3.

Objective Of The Study

4.

Definition Of Mutual Funds

6.

Structure Of Mutual Funds

7.

Types Of Mutual Funds

8.

Objectives Of Mutual Funds

9.

Benefits Of Mutual Fund Investment

10.

Disadvantages Of Mutual Funds

11.

Risks in mutual funds

13.

Investor Protection And Mutual Funds Regulation

14.

Reliance Mutual Funds

15.

Case Study

16.

Recommendations

17.

Conclusion

OBJECTIVE OF THE STUDY:

To study the awareness of market.

To study the concept of mutual fund.

Through understanding of mutual fund with the help of case study.
To identify the consumer behavior towards mutual funds.
To develop model portfolios based on clients profile and requirements.
To identify the consumer buying process of mutual funds.
To identify the factors which influence the customers to purchase mutual

funds?
To identify the match between companys strategy to sell the mutual
funds and customers requirement.
To do a comparative analysis between Lump sum investments &
Systematic Investment plan.
To give recommendation to the company on the basis of study for future
course of action.

Definition of mutual fund

A mutual fund is an entity that pools the money of many investors or unitholders to invest in different securities like shares, debt securities, money
market securities or a combination of these. These securities are professionally
managed on behalf of the unit-holders, and each investor is entitled to any
profits when the securities are sold, but subject to any losses in value as well.

Mutual Fund Operation Flow Chart

Structure of Mutual Fund

The structure of mutual funds in India is governed by the SEBI regulations
1996.
The structure of mutual fund in India constitutes the following
Sponsor
Trustee
Asset Management Company
Custodians
Registrars and Transfer Agents

 Distributors and Selling Agents

Legal Advisors

SPONSOR:

The sponsor is the promoter of mutual fund. It establishes the fund and registers
it with SEBI. The sponsor appoints the trustees, custodians and the AMC with
approval of SEBI, and in accordance with SEBI regulations. The sponsor is
required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of
the asset management company. The sponsor executes the trust deeds in favor of
the trustees.

TRUSTEE:
The mutual fund needs to be constituted in the form of a trust and the
instrument of the trust should be in the form of a deed registered under the
provisions of the Indian Registration Act, 1908. If it is a company then it is also
subject to the Indian Companies Act. It is the responsibility of the trustee to
protect the right of the investors, whose fund is managed by the AMC. There
must be at least 4 members in the board of trustees and at least 2/3rd of the
members of the board of trustees must be independent. Trustees must furnish to
SEBI, on half yearly basis, a report on the activities of the AMC.

ASSET MANAGEMENT COMPANY

(AMC):
Trustees, on the advice of the sponsors appoint the AMC. The trust is the mutual
fund; the AMC is its operational face. The AMC is usually a private limited
company, in which the sponsors and their associates are joint venture partners.
AMC must have a minimum net worth of 10 crores at all times. The AMC
structures the mutual fund products, markets them and mobilizes the funds,
manages the funds and services the investors.
Various types of AMCS in India are as follows:
a. AMCS owned by banks
b. AMCS owned by financial institutions
c. AMCS owned by the Indian private sector companies
d. AMCS owned by foreign institutional investors
e. AMCS owned jointly by Indian and foreign sponsors

CUSTODIANS:
A custodian provides the following services to the mutual fund:
Post-trading and custodial services to the Mutual Fund.

 Ensure that the benefits due on the holdings are received on time.
Detailed management information and other reports as required by the
AMC.
Maintain confidentiality of the transactions.
Be responsible for the loss or damage to the assets belonging to the
Scheme due to negligence on its part or on the part of its approved agents
and segregate assets of each Scheme.
REGISTRARS and TRANSFER AGENTS(R&T Agent):
The R&T agents are responsible for the investor servicing functions, as they
maintain the records of investor in mutual funds. R&T agents handle the
communications with investors, perform data entry services, and maintain
investor data and dispatches Account Statements reflecting the holding and
transactions of the investors.

DISTRIBUTORS and SELLING AGENTS:

Mutual fund products are reached to investors across the country through
distributors and selling agents.
Agents are individuals who bring in investors funds for a commission

Distributors are institutions that appoint agents and other mechanisms to

mobilize from investors. Most agents and distributors are paid commissions on
the funds they mobilize from investors.

LEGAL ADVISORS:
Legal advisors advise mutual funds on regulatory and taxation issues. Every
mutual fund has an employee designated as compliance officer, who work under
the advice of legal advisor.

TYPES OF MUTUAL FUNDS:

Most funds have a particular strategy they focus on when investing. For
instance, some invest only in Blue Chip companies that are more established
and are relatively low risk. On the other hand, some focus on high-risk startup
companies that have the potential for double and triple digit growth. Finding a
mutual fund that fits your investment criteria and style is important.

OBJECTIVES OF MUTUAL FUNDS

The objectives of mutual funds are presented below:
To provide a better opportunity to low income group investors
To provide a better expertise, talent, skillful, scientific, approach towards
stock market activities.
To manage small investors portfolio that provides regular income growth
safety liquidity and diversification.

Benefits of Mutual Fund investment

Professional investment management One of the primary benefits of
mutual funds is that an investor has access to professional management. A
good investment manager is certainly worth the fees you will pay.
That is because Mutual funds hire full-time, high-level investment
professionals. on the largest and most cost-effective scale.
Diversification A crucial element in investing is asset allocation. It plays a
very big part in the success of any portfolio. However, small investors do not
have enough money to properly allocate their assets. By pooling your funds
with others, you can quickly benefit from greater diversification. Mutual funds
invest in a broad range of securities. This limits investment risk by reducing the
effect of a possible decline in the value of any one security.

Low Cost A mutual fund let's you participate in a diversified portfolio

for as little as Rs.5, 000, and sometimes less. And with a no-load fund,
you pay little or no sales charges to own them.
Convenience and Flexibility Investing in mutual funds has its own
convenience. While you own just one security rather than many, you still
enjoy the benefits of a diversified portfolio and a wide range of services.
Fund managers decide what securities to trade collect the interest
payments and see that your dividends on portfolio securities are received

and your rights exercised. It also uses the services of a high quality
custodian and registrar
Liquidity-In open-ended schemes, you can get your money back
promptly at net asset value related prices from the mutual fund itself.

Variety There is no shortage of variety when investing in mutual funds. You

can find a mutual fund that matches just about any investing strategy you select.

Disadvantages of Mutual Funds

Investment Complexity

When you buy or sell mutual funds, you are making multiple trades at multiple
prices. If you are trying to accomplish a particular investing goal with a mutual
fund, targeting a certain price through your transactions can get very complex.
Its not as easy as buying a simple asset like an exchange traded fund.
transactions High Fee Structure
In conjunction with the trading complexity of mutual funds come the associated
costs. Multiple trades translate into multiple commissions and management
fees. Not to mention the advisory fees. With an active mutual fund portfolio, the
investing costs can add up rather quickly.
Lack of Liquidity
Yes, there are a lot of different mutual funds in the investment world, but that
doesnt necessarily mean they are very liquid. With mutual funds, the final
transactions arent complete until the end of a trading day difficulties on days
when Tax Disadvantages
Mutual funds are not the most tax-friendly investment in the world. Capital gain
taxes are incurred as the shares within the mutual fund are traded during the life
of the investment.

RISK in mutual funds :

Risk in mutual funds is closely associated with the factors that influence the
source of income, thus impacting the ability of the investor to earn the expected
returns on the security.
The following are the types of risk to which an investor is exposed:
Return trade - off risk
Market risk
Credit risk
Inflation risk
Interest rate risk
Political/government risk
Liquidity risk

Return Trade OFF Risk:

The most important relationship to understand is the risk-return trade-off.
Higher the risk greater the returns/loss and lower the risk lesser the returns/loss.

Market Risk:

It refers to the risk which the investor is exposed to as a result of adverse

movements in the interest rates. Sometimes prices and yields of all securities
rise and fall. Broad outside influences affecting the market in general lead to
this. This is true, may it be big corporations or smaller mid-sized companies.
This is known as Market Risk. As is a well known fact, in fixed income
securities, there is an inverse relationship between interest rates and the price.

Credit Risk:
The debt servicing ability (may it be interest payments or repayment of
principal) of a company through its cash flows determines the Credit Risk faced
by you. This credit risk is measured by independent rating agencies like CRISIL
who rate companies and their paper. An AAA rating is considered the safest
whereas a D rating is considered poor credit quality. Credit risk is influenced
by both business cycles and firm specific events. Credit risk increases during
economic contractions and decreases during economic expansions. A welldiversified portfolio might help mitigate this risk.

Inflation Risk:
It reflects the changes in the purchasing power of the cash flows resulting from
the fixed income securities. Whenever inflation sprints forward faster than the

earnings on your investment, you run the risk that you'll actually be able to buy
less, not more. Inflation risk also occurs when prices rise faster than your
returns.

Interest Rate Risk:

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

Political/Government Risk:
Changes in Government policy especially in regard to the tax benefits may
impact the business prospects of the companies leading to an impact on the
investments made by the fund. They can create a favorable environment for
investment or vice versa.

Liquidity Risk:
Liquidity risk arises when it becomes difficult to sell the securities that one has
purchased. Liquidity Risk can be partly mitigated by diversification, staggering
of maturities as well as internal risk controls that lean towards purchase of
liquid securities.

INVESTOR PROTECTION AND MUTUAL

FUNDS REGULATION
Need for regulation
The prevalence of risk associated with investment activity necessitates
regulation of the financial market in general, and the activities of investment
management firms in particular. Regulatory measures, whatever their form and
structure, are designed to attain the twin objectives of correcting market failures
and protecting investors from potential loss. The principles of regulating are
based on the following premises:
To correct identified market imperfections and failures in order to improve
the market and enhance competition ;
To increase the benefit to investors from economies of scale and
To improve the confidence of investors in the market by introducing
minimum standard of quality.