No. Of Respondent Percentage

Responden
t
0-20 5 13.9%
21-30 25 69.4%
31-40 3 8.3%
41-and Above 3 8.3%

Investment preference and decision-making process could change as an individual

grows older. Respondents were classified in terms of age, which is presented in table.
Majority of the respondents (69.4%) were from the age group of 21 – 30 years,
followed by 0-20 age group. Respondents below 31-40 and 41-above were less in
number. Respondents from the 21-30 age groups were more willing to participate in
the survey as comparison above 41
years

5
 Analysis of Preferred Financial Products of the Respondent

There could be various reasons for an investor to invest in a particular type of

financial product. A study of the current investments held by the respondents will
provide insight on the various financial products preferred by investors.

Investment Avenues No. of Respondent Percentage

Shared
Mutual funds 22 61.1%
Bank and Fixed Deposits 18 50.00%
Public Provident Fund 10 27.8%
National Saving Certificate 2 5.6%
Post Office Saving 7 19.4%
Government Securities 4 11.1%
Life Insurance 10 27.8%
Corporate Bonds and 1 2.8%
Debentures
Real Estate 7 19.4%
Gold/Silver 4 11.1%

It can be observed from table that, majority of the respondents hold Mutual Fund (61.1%) followed
by Bank and Fixed Deposits (50%), Public provident Fund (27.8%) and Life Insurance (27.8%). All
other financial product holding was on lower
side.

5
Trends of Respondents Investment in Mutual Funds

India is predominantly known as the next big investment economy, reflected by high savings
and investment rate, as compared to other world economies. In today‟s ever changing market
environment, mutual funds are considered upon as a transparent and low cost investment avenue,
which appeals a fair share of investor attention leading to growth of the industry. The financial
sector in India is unceasingly evolving for which credit goes to regulatory modifications being
undertaken, which is leading market participants like the asset management companies (AMCs) and
distributors to restructure their strategies and adopt business models which will yield sustainable
benefits both for the investor and also for the economy as a whole.

Option Respondent Opinion Percentage Share

Yes 34 94.6%
No 2 5.6%

It can be observed from table and figure that most of the respondent are preferred to investment in
mutual
Fund. The “Yes” saying respondent are 94.4 %and “No” saying respondent are 5.6%.

5
Respondent Opinion on Mutual Investment Plan

A Systematic Investment Plan (or SIP) is an investment mode through which you can invest
in mutual funds. As the term indicates, it is a systematic method of investing fixed amounts
of money periodically. This can be monthly, quarterly or semi-annually etc. A lump sum
investment (LIP) is depositing the entire amount at one go. Lump-sum investment is a
popular way of investing in mutual funds. If you invest the entire amount available with you
in a mutual fund scheme, it is called the lump-sum mutual fund investment.

Mutual Fund Investment Plan No. Of Respondent Percentage Share

Systematic Investment Plan (SIP) 27 75%
lump sum investment Plan (LIP) 9 25 %

Most of the respondents prefer systematic investment plans and got their source of
information primarily from banks and financial advisors. The Systematic Investment
plan has majority share that is 75% and Lumpsum Investment plan has a share of 25%

5
 FINDINGS

There are wide range of products available in mutual in the Indian market.

A mutual fund is a type of financial vehicle made up of a pool of money collected

from many investors to invest in securities like stocks, bonds, money market
instruments, and other assets. Mutual funds are operated by professional money
managers, who allocate the fund's assets and attempt to produce capital gains or
income for the fund's investors. A mutual fund's portfolio is structured and
maintained to match the investment objectives stated in its prospectus.

The aggressive market that can tap any individual is financial services. Investors
have their individual risk appetite and believe in the market they are entering in.

They have been identified as one of the important factors pushing up the market
prices of securities.

From Respondents it self it is found that the most of the peoples are investing in
mutual fund, They consider that it is they that it is best investment avenue in the
market available.

It is found that most of the investors invest in Systematic Investment Plan Method

5
 SUGGESTIONS

● Advertisement on television is the main source of attraction so the

company must advertise its products heavily.

● Product must be improved.

● There should be provision of complain suggestion boxes at each branch.

● Investment made by the investors needs to be prioritized in respect to their objectives.

● Depending upon their age the investors should go for equity exposure.

● Investors should look for long term capital appreciation and invest in diverse asset class

5
 CONCLUSION

Mutual Funds now 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. As the investor always
try to maximize the returns and minimize the risk. Mutual fund satisfies these
requirements by providing attractive returns with affordable risks: The fund industry
has already overtaken the banking industry, more funds being under mutual fund
management than deposited with banks. With the emergence of tough competition in
this sector mutual funds are launching a variety of schemes which caters to the
requirement of the particular class of investors. Risk takers for getting capital
appreciation should invest in growth, equity schemes. Investors who are in need of
regular income should invest in income plans.
The stock market has been rising for over three years now. This in turn has not
only protected the money invested in funds but has also to helped grow these
investments.
This has also instilled greater confidence among fund investors who are
investing mointo the market through the MF route than ever before.
Reliance India mutual funds provide major benefits to a common man who
wants to make his life better than previous.
India's largest mutual fund, UTI, still controls nearly 80 per cent of the market.
Also, the mutual fund industry as a whole gets less than 2 per cent of household
savings against the 46 per cent that go into bank deposits. Some fund managers say
this only indicates the sector's potential. "If mutual funds succeed in chipping away at
bank deposits, even a triple digit growth is possible over the next few years.

5
 BIBLIOGRAPHY

REFERENCE BOOK:

Financial markets and services –

Gordon and Natranjan

WEBSITE:

www.utimf.com
www.reliancemutual.co
m www.amfiindia.com

SEARCH ENGINE:

www.google.com
www.altavista.co
m
www.yahoo.com

5
QUESTIONNAIRE ON INVESTORS ATTITUDE

TOWARDS MUTUAL FUNDS PERSONAL PROFILE

Name of the Investor:

Age :

o 0-20
o 21-30
o 31-40
o 41 and above
Gender : O Male O Female

What is your preferred Investment Avenue?

Mutual funds
Bank and Fixed
Deposits Public
Provident Fund National
Saving Certificate Post
Office Saving
Government Securities
Life Insurance Corporate
Bonds and Debentures
Real Estate Gold/Silver

Do you invest in Mutual Fund?

o Yes
o No

Is mutual fund is to be considered as best investment avenue?

o Yes
o No

In which Investment Plan to you prefer to invest in mutual fund?

o Systematic Investment Method (SIP)

o Lumpsum Investment Plan (LIP