Study On Mutual Fund Industry

A
PROJECT REPORT
ON
STUDY OF MUTUAL FUND AND ITS
PROSPECTS AS AN INVESTMENT
OPTION IN INDIA
Undertaken at
SUBMITTED BY:
NIKHIL MAHAJAN
PGDM (2008-10)
Roll No. 240
SUBMITTED TO:
New Delhi Institute of Management
NEW DELHI INSTITUTE OF MANAGEMENT
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As per the requirement of Post
Graduate Diploma in Management
ACKNOWLEDGEMENT
I take this opportunity to express my deep sense of gratitude to all those

who have contributed significantly by sharing their knowledge and
experience in the completion of this project work.
My first word of gratitude is due to Mr. Nitish Dipankar, Area Sales Manager
Standard Chartered Bank, Branch – New Friends Colony, New Delhi, my
corporate guide, for his kind help and support and for his valuable guidance
throughout the project. I am thankful to him for providing me with
necessary insights and helping me out at every single step.
My heartfelt thanks to my respected Faculty Guide namely Prof. Sanjay

Tomar, Faculty of finance, New Delhi Institute of Management, Without her
continuous help the project would not have been materialized in the present
form. Her valuable suggestions helped me at every step. I would also like to
thank the placement cell for all their efforts to arrange this training.
I am also thankful to the respondent who helped us by filling up the

questionnaire.
Nikhil Mahajan
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EXECUTIVE SUMMARY
Indian Stock market has undergone tremendous changes over the

year. Investment in Mutual Fund has become a major alternative
among Investors. In few years Mutual Fund has emerged as a tool for
ensuring one’s financial well being. Mutual Funds have not only
contributed to the India growth story but have also helped families tap
into the success of Indian Industry. As information and awareness is
rising more and more people are enjoying the benefits of investing in
mutual funds. The main reason the number of retail mutual fund
investors remains small is that people with incomes in India do not
know that about mutual funds. But once people are aware of mutual
fund investment opportunities, the people who decide to invest in
mutual funds increases. The trick for converting a person with no
knowledge of mutual funds to a new Mutual Fund customer is to
understand which of the potential investors are more likely to buy
mutual funds and to use the right arguments in the sales process that
customers will accept as important and relevant to their decision.
This Project gave me a great learning experience and at the same time
it gave me enough scope to implement my analytical ability. The
analysis and advice presented in this Project Report is based on market
research on the saving and investment practices of the investors and
preferences of the investors for investment in Mutual Funds. This

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Report will help to know about Mutual fund as an
investment option in India.
This Project as a whole can be divided into two parts.
The first part gives an overview of Mutual Fund Industry and to

understand Investor’s perception about Mutual Fund in context of their
trading preference, explore investor’s risk perception & find out their
preference over Top Mutual Funds.
The second part deals with the investor perception regarding their
investment preferences about investment in Mutual Fund. This part of the
Project consists of data and its analysis collected through survey done on 50
people. Last part of the project report deals with observation of survey
report and conclusion drawn upon on the basis of the same.

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CONTENTS
➢ ACKNOWLEDGMENT
➢ EXECUTIVE SUMMERY
➢ COMPANY PROFILE
 About Standard Chartered Bank
 Current Position Of Standard Chartered Bank
 Recent Alliances And Strategic Acquisitions
 Standard Chartered Bank In India
➢ INTODUCTION
 CONCEPT OF MUTUAL FUNDS
 HISTORY OF INDIAN MUTUAL FUND INDUSTRY
 HOW MUTUAL FUND ARE STURCTURED
 REGULATING AGENCIES FOR MUTUAL FUND
 HOW INVESTOR EARN FROM MUTUAL FUND
 TYPES OF MUTUAL FUNDS
 BENEFITS OF MUTUAL FUNDS
 PERFORMANCE EVALUATION
✔ Parameters of mutual fund evaluation:
 Risk
 Returns
 Liquidity
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 Expense Ratio
 Composition of Portfolio
 TAX BANEFITS INVESTING IN MUTUAL FUNDS
 MAJOR PLAYERS IN MUTUAL FUND INDUSTRY
 TOP PERFORMANCE FUNDS
 FUTURE OF MUTUAL FUNDS IN INDIA
 MARKETING STRATEGY ADOPTED BY MUTUAL FUND
✔ Different sales methods
✔ Different methods of promotions
➢ MARKET STUDY
 Objective
 Methodology
 Analysis
➢ CONCLUSION
➢ RECOMMENDATIONS
➢ BIBLIOGRAPHY

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COMPANY PROFILE

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HISTORY
The Standard Chartered Group was formed in 1969 through a merger of two
banks: The Standard Bank of British South Africa founded in 1863 and the
Chartered Bank of India, Australia and China, founded in 1853.
Both companies were keen to capitalise on the huge expansion of trade and
to earn the handsome profits to be made from financing the movement of
goods from Europe to the East and to Africa.
The Chartered Bank

• Founded by James Wilson following the grant of a Royal Charter by
Queen Victoria in 1853.
• Chartered opened its first branches in Mumbai (Bombay), Calcutta and

Shanghai in 1858, followed by Hong Kong and Singapore in 1859.
• Traditional business was in cotton from Mumbai (Bombay), indigo and

tea from Calcutta, rice in Burma, sugar from Java, tobacco from
Sumatra, hemp in Manila and silk from Yokohama.
• Played a major role in the development of trade with the East which
followed the opening of the Suez Canal in 1869 and the extension of
the telegraph to China in 1871.
• In 1957 Chartered Bank bought the Eastern Bank together with the
Ionian Bank's Cyprus Branches. This established a presence in the
Gulf.
The Standard Bank

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• Founded in the Cape Province of South Africa in 1862
by John Paterson. Commenced business in Port Elizabeth, South
Africa, in January 1863.
• Was prominent in financing the development of the diamond fields of

Kimberley from 1867 and later extended its network further north to
the new town of Johannesburg when gold was discovered there in
1885.
• Expanded in Southern, Central and Eastern Africa and by 1953 had

600 offices.
• In 1965, it merged with the Bank of West Africa expanding its

operations into Cameroon, Gambia, Ghana, Nigeria and Sierra Leone.
In 1969, the decision was made by Chartered and by Standard to undergo a

friendly merger. All was going well until 1986, when a hostile takeover bid
was made for the Group by Lloyds Bank of the United Kingdom. When the
bid was defeated, Standard Chartered entered a period of change. Provisions
had to be made against third world debt exposure and loans to corporations
and entrepreneurs who could not meet their commitments. Standard
Chartered began a series of divestments notably in the United States and
South Africa, and also entered into a number of asset sales.
From the early 1990s, Standard Chartered has focused on developing its
strong franchises in Asia, the Middle East and Africa using its operations in
the United Kingdom and North America to provide customers with a bridge
between these markets. Secondly, it would focus on consumer, corporate

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and institutional banking and on the provision of treasury
services - areas in which the Group had particular strength and expertise.
At Standard Chartered, success is built on teamwork, partnership and the

diversity of our people. At the heart of their values lie diversity and
inclusion. They are a fundamental part of their culture, and constitute a
long-term priority in our theirs to become the world's best international
bank. Today they employ 73,000 people, representing 115 nationalities, and
you'll find 61 nationalities among our 500 most senior leaders. We believe
this diversity helps to fuel creativity and innovation, supporting the
development of exciting new products and services for our customers
worldwide.
Standard Chartered PLC is listed on both the London Stock Exchange and
the Stock Exchange of Hong Kong and is in the top 25 FTSE-100 companies,
by market capitalization. Following the acquisition of Korea First Bank,
Standard Chartered now employs 38,000 people in 950 locations in more
than 50 countries in the Asia Pacific Region, South Asia, the Middle East,
Africa, the United Kingdom and the Americas.
It serves both Consumer and Wholesale Banking customers. Consumer

Banking provides credit cards, personal loans, mortgages, deposit taking
and wealth management services to individuals and small to medium sized
enterprises. Wholesale Banking provides corporate and institutional clients
with services in trade finance, cash management, lending, securities
services, foreign exchange, debt capital markets and corporate finance.

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Standard Chartered is well established in growth markets and aims to be the
right partner for its customers. The Bank combines deep local knowledge
with global capability.
The Bank is trusted across its network for its standard of governance and its
commitment to making a difference in the communities in which it operates.
Type Public
Founded 1853
Headquarter London, England, UK

s
Key people Peter Sands, Chief Executive
Industry Banking
Products Financial Services

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Revenue $16,378 million (2008)
Operating
$4,568 million (2008)
income
Net income $3,511 million (2008)
Employees 73,000 (2008)
Website www.standardchartered.com

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CURRENT POSITION OF STANDARD
CHARTERED BANK
Today, the bank is a leading player throughout the developing world.
Standard Chartered Bank is one of the three banks issuing banknotes for
Hong Kong (Standard Chartered Bank (Hong Kong) Limited became a note-
issuing bank from 2004), the other two being the Bank of China (Hong
Kong) and The Hongkong and Shanghai Banking Corporation.
The bank supports marathons in many cities, including London (The City
Run), Jersey, Singapore, Dubai, Lahore, Mumbai, Hong Kong, and Nairobi.
Standard chartered bank has its global presence in all over America, Asia,
Africa, Middle East, and Europe.
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In its unique position as an international bank with strong
franchise, Standard Chartered combines an in-depth knowledge of local
markets with
global product expertise to offer effective financial solutions. The bank

capitalizes on its onshore presence across Asia, Africa and the Middle East to
offer customers convenient and reliable access to the widest range of
currency markets, to date local market information, country-specific global
risk management strategies, and customized capital raising and liquidity
management solutions.

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Establishment of Standard Chartered Bank around the
world
Country Year Country Year Established
Established
United Kingdom 1853 Australia 1964
China, India,
1858 Mexico, Oman 1968
Sri Lanka
Hong Kong,
1859 Peru 1973
Singapore
Indonesia,
1863 Jersey 1978
Pakistan
Philippines 1872 Brazil 1979
Malaysia 1875 Venezuela 1980
Falkland
Japan 1880 1983
Islands, Macau
Zimbabwe 1892 Taiwan 1985
The Gambia,
Sierra Leone, 1894 Cameroon 1986
Thailand
Ghana 1896 Nepal 1987
Botswana 1897 Vietnam 1990
Cambodia,
USA 1902 1992
South Africa
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Bangladesh 1905 Iran 1993
Zambia 1906 Colombia 1995
Kenya 1911 Laos, Argentina 1996
Uganda 1912 Nigeria 1999
Tanzania 1917 Lebanon 2000
Bahrain 1920 Cote d’Ivoire 2001
Jordan 1925 Mauritius 2002
Korea 1929 Turkey 2003
Qatar 1950 Afghanistan 2004
Brunei, UAE 1958
RECENT ALLIANCES AND STRATEGIC AQUISTIONS
In 2000, Standard Chartered acquired Grindlays Bank from ANZ

Bank, increasing its presence in private banking and further expanding its
operations in India and Pakistan. Standard Chartered retained Grindlays'
private banking operations in London and Luxembourg and the subsidiary in
Jersey, all of which it integrated into its own private bank. This now serves
high net worth customers in Hong Kong, Dubai, and Johannesburg under the
name Standard Chartered Grindlays Offshore Financial Services. In India,
Standard Chartered integrated most of Grindlays' operations, making
Standard Chartered the largest foreign bank in the country, despite
Standard Chartered having cut some branches and having reduced the staff
from 5500 to 3500 people.
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On 15th April 2005, the bank acquired Korea First
Bank, beating HSBC in the bid. Since then the bank has rebranded the
branches as SC First Bank.
Standard Chartered completed the integration of its Bangkok branch and

Standard Chartered Nakornthon Bank in October, renaming the new entity
Standard Chartered Bank (Thailand). Standard Chartered also formed
strategic alliances with Fleming Family & Partners to expand private wealth
management in Asia and the Middle East, and acquired stakes in ACB
Vietnam, Travelex, American Express Bank in Bangladesh and Bohai Bank in
China.
On 9th August 2006 Standard Chartered announced that it had

acquired an 81% shareholding in the Union Bank of Pakistan in a
deal ultimately worth $511 million.
This deal represented the first acquisition by a foreign firm of a Pakistani

bank and the merged bank, Standard Chartered Bank (Pakistan), is now
Pakistan's sixth largest bank.
On 22 October, 2006 Standard Chartered announced that it has received

tenders for more than 51 per cent of the issued share capital of Hsinchu
International Bank (“Hsinchu”). On completion of the offer, Standard
Chartered will have majority ownership of Hsinchu, Taiwan’s seventh largest
private sector bank by loans and deposits as at 30 June, 2006.

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In 2006, Standard Chartered in Bangladesh,
announced an alliance with Dutch Bangla Bank Ltd to share their
respective ATM operations.
On 23 August, 2007 Standard Chartered entered into an agreement

to buy a 49 percent of an Indian brokerage firm (UTI Securities) for
$36 million in cash from Securities Trading Corporation of India Ltd., with
the option to raise its stake to 75 percent in 2008 and, if both partners
agree, to 100 percent by 2010. UTI Securities offers broking, wealth
management and investment banking services across 60 Indian cities.
On 29th February 2008, Standard Chartered PLC announced it has

received all the required approvals leading to the completion of its
acquisition of American Express Bank Ltd (AEB) from the American Express
Company (AXP). The total cash consideration for the acquisition is US$ 823
million.
The acquisition of AEB provides Standard Chartered with an opportunity to

add capability, scale and momentum in the strategically important Financial
Institutions and Private Banking businesses. It will add 19 more markets to
the Standard Chartered footprint, while deepening presence in some core
markets and providing access to several new growth markets.
STANDARD CHARTERED BANK IN INDIA
The Chartered Bank opened its first overseas branch in India, at Kolkata, on
12 April 1858. Eight years later the Kolkata agent described the Bank's
credit locally as splendid and its business as flourishing, particularly the
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substantial turnover in rice bills with the leading Arab firms.
When The Chartered Bank first established itself in India, Kolkata was the
most important commercial city, and was the centre of the jute and indigo
trades. With the growth of the cotton trade and the opening of the Suez
Canal in 1869, Bombay took over from Kolkata as India's main trade centre.
Today the Bank's branches and sub-branches in India are directed and
administered from Mumbai (Bombay) with Kolkata remaining an important
trading and banking centre.
Standard Chartered Bank is the largest international banking Group in India

with 78 branches in 30 cities. The Bank is having a combined customer
base of 2.5 million in retail banking and over 1200 corporate customers.
Products offered by the bank

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➢ Accounts
 Term Deposits
 Savings Accounts
 aXcess Plus Account
 Super Value Account
 Parivaar Account
 No Frills Account
 aaSaan Account
 2-in-1 Account
 Depository Services
 Corporate Salary Account
 Current Accounts
 Business Plus Account
 Enhanced Business Plus Account
➢ Credit Cards
• Emirates Platinum
Card
• Platinum Card
• Emirates Titanium
Card
• Super Value Titanium
Card
• Gold Card
• EMI Card
• Executive Card
• Classic Card
• Business Gold Card

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• Gold Rewards Card
➢ Debit & Prepaid Cards

• Debit Cards
• Shop Smart Card
• Platinum Debit Card
• Plus Extended Protection Plan
• Prepaid Cards
• Smart Travel
➢ Loans & Mortgages

• Home Loans
• Loan Against Securities
• Home Saver
• Loan Against Term Deposits
• Loan Against Property
➢ NRI Banking
• NRE Account
• NRO Savings Account
• FCNR Account
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• Accounts for Returning Indians
➢ Exclusive Banking
• Excel Banking
• Priority Banking
• Private Banking
➢ Insurance & Investments

• General Insurance
• Life Insurance
• Investment Services
STANDARD CHARETERED MUTUAL FUND
Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored
by Standard Chartered Bank. The Trustee is Standard Chartered Trustee
Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt.
Ltd. is the AMC which was incorporated with SEBI on December 20, 1999.
IN 2008, Infrastructure Development Finance Corporation (IDFC) has outbid

other bidders such as Shinsei Bank, India bulls to emerge as winner in race
to acquire Standard Chartered Mutual Fund for $205 million. Standard
Chartered Mutual Fund has around Rs.14000 crore in assets of which
Rs.4000 crore is in equity while rest is in debt.
IDFC is one of India’s oldest lending institutions, and the deal would give it a
foothold in the retail sector and improve its high margin fee based income.
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Standard Chartered will continue to distribute mutual fund
products but will not manage funds and would only focus on consumer and
commercial banking.

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INTRODUCTION

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INTRODUCTION
The one investment vehicle that has truly come of age in India in the past
decade is mutual funds. Today, the mutual fund industry in the country
manages around Rs 407,300 crore (As of March, 2009) of assets, a large
part of which comes from retail investors. And this amount is invested not
just in equities, but also in the entire gamut of debt instruments. A mutual
fund is the ideal investment vehicle for today’s complex and modern
financial scenario. Market for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become matured
and information driven. Price changes on these assets are driven by global
events happening in faraway places. A typical individual is unlikely to have
the knowledge, skills inclination and time to keep track of events,
understand their implication and act speedily. An individual also finds it
difficult to keep track of his assets, investment, brokerage dues and bank
transaction etc.
A mutual fund is the answer to all these situations. It appoints professionally
qualified and experienced staffs that manage each of these functions on full
time basis. The large pool of money collected in the fund allows it to hire
such staff at a very low cost to each investor. In effect, the mutual fund
exploits economies of scale in all three area-research, investment and
transaction processing. While the concepts of individual coming together to
invest money collectively are not new, the mutual fund in its present form is
a 20th century phenomena. In fact mutual fund gains popularity only after
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the Second World War. Globally, there are thousands of
firms offering tens of thousands of mutual funds with different investment
objectives. Today, mutual funds collectively manage almost as much as or
compared to bank.
WHY DO WE NEED TO INVEST?
Savings form an important part of the economy of any nation. With the
savings invested in various options available to the people, the money acts
as the driver for growth of the country. It is vitally important in this current
day and age for all of us to begin taking control of our financial situation and
start planning for our future, and the futures of our children. We can no
longer rely on the government to hand out an aged pension once we retire.
We cannot take for granted that at the end of our working life we will be
taken care of financially. There are few main reasons to invest.
 Wealth accumulation: This is largely a factor of investment

performance, including both short term performance of an investment
and long term performance of a portfolio. Wealth management is the
ultimate measure of the success of an investment decision.
 Tax Benefits: Legitimate reduction in the amount of tax payable is an
important part of the Indian psyche. Every rupee saved in taxes goes
towards the wealth accumulation.
 Supplement Income: This refers to money distributed at intervals
by an investment, which are usually used by the investor for meeting
regular expenses. Income needs tend to be fairly constant because

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they are related to lifestyle and are very well
understood by the investors.
 Life Cover: Many investors look for investments that offer good
return with adequate life cover to manage the situation in case of any
eventualities.
 Retirement: Many investors invest for their retirement. They don’t
want to depend upon other for day to day expenses.
CONCEPT OF MUTUAL FUNDS
A Mutual Fund is a trust that pools the saving 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 instrument. The income earned through these investments and the
capital appreciation realized by the scheme is shared by its unit holders in
the proportion of 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 diversified, professionally managed portfolio at a relatively low

cost. Anybody with a surplus of as little as a few thousand rupees can invest
in Mutual funds.

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The flow chart below
describes broadly the working of a mutual fund:-
WORKING OF MUTUAL FUND

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Savings form an important part of the economy of any nation. With savings
invested in various options available to the people, the money acts as the
driver for growth of the country. Indian financial scene too presents multiple
avenues to the investors. Though certainly not the best or deepest of
markets in the world, it has ignited the growth rate in mutual fund industry
to provide reasonable options for an ordinary man to invest his savings.
Investment goals vary from person to person. While somebody wants
security, others might give more weightage to returns alone. Somebody else
might want to plan for his child’s education while somebody might be saving
for the proverbial rainy day or even life after retirement. With objectives
defying any range, it is obvious that the products required will vary as well.

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HISTORY OF THE INDIAN MUTUAL FUND
The Evolution
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
of India. 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 had Rs.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 Canbank Mutual
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Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 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.
Amoun Assets Mobilization

1992- t Under as % of gross
93 Mobiliz Manageme Domestic
ed nt Savings
UTI 11,057 38,247 5.2%

Public
Secto 1,964 8,757 0.9%
r
Total 13,021 47,004 6.1%
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

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with Franklin Templeton) was the first private sector mutual
fund registered in July 1993.
The number of mutual fund houses went on increasing, with many foreign
mutual 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 under management was way ahead of
other mutual funds.
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 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, 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
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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.
The graph indicates the growth of assets over the years.

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Latest Position of Mutual Funds
Assets under management (AUMs) of the Indian mutual fund industry for
May’09 have set the record by piercing the Rs 6 lakh crore mark once again.
Buoyed by a sharp rise in value of stocks, industry AUM at the end of May
jumped nearly Rs 87,000 crore or 16% over April numbers (Rs 5.5 trillion),
This level had been last topped in May 2008.
This is third time in as many months that the AUM of the industry has rose,
partially helped by the stock rally started in March that has led to sensex
gain around 80% by May. The combined average AUM of the 34 fund houses
in the country increased to Rs 6,39,609 crore in May as against Rs 5,51,254
crore in April.
Apart from the 30% rise in net asset values of diversified equity funds in this
month, the money that has come through liquid funds also bears
significance. Most banks are awash with liquidity and many of them are
parking their surplus cash with mutual funds to gain decent returns,"
Dhirendra Kumar of Value Research, an MF tracking firm said.
MF industry officials said that June might see some redemptions kicking as it
is the end of a quarter and many corporate are likely to cash out to beef up
their balance sheets. However, with the sentiment for equities having
improved considerably, they expect investors to stick on to equity schemes.

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ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the struc
ture of mutual funds: -
SEBI
The regulation of
mutual funds operating in India falls under the preview of authority of the
“Securities and Exchange Board of India” (SEBI). Any person proposing

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to set up a mutual fund in India is required under the SEBI
(Mutual Funds) Regulations, 1996 to be registered with the SEBI.
SPONSOR
Sponsor is defined under SEBI regulations as any person who, acting alone
or in combination with another body corporate, establishes a mutual fund.
The sponsor of a fund is akin to the promoter of a company as he gets the
fund registered with SEBI.
The sponsor should contribute at least 40% to the net worth of the AMC.
However, if any person holds 40% or more of the net worth of an AMC shall
be deemed to be a sponsor and will be required to fulfill the eligibility criteria
in the Mutual Fund Regulations. The sponsor or any of its directors or the
principal officer employed by the mutual fund should not be guilty of fraud
or guilty of any economic offence.
TRUSTEES
The mutual fund may be managed by a Board of Trustees- a body of
individuals, or a Trust company- corporate body. The Trustee does not
directly manage the portfolio of securities. For this specialists function, they
appoint an Asset Management Company.
The mutual fund is required to have an independent Board of Trustees, i.e.

two third of the trustees should be independent persons who are not
associated with the sponsors in any manner. An AMC or any of its officers or

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employees are not eligible to act as a trustee of any mutual
fund. The trustees are responsible for - inter alia – ensuring that the AMC
has all its systems in place, all key personnel, auditors, registrar etc. have
been appointed prior to the launch of any scheme.
Rights of Trustees
 Trustees appoint the AMC, in consultation with the sponsor and

according to SEBI Regulations
 All Mutual Fund Schemes floated by the AMC have to be approved by
the Trustees
 Trustees can seek information from the AMC regarding the Operations
and compliance of the mutual fund.
 Trustees can seek remedial actions if they believe that the conduct of
the fund’s business is not in accordance with SEBI Regulations. In
certain specific events, the Trustees have right to dismiss the AMC,
with the approval of SEBI and in accordance with the regulations.
 Trustees review and ensure that net worth of the AMC is according to
stipulated norms, every quarter
Obligations of the Trustees
 Trustees must ensure that the transactions of the mutual fund are in
accordance with the trust deed
 Trustees must ensure that the AMC has systems and procedures in
place, and that all the fund constituents are appointed
 Trustees must ensure due diligence on the part of AMC in the
appointment of constituents and business associates

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 Trustees must furnish to the SEBI, on half yearly basis
a report on the fund’s activities of the AMC
 Trustees must ensure compliance with SEBI regulations
ASSET MANAGEMENT COMPANY

The sponsors or the trustees are required to appoint an AMC to manage
the assets of the mutual fund. Under the mutual fund regulations, the
applicant must satisfy certain eligibility criteria in order to qualify to register
with SEBI as an AMC.
 The sponsor must have at least 40% stake in the AMC.
 The chairman of the AMC is not a trustee of any mutual fund.
 The AMC should have and must at all times maintain a minimum net
worth of Cr. 100 million.
 The director of the AMC should be a person having adequate

professional experience.
 The board of directors of such AMC has at least 50% directors who are not
associate of or associated in any manner with the sponsor or any of its
subsidiaries or the trustees.
Restrictions on the AMC
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 AMC’ s cannot launch a scheme without the prior
approval of the trustees
 AMC’ s have to provide full details of investments by employees and

Board members in all cases where the investment exceeds Rs.1 Lakh
 AMC’ s cannot take up any activity that is in conflict with the activities
of the mutual fund
TRANSFER AGENTS
The transfer agent is contracted by the AMC and is responsible for

maintaining the register of investors / unit holders and every day
settlements of purchases and redemption of units. The role of a transfer
agent is to collect data from distributors relating to daily purchases and
redemption of units.
CUSTODIANS
The mutual fund is required, under the Mutual Fund Regulations, to
appoint a custodian to carry out the custodial services for the schemes of
the fund. Only institutions with substantial organizational strength, service
capability in terms of computerization and other infrastructure facilities are
approved to act as custodians. The custodian must be totally delinked from
the AMC and must be registered with SEBI.
Functions of the Custodians
 Responsible for the securities held in the mutual fund’s portfolio
 Keep an investment record of the mutual fund

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 Collect dividends and investment payments due on
the mutual funds investment
 Track corporate actions like bonus issues, right offers, offer for
sale, buy back and open offers for acquisition
UNIT HOLDERS
They are the parties to whom the mutual fund is sold. They are ultimate
beneficiary of the income earned by the mutual funds
REGULATING AGENCIES FOR MUTUAL FUND
➢ SEBI
➢ RBI
➢ Ministry of Finance
➢ Company Law Board, Department of Company Affairs and

Registrar of Companies
➢ Stock Exchanges (For listed Mutual Funds)

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➢ Securities and Exchange Board of India (SEBI) - the
Capital Markets Regulator
Securities and Exchange Board of India (SEBI) was first established in the
year 1988 as a non-statutory body for regulating the securities market. It
became an autonomous body in 1992 and more powers were given through
an ordinance. Since then it regulates the market through its independent
powers.
Objectives of SEBI
 It tries to develop the securities market.
 Promotes Investors Interest.
 Makes rules and regulations for the securities market.
Functions of SEBI
 Regulates Capital Market
 Checks Trading of securities.
 It enhances investor's knowledge on market by providing

education.
 It regulates the stockbrokers and sub-brokers.
 To promote Research and Investigation.
 Registering & regulating the working of venture capital funds &

collective investing schemes, including Mutual Funds.
SEBI as a Mutual fund regulator

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The Government of India constituted Securities and
Exchange Board of India, by an Act of Parliament in 1992, as the apex
regulator of all entities that either raise funds in the capital markets or
invest in capital market securities such as shares and debentures listed on
stock exchanges. Mutual funds have emerged as an important institutional
investor in capital market securities. Hence they come under the purview of
SEBI. SEBI requires all mutual funds to be registered with them. It issues
guidelines for all mutual fund operations including where they can invest,
what investment limit and restrictions must be complied with. how they
should account for income and expenses, how they should make disclosures
of information to the investors and generally act in the interest of investor
protection.
Other entities that SEBI also regulates are companies when they issue
equity or debt, share registrars. custodians, bankers in the primary markets,
stock exchanges and brokers in the secondary markets, and foreign and
institutional investors such as FIIs, offshore mutual funds with dedicated
Indian mutual funds or venture capital investors.
➢ Reserve Bank of India- the Money Markets Regulator

Reserve Bank of India is the apex monetary Institution of India. It is also
called as the central bank of the country. The bank was established on
April1, 1935 according to the Reserve Bank of India act 1934. It acts as the
apex monetary authority of the country. The Central Office of the Reserve
Bank has been in Mumbai since inception. The Central Office is where the
Governor sits and is where policies are formulated. Though originally

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privately owned, since nationalization in 1949, the Reserve
Bank is fully owned by the Government of India.
What is the regulatory jurisdiction of RBI over mutual funds?

 RBI is the monetary authority and the regulator of the banking system
 Bank sponsored mutual funds were under the dual control of RBI and
SEBI
 Presently RBI is only the regulator of the sponsors of bank sponsored

mutual funds. SEBI is the regulator of all mutual funds
 Mutual funds are affected by the RBI stipulations on structure,

issuance, pricing & trading of Govt. Securities
➢ Ministry of Finance
Role of Ministry of Finance in mutual fund regulations
The Ministry of Finance, which is charged with implementing the government
policies, ultimately supervises both RBI and SEBI. Besides being the
ultimate policy making and supervising entity, the MF had also been playing
the role of an Appellate Authority for any major disputes over SEBI
guidelines on certain specific capital market related guidelines-in particular
any cases of insider trading or mergers and acquisitions. Since 2003,
however, a
Securities Appellate Tribunal has been created to provide the apex appeal
mechanism for any decisions taken by SEBI. SAT works as an independent
judicial authority.

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➢ Company Law Board, Department of Company
Affairs and Registrar of Companies
Mutual fund Asset Management Companies and corporate trustees are
companies registered under the Companies Act, 1956and are therefore
answerable to regulatory authorities empowered by the Companies Act.
The primary legal interface for all companies is the Registrar of Companies
(RoC). Rocs’, in turn, are supervised by the Department of Company Affairs.
The DCA forms part of the Company Law Board, which is part of the Ministry
of Law and Justice of the Govt. of India. The RoC ensures that the AMC, or
the trustee company as the case may be, is in compliance with all provisions
of the Companies Act. All AMC accounts and records are filed with the RoC,
who may demand additional, informational and documents from company.
The RoC monitors regulatory compliance by companies.
➢ Stock Exchanges
Stock exchanges are self-regulatory organizations supervised by SEBI. Many
closed-end schemes of mutual funds are listed on one or more stock
exchanges. Such schemes are subject to regulation by the concerned stock
exchange through a listing agreement between the fund and the stock
exchange. Rules of the stock exchange and provisions of the Companies Act
Would generally guide trading, clearing transfer and settlement of the

buying and selling of mutual fund units in the markets. Funds or AMCs do
not get directly involved with purchases and sales, of units of such listed
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closed-end schemes, as their registrars handle all such
transfers as in case of shares.
➢ Association of Mutual Funds in India (AMFI)

Association of Mutual Funds in India (AMFI) incorporated in Aug 1995 is the
Umbrella body of all the mutual fund registered with SEBI. It is nonprofit
organization committed to develop the Indian mutual fund industry on
professional, healthy & ethical lines & to enhance and maintain standards in
all areas with a view to protecting & promoting the interests of Mutual Funds
and their unit holders. AMFI is an industry association, incorporated in 1995,
is not an SRO, so it can just issue guidelines to members. It cannot enforce
regulations.
Objectives of AMFI:-
 To promote the interests of mutual funds and unit holders.
 To set ethical, commercial and professional standards in the

industry.
 To increase public awareness of the mutual fund industry.
 AMFI is governed by a board of directors elected from

mutual funds and is headed by a full time chairman.
 AMFI has therefore prepared guidelines for intermediaries called

AMFI Guidelines & Norms for Intermediaries (AGNI).

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HOW INVESTOR EARN FROM MUTUAL
FUND
Investors earn from a Mutual Fund in three ways:
1. Income is earned from dividends declared by mutual fund schemes

from time to time.
2. If the fund sells securities that have increased in price, the fund has a
capital gain. This is reflected in the price of each unit. When investors
sell these units at prices higher than their purchase price, they stand
to make a gain.
3. If fund holdings increase in price but are not sold by the fund
manager, the fund's unit price increases. You can then sell your
mutual fund units for a profit. This is tantamount to a valuation gain.
TYPES OF MUTUAL FUNDS

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A wide variety of Mutual Fund Schemes exist to cater to the
needs such as financial position, risk tolerance and return expectations etc.
The table below gives an overview into the existing types of schemes in the
Industry.
By structure:
a) open-ended schemes
b) close-ended schemes
c) Interval Funds
By Investment objective:
a) Growth / Equity Oriented Schemes

1) Index funds
2) Diversified funds
3) Sector funds
a) Tax-saving funds
b) Income / Debt Oriented Scheme
c) Gilt funds
d) Money Market or Liquid Funds
e) Balanced Fund
f) Load or no-load Fund

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By Structure
a) 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 more flexible and provides instant liquidity
b) Close-ended schemes
A closed-end fund has a stipulated maturity period which generally ranging

from 3 to 15 years. 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.
c) Interval Funds
Interval funds combine the features of open-ended and close-ended

schemes. They are open for sale or redemption during pre-determined
intervals at NAV related prices.

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By Investment objective:
A scheme can also be classified as growth scheme, income scheme, or

balanced scheme considering its investment objective. Such schemes may
be open-ended or close-ended schemes as described earlier. Such schemes
may be classified mainly as follows:
EQUITY DEBT MONEY MARKET
Diversified Fixed Money

Fund Income Market
Index Fund Fund

Mutual fund
Sector Gilt Fund
Fund
Balance Liquid
Fund Fund
a) Growth / Equity Oriented Schemes

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The aim of growth funds is to provide capital appreciation
over the medium to long- term. Such schemes normally invest a major part
of their corpus in equities. Such funds have comparatively high risks. These
schemes provide different options to the investors like dividend option,
capital appreciation, etc. and the investors may choose an option depending
on their preferences.
The investors must indicate the option in the application form. The mutual
funds also allow the investors to change the options at a later date. Growth
schemes are good for investors having a long-term outlook seeking
appreciation over a period of time.
Equity funds
As explained earlier, such funds invest only in stocks, the riskiest of asset
classes. With share prices fluctuating daily, such funds show volatile
performance, even losses. However, these funds can yield great capital
appreciation as, historically, equities have outperformed all asset classes. At
present, there are three types of equity funds available in the
market these are:
Equity Funds

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Index Diversifie Sector
Funds d Funds Funds
1) Index funds
These funds invest in the same pattern as popular market indices like S&P
CNX Nifty or CNX Midcap 200. The money collected from the investors is
invested only in the stocks, which represents the index. For example a Nifty
fund will invest only in the Nifty 50 stocks. The objective of such funds is not
to beat the market but to give a return equivalent to the market returns.
2) Diversified funds
Such funds have the mandate to invest in the entire universe of stocks.
Although by definition, such funds are meant to have a diversified portfolio
(spread across industries and companies), the stock selection is entirely the
prerogative of the fund manager. These funds are generally meant for risk-
averse investors who want a diversified portfolio across sectors.
3) Sector Funds
The riskiest among equity funds, sector funds invest only in stocks of a
specific industry, say IT or FMCG. A sector fund’s NAV will zoom if the sector
performs well; however, if the sector languishes, the scheme’s NAV too will

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stay depressed. These funds are targeted at investors who
are bullish or fancy the prospects of a particular sector.
a) Tax-saving Funds
Also known as ELSS or equity-linked savings schemes, these funds offer
benefits under Section 88 of the Income-Tax Act. So, on an investment of
up to Rs 10,000 a year in an ELSS, you can claim a tax exemption of 20 per
cent from your taxable income. You can invest more than Rs 10,000, but
you won’t get the Section 88 benefits for the amount in excess of Rs 10,000.
The only drawback to ELSS is that you are locked into the scheme for three
years.
In terms of investment profile, tax-saving funds are like diversified funds.
The one difference is that because of the three year lock-in clause, tax-
saving funds get more time to reap the benefits from their stock picks,
unlike plain diversified funds, whose portfolios sometimes tend to get
dictated by redemption compulsions.
b) Income / Debt Oriented Scheme

The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such as
bonds, corporate debentures, Government securities and money market
instruments. Such funds are less risky compared to equity schemes. These
funds are not affected because of fluctuations in equity markets. However,
opportunities of capital appreciation are also limited in such funds. The NAVs
of such funds are affected because of change in interest rates in the country.
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If the interest rates fall, NAVs of such funds are likely to
increase in the short run and vice versa. However, long term investors may
not bother about these fluctuations.
c) Gilt funds
These funds invest in Central and State Government securities. Since they
are Government backed bonds they give a secured return and also ensure
safety of principal amount. They are best suited for the medium to long-
term investors.
They invest only in government securities and T-bills–instruments on which
repayment of principal and periodic payment of interest is assured by the
government. This element of safety is why, in normal market conditions, gilt
funds tend to give marginally lower returns than income funds.
d) Money Market or Liquid Funds

These funds invest in highly liquid money market instruments (duration of
up to one year) such as treasury bills, call money, CPs and CDs. They
provide easy liquidity. They emerged as an alternative for saving and short-
term fixed deposit account with comparatively higher returns. These funds
are ideal for corporate, institutional investors and business houses that
invest their funds for very short periods.
e) Balanced Fund
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The aim of balanced funds is to provide both growth and
regular income as such schemes invest both in equities and fixed income
securities in the proportion indicated in their offer documents. These are
appropriate for investors looking for moderate growth. They generally invest
40-60% in equity and debt instruments. These funds are also affected
because of fluctuations in share prices in the stock markets. However, NAVs
of such funds are likely to be less volatile compared to pure equity funds.
As the name suggests, balanced funds have an exposure to both equity and
debt instruments. They invest in a pre-determined proportion in equity and
debt–normally 60:40 in favour of equity. On the risk ladder, they fall
somewhere between equity and debt funds, depending on the fund’s debt-
equity spilt–the higher the equity holding, the higher the risk. Therefore,
they are a good option for Investors who would like greater returns than
from pure debt, and are willing to take on little more risk in the process.
f) Load or no-load Fund

A Load Fund is one that charges a percentage of NAV for entry or exit. That
is, each time one buys or sells units in the fund, a charge will be payable.
This charge is used by the mutual fund for marketing and distribution
expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit
load charged is 1%, then the investors who buy would be required to pay
Rs.10.10 and those who offer their units for repurchase to the mutual fund
will get only Rs.9.90 per unit. The investors should take the loads into
consideration while making investment as these affect their yields/returns.

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However, the investors should also consider the performance
track record and service standards of the mutual fund which are more
important. Efficient funds may give higher returns in spite of loads.
A no-load fund is one that does not charge for entry or exit. It means the
investors can enter the fund/scheme at NAV and no additional charges are
payable on purchase or sale of units.
RISK V/S. RETURN

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INVESTMENT STRATEGIES
1. Systematic Investment Plan:

An SIP is a method of investing a fixed sum, on a regular basis, in a Mutual
Fund scheme. It is similar to regular saving schemes like a recurring
deposit. A SIP allows one to buy units on a given date each month, so that
one can implement a saving plan for themselves. A SIP can be started with
as small as Rs. 500 per month in ELSS schemes to Rs. 100 per month in
diversified equity schemes.
2. Systematic Transfer Plan:

Systematic Transfer Plan (STP) is a facility wherein unit holders of
designated open-ended schemes of a Mutual Fund can opt to transfer a fixed
amount or capital appreciated amount (variable amount) at regular intervals
to another designated open-ended schemes of that Mutual Fund.
3. Systematic Withdrawal Plan:

The Systematic Withdrawal Plan allows the investor the facility to withdraw
pre-determined amount/units from his fund at a pre-determined interval.
The investor’s units will be redeemed at the applicable NAV as on that day.

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BENEFITS OF MUTUAL FUNDS
➢ SEBI Removes Entry Load for Mutual Funds
The entry load charged by fund houses has been abolished by the Securities
and Exchange Board of India (SEBI). As per the decision distributors will
now have to disclose their commission for the schemes. This decision gives
the investors the independence to decide on the commission payable to the
distributors. The absence of entry load and the introduction of the prevalent
trail commission structure could lead to a shift of focus from new fund
offerings to existing mutual fund schemes. It is expected to have a major
impact on the sales of the mutual funds in the short term. The decision is
also expected to instill transparency and prevent mis-selling by the
distributors. However on the flip side it is considered that the removal of the
upfront commission to the investors will impact the marketing of the mutual
funds in the smaller towns.
➢ Professional Management
Mutual Funds provide the services of experienced and skilled professionals,
backed by a dedicated investment research team that analyses the
performance and prospects of companies and selects suitable investments to
achieve the objectives of the scheme.

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➢ Diversification
Mutual Funds invest in a number of companies across a broad cross-section
of industries and sectors. This diversification reduces the risk because
seldom do all stocks decline at the same time and in the same proportion.
You achieve this diversification through a Mutual Fund with far less money
than you can do on your own.
➢ Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with
brokers and companies. Mutual Funds save your time and make investing
easy and convenient.
➢ Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a
higher return as they invest in a diversified basket of selected securities.
➢ Low Costs
Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in
brokerage, custodial and other fees translate into lower costs for investors.
➢ Liquidity
In open-end schemes, the investor gets the money back promptly at net
asset value related prices from the Mutual Fund. In closed-end schemes, the
units can be sold on a stock exchange at the prevailing market price or the

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investor can avail of the facility of direct repurchase at NAV
related prices by the Mutual Fund.
➢ Transparency
Investor get regular information on the value of your investment in addition
to disclosure on the specific investments made by your scheme, the
proportion invested in each class of assets and the fund manager's
investment strategy and outlook.
➢ Flexibility
Through features such as regular investment plans, regular withdrawal plans
and dividend reinvestment plans, you can systematically invest or withdraw
funds according to your needs and convenience.
➢ Affordability
Investors individually may lack sufficient funds 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. Choices of mutual
funds offer a family of scheme to suit your varying need of an individual
over a lifetime.
➢ 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.

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The operations of Mutual Funds are regularly monitored by
SEBI.
PERFORMANCE EVALUATION
PARAMETERS OF MUTUAL FUND EVALUATION:

 Risk
 Returns
 Liquidity
 Expense Ratio
 Composition of Portfolio
 Risks Associated With Mutual Funds
Investing in mutual funds as with any security, does not come without risk.
One of the most basic economic principles is that risk and reward are
directly correlated. In other words, the greater the potential risk, the greater
the potential return. The types of risk commonly associated with mutual
funds are:
➢ Interest Rate Risk

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It relates to the risk of reduction in the value of a
security due to changes in interest rates. Interest rate changes directly
affect bonds - as interest rates rise, the price of a previously issued bond
falls; conversely, when interest rates fall, bond prices increase. The
rationale is that a bond is a promise of a future stream of payments; an
investor will offer less for a bond that pays-out at a rate lower than the
rates offered in the current market. The opposite also is true. An investor
will pay a premium for a bond that pays interest at a rate higher than
those offered in the current market.
For instance,
a 10-year, Rs.1, 000 bond issued last year at a 4% interest rate is

less valuable today, when the interest rate has gone up to 6%.
Conversely, the same bond would be more valuable today if
interest rates had gone down to 2%.
➢ Market Risk:
Market risk relate to the market value of a security in the future. Market
prices fluctuate and are susceptible to economic and financial trends, supply
and demand, and many other factors that cannot be precisely predicted or
controlled.
Here's an illustration of the concept of market risk:

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Let's say you decide to buy a car. You can buy a brand-new
car under full warranty. Or you can buy a used car with no warranty. Your
choice will depend on a variety of factors, like how much money you want to
spend, which features you want, how mechanical you are, and, of course,
your risk tolerance. As you research different vehicles, you'll find that some
makes and models have better performance and repair histories than
others.
But whichever car you chose, you will face certain risks on the road which
have nothing to do with the car itself, but which can significantly impact
your driving experience - including the weather, road conditions, even
animals
crossing the highway at night. While these factors may be out of your
control, being aware of them can help prepare you to navigate them
successfully.
➢ Inflation Risk
It is the risk that general increases in prices of goods and services will
reduce the value of money, and likely negatively impact the value of
investments.
For instance,
Let’s say the price of a Tea increases from Rs.20 to Rs.40. In the
past, Rs.40 would buy two pack of bread but now Rs.40 can buy

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only one pack of Tea, resulting in a decline in purchasing power of
money.
Inflation reduces the purchasing power of money and therefore has a

negative impact on investments by reducing their value. This risk is also
referred to as Purchasing Power Risk. Inflation and Interest Rate risks are
closely related as interest rates generally go up with inflation. To keep pace
with inflation and compensate for loss of purchasing power, lenders will
demand increased interest rates.
However, one should note that inflation can be cyclical. During periods of
low inflation, new bonds will likely offer lower interest rates. During such
times, investors looking only at coupon rates may be attracted to investing
in low-grade junk bonds carrying coupon rates similar to the ones that were
offered by ordinary bonds during inflation period. Investors should be aware
that
such low-grade bonds, while they may to a certain extent compensate for
the low inflation, bear much higher risks.
➢ Political Risk
Changes in the tax laws, trade regulations, administered prices etc. is some
of the many political factors that create market risk. Although collectively,
as citizens, we have indirect control through the power of our vote,
individually as investors, we have virtually no control.

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➢ Business Risk
Business Risk is the uncertainty concerning the future existence, stability

and profitability of the issuer of the security. Business Risk is inherent in all
business ventures. The future financial stability of a company cannot be
predicted or guaranteed, nor can the price of its securities. Adverse changes
in business circumstances will reduce the market price of the company’s
equity resulting in proportionate fall in the NAV of mutual fund scheme,
which has invested in the equity of such a company.
➢ Economic Risk
Economic Risk involves uncertainty in the economy, which, in turn can have
an adverse effect on a company’s business. For instance, if monsoons fall in
a year, equity stocks of agriculture bases companies will fall and NAVs of
mutual funds, which have invested in such stocks, will fall proportionately.
There are 3 different methods with the help of which we can measure the
risk.
METHODS OF MEASURING RISK
 Standard Deviation(SD)
SD measures the fluctuations of a fund’s return around mean level. SD
basically gives you an idea of how volatile the earning are. SD can be
computed for both equity and debt fund. SDs of different fund can be

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compared with each other, or with SD of a market index or
even that of another category.
 Beta Coefficient
Beta relates a fund’s return with a market index and measures the
sensitivity of fund’s return to change in the market index. A beta of 1
indicates that the security`s price will move with the market. A beta of less
than 1 means that the security will be less volatile than the market. A beta
of greater than 1 indicates that the security`s price will be more volatile
than the market. Higher beta portfolios give greater returns in rising
markets and are riskier in falling markets. But Beta is based on past
performance, so it does not necessarily indicates future performance.
 R- Squared
R- Squared measures how much of a fund’s fluctuations is attributable to
movements in overall market, from 0 to 100 %. Clearly, an index fund will
have R- squared of nearly 100%. Non diversified funds will have lower
R- squared.
Overall Standard Deviation is the best measure of risk, even though it is also
based on past returns. It is a broader than beta that measures total risk, not
just market risk. Risk of both specialized and diversified funds, and both
equity and debt funds are measurable with SD.
RETURNS
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Returns have to be studied along with the risk. A fund could have earned
higher return than the benchmark. But such higher return may be
accompanied by high risk. Therefore, we have to compare funds with the
benchmarks, on a risk adjusted basis. William Sharpe created a metric for
fund performance, which enables the ranking of funds on a risk adjusted
basis.
✔ Sharpe ratio
The Sharpe ratio tells us whether a portfolio's returns are due to
smart investment decisions or a result of excess risk. This
measurement is very useful because although one portfolio or fund can
reap higher returns than its peers, it is only a good investment if those
higher returns do not come with too much additional risk. The greater
a portfolio's Sharpe ratio, the better its risk-adjusted performance has
been.
Sharpe Ratio = Risk Premium
Funds Standard Deviation
✔ Treynor ratio
A ratio developed by Jack Treynor that measures returns earned in excess of
that which could have been earned on a riskless investment per each unit of
market risks. In other words, the Treynor ratio is a risk-adjusted measure
of return based on systematic risk. It is similar to the Sharpe ratio, with the
difference being that the Treynor ratio uses beta as the measurement of
volatility. :
Treynor Ratio = Risk Premium

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Funds Beta
Risk Premium = Difference between the Fund’s Average return and Risk
free return on government security or treasury bill over a given period .
 LIQUIDITY
Most of the funds being sold today are open-ended. That is, investors can
sell their existing units, or buy new units, at any point of time, at prices that
are related to the NAV of the fund on the date of the transaction. Since
investors continuously enter and exit funds, funds are actually able to
provide liquidity to investors, even if the underlying markets, in which the
portfolio is invested, may not have the liquidity that the investor seeks.
 EXPENSE RATIO
Expense ratio is defined as the ratio of total expenses of the fund to the
average net assets of the fund. Expense ratio can actually understate the
total expenses, because brokerage paid on transactions of a fund are not
included in the expenses. According to the current SEBI norms, brokerage
commissions are capitalized and included in the cost of the transactions.
Expense ratio = Total Expenses

Average Net Assets
 COMPOSITION OF THE PORTFOLIO

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Credit quality of the portfolio is measured by looking at the credit ratings of
the investments in the portfolio. Mutual Fund fact sheets show the
composition of the portfolio and the investments in various asset classes
over time.
Portfolio turnover rate is the ratio of lesser of asset purchased or sold by

funds in the market to the net assets of the fund.
If Portfolio ratio is 100% means portfolio has been changed fully. When
Portfolio ratio is high means expense ratio is high.
Portfolio Ratio = Total Sales & Purchase

Net Assets of fund
What is Net Asset Value?
The net asset value (NAV) is the market value of the fund's underlying
securities. It is calculated at the end of the trading day. Any open-end funds
buy or sell order received on that day is traded based on the net asset value
calculated at the end of the day. The NAV per units is such Net Asset Value
divided by the number of outstanding units
Market Value of Assets - Liabilities
NAV = Units Outstanding

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TAX BANEFITS INVESTING IN MUTUAL FUNDS
a) Dividends Received From Mutual Fund

○ Income distributed by a fund is exempted in the hands of
investors.
○ No TDS on any income distribution by mutual fund
a) Capital Gains on Sale of Units
○ However ,if the investor sells his units and earns “Capital Gain”,
the investor is subject to the capital gain tax as under:
✔ If units are held for not more than 12 months, they will be
treated as short term capital asset, otherwise as long term
capital asset. (This period is 36 months for assets other
than shares and listed securities).
✔ Tax law definition of Capital Gains= Sale Consideration-
(cost of acquisition+ cost of improvements= cost of
transfer)
✔ If the units were held for over one year, the investor gets
the tax benefits of “Indexation”, which means his purchase
price is marked up by an inflation index, so his capital gain
amount is less than otherwise. Purchase price of a long
term capital asset after Indexation is computed as
Cost of acquisition or improvement=actual cost of acquisition or

improvement*cost inflation index for year of transfer / cost inflation index
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for year of acquisition or improvement or for 1981,
whichever is later.
a) Schemes for Capital Gains Tax Exemption
In accordance with Section 54EC of the I-T Act, Capital Gains on sale of
mutual fund units (or other capital asset), if long term in nature, are
exempt from tax,
○ if the entire amount of capital gain is invested in specified bonds

issued by NABARD, NHAI or Rural electrification Corporation
within 6 months of transfer of units. if the entire gain is not
invested then, only proportionate exemption would be available.
These units must then be held by the investor for at least 3
years from the date of their acquisition, and during this period,
he must not take a loan/advance against the security of such
units. If any of these conditions is violated, the amount of
exemption granted under this section shall lapse and the
investor will be charged the capital gains tax.
In accordance with Section54 ED of the I-Tact, Capital Gains on sale of

mutual fund units (or other listed security), if long term in nature are
exempted from tax to the extent such capital gains are invested in equity
shares issued by a company formed and registered in India and offered for

71 | P a g e
subscription to the public. Investment in such shares must
be made within 6 months of sale of original mutual fund units. These shares
are subject to a lock-in period of one year, i.e. they cannot be sold or
transferred during this period.
Example (54EC): An investor purchases mutual fund units on January1,

1995 for Rs. 10 lakhs. He sells them on February 15, 2001 for a net
consideration of Rs. 14 lakhs.
• Since the units were held for more than 1year, profit on sale will
be treated as long Term capital gain
• Long term capital gains on the transaction= Sales proceeds -
(purchase price * cost inflation index for 2000-01 / cost inflation
index for 1994-95)= 14,00,000-(10,00,000*351/259)= 44,788

(notional numbers used for cost inflation index)
Under Section 54 EC, he can claim exemption from capital gains tax subject
to the following conditions:
✔ He invests Rs. 44788, the long term capital gain, in NABARD,

NHAI or Rural Electrification Corporation bonds
✔ Investment in such bonds must be made within 6 months of
transfer of the units
✔ The bonds must be held by him for at least3 years from the date
of investment
✔ During this period of3 years, he should not take a loan/advance
against the security of the bonds

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In accordance with the amendment made by Finance Act
2000, a unit-holder has the option to pay tax on long term capital gains
arising out of the sale of mutual fund units at a rate that is determined using
one of the following methods:
○ At a flat rate of 10%on the capital gain without the benefit of

indexation, or
○ At 20%on the capital gain after building in the impact of indexation.
Plus applicable Surcharge and Education cess.
a) Securities Transaction Tax (STT)
The sale and purchase of units in equity -oriented scheme of Mutual Fund
are subject to STT at the prescribed rate.
b) In accordance with section (80C) of the IT Act.
As per this section an individual and HUF will be entitled to deduction up to

Rs 1 lakh in respect of payment/deposit out of taxable income towards
certain specified instruments which includes units of unit linked plans of
mutual funds and ELSS.
c) Wealth Tax
Ownership of units is not considered as 'wealth' under the Wealth Tax Act,
and is therefore not chargeable to wealth tax.
d) Registration in Foreign Countries

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India has signed favorable Double Taxation Avoidance
Agreements (DTAA) with certain selected certain foreign countries, whereby
capital gains earned by investors based in such countries are not chargeable
to tax in India. The purpose is to encourage investment in India routed
through these countries.
e) Special Provisions for Offshore Fund Investors, NRIs, OCBs and

FIIs
Under Section 195 of the Act the Mutual Fund is required to deduct tax at
source at the rate of 20% on any long term capital gains if the payee-unit
holder is a non resident. Short term capital gains tax is required to be
deducted at source at the rate of 30% if the payee-unit holder is a non-
resident non corporate and at the rate of 48% if the payee-unit holder is a
foreign company. Further, in case of unit holders other than a foreign
company, this tax deduction is required to be increased by a surcharge of
2% of such tax liability. As per CBDT circular No.715 dated August 8, 1995
in case of Resident unit holders, no tax is required to be deducted at source
from capital gains arising at the time of repurchase or redemption of the

units.
As per circular No. 728 dated October 30, 1995 issued by the Central Board
of Direct Taxes in case of a remittance to a country with which a Double
Taxation Avoidance Agreement is in force tax should be deducted at the rate
provided in the Finance Act of the relevant year or at the rate provided in
the DTAA whichever is more beneficial to the assesses. In order for the Unit
74 | P a g e
holder to obtain benefit of a lower rate available under a
DTAA the Unit holder will be required to provide the Mutual Fund with a
certificate obtained from his Assessing Officer stating his eligibility for the
lower rate.

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MAJOR PLAYER IN MUTUAL FUNDS INDUSTRY

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MAJOR PLAYER IN MUTUAL
FUNDS INDUSTRY
ABN AMRO Mutual Fund

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO
Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO
Asset Management (India) Ltd. was incorporated on November 4, 2003.
Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.
ABN AMRO Asset Management is headquartered in London and Amsterdam
with important units in Atlanta, Hong Kong, Chicago and Singapore. It
provides tailored investment management services to its clients.
Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund was setup on December 24, 1994. The sponsors
of Birla Mutual Fund are Birla Global Finance Limited and Sun Life (India)
AMC Investments Inc. Sun Life Financial Group of Companies is a financial
services organization headquartered in Toronto, Canada.
The AMC of Birla Sun Life Mutual Fund is Birla Sun Life Asset Management
Company Limited which was incorporated on September 5, 1994.

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The diversified schemes are as follows:
• Debt Schemes
• Balanced Schemes
• Offshore Schemes
• Investment Plans
• Gift Certificates
Bank of Baroda Mutual Fund
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30,
1992 under the sponsorship of Bank of Baroda. BOB Asset Management
Company Limited is the AMC of BOB Mutual Fund and was incorporated on
November 5, 1992. Deutsche Bank AG is the custodian.
BOB Asset Management Company Ltd. is a wholly owned subsidiary of Bank

of Baroda.
The products of BOB Mutual Fund are
• BOB Diversified Fund
• BOB ELSS'96
• BOB ELSS'97
• BOB Gilt Fund
• BOB Income Fund
• BOB Liquid Fund
• BOB Income Fund STP

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• BOB Balance Fund
• BOB Growth Fund
• GILT FUND - PF Plan
• BOB MIP Fund
• BOB NRI Fund
• BOB Children Fund
HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers
nemely Housing Development Finance Corporation Limited and Standard
Life Investments Limited.
The products of HDFC Mutual Fund are as follows:
• Equity Funds
• Balance Funds
• Debt Funds
Apart from this it also provides the following value added services:
• SIP (Systematic Investment Plan)
• STP (Systematic Transfer Plan)
• SWAP (Systematic Withdrawal Advantage Plan)
HSBC Mutual Fund

HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and
Capital Markets (India) Private Limited as the sponsor. Board of Trustees,
HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.

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The AMC is HSBC Asset Management (India) Private Ltd., incorporated on
December 12, 2001.
The products of HSBC Mutual Fund are:
• Equity Fund
• Cash Fund
• Gilt Fund
• Income Fund
• India Opportunities Fund
• MIP
• Floating Rate Fund
ING Vysya Mutual Fund

ING Vysya Mutual Fund was setup on February 11, 1999 with the same
named Trustee Company. It is a joint venture of Vysya and ING. The AMC,
ING Investment Management (India) Pvt. Ltd. was incorporated on April 6,
1998.
ICICI PRUDENTIAL Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. of America,
one of the largest life insurance companies in the US of A. Prudential ICICI
Mutual Fund was setup on 13th of October, 1993 with two sponsors,
Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential
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ICICI Trust Ltd. and the AMC is Prudential ICICI Asset
Management Company Limited incorporated on 22nd of June, 1993.
Prudential ICICI Mutual Fund is the first private sector mutual fund in India
to cross Rs. 10,000 crore mark in assets (figuare as on 30th November,
2002) and have won the trust of 5,50,000 investors.
The Prudential ICICI Mutual Fund is the second largest mutual fund player in
the private sector with assets in excess of Rs. 40 bn.
Sahara Mutual Fund

Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial
Corporation Ltd. as the sponsor. Sahara Asset Management Company
Private Limited incorporated on August 31, 1995 works as the AMC of
Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.
SBI Mutual Fund

SBI Mutual Fund is a fully owned subsidiary of the State Bank of India,
India's premier and highly respected bank with largest banking operation in
the country.
Tata Mutual Fund

Tata Mutual Fund was setup on June 30, 1995. The Asset Management
Company of Tata Mutual Fund is Tata Asset Management Limited,
incorporated on March 15, 1994. The Trustee is Tata Trustee Company
Private Limited. ABN AMRO Bank N.V. and Deutche Bank are the custodians

81 | P a g e
of Tata Mutual Fund.
Tata Asset Management Limited is one of the fastest growing fund

management companies in India. As on April 30, 2005, its asset under
management was Rs. 7,703 crores.
The products diversification of Tata Mutual Fund are as follows:
Equity products
• Tata Pure Equity Fund
• Tata Tax Saving Fund
• Tata Select Equity Fund
• Tata Life Sciences & Technology Fund
• Tata Equity Opportunities Fund
• Tata Index Fund
• Tata Growth Fund
• Tata Equity P/E Fund
• Tata Dividend Yield Fund
• Tata Infrastructure Fund
• Tata Service Industries Fund
Balanced products
• Tata Balanced Fund

• Tata Young Citizens' Fund
Debt products
• Tata Liquid Fund

• Tata Short Term Bond Fund

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• Tata Gilt Securities Fund
• Tata Income Fund
• Tata Income Plus Fund
• Tata Fixed Horizon Fund
• Tata Fixed Horizon Fund Series 1
• Tata Monthly Income Fund
Kotak Mahindra Mutual Fund

Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of
KMBL. It is presently having more than 1,99,818 investors in its various
schemes. KMAMC started its operations in December 1998. Kotak Mahindra
Mutual Fund offers schemes catering to investors with varying risk - return
profiles. It was the first company to launch dedicated gilt scheme investing
only in government securities.
Unit Trust of India Mutual Fund

UTI Asset Management Company Private Limited, established in Jan 14,
2003, manages the UTI Mutual Fund with the support of UTI Trustee
Company Privete Limited. UTI Asset Management Company presently
manages a corpus of over Rs.20000 Crore. The sponsorers of UTI Mutual
Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of
India (SBI), and Life Insurance Corporation of India (LIC). The schemes of
UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds,
Index Funds, Equity Funds and Balance Funds.

83 | P a g e
Reliance Mutual Fund
Reliance Mutual Fund (RMF) was established as trust under Indian Trusts
Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance
Capital Trustee Co. Limited is the Trustee. It was registered on June 30,
1995 as Reliance Capital Mutual Fund which was changed on March 11,
2004. Reliance Mutual Fund was formed for launching of various schemes
under which units are issued to the Public with a view to contribute to the
capital market and to provide investors the opportunities to make
investments in diversified securities.
Franklin Templeton India Mutual Fund

The group, Frnaklin Templeton Investments is a California (USA) based
company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is
one of the largest financial services groups in the world. Investors can buy
or sell the Mutual Fund through their financial advisor or through mail or
through their website. They have Open end Diversified Equity schemes,
Open end
Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving
schemes, Open end Income and Liquid schemes, Closed end Income
schemes and Open end Fund of Funds schemes to offer.
Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and its leading in
the market in securities, investmenty management and credit services.
Morgan Stanley Investment Management (MISM) was established in the

84 | P a g e
year 1975. It provides customized asset management
services and products to governments, corporations, pension funds and non-
profit organisations. Its services are also extended to high net worth
individuals and retail investors. In India it is known as Morgan Stanley
Investment Management Private Limited (MSIM India) and its AMC is
Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified
equity scheme serving the needs of Indian retail investors focussing on a
long-term capital appreciation.
Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15, 1996 with Excorts Finance
Limited as its sponsor. The Trustee Company is Escorts Investment Trust
Limited. Its AMC was incorporated on December 1, 1995 with the name
Escorts Asset Management Limited.
Alliance Capital Mutual Fund

Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance
Capital Management Corp. of Delaware (USA) as sponsorer. The Trustee is
ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset
Management India (Pvt) Ltd. with the corporate office in Mumbai.
Benchmark Mutual Fund

Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial
Services Pvt. Ltd. as the sponsorer and Benchmark Trustee Company Pvt.
Ltd. as the Trustee Company. Incorporated on October 16, 2000 and

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headquartered in Mumbai, Benchmark Asset Management
Company Pvt. Ltd. is the AMC.
Canbank Mutual Fund

Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank
acting as the sponsor. Canbank Investment Management Services Ltd.
incorporated on March 2, 1993 is the AMC. The Corporate Office of the AMC
is in Mumbai.
Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment &
Finance Company Ltd. was setup on January 3, 1997. Cholamandalam
Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC
Limited.
LIC Mutual Fund

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June
1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC
Mutual Fund was constituted as a Trust in accordance with the provisions of
the Indian Trust Act, 1882.The Company started its business on 29th April
1994.
The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog
Asset Management Company Ltd as the Investment Managers for LIC Mutual
Fund.

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GIC Mutual Fund
GIC Mutual Fund, sponsored by General Insurance Corporation of India
(GIC), a Government of India undertaking and the four Public Sector
General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The
New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC)
and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in
accordance with the provisions of the Indian Trusts Act, 1882.
Assets Under Management (AUM) as at the end of

MAY-2009
S. No Mutual Name Asset Under Management as

on May 2009 (Rs. Cr.)

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1 Reliance Mutual Fund 102,730
2 HDFC Mutual Fund 75,406
3 ICICI Prudential Mutual Fund 65,550
4 UTI Mutual Fund 63,438
5 Birla Sun Life Mutual Fund 56,586
6 SBI Mutual Fund 34,44
7 LIC Mutual Fund 28,599
8 Kotak Mahindra Mutual Fund 28,338
9 Franklin Templeton Mutual 23,618

Fund
10 21,305
Tata Mutual Fund
11 20,139
IDFC Mutual Fund
12 17,097
DSP BlackRock Mutual Fund
13 12,780
22 Deutsche Mutual Fund
14 12,413
Sundaram BNP Paribas MF
15 9,813
HSBC Mutual Fund
16 9,290
28 Religare Mutual Fund
17 8,601
Fidelity Mutual Fund
18 8,555
PRINCIPAL Mutual Fund
19 8,051
Canara Robeco Mutual Fund
20 7,381
Fortis Mutual Fund
21 7,012
JM Financial Mutual Fund

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22 JPMorgan Mutual Fund 3,956
23 Baroda Pioneer Mutual Fund 3,483
24 ING Mutual Fund 2,422
25 DBS Chola Mutual Fund 2,159
26 Morgan Stanley Mutual Fund 1,846
27 25 AIG Global Investment 1,521

Group MF
28 1,042
Benchmark Mutual Fund
29 597
Taurus Mutual Fund
30 272
Bharti AXA Mutual Fund
31 216
Mirae Asset Mutual Fund
32 196
Sahara Mutual Fund
33 193
Escorts Mutual Fund
34 60
Quantum Mutual Fund
35 21
Edelweiss Mutual Fund
639,130
Total

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Top 15 Equity Funds – Period (Last 12 months)

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Rank Scheme Name Date NA Last 12 Months %
V
(Rs
.)
1 Sundaram BNP Paribas Financial Jun 10 13. 29.6211
Services Opportunities Fund - Retails - , 2009 233
Growth 7
2 Reliance Banking Fund - Growth Jun 10 60. 24.2706

, 2009 607
3
3 IDFC Small & Midcap Equity Fund - Jun 10 11. 23.4719
Growth , 2009 426
4
4 Birla Sun Life Pure Value Fund - Jun 10 11. 22.0529
Growth , 2009 380
7
5 Sahara Infrastructure Fund - Variable Jun 10 15. 21.2487
Pricing - Growth , 2009 495
7
6 Sahara Infrastructure Fund - Fixed Jun 10 15. 20.3514
Pricing - Growth , 2009 157
3
7 UTI Thematic Banking Sector Fund - Jun 10 26. 20.2485
Growth , 2009 78
8 Birla Sun Life Dividend Yield Plus - Jun 10 53. 19.6799

Growth , 2009 09
9 Sahara Growth Fund - Growth Jun 10 68. 18.1786

, 2009 719
8
10 JM Mid Cap Fund - Growth Jun 10 20. 16.9359
, 2009 144
2
11 UTI Opportunities Fund - Growth Jun 10 20 16.2915
, 2009
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12 Sahara Taxgain - Growth Jun 10 26. 16.2537
, 2009 857
5
13 HDFC Top 200 - Growth Jun 10 147 16.2367
, 2009 .63
8
14 Reliance Pharma Fund - Growth Jun 10 26. 15.4775
, 2009 605
3
15 ING Contra Fund - Growth Jun 10 13. 15.4368
, 2009 61

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Top 15 Debt Funds - Period (Last 12
Months)
Rank Scheme Name Date NAV Last 12

(Rs.) Months %
1 Canara Robeco Income Scheme - Growth Jun 10 , 2009 18.8916 30.6292
2 Reliance Monthly Income Plan - Growth Jun 10 , 2009 18.0214 25.4067
3 ICICI Prudential Income Fund -Growth Jun 10 , 2009 29.0923 23.3317
4 Kotak Twin Advantage Fund - Series II - Jun 8 , 2009 13.3472 20.148

Growth
5 Canara Robeco CIGO - Growth Jun 10 , 2009 25.83 20.1395
6 Birla Sun Life MIP - Savings 5 - Growth Jun 10 , 2009 15.6728 20.0788
7 Fortis Flexi Debt Fund - Growth Jun 10 , 2009 15.3372 19.7022
8 Reliance Income Fund - Retail - Growth Jun 10 , 2009 29.9583 17.3591

Plan - Growth
9 Kotak Bond Regular Plan - Growth Jun 10 , 2009 25.3655 17.3302
10 IDFC Dynamic Bond Fund - Plan A - Jun 10 , 2009 18.0191 17.2622

Growth
11 HDFC Monthly Income Plan - Long Term Jun 10 , 2009 18.7451 17.1898
Plan - Growth
12 Sahara Classic Fund - Growth Jun 10 , 2009 12.1373 17.1181
13 Kotak Bond Deposit - Growth Jun 10 , 2009 23.6208 16.9271
14 Birla Sun Life Income Plus - Growth Jun 10 , 2009 40.6119 16.7696

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15 ING Income Fund - Regular Plan - Growth Jun 10 , 2009 23.8533 16.6535
Top 15 Balance Funds – Period (Last 12 months)
Rank Scheme Name Date NAV Last 12

(Rs.) Months %
1 Reliance Regular Savings Fund - Balanced - Jun 10 , 2009 16.3028 20.6585
Growth
2 Birla Sun Life 95 - Growth Jun 10 , 2009 230.19 17.4259
3 Canara Robeco Balance - Growth Jun 10 , 2009 45.73 14.2679
4 HDFC Balanced Fund - Growth Jun 10 , 2009 36.943 11.0834
5 Franklin Templeton India Balanced Fund - Jun 10 , 2009 40.4233 10.9625
Growth
6 HDFC Prudence Fund - Growth Jun 10 , 2009 137.774 10.8976
7 Birla Sun Life Freedom Fund - Growth Jun 10 , 2009 32.2 8.8941
8 UTI Balanced Fund - Growth Jun 10 , 2009 62.8 7.4682
9 SBI Magnum Balanced Fund - Growth Jun 10 , 2009 42.05 7.3133
10 DSP BlackRock Balanced Fund - Growth Jun 10 , 2009 49.379 6.5972
11 Tata Balanced Fund - Growth Jun 10 , 2009 60.9672 5.3812
12 Sundaram BNP Paribas Balanced Fund - Jun 10 , 2009 38.1312 5.0153
Growth
13 LIC Balanced - Plan C (Growth) Jun 10 , 2009 50.3595 4.2062
14 Kotak Balance - Growth Jun 10 , 2009 21.546 2.9284
15 PRINCIPAL Balanced Fund - Growth Jun 10 , 2009 25.43 2.3256

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FUTURE OF MUTUAL FUNDS IN INDIA
By December 2004, Indian mutual fund industry reached

Rs 1, 50, 537 crore. It is estimated that by 2010 March-end, the total assets
of all scheduled commercial banks should be Rs 40, 90,000 crore.
The annual composite rate of growth is expected 13.4% during the rest of
the decade. In the last 5 years we have seen annual growth rate of 9%.
According to the current growth rate, by year 2010, mutual fund assets will
be double.
Some facts for the growth of mutual funds in India

 100% growth in the last 6 years.
 Number of foreign AMC's are in the que to enter the Indian markets
like Fidelity Investments, US based, with over US$1trillion assets
under management worldwide.
 Our saving rate is over 23%, highest in the world. Only channelizing
these savings in mutual funds sector is required.
 We have approximately 29 mutual funds which is much less than US

having more than 800. There is a big scope for expansion.
 'B' and 'C' class cities are growing rapidly. Today most of the mutual
funds are concentrating on the 'A' class cities. Soon they will find
scope in the growing cities.

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 Mutual fund can penetrate rurals like the Indian
insurance industry with simple and limited products.
 SEBI allowing the MF's to launch commodity mutual funds.
 Emphasis on better corporate governance.
 Trying to curb the late trading practices.
MARKETING STRATEGY ADOPTED

BY MUTUAL FUND COMPANIES
DIFFERENT METHODS OF SALES OF MUTUAL FUND
1. Get in touch with Customers

Various AMC directly contact the customers through various database. Then
the AMC convince the client to invest in their mutual fund. Many of the times
due to promotion the customers also contact AMC for investment.
2. Online Investment
Some mutual fund Web sites allow customers to invest online. However, the
customer must have an account with the banks AMC have partnered with.
For example, Prudential ICICI Mutual Fund allows customers to buy funds
online if he has a banking account with any of the following banks:
Centurion Bank, HDFC Bank, ICICI Bank, IDBI Bank and UTI Bank.
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3. Through Distributors
Each AMCs sell its products through various distribution channels. The
distributor in turn gets a variable commission from the AMC.The distributor
have a client base of their own in which they promote the mutual fund.
Some of the major distributors are listed below:
• Indiainfoline Limited
• Karvy
• Sherkhan
• Religare
• Blue Chip India Limited
4 .Through Banks
Some of the AMCs are sister concern of the bank example Prudential ICICI
Mutual Fund is a sister concern of ICICI BANK. These AMCs aggressively
promote their mutual fund to their client and develop a interest in them to
invest in mutual fund in order to get higher returns.
5. Through online finance portals
Some of the AMCs sell their Mutual Fund through online trading
account example ICICI Direct sell funds online through online trading
account. But the client must have a trading account with them. Some of the
AMCs which sell their product through online trading accounts are:

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• HDFC Securities
• ICICI Direct
• Kotak Street
METHODS ADOPTED BY AMCs PROMOTION

AND CAMPAIGNING OF MUTUAL FUNDS
1) Through Advertisement
Each AMCs spends a lot of money in order to advertise for its Mutual Fund.
The amount spend is high in case New Fund Offers i.e NFOs. Various
mediums of advertisement use are given below:
Television
Radio
Print Media
Hoardings
2) Online Blogs:
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Various AMC’s promote their product through online blogs.
They advertise their product on various online sites.
3) Telephonic Calls:
Almost all the distributors promote the Mutual Fund with the help of
telephone. They have the phone numbers of existing clients and potential
clients. A trained person makes a call to the clients and promotes the Mutual
Fund.
4) By Providing More Commission to Distributors:

The distributor gets a variable commission from the AMC when they sell
their Mutual Fund. The commission varies from 0.5% to 5%. Thus by
providing more commission to the distributor, the AMCs influence the
distributor to promote their products only.
5) By Putting Canopies:
This method is adopted by both distributor and AMCs in order to campaign
for the product. They put canopy at a place where they could interact with
maximum number of probable clients.

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MARKET
STUDY

102 | P a g e
STUDY AND SURVEY
Objective
This study is conducted in order to find out:-
➢ To study Mutual Fund industry in detail

➢ Current trends of mutual funds in the Indian market.
➢ Investor’s perception towards mutual funds as an investment option.
➢ Different views of professional advisors.
RESEARCH METHODOLOGY
I decided to do the project in two parts. The first part of the project deals
with Mutual Fund as a whole and the second part deals with the investor
perception regarding their investment preferences about investment in
Mutual Fund.
The first part of the project i.e. descriptive study comprising an overall
study of Mutual fund as what it is, why to invest and where to invest, risk
factor associated with it i.e. an overview of whole Mutual Fund industry.

103 | P a g e
The second part of the project that is related to Mutual
Fund and its prospects as an investment option in India and investor
perception about investment in Mutual Funds available in market. Indian
Stock market has undergone tremendous changes over the years.
Investment in Mutual Fund has become a major alternative among
Investors. The project has been
carried out to understand investors perception about Mutual Funds in the

context of their trading preference and explore investor`s risk perception.
The first part of the project relating the study of Mutual Funds is
collected through secondary data obtained from internet, newspaper,
magazines whereas the second par relating the Mutual Fund and its
prospects as an investment option in India and investor perception about
investment in Mutual Funds is covered using primary data.
Source of data collection

Both primary and secondary data are required
Primary data is the first hand information collected directly from

respondents. The tool used here is questionnaire. Primary Data is collected
through survey among existing clients along with other investors.

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The responses collected during the exercise are represented
through bar graphs, pie charts and line graphs. Graphical representation
helped to have a comparative outlook as it is easier to make comparison by
having a glance at the picture than comparing on the basis of quantitative
data. With the help of these diagrams the analysis regarding the study was
conducted in order to achieve the desired objectives of the study.
The analysis is done by considering following 4 parameters:
➢ General Analysis
➢ Age-wise Analysis
➢ Income-wise Analysis
➢ Occupation-wise Analysis
Secondary data is collected through internet, newspaper, magazines
DATA ANALYSIS
AND
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INTERPRETATION
ANALYSIS & INTERPRETATION OF THE
DATA
General Analysis
In this part of the analysis we take all the respondents as one group without
segregating them into subgroups.

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Observations
Among the 50 respondents, maximum respondents are from age group
26-40yrs they cover around 34% of total population. This is because people
in this age group are more responsive. And 22% of populations are from 18-
25 age group, 28% are from 41-55 age group and least population from 56-
65 age group I.e., 16%.
Occupation wise distribution of sample
Observations
Out of total 50 respondents 40% are in private service and 28% of them are
in business, 24% of the total pie is owned by the government servant and
retired hold the least i.e 8% of the total sample size.
Income Breakup
Out of total 50 respondents, respondents are mostly from 3-5 lacs income
bracket, 24% of total populations are from 1.5-3lacs bracket and 14% of of
respondents earning income above 7 lacs.
Earlier investment
Observations

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In general it is observed that 96% of the population is
involved in investment. That is, there is only 4% of the population which is
not involved in investment.
From this we can conclude only 4% of the population is unaware of available

investment option. That is, very small part of our population is having low
level of knowledge regarding investments.
Investment Avenue
Observations
Almost all respondents were aware of Fixed Deposit and when it comes to
investing in this product, 23% of the people actually invested in this option,
which is greater than any other investment option.
Only 9% people invest in ULIPs this may be due to the fact that people are
unaware this product provides both the benefits of insurance cover as well

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as investment. 16% people preferred investing in insurance.
18% people invest in Mutual funds, which is high in comparison to ULIPs,
which means in India Mutual Fund industry has tremendous scope to
expand.
13% of the respondents have invested in Real Estate, which may be due to
the fact that it tends to give positive returns even when it has very less
liquidity.
With the recovery of the market, people have started investing in share
market and14% of the respondents invest in this option. And 7% people
have invested in gold.
Investment Objective
Observations
It is observed that 46% people invests with objective of long term gain,
24% people have children’s future as their investment objective as the cost
of living and higher education is rising day by day.20% people investments
for requirements after retirement and 10% have other investment objectives
which may be for special purposes or personal needs..

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Risk taking capacity
Observations
Higher the risk, the more is the profit. People need to take risk to enjoy the
benefits. Some investors want to play safe and this is the reason they invest
in mutual fund, as it gives a minimum security and gives high returns as
compared to its traditional counterparts.
Most of people would like to take medium risk. 30% of respondents like to
take low risk in the mutual fund investment. Most of these people look to
invest in SIP and balanced funds because they want to assured returns with
low risk. Around 20% of investors go in for are high risk. These groups of
respondent are mostly of young age and plan well for the risk.
Expected rate of return
Observations
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From the graph it is observed that 28% people expect 20%-
30% return on their investments, 38% expect 10%-20% return, 26%
expect less than 10% return, 8% expect above 30% interest.
So, we can say that maximum number of people wants 10%-20% return on
their investments.
Parameter of investment
Observations
From 50 respondents, 42% of people prefers safety of capital, these people
generally like to invested in Fixed deposited, bonds and they are moderate
risk takers.28% of people like to take tax benefits from their investments
they generally invests in ULIPS, Mutual funds because in ULIP get tax
benefits under section 80C.16% of people wants life cover,10% of people

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like regular income from investments. And only 4% wants
flexibility in investment.

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Tenure of investment
Observations
The investment period is very important to increase the profits. The smart
investor decides it in advance for how much time he would be keeping his
money in the market and when he should leave squaring-up. Mostly (44%)
they invest for more than 2 years to get maximum benefits. Only 2% of the
total respondents want to invest for the period of less than 3 months, 24%
of the respondents want to invest for the period of 3 to 9 months. And 30%
of the respondents want to invest for 10 months to 2 years.
Withdrawal in-between
Observations

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From a 50 respondents 72% of people withdrawal in
between a period of investment. And 28% of respondents expect that they
will not need to withdraw money in between the investment tenure.
Factors influencing investing in Mutual Fund
Observations
There are many factors which influence the investment decision of the
investors. It may be the current news (political, technological, financial,
etc.), magazines, friends ,etc. in the study it is proved that many people
trust the brokers most for the investment decisions. The Self-Evaluation is
the next major factor. Reviews from financial Magazines and current news
also matters. Any bad news can make a person change his /her decision.

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Around 36% of the investor depends on the brokers for
their investment decisions. Around 26% people depend on their individual
and self evaluation for investing in the mutual funds. 12% of people take
reviews from financial magazines and 10% from friends.
Type of Mutual Fund
Observations
The schemes offered in the market are of two types, closed ended and open
ended. The more demand was for the closed ended funds with the locking
period of around 2-3 years. Around 62% of the investors go in for the closed
ended scheme and 38% of the investors go for the open ended funds.

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Age-wise Analysis
Here, people are divided into subgroups on the basis of their age. People
belonging to different age groups have different preferences due to their
experience and mindset. They are analyzed on basis of age; this will help us
to find how age affects the investment strategy of the investors.
For analyzing the data age wise following four categories of age was made:
✔ 18-25 years
✔ 26-40 years
✔ 41-55 years
✔ 56-65 years
In a sample, 34% lies in 26-40 category, 22% people are in age-group 18-
25, 28% are 41-55 age and 16% people lies in age group 56-65.

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Relation between age and earlier investment
Observations
➢ 18-25
In the survey, nine people of this age group are involved in investment. This
may be due to highly active and well aware present generation. And only 2
people have not yet made any investment. This may be due to low earning,
no earning or lack of knowledge.
➢ 26-40
In this age group everybody, start earning and as a result they also start
investing their money to meet the future financial needs. In this age group
people has already made an earlier investment.
➢ 41-55
In this age-group, everybody is well aware and is involved in investments, either
small or large.
➢ 56-65
At this age, everybody has been into investments for one or the other
reason. This is due to fact that investments are part of saving and at this
age almost everybody realizes the importance of savings.
Relation between age and investment Options
Observations
➢ 18-25 years

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At this age, people mostly choose Mutual Fund and closely
followed by real estate, as their investment option. Then few people go for
insurance, shares, fixed deposit and 3 out 11 people opt Gold.
➢ 26-40 years
In this group, a person mostly makes investments in fixed deposits. Eleven
respondents make investment in Insurance and ten respondents are
involved in shares. Eight people invest in ULIPs and least preferable
investment option in this age group is Gold.
➢ 41-55 years
This age group also shows the similar trend with fixed deposits being the
most favored investment option followed by mutual funds. In this age group,
5 people invest in shares and same number of people invests in Insurance.
And three respondents take interest in Real Estate.
➢ 56-65 years
In this group also, fixed deposit is the most preferred investment option,
followed closely by real estate and mutual funds
Relation between age and investment objective
Observations
➢ 18-25 years
In this age group, around 63% of people invest for Long Term Gains. This
may be due to Greater awareness and knowledge level of Young people in
today’s scenario. However, they also plan for the retirement.
➢ 26-40 years
In this age group, eight people invest for children’s future, and five people
invest for their retirement. At this age, only four people have long term gain
as an investment objective.
➢ 41-55 years

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Long term gain remains the major objective in this age
group and few people have retirement, children’s future as an investment
objective.
➢ 56-65 years
Some specific personal needs becomes the most important objective of the
people falling under this age group, followed closely by long term gain
Relation between age and Risk taking capacity
Observations
➢ 18-25 years
One thing is quiet clear that low and high risk takers are in minority, age
has very little significance. Majority of youngsters tend to put themselves in
moderate risk return profile.
➢ 26-40 years
As the age increases the income of the people increases, but still majority of
respondents wanted to invest in medium risk return profile, however the
number of people taking high risk increases.
➢ 41-55 years
In this age group, nine people have Medium risk taking capacity. Five people
have Low risk taking tendency and none in high risk profile.
➢ 56-65 years
At this age group, number of medium risk taker people decreases, Four
people have Low risk taking capacity and none in high risk profile.
Relation between age and Expected rate of return

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Observations
➢ 18-25 years
Majority of respondents under this age group expect a return of more than
30%, closely followed by respondents who expect a return of 20-30%. Equal
numbers of respondents expect a return of 10-20% as those expecting a
return of more than 30%, whereas none of them expect a return of less
than 10%.
➢ 26-40 years
6 out of 17 respondents of this age group expect a return of more than 30%
and equal number of respondents expects a return of 20-30% and 10-20%,
whereas only one respondent expect a return of less than 10%.
➢ 41-55 years
2 out of 17 respondents of this age group expect a return of more than 30%
and 7 respondents expects a return of 20-30% , 3 respondents expect a
return of 10-20%, whereas only 2 respondents expect a return of less than
10%.
➢ 56-65 years
Equal numbers of respondents of this age group expect a return of less than
10% and 10-20%, followed by an investor each who expects a return of 20-
30% and more than 30%.
Relation between age and parameter governing investment
Observations
➢ 18-25 years
In this age group equal numbers of respondents i.e. 4 respondents prefer

safety of capital and tax saving parameter while investment. And two

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respondents want life cover from investment, an individual
prefer flexibility in investment.
➢ 26-40 years
In this age group maximum people prefer safety of capital and closely
followed by tax saving. In this age group number of people prefers life cover
increases and only one person want regular income from investment.
➢ 41-55 years
In this age group also maximum people prefer safety of capital. In this age
group tax saving people decreases and only one person want regular income
from investment.
➢ 56-65 years
In this age group also maximum people prefer life cover and regular income
as most of people retired in this age group, they need regular income. And
two respondents prefer tax saving parameter while investment.

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Relation between age and tenure of investment
Observations
➢ 18-25 years
In this age group maximum respondent invest for a period of more than 2
years; respondents feel that their investment would double at the prevalent rate of
return. Four people invest for a period of 10months-2 years and only two people
invest for a period of 3–9 months. In this age group no one is interested in
investment tenure of less than 3 months.
➢ 26-40 years

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In this age group number of people who invest for a period
of more than 2 year increases as compared to age group 18-25. And three
people prefer to invest their money for a period of 10 months- 2 years. Only
one person invests for a period of 3-9 months in this age group.
➢ 41-55 years
In this age group maximum respondents invest for a period of 3-9 months,
which may be due to the fact that most of the responsibilities are to be
fulfilled in this age. And in this age group number of people who invest for a
period of more than 2 year decreases as compared to age group 26-40.
Three respondents made investment for a period of 10 months -2 year and a
respondent invest for period of less than 3 months.
➢ 56-65 years
In this age group maximum respondents invest for a period of 10 months-2
year. In this age group number of people who invest for a period of 3-9
months decreases as compared to age group 41-55 and one respondent
invest for a period of more than 2 years.

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Relation between age and expected withdrawal during the tenure of
investment
Observations
➢ 18-25 years
Only one person of this age group withdraws in between the tenure. And
rests are quite sure that they will not withdraw in between the tenure,
because they do not have much financial liability.
➢ 26-40 years
In this age group number of people who do not withdraw in between the
tenure decreases as compared to age group 18-25. And fourteen
respondents withdraw in between the tenure.
➢ 41-55 years

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In this age group no one withdraw in between the tenure.
➢ 56-65 years
In this age group number of people who do not withdraw in between the
tenure decreases as compared to age group 41-55. And seven people
withdraw in between the tenure.
Relation between age and factor influencing investing in Mutual

Fund
Observations
➢ 18-25 years
In this age group 3 out of 7 people take broker advice. Two respondents
take decisions by self evaluating and same number of respondent influence
by other factors.
➢ 26-40 years
In this age group 2 out of 5 people take decision their own. And rest of
people influence by news, broker’s advice and other factors.
➢ 41-55 years
In this age group maximum respondent decisions are influence by news.
Two respondents take brokers advice and one person is decision influence
by other factor.
➢ 56-65 years
In this age group maximum decision are influence by broker’s advice and
self evaluate. And one person decision is influence by other factor.
Relation between age and type of Mutual Fund

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Observations
➢ 18-25 years
In this age group 5 out of 7 people prefer closed ended funds. Only two
people prefer open ended funds.
➢ 26-40 years
In this age group number of people who prefer closed ended fund decrease
as compared to age group 18-25. And two people prefer open ended funds.
➢ 41-55 years
In this age group number of people who prefer closed ended fund increases
as compared to age group 26-40. In this age group number of people who
prefer open ended fund increases as compared to age group 26-40.
➢ 56-65 years
In this age group number of people who prefer closed ended fund decreases
as compared to age group 41-55. And number of people who prefer open
ended fund also decreases as compared to age group 41-55.
INCOME WISE ANALYSIS
Here, categorization is done on the basis of annual income. People follow

different investment patterns based on their incomes. So, to have a clear
understanding of investment patterns income-wise analysis is done.
Four categories considered are:
➢ 1.5-3 lacs
➢ 3-5 lacs
➢ 5-7 lacs
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➢ Above 7 lacs
In a sample, 24% lies in subgroup of 1.5lacs-3lacs, 38% people are in sub-

group of 3-5 lacs, 24% are category of 5-7 lacs and 14% people lies in sub-
group of above 7lacs.
Relation between Income and earlier investment
Observations
➢ 1.5-3 lacs
In this income group ten people involved in investment. Only two people
have not yet made any investment. This may be due to low earning or no
earning.
➢ 3-5 lacs
In this income group 100% population is involved in investments.
➢ 5-7 lacs
In this income group 100% population is involved in investments. But
number of people who are involved in earlier investment decreases as
compared to income group 3-5 lacs.
➢ Above 7 lacs
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At this level of earning, almost everybody has been into
investments for one or the other reason. This is due to fact that investments
are part of saving and with this much earning almost everybody has a view
of earning by savings.
Relation between Income and earlier investment
Observations
➢ 1.5-3 lacs
In this income group, investors mostly choose fixed deposits and insurance
as their investment option. Then 3 people go for shares and same number of
people invests in mutual fund. 2 people go for gold as an investment and
same number of people invests in ULIPs and real estate.
➢ 3-5 lacs
In this group, a people mostly make investments in fixed deposits and
mutual fund. This may be because of the fact that in fixed deposits return is
sure. 9 people invest in insurance. 7 people make investments in ULIPS and
6 people are involved in Shares. 5 people invest in gold and 4 people in real
estate.
➢ 5-7 lacs
In this group, a people mostly make investments in fixed deposits and
insurance. In this group, 8 people invest in real estate. 6 people invest in
share, 5 people invests in mutual fund. 3 people take interest in ULIPS and
same number of people invests in gold also.
➢ Above 7 lacs

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In this income-group, 6 people invest in mutual fund. 5
people takes interest in Real Estate, share and FD. 2 people take interest in
ULIPS and 1 person in insurance.

129 | P a g e
Relation between Income and investment objective
Observations
➢ 1.5-3 lacs
In this group, 6 people invest for long term gains, 3 people invest for
children’s future, and only 2 people invest for retirement this may be due to
their lower earning.
➢ 3-5 lacs
In this group, maximum people invest for long term gains, 6 people have
children’s future as their investment objective and 3 people invest for their
Retirement.
➢ 5-7 lacs
Maximum numbers of people of this group have long term gains as their
investment objective. 4 people invest for children’s futures as their
objective. One person invests for retirement.
➢ Above 7 lacs
In this group 3 out of 7 people have Long Term Gains as their investment
objective, 2 people have retirement as their investment objective. And rest
invests for children’s future.
Relation between Income and risk taking capacity
Observations
➢ 1.5-3 lacs

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In this income group, mostly people have low risk taking
capacity, two people have low medium risk taking capacity and only one
person have High risk taking capacity.
➢ 3-5 lacs
In this group, twelve people have medium risk taking capacity. 4 people
have low risk taking capacity and only 3 people have High risk taking
capacity. This may be due to fact that people of this income group want
growth with surety.
➢ 5-7 lacs
In this group, numbers of people have Medium risk taking capacity
decreases as compared to 3-5 lacs income group. Numbers of people have
high risk taking tendency increases as compared to 3-5 lacs income group.
And only two people have low risk taking capacity.
➢ Above 7 lacs
In this income group, five people have medium risk taking capacity. And two
people have high risk taking capacity.
Relation between Income and expected rate of return
Observations
➢ 1.5-3 lacs
Seven people expect less than 10% returns, four people expect 10%-20%
returns, and one person expects more than 30% interest.
➢ 3-5 lacs
Ten people expect 10%- 20% returns, four people expect less than 10%
returns, three people expect 20%-30%-interest, and two people expect
above 30% rate of interest.
➢ 5-7 lacs

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In this income group maximum people expect 20%-30%
returns, and rest of people expect 10%-20%, less than 10% return on
investment.
➢ Above 7 lacs
In this income group maximum people expect 20-30% and 10-20% returns.
Only one person expects less than 10% return on investment.
Relation between Income and parameter governing investment
Observations
➢ 1.5-3 lacs
In this income group maximum people prefer safety of capital, two people
prefer life cover and same number of people prefers regular income from
investment. One person wants tax benefits from investment.
➢ 3-5 lacs
In this income group maximum people prefer safety of capital, four people
like flexibility and same number of people prefer life cover from investment.
And only two people want regular income from investment.
➢ 5-7 lacs
In this group maximum people prefer tax benefits and safety of capital. And
one person prefers life cover from investment.
➢ Above 7 lacs
In this group number of people who prefers tax benefits decreases as
compared to 5-7 lacs income group. Number of people who prefers safety of

132 | P a g e
capital also decreases as compared to 5-7 lacs income
group. Only one person wants life cover.
Relation between Income and tenure of investment
Observations
➢ 1.5-3 lacs
In this income group, five people invest for period of 3-9 months followed by
four people invest for period of 10months- two years. Only two people invest
for period of more than 2 years and one person invests for period of less
than 3 months.
➢ 3-5 lacs
In this income group maximum people invests for period of 10 months-2
years followed by more than 2 years and four people invests for period of 3-
9 months.
➢ 5-7 lacs
In this income group maximum people invests for period of more than 2
years. Decline in number of people invest for period of 10 months- 2 years
and 3-9 months.
➢ Above 7 lacs
In this income group five people invest for period of more than 2 years and
only one person for 3-9 months.
Relation between Income and Expected Withdrawal during the

tenure of investment

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Observations
➢ 1.5-3 lacs
Eight people of this group expect withdraws in between the tenure. And
rests are quite sure that they will not withdraw in between the tenure of
investment.
➢ 3-5 lacs
This group shows increase in number of people who withdraw between the
tenure. And seven people do not expect withdrawal in between the tenure of
investment.
➢ 5-7 lacs
Here, decline in number of people who expect withdrawals and do not
expect withdrawals during the tenure of investment.
➢ Above 7 lacs
In this income group, all respondents withdraw during the tenure of
investment.
Relation between income and factor influencing investing in Mutual

Fund
Observations
➢ 1.5-3 lacs
In this income group people take their decision by self evaluating market
conditions.
➢ 3-5 lacs

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In this income group maximum people influence by news
and followed by broker’s advice, only three people take their decision by self
evaluating market conditions.
➢ 5-7 lacs
In this income group maximum people influenced news and other factors.
Only one respondent take brokers advice.
➢ Above 7 lacs
In this income group, two people influence by news and one person by
brokers advice.
Relation between income and type of Mutual Fund
Observations
➢ 1.5-3 lacs
In this group two people prefer open ended funds and one person prefers
closed ended funds.
➢ 3-5 lacs
This group shows increase in both type of mutual fund.
➢ 5-7 lacs
This group shows decline in both type of mutual fund.
➢ Above 7 lacs
In this income group three people prefers closed ended and same number of
people prefers open ended funds

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OCCUPATION WISE ANALYSIS:-
In this analysis we will analyze all the attributes on the basis of the
occupation of the respondents. This will help us to find how occupation
affects the investment strategy of the investors.
Different occupational groups show different result and trends as the need of
the person varies largely with different occupations. For the occupation wise
analysis of the data, following four categories of age was made:-
➢ Private employee
➢ Government employee
➢ Business
➢ Retired
In a sample of 50 people, 40% are Pvt. Employee, 28% people are in

Business, 24% are Govt. Employee, and 8% are Retired.
Relation between occupation and earlier investment

136 | P a g e
Observations
➢ Business
In this group, everybody has been into investments. This is due to fact that
investments are part of saving and Businessman has no other way to make
savings for his future prospects.
➢ Govt. Employee
In this group, almost everybody is well is involved in investments, either
small or large. This may be due to fact that all Govt. organizations provide
investments schemes for which deductions are made from salary. Only one
person does not involve in any investment.
➢ Pvt. Employee
In this group, 19 out of 20 people is involved in investments. Only one
person of this group is not into investments. This may be due to higher
expenses than earnings.
➢ Retired
Even in this group, everybody has made investments. This is due to fact that
being retired they have no other source of income except investments which
they must have made earlier.
Relation between occupation and investment Options
Observations
➢ Business
In this group, eleven people invest in FD, eight people invest in Shares,
seven people invest in mutual fund, six people equally invest in real estate
and ULIPs. Insurance is taken by four people and one person is interested in
gold.
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➢ Govt. Employee
In this group, maximum people invest in FD and insurance, followed by six
people invest in mutual fund, four people in shares, three people in real
estate and two people each invested in ULIPs and gold.
➢ Pvt. Employee
In this group, a people mostly make investments in FD, and closely followed
by insurance and mutual fund. Eight people are involved in share and same
number of people involved in real estate. And six people invests in gold, four
invest in ULIPs.
➢ Retired
In this group, maximum people invested in Fixed Deposit and Mutual Fund.
Relation between occupation and investment objective
Observations
➢ Business
In this group eight people have long term gain as their investment objective.
And remaining take equal interest in both Retirement and children’s future.
➢ Govt. Employee
Four people of this group have long term gain as their investment objective
and same numbers of people have retirement as their objective. 3 out of 12
people have children’s future as an investment objective. Only one has other
objective of investment.
➢ Pvt. Employee
In this group, number of people who have long term gain and children’s
futures as an investment objective increases. Three people have retirement
as their investment objective.
➢ Retired
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This group shows decline in number of people who have long
term gain and children’s futures as their investment objective. Only two
people of this group have other investment objective.
Relation between occupation and risk taking capacity
Observations
➢ Business
In this group, two people have Low risk taking capacity, nine people are
medium risk takers and three people have high risk taking capacity.
➢ Govt. Employee
In this group, maximum people medium risk taking capacity, closely
followed by low risk taker and only one person has high risk taking capacity
➢ Pvt. Employee
This group, show increase in number of people who have medium risk
taking capacity. And six people have Low risk taking capacity and six people
have High risk taking capacity.
➢ Retired
In this group people either take Low risk or Medium risk. They are not ready
to take High risk. This may be because at this age they are not ready to
loose what they have earned till now. Moreover, they want to be financially
secure.
Relation between occupation and expected rate of return

139 | P a g e
Observations
➢ Business
Six people expect 10%-20% returns, three people expect less than10%
returns and two people expect 20%-30% interest return on investment.
➢ Govt. Employee
Five people expect less than 10% returns, three people expect 10%-20%
returns and four people expect 20%-30% interest return.
➢ Pvt. Employee
In this group maximum people expect 20%-30% returns and closely
followed by 10-20% return on investment. Four people expect less than
10% returns and only one person expect above 30% return.
➢ Retired
In this group, three people expect 10%-20% and one person expects less
than 10%.
Relation between occupation and parameter governing investment
Observations
➢ Business
In this group, maximum people prefer safety of capital and then five people
prefer tax benefits from investment, least is life cover.

140 | P a g e
➢ Govt. Employee
In this group, four people prefer safety of capital and same number of
people prefers tax benefits from investment. Only two people want life cover
and of people prefer equally regular income and flexibility in investment.
➢ Pvt. Employee
In group number of people who prefer safety of capital increases. Five
people go for tax benefits, three people go for regular income and one
person go for flexibility in this group.
➢ Retired
In this group, two people prefer life cover and same number of people
prefers regular income from investment.
Relation between occupation and tenure of investment
Observations
➢ Business
In this most of people invest for a period of less than 3 months, five people
invest for a period of 3-9 months and 2 people invest for a period of 10
months-2 years.
➢ Govt. Employee
In this group maximum people invest for a period of more than 2 years,
closely followed by 10 months -2 years. Two people invest for a period of 3-
9 months and an individual invest for a period of less than 3 months.
➢ Pvt. Employee

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In this group show increase in number of people invest for a
period of less than 3 months. Six people invest for a period of 10 months -2
years and four people invest for a period of 3-9 months.
➢ Retired
In this group, three people invest for a period of 10 months -2 years and
one person invest for a period of 3-9 months.
Relation between occupation and Expected Withdrawal during the

tenure of investment
Observations
➢ Business
Only three people of this group expect not withdraw in between the tenure.
And rests people will withdraw in between the tenure.
➢ Govt. Employee
Here, maximum people expect withdrawals during the tenure and only one
person do not expect withdrawals during the tenure.
➢ Pvt. Employee
50% people of this group do not expect any withdrawals during the tenure
and 50% expect withdrawals during the tenure.
➢ Retired
In this group four people expect withdrawals during the tenure.

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Relation between occupation and factor influencing
investing in mutual fund
Observations
➢ Business
In this group three people influence by broker’s advice and two people
influence by news. Rest of people equally influence by other factors and self
evaluating.
➢ Govt. Employee
There is increase in number of people influence by news and self evaluation
and decline in number of people influence by broker’s advice.
➢ Pvt. Employee
In this group, maximum people influence by news and self evaluation. And
two people each influence by brokers advice and other factors
➢ Retired
In this group two people decisions by self evaluating the market condition
and one person is influenced by news.
Relation between occupation and type of mutual fund
Observations
➢ Business
In this group, four people prefer open ended funds and three people prefer
closed ended funds.
➢ Govt. Employee
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In this group equal number of prefer open and closed ended
funds.
➢ Pvt. Employee
In this group maximum people prefer closed ended funds and only two
people prefer open ended funds.
➢ Retired
In this group two people prefer closed ended funds and only one person
prefer open ended funds.
FINDINGS
➢ In survey, Age Group of 26-40 years was more in numbers. The
second most Investors were in the age group of 41-55 years and the
least were in the age group of 56-65 years.
➢ In Occupation group most of the Investors were Pvt. employees, the
second most Investors were Govt. employees and the least were
retired people.
➢ In family Income group, between Rs 3-5 lacs were more in number,
the second most were in the Income group of more than Rs. 5-7 lacs
and the least were in the group of above Rs. 7 lacs.
➢ Only 4% respondents are not involved in any form of an investment.
➢ In survey, maximum respondents had a Fixed Deposit, 76% invested

in Mutual Fund. Only 7% respondents invested in Gold.

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➢ Mostly respondents made investment for long term
gain, 24% for children’s future and 20% people investments for
requirements after retirement.
➢ In survey, 50% of respondents would like to take medium risk and

only 20% of respondents like to take high risk.
➢ Mostly Respondents expected 10-20% return from investment.
➢ Respondents like to invest for tenure of more than 2 years. And least
invests for tenure of less than 3 months.
➢ From a 50 respondents, 72% of people withdrawal in between a period

of investment.
➢ From a 50 respondents, 56% population takes services of investment

advisor and 44% population makes their own decision.
➢ In survey, 36% of respondents took Broker’s advice while investing in

mutual Fund.
➢ In survey, 62% of Mutual Fund investors prefer closed ended schemes
LIMITATIONS OF THE STUDY

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Some of the limitations of the project are listed as below:
1. Due to the financial and time constraints a cluster analysis of the

population so as to get better results was not feasible.
2. It was difficult to break the ice with the common people initially. It
was a daunting task to convince them to fill in the personal details of
the questionnaire where they have to mention the monthly income,
occupation etc.
3. To convince the people for a proper interviewing process is also
difficult.
4. The survey was conducted in Sarojni Nagar and Alaknanda Market.
The standard of living, per capita income of people, earning style, etc.
of this region is different from other areas. Therefore, the inferences
drawn from the survey can’t be generalized.

146 | P a g e
CONCLUSION
Running a successful Mutual Fund requires complete understanding of the

peculiarities of the Indian Stock Market and also the psyche of the small
investors. This study has made an attempt to understand the financial
behavior of Mutual Fund investors in connection with the preferences of
Brand (AMC), Products, and Channels etc. I observed that many of people
have fear of Mutual Fund. They think their money will not be secure in
Mutual Fund. They need the knowledge of Mutual Fund and its related terms.
Many of people do not have invested in mutual fund due to lack of
awareness although they have money to invest. As the awareness and
income is growing the number of mutual fund investors are also growing.
“Brand” plays important role for the investment. People invest in those
Companies where they have faith or they are well known with them. There
are many AMCs but only some are performing well due to Brand awareness.
Some AMCs are not performing well although some of the schemes of them
are giving good return because of not awareness about Brand. Reliance, UTI,
SBIMF, ICICI Prudential etc. they are well known Brand, they are performing
well and their Assets Under Management is larger than others whose Brand
name are not well known like Principle, Sunderam, etc.
Distribution channels are also important for the investment in mutual fund.
Financial Advisors are the most preferred channel for the investment in
mutual fund. They can change investors’ mind from one investment option
to others. Many of investors directly invest their money through AMC

147 | P a g e
because they do not have to pay entry load. Only those
people invest directly who know well about mutual fund and its operations
and those have time.
Indian mutual fund market has great potential in the future, investors are
willing to pour money in mutual funds, despite some temporary restraints,
and other economic factors are in favorable mode. Thus we need proper
management of advisory services, more schemes, financial advisors and
institutions to cater untouched markets.

148 | P a g e
RECOMMENDATIONS
✔ Create more awareness of mutual funds
Investors should be made aware of the benefits. Nobody will invest until and
unless he is fully convinced. Investors should be made to realize that
ignorance is no longer bliss and what they are losing by not investing.
✔ Concentrate on the rural areas
Mutual funds AMC (Asset Management Company) must concentrate on their

rural areas & try to expand area of operation. It must come up with new
scheme, which may offer stable returns with security of funds.
✔ An aggressive marketing
Mutual fund houses must undertake an aggressive marketing to sell mutual

funds. It must advertise on the media like television & newspaper, financial
magazines.
✔ Provide factual details
Company should provide factual details about the mutual funds to related
parties. It must give comparison of different schemes, fund houses. It must
provide NAV, return across the different period.
✔ Mutual funds have bright future
Investors are willing to pour money in mutual funds, despite some

temporary restraints. Thus we need proper management of advisory
services, more schemes, financial advisors and institutions to cater

149 | P a g e
untouched markets. Younger people aged under 35 will be a key
new customer group into the future, so making greater efforts

with younger customers who show some interest in investing
should pay off. Customers with graduate level education are
easier to sell to and there is a large untapped market there. To
succeed however, advisors must provide sound advice and high
quality.
✔ More appointments of Relationship Managers

There should be more appointments of RMs so that every customer gets
equalized attention.
✔ Build excellent customer service

Build excellent customer service so that the existing customers get a regular
updates about funds into which they have invested. Especially what is their
fund value at a current date.
✔ More emphasis should be given to investors who depends on

the broker advice to invest this is the junction where the company can
increase its customer base.
✔ Provision for class room
Provision for class room training for new investors for boost their moral and
give basic knowledge about mutual fund. And also some tips can also be
given to these investors during the session.

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✔ Innovative
The company should come up with innovative ways of service at their door
steps this may be a costly affair but will surely give positive results in the
long run.
BIBLIOGRAPHY
BOOKS REFRRED
AMFI Mutual Fund
Business World
WEB SITES
• www.amfiindia.com
• www.mutualfundsindia.com
• www.mutualfundsindia.com
• www.ask.com
• www.faq.com
• www.bseindia.com
• www.amfiindia.com/mutual funds/nav/about funds/open ended
schemes.com
• www.investopedia/aboutus/html

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QUESTIONNAIRE
Name ………………………………………..
1. Age
18-25 26-40 41-55
56-65
2. Gender
Male Female
3. Occupation
Govt. Employee Private Employee Business
Retired
4. What is your annual income?

1.5-3lacs 3-5lacs 5-7lacs
Above 7lacs
5. Have you made any earlier investment?

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Yes No
6. Are you holding any of the following investment products?

(Select all applicable options)
Fixed Deposits ULIPs Insurance Mutual
Funds
Real Estate Gold Shares

7. While investing you will be more concerned about? (Mark the
following in accordance to their importance)
Very Somewhat Not Important
Important Important
Safety of
Capital
Life Cover
Tax Efficiency
Flexibility
Regular Income
8. What is your primary investment strategy?
Retirement Long term gain Children’s

future Others
9. How would you like to invest your money?

Low Risk Medium Risk High Risk
10. What returns do you expect from investments?
Less than 10% 10-20% 20-30%

More than30%
11.You plan to make withdrawals during the term of your

investment?
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Yes No
12.Parameter guiding your investment?

Safety of capital Life cover Tax saving
flexibility
Regular income
13.Factors influencing while investing in Mutual Fund?

Advice from Broker Current news
Self Evaluation
Others
14.Which type of Mutual Fund do you prefer?

Open Ended Schemes Closed Ended Schemes
GLOSSARY
Advisor

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Your financial consultant who gives professional advice on the
fund's investments and to supervise the management of its assets.
Amortization
A method of equated monthly payments over the life of a loan. Payments usually
are paid monthly but can be paid annually, quarterly, or on any other schedule. In
the early part of a loan, repayment of interest is higher than that of principal. This
relationship is reversed at the end of the loan.
Appreciation
When an investment increases in value, it appreciates. For example, a equity share
whose price goes from Rs. 20/- to Rs. 25/- has appreciated by Rs. 5/-.
Arbitrage
The practice of buying and selling an interlaced stock on different exchanges in

order to profit from minute differences in price between the two markets.
Asset
Property and resources, such as cash and investments, comprise a person's assets;
i.e., anything that has value and can be traded. Examples include stocks, bonds,
real estate, bank accounts, and jeweler.
Asset Allocation
When you divide your money among various types of investments, such as stocks,
bonds, and short-term investments (also known as "instruments"), you are
allocating your assets. The way in which your money is divided is called your asset
allocation.
Annualized Return
This is the hypothetical rate of return that, if the fund achieved it over a year's
time, would produce the same cumulative total return if the fund performed
consistently over the entire period. A total return is expressed in a percentage and
tells you how much money you have earned or lost on an investment over time,
assuming that all dividends and capital gains are reinvested.
Balanced Fund
A mutual fund that maintains a balanced portfolio, generally 40% bonds and 60%
equity.
Bid or Sell Price
The price at which a mutual fund's shares are redeemed (bought back) by the fund.
The bid or redemption price means the current net asset value per share, less any
redemption fee or back-end load.

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Capital
This is the amount of money you have invested. When your investing objective is
capital preservation, your priority is trying not to lose any money. When your
investing objective is capital growth, your priority is trying to make your initial
investment grow in value.
Capital Gain
Profit from a sale of an investment constitutes a capital gain. For example, if you
bought a share of stock for Rs. 5/- and later sold it for Rs. 7/-, you would have a
capital gain of Rs. 2/-.
Capital Gains Distributions
Payments (usually annually) to mutual fund shareholders of gains realized on the
sale of portfolio securities.
Capital Growth
A rise in market value of a mutual fund's securities, reflected in its NAV per share.
This is a specific long-term objective of many mutual funds.
Derivative
An investment contract based on an underlying investment called an "instrument."
The most common type of derivative is an option contract, which involves the right
to buy or sell the underlying instrument at an agreed price. Futures contracts are
also derivatives.
Diversification
The policy of spreading investments among a range of different securities to reduce
the risks inherent in investing.
Dividend
When companies pay part of their profits to shareholders, those profits are called
dividends. A mutual fund's dividend is money paid to shareholders from investment
income the fund has earned. The amount of each share's dividend depends on how
well the company does.
Endorsement
Assigning or transferring a lien to another person is accomplished through the use
of an endorsement. The words "PAY TO THE ORDER OF" and then the name of the

156 | P a g e
person to whom the lien is being assigned to, is written. If there is
not enough space on the original note to write an endorsement, it is written on a
separate piece of paper that is permanently affixed to the original note. This is
called an along.
Face Value
The face value is the term used to describe the value of a bond in terms of what
the company which issued the bond will actually repay when the loan matures. It's
sometimes described as nominal or par value.
Load
A sales charge or commission assessed by certain mutual funds ("load funds") to
cover their selling costs.
Redeemable
Preferred shares or bonds that give the issuing corporation an option to repurchase
securities at a stated price. These are also known as callable securities.
Redemption Fee
A fee charged by a limited number of funds for redeeming, or buying back, fund
units.
Redemption Price
The price at which a mutual fund's units are redeemed (bought back) by the fund.
The redemption price is usually equal to the current NAV per unit.
Reinvestment Date
The date on which a share's dividend and/or capital gains will be reinvested (if
requested) in additional fund shares.

157 | P a g e

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I take this opportunity to express my deep sense of gratitude to all those

My heartfelt thanks to my respected Faculty Guide namely Prof. Sanjay

I am also thankful to the respondent who helped us by filling up the

Indian Stock market has undergone tremendous changes over the

NEW DELHI INSTITUTE OF MANAGEMENT

This Project as a whole can be divided into two parts.

The first part gives an overview of Mutual Fund Industry and to

NEW DELHI INSTITUTE OF MANAGEMENT

NEW DELHI INSTITUTE OF MANAGEMENT

NEW DELHI INSTITUTE OF MANAGEMENT

The Chartered Bank

• Chartered opened its first branches in Mumbai (Bombay), Calcutta and

• Traditional business was in cotton from Mumbai (Bombay), indigo and

The Standard Bank

NEW DELHI INSTITUTE OF MANAGEMENT

• Was prominent in financing the development of the diamond fields of

• Expanded in Southern, Central and Eastern Africa and by 1953 had

• In 1965, it merged with the Bank of West Africa expanding its

In 1969, the decision was made by Chartered and by Standard to undergo a

NEW DELHI INSTITUTE OF MANAGEMENT

At Standard Chartered, success is built on teamwork, partnership and the

It serves both Consumer and Wholesale Banking customers. Consumer

NEW DELHI INSTITUTE OF MANAGEMENT

Headquarter London, England, UK

Key people Peter Sands, Chief Executive

Products Financial Services

NEW DELHI INSTITUTE OF MANAGEMENT

Net income $3,511 million (2008)

Employees 73,000 (2008)

NEW DELHI INSTITUTE OF MANAGEMENT

global product expertise to offer effective financial solutions. The bank

NEW DELHI INSTITUTE OF MANAGEMENT

United Kingdom 1853 Australia 1964

Philippines 1872 Brazil 1979

Malaysia 1875 Venezuela 1980

Zimbabwe 1892 Taiwan 1985

Ghana 1896 Nepal 1987

Botswana 1897 Vietnam 1990

Zambia 1906 Colombia 1995

Kenya 1911 Laos, Argentina 1996

Uganda 1912 Nigeria 1999

Tanzania 1917 Lebanon 2000

Bahrain 1920 Cote d’Ivoire 2001

Jordan 1925 Mauritius 2002

Korea 1929 Turkey 2003

Qatar 1950 Afghanistan 2004

Brunei, UAE 1958

RECENT ALLIANCES AND STRATEGIC AQUISTIONS

In 2000, Standard Chartered acquired Grindlays Bank from ANZ

Standard Chartered completed the integration of its Bangkok branch and

On 9th August 2006 Standard Chartered announced that it had

This deal represented the first acquisition by a foreign firm of a Pakistani

On 22 October, 2006 Standard Chartered announced that it has received

NEW DELHI INSTITUTE OF MANAGEMENT

On 23 August, 2007 Standard Chartered entered into an agreement

On 29th February 2008, Standard Chartered PLC announced it has

The acquisition of AEB provides Standard Chartered with an opportunity to

STANDARD CHARTERED BANK IN INDIA

Standard Chartered Bank is the largest international banking Group in India

Products offered by the bank

NEW DELHI INSTITUTE OF MANAGEMENT