: Project Title

: COMPARATIVE ANALYSIS OF MUTUAL

FUNDS AND STUDY OF INVESTMENT PATTENS OF INDIVIDUAL
INVESTORS

INTRODUCTION
financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme.
These could range from shares to debentures to money market instruments.
The income earned through these investments and the capital appreciation
realized by the scheme is shared by its unit holders in proportion to the
number of units owned by the (pro rata). Thus a Mutual fund is the most
suitable investment for the common man as it offers an opportunity to invest
in a diversified, professionally managed portfolio at a relatively low cost.
Anybody with an invest able surplus of as a few thousand rupees can invest
in Mutual Funds. Each Mutual Fund scheme has a defined investment
objective and strategy
The flow chart below describes broadly the working of a Mutual FUND

A Mutual Fund is a body corporate registered with the Securities and

Exchange Board of India (SEBI) that pools up the money from
individual/corporate investors and invests the same on behalf of the
investors/unit holders, in Equity shares, Government securities, Bonds, Call
Money Markets etc, and distributes the profits. In the other words, a Mutual
Fund allows investors to indirectly take a position in a basket of assets.
Mutual Fund is a mechanism for pooling the resources by issuing units to the
investors and investing funds in securities in accordance with objectives as
disclosed in offer document. Investments in securities are spread among a
wide cross-section of industries and sectors thus the risk is reduced.
Diversification reduces the risk because all stocks not move in the same
direction in the same proportion at same time. Investors of mutual funds are
known as unit holders.
The investors in proportion to their investments share the profits or losses.
The mutual funds normally come out with a number of schemes with
different investment objectives which are launched from time to time. A
Mutual Fund is required to be registered with Securities Exchange Board of
India (SEBI) which regulates securities markets before it can collect funds
from the public.

A mutual fund is the ideal investment vehicle for today's complex and
modern financial scenario. Markets for equity shares, bonds and other fixed
income instruments, real estate, derivatives and other assets have become
mature and information driven. Price changes in these assets are driven by
global events occurring in faraway places. A typical individual is unlikely to
have the knowledge, skills, inclination and time to keep track of events,
understand their implications and act speedily. An individual also finds it
difficult to keep track of ownership of his assets, investments, brokerage
dues and bank transactions etc.
A mutual fund is answer to all these situations. It appoints professionally
qualified and experienced staff that manages each of these functions on a
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
vehicle exploits economies of scale in all three areas research, investments
and transaction processing. While the concept of individuals coming together
to invest money collectively is not new, the mutual fund in its present form is
a 20th century phenomenon. In fact, mutual fund gained popularity only
after 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 more money
as compared to banks

Mutual Funds now represent perhaps the most appropriate investment

opportunity for most investors. As financial markets become more
sophisticated and complex, investors need a financial intermediary who
provides the required knowledge and professional expertise on successful
investing. As a result, in the birthplace of mutual funds - the U.S.A. - the fund
industry has overtaken the banking industry: more funds are under mutual
fund management than
deposited
with
banks.

In India with more person getting interested to earn more from their saving
to minimize the effect of growing inflation mutual funds are becoming one
the best way to achieve the required solution. Despite the fact that mutual
funds are still a new financial intermediary in India, they have started
opening up many exciting investment opportunities for the Indian investor.

A mutual fund is a professionally-managed firm of collective investments

that pools money from many investors and invests it in stocks, bonds, shortterm money market instruments, and/or other securities. In other words we
can say that A Mutual Fund is a trust registered with the Securities and
Exchange Board of India (SEBI), which pools up the money from individual /
corporate investors and invests the same on behalf of the investors /unit
holders, in equity shares, Government securities, Bonds, Call money markets
etc., and distributes the profits.
The value of each unit of the mutual fund, known as the net asset value
(NAV), is mostly calculated daily based on the total value of the fund divided
by the number of shares currently issued and outstanding. The value of all
the securities in the portfolio in calculated daily. From this, all expenses are
deducted and the resultant value divided by the number of units in the fund
is the funds NAV.

NAV =

Total value of the fund

Number of shares currently issued and outstanding

ADVANTAGES OF MUTUAL FUND

Professional Management Fund manager undergoes through various research works and
has better investment management skills which ensure higher returns to the investor than
what he can manage on his own.
Less Risk Investors acquire a diversified portfolio of securities even with a small
investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in
merely 2 or 3 securities.
Low Transaction Costs Due to the economies of scale (benefits of larger volumes),
mutual funds pay lesser transaction costs. These benefits are passed on to the investors.
Liquidity An investor may not be able to sell some of the shares held by him very easily
and quickly, whereas units of a mutual fund are far more liquid
Choice of Schemes Mutual funds provide investors with various schemes with different
investment objectives. Investors have the option of investing in a scheme having a
correlation between its investment objectives and their own financial goals. These
schemes further have different plans/options.
Transparency Funds provide investors with updated information pertaining to the
markets and the schemes. All material facts are disclosed to investors as required by the
regulator.

 Flexibility Investors also benefit from the convenience and flexibility offered by Mutual
Funds. Investors can switch their holdings from a debt scheme to an equity scheme and
vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also
offered to the investors in most open-end schemes.
Safety Mutual Fund industry is part of a well-regulated investment environment where
the interests of the investors are protected by the regulator. All funds are registered with
SEBI and complete transparency is forced.
Portfolio Diversification Mutual Funds invest in a well-diversified portfolio of securities
which enables investor to hold a diversified investment portfolio (whether the amount of
investment is big or small). There a lot of schemes in the mutual fund market INDIA i.e.
44 Asset management companies each may holding almost more than 50 schemes.
DISADVANTAGES OF MUTUAL FUND
Costs Control Not in the Hands of an Investor Investor has to pay investment
management fees and fund distribution costs as a percentage of the value of his
investments (as long as he holds the units), irrespective of the performance of the fund. 2.
No Customized Portfolios The portfolio of securities in which a fund invests is a
decision taken by the fund manager. Investors have no right to interfere in the decision
making process of a fund manager, which some investors find as a constraint in achieving
their financial objectives.
Difficulties in Selecting Suitable Fund Scheme Many investors find it difficult to select
one option from the plethora of funds/schemes/plans available. For this, they may have to
take advice from financial planners in order to invest in the right fund to achieve their
objectives.

OBJECTIVES OF THE STUDY

TO study the investment Patterns of individual investors

To know the investment behavior of investors in mutual fund to different age groups
TO study the risk associated with the investment in mutual fund
To give an idea of the types of schemes available in Equity and Debt
INVESTMENT PATTERNS

Systematic Investment Plan

Under this a fixed sum is invested each month on a fixed date of a month.
Payment is made through post dated cheques or direct debit facilities. The
investor gets fewer units when the NAV is high and more units when the NAV
is low. This is called as the benefit of Rupee Cost Av stueraging (RCA)
Systematic Transfer Plan
Under this an investor invests in debt oriented fund and gives instructions to
transfer a fixed sum, at a fixed interval, to an equity scheme of the same
mutual fund.
Systematic Withdrawal Plan
If someone wishes to withdraw from a mutual fund then he can withdraw a
fixed amount each month.
Lump sum
If someone wishes to invest at one go he or she can invest at one point of
tim
RISK ASSOCIATED WITH THE INVESTMENT IN THE MUTUAL FUNDS
Savings are invested in various investment opportunities for earning better
returns. The returns of the investment depend upon the risk of such
investment. All investments involve some risk. The objective of any investor
is to minimize the risk and maximize returns. The value of financial assets
depends on their return and risk patterns.
Risk can be defined as the chance factor in trading in which expected
or perspective advantage, gain, profit or return may not
materialize
The actual outcome of investment may be less than the expected outcome.
The greater is the variability in the possible outcome, the greater is the risk.
Generally, the variance and the standard deviation of return are used as the
alternative statistical measures of the risk of the financial asset. Similarly, covariance measured the risk of the assets, relative to other assets in a
portfolio. Some risks can be controlled by the investors. Others cannot be
controlled, and they are to be borne by the investor compulsorily.

DIFFERENT TYPES OF RISK IN MUTUAL FUNDs

Risk is an inherent aspect of every form of investment. For mutual fund

investments, risks would include variability, or period-by-period fluctuations
in total return. The value of the schemes investment may be affected by
factors affecting capital markets such as price and volume, volatility in the
stock markets, interest rates, currency exchange rates, foreign investment,
changes in government policy, political, economic or other developments.

Market Risk
At times the prices or yields of all the securities in a particular market rise or
fall due to broad outside influences. When this happens, the stock prices of
both an outstanding, highly
profitable company and a fledgling corporation may be affected. This change
in price is due to market risk.
Inflation Risk
Sometimes it is referred to as loss of purchasing power. Whenever the rate of inflation exceeds
the earnings on your investment, you run the risk that you will actually be able to buy less, not
more.
Credit Risk
In short, how stable is the company or entity to which you lend your money when you invest?
How certain are you that it will be able to pay the interest you are promised, or repay your
principal when the investment matures?
Interest Rate Risk
Changing interest rates affect both equities and bonds in many ways. Bond prices are influenced
by movements in the interest rates in the financial system. Generally, when interest rates rise,
prices of the securities fall and when interest rates drop, the prices increase. Interest rate
movements in the Indian debt markets can be volatile leading to the possibility of large price

movements up or down in debt and money market securities and thereby to possibly large
movements in the NAV.
Investment Risk
In the sectored fund schemes, investments will be predominantly in equities of selected
companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity
performance of such companies and may be more volatile than a more diversified portfolio of
equities.
Liquidity Risk
Thinly traded securities carry the danger of not being easily saleable at or near their real values.
The fund manager may therefore be unable to quickly sell an illiquid bond and this might affect
the price of the fund unfavorably. Liquidity risk is characteristic of the Indian fixed income
market.
Changes in the Government Policy
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.
BIRLA SUN LIFE MUTUAL FUNDs
DIFFERENT SCHEMEs

EQUITY SCHEMES

DEBT SCHEMES

Birla Sun Life Advantage Fund

Birla Sun Life Short Term

Opportunities Fund

Birla Sun Life Dividend Yield Plus

Birla Sun Life Dynamic Bond fund

Birla Sun Life Tax Plan

Birla Sun Life Gilt Plus- liquid Plan

Birla Sun Life Index Fund

Birla Sun Life Gilt Plus-PF Plan

Birla Sun Life India GenNect Fund

Birla Sun Life Gilt Plus- Regular

Plan

Birla Sun Life India Opportunities

Fund

Birla Sun Life Income Plus

Birla Sun Life Midcap Fund

Birla Sun Life Govt. Securities(Long

Term)

Birla Sun Life MNC Fund

Birla Sun Life Govt.

Securities(Short Term)

Birla Sun Life Basic Industries

fund

Birla Sun Life Income Fund- Half

Yearly Dividend

Birla Sun Life Buy India Fund

Birla Sun Life Income FundQuarterly Dividend

Birla Sun Life Equity Fund

Birla Sun Life Liquid PlusInstitutional Monthly Dividend

Birla Sun Life Frontline Equity

Fund

Birla Sun Life Liquid Plus-Retail

Monthly Dividend

Birla Sun Life New Millennium

fund

Birla Sun Life Short Term FundMonthly Dividend

Birla Sun Life Tax Relief96

Birla Sun Life Top 100 fund
SECTORIAL ANALYSIS OF MUTUAL FUND IN INDIA
Let us start the discussion of the performance of mutual funds in India from the concept of
mutual fund took birth in India. The year was 1963, Unit Trust of India invited investors or rather

to those who believed in savings, to park their money in UTI mutual fund. And their idea of this
investment was good.
For 30 years it goaled without a single second player. Though the 1988 year saw some new
mutual fund companies, but UTI remained in a monopoly position.
The performance of mutual funds in India in the initial phase was not even closer to satisfactory
level. People rarely understood, and of course investing was out of question. But yes, some 24
million shareholders were accustomed with guaranteed high returns by the beginning of
liberalization of the industry in 1992. This good record of UTI became marketing tool for new
entrants. The expectations of investors touched the sky in profitability factor. However, people
were miles away from the preparedness of risks factor after the liberalization.
The Assets under Management of UTI was Rs. 67bn. by the end of 1987. Let me concentrate
about the performance of mutual funds in India through figures. From Rs. 67bn. the Assets under
Management rose to Rs. 470 bn. in March 1993 and the figure had a three times higher
performance

by

April

2004.

It

rose

as

high

as

Rs.

1,540bn.

The net asset value (NAV) of mutual funds in India declined when stock prices started falling in
the year 1992. Those days, the market regulations did not allow portfolio shifts into alternative
investments. There were rather no choices apart from holding the cash or to further continue
investing in shares. One more thing to be noted, since only closed-end funds were floated in the
market, the investors disinvested by selling at a loss in the secondary market.
The performance of mutual funds in India suffered qualitatively. The 1992 stock market
scandals, the losses by disinvestments and of course the lack of transparent rules in the where
about rocked confidence among the investors. Partly owing to a relatively weak stock market
performance, mutual funds have not yet recovered, with funds trading at an average discount of
1020

percent

of

their

net

asset

value.

The supervisory authority adopted a set of measures to create a transparent and competitive
environment in mutual funds. Some of them were like relaxing investment restrictions into the

market, introduction of open-ended funds, and paving the gateway for mutual funds to launch
pension

schemes.

The measure was taken to make mutual funds the key instrument for long-term saving. The more
the

variety

offered,

the

quantitative

will

be

investors.

At last to mention, as long as mutual fund companies are performing with lower risks and higher
profitability within a short span of time, more and more people will be inclined to invest until
and unless they are fully educated with the dos and donts of mutual funds.
MAJOR PLAYERS IN MUTUAL FUNDS INDUSTRY
.HDFC Mutual fund was incorporated under the companies Act 1956 on December 10 1999
and wos approved to Act as an Asset Management company for the HDFC mutual fund by
securities and exchange board of India vide its letter dated July 3 ,2000 setup on May 2
Birla Sun Life Mutual Fund Birla Sun Life Mutual Fund is the joint venture of Aditya Birla
Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is
being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from
India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment.
Recently it crossed AUM of Rs.10,000 Crores
.UTI 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.

ORGANIZATINAL INTRODUCTION

The Aditya Birla Group is one of India's largest business houses. Global in
vision, rooted in Indian values, the Group is driven by a performance ethic
pegged on value creation for its multiple stakeholders.

The Group's operations span 66 state of the art, straddling India, Thailand, Malaysia, Indonesia,
Egypt, Philippines, Canada, Australia and China.
A US $28 billion corporation with a market cap. Of US $31.5 billion and in the League of
Fortune 500, the Aditya Birla Group is anchored by an extraordinary force of 100,000
employees, belonging to 25 different nationalities. Over 50 per cent of its revenues flow from its
operations

across

the

world.

The Aditya Birla Group is a dominant player in all its areas of operations viz; Aluminum,
Copper, Cement, Viscose Staple Fiber, Carbon Black, Viscose Filament Yarn, Fertilizers,
Insulators, Sponge Iron, Chemicals, Branded Apparels, Insurance, Mutual Funds, Software and
Telecom. The Group has strategic joint ventures with global majors such as Sun Life (Canada),
AT&T (USA), the Tata Group and NGK Insulators (Japan), and has ventured into the BPO sector
with the acquisition of Trans Works, a leading ITES/BPO company.
Sun Life Financial
Sun Life Financial is a leading international financial services organization providing a diverse
range of wealth accumulation and protection products and services to individuals and corporate
customers. Chartered in 1865, Sun Life Financial and its partners today have operations in key
markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong, the
Philippines, Japan, Indonesia, India, China and Bermuda.
Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading
Mutual Funds managing assets of a large investor base. The fund offers a range of investment
options, which include diversified and sector specific equity schemes, fund of fund schemes,
hybrid and monthly income funds, a wide range of debt and treasury products and offshore
funds.

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of
Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun

Life Financial Services Inc. of Canada. The joint venture brings together the Aditya Birla
Group s experience in the Indian market and Sun Life s global experience.
No. of schemes

71

No. of schemes including options

218

Equity Schemes

63

Debt Schemes

106

Short term debt Schemes

17

Equity & Debt

10

Money Market

Gilt Fund

16

Corpus under management

Rs.49983.17 Crs. as on Feb 28, 2009
Key Personnel
Donald Stewart (Chairman), A Balasubramanian (CEO), Ashok Suvarna (COO), Abhay
Palnitkar (CFO), Sanjay Singal(CMO), Bhavdeep Bhatt ( Head Products), Chandrashekhar
Chavan (Head HRD), Rama Vasantharajan (Hd Compliance & Risk),
Fund Managers
Ajay Garg , Ankit Sancheti , Atul Penkar , Maneesh Dangi , Navneet Munot, Nishit
Dholakia , Prasad Dhonde , Sanjay Chawla , Satyabrata Mohanty, Sunaina da Cunha ,
Vineet Maloo .
BSLAMC follows a long-term, fundamental research based approach to investment. The
approach is to identify companies, which have excellent growth prospects and strong
fundamentals. The fundamentals include the quality of the companys management,
sustainability of its business model and its competitive position, amongst other factors. Birla Sun
Life Asset Management Company has one of the largest team of research analysts in the industry,
dedicated to tracking down the best companies to invest in. Birla Sun Life AMC strives to
provide transparent, ethical and research-based investments and wealth management services.

As of 30 June 2010, the Sun Life Financial group of companies had total assets under
management of CDN $ 435 billion.
Vision
To be the most trusted name in investment and wealth management, to be the preferred employer
in the industry and to be a catalyst for growth and excellence of the asset management business
in India.
Mission

Achieving superior and consistent investment results.

Creating a conducive environment to hone and retain talent.
Providing customer delight.
Institutionalizing system-approach in all aspects of functioning.
Upholding highest standards of ethical values at all times.

Values

Integrity
Commitment
Passion
Seamlessness
Speed

Track Record
With a proven track record of over 14 years, Birla Sun Life Mutual Fund has been a catalyst
towards the growth of the private sector asset management business.
Investment Philosophy
Birla Sun Life Mutual Fund follows a long-term, fundamental research based approach to
investment. The approach is to identify companies, which have excellent credit-worthiness and
strong fundamentals. The fundamentals include the quality of the company's management,
sustainability of its business model and its competitive position, amongst other factors. Birla Sun

Life Asset Management Company (BSLAMC) has one of the largest team of research analysts in
the industry, dedicated to tracking down the best companies to invest in.
BSLAMC will always strive to provide transparent, ethical and research-based investments and
wealth management services.
Geographical Reach
Today, BSLAMC is present in 111 locations, including 74 branches.
Product Offerings
Birla Sun Life Mutual Fund offers a range of investment options, which
include diversified and sector specific equity schemes, fund-of-fund schemes,
hybrid and monthly income funds, a wide range of debt and treasury
products

and

offshore

Management services.

funds.

BSLAMC

also

provides

Private

Wealth