PROJECT REPORT

ON

ANANYSIS OF MUTUAL FUNDS

AT

SUBMITTED BY:

Sushil Goyal

MeBA- 72 (2008-2010)

INDIAN INSTITUTE OF e-BUSINESS MANAGEMENT

Wakad Pune

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 PREFACE

For any management course, summer training is essential and important part of curriculum of
MBA degree. It is an exposure to corporate environment and help MBA aspirants to get
acquainted with organizational norms, procedure, practices, ethics, and culture. It also gives an
insight of actual functioning of the organization. It helps the student to understand and to
correlate with theoretical aspect with practical reality. It was the great experience with
RELIANCE MONEY during summer project which has helped me to improve my
communication and interpersonal skills and also give me the better understanding of the subject.

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 ACKNOWLEDGEMENT

I would like to express our sincere thanks to my Project Guide Mr. Suchet Sinde for his
guidance and support throughout my training at RELIANCE MONEY (PUNE) branch. His
calm demeanor and willingness to teach has been a Great help in our successfully completing the
project. My learning has been immeasurable and working under him was a great experience. I
extend my sincere thanks to all the staff members of Reliance Money for providing a very
hospitable and helpful work environment and making my summer training an exciting and
memorable event.I also acknowledge heart felt gratitude for all those people who have made
available tons of information required for our Project.The successful accomplishment of any task
is incomplete without acknowledging the contributing personalities who both assisted and
inspired and lead us to visualize the things that turn them into successful stories for our
successors.I thank the Almighty God for his grace bestowed on us throughout this project.
Last, but not the least, I would like to thank my Parents and all my Friends for their wholehearted
direct and indirect support and encouragement.

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 DECLARATION

This project was done as per the guidelines of the RELIANCE MONEY branch and with the help
of data provided by them. My industry guide Mr. Suchet Sinde assigned us the project in groups
and so the project was being done in group by me and my group members of the Reliance
Money. I also declare that this project is the result of my own effort and has not been submitted
to any other institution.

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 ®

INDIAN INSTITUTE OF EDUCATION & BUSINESS MANAGEMENT,

(IIEBM) WAKAD, PUNE – 57

This is to certify that Mr. / Ms. Sushil Goyal has successfully completed his / her Summer
Project titled “Analysis Of Mutual Funds ” at RELIANCE MONEY Ltd. from 11.05.2009 to
11.07.2009 in partial fulfillment of the requirements of the Masters In e-Business Administration
(MeBA) 2008-10 Course

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Particulars Page No

1. Objectives of the Study 07

2. Introduction of Mutual Fund 08

3. Company Details 10

4. Growth of Reliance Money 12

5. History of Mutual Fund 17

6. Organization of Mutual fund 20

7. Research on Mutual fund 26

8. Types of Mutual fund 36

9. Benefits and Risks in Mutual Funds 39

10. Conclusion 49

11. Bibliography 50

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 Objectives of the Study:-

a. To draw a comparative analysis of mutual funds and to explore various popular

investment avenues for the investors has been the prime objective of this study.

b. To Test the awareness level in the market for Mutual Fund.

c. To find the importance of various investments based parameters among sample of investors.

d. To identify the potential customers across locations, age-groups, profession.

e. To get an idea of customer expectations in terms of rate of return.

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INTRODUCTION OF MUTUAL FUND

MUTUAL FUNDS . AN OVERVIEW:

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 held by them. Thus a mutual fund is the most suitable for the common man as it
offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively
low cost. Anybody with an invest able surplus of as little as a few thousand rupees can invest in
Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. A
Mutual Fund is the ideal investment vehicle for today’s complex and modern financial scenario.
Markets for Equities, Bonds and other Fixed Income Instruments, real estate, derivatives and
other assets are driven by global events occurring in faraway places. A typical individual is
unlikely to have the knowledge, skills, inclination and the time to
keep track of events, understand their implications and act speedily. An Individual also finds it
difficult to keep track of ownership of his assets, brokerage, dues and bank transactions etc.
A Mutual Fund is the answer to all these situations. It appoints professionally qualified and
experienced staff that manages each of these functions on full time basis. The large pool of
money collected in the fund allows it to hire such staff at a very low cost to each investor. In
effect, the mutual fund vehicle exploits economies of Scale in all three areas- Research,
Investments and Transaction Processing. While the concept of coming together to invest money
collectively is not new, the mutual funds in their present form are a 20th century Phenomenon. In
fact, mutual funds gained popularity only after the Second World War. Globally there are
thousands of mutual funds with different investment objectives. Today, mutual funds,
collectively manage almost as much as or more money as compared to banks. A draft offer
document is to be prepared at the time of launching the fund. Typically, it pre-specifies the
investment objectives of the fund, the risk associated, the costs involved in the process and the
broad rules for entry into and exit from the fund and other areas of operation. In India, as in most

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of the countries, these sponsors need approval from a regulator, SEBI. SEBI looks at he records
of the Sponsor and its financial strength in granting approval to the fund for commencing
operations. A sponsor then hires an. Asset Management Company to invest the funds according
to the investment objective. It also hires equity to the custodian of the assets of the fund and
perhaps a third one to handle registry work for the unit holders of the fund. In the Indian concept,
the sponsors promote the AMC also, in which it holds a majority stake. In many cases a Sponsor
can hold a 100% stake in the AMC eg. IL&FS is the sponsor of IL&FS AMC, which has floated
different Mutual fund schemes and also acts as an asset manager or the funds collected under the
schemes.

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 RELIANCE MONEY

Reliance Mutual Fund fall into four main categories: equity, debt, sector specific and ETF
(Exchange Traded Fund).Each taps into a specific audience profile fulfilling their varying needs.
Under the equity category, Reliance has118 SUPERBRANDS sixteen schemes with Reliance
Growth Fund and Reliance Vision Fund as its flagship schemes. Reliance Equity Opportunities
Fund is a scheme which operates in the multi-cap/multi-sector segment; Reliance Equity Fund is
a long-short fund, Reliance Quant Plus Fund is a quant fund. Reliance offers investments in
banking, power, media, entertainment and pharmaceuticals; Reliance Tax Saver Fund and
Reliance Equity-Linked Savings Fund – Series 1 are tax saving schemes; an NRI-dedicated
equity scheme is
tailored for non-resident Indians. Reliance Regular Savings Fund is an asset-allocation fund with
three options. Under the debt and liquid categories, Reliance has liquid funds, liquid plus funds,
income funds, an NRI-dedicated debt fund, gilt funds, fixed maturity plans and an interval fund.
In the hybrid category, Reliance Monthly income Plan is a popular option

Reliance understands that investments in mutual fund share a function of knowledge

dissemination and awareness of products amongst potential investors. In building its own base of
assets under management it will necessarily have to carry the entire mutual fund
industry. Towards this end Reliance has launched a two-pronged initiative In the first pincer it
has created a formidable network of 26,000 distributors including some of the biggest names in
the banking sector. This who’s who of the financial industry comprises such giants as Citibank,
Standard Chartered, HSBC,ICICI, AXIS, Bank of Baroda, Central Bank of India, Allahabad
Bank and fund houses such as JM, DSP Merrill Lynch and Karvy in addition to a massive
infrastructure of direct financial investment officers. This prodigious effort is supplemented by
the brands’ captive network of 120 branch offices
and 30 financial centres. In the second prong, Reliance has created a series of information packed
presentations which help dispel misinformation Group. This mega business house dominates this
key area in the financial sector. Figures for March 2008 show that it has emerged as the top
Indian mutual fund with average assets under management of Rs. 90,938 crore (US$ 22.73
billion) and an investor base of over 6.6 million (Source:www.amfiindia.com).Reliance’s mutual

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fund schemes are managed by Reliance Capital Asset Management Limited (RCAM), a
subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM.
The company notched up a healthy growth of Rs. 16,354 crore (US$ 4.09billion) in asset sunder
management in February2008 and helped propel the total industry-wide AUM to Rs. 565,459
crore (US$ 141.36 billion) (Source: indiainvestments.com). A sharp rise infixed maturity plans
(FMPs) and collection of Rs. 7000 crore (US$ 1.75 billion) through new fund offers (NFOs)
created this surge. In AUM rankings, Reliance continues to be in the number one spot.
Reliance was the first fund house to launch sector funds with flexibility to invest in a range of
0% to 100% in either equity or debt instruments Mutual fund investments linked to an
ATM/debit card are a Reliance innovation India’s first long-short fund comes from Reliance
Mutual Fund As at 31st May 2008, more than 6.6 million people had invested in Reliance Mutual
Fund the investments comprised 16% of the country’s entire mutual fund asset base.

GROWTH OF RELIANCE MONEY THROUGH RECOGNITION

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"Growth has no limit at Reliance. I keep revising my vision.
Only when you can dream it, you can do it."

Dhirubhai Ambani founded Reliance as a textile company and led its evolution as a global leader
in the materials and energy value chain businesses. He is credited to have brought about the

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equity cult in India in the late seventies and is regarded as an icon for enterprise in India. He
epitomized the spirit 'dare to dream and learn to excel'.The Reliance Group is a living testimony
to his indomitable will, single-minded dedication and an unrelenting commitment to his goals.

RELIANCE MUTUAL FUND

This group dominates this key area in the financial sector. This mega business houses show that
it has assets under management of Rs. 90,938 crore (US$ 22.73 billion) and an investor base of
over 6.6 million (Source:www.amfiindia.com). Reliance’s mutual fund schemes are managed by
Reliance Capital Asset Management Limited RCAM), a subsidiary of Reliance Capital Limited,
which holds 93.37% of the paid-up capital of RCAM.
The company notched up a healthy growth of Rs. 16,354 crore (US$ 4.09 billion) in assets under
management in February 2008 and helped propel the total industry-wide AUM to Rs. 565,459
crore (US$ 141.36 billion) (Source: indiainvestments.com). A sharp rise infixed maturity plans
(FMPs) and collection of Rs. 7000 crore (US$ 1.75 billion) through new fund offers (NFOs)
created this surge. In AU rankings, Reliance continues to be in the number one spot.

India's Best Offering: Reliance Mutual Fund

Investing has become global. Today, a lot of countries are waking up to the reality that in
order to gain financial growth, they must encourage their citizens to not only save but also invest.
Mutual funds are fast becoming the mode of investment in the world.

In India, a mutual fund company called the Reliance Mutual Fund is making waves. Reliance is
considered India's best when it comes to mutual funds. Its investors number to 4.6 billion people.
Reliance Capital Asset Management Limited ranks in the top 3 of India's banking companies
and.Finacial sector in terms of net value netvalue

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The Anil Dhirubhai Ambani Group owns Reliance; they are the fastest growing investment
company in India so far. To meet the erratic demand of the financial market, Reliance Mutual
Fund designed a distinct portfolio that is sure to please potential investors. Reliance Capital Asset
Management Limited manages RMF.

Vision And Mission

Reliance Mutual Fund is so popular because it is investor focused. They show their dedication by
continually dishing out innovative offerings and unparalleled service initiatives. It is their goal to
become respected globally for helping people achieve their financial dreams through excellent
organization governance and customer care. Reliance Mutual fund wants a high performance
environment that is geared at making investors happy.
RMF aims to do business lawfully and without stepping on other people. They want to be able to
create portfolios that will ensure the liquidity of the investment of people in India as well as
abroad. Reliance Mutual Fund also wants to make sure that their shareholders realize reasonable
profit, by deploying funds wisely. Taking appropriate risks to reach the company's potential is
also one of Reliance Mutual Fund's objectives.

Schemes
To make their packages more attractive, Reliance Mutual Fund created proposals called The
Equity/ Growth scheme, Debt/Income Scheme, and Sector Specific Scheme.

i. Debt/Income Scheme, and Sector Specific Scheme.The Equity/ Growth scheme give
medium to long term capital increase. The major part of the investment is on equities and
they have fairly high risks. The scheme gives the investors varying options like, capital
augmentation or dividend preference. The choices are not deadlocked because if you want
you may change the options later on. Providing steady and regular income is one of the
Debt/Income Scheme's primary goals. The Debt/Income scheme has in its portfolio
government securities, corporate debentures fixed income securities, and bonds. Returns
on Sector Specific Scheme are dependent on the performance of the industry at which
your money is invested upon. Compared to diversified funds this is a lot more risky and

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 you will need to really give your time on observing the market. Although RMF is gaining
good ground in the financial market, remember that they are a risk taking bunch. They
give higher profit because they take a lot of risks. So, if you are faint hearted, then
Reliance Mutual Fund is not for you.

Growth through Recognition

Reliance has merited a series of awards and recognitions for excellence for businesses and
operations.

Corporate Ranking and Ratings:

• Reliance featured in the Fortune Global 500 list of ‘World’s Largest Corporations’ for the
fourth consecutive year.
• Ranked 269th in 2007 having moved up 73 places from the previous year.
• Featured as one of the world’s Top 200 companies in terms of Profits.
• Among the top 25 climbers for two years in a row.
• Featured among top 50 companies with the biggest increase in Revenues.
• Ranked 26th within the refining industry.

Reliance is ranked 182nd in the FT Global 500 (up from previous year’s 284th rank).

PetroFed, an apex hydrocarbon industry association, conferred the PetroFed 2007 awards in the
categories of “Refinery of the Year” and “Exploration & Production - Company of the Year”.
Brand Reliance was conferred the “Bronze Award” at The Buzziest Brands Awards 2008,
organized by agencyfaqs!
Institute of Economic Studies conferred the “Udyog Ratna” award in October 2007 for
contributions to the industry. Chemtech Foundation conferred the “Hall of Fame” in February
2008 for sterling contributions to the industry.Chemtech Foundation conferred the “Outstanding
Achievement - Oil Refining” for work at the Jamnagar Manufacturing Division.

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Petroleum Federation of India conferred the “Refinery of the Year Award -2007” to Jamnagar
Manufacturing Division “The Plastics Export Promotion Council - PLEXCOUNCIL Export
Award” in the category of Plastic Polymers for the year 2006-2007 was awarded to Reliance
being the largest exporter in this category.

Achievements

In two successive joint surveys by The Economic Times’ Brand Equity and ACNielsen, Reliance
was recognized as India’s Most Trusted Mutual Fund. The company also walked away with
seven other scheme prizes – five of them being outright winners – in the Gulf 2007 Lipper
Awards. These included the Fund House of the Year by Lipper GCC as well as ICRA Online and
the Most Improved Fund House by Asia Asset Management. It also received the NDTV
Business Leadership Award 2007 in the mutual fund category and runners’ up recognition as the
Best Fund House in the Outlook Money-NDTV Profit Awards. In addition, the company
received the coveted CNBC Web18 Genius of the Web distinction for the Best Mutual Fund
Website in the country. RCAM was awarded the India Onshore Fund House 2008 instituted by
the Asian Investor magazine. The company also won the India Equities award in the 5-
yearPerformance category.

HISTORY OF MUTUAL FUND

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 • Unit Trust of India is the first Mutual Fund set up under a separate act, UTI Act in 1963,
and started its operations in 1964 with the issue of units under the scheme US-641. In
1978 UTI was delinked from the RBI and Industrial Development Bank of India (IDBI)
took over the Regulatory and administrative control in place of RBI.
• In the year 1987 Public Sector banks like State Bank of India, Punjab National Bank,
Indian Bank, Bank of India, and Bank of Baroda have set up mutual funds.
• Apart from these above mentioned banks Life Insurance Corporation [LIC] and General
Insurance Corporation [GIC] too have set up mutual fund. LIC established its mutual
fund in June 1989.while GIC had set up its mutual fund in December 1990.The mutual
fund industry had assest under management of Rs. 47,004 crores.
• With the entry of Private Sector Funds a new era has started in Mutual Fund Industry
[e.g:- Principal Mutual Fund.]

The flow chart below describes broadly the working of a mutual fund

Mutual Fund Operation Flow Chart

History of mutual funds in India

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The history of mutual funds in India can be broadly divided into 5 important phases.

First Phase: 1963-87 Initial Development phase (Unit Trust of India)

In 1963, UTI was established by an Act of Parliament and given a monopoly. UTI
commenced its operations from July 1964 .The impetus for establishing a formal
institution came from the desire to increase the propensity of the middle and lower
groups to save and to invest. UTI came into existence during a period marked by great political
and economic uncertainty in India. The first and still one of the largest schemes, launched by
UTI was Unit Scheme 1964. UTI created a number of products such as monthly income plans,
children’s plans, equity-oriented schemes and offshore funds during this period. The total asset
under management for the year 1987-88 was 6,700 crores.

Second Phase: 1987-93 (Entry of Public Sector Funds)

Second phase witnessed the entry of mutual funds sponsored by state owned banks
and financial institutions. With the opening up of the economy, many public sector and financial
institutions were allowed to establish mutual funds. In November 1987 the State Bank of India
established the first non-UTI mutual fund-SBI Mutual Fund. This was followed by Canbank
Mutual Fund (launched in December, 1987), LIC Mutual Fund (1989), and Indian Bank Mutual
Fund (1990) followed by Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund.
These mutual funds helped enlarge the investor community and the invest able funds. During this
period, investors were shifting away from bank deposits to mutual funds. Most funds were
growth-oriented closed-ended funds. From 1987 to 1992-93, the fund industry expanded nearly
seven times in terms of Assets under Management. The total asset under management
considering both UTI and Public Sector was 47,004.

Third Phase: 1993-96 (Emergence of Private Funds)

A new era in the mutual fund industry began with the permission granted for the entry of
private sector funds in 1993, both Indian and Foreign. Also Government launched a
series of measures aimed at the financial sector as a part of the economic liberalization
and reform process. This included the setting up of the Securities and Exchange Board
of India (SEBI) as a regulatory body for the financial sector including Mutual Funds,

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which issued the SEBI Mutual Fund Regulations in January 1993. During the year 1993-
94, five private sector mutual funds launched their schemes followed by six others in
1994-95.

Fourth Phase: 1996-1999 (SEBI Regulations for Mutual Funds)

More investor friendly regulatory measures have been taken both by SEBI to protect the
investor and by the Government to enhance investors. returns. A comprehensive set of
regulations for all mutual funds operating in India was introduced with SEBI (Mutual
Fund), 1996. These regulations set uniform standards for all funds and will eventually
be applied in full to Unit Trust of India as well, even though UTI is governed by its own
UTI Act. In 1999 Union Government Budget took a big step in exempting all mutual
funds dividends from income tax in the hands of investors. 1999 marks the beginning of
a new phase in the history of the mutual fund industry in India, a phase of significant
growth in terms of both amounts mobilized from investors and assets under
management.

Fifth Phase: 1999-2002

This phase was marked by very rapid growth in the industry, and significant increase in
market shares of private sector players. Assets crossed Rs. 1,00,000. The tax break
offered to mutual funds in 1999 created arbitrage opportunities for a number of
institutional players. Bond funds and liquid funds registered the highest growth in this
period, accounting for nearly 60% of the assets. UTI.s share of the industry dropped to
nearly 50%

ORGANISATION OF A MUTUAL FUND

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A mutual fund invites the prospective investors to join the fund by offering various
schemes so as to suit to the requirements of categories of investors. The resources of
individual investors are pooled together and the investors are issued units/shares for the
money invested. The amount so collected is invested in capital market instruments like
treasury bills, commercial papers, etc.
For managing the fund, a mutual fund gets an annual fee of 1.25% of funds
managed at the maximum as fixed by SEBI (MF) regulations, 1993 and if the funds
exceed Rs. 100 cores , the fee is only 1%. The fee cannot exceed 1%. Offcourse,
regular expenses like custodial fee, cost of dividend warrants, fee for registration, the
asset management fee etc are debited to the respective schemes. These expenses
cannot exceed 3% of the assets in the respective schemes. These expenses cannot
exceed 3% of the assets in the respective schemes each year. The remaining amount is
given back to the investors in full.

The formation and operations of Mutual Funds in India is solely guided by SEBI (Mutual
Funds) Regulations, 1993, which came into force on 20th January, 1996, through a
notification on 9th December, 1996. these Regulations make it mandatory for Mutual
Funds to have a three-tier structure of :
1. A Sponsor Institution to promote the Fund.
2. A team of Trustees to oversee the operations and to provide checks for the
efficient, profitable and transparent operations of the fund and
3. An Asset Management Company (AMC) to actually deal with the funds.

Sponsor

The Company, which sets up the mutual fund, is called the Sponsor. SEBI has laid down certain
criteria to be met by the sponsor. The criterion mainly deals with adequate experience, good past
track record, net worth etc. Sponsor appoints the Trustees, Custodian and the AMC with the prior
approval of SEBI, and in accordance with SEBI Regulations. Sponsor must have at least 5-year
track record of business interest in the
Financial Markets.

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Trustees:
Trustees are the people with long experience and good integrity in the respective
fields carry the crucial responsibility in safeguarding the interests of the investors
.For this purpose, they monitor the operations of the different schemes. They have
wide ranging powers and they can even dismiss AMC with the approval of SEBI.
The Indian Trust Act governs them. Rules regarding appointment of the Trustees are:
Appointment of Trustees has to be done with the prior approval of SEBI.

There must be at least 4 members in the Board of Trustees and at least 2/3rd of the members of
the Board of Trustees must be independent. Trustees of one Mutual Fund cannot be a Trustee of
another Mutual Fund, unless he is an independent trustee in both cases, and has the approval of
both the Boards.

Rights of Trustees:
Trustees appoint the AMC, in consultation with the sponsor and according to SEBI
Regulations.All mutual Fund Schemes floated by the AMC have to be approved by the Trustees.
Trustees can seek information from the AMC on the operations and compliance of the Mutual
Fund, with the provisions of the trust Deed, investment management agreement and the SEBI
Regulations. Trustees can review and ensure that Net worth of the AMC is according to
stipulated norms and regulations.

Asset Management Company:

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The AMC actually manages the funds of the various schemes. The AMC employs a large number
of professionals to make investments, carry out research &to do agent and investor servicing.
Infact, the success of any Mutual Fund depends upon the efficiency of this AMC. The AMC
submits a quarterly report on the functioning of the mutual fund to the trustees who will guide
and control the AMC.The AMC is usually a private limited company, in which the sponsors and
their associations or joint venture partners are shareholders. The AMC has to be
registered by SEBI and should have a minimum Net worth of Rs.10 cores all times. The role of
the AMC is to act as the Investment Manager of the Trust along with the following functions:
It manages the funds by making investments in accordance with the provision of the Trust Deed
and Regulations The AMC shall disclose the basis of calculation of NAV and Repurchase
price of the schemes and disclose the same to the investors. Funds shall be invested as per Trust
Deed and Regulations.

Restrictions on the AMC.s:


AMC.s cannot launch a fund scheme without the prior approval of Trustees. AMC.s have to
provide full details of Employees and Board Members, in all cases where such investments
exceed Rs. 1 lakh. A
 MC.s cannot take up any activity that is in conflict with the activities of the
mutual funds.

Registrars and Transfer Agents:

The Registrars and Transfer Agents are responsible for the investor servicing functions, as they
maintain the records of investors in the mutual funds. They process investor applications , record
details provided by the investors on application forms, send out periodical information on the
performance of the mutual fund; process dividend pay-out to the investors; incorporate changes
in information as communicated by investors; and keep the investor record up to date, by
recording new investors and removing investors who have withdrawn their funds.

Custodian:

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Custodians are responsible for the securities held in the mutual funds portfolio. They discharge
an important back-office function, by ensuring that securities that are bought are delivered and
transferred to the books of mutual funds, and that funds are paid-out when mutual fund buys
securities. They keep the investment account of the mutual fund, and also collect the dividends
and interest payments due on the mutual fund investments. Custodians also track corporate
actions like bonus, issues, right offers, offer for sale, buy back and open offers for acquisition.

Regulatory Authorities

To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds.
It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. MF
either promoted by public or by private sector entities including one promoted by foreign entities
is governed by these Regulations.SEBI approved Asset Management Company (AMC) manages
the funds by making investments in various types of securities. Custodian, registered with SEBI,
holds the securities of various schemes of the fund in its custody.

According to SEBI Regulations, two thirds of the directors of Trustee Company or board of
trustees must be independent.The Association of Mutual Funds in India (AMFI) reassures the
investors in units of mutual funds that the mutual funds function within the strict regulatory
framework. Its objective is to increase public awareness of the mutual fund industry.AMFI also
is engaged in upgrading professional standards and in promoting best industry practices in
diverse areas such as valuation, disclosure, transparency etc.

CONCEPT OF MUTUAL FUNDS

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24
The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt for bank
FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital
protected funds and the profit-bonds that give out more return which is slightly higher as
compared to the bank deposits but the risk involved also increases in the same proportion.

Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide
professional management, diversification, convenience and liquidity. That doesn’t mean mutual
fund investments risk free. This is because the money that is pooled in are not invested only in
debts funds which are less riskier but are also invested in the stock markets which involves a
higher risk but can expect higher returns. Hedge fund involves a very high risk since it is mostly
traded in the derivatives market which is considered very volatile.

RESEARCH ON MUTUAL FUND

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Mutual Funds over the years have gained immensely in their popularity. Apart from the many
advantages that investing in mutual funds provide like diversification, professional management,
the ease of investment process has proved to be a major enabling factor. However, with the
introduction of innovative products, the world of mutual funds now a days has a lot to offer to its
investors. With the introduction of diverse options, investors needs to choose a mutual fund that
meets his risk acceptance and his risk capacity levels and has similar investment objectives as the
investor.

With the plethora of schemes available in the Indian markets, an investors needs to evaluate and
consider various factors before making an investment decision. Since not everyone has the time
or inclination to invest and do the analysis himself, the job is best left to a professional. Since
Indian economy is no more a closed market, and has started integrating with the world markets,
external factors which are complex in nature affect us too. Factors such as an increase in short-
term US interest rates, the hike in crude prices, or any major happening in Asian market have a
deep impact on the Indian stock market. Although it is not possible for an individual investor to
understand Indian companies and investing in such an environment, the process can become
fairly time consuming. Mutual funds (whose fund managers are paid to understand these issues
and whose Asset Management Company invests in research) provide an option of investing
without getting lost in the complexities.

Most importantly, mutual funds provide risk diversification: diversification of a portfolio is

amongst the primary tenets of portfolio structuring, and a necessary one to reduce the level of
risk assumed by the portfolio holder. Most of the investors are not necessarily well qualified to
apply the theories of portfolio structuring to their holdings and hence would be better off leaving
that to a professional. Mutual funds represent one such option.

Lastly, Evaluate past performance, look for stability and although past performance is no
guarantee of future performance, it is a useful way to assess how well or badly a fund has
performed in comparison to its stated objectives and peer group. A good way to do this would be
to identify the few best performing funds (within your selected investment objectives) over
various periods, say 3 months, 6 months, one year, two years and three years. Shortlist funds that

26
appear in the top 5 in each of these time horizons as they would have thus demonstrated their
ability to be not only good but also, consistent performers.

Composition of Indian Mutual Fund Industry:

ORGANISATION OF A MUTUAL FUND:

There are many entities involved and the diagram below illustrates the
Organizational set up of a mutual fund:

Composition of Indian Mutual Fund Industry:

Unit Trust of India
Bank sponsored
Bank of Baroda AMC
Bank of India AMC
Canbank Investment Management Services Ltd.
Punjab National Bank AMC Ltd.
SBI Funds Management Ltd.
Indfund Management Ltd.

Institutions:

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General Insurance Corporation AMC
IDBI Principal Asset Management Co.
Jeevan Bima Sahayog Asset Management Co. Ltd.

Private Sector:
1. India
Benchmark AMC Ltd.
Cholamandalam AMC Ltd.
Escorts AMC Ltd.
J.M. Capital Management Co. Ltd.
Kotak Mahindra AMC Ltd.
Shriram AMC Ltd.

2. Joint Venture .Predominantly Indian

Birla Sun Life AMC Pvt. Co. Ltd.
DSP Merrill Lynch Investment Mangers (India) ltd.
HDFC AMC Ltd.
Sundaram Newton AMC
Tata TD Waterhouse Asset Management Private Ltd.

3. Joint Ventures .Predominantly Foreign

Alliance Capital Asset Management (India) Pvt. Ltd.
Standard Chartered Asset Management Co. Pvt. Ltd.
ING Investment Management (India) Pvt. Ltd.
JM Asset Management (India) Pvt. Ltd.
Morgan Stanley Investment Management Pvt. Ltd.
Prudential ICICI Management Co. Ltd.
Templeton Asset Management (I) Pvt. Ltd.

Mutual funds vs. other investments

28
Mutual funds offer several advantages over investing in individual stocks. For example, the
transaction costs are divided among all the mutual fund shareholders, which allows for cost-
effective diversification. Investors may also benefit by having a third party (professional fund
managers) apply expertise and dedicate time to manage and research investment options,
although there is dispute over whether professional fund managers can, on average, outperform
simple index funds that mimic public indexes. Whether actively managed or passively indexed,
mutual funds are not immune to risks. They share the same risks associated with the investments
made. If the fund invests primarily in stocks, it is usually subject to the same ups and downs and
risks as the stock market.

Share classes

Many mutual funds offer more than one class of shares. For example, you may have seen a fund
that offers "Class A" and "Class B" shares. Each class will invest in the same pool (or investment
portfolio) of securities and will have the same investment objectives and policies. But each class
will have different shareholder services and/or distribution arrangements with different fees and
expenses. These differences are supposed to reflect different costs involved in servicing investors
in various classes; for example, one class may be sold through brokers with a front-end load, and
another class may be sold direct to the public with no load but a "12b-1 fee" included in the
class's expenses (sometimes referred to as "Class C" shares). Still a third class might have a
minimum investment of $10,000,000 and be available only to financial institutions (a so-called
"institutional" share class). In some cases, by aggregating regular investments made by many
individuals, a retirement plan (such as a 401(k) plan) may qualify to purchase "institutional"
shares (and gain the benefit of their typically lower expense ratios) even though no members of
[14]
the plan would qualify individually. As a result, each class will likely have different
performance results. [15]

A multi-class structure offers investors the ability to select a fee and expense structure that is
most appropriate for their investment goals (including the length of time that they expect to
remain invested in the fund). [15]

Load and expenses

29
A front-end load or sales charge is a commission paid to a broker by a mutual fund when shares
are purchased, taken as a percentage of funds invested. The value of the investment is reduced by
the amount of the load. Some funds have a deferred sales charge or back-end load. In this type of
fund an investor pays no sales charge when purchasing shares, but will pay a commission out of
the proceeds when shares are redeemed depending on how long they are held. Another derivative
structure is a level-load fund, in which no sales charge is paid when buying the fund, but a back-
end load may be charged if the shares purchased are sold within a year.

Load funds are sold through financial intermediaries such as brokers, financial planners, and
other types of registered representatives who charge a commission for their services. Shares of
front-end load funds are frequently eligible for breakpoints (i.e., a reduction in the commission
paid) based on a number of variables. These include other accounts in the same fund family held
by the investor or various family members, or committing to buy more of the fund within a set
period of time in return for a lower commission "today".

It is possible to buy many mutual funds without paying a sales charge. These are called no-load
funds. In addition to being available from the fund company itself, no-load funds may be sold by
some discount brokers for a flat transaction fee or even no fee at all. (This does not necessarily
mean that the broker is not compensated for the transaction; in such cases, the fund may pay
brokers' commissions out of "distribution and marketing" expenses rather than a specific sales
charge. The purchaser is therefore paying the fee indirectly through the fund's expenses deducted
from profits.)

No-load funds include both index funds and actively managed funds. The largest mutual fund
families selling no-load index funds are Vanguard and Fidelity, though there are a number of
smaller mutual fund families with no-load funds as well. Expense ratios in some no-load index
funds are less than 0.2% per year versus the typical actively managed fund's expense ratio of
about 1.5% per year. Load funds usually have even higher expense ratios when the load is
considered. The expense ratio is the anticipated annual cost to the investor of holding shares of
the fund. For example, on a $100,000 investment, an expense ratio of 0.2% means $200 of
annual expense, while a 1.5% expense ratio would result in $1,500 of annual expense. These
expenses are before any sales commissions paid to purchase the mutual fund. Many fee-only

30
financial advisors strongly suggest no-load funds such as index funds. If the advisor is not of the
fee-only type but is instead compensated by commissions, the advisor may have a conflict of
interest in selling high-commission load funds.

NOTE: From August 1st 2009 Sebi (Securities Exchange Board Of India) Abolished Entry
Load on Investment on any type of Mutual Fund

ROLE OF MUTUAL FUNDS IN THE FINANCIAL MARKET

31
Indian financial institutions have played a dominant role in assets formation and intermediation,
and contributed substantially in macroeconomic development. In this process of development
Indian mutual funds have emerged as strong financial intermediaries and are playing a very
important role in bringing stability to the financial system and efficiency to resource allocation.
Mutual funds play a crucial role in an economy by mobilizing savings and investing them
in the capital market, thus establishing a link between savings and the capital market.
The activities of mutual funds have both short-and long-term impact on the savings and
capital markets, and the national economy. Mutual funds, thus, assist the process of
financial deepening and intermediation. They mobilize funds in the savings market and
act as complementary to banking; at the same time they also compete with banks and
other financial institutions. In the process stock market activities are also significantly
influenced by mutual funds. There is thus hardly any segment of the financial market, which is
not (directly or indirectly) influenced by the existence and operation of mutual funds. However,
the scope and efficiency of mutual funds are influenced by overall economic fundamentals:
the interrelationship between the financial and real sector, the nature of development of
the savings and capital markets, market structure, institutional arrangements and overall
policy regime.

Regulatory Aspects of Mutual Fund Schemes of mutual fund:

The asset management company shall launch no scheme unless the trustees approve such scheme
and a copy of the offer document has been filed with the Board. Every mutual fund shall along
with the offer document of each scheme pay filing fees .The offer document shall contain
disclosures which are adequate in order to enable the investors to make informed investment
decision including the disclosure on maximum investments proposed to be made by the scheme
in the listed securities of the group companies of the sponsor. N
 o one shall issue any form of
application for units of a mutual fund unless the form is accompanied by the memorandum
containing such information as may be specified by the Board.Every close ended scheme shall be
listed in a recognized stock exchange within six months from the closure of the subscription. The
asset management company may at its option repurchase or reissue the repurchased units of a
close-ended scheme. A close-ended scheme shall be fully redeemed at the end of the maturity
period. "Unless a majority of the unit holders otherwise decide for its rollover by passing

32
a resolution". The mutual fund and asset management company shall be liable to refund the
application money to the applicants,-

(I) If the mutual fund fails to receive the minimum subscription amount referred to in clause (a)
of sub-regulation
(ii) If the moneys received from the applicants for units are in excess of subscription as referred
to in clause (b) of sub-regulation (1).
The asset management company shall issue to the applicant whose application has been accepted,
unit certificates or a statement of accounts specifying the number of units allotted to the applicant
as soon as possible but not later than six weeks from the date of closure of the initial subscription
list and or from the date of receipt of the request from the unit holders in any open ended scheme.

INVESTMENT OBJECTIVES AND VALUATION POLICIES:

The money collected under any scheme of a mutual fund shall be invested only in transferable
securities in the money market or in the capital market or in privately placed debentures or
securitised debts. P
 rovided that moneys collected under any money market scheme of a mutual
fund shall be invested only in money market instruments in accordance with directions
issued by the Reserve Bank of India. The mutual fund shall not borrow except to meet temporary
liquidity needs of the mutual funds for the purpose of repurchase, redemption of units or payment
of interest or dividend to the unit holders. The mutual fund shall not advance any loans for any
purpose. The Net Asset Value of the scheme shall be calculated and published at least in two
daily newspapers at intervals of not exceeding one week. The price at which the units may be
subscribed or sold and the price at which such units may at any time be repurchased by the
mutual fund shall be made available to the investors.

33
34
Regulatory Aspects of Mutual Fund

The asset management company shall launch no scheme unless the trustees approve such scheme
and a copy of the offer document has been filed with the Board.Every mutual fund shall along
with the offer document of each scheme pay filing fees.The offer document shall contain
disclosures which are adequate in order to enable the investors to make informed investment
decision including the disclosure on maximum investments proposed to be made by the scheme
in thelisted securities of the group companies of the sponsor. N
 o one shall issue any form of
application for units of a mutual fund unless the form is accompanied by the memorandum
containing such information as may be specified by the Board. Every close ended scheme shall
be listed in a recognized stock exchange within six months from the closure of the subscription.
The asset management company may at its option repurchase or reissue the repurchased units of
a close-ended scheme. A
 close-ended scheme shall be fully redeemed at the end of the maturity
period."Unless a majority of the unit holders otherwise decide for its rollover by passing
a resolution" The mutual fund and asset management company shall be liable to refund the
application money to the applicants,-

(I) If the mutual fund fails to receive the minimum subscription amount referred to in
clause (a) of sub-regulation
(II) If the moneys received from the applicants for units are in excess of subscription as
referred to in clause (b) of sub-regulation (1).

The asset management company shall issue to the applicant whose application has been accepted,
unit certificates or a statement of accounts specifying the number of units allotted to the applicant
as soon as possible but not later than six weeks from the date of closure of the initial subscription
list and or from the date of receipt of the request from the unit holders in any open ended scheme.

TYPES OF MUTUAL FUNDS:

35
Broadly Mutual Funds are classified into:

Open-ended schemes:
The open-ended schemes do not have a fixed maturity and are open for subscription the whole
year. One can buy and sell units at the NAV related prices to the Mutual funds. These schemes
are normally not listed on the stock exchanges and can be redeemed directly to the Mutual Fund.

Close-ended Schemes:
The closed ended schemes can be bought and sold on the stock exchange subsequent to the initial
subscription through the public offer. One can stay invested in the scheme for a stipulated period
ranging from 2 to 15 years. Generally, the close-ended schemes are traded at a discount to their
NAV in the stock exchange.

On the basis of investments objective, there are five different types of schemes:

Growth/Equity Scheme :
Majority of the corpus of such a scheme is invested in equities and equity related instruments.
This kind of scheme is for those investors who are not risk averse and are willing to hold on to
their investment for a long period of time, caring little for volatility. In such schemes, dividend
may or may not be declared.

Income /Debt Scheme:
The Fund Manager of such schemes invests a substantial portion of their fund in fixed income
securities like debentures, bonds and money market instruments. This kind of scheme is ideal for
risk averse investors who are interested in steady income.

Balanced Schemes:
Fund Manager of such funds invests in both equity as well as debt markets in the proportion as
that highlighted in the prospectus. The objective of such a scheme is to provide both growth and

36
income by distributing a part of the income and capital gains they earn. Such a scheme is suitable
for investors who want long-term returns without taking the entire risk of the equity market.

Money Market/Liquid Schemes:
These are schemes with very low risks. They invest in Zero risk or safer, short term instruments
like treasury bills, certificates of deposit, Commercial Paper and inter-bank call money. The
objective of these schemes is to provide liquidity and moderate income and also preserve the
capital.

Tax Saving Schemes:
The objective of such a scheme is to provide tax benefits to the investors. Two types of schemes
fall under this head.

1. ELSS (Equity Linked Savings Schemes:

A Fund Manager of such a scheme invests primarily in stocks. An important feature of this
scheme is that there is a lock-in period of three years from the date of investment. During this
period unit holders are prohibited from trading, pledging and transferring the units. Repurchase is
permitted only after three years.

2. Pension Schemes:
A unit holder in a Pension Scheme can avail of a tax rebate of 20 per cent for investments up to
Rs 60,000 (tax saving of Rs 12,000).

37
INVESTMENT OBJECTIVES AND VALUATION POLICIES:

The money collected under any scheme of a mutual fund shall be invested only in transferable
securities in the money market or in the capital market or in privately placed debentures or
securitised debts.Provided that moneys collected under any money market scheme of a mutual
fund shall be invested only in money market instruments in accordance with directions issued by
the Reserve Bank of India.The mutual fund shall not borrow except to meet temporary liquidity
needs of the mutual funds for the purpose of repurchase, redemption of units or payment of
interest or dividend to the unit holders. The mutual fund shall not advance any loans for any
purpose. The Net Asset Value of the scheme shall be calculated and published at least in two
daily newspapers at intervals of not exceeding one week. The price at which the units may be
subscribed or sold and the price at which such units may at any time be repurchased by the
mutual fund shall be made available tothe investors.

38
 BENEFITS RELATED MUTUAL FUNDS

• Reliance was the first fund house to launch sector funds with flexibility to invest in a
range of 0% to 100% in either equity or debt instruments.

• Mutual fund investments linked to an ATM/debit card a Reliance innovation India’s

first long-short fund comes from Reliance Mutual Fund .

• As at 31st May 2008, more than 6.6 million people had invested in Reliance Mutual
Fund;the investments comprised 16% of the country’s entire mutual fund.

1. Small investments:
Mutual funds help you to reap the benefit of returns by a portfolio spread across a wide spectrum
of companies with small investments. Such a spread would not have been possible without their
assistance. 
2. Professional Fund Management:
Professionals having considerable expertise, experience and resources manage the pool of money
collected by a mutual fund. They thoroughly analyse the markets and economy to pick good
investment opportunities.

3. Spreading Risk:
An investor with a limited amount of fund might be able to invest in only one or two stocks /
bonds, thus increasing his or her risk. However, a mutual fund will spread its risk by investing a
number of sound stocks or bonds. A fund normally invests in companies across a wide range of
industries, so the risk is diversified at the same time taking advantage of the position it holds.
Also in cases of liquidity crisis where stocks are sold at a distress, mutual funds have the
advantage of the redemption option at the NAVs.

4. Transparency and interactivity:

39
Mutual Funds regularly provide investors with in formation on the value of their
investments. Mutual Funds also provide complete portfolio disclosure of the
investments made by various schemes and also the proportion invested in each
asset type. Mutual Funds clearly layout their investment strategy to the investor.

5. Liquidity:
Closed ended funds have their units listed at the stock exchange, thus they can be bought and
sold at their market value. Over and above this the units can be directly redeemed to the Mutual
Fund as and when they announce the repurchase.

6. Choice:
The large amounts of Mutual Funds offer the investor a wide variety to choose from. An investor
can pick up a scheme depending upon his risk / return profile.

7. Regulations:
All the mutual funds are registered with SEBI and they function within the provisions of strict
regulation designed to protect the interests of the investor.

8. Flexibility:
Investors can exchange their units from one scheme to another, which cannot be done in other
kinds of investments. Income units can be exchanged for growth units depending upon the
performance of the funds.

9. Potential yields:
The pooling of funds from a large number of customers enables the fund to have large funds at
its disposal. Due to these large funds, mutual funds are able to buy cheaper and sell dearer than
the small & medium investors. Thus, they are able to get better market rates and lower rates of
brokerage. So, they provide better yields to their customers. They also enjoy the economies of
scale and reduce the cost of capital market participation. The transaction costs of large
investments are quite lower than that of small investments. All the profits are passed on to the

40
investor in the form of dividends and capital appreciation. Mutual funds have a return ranging
from 12-17% p.a.

10. Renders expertise service at lower costs:
The management of the fund is generally assigned to professionals who are well trained and have
adequate experience in the field of investment. The investment decisions of these professionals
are backed by informed judgement and experience. Thus, investors are assured of quality
services in their best interest. The fee charged by the mutual funds is 1%.

11. Recordkeeping Service:-

With your own portfolio of stocks and bonds, you would have to do your own Record keeping of
purchases, sales, dividends, interest, short-term and long-term gains and losses. Mutual funds
provide confirmation of your transactions and necessary tax forms to help you keep track of your
investments and tax reporting.

12. Safekeeping:-
When you own shares in a mutual fund, you own securities in many companies without having to
worry about keeping stock certificates in safe deposit boxes or sending them by registered mail.
You don't even have to worry about handling the mutual fund stock certificates; the fund
maintains your account on its books and sends you periodic statements keeping track of all your
transactions.

13. Retirement and College Plans:-

Mutual funds are well suited to Individual Retirement Accounts and most funds offer IRA-
approved prototype and master plans for individual retirement accounts (IRAs) and Keogh,
403(b), SEP-IRA and 401(k) retirement plans.

14. Online Services:-

The internet provides a fast, convenient way for investors to access financial information. A host
of services are available to the online investor including direct access to no-load companies. Visit
Company Links to access these Companies.

41
15. Sweep Accounts:-
With many funds, if you choose not to reinvest your stock or bond fund dividends,you can
arrange to have them swept into your money market fund automatically. You get all the
advantages of both accounts with no extra effort

16. Ease of Investing:-

You may open or add to your account and conduct transactions or business with the fund by
mail, telephone or bank wire. You can even arrange for automatic monthly investments by
authorizing electronic fund transfers from your checking account in any amount and on a date
you choose.

17. Total Liquidity, Easy Withdrawal:-

You can easily redeem your money anytime you need cash by letter, telephone, bank wire or
check, depending on the fund. Your proceeds are usually available within a day or two.

18. Automatic Direct Deposit:-

You can usually arrange to have regular, third-party payments -- such as Social Security or
pension checks -- deposited directly into your fund account. This puts your money to work
immediately, without waiting to clear your checking account, and it saves you from worrying
about checks being lost in the mail

42
 RISK OF INVESTMENT IN MUTUAL FUNDS:

Mutual funds are not free from risks as the funds so collected are invested in stock markets,
which are volatile in nature and are not risk free. The following risks are generally involved in
mutual funds

Scheme risks:
There are certain risks inherent in the scheme itself. For instance, in a pure growth scheme, risks
are greater. It is obvious because if one expects more returns as in the case of a growth scheme,
one has to take more risks.

Investment risk:
Whether the mutual fund makes money in shares or loses depends upon the investment expertise
of the Asset Management Company (AMC). If the investment advice goes wrong, the fund has to
suffer a lot. The investment expertises of various funds are different and it is reflected on the
returns, which they offer to the investors.

Business Risk:
The corpus of a mutual fund might have been invested in a company.s shares. If the business of
that company suffers any set back, it cannot declare any dividend. It may even go to the extent of
winding up its business. Though the mutual funds can withstand such a risk, its income paying
capacity is affected.

Political risks:
Every government brings new economic ideologies and policies. It is often said that many
economic decisions are politically motivated. Change of government brings in the risk of
uncertainty, which every player in the finance service industry has to face.
No Insurance:-
Mutual funds, although regulated by the government, are not insured against losses. The Federal
Deposit Insurance Corporation (FDIC) only insures against certain losses at banks, credit unions,
and savings and loans, not mutual funds. That means that despite the risk-reducing diversification

43
benefits provided by mutual funds, losses can occur, and it is possible (although extremely
unlikely) that you could even lose your entire investment.

Dilution:-
Although diversification reduces the amount of risk involved in investing in mutual funds, it can
also be a disadvantage due to dilution. For example, if a single security held by a mutual fund
doubles in value, the mutual fund itself would not double in value because that security is only
one small part of the fund's holdings. By holding a large number of different investments, mutual
funds tend to do neither exceptionally well nor exceptionally poorly.

Fees and Expenses:-

Most mutual funds charge management and operating fees that pay for the fund's management
expenses (usually around 1.0% to 1.5% per year). In addition, some mutual funds charge high
sales commissions, 12b-1 fees, and redemption fees. And some funds buy and trade shares so
often that the transaction costs add up significantly. Some of these expenses are charged on an
ongoing basis, unlike stock investments, for which a commission is paid only when you buy and
sell (see Investor Guide University: Fees and Expenses).

Poor Performance:-
Returns on a mutual fund are by no means guaranteed. In fact, on average, around 75% of all
mutual funds fail to beat the major market indexes, like the S&P 500, and a growing number of
critics now question whether or not professional money managers have better stock-picking
capabilities than the average investor.

Loss of Control:-
The managers of mutual funds make all of the decisions about which securities to buy and sell
and when to do so. This can make it difficult for you when trying to manage your portfolio. For
example, the tax consequences of a decision by the manager to buy or sell an asset at a certain
time might not be optimal for you. You also should remember that you are trusting someone else
with your money when you invest in a mutual fund.

44
Trading Limitations:-
Although mutual funds are highly liquid in general, most mutual funds (called open-ended funds)
cannot be bought or sold in the middle of the trading day. You can only buy and sell them at the
end of the day, after they've calculated the current value of their holdings.

Size:-
Some mutual funds are too big to find enough good investments. This is especially true of funds
that focus on small companies, given that there are strict rules about how much of a single
company a fund may own. If a mutual fund has $5 billion to invest and is only able to invest an
average of $50 million in each, then it needs to find at least 100 such companies to invest in; as a
result, the fund might be forced to lower its standards when selecting companies to invest in.

Inefficiency of Cash Reserves:-

Mutual funds usually maintain large cash reserves as protection against a large number of
simultaneous withdrawals. Although this provides investors with liquidity, it means that some of
the fund's money is invested in cash instead of assets, which tends to lower the investor's
potential return.

Different Types:-
The advantages and disadvantages listed above apply to mutual funds in general. However, there
are over 10,000 mutual funds in operation, and these funds vary greatly according to investment
objective, size, strategy, and style. Mutual funds are available for virtually every investment
strategy (e.g. value, growth), every sector (e.g. biotech, internet), and every country or region of
the world. So even the process of selecting a fund can be tedious.
.
MAJOR MUTUAL FUND COMPANIES IN INDIA

Birla Sun Life Mutual Fund

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial.
Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada,
the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual

45
Fund follows a conservative long-term approach to investment. Recently it crossed AUM of Rs.
10,000 cr.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing
Development Finance Corporation Limited and Standard Life Investments Limited.

HSBC Mutual Fund

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

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential Plc. Of America, one of the largest
life insurance companies in the USA. Prudential ICICI Mutual Fund was setup on 13th of
October 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed is
Prudential ICICI Asset Management Company Limited corporated on 22nd of June 1993.

Sahara Mutual Fund

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

Tata Mutual Fund

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

46
Kotak Mahindra Mutual Fund
Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is
presently having more than 1,99,818 investors in its various schemes. KMAMC started its
operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors
with varying risk - return profiles. It was the first company to launch dedicated gilt scheme
investing only in government securities.
Franklin Templeton India Mutual Fund
The group, Franklin Templeton Investments is a California (USA) based company with a global
AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services in the
world. Investors can buy or sell the mutual fund through their financial advisor or through mail
or through their website. They have Open-End Diversified Equity Scheme, Open-End Sector
Equity Schemes, Open-End Hybrid Schemes, Open-End Tax Savings Schemes, Open-End
Income and Liquid Schemes, Closed-End Income Schemes and Open-End Fund Of Funds
Schemes to offer.

Morgan Stanley India Mutual Fund

Morgan Stanley is a worldwide financial services company and it is leading in the market of
securities, investment management and credit services. Morgan Stanley Investment Management
(MSIM) was established in the year 1975. It provides customized asset management services and
products to governments, corporations, pension funds and non-profit organization. Its services
are also extended to high net worth individuals and retail investors. In India it is known as
Morgan Stanley Investment Management Private Limited (MSIM) and its AMC is Morgan
Stanley Mutual Fund (MSMF). This is the first close-end diversified equity scheme serving the
needs of Indian retail investors focusing on a long-term capital appreciation.

Canbank Mutual Fund

Canbank Mutual Fund was setup on Dec 19, 1987 with Canara Bank acting as the sponsor.
Canbank Investment Management Services Ltd. incorporated on March 02, 1993 is the AMC.
The corporate office of the AMC is in Mumbai.

LIC Mutual Fund

47
Life Insurance Corporation of India setup LIC Mutual Funds on 19th June 1989. It contributed
Rs. 2 cr. towards the corpus of the fund. LIC Mutual Fund was constituted as a trust in
accordance with the provisions of the Indian Trust Act 1882. The company started its business on
29th April 1994. The trustees of LIC Mutual Fund have appointed Jeevan Bima Sahyog Asset
Management Company Ltd. as the investment managers for LIC Mutual fund.

48
CONCLUSION

The investors while investing Selecting a tool may seem like a daunting task, but knowing your
objectives and risk tolerance is half the battle. Thus the investors should study the tools before
investing in and should match the scheme with their preferences.

Before investing in Mutual fund, an investor must first identify his or her goals and desires for
the money being invested. Are long-term capital gains desired, or a current income is preferred.
Will the money be used to pay for college expenses, or to supplement a retirement that
is decades away? Identifying a goal is important because it will enable the investor dramatically
whittle down the list so many tools available in the the public domain.

In addition, investors must also consider the issue of risk tolerance. If the investor is able to
afford and mentally accept dramatic swings in portfolio value then he should go for riskier
investments. Or, if a more conservative investment warranted from the scheme. Therefore
Identifying objective preferences and risk tolerance is as important as identifying a goal.

To finish, I would like to state that this project gave me a lot of assistance to get a hold on the
basic knowledge about the products Mutual Funds in detailed manner and also all the
mechanism, maneuver related to it.

49
BIBLIOGRAPHY

WEBSITES

www.amfiindia.com
www.bseindia.com
www.rbi.org.in
www.investopedia.com
www.google.com
www.valuepro.net

BOOKS

INVESTMENT MANAGEMENT ,SECURITY ANALYSIS AND PORTFOLIO

MANAGEMENT BY V.K.BHALLA

STATISTICS FOR MANAGEMENT BY LEVIN & RUBIN

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