Mutual Funds - Concept

INTRODUCTION
MUTUAL FUNDS – CONCEPT

A mutual fund is an entity that pools the money of many investors its unit –
holders to invest in different securities. Investments may be in shares, debt securities,
money market securities or a combination of these. Those securities are professionally
managed on behalf of the unit – holders, and each investor holds a pro-rata share of
the portfolio i.e. entitled to any profits when the securities are sold, but subject to any
losses in value as well.
MUTUAL FUND STRUCTURE

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a
fund established in the form of a trust by a sponsor to raise monies by the Trustees
through the sale of units to the public under one or more schemes for investing in
securities in accordance with these regulations.
These regulations have since been replaced by the SEBI (Mutual Funds)
Regulations, 1996. The structure indicated by the new regulations is indicted as under.
A mutual fund comprises four separate entities, namely sponsor, mutual fund
trust, AMC and custodian. The sponsor establishes the mutual fund and gets it
registered with SEBI.
The mutual fund needs to be constituted in the from of a trust and the
instrument of the trust should be in the form of a deed registered under the provision
of the Indian Registration Act, 1908.
The sponsor is required to contribute at least 40% of the minimum net worth
(Rs. 10 crore) of the asset management company. The board of trustees manages the
MF and the sponsor executes the trust deeds in favour of the trustees. It is the job of
the MF trustees to see that schemes floated and managed by the AMC appointed by
the trustees are in accordance with the trust deed and SEBI guidelines.
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Establishes the MF as a trust
Sponsor Company registers the MF with SEBI
Managed by a Board of Trustees
Hold unit-holders funds in MF

Mutual Fund enter into an agreement with SEBI
and ensure compliance
Float MF funds manages the fund

AMC as per SEBI guidelines and AMC
agreement
Custodian Provides custodial services
Provides registrar and transfer

Registrar
services
Provides the network for

Distributors distribution of the schemes to the
investors
BENEFITS OF MUTUAL FUNDS

i) Professional Investment Management
Mutual funds hire full-time, high – level investment professionals. Funds can
afford to do so as they mange large pools of money. The managers have real-time
access to crucial market information and are able to execute trades on the largest and
most cost-effective scale.
ii) 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. Mutual
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fund unit-holder can benefit from diversification techniques usually available only to
investors wealthy enough to buy significant position in a wide variety of securities.
iii) Low Cost

A mutual fund let’s investor participate in a diversified portfolio for as little as
Rs.5,000/-, and sometimes less. And with a no-load fund, investors pay little or no
sales charges to own them.
iv) Convenience ad Flexibility

Investors own just one security rather than many, yet enjoy the benefits of a
diversified portfolio and a wide range of services. Fund managers decide with
securities to trade, collect the interest payments and see that their dividends on
portfolio securities are received and their rights exercised. It also uses the services of
a high quality custodian and registrar in order to make sure that your convenience
remains at the top of our mind.
v) Personal Service
One call puts investor in touch with a specialist who can provide them with
information customers can use to make their own investment choices. They will
provide them personal assistance in buying and selling customer fund units, provide
fund information and answer questions about investors account status.
vi) Liquidity
In open-ended scheme, you can get your money back prompt at net asset value
related prices from the mutual fund itself.
vii) Transparency
investors get regular information on the value of their investment in addition
to disclosure on the specific investment made by mutual fund scheme.
TYPES OF FUNDS
There are wide variety of Mutual Fund schemes that eater to investor needs,
whatever the age, financial position, risk tolerance and return expectations. The
mutual fund schemes can be classified according to both their investment objective
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(like income, growth, tax saving) as well as the number of units (if there are unlimited
then fund is an open-ended one while if there are limited units then the fund is close-
ended).
Types of Funds
Capitalization
Open-Ended Schemes
Open-Ended Schemes
Investment
Growth Funds
Growth and Income Funds
Fixed-Income Funds
Balanced/Equity Income
Funds
Specialty Sector Funds
Open-Ended Schemes
These funds are sold at the NAV based prices, generally calculated on every
business day. These schemes have unlimited capitalization, open-ended schemes do
not have a fixed maturity – i.e., there is no cap on the amount investor can buy from
the fund and the unit capital can keep growing. These funds are not generally listed on
any exchange.
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Open-ended funds are bringing in a revival of the mutual funds industry owing
to increased liquidity, transparency and performance in the new open-ended funds
promoted by the private sector and foreign players. Open-ended funds score over
close-ended ones on several counts. Some of these are listed below:
a) Any time exit option: This issuing company directly takes the responsibility
of providing an entry and an exit. This provides ready liquidity to the investors
and avoids reliance on transfer deeds, signature verifications and bad
deliveries.
b) Tax advantage: Though Budget 2004 proposals envisage a tax rate of 20-
91% (Corporate investors) and 13.06875%(Non-corporate investors) on
dividend distribution made by the Debt funds, the funds continue to remain
investment vehicles. In equity plans there is no distribution tax.
c) Any time option: An open-ended fund allows one to enter the fund at any
time and even to invest at regular intervals (a systematic investment plan).
Close ended schemes

Schemes that have a stipulated maturity period, limited capitalization and the
units are listed on the stock exchange are called close-ended schemes.
These schemes have historically seen a lot of subscription. This popularity is
estimated to be on account of firstly public sector MFs having floated a lot of close-
ended income schemes with guaranteed returns and secondly easy liquidity on
account of listing on the stock exchanges.
Objectives
Mutual funds have specific investment objectives such as growth of capital,
safety of principle, current income or tax-exempt income. In general mutual funds fall
into tree general categories:
• Equity Funds invest in shares or equity of companies.
• Fixed-Income funds invest in government or corporate securities that offer
fixed rates of return.
• Balanced Funds invest in a combination of both stocks and bonds.
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i) Growth Funds
These funds seek to provide growth of capital with secondary emphasis on
dividend. They invest in shares with a potential for growth and capital appreciation.
Because they invest in well-established companies where the company itself and the
industry in which it operates are thought to have good long-term growth potential,
growth funds provide low current income. Growth funds generally incur higher risks
than income funds in an effort to secure more pronounced growth.
These funds may invest in a broad range of industries or concentrate on one or

more industry sectors. Growth funds are suitable for investors who can afford to
assume the industry sectors. Growth funds are suitable for investors who can afford to
assume the risk of potential loss in value of their investment in the hope of achieving
substantial and rapid gains. They are not suitable for investors who must conserve
their principal or who must maximize current income.
ii) Growth and Income Funds

Growth and income funds seek long-growth of capital as well as current
income. The investment strategies used to reach these goals vary among funds. Some
invest in a dual portfolio consisting of growth stocks and income stocks, or a
combination of growth stocks, stocks paying high dividends, preferred stocks,
convertible securities or fixed-income securities such as corporate bonds and money
market instruments. Others may invest in growth stocks and earn current income by
selling covered call options on their portfolio stocks.
Growth and income funds have low to moderate stability of principal and
moderate potential for current and growth. They are suitable for investors who can
assume some risk to achieve growth of capital but who also want to maintain a
moderate level of current income.
iii) Fixed – Income Funds

The goal of fixed income funds is to provide current income consistent with
the preservation of capital.
These funds invest in corporate bonds or government-backed mortgage
securities that have a fixed rate of return. Within the fixed-income category, funds
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vary greatly in their stability of principal and in their dividend yields. High-yield
funds, which seek to maximize yield by investing in lower-rated bonds of longer
maturities, entails less stability of principal than fixed-income funds that invest in
higher-rated but lower-yielding securities.
Some fixed-income funds seek to minimize risk by investing exclusively in
securities whose timely payment of interest and principal is backed by the full faith
and credit of the Indian government. Fixed-income funds are suitable for investors
who want to maximize current income and who can assume a degree of capital risk in
order to do so.
iv) Balanced Fund

The Balance fund aims to provide both growth and income. These funds invest
in both shares and fixed income securities in the proportion indicated in their offer
documents. Ideal for investors who are looking for a combination of income and
moderate growth.
v) Money Market Funds/Liquidity Funds

For the cautious investor, these funds provide a very high stability of principal
while seeking a moderate to high current income. They invest in highly liquid,
virtually risk-free, short-term debt securities of agencies of the Indian Government,
banks and corporation and Treasury bills. Because of their short-term investment,
money market mutual funds are able to keep a virtually consent unit price only the
yield fluctuates.
Therefore, they are an attractive alternative to bank accounts. With yields that
are generally competitive with and usually higher than yields on bank savings
account, they offer several advantages. Money can be withdrawn any time without
penalty. Although not insured, money market funds invest only in highly liquid, short-
term, top-rated money market instruments. Money market funds are suitable for
investors who want high stability o principal and current income with immediate
liquidity.
vi) Specialty / Sector Funds

These funds invest in securities of a specific industry or sector of the economy
such as health care, technology, leisure, utilities or precious metals. The funds enable
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investors to diversify holdings among many companies within an industry, a more
conservative approach than investing directly in one particular company.
Sector funds offer the opportunity for sharp capital gains in cases where the
fund’s industry is “in favor” but also entail the risk of capital losses when the industry
is out of favor. While sector funds restrict holdings to a particular industry, other
specialty funds such as index funds give investors a broadly diversified portfolio and
attempt to mirror the performance of various market averages.
Index funds generally buy shares in all the companies composing the BSE
Sensex or NSE Nifty or other broad stock market indices. They are not suitable for
investors who must conserve their principal or maximize current income.
A summary is presented in the table below of the various funds and their
investment objectives.
Time Risk
Scheme type Typical Investment Pattern
Horizon Profile
Money
Equity Debt Market
Objective Open Close
(%) (%) Inst./Others
(%)
Money Short-
Yes No Low 0 0-20 80-100
Market Term
Medium-
Low to
Income Yes Yes Long 0 80-100 0-20
Medium
Term
Long
Growth Yes Yes High 80-100 0-20 0-20
Term
Long Medium
Balanced Yes Yes 0-60 0-40 0-20
Term to high
Tax Long
Yes Yes High 80-100 80-100 0-20
Saving Term
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RISK TOLERANCE
The discussion on investment objectives would not be complete without a
discussion on the risks that investing in a mutual fund entails.
At the cornerstone of investing is the basic principle that the greater the risk
investor take, the greater the potential reward. Remember that the value of all
financial investments will fluctuate.
Typically, risk is defined as short-term price variability. But on a long-term
basis, risk is the possibility that investor’s accumulated real capital will be insufficient
to meet your financial goals. And if investor want to reach their financial goals, you
must start with an honest appraisal of their own personal comfort zone with regard to
risk. Individual tolerance for risk varies, creating a distinct “investment personality”
for each investor. Some investors can accept short-term volatility with ease, others
with near panic. So whether you consider your investment temperament to be
conservative, moderate or aggressive, you need to focus on how comfortable investor
will be as the value of your investment moves up or down.
Recognizing the type of investor you are will go a long way towards helping
investor build a meaningful portfolio of investments that they can live with. take the
test “Tolerance Questionnaire” to determine where your preferences lie.
Market
Risks
Inflation
Managing Risk
Credit
Diversification
Interest Rate
SIP
Employees
Exchange Rate
Type of risk
Investment
Government
Policies
Questionnaire
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Managing Risks
Mutual funds offer incredible flexibility in managing investment risk.
Diversification and Automatic Investing (SIP) are two key techniques investor can
use to reduce your investment risk considerably and reach your long-term financial
goals.
Diversification
When people invest in one mutual fund, investor instantly spread their risk
over a number of different companies. Investor can also diversify over several
different kinds of securities by investing in different mutual funds, further reducing
their potential risk. Diversification is a basic risk management tool that investor will
want to use throughout your lifetime as they rebalance their portfolio to meet your
changing needs and goals. Investors, who are willing to maintain a mix of equity
shares, bonds and money market securities have a greater chance of earning
significantly higher returns over time than those who invest in only the most
conservative investments. Additionally, a diversified approach to investing –
combining the growth potential of equities with the higher income of bonds and the
stability of money markets – helps moderate investor risk and enhance their potential
return.
System Investment Plan (SIP)

The Unitholders of the Scheme can benefit by investing specific Rupee
amounts periodically, for a continuous period. Mutual fund SIP allows the investors
to invest a fixed amount of Rupees every month or quarter for purchasing additional
units of the Scheme at NAV based prices. Here is an illustration using hypothetical
figures indicating how the SIP can work for investors: Suppose an investor would like
to invest Rs.1,000 under the Systematic Investment Plant on a quarterly basis.
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Amount Invested Purchase Price No.of Units
(Rs.) (Rs.) Purchased
Initial Investment 1000 10 1000
1 1000 8.20 121.95
2 1000 7.40 135.14
3 1000 6.10 163.93
4 1000 5.40 185.19
5 1000 6.00 166.67
6 1000 8.20 121.95
7 1000 9.25 108.11
8 1000 10.00 100.00
9 1000 11.25 88.89
10 1000 13.40 74.63
11 1000 14.40 69.44
TOTAL 12,000 - 1,435.90
Average unit cost Rs.12,000/1,435.9=Rs.8.36

Average unit price 109.6/12=Rs 9.13
Unit price at beginning of next quarter Rs.14.90
Market value of investment 1435.9*14.90=Rs.21.395/-
The investor liquidates his units and gets back Rs.21,395/-
Using the SIP strategy the investor can reduce his average cost per unit. The investor
gets the advantage of getting more units when the market is turned down.
TYPES OF RISKS
All investments involve some form of risk. Even an insured bank account is
subject to the possibility that inflation will rise faster than customer earnings, leaving
you with les real purchasing power than when you started consider these common
types of risks and evaluate them against potential rewards when they select an
investment.
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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 fledging corporation may be affected.
This change in price is due to “market risk”.
Inflation Risk
Sometimes refereed to as “loss of purchasing power”. Whenever inflation
sprints forward faster than the earnings on customer investment, investor run the risk
that they will actually be able to buy less, not more. Inflation risk also occurs when
prices rice faster than return.
Credit Risk
In short, how stable is the company or entity to which investor lend their
money when they invest? How certain are customer that it will be able to pay the
interest you are promised, or repay your principal when the investment matures?
Inflation Risk
Changing interest rates affect both equities ad bonds in many ways. Investors
are reminded that “predicting” which way rates will go is rarely successful. A
diversified portfolio can help in offsetting these changes.
Effect of loss of key professionals and inability to adapt

An industries’ key assets is often the personnel who run the business i.e.,
intellectual properties of the key employees of the respective companies. Given the
ever-changing complexion of few industries and the high obsolescence levels,
availability of qualified, trained and motivated personnel is very critical for the
success of industries in few sectors. It is, therefore, necessary to attract key personnel
and also to retain the to meet the changing environment and challenges the sector
offers.
Failure or inability to attract/retain such qualified key personnel may impact
the prospects of the companies in the particular sector in which the fund invests.
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Exchange Risks
A number of companies generate revenues in foreign currencies and may have
investments or expenses also denominated in foreign currencies. Changes in exchange
rates may, therefore, have a positive or negative impact on companies which in turn
would have an effect on the investment of the fund.
Investment Risks
The sectoral fund schemes, investments will be predominantly in equities of
select companies in the particular sectors. Accordingly, the NAV of the schemes are
linked to the equity performance of such companies and my be more volatile than a
more diversified portfolio of equities.
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.
Equity Funds
Equity funds seek to provide maximum growth of capital with secondary
emphasis on dividend or interest income. They invest in common stocks with a high
potential for rapid growth and capital appreciation. An equity fund gives an exposure
to the stock market. The fund would have long-term growth potential but provide low
current income. They are not suitable for investors who are risk averse and are
focused on maximizing current income or conserving principal.
Investment Philosophy
The overriding objective of the AMC in managing its investments is to
produce a consistently above average long-term performance.
The AMC believes in a bottom-up approach to stock picking. This means that
the focus is on the fundamental quality of companies as opposed to a focus on a
favoured sectors and market movements.
The AMC will follow a structured investment process in order to identify the
best stocks for inclusion in the portfolio. This would involve consistently examining
all stocks under an internally developed research framework. A stock would be
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considered or inclusion in the portfolio when the valuation does not adequately
capture its underlying fundamental value in the AMC’s opinion based on the above
factors.
The AMC’s portfolio management style is conductive to a low portfolio
turnover rate. However, the AMC will take advantage of the opportunities that present
themselves from time to time because of inefficiencies of the securities markets. The
AMC will endevour to balance the increased cost on account of higher portfolio
turnover with the benefits derived therefrom.
Balanced Funds
Balanced funds are more evenly invested in equities and income securities.
Balanced and equity-income funds are suitable for conservative investors who want
high current yield with some growth. If investor seek to generate long-term capital
appreciation and current income, an investment in the balanced fund would be ideal.
It gives investor an exposure to the stock market without the entire risk of the stock
market.
The AMC proposes to invest in a mix of equities and fixed income securities
with the aim of generating capital appreciation, while at the same time minimize the
volatility inherent in pure equity schemes. With the aim, the AMC would allocate the
assets between equity and fixed income instruments within the limits laid down for
each scheme.
Debt Funds
The goals of fixed income funds is to provide high current income consistent
with the preservation of capital. Growth of capital is of secondary importance. These
funds invest in corporate bonds or government securities that have a fixed rate of
return. The funds are suitable for investors who want to maximize current income and
who do not wish to assume a high degree of capital risk in order to do so. Since bond
prices fluctuate with changing interest rates, there is some principal risk involved
despite the fund’s conservative nature.
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The AMC aims to identify securities, which offer superior levels of yield at
lower level of risks. With the aim of controlling risks, rigorous in-depth credit
evaluation of the securities proposed to be invested in will be carried out by the
investment team of the AMC. The credit evaluation includes a study of the operating
environment of the company, the past track record as well as the future prospects of
the issuer, the short as well as longer term financial health of the issuer, Rated debt
instruments in which the Scheme invests will be of investment grade as rated by a
credit rating agency. In case a debt instrument is not rated, specific approval of the
Board of the AMC will be obtained for such an investment.
In addition, the investment team of the AMC studies the macro economic
conditions, including the politico – economic environment and factors affecting
liquidity and interest rates. He AMC would use this analysis to attempt to predict the
likely direction of interest rates and position the portfolio appropriately to take
advantage of the same.
CALCULATION OF NAV
The formal to calculate the NAV is
Market or Fair Current liabilities

Current assets
Value of the and Provision
(including
Scheme’s (including accrued
accrued income)
Investment expenses)
NAV
No. of Units outstanding under the Scheme.
The NAV of the respective schemes will be calculated and disclosed at the close of
every business day.
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Important Information About the New Schemes
Here we provide them with the important information about the new schemes
like the opening and closing date of IPO, the Entry and exit loads applicable, the lock
– in period if any the tax benefit if any in the launched scheme. By this the Distributor
could easily grasp the important things to be mentioned to the client which helped
them to sell the fund easily.
Impact Interest Rates on NAV’s

While stability is one of the key features of bond, funds, their NAV’s can
fluctuate on account of interest rate changes and on account of other events affecting
debt markets. This happens because interest rate change and expectations about such
changes impact the prices of bonds, the underlying instruments of a bond fund. The
impact of interest rates on bond funds therefore can be understood by understanding
the impact the such change have on bond prices.
It has been observed that bond prices and interest rate have on inverse
relationship, that is, when interest rates go down, bond prices go up and vice, versa,
further, the impact of interest rate changes-in terms of price changes – is more
pronounced in the case of longer duration bonds.
The implications therefore for bond funds are clear. In case of interest rate
increases existing investors could see their NAVs suffer a bit as the prices of
underlying instruments will decline. However, fresh investments made by the funds
will be made in instrument that yield more. The reverse will happen in the case of
interest rate declines. While the bond fund will record a gain in NAV on account of
appreciation in the value of the underlying instruments, subsequent will be made in
instrument of lower yield.
A related factor to be taken into account is the maturity profile of the fund. If a
fund is locked in debt instruments of longer durations then the impact of such changes
would be greater on the portfolio. Therefore, while in a bond fund in a volatile related
factors
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Market Trends
A lone UTI just one scheme in 1964 now competes with as many as 400 odd
products and 34 players in the market. In spite of the stiff competition and losing
market share, UTI still remains a formidable force to reckon with.
Last six years have been the most turbulent as well as exiting ones for the
industry. New players have come in, while others have decided to close shop by either
selling off or merging with others. Product innovation is now passé with the game
shifting to performance delivery in fund management as well as service. Those
directly associated with the fund management industry like distributors, registrars and
transfer agents, and even the regulators have become more mature and responsible.
The industry is also having a profound impact on financial markets. While

UTI has always been a dominant player on the bourses as well as the debt markets,
the new generation of private funds which have gained substantial mass are now seen
flexing their muscles. Fund manager, by their selection criteria for stocks have forced
corporate governance on the industry. By rewarding honest and transparent
management with higher valuation, a system of risk – reward has been created where
the corporate sector is more transparent then before.
Funds have shifted their focus to the recession free sectors like
pharmaceuticals, FMCG and technology sector. Funds performances are improving.
Funds collection, which averaged at less then Rs100bn per annum over five-year
period spanning 1993-98 doubled to Rs210bn in 1998-99. in the current year
mobilization till now have exceeded Rs300bn. Total collection for the current year
ending march 2000 is expected to reach Rs450bn.
What is particularly noteworthy is that bulk of the mobilization has been by

the private sector mutual funds rather than public sector mutual funds. Indeed private
MFs saw a net inflow of Rs. 7819.34 crore during the first months of the year as
against a net inflow of Rs. 604.40 crore in the case of public sector funds.
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Mutual funds are now also competing with commercial banks in the for retail
investor’s saving and corporate float money. The power shift towards mutual funds
has become obvious. The coming few years will show that the traditional saving
avenues are losing out in the current scenario. Many investors are realizing that
investments in saving accounts are as good as locking up their deposits in a closet.
The fund mobilization trend by mutual funds in the current year indicates that money
is going to mutual funds in a big way. The collection in the first half of the financial
year 1999-2000 matches the whole of 1998-99.
India is at the first of a revolution that has already peaked in the U.S. The U.S.
boasts of an Asset base that is much higher than its bank deposits. In mutual fund
assets are no even 10% of the bank deposits, but this is beginning to change. Recent
figures indicate that in the first quarter of the current fiscal year mutual fund assets
went up by 115% whereas bank deposits rose by only 17%. (source : thinktank, the
financial express September, 99) This is forcing a large number of banks to adopt the
concept of narrow banking wherein the deposits are kept in gilts and some other assets
which improves liquidity and reduces risk. The basic fact lies that banks cannot be
ignored and they will not close down completely. Their role as intermediaries cannot
be ignored. It is just that mutual funds are going to change the way banks do business
in the future.
PRESENT SCENARIO
Conservatism to dynamism
At present, numerous new financial intermediaries have started functioning
with a view to extending multifarious services to the investing public in the area of
financial services. The emergence of various financial institutions and regulatory
bodies has transformed the financial services sector from being a conservative to a
very dynamic one.
Emergence of primary Equity Market

Now we are also witnessing the emergence of much private sector financial
service. The capital markets which were very sluggish, have become a popular source
for raising finance. The number of stock exchanges in the country has gone up from 9
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in 1980 to 22 to 1994. The aggregate funds raised by the industries in the primary
markets have gone from Rs.61 billion in 1991-92 to Rs.126 billion in 1993-94. The
number of companies listed on the stock exchange has also gone up from 2265 in
1980 to over 7000 in 1993. Thus, the primary equity market has emerged as an
important vehicle to canalize the savings of the individuals and corporate for
productive purpose and thus to promote the industry and economic growth of our
nation.
Process of Globalization
Again, the process of globalization has paved the way for the entry of
innovative and sophisticated financial products into our country. Since the
government is very keen in removing all obstacle that stand in he way of inflow of
foreign capital, the potent abilities for the introduction of innovative international
financial products in India are very great. Moreover, India is likely to enter the full
convertibility era before 1996. Hence, there is every possibility of introduction of
more and more innovative and sophisticated financial in out country.
Process of Liberalization
Realizing all these factors, the Government of India has initiate many steps to
reform the financial service industry. The government has already switched over to
free pricing of issued from pricing issued by the Controller of capital issues. The
interest rates have been deregulated. The private sector has been permitted to
participate banking and mutual funds and the public sector undertaking ate being
privatized. The finance Act 1992 has brought into effect large-scale amendment in the
tax structure of long-term capital gains. Te finance Act 1994 has given a further boost
by lowering the lock-in period from 3 years to 1 year, in order to get the entitlement
as a long-term capital asset. The securities exchange board of India has liberalized
many stringent conditions so as to boost the capital and money markets. In this
changed context, the financial service industry in India has to play a very positive and
dynamic role in the year to come of the millions of prospective investors spread
throughout the country.
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GROWTH OF MUTUAL FUNDS IN LAST 10 YEARS
The Indian mutual funds industry has recorded a tremendous growth in size
during the last 10 years with cumulative resources rising form Rs. 4,5563 crores in
1986 to over Rs.85,822 crores in 1997. The Indian mutual fund industry began with
the formation of unit trust of India (UTI) in 1963. The first mutual fund was Unit
Scheme ‘64’ which is still the biggest scheme.
The UTI introduced several schemes aimed at different sections of people. The
public sector monolith operated under monopoly conditions and in an over regulated
economy till the mid-eighties. In 1987, the commercial banks and the insurance
companies were also permitted to launch schemes. Their schemes were received with
enthusiasm and more than Rs.6000 crores were raised in 1988-89. the nationalized
banks sold their schemes like any other traditional banking deposit. Assured returns
were offered in some schemes and this might have created a perception that mutual
funds are as safe as nationalized bank deposits. The boom continued into the nineties
with the liberalization evoking positive response from. The investors and acting as an
additional catalyst for growth. In 1991-92 mutual funds mobilized a record Rs.14,000
crores.
The industry experienced its first setback after the stock market crash of 1992.
the annual gross mobilization of the mutual funds fell to Rs.9,500 crores during the
year. At that point that market was further liberalized, as foreign institutional
investors were permitted portfolio investments. The financial markets once again
picked up. In addition, the period also witnessed a tremendous growth in the primary
markets with annual mobilizations from equity issues crossing Rs. 36,000 crores in
1994-95 (as against Rs. 18,100 crores raised in 1992-93). The resource mobilizations
by mutual funds also continued to remain high with annual gross mobilizations
averaging Rs. 144,000 crores per mutual funds. However the crash in the financial
markets in October 1994 and the continued prevalence of bearish conditions have hit
mutual funds. During 1996 – 97, mutual funds resource mobilizations were at a six-
year low. However resource mobilization by mutual funds has picked up during the
current year. The mobilization during the first nine months far exceeds the collections
for the entire previous year.
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Decline of the primary equity market after an unprecedented boom and the
slowdown in the economy longed bear phase lasting till the end of 1988 ; high interest
rates (16-18), with poor performance of equities saw investor preference shift to fixed
income and debt instruments. Mutual funds realized that equity funds were hard to
sell. The period 1994-96 was one of the worst in the history of Indian mutual funds.
Notable, was the market share in terms of assets under equity schemes, decreased
from 43.88% in 1994 to 18.02% in 1996. The mutual fund industry saw a decline in
the gross mobilizations during the above years. Therefore, emphasis shifted to open –
ended debt funds. But here too, new players faced competition from 90 percent.
Market share through its close-ended assured returns debt products, popularly known
as Monthly income plans (MIPs). From then began the process of restructuring.
Portfolios went in for a total overhaul. Dead stocks were written-off. Huge portfolios
were made. NAVs eroded by up to 440-free sectors like FMCG, pharmaceuticals and
Software.
Over the two years, the fruits of this effort became visible as funds
performances started showing improvement. With the economic turnaround
seemingly around the corner, the stock market turned bullish towards the beginning of
this year further improving the performance of equity funds. Finally, with the 1999
budget giving special tax sops for mutual funds, especially equity-oriented funds,
money flow into the funds increased sharply. Low interest rates, which now hovered
at 11-12 percent for AAA rated paper, saw investors, take a second look at equity
funds perform even better. Since then, as on February 2000, number of mutual funds
has grown to 36, the number of schemes increased to 500. foreign assent management
companies have also set up joint ventures to manage some of domestic mutual funds.
Mutual funds are financial intermediaries, which collect the saving of

investors and invest them in a large and well – diversified portfolio of securities such
as money market instruments, corporate and government bonds and equity shares of
joint stock companies. A mutual fund is a pool of commingle funds invested by
different investors, who have no contact with each other. Mutual funds are conceived
as institutions for providing small investors with avenues of investments in the capital
market.
21
Since small investors generally do not have adequate time, knowledge,
experience and resources for directly assessing the capital market, they have to rely on
an intermediary, which undertakes informed investment decisions and provides
consequential benefits of professional expertise. The advantages for the investors are
reduction in risk, expert professional management, diversified portfolios, and liquidity
of investment and tax benefits. By pooling their assets through mutual funds,
investors achieve economic of scale. The interests of the investors are protected by the
SEBI, which acts as a watchdog.
22
INDUSTRY PROFILE
23
INDUSTRY PROFILE
Mutual funds era was started with the establishment of UTI on Feb 1, 1964.
UTI was formed with the initial capital of Rupees 5 Crores. As all the Mutual funds
houses are formed as trust they are expected to operate on “No profit and No Loss”
basis . UTI ruled the Mutual Fund Industry for two decades in the controlled
economy. By 1987 UTI has about 4,500 crores of AUM (Assets Under Management)
and by 1997 the AUM of UTI was 47,000 crores.
Year 1987 was a great landmark in the history of Mutual Fund Industry where
the sector opened for private players. Some of the Private players are SBI, Canara
Bank and LIC e.t.c in the year 1993 the entire Mutual Fund Industry was liberalized
and also opened for foreign players also.
As of Jan 31, 2007 they are 33. Active fund houses which were offering
around 1997 fund schemes with AUM of around 3,26,388 crores. Some of the Active
Fund house are
1. Reliance
2. Unit Trust of India
3. ICICI PRUDENTIAL
4. Kotak Mahindra
5. Fidelity
6. HSBC
7. HDFC
The Mutual fund Industry is regulated by SEBI (Securities Exchange Bureau

of India) which is a statutory Body. There was a association of mutual Fund houses in
India i.e. AMFI.
The mutual Funds Industry in India has been on a roll as the assets under
management (AUMs) continued to show strong growth during the last five years.
24
According to the Association of mutual Funds in India (AMFI), the AUMs
swelled to Rs 3,26,388 crore by May 2007 from Rs 1,49,554 crore in March 2007. the
industry has indeed come a long way from being single – player in 1964 (UTI with
single scheme (US-64) to 33 players offering 460 schemes as in May 2007.
A slew of factors have contributed to this surge in the industry. First and the
foremost is a buoyant domestic economy coupled with a booming economy coupled
with a booming stock market during the last five years. Conductive regulatory regime
and measures for investors, protection by SEBI are yet another significant factors.
Further, incentives, such as making dividend tax-free in the hands of investors,
removal of long-term capital gains tax and low interest rates on bank deposits, have
provided a strong impetus to the growth. Increased focus on product and distribution
innovations from the industry players has also fuelled the growth.
However, the industry still has a long way to go as it slugs out with the
competition from other investment avenues in a battle to gain greater share of the
investor’s wallets. Compared to the AUMs of the industry worth Rs 3, 26, 388 crore
in March 2007, the Bank deposit figure was a mammoth Rs 1,622,579 crore, i.e., the
AUMs are not even 10 per cent of bank deposits.
In USA, the corpus of mutual funds is around three times that of bank
deposits. In comparison, the Indian mutual funds industry accounts for just 6 per cent
of the country’s gross domestic product (GDP) compared to 87 per cent in Australia,
72 per cent in USA and 37 per cent world over.
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EVALUATION
The mutual fund industry can be broadly put into four phases according to the
development of the sector. Each phase is briefly described as under.
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)

Entry of Non-UTI mutual funds. SBI Mutual Fund was the first followed by
Canbank Mutual Fund (Dec87), 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 in 1989 and GIC in 1990. The end of 1993 marked Rs.47,004 as assets
under management.
Third Phase-1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families.
Also, 1993 was the year in which the first Mutual Fund Regulations came into being,
under which all mutual funds, except UTI were to be registered and governed. The
erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private
sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual 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
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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
This phase had bitter experience for UTI, it was bifurcated into two separate
entitles. One is the Specified Undertaking of the Unit Trust of India with AUM or
Rs.29,835 crores (as on January 2003). The Specified Undertaking of Unit Trust of
India, functioning under an administrator and under the rules framed by Government
of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.
With the bifurcation of the erstwhile UTI which had in March 2000 more than
Rs.76,000 crores of AUM and with the setting up of a UTI Mutual Fund, conforming
to the SEBI Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September 2004, there were 29 funds,
which manage assets of Rs.153108 crores under 421 schemes.
On the Growth Track

After an initial slow growth, this four-decades aged industry slowly but
steadily began to see significant growth during the recent period of 1993-2005. The
AUMs during this period swelled phenomenally from mere Rs 47,000 crore in March
1993 to Rs 3,26,388 crore by March 2007. Previously, the AUMs had been on a
decline. The situation reversed as, riding on a positive market sentiment, a slew of
new offering from mutual fund houses swelled the AUMs, which stood at Rs 3,26,388
crore in March 2007. This was a revolutionary shift in the industry with an all-round
increase of Rs 94,080 crore in AUMs.
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CATEGORY WISE GROWTH OF MUTUAL FUND AUMs
Category March 2003 March 2004 March 2005 March 2006 March 2007
Income funds 47,567 62,524 47,605 60,278 119,322
Growth funds 9,887 23,613 36,711 92,867 113,386
Balanced 3,141 4,080 4,867 7,493 9,110
funds
Liquid/money 13,734 41,704 54,068 61,500 72,006
market funds
Gilt funds 3,910 6,026 4,576 3,135 2,257
Elss funds 1,228 1,669 1,727 6,589 10,211
Total 79,464 139,616 149,554 231,862 326,388
Future of Mutual Funds in India

By March 2007, Indian mutual fund industry rached Rs 3,26,388 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 lat 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.
ORGANIZATION OF MUTUAL FUND

All mutual funds comprise four constituents – Sponsors, Trustees, Asset
Management Company (AMC) and Custodians.
Sponsors
The sponsors initiate the idea to set up a mutual fund. It could be registered
company, scheduled bank or financial institution. A sponsor has to satisfy certain
condition, such as capital, record (at least five years’ operation in financial services),
de-fault free dealings and general reputation of fairness. The sponsors appoint the
Trustee, AMC and Custodian. Once the AMC is formed, the sponsor is just a
stakeholder.
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Trust / Board of Trustees
Trustees hold fiduciary responsibility towards unit holders by protecting their
interests. Trustees float and market schemes, and secure necessary approvals. They
check if the AMC’s investment are within well-defined limits, whether the fund’s
assets are protected, and also ensure that unit holders get their due returns. They also
review any due diligence by the AMC. For major decisions concerning the fund, they
have to take the unit holders consent. They submit reports every six months to SEBI;
investors get an annual report. Trustees are paid annually out of the fund’s assets – 0.5
percent of the weekly net asset value.
Fund managers/ AMC

They are the ones who manage money of the investors. An AMC takes
decisions, compensates investors through dividends, maintains proper accounting and
information for pricing of units, calculates the NAV, and provides information on
listed schemes. It also exercises due diligence on investments, and submits quarterly
reports to the trustees. A fund’s AMC can neither act for any other fund nor
undertake any business other than asset management. Its net worth should not fall
below Rs.10 crore. And, its fee should not exceed 1.25 percent if collections are
below Rs.100 crore and 1 percent if collections are above Rs.100 crore. SEBI can
pull up an AMC if it deviates from its prescribed role.
Custodian
Often an independent organization, it takes custody of securities and other
assets of mutual fund. Its responsibilities include receipt and delivery of securities,
collecting income-distributing dividends, safekeeping of the units and segregating
assets and settlements between schemes. Their charges range between 0.15-0.2
percent of the net value of the holding. Custodians can service more than one fund.
29
ASSETS UNDER MANAGEMENT AS ON 31ST MARCH, 2007
Sr.No. Name of the Asset Management Company Asset Under
Management
(Rs. in Crore)
A BANK SPONSORED
(i) Joint Ventures – Predominantly Indian
1 SBI Funds Management Pvt. Ltd. 16,807
Total A (i) 16,807
(ii) OTHERS
1 BOB Asset Management Co. Ltd. 90
2 Canbank Investment Management Services Ltd. 2,185
3 UTI Asset Management Company Pvt. Ltd. 33,488
Total A (ii) 37,763
Total A (i + ii) 54,570
B INSTITUTIONS
1 LIC Mutual fund Asset Management Co. Ltd. 9,643
Total B 9,463
C PRIVATE SECTOR
(i) INDIAN
1 Benchmark Asset Management Co. Pvt. Ltd. 3,852
2 DBS Cholamandalam Asset Management Co. 1,985
Ltd.
3 Taurus Asset Management Co. Ltd. 278
4 Escorts Asset Management Ltd. 118
5 J.M.Financial Asset Management Ltd. 3,148
6 Kotak Mihindra Asset Management Pvt. Ltd. 11,604
7 Quantum Asset Management Co. Pvt. Ltd. 60
8 Reliance Capital Asset Management Ltd. 46,307
9 Sahara Asset Management Co. Pvt. Ltd. 180
10 Tata Asset Management Ltd. 12,625
Total C (i) 80,157
(ii) JOINT VENTURE – PREDOMINANTLY
INDIAN
1 Birla Sun Life Asset Management Co. Ltd. 19,047
2 DSP Merrill Lynch Fund Managers Ltd. 12,063
3 HDFC Asset Management Co. Ltd 28,358
4 ICICI PRUDENTIAL Asset Management Co. 37,870
Ltd.
5 Sundaram Asset Management Company Ld. 7,741
Total C (ii) 104,779
(iii) JOINT VENTURES –
PREDOMINANTLY FOREIGN
1 ABN AMRO Asset Management (India) Ltd. 4,805
2 Deutsche Asset Management (India) Pvt. Ltd. 5,905
3 Fidelity Fund Management Pvt. Ltd. 5,830
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4 Franklin Templeton Asset Management (India) 22,019
Pvt. Ltd.
5 HSBC Asset Management (India) Pvt. Ltd. 11,039
6 Lotus India Asset Management Co. Pvt. Ltd. 1,172
7 ING Investment Management (India) Pvt. Ltd. 1961
8 Morgan Stanley Investment Management Pvt. 2892
Ltd.
9 Principal PNB Asset Management Co. Pvt. Ltd. 6489
10 Standard Chartered Asset Management Co. Pvt. 9411
Ltd.
Total C (iii) 77,239
Total C (i +ii +iii) 262,175
Total C (A+B+C) 326,388
REGULATORY ASPECTS
Schemes of a Mutual Fund
The asset management company shall launch no scheme unless the trustees
approve such scheme and a copy of the offer document has been filed with the Board.
Every mutual fund shall along with the offer document of each scheme pay filing
fees. The offer document shall contain disclosures which are adequate in order to
enable the investors to make informed investment decision including the disclosure on
maximum investments proposed to be made by the scheme in the listed securities of
the group companies of the sponsor A close-ended scheme shall be fully redeemed at
the end of the maturity period. “Unless a majority of the unit holders otherwise
decide for its rollover by passing a resolution”.
The mutual fund and asset management company shall be liable to refund the
application money to the applicants
(i) If the mutual fund fails to receive the minimum subscription amount
referred to in clause (a) of sub-regulation (1);
(ii) If the moneys received from the applicants for units are in excess of
subscription as referred to in clause (b) of sub-regulation (1).
The asset management company shall issue to the applicant whose application
has been accepted, unit certificates or a statement of accounts specifying the number
of units allotted to the applicant as soon as possible but not later than six weeks from
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the date of closure of the initial subscription list and or form the date of receipt of the
request form the unit holder in any open ended scheme.
Mutual Fund Companies in India

The concept of mutual funds in India date back to the year 1963. the era
between 1963 and 1987 marked the existence of only one mutual fund company in
India with Rs.67bn assets under management (AUM), by the end of its monopoly era,
the Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund
companies in India took their position in mutual fund market.
The new entries of mutual fund companies in India were SBI Mutual Fund,
Canbank mutual Fund, Punjab National Bank Mutual Fund Indian Bank Mutual Fund,
Bank of India Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund industry.
By the end of 1993, the total AUM of the industry was Rs.470.04bn. The private
sector funds started penetrating the fund families. In the same year the first Mutual
Fund Regulations came into existence with re-registering all mutual funds except
UTI. The regulations were further given a revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India
which has now merged with Franklin Templeton. Just after ten years with private
sector players penetration, the total assets rose up to Rs.1218.05bn. Today there are
33 mutual fund companies in India.
MAJOR MUTUAL FUND COMPANIES IN INDIA 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.
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.
32
Bank of Baroda Mutual Fund (BOB 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.
HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers namely
Housing Development Finance Corporation Limited and Standard Life Investments
Limited.
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.
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. ICICI PRUDENTIAL
Mutual Fund was setup on 13th of October, 1993 with two sponsorers, Prudential Plc.
and ICICI Ltd. The Trustee Company formed is ICICI PRUNDENTIAL Trust Ltd.
and the AMC is ICICI PRUNDENTIAL Asset Management Company Limited
incorporated on 22nd of June, 1993.
Sahara Mutual Fund

Sahara Mutual Fund was setup on July 18, 1996 with Sahara India Financial
Corporation Ltd. as the sponsor. Sahara Asset Management Company Private
33
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.
State Bank of India Mutual Fund

State Bank of India Mutual Fund is the first Bank sponsored Mutual fund to
launch offshore fund, the India Magnum Fund with a corpus of Rs.225 crore.
approximately. Today it is the largest Bank sponsored Mutual Fund in India. They
have already launched 35 Schemes out of which 15 have already yielded handsome
returns to investors. State Bank of India Mutual Fund has more than Rs.5,500 crore
as AUM. Now it has an investor base of over 8 Lakhs spread over 18 schemes.
Tata Mutual Fund

Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The
sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation
Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee
Company Pvt. Limited. Tata Asset Management Limited’s is one of the fastest in the
country with more than Rs.7,703 crores (as on April 30, 2005) of AUM.
Kotak Mahindra Mutual Fund

Kotak Mahindra Assets Management Company (KMAMC) is a subsidiary of
KMBI., 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 Private
Limited. UTI Asses Management Company presently manages a corpus of over
Rs.20000 Crore. the sponsors 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.
34
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 to the Public with a
view to contribute to the capital market and to provide investors the opportunities to
make investments in diversified securities.
Standard Chartered Mutual Fund

Standard Chartered Mutual Fund was set up on March 13,2000 sponsered 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.
Franklin Templeton India Mutual Fund

The group, Franklin 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, investment management and credit services. Morgan Stanley
Investment Management (MISM) was established in the year 1975. it provides
customized asset management services and products to governments, corporations,
pension funds and non-profit organizations. Its services are also extended to high net
worth individual and retail investors. In India it is known as Morgan Stanley
Investment Management Private Limited (MISM India) and its AMC is Morgan
Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme
35
serving the needs of Indian retail investors focusing on a long-term capital
appreciation.
Escorts Mutual Fund

Escorts Mutual Fund was setup on April 15,1996 with Escorts Finance
Limited as its sponsor. The Trustee Company is Escorts investment Trust Limited. Its
AMC was incorporated on December 1,1995 with the name Escort 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 sponsored. 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 headquartered in Mumbai,
Benchmark Assest 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 Januvary 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
36
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.
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 Companeis, 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.
Future Outlook
The mutual funds industry has been growing annually at the rate of 9 per cent
for the last five years and is expected to double its AUMs by the end of March 2010,
according to AMFI. Further, the annual composite growth rate of the industry is
expected to be 13 per cent in the next ten years. The industry, with less than ten
schemes a decade ago, has 460 schemes today. The schemes are more diverse and
offer a wide array of choice to investors.
37
COMPANY PROFILE
38
RELIANCE MUTUAL FUND
Mission Statement:
To create and nurture a world-class, high performance environment aimed at
delighting our customers.
Vision Statement:
To be a globally respected wealth creator with an emphasis on customer care
and a culture of good corporate governance.
Reliance Capital Asset Management Ltd:

Reliance Capital Asset Management Ltd. is a subsidiary of Reliance Capital
Limited, the sponsor. Reliance Mutual Fund (RMF) has been sponsored by Reliance
Capital Ltd (RCL). The promoter of RC is AAA Enterprises Private Limited. Reliance
Capital Limited is a Non Banking Finance Company. Reliance Capital Limited is one
of the India’s leading and fastest growing financial services companies, and ranks
among the top three private sector financial services and banking companies, in terms
of net worth.
Reliance Capital has interest in asset management and mutual funds, life and
non-life insurance, private equity and proprietary investments, stock broking and
other activities in the financial services sector.
About Reliance Mutual Fund

Reliance Mutual Fund (RMF) has been established as a trust under the Indian
Trust Act, 1882 with Reliance Capital Limited (RCL), as the Settler/Sponser and
Reliance Capital Trustee Co. Limited (RCTCL), as the Trustee. RMF has been
registered with the Securities & Exchange Board of India (SEBI) vide registration
number MF/022/95/1 dated June 30,1995. The name of Reliance Capital Mutual Fund
has been changed to Reliance Mutual Fund effective 11th March 2004 vide SEBI’s
letter no.IMD/PSP/4958/2004 date 11th March 2004 Reliance Mutual Fund was
formed to launch 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.
39
Investment Objective
Reliance Regular Savings Fund provides you the choice of investing in Debt,
Equity or Hybrid options with a pertinent investment objective and pattern for each
option.
Debt Option
The primary investment objective of this option is to generate optimal returns
consistent with a moderate level of risk. This income may be complemented by
capital appreciation of the portfolio. Accordingly, investments will predominantly be
made in Debt & Money Market Instruments.
Equity Option
The primary investment objective of this option is to seek capital appreciation
and/or to generate consistent returns by actively investing in Equity & Equity-related
Securities.
Balanced Option
The primary investment objective of this option is to generate consistent
returns and appreciation of capital by investing in mix of securities comprising of
equity, equity related instruments & fixed income instruments.
Mutual fund investment at a VISA ATM

The Reliance Regular Savings Fund is an open-ended scheme, which comes
with its own ATM cum Debit card-the Reliance Any Time Money Card. You don’t
have to give up the returns of a mutual fund for instant availability of cash. The
Reliance Regular Savings Fund endeavors to deliver both. For the first time in India,
your mutual fund offers instant cash withdrawal facility on your investment at any
VISA-enabled ATM near you. With a choice of three investment options, the fund in
truly, the smart new way to invest.
India’s first mutual fund with its own ATM cum Debit Card
Get instant cash when you need it
Simply walk down to any VISA enabled ATM near you and withdraw your
money invested in the fund (redeem your units).
40
Cashless transactions at over 24 million * Merchant Establishment locations
The Reliance Any Time Money Card is accepted at over 24 million Merchant
Establishment locations worldwide. You can now have cashless transactions,
whenever you make a purchase or use the service at any Merchant Establishment
validated by VISA.
A worldwide network of VISA/HDFC Bank ATMs
The Reliance Any Time Money Card is brought to you by Reliance Mutual
Fund in association with HDFC Bank and VISA. A worldwide network of 1 million
VISA ATMs *ensures your investment is within your reach, wherever you go.
Just Rs.100/-per month

Invest as little as Rs.100/- every month in the Reliance Regular Savings Fund
through the Systematic Investment Plan (SIP) route to build your investment little by
little, month by month. Now even your small savings can mean a lot.
Round-the-clock access
With the Reliance Any Time Money Card you can check the Current Holding
Value as well as the Withdrawal Limit of your investment any time of the day or
night. The card is your key to access you investment round the clock.
Withdrawal Limits
You can withdraw only up to the maximum permissible ATM withdrawal
limit in a day (which is as prescribed by the Bank for ATM/Point of Sale transaction)
or 50% of your withdrawals limit (as set by Reliance Mutual Fund) whichever is
lower.
General Risk Factors:

Mutual Funds and securities investments are subject to market risks and there
is no assurance or guarantee that the objectives of the Scheme will be achieved. As
with any investment in securities, the NAV of the Units issued under the Scheme can
go up or down depending on the factors and forces affecting the capital markets. Past
performance of the Sponsor/AMC/Mutual Fund is not indicative of the future
41
performance of the Scheme. The Sponsor is not responsible or liable for any loss
resulting from the operation of the Scheme beyond their initial contribution of Rs.1
lakh toward the setting up of the Mutual Fund and such other accretions and additions
to the corpus. The Mutual Fund is not guaranteeing or assuring any dividend/bonus.
The Mutual Fund is also not assuring that is will make periodical
dividend/bonus distribution, though it has every intention of doing so. All
dividend/bonus distributions are subject to the distributable surplus in the Scheme.
For details of scheme features and scheme specific risk factors, please refer to the
provisions of the offer document.
The main objectives of the Trust are:

• To carry on the activity of Mutual Fund as may be permitted at law
and formulate and devise various collective Schemes of savings and
investments for people in India and abroad and also ensure liquidity of
investments for the Unit holders;
• To deploy Funds thus raised so as to help the Unit holders earn
reasonable returns on their savings and.
• To take such steps as may be necessary from time to time to realize the
effects without any limitation.
Equity/Growth Schemes:
Reliance Natural Resources Fund:
(An Open Ended Equity Scheme) The primary investment objective of the
scheme is to seek to generate capital appreciation & provide long-term growth
opportunities by investing in companies principally engaged in the discovery,
development, production, or distribution of natural resources and the secondary
objective is to generate consistent returns by investing in debt and money market
securities.
Reliance Equity Fund:

(An open-ended diversified Equity Scheme.) The primary investment
objective of the scheme is to seek to generate capital appreciation & provide long-
42
term growth opportunities by investing in a portfolio constituted of equity & equity
related securities of top 100 companies by market capitalization & of companies
which are available in the derivatives segment from time to time and the secondary
objective is to generate consistent returns by investing in debt and money market
securities.
Reliance Tax Saver (ELSS) Fund:

(An Open-ended Equity Linked Savings Scheme.) The primary objective of
the scheme is to generate long-term capital appreciation from a portfolio that is
invested predominantly in equity and equity related instruments.
Reliance Equity Opportunities Fund:

(An Open-ended Diversified Equity Scheme.) The primary objective of the
scheme is to generate long-term capital appreciation from a portfolio that is invested
predominantly in equity and equity related instruments.
Reliance Equity Opportunities Fund:

(And Open-ended Diversified Equity Scheme) The primary investment
term growth.
Reliance Vision Found:

(An Open-ended Equity Growth Scheme) The primary investment objective of
the Scheme is to achieve long term growth of capital by investment in equity and
equity related securities through a research based investment approach.
Reliance Growth Fund:

(An open-ended Index Linked Scheme) The Investment Objective under the
Nifty Plan is to replicate the composition of the Nifty, with a view to endeavor to
generate returns, which could approximately be the same as that of Nifty. The
Investment Objective under the Sensex plan is to replicate the composition of the
Sensex, with a view to endeavor to generate returns, which could approximately be
the same as that of Sensex.
43
Reliance NRI Equity Fund:
(An open-ended Diversified Equity Scheme) The Primary investment
objective of the scheme is to generate optimal returns by investing in equity or equity
related instruments primarily drawn form the Companies in the BSE 200 Index.
Reliance Regular Savings Fund:

(An open-ended Scheme) Equity Option: The primary investment objective of
this option is to seek capital appreciation and/or to generate consistent returns by
actively investing in Equity & Equity-related Securities.
Balance option: The primary investment objective of this option is to generate

consistent returns and appreciation of capital by investing in mix of securities
comprising of equity, equity related instruments & fixed income instruments.
Reliance Long Term Equity Fund:

(An close-ended Diversified Equity Scheme) The primary investment
objective of the scheme is to seek to generate long term capital appreciation &
provide long-term growth opportunities by investing in a portfolio constituted of
equity & equity related securities and Derivatives and the secondary objective is to
generate consistent returns by investing in debt and money market securities.
Reliance Equity Advantage Fund:

(An open-ended Diversified Equity Scheme) The primary investment
term growth opportunities by investing in a portfolio predominantly of equity &
equity related instruments with investment generally in S & P CNX Nifty stocks and
the secondary objective is to generate consistent returns by investing in debt and
money market securities.
2. DEBT/INCOME SCHEMES
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
44
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. 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.
• Reliance Monthly Income Plan:
An open ended fund. Monthly income is not assured & is subject to the
availability of distributable surplus the primary investment objective of the
scheme is to generate regular income in order to make regular dividend
payments to unit holders and the secondary objective is growth of capital.
• Reliance Gilt Securities Fund - Short Term Gilt Plan & Long Term Gilt
Plan:
Open- ended government securities scheme the primary objective of the
scheme is to generate optimal credit risk-free returns by investing in a
portfolio of securities issued and guaranteed by the central Government and
State Government.
• Reliance Income Fund:
An open-ended income scheme the primary objective of the scheme is to
generate optimal returns consistent with moderate levels of risk. This income
may be complemented by capital appreciation of the portfolio. Accordingly,
investments shall predominantly be made in Debt & Money market
Instruments.
• Reliance Medium Term Fund:
An open end income scheme with no assured returns. The primary investment
objective of the Scheme is generate regular income in order to make regular
dividend payments to unit holders and the secondary objective is growth of
capital.
• Reliance Short Term Fund:
(An Open End Income Scheme) The primary investment objective of the
scheme is to generate stable returns for investors with a short investment
horizon by investing in Fixed Income Securities of short term maturity.
45
• Reliance Liquid Fund:
(Open-ended Liquid Scheme) The primary investment objective of the
Scheme is to generate optimal returns consistent with moderate levels of risk
and high liquidity. Accordingly, investments shall predominantly be made in
Debt and Money Market Instruments.
• Reliance Floating Rate Fund:
(An Open End Liquid Scheme) The primary objective of the scheme is to
generate regular income through investment in a portfolio comprising
substantially of Floating Rate Debt Securities (including floating rate
securitized debt and Money Market Instruments and Fixed Rate Debt
Instrument swapped for floating rate returns). The scheme shall also invest in
Fixed rate debt Securities (including fixed rate securitized debt, Money
Market Instruments and Floating Rate Debt Instruments swapped for fixed
returns.
• Reliance NRI Income Fund:
(An open-ended Income Scheme) The primary investment objective of the
Scheme is to generate optimal returns consistent with moderate levels of risks.
This income may be complimented by capital appreciation of the portfolio.
• Reliance Liquidity Fund:
(An open – ended Liquid Scheme) The investment objective of the Scheme is
to generate optimal returns consistent with moderate levels of risk and high
liquidity. Accordingly, investments shall predominantly be made in Debt and
Money Market Instruments.
• Reliance Interval Fund:
(A Debt Oriented Interval Scheme) The primary investment objective of the
scheme is to seek to generate regular returns and growth of capital by
investing in a diversified portfolio.
• Reliance Liquid plus Fund:
(An Open-ended Income Scheme) The investment objective of the Scheme is
to generate optimal returns consistent with moderate levels of risk and
liquidity by investing in debt securities and money market securities.
• Reliance Fixed Horizon Fund-I:
46
(A Closed ended Scheme) The primary investment objective of the scheme is
to seek to generate regular returns and growth of capital by investing in a
diversified portfolio.
• Reliance Fixed Horizon Fund –II:
(An closed ended Scheme) The primary investment objective of the scheme is
• Reliance Fixed Horizon Fund –III:
(An closed-ended Income Scheme) The primary investment objective of the
scheme is to seek to generate regular returns and growth of capital by
investing in a diversified portfolio.
• Reliance Fixed Tenor Fund:
(An Close-ended Scheme) The primary investment objective of the Plan is to
seek to generate regular returns and growth of capital by investing in a
• Reliance Fixed Horizon Fund-Plan:
(An Closed ended Scheme) The primary investment objective of the scheme is
• Reliance Fixed Horizon Fund –IV:
The primary investment objective of the scheme is to seek to generate regular
returns and growth of capital by investing in a diversified portfolio.
• Reliance Fixed Horizon Fund –V:
The primary investment objective of the scheme is to seek to generate regular
returns and growth of capital by investing in a diversified portfolio of Central
and State Government securities and
Other fixed income/debt securities normally maturing in line with the time
profile of the scheme with the objective of limiting interest rate volatility.
3. SECTOR SPECIFIC SCHEMES:
These are the funds/schemes which invest in the securities of only those
sectors or industries as specified in the offer documents. E.g. Pharmaceuticals,
Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns
in these funds are dependent on the performance of the respective sectors/industries.
47
While these funds may give higher returns, they are more risky compared to
diversified funds. Investors need to keep a watch on the performance of those
sectors/industries and must exit at an appropriate time. They may also seek advice of
an expert.
• Reliance Banking Fund:

Reliance Mutual Fund has an Open-Ended Banking Sector Scheme which has
the primary investment objective to generate continuous returns by actively
investing in equity / equity related or fixed income securities of banks.
• Reliance Diversified Power Sector Fund:
Reliance Diversified Power Sector Scheme is an Open-ended Power Sector
Scheme. The primary investment objective of the Scheme is to seek to
generate consistent returns by actively investing in equity / equity related or
fixed income securities of Power and other associated companies.
• Reliance Pharma Fund:
Reliance Pharma Fund is an Open-ended Pharma Sector Scheme. The primary
investment objective of the Scheme is to generate consistent returns by
investing in equity / equity related or fixed income securities of Pharma and
other associated companies.
• Reliance Media & Entertainment Fund:
Reliance Media & Entertainment Fund is an Open-ended Media Entertainment
sector scheme. The primary investment objective of the Scheme is to generate
consistent returns by investing in equity / equity related or fixed income
securities of media & entertainment and other associated companies.
4. Exchange Traded Fund

• Reliance Gold Exchange Traded Fund:
(An open-ended Gold Exchange Traded Fund) The investment objective is to

seek to provide returns that closely correspond to returns provided by price of
gold through investment in physical Gold (and Gold related securities ad
permitted by Regulators from time to tome). However, the performance of the
48
scheme may differ form that of the domestic prices of Gold due to expenses
and or other related factors.
A wards and Achievements:
Reliance Mutual Fund – At a Glance

Reliance Mutual Fund (RMF) is one of India;s leading Mutual Funds, with
Average Assets Under Management (AAUM) of Rs. 71,094 Crores (AAUM as on 31st
Oct 2008) and an investor base of over 70.68 Lakhs.
Investor base of over 70.68 Lakhs as on 31st Oct 2008
Rapid growth in Assets under Management (AUM), 87.7% growth in AUM

year on year. AUM of over Rs.46,306 crore ($10.62 billion) as on March 30,
2007from Rs.24,669 crore ($5.53 billion) as on March 31, 2006.
Accelerated growth in investor base – 66.89% growth in investor base year on
year. Over 3.38 million investors as on March 31, 2007 from over 2.02 million
investors as on March 31, 2006.
Reliance Mutual Fund has over 10 years of extensive market experience, over
26 schemes combined with a strong performance track record.
Reliance Equity Fund NFO (6th Feb – 7th March 2006), the largest ever
collection of Rs.5,759 crore ($1.29 billion) in the history of the Indian Mutual Fund
industry.
Reliance Capital Asset Management Ltd. won the Asia Asset management
Award 2007 under the Best of Country Awards category. The award is given by the
reputed Asia Asset Management magazine to recognize the growth, market strategy,
brand creation and measurable impact to investors by a Fund House in each Country.
Reliance Capital Asset Management Ltd. won the Social & Corporate
Governance Award 2007 – for the category of “Organization the offers best returns
to the investors”, organized in Mumbai by Bombay Stock Exchange Ltd. (BS) &
Nasscom Foundation.
49
The award was to recognize the innovation strategies (product innovation) &
measurable impacts (return to investors) by companies & create a meaningful support
to the movement of Corporate Social Responsibility.
Reliance Mutual Fund has won the “Most Trusted Mutual Fund Brand” for
the second year, in succession by Economic Times – AC Nielsen ORG-MARG
survey.
Reliance Mutual Fund has been awarded the “NDTV Business Leadership
Award 2007” in the Mutual Fund category.
Reliance Mutual Fund has been awarded “Best Fund House” (Runners
up) for 2007 at the “Outlook Money NDTV Profit Awards 206-07” for the Best
Wealth Creator (mutual funds category)._Reliance Capital Asset Management has
been adjudged as the Best Fund House (Runners up) for 2007 at the “Outlook Money
NDTV Profit Awards 206-07” for the Best Wealth Creator (mutual funds category).
50
METHODOLOGY
51
RESEARCH METHODOLOGY
This chapter has discussed the following objectives and an attempt has also
been made to brief the scope and nature of the study along with certain limitations.
Objectives of the Study

 To study the socio-economic background of the respondents.
 The main objective is to understand the portfolio of Reliance Mutual Funds
and strategize its marketing plans.
 To understand how the customers are introduced to the company.
 To find out the reasons of the Customers choice with regard to Schemes and
Plans for Reliance Mutual Fund Schemes at Guntur.
 To investmentor extent, the customers are aware about Entry and Exit Load.
 To identify the Customer satisfaction level about the service that is provided at
Reliance Mutual Fund Scheme at Guntur.
Nature of Sample
• The sample size is 50 customers.
• The sample is among the customers of Reliance Mutual Funds at
Guntur. Who invested in the previous year i.e. April 2006 to March
2008.
• The sample is the customers who have invested more than 20,000
rupees.
• Random Sampling is used in order to identify the respondent to the
Questionnaire.
Questionnaire design
The Questionnaire includes Unstructured Questions (Open ended), Structured
Questions (Closed ended) and Dichotomous Questions (including YES and NO as the
Options).
The Questionnaire helps in collecting Primary data about Customer perception
on Reliance Mutual Fund Schemes at Guntur region.
Data Analysis
52
The data analysis will be done with the help of tables, charts and Graphs. It is
also trying to use various Scaling techniques for optimum results.
Techniques used in Data Collection
 Personal Interview
LIMITATIONS:
1. One of the limitation in this research work is to get the attention of the
customers is very difficult.
2. Even if customers are ready to answer it is very difficult to tackle with
some customers who feel that we are the company employees and they
show their frustration on us.
3. It is also very difficult to get assistance from company employees
during the project time as they are busy they do not give much time to
interact.
53
ANALYSIS & DATA INTERPRETATION
54
ANALYSIS AND INTERPRETATION
Table – 1: Age wise income:
Age \ 20-30 30-40 40-50 Above 50 Total

Income
range
Below 2 6 4 2 14
1,00,000
1 lakh – 5 4 8 6 4 24
lakh
Above 2 4 4 2 12
5,00,000
Total 10 20 15 5 50
Interpretation:
The above table it is very clear that out of 50 respondents 24% of the total
respondents of the income below 1,00,000 of which about 33.% these are in age group
of 30 to 40. remaining age groups 20 to 30 to 50, above 50 are in rest. Why because
in this age group they does not take the family responsibilities. So they are trying to
facing risks. As well as above 1,00,000 income rage people must pay income tax
under sec 80c.so the people can deposit the money in financial investments to escape
paying the income tax.
Here least respondents namely 24% of the total respondents of the income are
above 5,00,000 of which about 141% these are in age group of above 50. Why
because in this age they have family responsibilities. So they can not take the risk at
this time.
55
Table -2: Income wise occupation:
Occupation \ Employs Business Students Total

income range
Below 5 3 2 10
1,00,000
1 lakh – 5 lakh 25 5 5 25
Above 5 8 2 15
5,00,000
Total 25 16 9 50
Interpretation:
respondents of the income are between, 1,00,000 and 5,00,000 of which about 60%
these are employees. Why because employees want to save their money in financial
investments mainly to get high returns and to meet their needs.
Here least respondents namely 18% of the total respondents of the occupation
are students of which about 30% these are in income range of above 5 lakh. In this
case students do not have the monthly income that’s why they do not invest in
financial investments.
56
Table -3: Family wise income:
Family size \ Below 3 3 to 6 Above 6 Total
income range
Below 3 5 2 10
1,00,000
1 lakh – 5 lakh 5 15 5 25
Above 5 8 2 15
5,00,000
Total 13 28 9 50
Interpretation:
respondents of the income are between 1,00,000 and 5,00,000 of which about 30%
these are in family size of 3 to 6. why because the family have income range high as
well as family size is low so they are going to take the risk as well as possible.
Her least respondents namely 10% of the total respondents of the family size
are above 6 of which about 4% these are in income range of Above 5,00,000. Why
because they have low income range and higher family size. So they never take the
risk.
57
Table – 4: Gender wise classification:
Gender No of Respondents Percentage

Male 42 84%
Female 8 16%
Total 50 100%
Interpretation:
The above table it is very clear that 42 respondents are male and they will give
the 84% of preference to invest in financial investments. Next 8 respondents are
females and they will give the 16% of preference to invest in financial investments.
Why because the males for aggressive. So they are trying to face risks but
females for ingressive. So they can not move risks.
58
5. The following table illustrates that the customers introduction by and from
different sources to Reliance Mutual Fund.
TYPES OF PERCENTAGE (%) Respondence

INTRODUCERS
Agents 46 23
Company Executives 20 10
Friends 14 7
Advertisements 10 5
Others 10 5
TYPES OF INTRODUCERS
50 46
45
40
35
30
25 20
20
14
15 10 10
10
5
0
Executives
Agents
Advertisements
Others
Friends
Company
PERCENTAGE (%)
INTERPRETATION:
The above table shows that nearly the agents introduced 46% of customers and
the Company agents introduced the next chunk of the customers. Thus the company
needs to recognize the agent’s contribution and they should promote the agents with
various schemes, commission rate and gifts.
59
6. The following table illustrates that the reasons for the customers choice in
selecting the Reliance Mutual Fund in the market.
Reasons for Brand name Friends Belief in the Agents Advice

choosing Reference company
RMF
Percentage (%) 30 24 6 40
Respondence 15 12 3 20
Reasons for choosing RMF
45
40
40
35
30
30
24
25
20
15
10
6
5
0
Brand name Friends Reference Belief in the Agents Advice
company
Percentage (%)
INTERPRETATION:
From the above table we can say that almost 40% of the customers were
relying on the Agents advice in choosing the Mutual Fund House. The next 30% of
the customers were chose the RMF based on the brand.
Thus the company must promote the agents for better performance and they
have to be satisfied.
60
7. This table indicates the reasons for opting open ended *** Schemes by
customers.
Reasons for Flexibility Easy Liquidity Others

choosing Redemption
Open ended
Scheme
Percentage (%) 28 20 36 16
Reasons for choosing Open ended Scheme
40
36
35
30 28
25
20
20
16
15
10
0
Flexibility Easy Redemption Liquidity Others
Percentage (%)
INTERPRETATION:
Nearly 36% of the Customer have chosen Open Ended Scheme because of
Liquidity and the next 28% of the people believe there is flexibility of operation in the
Open ended Scheme. By this we can understand that most of the customers preferred
Liquidity before choosing particular Fund Scheme.
61
8. This table shows the feasible measures for opting SIP by customers.
Reasons for Flexibility Easy Liquidity Others

choosing SIP Redemption
Percentage (%) 28 20 36 16
Reasons for choosing SIP
40
36
35
30 28
25
20
20
16
15
10
0
Flexibility Easy Redemption Liquidity Others
Percentage (%)
Interpretation:
From the above table we can understand nearly 36% of the customers have
chosen SIP because they are able to Invest in small installments. And nearly 28% of
the respondents say that it is easy for them because they are monthly salaried persons.
The company has to promote the monthly salaried persons in order to get the
aggregate of small investments from the individuals.
62
9. The following table indicates the reasons for redemption by customers.
Reasons for Missing Need for Fund is not NAV’s are

Redemption Money Perform down
Percentage (%) 60 16 4 20
Reasons for Redemption
70
60
60
50
40
Percentage (%)
30
20
20 16
10 4
0
Missing Need for Money Fund is not NAV’s are dow n
Perform
Options
Interpretation:
Out of the 50 respondents it is observed that nearly 40% of the people have
redeemed their Investments. Nearly 60% of the customers among 20 respondents
have redeemed because the NAV’s are down and 20% of the respondents redeemed
because of need of money. The company has to educate the investors of the company
because they were redeeming at the time when market was down. By this way they
are booking profits for themselves and also to the AMC.
63
10. Table showing the awareness levels of entry load.
Awareness about the YES NO

entry load
Percentage (%) 80 20
Respondence 40 10
Awarenessabout theentryload
90
80
80
70
60
50
Percentage(%)
40
30
20
20
10
0
YES NO
options
Interpretation:
Among 50 respondents surveyed nearly 80% of the people were aware about
the Entry and Exit Load and 20% of the respondents were not aware.
The employees and agents should be very transparent while explaining mutual
Fund schemes to the investors.
64
11. This table gives us the information regard with rating for entry load and exit
load by customers.
Rate for entry and Missing High Moderate

exit load
Percentage (%) 20 40 40
Respondence 10 20 20
Rate for entry and exit load
45
40 40
40
35
30
25
20 Percentage (%)
20
15
10
0
Missing High Moderate
Options
Interpretation:
Among 80% of the people who are aware about the Entry and Exit Load
nearly 50% have rated that the load structure is High and nearly 50% of the
respondents said it is Moderate Mutual Fund.
65
12. Returns for R M F are shown below through this table.
Rating of returns Excellent Good Moderate

Respondence 3 35 12
Rating of returns
80
70
70
60
50
40 Percentage (%)
30 24
20
10 6
0
Excellent Good Moderate
Options
Interpretation:
Nearly 70% of the investors have rated the returns of R M F as Good and
nearly 24% said it is Moderate and the rest said it is excellent.
66
13. Customer Preferences are shown in this table with regard to returns.
Type of return Fixed return High return Risky return

Respondence 3 42 5
Type of re turn
90 84
80
70
60
50
Perc entage (% )
40
30
20 10
6
10
0
Fix ed return High return Ris ky return
Op tion s
Interpretation:
From the above we can say that nearly 84% of the respondents prefer High
returns. We can understand that the investors are anticipating higher returns and they
are ready to take risk for higher returns.
67
14. MF Products ratings are shown in this table.
Rating R M F Excellent Good Moderate

mutual funds
Respondence 8 30 12
Rating R M F Mutual Funds
70
60
60
50
40
Percentage (%)
30 24
20 16
10
0
Excellent Good Moderate
Options
Interpretation:
Nearly 60% of the customers have rated the R M F products as good on a five
point scale and the 24% said they are Moderate.
Thus we can understand that the majority of the customers are satisfied with
the Reliance Mutual Schemes at Guntur.
68
15. The Satisfaction Levels of customers are indicated through this table with
reference to R M F.
Satisfied with customer Missing Yes

service
Percentage (%) 10 90
Respondence 5 45
Satiesfied w ith Custom er Service
100
90
90
80
70
60
50 Percentage (%)
40
30
20
10
10
0
Missing Yes
Interpretations:
Nearly 90% of the Customers whom were interviewed said they have visited
the Reliance Mutual Fund at – Guntur. And the rest 10% haven’t visit the Office yet
and all the Customers who have visited said that they were satisfied with the
Customer Service at Reliance Mutual Fund – Guntur.
69
Findings & Suggestions
70
FINDINGS
1. R M F needs to recognize the agents contribution and they should promote the
agents with various schemes, commission rate and gifts.
2. R M F must promote the agents for better performance and they have to be
satisfied.
3. Most of the customers prefer liquidity before they choose particular Fund
Scheme.
4. The company has to promote the monthly salaried persons in order to get the
aggregate of small investments from the individuals.
5. The company has to educate the investors of the company because they were
redeeming at the time when market was down. By this way they are booking
profits for themselves and also the AMC.
6. The employees and agents should be very transparent while explaining Mutual
Fund schemes to the investors.
7. R M F have to understand that the investors are anticipating higher returns and
they are ready to take risk for higher returns.
8. Almost all the Customers are satisfied with the performance of the Reliance
Mutual Fund Schemes.
9. Almost majority of the customers visit the R M F.
10. Almost majority of the customers who visit the Reliance Mutual Funds are
satisfied with the Customer service.
71
SUGGESTIONS
• Mutual Funds is suddenly a new form of investment which has emerged a lot
and almost 33 fund houses are issuing NFO’s (New Fund Offers) every year in
order to tap the market. The investors are willing to take risk and they want to
have very high returns.
• Thus the company has to make promotion in order to have more sales.
• The Investors are ready to Invest in scheme but they highly rely on Agents
Advice and Companies Executive. If the things go wrong this may become
one of the hindrances to the performance of Mutual Fund house. Thus the
company employees and agents are to be very transparent and have to explain
in detail to the investors.
• And one of the reasons why people invest in Mutual Fund is to diversify their
Investments and some people perceive that this is the easy way to make
money with a lesser amount.
• Thus Customers of R M F are very optimistic about the markets and they are
expecting very high returns. Thus the company can increase its sales force
and target all customer segments.
• Conduct training classes to its distributors and agents, which are the major
source of sale of mutual funds with regard to in-dept knowledge of Monthly
Income Plan of Reliance Mutual Fund so that, it would be easier for them to
educate their customers.
• Training about mutual funds would also enable distributors and individual
agents to propose the most beneficial schemes to their customers with regard
to the risk taking capability of the customer and his period of investment.
• Conduct a number of presentations in public to educate them about the various
benefits of mutual funds. To maintain healthy relations with Agents,
Distributors and Clients, conduct regular get-togethers, meetings.
72
APPENDIX
73
BIBLIOGRAPHY
74
BIBLIOGRAPHY
BOOKS:-
• Christopher lovelock: Service Marketing. 2002, Fourth Edition, person
Education
• Adrain payene: The Essence of service Marketing, 2002, Prentice – Hall of
India Pvt. Ltd
• Leon G.Schiff man and Leslie Lazar Kanuk – Consumer Behavior eighth
edition – prentice-hall India publications
• I.M. Pandey. – Financial Management – Tata Mc Graw Hill Publishing
Limited New Delhi.
WEB SITIES:
• www.reliancemutual.com
Introduction of mutual fund, company profile. 24-01-09, 4.30PM
• www.amfiindia.com
Introduction of AMF India. 30-01-09, 6.00 PM
• www.sebi.com
Introduction on SEBI guidelines. 08-02-09, 5.30 PM
• www.finance.indiamart.com
Introduction to Indian market. 15-02-09, 9.30 AM
• www.mutualfundindia.com
Industry profile of mutual fund. 24-02-09, 11.30 AM
• www.equitymaster.com
Operation of equity master on mutual fund. 28-03-09, 3.30 PM
• Offer Document and fact sheet of the principal mutual fund Introduction of
Awareness of mutual fund and what is mutual fund. 09-0209, 6.30PM
• Sample pamphlets – Reliance Mutual Fund Schemes of the Reliance mutual
Fund. 19-02-09, 7.00PM
• Fact sheet of the Reliance mutual Fund Annual reports to Reliance Mutual
Fund, The Schemes of Reliance Mutual Fund are increased as compared to the
previous year increase. 25-02-09, 8.30PM
75

Mutual Funds - Concept

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Mutual Funds - Concept

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INTRODUCTION

MUTUAL FUNDS – CONCEPT

MUTUAL FUND STRUCTURE

Managed by a Board of Trustees

Hold unit-holders funds in MF

Float MF funds manages the fund

Custodian Provides custodial services

Provides registrar and transfer

Provides the network for

BENEFITS OF MUTUAL FUNDS

iii) Low Cost

iv) Convenience ad Flexibility

Growth and Income Funds

Specialty Sector Funds

Close ended schemes

These funds may invest in a broad range of industries or concentrate on one or

ii) Growth and Income Funds

iii) Fixed – Income Funds

iv) Balanced Fund

v) Money Market Funds/Liquidity Funds

vi) Specialty / Sector Funds

System Investment Plan (SIP)

Average unit cost Rs.12,000/1,435.9=Rs.8.36

Effect of loss of key professionals and inability to adapt

Changes in the Government Policy

Market or Fair Current liabilities

Impact Interest Rates on NAV’s

The industry is also having a profound impact on financial markets. While

What is particularly noteworthy is that bulk of the mobilization has been by

Emergence of primary Equity Market

Mutual funds are financial intermediaries, which collect the saving of

The Mutual fund Industry is regulated by SEBI (Securities Exchange Bureau

First Phase – 1964-87

Second Phase-1987-1993 (Entry of Public Sector Funds)

Third Phase-1993-2003 (Entry of Private Sector Funds)

On the Growth Track

Future of Mutual Funds in India

ORGANIZATION OF MUTUAL FUND

Fund managers/ AMC

Mutual Fund Companies in India

MAJOR MUTUAL FUND COMPANIES IN INDIA ABN AMRO Mutual Fund

Birla Sun Life Mutual Fund

HDFC Mutual Fund

HSBC Mutual Fund

ING Vysya Mutual Fund

ICICI PRUDENTIAL Mutual Fund

Sahara Mutual Fund

State Bank of India Mutual Fund

Tata Mutual Fund

Kotak Mahindra Mutual Fund

Unit Trust of India Mutual Fund

Standard Chartered Mutual Fund

Franklin Templeton India Mutual Fund

Morgan Stanley Mutual Fund India

Escorts Mutual Fund

Alliance Capital Mutual Fund

Benchmark Mutual Fund

Canbank Mutual Fund

Chola Mutual Fund

LIC Mutual Fund

GIC Mutual Fund

Reliance Capital Asset Management Ltd: