Research On IB

MUTUAL FUNDS AS AN INVESTMENT OPTION
IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR

MASTER OF FINANCIAL MANAGEMENT (M.F.M) 2018-2019
ROLL NO. 15-F-347
Jamnalal Bajaj Institute of Management Studies, Mumbai

Acknowledgement
This report is culmination of my efforts and perseverance during my Vth Semester of Third
year of Masters in Financial Management course at Jamnalal Bajaj Institute of Management
Studies, Mumbai. The Year Long project has been a learning experience for me and I have
been ably guided in my Endeavour by my well-wishers.
I am highly obliged to my Project Guide for the valuable advice and guidance from the early
stage of the project till its finish.
I am thankful to the Director, JBIMS for providing me with this opportunity. I am grateful to
all the respectable faculty members at JBIMS for their thorough teaching and concept building.
Also, I would like to thank everybody who has directly or indirectly helped me in successful
completion of the project.
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Table of Contents
Sr. No. Particular Page No.
1 Executive Summary 6
2 Introduction 9
2.1 Need of Study 14
2.2 Objective of Study 14
2.3 Scope of Study 15
3 Concept of Mutual Fund 16
4 Indian Mutual Fund Industry 30
5 Role of Mutual Funds in Financial Planning 54
6 Mutual Funds and portfolio Management Services 60
7 Risk Measures 66
8 Literature Review 76
9 Research Methodology 78
10 Data Analysis & Interpretation - Chi Square Test 81
11 Data Analysis & Interpretation (Findings) 86
12 Recommendations 89
13 Conclusion 91
14 Limitation of Study 92
15 Bibliography and References 93
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LIST OF TABLES, GRAPHS & CHARTS
Sr. No. Particular Page No.
1 Mutual Fund Framework 11
2 Steps to Financial planning 15
3 Mutual Fund Set up 18
4 ETF Trade Flow 26
5 BSE Sensex Graph and Major events 34
6 AUM Growth 34
7 Equity AUM as a % of Total market capitalization 35
8 Top 10 Mutual Fund companies by Debt AUM 35
9 Top 10 Mutual Fund companies by Equity AUM 36
10 Growth Chart of Mutual Fund AUM 36
11 India’s Age profile 37
12 Top 10 Equity Schemes by AUM 38
13 Top 10 Holdings – HDFC Equity Fund 39
14 Top 10 Holdings – HDFC Mid cap Opportunities Fund 40
15 Top 10 Holdings – Aditya Birla SL Frontline Equity Fund 41
16 Top 10 Holdings – SBI Blue Chip Fund 42
17 Top 10 Holdings – ICICI Prudential Value Discovery Fund 43
18 Top 10 Holdings – Kotak Select Fund 44
19 Top 10 Holdings – ICICI Prudential Focused Blue Chip Equity Fund 44
20 Top 10 Holdings – Axis Long term Equity Fund 45
21 Top 10 Holdings – HDFC Top 200 Fund 46
22 Top 10 Holdings – Franklin India Prima Plus Fund 47
23 Debt Oriented Mutual Funds 51
24 Equity Oriented Mutual Funds 52
25 SIP Mutual Fund Report Analysis 53
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26 Financial Planning Process 54
27 Financial Planning steps 55
28 Financial Planning Goals 58
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1. EXECUTIVE SUMMARY
In the continuous demanding world, there is an inescapable truth that money is a means to
many ends. A First time Home Buyer, Good education for kids, Vacation Abroad, a set of ends
may vary from person to person but the means continue to remain the same. Money earned
wisely, saved regularly and invested smartly will help us in achieving our financial goals.
The above mentioned holds true for Mutual Funds to a large extent. This prompted to me
conduct a study on the awareness of Mutual Funds to the investors at large. And how they are
able to plan meticulously with all the knowledge they have.
The mutual funds sector is one of the fastest growing sectors in Indian Economy. Mutual fund
is more reliable to the investors as the risk is more diversified compared to other sources of
investment. It is more reachable to the investors as the funds do not get invested in one sector
but gets diversified to many sectors. The diversification happens in a professional method.
Indian mutual fund has gained a lot of popularity from the past few years. Earlier only UTI
enjoyed the monopoly in this industry but with the passage of time many new players entered
the market, due to which the UTI monopoly breaks down and the industry faces a severe
competition. As the time passes this industry has become a buzz word in the Indian financial
system. So it is very important to know the investors’ perception about this industry.
The present study analyses the mutual fund investments in relation to investor’s behavior.
Investors’ opinion and perception has been studied relating to various issues like type of mutual
fund scheme, main objective behind investing in mutual fund scheme, role of financial advisors
and brokers, investors’ opinion relating to factors that attract them to invest in mutual funds,
sources of information, deficiencies in the services provided by the mutual fund managers,
challenges before the Indian mutual fund industry etc.
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This research paper focused attention on number of factors that highlights investor’s perception
about mutual fund. The study of the research is on Investor awareness level as well as
perception towards mutual funds.
The research done was a primary research from 150 respondents with convenience sampling
method using questionnaire. It stated that more people were aware of mutual fund because of
advertisements and social media. This Research denoted that there was a frequent investment in
mutual funds compared to other investment sectors. And this study has been analyzed on the
basis of demographic factors using chi square.
The study has been undertaken to find the factors that influence investment in Mutual Funds,
problems faced by investors of mutual fund, tools of investment are popular among the
investors, pattern of investment of Mutual Funds, pattern of investment of Mutual Funds. In
order to understand the level of investor’s preference, a survey was conducted taking in to
consideration various parameters involved in investors decision making. For the purpose of
evaluation, a questionnaire survey method was selected keeping in mind objectives of the
study. The report is concluded with findings and suggestions and Limitations. Most of the
respondents are highly satisfied with the benefits and the service rendered by the Mutual Fund
Investments that they have taken. Mutual fund industry in India is just four decades old in
India. During this short span of time it has made tremendous growth. It was started by UTI in
the year 1964 with few handful schemes for small investors. Now days it has become a major
source of investment for large number of investors. Moreover mutual funds have added new
dimensions in fund raising capacity of corporate sectors. It acts like a mediator between small
investors and corporate sector. Considering these points this paper is an attempt to know the
investors perception towards selection of mutual funds.
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The world of investments too has several ground rules meant for investors who are novices in
their own right and wish to enter the myriad world of investments. These come in handy for
there is every possibility of losing what one has if due care is not taken. Assess yourself: Self-
assessment of one’s needs; expectations and risk profile is of prime importance failing which,
one will make more mistakes in putting money in right places than otherwise. One should
identify the degree of risk bearing capacity one has and also clearly state the expectations from
the investments. Irrational expectations will only bring pain. Assess yourself: Self-assessment
of ones needs; expectations and risk profile is of prime importance failing which; one will
make more mistakes in putting money in right places than otherwise. One should identify the
degree of risk bearing capacity one has and also clearly state the expectations from the
investments. Irrational expectations will only bring pain. It is important to identify the nature of
investment and to know if one is compatible with the investment goals. One can lose
substantially if one picks the wrong kind of mutual fund. In order to avoid any confusion it is
better to go through the literature such as offer document and fact sheets that mutual fund
companies provide on their funds To Study the preference of clients. Ability and Willingness of
Investor
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2. INTRODUCTION
Indian Financial System was rejuvenated with the introduction of multiple financial
institutions, financial services and financial instruments in the post LPG era. This process has
opened doors to the private business entities also to start new financial institutions and offer
various financial services and instruments .One such institution was mutual funds. The Indian
financial system is based on four basic components Financial Market, Financial Institutions,
Financial Service, and Financial Instruments. All play important role for smooth activities for
the transfer of the funds and allocation often funds. All the four components are inter
connected. To boost the economic system intermediation of these four components are vital.
Mutual funds as a Financial Institution offer financial services as well as financial instruments
to the investors and helps in boosting the financial markets. The contribution of mutual funds
for the growth and development to of directly financial markets and indirectly for the boost of
economy cannot be undermined. Though mutual fund as an institution started working way
back from 1964 with the formation of UTI, the real growth of the institution and becoming as a
major player in the economy can be seen only after 1990 economic reforms.
A large number of Individual Investors have emerged with Booming Economy who are ready
to invest in Financial Markets due to higher returns compared to traditional Investments.
Investors have different mindset when they decide about investing in a particular avenue every
individual want that his saving must be invest in most secured and liquid avenue however, the
decision changes according to individual and his risk taking ability.
With my Study I would like to understand the awareness present in the Investors for mutual
funds, Risk – Return Objectives, What Time Horizon do investors keep in Mind before
Investing. Also, Along with Investor Behavior I would like to strategize how an Individual can
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plan and do their own Portfolio Management by selecting a Mix of Mutual Funds which caters
to both Equity and Debt Market.
If mutual funds are emerging as the favorite investment vehicle it is because of the many
advantages. They have over other forms and avenues of investing parties for the investors who
has limited resources available in terms of Capital and ability to carry out detailed reserves and
market monitoring.
Among many financial instruments available in the Financial Market mutual fund is one of the
most attractive financial investment instruments that play a vital role in the economy of a
country. Mutual fund schemes provide new opportunities for investors.
Mutual Funds provide a platform for a common investor to participate in the Indian capital
market with professional fund management irrespective of the amount invested. The Indian
mutual fund industry is growing rapidly and this is reflected in the increase in Assets under
management of various fund houses. Mutual fund investment is less risky than directly
investing in stocks and is therefore a safer option for risk averse due to professional
Management.
A number of Factors include Mutual Fund Development
 Improving levels of Economic Development and Deep & Liquid Markets
 Middle Class Growth in Developing Countries Represents Growth Potential
 As developing countries’ populations mature, their middle classes expand, and investors better
understand financial investment importance and diversification, mutual fund markets have the
potential to grow rapidly and have proven the same lately.
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Thus a Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in different
types of securities depending upon the objective of the scheme. These could range from shares
to debentures to money market instruments. The income earned through these investments and
the capital appreciations realized by the scheme are shared by its unit holders in proportion to
the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the
Common man as it offers an opportunity to invest in a diversified, professionally managed
portfolio at a relatively low cost. The small savings of all the investors are put together to
increase the buying power and hire a professional manager to invest and monitor the money.
Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual
Funds. Mutual Fund scheme has a defined investment objective and strategy.
Figure.1
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Beginning of Mutual Fund Industry:
Prof K Geert Rouwen horst in 'The Origins of Mutual Funds', states that the origin of pooled
investing concept dates back to the late 1700s in Europe, when "a Dutch merchant and broker
invited subscriptions from investors to form a trust to provide an opportunity to diversify for
small investors with limited means." The emergence of "investment pooling" in England in the
1800s brought the concept closer to the US shores.
The enactment of two British laws, the Joint Stock Companies Acts of 1862 and 1867,
permitted investors to share in the profits of an investment enterprise and limited investor
liability to the amount of investment capital devoted to the enterprise. Shortly thereafter, in
1868, the Foreign and Colonial Government Trust was formed in London. The Scottish
American Investment Trust, formed in February 1873, by fund pioneer Robert Fleming,
invested in the economic potential of the US, chiefly through American railroad bonds. The
stock market crash of 1929 and the Great Depression that followed greatly hampered the
growth of pooled investments until a succession of landmark securities laws, beginning with
the Securities Act, 1933 and concluded with the Investment Company Act, 1940, reinvigorated
investor confidence. Renewed investor confidence and many innovations led to relatively
steady growth in industry assets and number of accounts.
The first mutual fund
Against this backdrop, a Dutch merchant, Adriaan van Ketwich, had the foresight to pool
money from a number of subscribers to form an investment trust – the world’s first mutual fund
– in 1774. The financial risk to the mainly small investors was spread by diversifying across a
number of European countries and the American colonies, where investments were backed by
income from plantations, an early version of today’s mortgage-backed securities.
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Subscription to the closed-end fund, which Van Ketwich called “Eendragt Maakt Magt” (“unity
creates strength”), was available to the public until all 2,000 units were purchased. After that,
participation in the fund was available only by buying shares from existing shareholders in the
open market. The fund’s prospectus required an annual accounting, which investors could view
if they requested. Two subsequent funds set up in the Netherlands increased the emphasis on
diversification to reduce risk, escalating their appeal to even smaller investors with minimal
capital. Van Ketwich’s fund survived until 1824 but the vehicle he created is still a hallmark of
personal investing more than two centuries later with an estimated $27.86 trillion US in global
assets in July 2013. In Canada alone, mutual funds represent $1.43 trillion.
The early mutual funds spread were of the closed-end variety, issuing a fixed number of shares.
They spread from the Netherlands to England and France before heading to the U.S. in the
1890s.
The first modern-day mutual fund, Massachusetts Investors Trust, was created on March 21,
1924. It was the first mutual fund with an open-end capitalization, allowing for the continuous
issue and redemption of shares by the investment company. After just one year, the fund grew
to $392,000 in assets from $50,000. The fund went public in 1928 and eventually became
known as MFS Investment Management.
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2.1 Need for Study
The main need of study arises to understand the awareness amongst investors and the various
perceptions that is carried in the investors mind. As investors become more aware about the
financial markets there is a shift in the individual investment pattern from Traditional
investment to Capital Market. As the human behavior is unpredictable, this study helps in
finding out the necessary facts regarding investors’ opinion and perceptions regarding mutual
fund investment. By being aware of the Financial Markets an Investor can prepare a financial
plan accordingly, determine the financial goals and achieve the same in respective Time period.
Various options that are available which can help in determining our goals and achieving the
same and to be practical by understanding how a respective goal can be achieved and making it
possible .Being realistic is the Key expectations should take micro and macro factors into
consideration.
2.2 The main objectives of the study are:
1. To analyze the investors awareness (Knowledge level) with respect to Mutual Funds.
2. To find investment avenues preferred by investor.
3. To study the Investors perception and preferences toward Mutual Fund Investing.
4. To find out the right balance of Mutual Fund Investments to provide capital appreciation as
well as capital preservation.
5. To understand factors that influence in Mutual Fund Investing.
6. Factors that influence investment in Mutual Funds.
7. The various Factors that do not encourage investors from investing in the Mutual Funds.
8. Portfolio diversification and planning that can be done by using Mutual Funds.
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2.3 Scope
1. The project will provide us the better platform to understand the history, growth and various
aspects of mutual fund.
2. It will also help to understand the behavior of Indian investors towards mutual fund.
3. Basic concept of mutual fund, various schemes of mutual fund, investment alternatives,
factors influencing investment, investor’s expectation regarding the mutual fund and investors’
preference of different mutual fund schemes.
Figure 2
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3. CONCEPT OF MUTUAL FUND
Mutual Funds are one of the best vehicles for people who don’t have either the expertise or the
time to take care of own investments.
• Investors with common financial objectives pool their money.
• Investors on a proportionate basis, get mutual funds units for the sum contributed to the pool.
• The money collected from investors is invested into shares, Debentures and other securities by
the fund Manager.
• The Fund Manager realizes gains or losses, and collective dividend or interest Income.
• Any Capital Gains or losses from such investments are passed on to investors in proportion of
the number of units held by them.
• Investments in securities are spread across a wide cross-section of industries and sectors and
thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the
same direction in the same proportion at the same time. Mutual fund issues units to the
investors in accordance with quantum of money invested by them. Investors of mutual funds
are known as unit holders.
• The profits or losses are shared by the investors in proportion to their investments. The mutual
funds normally come out with a number of schemes with different investment objectives which
are launched from time to time. A mutual fund is required to be registered with Securities and
Exchange Board of India (SEBI) which regulates securities markets before it can collect funds
from the public.
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Mutual fund set up
• A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management
Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor
who is like promoter of a company. The trustees of the mutual fund hold its property for the
benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages
the funds by making investments in various types of securities. Custodian, who is registered
with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are
vested with the general power of superintendence and direction over AMC. They monitor the
performance and compliance of SEBI Regulations by the mutual fund.
• SEBI Regulations require that at least two thirds of the directors of trustee company or board of
trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of
the directors of AMC must be independent. All mutual funds are required to be registered with
SEBI before they launch any scheme
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Figure 3
Net Asset Value (NAV) of a scheme
The performance of a particular scheme of a mutual fund is denoted by Net Asset Value
(NAV).
NAV is the market value of the securities held by the scheme. Since market value of securities
changes every day, NAV of a scheme also varies on day to day basis.
It is calculated as follows: Take the current market value of the fund's net assets (securities held
by the fund minus any liabilities) and divide by the number of units outstanding. Thus, if a fund
has total net assets of ₹ 100 crores and 5 crore units, the NAV are ₹ 20 per unit.
Fund liabilities include items such as fees to investment managers.
Open-ended schemes declare the NAV at the end of every business day.
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Calculation of NAV
The most important of the calculation is the valuation of the assets owed by the funds. Once it
is calculated, the NAV is simply the net value of assets divided by the number of units
outstanding. The detailed methodology for the calculation of the asset value is given below. Net
Asset value =Sum of market value of shares/debentures + Liquid assets/cash held (if any)
+Dividends/interest accrued-Amount due on unpaid assets -Expenses accrued but not paid
Different types of mutual fund schemes
A mutual fund scheme can be classified into open-ended scheme or close-ended scheme
depending on its maturity period.
Open-ended Fund/ Scheme:
An open-ended fund or scheme is one that is available for subscription and repurchase on a
continuous basis. These schemes do not have a fixed maturity period. Investors can
conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on
a daily basis. The key feature of open-end schemes is liquidity.
Close-ended Fund/ Scheme:
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open
for subscription only during a specified period at the time of launch of the scheme. Investors
can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell
the units of the scheme on the stock exchanges where the units are listed. In order to provide an
exit route to the investors, some close-ended funds give an option of selling back the units to
the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate
that at least one of the two exit routes is provided to the investor i.e. either repurchase facility
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or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on
weekly basis.
Schemes according to Investment Objective:
Growth / Equity Oriented Scheme
The aim of growth funds is to provide capital appreciation over the medium to long- term. Such
schemes normally invest a major part of their corpus in equities. Such funds have
comparatively high risks. These schemes provide different options to the investors like
dividend option, capital appreciation, etc. and the investors may choose an option depending on
their preferences. The investors must indicate the option in the application form. The mutual
funds also allow the investors to change the options at a later date. Growth schemes are good
for investors having a long-term outlook seeking appreciation over a period of time.
These funds invest a maximum part of their corpus into equities holdings. The structure of the
fund may vary different for different schemes and the fund manager’s outlook on different
stocks. The Equity Funds are sub-classified depending upon their investment objective, as
follows:
I. Large Cap
II. Mid-Cap Funds
III. Small Cap Funds
IV. Sector Specific Funds
V. Tax Savings Funds (ELSS)
VI. Thematic Funds
VII. Diversified Equity Funds
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Equity investments are meant for a longer time horizon, thus Equity funds rank high on the
risk-return matrix.
I. Large Cap
Large cap funds are those funds which invest a larger proportion of their corpus in companies
with large market capitalization. Trustworthy, reputable and strong are three adjectives that are
often used to describe a large-cap company. These are the old and well-established players with
a track record. Such companies typically have strong corporate-governance practices, and have
generated wealth for their investors slowly and steadily over a long term
II. Mid-Cap Funds
Mid-caps are those that they lay between large-caps and small-caps in terms of company size.
During a bull phase, mid-cap stocks may outperform their large-cap counterparts, as these
companies seek to expand by looking out for suitable growth opportunities.
III. Small Cap Funds
Small-cap stocks typically have the highest growth potential, since the underlying companies
are young, and seek to expand aggressively. They are more vulnerable to a business or
economic downturn, making them more volatile than large and mid-caps.
IV. Sector Specific Funds
Mutual funds which invest in a particular sector or industry are said to be sector-specific funds.
Since the portfolio of such mutual funds consists mainly of investment in one particular type of
sector, they offer less amount of diversification and are considered to be risky.
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V. Tax Savings Funds (ELSS)
An Equity Linked Savings Scheme (ELSS) is a mutual fund which invests primarily in equity
market giving you higher interest rate. ELSS is specially created to give taxpayers the dual
benefit of saving taxes under Sec 80C with the lowest lock-in period.
VI. Thematic Funds
An extension of a Sector Fund is a Thematic Fund that invests in stocks based on a particular
theme. Sector and Thematic Funds are generally referred to as a single category funds which
means they cannot take exposure to multiple sectors or themes.
VII. Diversified Equity Funds
A diversified equity fund invests in companies regardless of size and sector. It diversifies
investments across the stock market in a bid to maximize gains for investors.
Income / Debt Oriented Scheme:
The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures, Government
securities and money market instruments. Such funds are less risky compared to equity
schemes. These funds are not affected because of fluctuations in equity markets. However,
opportunities of capital appreciation are also limited in such funds. The NAVs of such funds
are affected because of change in interest rates in the country. 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.
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers.
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By investing in debt instruments, these funds ensure low risk and provide stable income to the
investors. Debt funds are further classified as:
I. Gilt Funds
II. Income Funds
III.MIPs – Monthly Income Plan
IV. Short Term Plans
V. Liquid Funds
I. Gilt Funds
Gilt funds, in simpler terms, are mutual funds that allow you to invest in various government
bonds and securities. This makes them extremely less risky than all the other types of
investments. Gilt funds tend to offer you double benefit of security and returns. Your
investments are in government bonds and hence, there is very little to no risk to your invested
amount. And it also gives you satisfactorily good returns when compared to your savings bank
account. This is made possible by investing in the high-quality debt instruments like
government bonds. Some even use gift funds in their portfolio as a backup for capital invested
in gilt funds are rarely lost.
II. Income Funds
Income funds are a class of debt mutual funds that invest in a combination of government
securities, certificates of deposits, corporate bonds and money market instruments. They are
managed by expert fund managers who actively try to manage the portfolio based on interest
rate movements, while at the same time keeping the portfolio credit worthy.
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III.MIPs – Monthly Income Plan
An MIP is a debt mutual fund scheme which invests a small part of the funds (15-25 per cent)
in equities. It offers regular income in the form of periodic (monthly, quarterly, half-yearly)
dividend payouts. Due to the presence of equity, MIP returns can be volatile.
IV. Short Term Plans
To generate income through investments in a range of debt and money market instruments of
various maturities with a view to maximizing income while maintaining the optimum balance
of yield, safety and liquidity.
V. Liquid Funds
Liquid fund is a category of mutual fund which invests primarily in money market instruments
like certificate of deposits, treasury bills, commercial papers and term deposits. Lower maturity
period of these underlying assets helps a fund manager in meeting the redemption demand from
investors. These funds are also income funds and their aim is to provide easy liquidity,
preservation of capital and moderate income. These schemes invest exclusively in safer short-
term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank
call money, government securities, etc.
Balanced Fund:
The aim of balanced funds is to provide both growth and regular income as such schemes
invest both in equities and fixed income securities in the proportion indicated in their offer
documents. These are appropriate for investors looking for moderate growth. They generally
invest 40-60% in equity and debt instruments. These funds are also affected because of
fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be
less volatile compared to pure equity funds .It has pre-defined investment objective of the
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scheme. Aims to provide investors with the best of both the worlds. Equity part provides
growth and debt part provides stability in returns.
Index Funds:
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P
NSE 50 index (Nifty), etc. these schemes invest in the securities in the same weightage
comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or
fall in the index, though not exactly by the same percentage due to some factors known as
"tracking error" in technical terms. Necessary disclosures in this regard are made in the offer
document of the mutual fund scheme. There are also exchange traded index funds launched by
the mutual funds which are traded on the stock exchanges an index fund merely replicates the
market return and benefits investors in the form of low fees.
Exchange Traded Funds: ETFs are just what their name implies: baskets of securities that are
traded, like individual stocks, on an exchange. Unlike regular open-end mutual funds, ETFs can
be bought and sold throughout the trading day like any stock. Most ETFs charge lower annual
expenses than index mutual funds. However, as with stocks, one must pay a brokerage to buy
and sell ETF units, which can be a significant drawback for those who trade frequently or
invest regular sums of money. Their passive nature is a necessity: the funds rely on an arbitrage
mechanism to keep the prices at which they trade roughly in line with the net asset values of
their underlying portfolios. For the mechanism to work, potential arbitragers need to have full
and timely knowledge. The first ETF in India, "Nifty BeEs (Nifty Benchmark Exchange Traded
Scheme) based on Nifty 50, was launched in January 2002 by Benchmark Mutual Fund. It may
be bought and sold like any other stock on NSE. Its symbol on NSE is "NIFTYBEES"
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Figure: 4
ETFs Parameters
Parameter Open Ended Fund Closed Ended Fund Exchange Traded Fund
Fund Size Flexible Fixed Flexible
NAV and Portfolio Daily Daily Real Time
Disclosure
Liquidity Provider Fund itself Stock Market Stock Market / Fund itself
Availability Fund itself Through Exchange where Through Exchange where
listed listed / Fund itself.
Intra-Day Trading Not possible Expensive Possible at low cost
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Benefits of investing in a Mutual Fund
The benefits of investing in Mutual Funds are as follows -
 Access to professional money managers - Experienced fund managers using advanced
quantitative and mathematical techniques manage your money.
 Diversification - Mutual Funds aim to reduce the volatility of returns through diversification
by investing in a number of companies across a broad section of industries and sectors. It
prevents an investor from putting 'all eggs in one basket'. This inherently minimizes risk. Thus
with a small investible surplus an investor can achieve diversification which would have
otherwise not been possible.
 Liquidity - Open-ended Mutual Funds are priced daily and are always willing to buy back
units from investors. This means that investors can sell their holdings in Mutual Fund
investments anytime without worrying about finding a buyer at the right price. In the case of
other investment avenues such as stocks and bonds, buyers are not necessarily available and
therefore these investment avenues are less liquid compared to open-ended schemes of Mutual
Funds.
 Tax efficiency - Mutual Fund offers a variety of tax benefits. Please visit the tax corner section
or consult your tax advisor for details.
 Low transaction costs - Since Mutual Funds are a pool of money of many investors, the
amount of investment made in securities is large. This therefore results in paying lower
brokerage due to economies of scale.
 Transparency - Prices of open ended Mutual Funds are declared daily. Regular updates on the
value of your investment are available. The portfolio is also disclosed regularly with the fund
manager's investment strategy and outlook
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 Well-regulated industry - All the Mutual Funds are registered with SEBI and they function
under strict regulations designed to protect the interests of investors
 Convenience of small investments - Under normal circumstances, an individual investor
would not be able to diversify his investments (and thus minimize risk) across a wide array of
securities due to the small size of his investments and inherently higher transaction costs. A
Mutual Fund on the other hand allows even individual investors to hold a diversified array of
securities due to the fact that it invests in a portfolio of stocks. A Mutual Fund therefore permits
risk diversification without an investor having to invest large amounts of money
 Debt funds offer a wider variety. Regardless of the time horizon, there is a suitable debt fund.
For short periods of less than 3 months, there are liquid funds. These are considered a good
alternative to savings bank accounts as they come with high liquidity and relatively stable
returns. Similarly, ultra-short term bond funds are suitable for a 3-month to 1-year period.
Similarly, one can consider short-term bond funds for a 1-2 year horizon, medium-term funds
for 2-3 years and long-term funds for 3-5 years. In each case, returns and risk are
commensurately higher as one invests for the longer term.
 Regular cash flows: With declining interest rates and rising life expectancy, there is a fear that
retirees may run out of their retirement corpus. Debt mutual funds can help to provide tax
efficient regular cash flows via systematic withdrawal plans or SWPs
 Diversification: Debt funds are an important component of a well-diversified portfolio as their
returns are typically more stable (less volatile) than equity funds. Thus, diversifying via debt
funds reduces the overall portfolio risk.
 Convenience: Assume you have a large sum of money to invest in equities but are unsure of
when to invest. An SIP is a good way to build time in the market, and benefit from rupee cost
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averaging. The fund managers of many such schemes view their portfolio as a collection of
businesses and not just stocks.
Different plans that Mutual Funds offer
Growth Option Dividend is not paid-out under a Growth Option and the investor realizes only
the capital appreciation on the investment (by an increase in NAV).
 Dividend Payout Option
Dividends are paid-out to investors under the Dividend Payout Option. However, the NAV of
the Mutual Fund scheme falls to the extent of the dividend payout.
 Dividend Re-Investment Option Here the dividend accrued on Mutual Funds is automatically
re-invested in purchasing additional units in Open-ended Funds. In most cases Mutual Funds
offer the investor an option of collecting dividends or re-investing the same.
 Retirement Pension Option: Some schemes are linked with retirement pension. Individuals
participate in these options for themselves, and corporate participate for their employees.
 Insurance Option: Certain Mutual Funds offer schemes that provide insurance cover to
investors as an added benefit
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INDIAN MUTUAL FUND INDUSTRY
The origin of Mutual Funds can be found in the early 19th century’s English Investment Trusts
and Investment companies. The first investment trust founded was the society General de
Belgique in Brusseks in August 1822.In 1849 and 1852, similar Swiss and French companies
were formed respectively. The Mutual Fund industry started in 1963 with the Formation of
Unit Trust of India, at the initiative of Government of India and the Reserve Bank of India. The
History of Indian Mutual Fund Industry can be broadly divided into four distinct phases.
First Phase1964-87 (UTI)

In 1963, UTI was established by an act of Parliament and given a monopoly. RBI established it
and it functioned under Regulatory and administrative control of Reserve Bank of India. The
first of a kind launched in 1964.Over the years US 64 attracted large no. of Investors. In 1978
UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took
over the regulatory and administrative control in place of RBI. The first scheme launched by
UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under
management.
Second Phase - 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks
and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed
by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990.
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At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004
crores.
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 with total assets of Rs. 1,21, 805 crores.
The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of
other mutual funds.
Fourth Phase - since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with
assets under management of Rs. 29,835 crores as at the end of January 2003, representing
broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified
Undertaking of Unit Trust of India, functioning under an administrator and under the rules
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framed by Government of India and does not come under the purview of the Mutual Fund
Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the
erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under
management and with the setting up of a 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.
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit
Trust of India effective from February 2003. The Assets under management of the Specified
Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the
industry as a whole from February 2003 onwards.
Fifth Phase (From 2004 Onwards): Consolidation and Growth:
The industry has lately witnessed a spate of mergers and acquisitions, most recent ones being
the acquisition of schemes of Allianz Mutual Fund by Birla Sun Life, PNB Mutual Fund by
Principal, among others. At the same time, more international players continue to enter India
including Fidelity, one of the largest funds in the world.
Current Scenario
Average Assets under Management (AAUM) of Indian Mutual Fund Industry for the month of
December 2017 stood at ₹ 22.60 lakh crore. Assets under Management (AUM) as on
December 31, 2017 stood at ₹ 21.27 lakh crore.
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The AUM of the Indian MF Industry has grown from ₹ 3.26 trillion as on 31st March 2007 to
₹21.27 trillion as on 31st December, 2017, about six and half fold increase in a span of about
10 and half years.
The MF Industry’s AUM has grown from ₹5.87 trillion as on 31st March, 2012 to ₹ 21.27
trillion as on 31st December, 2017, about three and half fold increase in a span of about 5 and
half years
The Industry’s AUM had crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for the first
time in May 2014 and in a short span of about three and half years, the AUM size has increased
more than two folds and stood at ₹21.27 Trillion (₹ 21.27 Lakh Crore) as on 31st December,
2017.
The total number of accounts (or folios as per mutual fund parlance) as on December 31, 2017
stood at 6.65 crore (66.5 million), while the number of folios under Equity, ELSS and Balanced
schemes, wherein the maximum investment is from retail segment stood at 5.46 crore (54.6
million)
Equity AUM rises for 12th consecutive month; up 64% in CY17
CY17 was an eventful year, with several disruptive events causing significant volatility in the
markets. However, bucking this volatile trend, mutual funds continued witnessing steady
inflows in CY17, largely led by increased investor participation via systematic investment
plans (SIPs) positive impact from demonetization, with a clear shift in investment preference
from physical to financial savings (real estate and gold were less preferred) and strong returns
in mid-caps.
MFs recorded highest-ever net inflows from equities of INR1,523b in CY17, higher than
cumulative inflows for CY16 (INR549b) and CY15 (INR906b).
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Figure 5
Figure 6
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Figure 7
AMC Company Debt Value (Rs. Mln)

( Dec-2017 )
ICICI Prudential Mutual Fund 1,711,413.00
HDFC Mutual Fund 1,599,015.00
Aditya Birla Sun Life Mutual Fund 1,586,917.00
Reliance Mutual Fund 1,398,714.00
SBI Mutual Fund 947,199.00
UTI Mutual Fund 824,011.00
Kotak Mahindra Mutual Fund 731,727.00
IDFC Mutual Fund 509,790.00
Franklin Templeton Mutual Fund 454,452.00
DSP Blackrock Mutual Fund 437,756.00
Figure 8
AMC Company Equity Value (Rs. Mln)

( Dec-2017 )
HDFC Mutual Fund 1,326,537.00
ICICI Prudential Mutual Fund 1,176,650.00
SBI Mutual Fund 1,047,117.00
Reliance Mutual Fund 886,097.00
Aditya Birla Sun Life Mutual Fund 775,717.00
UTI Mutual Fund 548,658.00
Franklin Templeton Mutual Fund 513,793.00
Kotak Mahindra Mutual Fund 405,400.00
DSP BlackRock Mutual Fund 384,376.00
AXIS Mutual Fund 291,882.00
Figure 9
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Figure 10
Favorable demographics
India stands at a historical juncture with the potential to reap economic benefits in the next few
decades. The rapid growth in the country’s population would be accompanied by an
unprecedented demographic transition, with far reaching consequences on economic growth.
India is expected to become the most populous nation by 2022.The country’s population
pyramid is expected to bulge across the 15-64 age group, Increasing the working age
population to over 1 Billion by 2050.This will immensely benefit the Mutual fund Industry as a
significant proportion of savings will flow into capital markets.
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Figure 11
Technological innovations likely to change MF distribution dynamics
Mobile platforms : Fund Houses are adopting innovative practices to make products and
services more accessible to investors .For instance some AMC’S offer a dedicated mobile
platform for MF transactions and also offer SMS transactions facilities ,through which buyers
can transact by sending an SMS.
MF Utility : AMFI has created a front end portal called MF Utility ,which eases the
operational burden as a single account number is used to invest across schemes of all fund
houses.
ATM-linked mutual funds: To enhance liquidity in MF’S Fund Houses have launched debit
cards linked to MF Investments .For example , a large domestic AMC has launched Any time
money card which can be used like a debit card for physical redemption to withdraw funds at
ATM’S and POS
Emergence of Robo Advisors: With a view to provide automated, Algorithm based advice
ROBO advisors have emerged. Robo advisors provide the distinct advantage of Low cost,
better customer interface, convenience and quality financial advice. These platforms also
advice in increasing transparency. However, Robo advisory will take time to earn the trust of
Investors
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Top 10 Equity Schemes by AUM
Top schemes by AUM

Equity AUM
Scheme Name Total AUM (INR B) (INR B)
HDFC Equity Fund 225 222
HDFC Mid-Cap Opportunities Fund 210 204
Aditya Birla SL Frontline Equity Fund 207 203
SBI BlueChip Fund 179 162
ICICI Pru Value Discovery Fund 176 163
Kotak Select Focus Fund 170 156
ICICI Pru Focused Bluechip Equity Fund 165 154
AXIS Long Term Equity Fund 161 155
HDFC Top 200 Fund 158 157
Franklin India Prima Plus 123 115
Figure 12
HDFC Equity Fund: an open Ended Growth Scheme
Investment Objective of the Scheme: To achieve capital appreciation.
Fund Managers: Mr. Rakesh Vyas and Mr. Prashant Jain
Benchmark Index: NIFTY500
Investment Strategies
In order to provide long term capital appreciation, the Scheme will invest predominantly in
growth companies. Companies selected under this portfolio would as far as practicable consist
of medium to large sized companies which:
a) Are likely to achieve above average growth than the industry;
b) Enjoy distinct competitive advantages
c) Have superior financial strengths.
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Benchmark Index
The NIFTY 500 is India's first broad based benchmark of the Indian capital market,
representing about 95.2% of the free float market capitalization of the stocks listed on NSE as
on March 31, 2017. The total traded value for the last six months ending March 2017 of all
Index constituents is approximately91.7% of the traded value of all stocks on NSE.
Top 10 Holding
Name of security Industry %Weightage
ICICI Bank Ltd. Banks 9.13
Larsen & Toubro Ltd. Construction Project 8.93
State Bank of India Banks 8.60
Infosys Ltd. Software 7.00
HDFC Bank Ltd. Banks 5.71
Balkrishna Industries Ltd. Auto Ancillaries 3.37
Tata Steel Ltd. Ferrous Metals 3.29
Reliance Industries Ltd. Petroleum Products 3.05
CESC Ltd. Power 2.73
Axis Bank Ltd. Banks 2.65
Figure 13
HDFC Mid-Cap Opportunities Fund: an open Ended Growth Scheme
Investment Objective of the Scheme: To generate long-term capital appreciation from a
portfolio that is substantially constituted of equity and equity related securities of Small and
Mid-Cap companies.
The Investment Manager will also seek participation in other equity and equity related
securities to achieve optimal portfolio construction. The Scheme may also invest a certain
portion of its corpus in debt and money market securities. Small and Mid-Cap companies offer
higher return potential than large cap companies on one hand but also carry higher risk than
large cap companies, particularly over the short and medium term. Room for P/E multiples to
expand if the company transitions from a small / mid cap to large cap, etc. Fund Managers:
Mr. Chirag Setalvad, Mr. Rakesh Vyas Benchmark Index: NIFTY 500
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Top 10 Holding
Voltas Ltd. Construction Project 3.33
Sundram Fasteners Ltd. Auto Ancillaries 2.99
Balkrishna Industries Ltd. Auto Ancillaries 2.91
TI Financial Holdings Ltd. Finance 2.43
Hexaware Technologies Ltd. Software 2.32
Aurobindo Pharma Ltd. Pharmaceuticals 2.23
Cholamandalam Investment and Finance Company Ltd. Finance 2.11
Edelweiss Financial Services Ltd. Finance 2.06

Aarti Industries Ltd. Chemicals 1.93
Yes Bank Ltd. Banks 1.92
Figure 14
Aditya Birla SL Frontline Equity Fund
Investment Objective : An open ended growth scheme with the objective of long term growth
of capital , through a target allocation of 100% equity by aiming at being as diversified across
various Industries and or sectors as its chosen.
BSL Frontline Equity Fund invests in approximately the same proportion as the industries in
the BSE 200. This gives each industry its due importance and thus the fund remains invested
across industries at any given time. This discipline also reduces overdependence on a particular
industry, giving stability to the portfolio.
Benchmark Index :s&p BSE 200
Fund Manager - Mr. Mahesh Patil
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Top 10 Holding
Hdfc Bank Ltd. Banks 7.01
ICICI Bank Ltd. Banks 8.93
ITC Ltd. Consumer Products 8.60
Infosys Ltd. IT 7.00
Maruti Suzuki India Ltd. Automobiles 5.71
Hindalco Industries Ltd. Aluminium 3.37
Housing Development Finance Corporation Ltd. Financials 3.05

GAIL (India) Ltd. Energy 2.73
IndusInd Bank Ltd. Banks 2.65
Figure 15
SBI Blue-chip Fund
Investment Objective: To provide investors with opportunities for long-term growth in capital
through an active management of investments in a diversified basket of equity stocks of
companies whose market capitalization is at least equal to or more than the least market
capitalized stock of S&P BSE 100 Index.
Investment Strategies: SBI Blue-chip Fund aims to provide investors with opportunities for
long-term growth in capital through an active management of investments in a diversified
basket of equity stocks of companies whose market capitalization is at least equal to or more
than the least market capitalized stock of S&P BSE 100 Index. Currently, the fund is
predominantly large cap with opportunistic allocations to high conviction midcaps (up to
20%).The fund is suitable for investors who want exposure to blue chip Indian companies from
a medium to long term perspective.
Benchmark:S&P BSE 100 Index and Fund Manager : Ms. Sohini Andani
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Top 10 Holding
HDFC Bank Ltd. Banks 7.93
CCIL-CLEARING CORPORATION OF INDIA LTD (CBLO) Banks 5.85
NATIONAL STOCK EXCHANGE OF INDIA LTD Consumer Products 4.51

Infosys Ltd. IT 7.00
Maruti Suzuki India Ltd. Automobiles 5.71
Hindalco Industries Ltd. Aluminium 3.37
Housing Development Finance Corporation Ltd. Financials 3.05

GAIL (India) Ltd. Energy 2.73
IndusInd Bank Ltd. Banks 2.65
Figure 16
ICICI Prudential Value Discovery Fund
To generate returns through a combination of dividend income and capital appreciation by
investing primarily in a well-diversified portfolio of value stocks. Value stocks are those, which
have attractive valuations in relation to earnings or book value or current and/or future
dividends.
Investment Objective: To generate returns through a combination of dividend income and
capital appreciation by investing primarily in a well-diversified portfolio of value stocks. Value
stocks are those, which have attractive valuations in relation to earnings or book value or
current and/or future dividends.
Fund Manager - Mr. Mrinal Singh
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Sun Pharmaceutical Industries Ltd. Pharmaceutical 10.64%
Larsen & Toubro Ltd construction 9.25%
Wipro Ltd. IT 6.22%
HDFC Bank Banking 6.06%
NTPC Thermal power 5.01%
Infosys Ltd. IT 4.59%
Mahindra and Mahindra Auto 4.09%
State Bank of India Banking 3.60%
ITC FMCG 3.52%
Indian oil Corporation Energy 3.36%
Figure 17
Kotak select Focus Fund
Kotak Select Focus Fund is an open-ended equity scheme. The investment objective of the
scheme is to generate long-term capital appreciation from a portfolio of equity and equity
related securities, generally focused on a few selected sectors.
Investment Strategy
To achieve the investment objective, the scheme will invest in equity and equity linked
instruments across companies irrespective of their market capitalizations. However, the Fund
Manager will generally invest in a few selected sectors, which in the opinion of the fund
manager have potential to grow .To that extent it would be a concentrated strategy but managed
actively. Moreover there will not be any restrictions in terms of investment in a single sector or
cap on floor of investment per sector, there will be concentration in 21 the portfolio on certain
select sectors, which are in the opinion of the fund manager expected to do well.
Fund Managers : Mr. Harsha Upadhyaya
Benchmark : Nifty 200
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TOP 10 COMPANIES AS ON 31/12/2018

HDFC Bank Ltd. Bank 7.03%
Larsen & Toubro Ltd construction 5.02%
Reliance Industries Ltd. Petroleum products 4.97%
HDFC Thermal power 3.71%
ICICI Bank Bank 3.69%
Hero Motocorp Ltd Auto 3.67%
Maruti Suzuki India Ltd Auto 3.43%
ITC FMCG 3.01%
IndusInd Bank Ltd. Banks 2.81%
Figure 18
ICICI Prudential Focused Blue-chip Equity Fund
Investment Objective: To generate long-term capital appreciation and income distribution to unit
holders from a portfolio that is invested in equity and equity related securities of about 20
companies belonging to the large cap domain and the balance in debt securities and money
market instruments. The Fund Manager will always select stocks for investment from among
Top 200 stocks in terms of market capitalization on the National Stock Exchange of India Ltd.
Investment Strategy:
Fund Manager : Sankaran Naren

ICICI Bank Ltd. Bank 6.89%
HDFC Bank Ltd. Bank 6.38%
Infosys Ltd IT 4.11%
Maruti Suzuki India Ltd. Auto 3.92%
State Bank Of India Bank 3.80%
Motherson Sumi Systems Ltd. Automotive 3.76%
Bharti Airtel Ltd. Telecom 3.76%
ITC Ltd. FMCG 3.57%
Larsen & Toubro Ltd. Construction 3.39%
NTPC Ltd. Thermal power 3.29%
Figure 19
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AXIS Long Term Equity Fund
Investment Objective: To generate income and long-term capital appreciation from a diversified
portfolio of predominantly equity and equity-related securities. However, there can be no
assurance that the investment objective of the Scheme will be achieved.
The fund looks at companies that can sustainably grow profits and generate wealth over 3-4
years. This allows the fund manager to overlook short term volatility of the stock price as well as
any temporary hiccups in the company’s earnings.
Benchmark: BSE 200
Fund Manager: Mr.Jinesh Gopani
Company Name Sector Holding %
Kotak Mahindra Banking 7.53%
HDFC Housing Finance 6.08%
Pidilite Industries Chemicals 5.77%
Maruti Suzuki Auto 5.72%
Motherson Sumi Auto Ancillaries 4.80%
Bajaj Finance Finance (including NBFCs) 4.36%
TTK Prestige House ware 3.69%
Avenue supermarkets3 Department Stores 3.61%
Gruh Finance Housing Finance 3.25%
Figure 20
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HDFC Top 200 Fund
Investment Objective: To generate long term capital appreciation from a portfolio of equity and
equity-linked instruments primarily drawn from the companies in BSE 200 index.
Benchmark Index : S&P BSE 200
Fund Managers Mr. Rakesh Vyas and Mr. Prashant Jain
Investment Strategies : The investment strategy of primarily restricting the equity portfolio to
the BSE 200 Index scrips is intended to reduce risks while maintaining steady growth. Stock
specific risk will be minimised by investing only in those companies / industries that have been
thoroughly researched by the investment manager's research team. Risk will also be reduced
through a diversification of the portfolio.
Larsen and Toubro Ltd. Construction 6.14%
ICICI Bank Ltd. Banking 6.0%
Infosys Limited IT 4.96%
Reliance Industries Ltd. Integrated oil and gas 4.74%
ITC Ltd. Consumer Goods 4.35%
Tata Consultancy Services Ltd. IT 2.83%
Maruti Suzuki India Limited Auto 2.79%
Housing Development Finance Corporation Housing Finance 2.78%
Ltd.$
Figure 21
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Franklin India Prima plus Fund
Investment Objective: The investment objective of Prima Plus is to provide growth of capital
plus regular dividend through a diversified portfolio of equities, fixed income securities and
money market instruments.
Investment Strategy: The scheme follows a blend of value and growth style of investing. The
fund will follow a bottom-up approach to stock-picking and choose wealth creating companies
across sectors. The scheme will invest in diversified portfolio of primarily large cap stocks,
with a marginal small/mid cap exposure.
Benchmark: Nifty 500
Fund Manager: Mr. Anand Radhakrishnan
Infosys IT 4.33%
Bharti Airtel Ltd Telecom 4.23%
ICICI Bank Ltd. Banking 4.10%
Larsen and Toubro Construction 3.74%
Yes Bank Banking 3.73%
Mahindra and Mahindra Auto 3.12%
Axis Bank Ltd Banking 2.76%
Kotak Mahindra Bank Ltd. Banking 2.72%
Dr Reddy’s Lab Pharma 2.42%
Figure 22
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A Good Mutual fund company will invest in co’s as per below criteria
• Low debt burden
• Strong franchises
• Relatively low earnings volatility
• Run by competent managements who consider the interests of minority shareholders
Also, such schemes will have very low portfolio turnover ratios, as the fund manager will
prefer to hold on to the underlying companies as long as the business fundamentals are intact.
Many investors look up to Warren Buffett as a talisman. He is the emblem of everything an
investor ought to be. His observations on investing are, both, humorous and thought-provoking.
A few of his views on stocks and the stock market outline why he is such a favorite.
1. Forever is a good holding period?
2. Be greedy when others are fearful.
3. The more you trade, the more you underperform.
4. Rather than focus on the underlying business, we are all too often consumed with market
Quotations.
PARAMETERS TO SELCT A GOOD MUTUAL FUND
Apart from ratings one also looks at the various parameters while selecting a mutual fund.
1. Performance Ranking
More than the recent or long term performance of any scheme it’s ranking among peers should
be looked at. To find out the ranking you need to check out the quartile ranking which will
show how the fund has performed quarter on quarter among its peer group. In quartile ranking
each quartile comprises of 25 percent of peer group schemes. So one may select the scheme
which has remained in top quartile most of the time. If at all you find your scheme going below
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3rd quartile in a couple of consecutive quarters it hints that time has come to exit the scheme.
You can find these rankings from the factsheets of various AMCs and also on some mutual
funds research websites.
2. Ratio analysis
Risk and return ratios like standard deviation, Sharpe ratio etc. Along with those ratios, one
also should check out the ALPHA of the fund. Alpha tells us what extra or less the fund
manager has generated out of a given portfolio in comparison to benchmark. In other words
alpha is the performance ranking of the fund manager. You may check how often the fund
manager has generated positive alpha in last few quarters and also keep a watch on its
consistency going forward.
3. Total expense ratio
Expense ratio is very important parameter to be looked at while selecting any mutual fund
scheme. All fund management and distribution related expenses are borne by the scheme. This
means high expense ratio will affect the fund’s returns. Though mutual fund’s total expense
ratio has been capped by SEBI, still lower the better unless we get some extraordinary return by
paying higher expenses for fund management.
4. Fund manager tenure and experience
Fund manager plays a very important role in the fund’s performance. Though it is a process
oriented approach but still fund manager is the ultimate decision maker and his experience and
view point counts a lot. You should know who the fund manager of the scheme is and what his
past track record is. You should also look at the performance of other funds which he is
managing. If the fund manager of the scheme has recently been changed, don’t panic. Just
keep a watch on his performance by looking at alpha and quarter to quarter performance. If you
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find that due to change in the fund manager there is considerable effect on the fund’s
performance which does not suit your risk appetite then you may make a decision to exit.
5. Scheme asset size
This parameter is different for debt and equity schemes. In equity the comfortable asset size in
hundreds of crores, in debt it should be in thousands of crores as the investment value per
investor is higher in debt funds. 90 percent of total assets under management (AUM) of the
mutual fund industry are invested in debt funds, so your selected scheme assets should also
have a considerable AUM.
Less AUM in any scheme is very risky as you don’t know who the investors are and what
quantum of investments they have in this particular scheme. Exit of any big investor out of any
mutual fund may impact its overall performance very badly and the remaining investors in a
scheme will have to bear the impact. In schemes with larger AUMs this risk gets
minimized. It has observed that all the above mentioned parameters are overlapping each
other in some way or the other. A good fund manager will automatically result in better
performance and thus improve the quartile ranking and would also generate good alpha.
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Figure 23
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Figure 24
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Figure 25
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Role of Mutual Funds in Financial Planning
A goal based financial plan and investment solutions help you create wealth. Mutual funds help
one prepare for future. The most important role is to help prepare for future.
Figure 26
Reasons to prepare financial goals
1. It helps us to know where we stand currently
2. It helps us to determine our goal
3. It provides options on how to reach there.
4. It helps us know what is possible and what is not.
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The chief constituents of a Financial Plan are:
1. Cash Flow Management
2. Insurance
3. Asset Allocation
4. Estate Planning
Figure27
A prudent investor is one who always remains invested for the long term and allows his money
to compound. Equities can help you fulfill your long-term financial aspirations, provided you are
willing to stay the course and not sell in panic during market downturns. You could also choose
to invest in equities through equity mutual fund schemes via the Systematic Investment Plan
(SIP) route
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1. Clarity of goals
You need to be clear if you have short-term goals or long-term goals in mind as the plan of
action for both will be different. If you are planning for short-term investments, then the
emphasis usually has to be on liquid funds and short-term debt funds. In case of long-term
goals, you may look at options like diversified equity funds, thematic funds, Exchange Traded
Fund’s etc.
2. The three-step approach
When you decide to invest in Mutual Funds, you must first set your financial goals. Make sure
that you follow a practical approach while setting your goals. Then do a thorough research and
decide on which are the feasible Mutual Funds in which you might invest. Finally, invest in a
few Mutual Funds. Do not try to invest in too many Mutual Funds in one go. Ideally, try to opt
for big portfolios.
3. Invest in equity those who wish to invest for long-term potential benefits may opt for equity.
When you invest in equity, you have to wait with patience and they usually carry high risk.
These investments seek capital growth and potential returns in the long run but slowly and
steadily.
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Systematic investment plan (SIP)
Disciplined method of long term wealth creation SIP in mutual fund allows individuals to
invest at regular interval and create wealth in long term, reducing timing risk.
Benefits of SIP are
Rupee cost averaging: The phenomenon of reducing the average unit price in a volatile market
through investments spread over a period of time is called rupee cost averaging. Over a period
of time as the markets go up you stand to make money.
Convenience: You choose the frequency of your investments and the amount of investments.
With as little as Rs 500 per month, you can start your journey of long term wealth creation.
You can enroll for an SIP online in minutes or by signing an SIP form. No need to fill and sign
forms each month. It is automated and keeps you in the loop when each transaction is carried
out.
Disciplined approach to ride market volatility: You remain committed to your investments
plan. Irrespective of market volatility, your investments keep buying units. With fall in NAV
due to market fall, you get to buy more units. This discipline pays you in long term as market
gains.
Power of compounding: As you invest in small amounts at regular intervals for long term,
power of compounding works in your favor.
SIP with financial goals: If you attribute each of your SIP to your financial goals, you can
track your progress towards achieving your financial goals. Keep saving and you will be home.
SIP thus can be a key to your long term wealth creation and financial freedom. Mutual fund
investments can be rewarding for disciplined investors and the best way to do it is through
systematic investment plan.
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Figure 28
Moreover, with everything becoming more expensive, investment in traditional instruments
might not live upto your expectations. This is where investments in mutual funds can be
beneficial. Whatever your goals might be, there are mutual funds to help meet them. The
mutual fund basket has something for everyone whether you are a conservative or aggressive
investor, have a short-term and long-term goal and have a small or large amount to invest. You
can use different kinds of mutual funds with different investment objectives to reach your
goals.
Choosing the right mutual fund, hence, becomes the first important step in achieving your
financial goal.
Mutual funds can be used to create a diversified investment portfolio that meets your long-term
and short-term financial needs. However, one should ensure that there is sufficient
diversification or spread of investments across the chosen mutual fund schemes. You should
also take into account the risks and avoid under or over allocation in a particular asset class.
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Common Goals Most suited mutual fund Time Horizon
category
Retirement Equity diversified mutual Long-term
funds, sector or thematic funds
Tax planning Equity Linked Savings Medium (3 years lock-in) to
Scheme long-term
Child’s education and Balanced funds, index funds, Long-term
marriage gold funds
Saving for an overseas short-term gilt funds, short- to Short-term
holiday, buying a car next medium-term debt funds
year or saving for home
renovation in one or two
years
Regular payouts MIPs Medium to short-term
All in all, you have a variety of mutual funds to choose from, each with a different investment
objective. Further, you can leverage mutual fund investments to instill financial discipline and
meet your financial aspirations in a structured and timely manner.
Mutual funds also offer asset allocation funds that can mirror your life-stage and progressively
reduce the exposure to volatile assets and move to more stable options as you grow old. These
funds are a good option if you want to leave the rebalancing of your asset allocation to the fund
manager.
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Mutual Funds and portfolio Management services
The first thing which distinguishes a Portfolio Management Service from a mutual fund is that
you directly own shares in various companies rather than units in a fund where there are many
co-investors with you.
In PMS, you know exactly what you own and depending on the agreement with your portfolio
manager, you may have a say in selecting your investments. Your portfolio does not get
affected with the subscriptions and redemptions of other co-investors as in the case of a mutual
fund.
Portfolio Management Services account is a sophisticated investment vehicle where the
portfolio manager invests in Stocks, Debt and fixed income products and other securities that
can potentially be tailored to meet specific investment objectives. According to SEBI “A
portfolio manager is a body corporate who, pursuant to a contract or arrangement with a client,
advises or directs or undertakes on behalf of the client (whether as a discretionary portfolio
manager or otherwise), the management or administration of a portfolio of securities or the
funds of the client.” In India major brokerage firms, asset management companies and
independent experts provide portfolio management services to clients.
On 7th January 1993, SEBI issued Securities and Exchange Board of India (Portfolio
Managers) Regulations, 1993 which marked the beginning of PMS as a formal investment
vehicle in India Before this PMS operated as unregulated activity the issuance of the guidelines
within a year of the establishment of SEBI highlights the importance of this service in the
capital markets.
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A comparison between Mutual Funds and Portfolio Management services
Customized Investments – It is commonly believed that portfolio management services offer
customized services, with many brokerages offering you the choice of different model portfolio
such as large cap or mid cap depending on your portfolio.
Transparency: Portfolio Management offers complete Transparency in money management
you will be aware of every purchase and sale of shares, brokerage, date of transaction, portfolio
management exact fees amongst others.
Flexibility: Unlike mutual funds a portfolio management is not restricted to a stated objective
and stringent set of terms. This offers flexibility to the portfolio manager in terms of how and
when he wants to invest and / pull back your money.
Separate Status: In PMS your portfolio is treated as separate status .This prevents from other
action affecting your portfolio. A lot of investors are redeeming simultaneously, and then the
fund manager of a mutual fund may have to create liquidity by selling off the most liquid
stocks.
Fee structure: Mutual Funds have a fixed fee structure .Portfolio management service
providers will offer you more than one option with the same fee structure.
Accountability: Portfolio Management service managers are directly answerable to investors,
whereas mutual fund managers have no obligations.
Profit Sharing: Some PMS schemes also have profit sharing arrangements, wherein the
provider charges a certain amount of fees/profit over the stipulated return generated in the
fund.
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Parag Parikh Financial Advisory Services Ltd. (PPFAS) launched the PMS named Cognito in
October 1996 .In 2000, ICICI Prudential was the first institutional participant to provide PMS
services.
According to SEBI guidelines PMS can be offered only by entities having specific SEBI
registration. However, there are unregistered PMS providers who provide these services to
their clients. While SEBI-registered PMS Managers need to be body corporate, having a
minimum net worth of Rs. 2 crore and collect a minimum amount of Rs. 25 lakh from a single
client to be managed, entities running such services without the regulator's recognition may be
doing so without meeting any of these parameters.
Further, before giving a PMS license, the market regulator insists on previous experience of the
applicant in related activities and managing funds. Some unregistered firms are practising PMS
because their parent firm or subsidiary firm has a certificate. However, even these could come
under SEBI’s scanner. SEBI, on earlier occasions has warned of wide ranging consequences
for such unregistered PMS providers Hence it is in the interest of investors to choose only SEBI
registered PMS providers
PROFILE OF PMS CLIENT
The Investment solutions provided by PMS cater to a niche segment of clients. The clients can
be Institutions or Individuals with high net worth. A high net worth individual (HNI) with a
minimum net worth of Rs. 2 crore is a suitable profile Someone looking for a focused portfolio
management and personalized investment solutions and high level of service The offerings are
usually ideal for investors: who are looking to invest in asset classes like equity, fixed income,
structured products etc.
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The following are eligible investors:
 Resident Individuals (>18 years)
 Hindu Undivided Families (HUF)
 Body corporate (Private /Public)
 Trust (registered)
 Sole Proprietorship Firm
 Co-Operative Society
 NRIs
 subject to RBI approvals
 Partnership firms and other eligible investors
PMS CLASSIFICATION
Discretionary portfolio management – The portfolio manager individually and independently
manages the funds of each client in accordance with the needs of the client.
Non-discretionary portfolio management – The portfolio manager manages the funds in
accordance with the directions of the client. The portfolio manager cannot make buy-sell
decisions at his own discretion; he has to refer to the client for every transaction. The choice as
well as the timings of the investment decisions rest solely with the Investor. However the
execution of trade is done by the portfolio manager
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Advisory – Under these services, the portfolio manager only suggests the investment ideas.
The choice as well as the execution of the investment decisions rest solely with the Investor.
Advantages of PMS
It offers the advantage of customization and concentrated portfolios. This works well in
uncertain and volatile markets, where opportunities may be more concentrated. In other words,
if you want to invest in or avoid specific stocks or sectors you can’t do that with an equity MF.
There is scope of one-on-one interaction with the portfolio manager which increases level of
engagement
The client has a greater control over his/her portfolio
Personalized and professional services
Transparency with respect to the portfolio is very high. Usually clients are given online access
to view their portfolios any time
Disadvantages of PMS
Most PMS don’t have a system of NAV like mutual funds. Every PMS scheme has a model
portfolio and all the investments for a particular investor are done in the Portfolio Management
Services on the basis of model portfolio of the scheme. However the portfolio may differ from
investor to investor.
Also limited information is available in public domain. So the comparison of performance
becomes challenging making it difficult to choose the right PMS provider.
A disadvantage PMS has over a mutual fund is that investment in PMS does not carry tax
benefits unlike MFs. The threshold size of PMS is Rs 25 lakhs upwards which makes the
service inaccessible to middle class households.
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AIFs AND PMS
AIFs are private investment funds that pool assets from a group of investors and have a defined
target for that pool there are three distinct categories under AIF. – Category I include those
AIFs with positive spillover effects on the economy, for which incentives or concessions might
be considered by SEBI or Government of India or other regulators in India; and which shall
include Venture Capital Funds, SME Funds, Social Venture Funds, and Infrastructure Funds.
This implies certain specific sector investments and focuses on the unlisted category of
enterprises, where there is need for private funding. – Category II focuses on unlisted
enterprises but doesn’t limit the fund to a defined sector. This is akin to many sector-agnostic
PE funds that are likely to fall in this category. – Category III caters to any other kind of fund—
hence, a fund that invests primarily in listed equity will qualify for this category. The last
category also includes hedge funds that take leverage as part of their strategy and use a mix of
assets and derivatives to achieve returns. Category I and II AIFs shall be close-ended and shall
have a minimum tenure of 3 years while Category III AIFs may either be close or open-ended.
Difference between AIF and PMS: – AIFs pool money to invest in unlisted equity unlike PMS
Managers who make investments into listed equity. –
The minimum investment in PMs is Rs. 25 lakhs while that for AIFs is Rs. 1 crore. – PMS
products cannot be close-ended while Category I and II AIFs are close-ended
Opportunity for Investors
Income levels in India on a rise making Rs. 25 lakhs not beyond the reach of many
Scope for product innovation - existing offerings largely plain vanilla
Many Fund Managers with established track records are now offering PMS products
SEBI guidelines have improved investor safety and confidence.
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RISK MEASURES
At the forefront of risk control is the widely held belief and much publicized theory that an
investor must diversify hi portfolio among several types of investments and also among several
individual holdings within an investment type itself. So popular has this theory become that the
mutual fund industry uses diversification as one of their strongest sales arguments for pushing
their funds on the small investor.
The Beta Factor
Most widely accepted measure of risk is the so called beta of either an individual security or a
portfolio. Specifically, Beta expresses the relationship between a portfolio’s or security’s return
against the return of a benchmark index as a whole. Beta is also defined as a measure of
volatility. An und with a beta higher than 1 is thus more volatile and a fund with a beta below 1
is less volatile than the benchmark market Index.
Beta = Std dev of the Fund or portfolio divided by std deviation of the benchmark Index
Risk is inherent to investing. Investments vary across the risk spectrum, but there is hardly any
investment that's entirely risk-free. Mutual funds also carry risk. But first, what is 'risk'? In the
world of investments, risk is the other name for volatility or fluctuation in price. An investment
that is susceptible to wild swings in either direction is considered to be highly risky. Both
equity funds and debt funds carry risk. Comparatively, debt funds are generally not as risky as
equity funds. Equity tends to be volatile, especially in the short to medium term.
However, whether a high beta is good or bad depends upon the state of the market. If the
market sentiments are bullish, then a high beta stock is better and if the market sentiments are
bearish then, low beta stock is better.
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Similarly, beta could be calculated by first dividing the security's standard deviation of returns
by the benchmark's standard deviation of returns. The resulting value is multiplied by
the correlation of the security's returns and the benchmark's returns.
Standard Deviation
Standard deviation (SD) measures the volatility the fund's returns in relation to its average. It
tells you how much the fund's return can deviate from the historical mean return of the scheme.
If a fund has a 12% average rate of return and a standard deviation of 4%, its return will range
from 8-16%.
Computation: Standard Deviation (SD) = Square root of Variance (V) Variance = (Sum of
squared difference between each monthly return and its mean / number of monthly return data
– 1).
Significance: The higher the number, the more volatile is the fund's returns. Investors prefer
funds with lower volatility.
Correlation:
A perfect positive correlation means that the correlation coefficient is exactly 1. This implies
that as one security moves, either up or down, the other security moves in lockstep, in the same
direction. A perfect negative correlation means that two assets move in opposite directions.
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Information Ratio
Information Ratio Definition: The Information ratio is a measure of the risk-adjusted return of a
financial security (or asset or portfolio). It is also known as Appraisal ratio. Information ratio is
expected active return divided by tracking error, where active return is the difference between
the return of the security and the return of a selected benchmark index, and tracking error is the
standard deviation of the active return. The information ratio (IR) IR is advanced version of
Sharpe Ratio. Sharpe ratio is the excess return of an asset over the return of a risk free asset
divided by the variability or standard deviation of returns, the information ratio is the active
return to the most relevant benchmark index divided by the standard deviation of the "active"
return or tracking error.
Computation: (Annualized Rp – Annualized Ri) /(Standard Deviation of Monthly (Rp – Ri)) A
common mathematical definition of the information ratio for a portfolio is the excess returns of
the portfolio over the predefined benchmark divided by the standard deviation of those excess
returns, or the tracking error. The information ratio is often annualized.
Significance
 The information ratio is often used to gauge the skill of managers of mutual funds. It
measures the expected active return of the manager's portfolio divided by the amount of risk
that the manager takes relative to the benchmark.
 The higher the information ratio, the better is the performance of the fund manager.
 Information ratio is useful in comparing a group of funds with similar management styles.
 Information ratio shows the consistency of the fund manager in generating superior risk
adjusted performance
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Jensen's Alpha
The simplest definition is the excess returns of the fund over the benchmark. Alpha is
performance ratio to measure risk-adjusted performance of a portfolio, intended to help
investors determine the risk-reward profile of a mutual fund. Alpha measures the difference
between a fund's actual returns and its expected performance, given its level of risk. A fund's
alpha is often considered to represent the value that a portfolio manager adds to or subtracts
from a fund's return above and beyond a relevant index's risk/reward profile. Jensen's alpha was
first used as a measure in the evaluation of mutual fund managers by Michael Jensen in 1968.
Alpha = {(Fund return-Risk free return) – (Funds beta) *(Benchmark return- risk free return)}.
Significance The Alpha as represented by percentage indicates under performance or
Outperformance of a portfolio.
A positive alpha means the fund has outperformed its benchmark index. Correspondingly, a
negative alpha would indicate an underperformance.
As a fund's return and its risk both contribute to its alpha, two funds with the same returns
could have different alphas. Investors are often advised to pick funds with high Jensen Alpha
ratios.
R-Squared
Definition: R-Squared measures the relationship between a portfolio and its benchmark. It can
be thought of as a percentage from 1 to 100. R-squared is not a measure of the performance of a
portfolio. A great portfolio can have a very low R-squared. It is simply a measure of the
correlation of the portfolio's returns to the benchmark's returns.
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You want a portfolio that moves like the benchmark, you'd want a portfolio with a high R-
squared. If you want a portfolio that doesn't move at all like the benchmark, you'd want a low
R-squared.
General Range for R-Squared:
 70-100% = good correlation between the portfolio's returns and the benchmark's returns
 40-70% = average correlation between the portfolio's returns and the benchmark's returns
 1-40% = low correlation between the portfolio's returns and the benchmark's returns
Sharpe Ratio:
Investing by considering only historical returns in a mutual fund scheme is risky. Investors
need to evaluate the risk involved in mutual fund schemes before investing. There are no of
ratios which mutual fund investors should consider before making their investments. Sharpe
Ratio measures how well the fund has performed vis-a vis the risk taken by it. It is the excess
return over risk-free return (usually return from treasury bills or government securities) divided
by the standard deviation. The higher the Sharpe Ratio, the better the fund has performed in
proportion to the risk taken by it. The Sharpe ratio is also known as Reward-to-Variability ratio
and it is named after William Forsyth Sharpe.SR = (TOTAL RETURN – RISK FREE RATE) /
STANDARD DEVIATION OF FUND The Sharpe Ratio is calculated by taking the return of the
portfolio and subtracting the risk-free return, then dividing the result (the excess return) by
standard deviation of the portfolio returns. Basically, it is measuring excess return (over risk-
free rate) per unit of risk. If Sharpe ratio is 1.25 p.a., then it implies 1.25%p.a. excess return for
1% annual volatility. For example: Your investor gets 7 per cent return on her investment in a
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scheme with a standard deviation/volatility of 0.5. We assume risk free rate is 5 per cent.
Sharpe Ratio is 7-5/0.5 = 4 in this case. Significance  The greater a portfolio's Sharpe Ratio,
the better its risk-adjusted performance. A negative Sharpe Ratio indicates that a risk-less asset
would perform better than the security being analyzed. This measurement is very useful to
compare funds with similar returns or high returns, by analyzing the same in line with the risk
taken. Risk-adjusted financial performance of investment portfolios or mutual funds is
typically measured by Sharpe's ratio. From an investor's point of view, the ratio describes how
well the return of an investment compensates the investor for the risk he takes.
Sortino Ratio:
Sortino ratio is the statistical tool that measures the performance of the investment relative to
the downward deviation. The Sortino ratio is similar to the Sharpe ratio, except it uses
downside deviation for the denominator instead of Standard Deviation (SD). Standard deviation
involves both the upward as well as the downward volatility. Since investors are only
concerned about the downward volatility, Sortino ratio presents a more realistic picture of the
downside risk ingrained in the fund or the stock. The ratio was named after Frank A. Sortino.
Sortino ratio subtracts the risk-free rate of return from the portfolio’s return, and then divides
that by the downside deviation. A large Sortino ratio indicates there is a low probability of a
large loss.
Significance
 The formula does not penalize a portfolio manager for volatility, and instead focuses on
whether returns are negative or below a certain threshold.
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 Sharpe ratios are better at analyzing portfolios that have low volatility while Sortino ratio is
better when analyzing highly volatile portfolios.
 A large Sortino ratio indicates there is a low probability of a large loss.
Tracking Error: Tracking error is the difference between a mutual fund portfolio’s returns
and the benchmark index it was designed to copy. Generally, tracking errors are calculated
against the total returns for the specific benchmark—which includes dividend payments—and
are reported as a “standard deviation percentage” difference.
Tracking error is the standard deviation of the differential return, which is defined as the
difference between fund return and its benchmark return. In other words, tracking error
measures the extent to which the differential returns varies from the average differential return.
Treynor Ratio: Treynor ratio is also known as reward-to-volatility ratio, Treynor ratio is the
excess return generated by a fund over and above the risk free return (government bond yield).
It is similar to Sharpe ratio though one difference is that it uses beta as a measure of a measure
of volatility. The ratio is named after Jack L. Treynor The higher the Treynor ratio, the better
the performance of the portfolio under analysis. A fund with a higher Treynor ratio implies that
the fund has a better risk adjusted return than that of another fund with a lower Treynor ratio.
Treynor measure and Jenson model use systematic risk based on the premise that the
unsystematic risk is diversifiable. These models are suitable for large investors like institutional
investors with high risk taking capacities as they do not face paucity of funds and can invest in
a number of options to dilute some risks. Sharpe measure considers the entire risks associated
with fund are suitable for small investors, as the ordinary investor lacks the necessary skill and
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resources to diversify. Moreover, the selection of the fund on the basis of superior stock
selection ability of the fund manager will also help in safeguarding the money invested to a
great extent.
01.09.2015-17.01.2018
Scheme Name Beta Correlation Information
Ratio
Aditya Birla SL Equity Fund(G) 0.9793 0.9649 0.0534
Axis Equity Fund(G) 0.9241 0.9569 -0.0462
Axis Focused 25 Fund(G) 0.9468 0.9156 0.0362
Canara Rob Equity Diver Fund-Reg(G) 1.0236 0.9643 -0.0478
DSPBR Focus 25 Fund-Reg(G) 0.9925 0.9407 -0.0307
DSPBR Opportunities Fund-Reg(G) 1.0614 0.9616 0.0710
Franklin India Opportunities Fund(G) 0.9406 0.9572 -0.0193
Franklin India Prima Plus Fund(G) 0.8679 0.9721 -0.0399
HDFC Capital Builder Fund(G) 1.0099 0.9640 0.0638
HDFC Equity Fund(G) 1.1654 0.9192 0.0236
ICICI Pru Dynamic Plan(G) 0.7849 0.9152 0.0211
ICICI Pru Value Discovery Fund(G) 0.8616 0.9312 -0.0526
IDFC Focused Equity Fund-Reg(G) 0.9591 0.9238 0.0481
Kotak Opportunities Fund(G) 0.9457 0.9674 0.0099
Kotak Select Focus Fund(G) 0.9258 0.9682 0.0165
L&T India Value Fund-Reg(G) 1.0820 0.9362 0.0541
LIC MF Growth Fund(G) 0.9419 0.9614 -0.1119
Parag Parikh Long Term Value Fund(G) 0.5266 0.7550 -0.0066
Reliance Growth Fund(G) 1.0440 0.9224 0.0228
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Scheme Name Jensen's R- Standard Deviation
Alpha Squared
Aditya Birla SL Equity Fund(G) 0.0127 0.9184 0.8215
Axis Equity Fund(G) -0.0067 0.9032 0.7817
Axis Focused 25 Fund(G) 0.0152 0.8270 0.8370
Canara Rob Equity Diver Fund-Reg(G) -0.0122 0.9174 0.8591
DSPBR Focus 25 Fund-Reg(G) -0.0085 0.8670 0.8520
DSPBR Opportunities Fund-Reg(G) 0.0143 0.9061 0.8912
Franklin India Opportunities Fund(G) -0.0013 0.9038 0.7954
Franklin India Prima Plus Fund(G) -0.0008 0.9322 0.7226
HDFC Capital Builder Fund(G) 0.0138 0.9168 0.8479
HDFC Equity Fund(G) 0.0010 0.8334 1.0263
ICICI Pru Dynamic Plan(G) 0.0187 0.8262 0.6942
ICICI Pru Value Discovery Fund(G) -0.0080 0.8554 0.7489
IDFC Focused Equity Fund-Reg(G) 0.0178 0.8418 0.8403
Kotak Opportunities Fund(G) 0.0050 0.9233 0.7912
Kotak Select Focus Fund(G) 0.0074 0.9248 0.7739
L&T India Value Fund-Reg(G) 0.0137 0.8646 0.9354
LIC MF Growth Fund(G) -0.0218 0.9117 0.7930
Parag Parikh Long Term Value Fund(G) 0.0224 0.5624 0.5645
Reliance Growth Fund(G) 0.0057 0.8393 0.9161
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Scheme Name Sharpe Sortino Tracking Treynor
Error
Aditya Birla SL Equity Fund(G) 0.0806 0.1291 0.2159 0.0676
Axis Equity Fund(G) 0.0560 0.0915 0.2346 0.0474
Axis Focused 25 Fund(G) 0.0800 0.1302 0.3385 0.0707
Canara Rob Equity Diver Fund-Reg(G) 0.0509 0.0779 0.2276 0.0428
DSPBR Focus 25 Fund-Reg(G) 0.0520 0.0854 0.2884 0.0446
DSPBR Opportunities Fund-Reg(G) 0.0794 0.1305 0.2488 0.0667
Franklin India Opportunities Fund(G) 0.0630 0.1029 0.2346 0.0533
Franklin India Prima Plus Fund(G) 0.0646 0.1062 0.2000 0.0538
HDFC Capital Builder Fund(G) 0.0815 0.1290 0.2249 0.0684
HDFC Equity Fund(G) 0.0631 0.1076 0.4248 0.0555
ICICI Pru Dynamic Plan(G) 0.0888 0.1465 0.3287 0.0785
ICICI Pru Value Discovery Fund(G) 0.0523 0.0872 0.2943 0.0455
IDFC Focused Equity Fund-Reg(G) 0.0836 0.1382 0.3227 0.0733
Kotak Opportunities Fund(G) 0.0717 0.1167 0.2045 0.0600
Kotak Select Focus Fund(G) 0.0750 0.1224 0.2021 0.0627
L&T India Value Fund-Reg(G) 0.0779 0.1215 0.3345 0.0673
LIC MF Growth Fund(G) 0.0374 0.0604 0.2227 0.0315
Parag Parikh Long Term Value Fund(G) 0.0906 0.1442 0.5314 0.0972
Reliance Growth Fund(G) 0.0685 0.1070 0.3547 0.0601
Figure 20
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LITERATURE REVIEW
John M. Griffin, Federico Nardari, René M. Stulz* (2006). Many stock markets exhibit a
strong positive relation between turnover and past returns. These findings stand up in the face
of various controls for volatility, alternative definitions of turnover, differing sample periods,
and are present at both the weekly and daily frequency. The relation is more statistically and
economically significant in countries with high levels of corruption, with short-sale restrictions,
and in which market volatility is high
Ranganathan, K. (2006). examined the related aspects of the fund selection behavior of
individual investors towards Mutual funds, in the city of Mumbai. This study will help
developing and expanding knowledge in the field of Consumer behavior from the marketing
world and also the financial economics has brought together. And Griffin, J. M., Nardari, F., &
Stulz, R. M. (2006) investigates the lively relation between market-wide trading activity and
returns in markets. Many stock markets display a strong positive relation between turnover and
past returns. These findings stand up in the face of various controls for unpredictability,
alternative definitions of turnover, differing sample periods, and are present at both the weekly
and daily frequency. The relation is more statistically and economically significant in countries
with high levels of corruption, with short-sale restrictions, and in which market volatility is
high.
K. Lashmana Rao (2011) made analysis of investor’s perception towards mutual fund
schemes, he made conclusion SEBI, AMFI, and IRDA should take appropriate steps to enhance
Consumers knowledge for making more prudent decisions.
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Ramamurthy and Reddy (2005) conducted a study to analyze recent trends in the mutual fund
industry and draw a conclusion that the main benefits for small investors’ due to efficient
management, diversification of investment, easy administration, nice return potential, liquidity,
transparency, flexibility, affordability, wide range of choices and a proper regulation governed
by SEBI. The study also analyzed about recent trends in mutual fund industry like various exit
and entry policies of mutual fund companies, various schemes related to real estate,
commodity, bullion and precious metals, entering of banking sector in mutual fund, buying and
selling of mutual funds through online.
Treynor (1965) used ‘characteristic line’ for relating expected rate of return of a fund to the
rate of return of a suitable market average. He coined a fund performance measure taking
investment risk into account. Further, to deal with a portfolio, ‘portfolio-possibility line’ was
used to relate expected return to the portfolio owner’s risk preference. Sharpe, William F
(1966) developed a composite measure of return and risk. He evaluated 34 open-end mutual
funds for the period 1944-63. Reward to variability ratio for each scheme was significantly less
than DJIA (Dow Jones Industrial Average) and ranged from 0.43 to 0.78. Expense ratio was
inversely related with the fund performance, as correlation coefficient was 0.0505. The results
depicted that good performance was associated with low expense ratio and not with the size.
Sample schemes showed consistency in risk measure.
Treynor and Mazuy (1966) evaluated the performance of 57 fund managers in terms of their
market timing abilities and found that, fund managers had not successfully outguessed the
market. The results suggested that, investors were completely dependent on fluctuations in the
market. Improvement in the rates of return was due to the fund managers’ ability to identify
underpriced industries and companies.
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Research Methodology
Source of Data Primary data is collected through questionnaire. And secondary data is collected
through AMFI report, journals, SEBI distributed. The questionnaire has two sections; the first
section relates to demographical profile of respondents and the second part relates to the
perception of investors of Mutual Funds.
Data collection Method
Primary data is collected through structured questionnaire with options paper as well as Google
Forms.
The basic design of survey instrument consists of structured questionnaires. It is so designed to
collect all required information from investors of mutual funds. Based on their knowledge,
information source and investment decision factors related to their selection of a particular
scheme fund.
While secondary data is collected from various websites of institutions like AMFI, Mutual
Funds websites Financial Journals and Investment Management Books
Sampling Method – Convenient Sampling
Method Sample size – 150 respondents
Statistical tools & techniques applied
There are several techniques available to analyze data and to draw a conclusion. For this
purpose chi-square is used to judge the phenomena.
Excel was used to analyze the data.
Chi-Square Test was applied for testing the hypothesis at 5% level of
Significance.
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Method of Analysis
Chi-Square Karl Pearson in 1900 developed a non-parametric test for testing the significance of
the discrepancy between experimental (observed) frequencies and the theoretical frequencies
(expected) obtained under some theory or hypothesis. This test is known as Chi-Square Test
test of goodness of fit, and is used to test whether the discrepancy between expected and
observed values may be attributed the chance (fluctuations of sampling) or whether the
deviation is really because of the inadequacy of the theory to fit the observed data.
Research Approach: The research will mainly use survey approach. A large number of
Individual Investors have emerged with Booming Economy who is ready to invest in Financial
Markets due to higher returns compared to traditional Investments.
With my Study I would like to understand the preferences of Investors, Risk – Return
Objectives, What Time Horizon do investors keep in Mind before Investing. Also, Along with
Investor Behavior I would like to strategize how an Individual can plan and do their own
Portfolio Management by selecting a Mix of Mutual Funds which caters to both Equity and
Debt Market.
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The research done was a primary research from 150 respondents with convenience sampling
method. It stated that more people were aware of mutual fund because of advertisements and
social media. This Research denoted that there was a frequent investment in mutual funds
compared to other investment sectors. And this study has been analyzed on the basis of
demographic factors using chi square
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Data Analysis & Interpretation - Findings
Hypothesis testing of age and attitude towards mutual Funds
H0: There is no association between age and attitude towards mutual Funds.
H1: There is association between age and attitude towards mutual Funds
The below explains the association between the age and the attitude towards the mutual funds.
The calculated value is less than the table value at 5% levels of significance. Hence it is not significant
and the null hypothesis is accepted at 5% level of significance. Thus there is no association between age
and attitude towards mutual funds.
The variables mentioned in the null hypothesis are independent variables.
Attitude Level
Age positive negative neutral Total
Below 30 40 14 20 74
Between 30-40 16 16 8 40
above 40 18 10 8 36
Total 74 40 36 150
significance level 5%
chi critical value 9.488
DF 4
CHI VALUE 5.989
Since 9.488>5.989
Accept the null hypothesis
The calculated value of chi square is 5.989 and table value is 9.488 at 5% level of significance.
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Hypothesis testing of Income and risk taking ability towards mutual funds
H0: There is no association between income and risk taking ability towards mutual Funds.
H2: There is association between income and risk taking ability towards mutual Funds.
The below explains the association between the between income and risk taking ability towards mutual
Funds.
and the null hypothesis is accepted at 5% level of significance. Thus there is no association between
income and risk taking ability towards mutual funds.
Risk taking ability

High risk and Medium risk and Medium Low risk and Low
Income level High return Return return Total
Upto than 3 lac 14 8 12 34
between 3-8lakh 21 18 8 47
More than 8 lakh 29 21 19 69
Total 64 47 39 150
DF 4
CHI VALUE 6.53
Since 6.53<9.488
Accept the null
hypothesis
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Hypothesis testing of occupation and attitude towards mutual Funds
H0: There is no association between occupation and attitude towards mutual Funds.
H3: There is association between occupation and attitude towards mutual Funds.
The below explains the association between the between occupation and attitude towards mutual
Funds.
occupation and attitude towards mutual funds.
Occupation
Attitude Self Employed/Business service other
High risk 25 38 18 81
medium risk 12 19 10 41
low risk 8 15 5 28
45 72 33 150
DF 4
CHI VALUE 4.61
Since 4.61 < 9.488
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Hypothesis testing of Education and attitude towards mutual Funds
H0: There is no association between Education and attitude towards mutual Funds.
H4: There is association between Education and attitude towards mutual Funds.
The below explains the association between the between Education and attitude towards mutual Funds.
Education and attitude towards mutual funds.
Attitude Total
Education Positive neutral negative
Graduate 37 39 22 98
Post Graduate 22 21 7 50
Doctorate 2 0 0 2
Total 61 60 29 150
DF 4
CHI VALUE 4.53
Since 4.53 < 9.488
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Hypothesis regarding time period of Investment and Knowledge level
H0: Time period an Investor stays invested in Mutual Fund is not directly proportional to the level
Knowledge regarding investment.
H5: There is significant relationship between level of knowledge regarding Investment and Time
period and investor stays invested.
Level of Knowledge
Invested Time Ignorant Aware only of schemes High level of awareness TOTAL
Less than 1 year 20 18 8 46
Between 1 and 3 10 23 15 48
More than 3 Year 16 12 28 56
TOTAL 46 53 51 150
DF 4
CHI VALUE 17.51
Since 17.51 > 9.448
Reject the null hypothesis
Chi Square Test was used to test the hypothesis and the value calculated was 17.51
While the degree of freedom at 5% level of significance is (r-1) (c-1) = (3-1) (3-1) = 2x2 = 4
The degree of freedom at 5% table value is 9.448
Hence the table value is less than tabulated value, H0 is rejected, so there is significant relationship
between Time period an Investor stays invested in Mutual Fund and Knowledge.
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Data Analysis & Interpretation (Findings)
Investors are willing to invest in High risk Fund with the result of good return in future. As
investors are well informed and well aware of the functioning of capital market they are willing
to invest in Funds which have the investment objective of capital appreciation.
Majority investors prefer to be invested in both debt funds as well as High growth equity funds
as they want to benefit from both capital preservation in case of any emergency need and
capital appreciation for wealth creation.
There is good awareness of the Funds amongst investors and the performance comparison are
often made.
Systematic Investment plan has become a popular method of investing in mutual Funds due to
its multiple benefits and also the cash outflow does not come as a burden to the investors.
As women form a large part of working population in the urban area their contribution to the
investment is on rise.
Investor below the age of 40 Favorite Avenue for investment is Equity Funds as they believe
they can take higher risk for higher returns.
Also compared to traditional form of investment the Mutual Fund investments have become the
preferred choice as it lets one take part in the boom in the equity market without directly
putting in the money in stock market.
As the money is professionally managed there is good faith among investors.
HNI’S and Investors willing to take risk are also investing in portfolio schemes and AIF .
The study clearly show as to how attractive the mutual funds is to an investor and that is the
reason behind investing in mutual funds is the basis of the personal observation .following
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suggestions have made which would definitely bring about a change in the mindsets of the
people with regard to mutual funds as an investment avenue.
Mutual Funds have emerged as an important segment of financial markets and so far have
delivered value to the investors. The study reveals that the investors’ perception is dependent
on the demographic profile and assesses that the investors Age, Marital status and occupation
has direct impact on the investors’ choice of investment. The study further reveals that female
segment are not fully tapped and even there is low target on higher income group people.
Hence fund managers should take steps to tap the female segment and higher income group
segment to enhance more investment in mutual fund Investment Avenue which would really
help the industry to flourish. Further the findings of the research were on the factors influencing
investors’ perception on public private MF’s. It reveals that Liquidity. Flexibility, Tax savings,
Service Quality and Transparency are the factors which have a higher impact on perception of
investors. These factors give them the required boosting in the investment process. Therefore it
becomes imperative on part of the fund managers to enhance these features for attracting more
investors and also to retain the trust, the investors have in them
New and more innovative schemes should be launched from time to time so that investor’s
confidence should be maintained. All this will lead to the overall growth and development of
the mutual fund industry.
Many investors are of opinion that brokers/sub brokers are more interested in their incentives
provided to them by the companies for selling more schemes. So it is very necessary that they
should perform their duties with full care and diligence and should not misguide the investors.
Mostly a lay person doesn’t have enough knowledge to invest in mutual funds. So they depend
on the fund managers who are experts in managing efficient portfolios. The fund managers
87 | P a g e
should be the person of integrity and financial experts. They should have clear cut knowledge
of when to invest and in which securities to invest .They should mobilize the investor’s savings
in such a way that they can get maximum benefits out of the investment. Every investor has one
or more objectives behind their investments in mutual funds. Without any investment objective, the
investment is considered as useless. According to table 1 the main objective of the respondents behind
investing in mutual funds is the tax benefits offered by it followed by high return and safety of the
schemes. Therefore getting tax benefits from the scheme is the main motive of the investors behind
their investment in mutual funds.
The main findings of the study relating to the perception of the investors regarding different
aspects of mutual funds such as their main objective behind investing in mutual funds, their
knowledge about SIP, sources of information, perception about financial advisors and brokers,
method of performance evaluation .
Also the various Fund houses can use this information to predict the future requirements of the
clients and use it for the product design. Every individual has different needs and thus it can be
customized to suit their needs.
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Recommendations
Suggestions for Investors:
1. Investors generally make the investment decision in particular schemes mainly on the basis of
Net Asset Value and recent past performance but they have to consider the Performance
analysis of the scheme for a considerable long period taking into account historical returns and
portfolio.
2. They should take into consideration risk and return of the fund.
3. Investors should taking into consideration age and size of the fund before investing in a fund,
read the prospectus to find out how long the fund has been operating and the asset size of the fund.
Newly created or small funds sometimes have excellent short-term performance records. Because
these funds may invest in only a small number of stocks, a few successful stocks can have a large
impact on their performance. You can get a better picture of a fund's performance by looking at
how the fund has performed over longer periods and how it has affected by the ups and down in the
market.
4. Investors should consider the Analysis of the fund corpus and how it has changed across the
time period
5. Comparison of charges deducted by Asset Management Companies across the category where an
investor wishes to make investment.
6. The price at which one can exit the scheme and its impact on overall return.
7. Comparison of scheme with its benchmark and how has the scheme performed especially in a
volatile environment. It is advisable for investors that the longer you stay invested the better and
steady return on your investment. Investors should hold the funds at least for 3-5 years. Past
performance is not a reliable indicator of future performance. So don't be dazzled by last year's
high returns. But past performance can help you assess a fund's volatility over time.
89 | P a g e
8. Consider the fund's portfolio turnover rate. A fund's portfolio turnover rate measures the
frequency with which it buys and sells securities. A fund that rapidly buys and sells securities
may generate higher trading costs and capital gains taxes.
9. Think about the volatility of the fund. While past performance does not necessarily predict
future returns, it can tell you how volatile a fund has been. Generally, the more volatile a fund,
the higher the investment risk.
10. Investors should ask about recent changes in the fund's operations. Has there any change
which is made by the AMC regarding fund manager and fund allocation. It also affects the
performance of the fund.
11. Assess how the fund will impact the diversification of your portfolio. Generally, the success
of your investments over time will depend largely on how much money you have invested in
each of the major asset classes – stocks, bonds, and cash – rather than on the particular
securities you hold. When choosing a mutual fund, you should consider how your interest in
that fund affects the overall diversification of your investment portfolio. Maintaining a
diversified and balanced portfolio is key to maintaining an acceptable level of risk.
12. Last but not the least an investor can refer to certain investment ratios such as Sharpe,
Treynor, Jensen Alpha, beta and coefficient of determination etc. to judge the risk-return
analysis of the scheme. Today the main task before mutual fund industry is to convert the
potential investors into the reality investors. New and more innovative schemes should be
launched from time to time so that investor’s confidence should be maintained. All this will
lead to the overall growth and development of the mutual fund industry
90 | P a g e
CONCLUSION
The objective which is set to study the investors view towards mutual fund as per the sample
size and test which is applied to the study. found that the investors are not choosing or feeling
confident in investing in mutual fund because they think that mutual fund is risky than other
investment option. The awareness level of mutual fund among the investors is high because of
increased financial literacy and also due to many websites and TV shows catering specifically
to Mutual funds.
The most preferred investment are the Equity funds amongst mutual funds and Fixed deposits
and Gold still rank high amongst other investment option, because they feel it is the safest and
returns are fixed and not having fear of losing the money
Apart from these found that there are investors facing various problems in selecting mutual
fund as an investment option because of share market uncertainties and risk associated with it
so investors avoid the investing in mutual fund.
Mutual fund are link with share market and investors are not taking advice from expert advisor
to guide them for their investment in mutual fund so it creates the difficulty to select the mutual
fund scheme beneficial for them.
Investment and all investors know the risk in share market and which is the main reason
investor avoid investing in shares and equities or mutual fund because of the fear of losing the
money. Steps should be taken to boost the confidence and morale of the investors. This can be
done through appropriate communication and by educating investors to invest in mutual funds.
Timely and right information should be provided to them by different communication modes so
that they come to know about the latest trends in the market.
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LIMITATIONS OF STUDY
1. This project is limited in scope as the survey is conducted within a limited set of sample
population of150.
2. The survey did not include sample from Tier1 and Tier 11 cities where in recent times there
has been a lot of interest shown in investing in Mutual Funds.
3. Due to increase in financial literacy and over all awareness due to Social Media, Internet and
television a lot of Inflow in the DII segment has been coming from small towns. Including
them in the survey would have given a wider horizon to the overall study. The thinking of
burgeoning middle class could have been included in survey
4. There are certain biases among the people who take part in survey and may not give neutral
answers.
5. The questionnaire was limited to questions on mutual Funds. Having questions on Stock
market and debt market would have given more scope to study.
6. Only educated group is targeted here. There is a large segment of population which is not
educated but actively takes part in investing due to experience and help of Financial Advisors.
7. Few respondents are hesitant to give exact details.
8. Certain Respondents depend too much on their financial advisors for all their investment
decisions thus are not much aware of where they have invested.
92 | P a g e
BIBLIOGRAPHY
Ranganathan, K. (2006). A Study of Fund Selection Behaviour of Individual Investors towards

Mutual Funds-with Reference Mumbai city.
Sharpe, William F. "Mutual Fund Performance." Journal of Business, January 1966, pp. 119-138
Mark Grinblatt a,n , Matti Keloharju b,c , Juhani T. Linnainmaa (2011)IQ, trading behavior, and
performanceJournal of Financial Economics, 104(2), 2-5
Edwin J.EltonaMartin J.Gruberb (2013) : Handbook of the Economics of Finance - Pages 1011-
1061
John M. Griffin,Federico Nardari,René M. Stulz* :Do investors trade more when stocks have
performed well? Evidence from 46 countries
WEBSITES
WWW.SEBI.GOV.IN
WWW.AMFIINDIA.COM
WWW.MONEYCONTROL.COM
WWW.HDFCFUND.COM
WWW.FRANKLINTEMPLETONFUDS.COM
WWW.MUTUALFUNDSINDIA.COM
WWW.MORNINGSTAR.COM
WWW.VALUERESEARHONLINE.COM
WWW.TRUSTNET.COM
WWW.MOTILALOSWALMF.COM
OTHER MEDIUM
ACCORD SOFTWARE
PRISM SOFTWARE
93 | P a g e
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MUTUAL FUNDS AS AN INVESTMENT OPTION

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR

ROLL NO. 15-F-347

Jamnalal Bajaj Institute of Management Studies, Mumbai

year of Masters in Financial Management course at Jamnalal Bajaj Institute of Management

been ably guided in my Endeavour by my well-wishers.

stage of the project till its finish.

completion of the project.

2.1 Need of Study 14

2.2 Objective of Study 14

2.3 Scope of Study 15

3 Concept of Mutual Fund 16

4 Indian Mutual Fund Industry 30

5 Role of Mutual Funds in Financial Planning 54

6 Mutual Funds and portfolio Management Services 60

10 Data Analysis & Interpretation - Chi Square Test 81

11 Data Analysis & Interpretation (Findings) 86

15 Bibliography and References 93

25 SIP Mutual Fund Report Analysis 53

27 Financial Planning steps 55

28 Financial Planning Goals 58

able to plan meticulously with all the knowledge they have.

challenges before the Indian mutual fund industry etc.

perception towards mutual funds.

basis of demographic factors using chi square.

investors, pattern of investment of Mutual Funds, pattern of investment of Mutual Funds. In

investors perception towards selection of mutual funds.

to invest in Financial Markets due to higher returns compared to traditional Investments.

decision changes according to individual and his risk taking ability.

to both Equity and Debt Market.

country. Mutual fund schemes provide new opportunities for investors.

A number of Factors include Mutual Fund Development

 Improving levels of Economic Development and Deep & Liquid Markets

 Middle Class Growth in Developing Countries Represents Growth Potential

potential to grow rapidly and have proven the same lately.

Common man as it offers an opportunity to invest in a diversified, professionally managed

1800s brought the concept closer to the US shores.

steady growth in industry assets and number of accounts.

The first mutual fund

income from plantations, an early version of today’s mortgage-backed securities.

known as MFS Investment Management.

2.2 The main objectives of the study are:

2. To find investment avenues preferred by investor.

well as capital preservation.

5. To understand factors that influence in Mutual Fund Investing.

6. Factors that influence investment in Mutual Funds.

aspects of mutual fund.

preference of different mutual fund schemes.

time to take care of own investments.

• Investors with common financial objectives pool their money.

the fund Manager.

the number of units held by them.

are known as unit holders.

from the public.

performance and compliance of SEBI Regulations by the mutual fund.

SEBI before they launch any scheme

Net Asset Value (NAV) of a scheme

Fund liabilities include items such as fees to investment managers.

Different types of mutual fund schemes

depending on its maturity period.

Open-ended Fund/ Scheme:

a daily basis. The key feature of open-end schemes is liquidity.

Close-ended Fund/ Scheme: