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A project report

Networth stock Broking Ltd.

Submitted in partial fulfillment of the

Requirements for the award of the Degree

Submitted By

Under the Guidance of

Mr.K.V.R.Satya Kumar
HOD & Assistant Professor
(Affiliated to Jawaharlal Nehru Technological University Hyderabad)
2014 2016

Mutual fund is a trust that pools the savings of a number of investors who share a common
financial goal. This pool of money is invested in accordance with a stated objective. The joint
ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus
collected is then invested in capital market instruments such as shares, debentures and other
securities. Mutual fund is the pool of money, based on the earnings of individuals who shares a
common objective of having financial secured for future uncertainty as well as some sort of
financial benefits like the capital appreciation and dividend earning. The money collected from
the investors is then relocated or invested in capital market instruments such as shares,
debenture, and various foreign markets. Investors invest money and get the units as per the unit
value which can be called as Net Assets Value (NAV).The income earned through these
investments and the capital appreciations realized are shared by its unit holders in proportion 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 basket
of securities at a relatively low cost.

A Mutual Fund pools the money of people with certain investment goals. The money invested
in various securities depending on the objectives of the mutual fund scheme and the profits (or
loss) are shared among investors in proportion to their investment. Investments in securities are
spread across a wide cross-section of industries and sectors. 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 investment. 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.

Mutual funds can be invested in many different kinds of securities. The most common are cash,
stock, and bonds, but there are hundreds of sub-categories. Stock funds invest primarily in the
shares of a particular industry, such as technology or utilities. These are known as sector funds.
Bond funds can vary according to risk (e.g., high-yield or junk bonds, investment-grade
corporate bonds), type of issuers (e.g., government agencies, corporations, or municipalities), or
maturity of the bonds (short- or long-term). Both stock and bond funds can invest in primarily
U.S. securities (domestic funds), both U.S. and foreign securities (global funds), or primarily
foreign securities (international funds). Most mutual funds' investment portfolios are
continually adjusted under the supervision of a professional manager, who forecasts the
future performance of investments appropriate for the fund and chooses those which he or she
believes will most closely match the fund's stated investment objective. A mutual fund is
administered through a parent management company, which may hire or fire fund managers.
Mutual funds are liable to a special set of regulatory, accounting, and tax rules. Unlike most
other types of business entities, they are not taxed on their income as long as they distribute
substantially all of it to their shareholders. Also, the type of income they earn is often
unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free
municipal bond income are also tax-free to the shareholder. Taxable distributions can be either
ordinary income or capital gains, depending on how the fund earned those distributions.

1.1 The Concept of Mutual Fund:

Investors have a basic choice, they can invest directly in individual securities, or they can invest
indirectly through a financial intermediary. Financial intermediaries gather savings from
investors and invest these monies in portfolio of financial assets.

A mutual fund is a type of financial intermediary that pools the funds of investors who seek the
same general investment objectives and invests them in a number of different types of financial
claims (e.g. equity shares, bonds, money market instruments). These pooled funds provide
thousands of investors with proportional ownership of diversified portfolios managed by
professional investment managers. The term mutual is used in the sense that all its returns,
minus expenses, are shared by the funds unit holders.

1.2 Definition of Mutual Fund:

An investment vehicle that is made up of a pool of funds collected from many investors for the
purpose of investing in securities such as stocks, bonds, money market instruments and similar
assets. Mutual funds are operated by money managers, who invest the fund's capital and attempt
to produce capital gains and income for the fund's investors. A mutual fund's portfolio is
structured and maintained to match the investment objectives stated in its prospectus.

A mutual fund is a company that brings together money from many people and invests it in
stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund
owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of
these holdings.
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. This could range from shares to
debenture to money market instruments. Its unit holders in proportion to the number of units
owned by them (pro rate) share the income earned through this investment and capital
appreciation realized by the scheme. Thus a mutual fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally managed
portfolio at a relatively low cost. Anybody with an invisible 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 model financial scenario.
Market for equity shares, bonds, and other fixed income instruments, real estate, derivatives and
other assets have become mature and information driven. Price changes in this asset are driven
by global events occurring in faraway places. A typical individual is unlikely to have the
knowledge, skills, inclination and time to keep track of event, understand their implications and
act speedily. An individual also find it difficult to keep track of ownership of his asset,
investment, brokerage dues and bank transaction 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 a full time basis. The large pool of
money collected in the fund allows it to hire such staff at a very low cost to each investor. In
effect, the mutual fund vehicle exploits economies of scale in all the three areas namely
research, investment and transaction processing. While the concept of individual coming
together to invest money collectively is not new, the mutual fund in its present form of 20 th
century phenomenon. In fact, the mutual fund gained popularity only after the Second World
War. Globally, there are thousands of firm offering tens of thousands of mutual funds with
different investment objectives. Today, mutual funds collectively manage almost as much as or
money as compared to banks.
A draft order 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 cost involved in the
process and the board rules for entry into and exit from the fund and other areas of operations. In
India, as in most countries, these sponsors need approval from the regulator, SEBI (Securities
Exchange Board of India) in our case. SEB1 looks at the track record of the sponsors 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 another entity to be the custodian of the asset of the fund and
perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.
In the Indian context, the sponsors promote the Asset Management Company also, in
which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset
Management Company (AMC). E.g. Birla Global Finance is the of the Birla Sun Life Asset
Management Company ltd, which has floated different mutual fund scheme.
Objectives of Mutual Fund:
1 To provide an opportunity for lower income group to acquire property without much
difficulty in the form of share To cater mainly to the needs of individual investor whose means
are small
1 To manage investor's portfolio in a manner that provides regular income, growth safety,
liquidity and diversification
Mutual fund scheme may be classified on the basis of its structure its investment
1. By Structure

Open-ended Funds
An open-end Fund is one that is available for subscription all through the year. These do not
have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV)
related prices. The key feature of open-end scheme is liquidity.
Closed-ended Funds
A closed end fund has a stipulated maturity period, which generally ranges from 3 to 15 years.
The fund is open for subscription only during a specified period. Investors can invest in the
scheme at the time of initial public issue and there after they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an exit route to
investors, some close ended funds give an option of selling back the units of 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. Salient differences between the closed end and
open-end schemes
1 The subscription to closed end scheme is kept open only for a limited period (usually one
month to three months), whereas open-end scheme accepts funds from investors by offering
its units or shares on a continuing basis
2 A close end scheme does not allow investors to with draw money as & when they like, where
as open end scheme permits the investors to withdraw funds on a continuing basis.
3 A close end scheme has a fixed maturity period (usually 5-15 years) where as open end
scheme has no maturity period.
4 The close end schemes are listed on the secondary market, where as the open end scheme are
ordinarily not listed.
Interval Funds
Interval funds combine the features of open-end scheme and close-end scheme. They are open
for the sale or redemption during pre-determined intervals at NAV related prices.
2. By Investment Objective
Growth Funds
The aim of growth fund is to provide capital appreciation over the medium to long term. Such
schemes normally invest a majority of their corps in equities. It has been proven that returns
from stocks, have out performed most other kind of investments held over the long term.
Growth schemes are ideal for investor having a long term out look seeking growth over a period
of time.

Income Funds
The aim of income fund is to provide regular and steady income to the investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures and government
securities. Income funds are ideal for capital stability and regular income.
Balanced Funds
The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earnings and invest both in equities and fixed income
securities in proportion indicated in their offer documents. In a risking stock market, the NAV of
these schemes may not normally keep pace, or fall equally when the markets falls. These are
ideal for investors looking for a combination of income and moderate growth.
Money Market Funds
The main aim of money market funds is to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer short-term instruments such as
treasury bills, certificate of deposit, and commercial paper and inter bank call money. Returns on
these schemes may fluctuate depending upon the interest rates in the market. These are ideal for
corporate and individual investors as a means to park their surplus funds for short period.

Load Funds
A load fund is one that charges a commission for entry or exit. That is. each time you buy or sell
a unit in the fund, commission will be payable. Typically entry and exit loads ranges from 1% to
2%. It could be worth paying the load, if the fund has a good performance history.
No-load Funds
A no load fund is the one that does not charges commission for entry or exit. That is, no
commission is payable on purchase or sale of units in the fund. The advantage of the fund is that
the entire corpus I put to work.

3. Other Schemes
Tax Saving Schemes These schemes offer tax rebates to the investors under specific provisions
of the Indian Income Tax Act as the government offers tax incentives in specified avenues.
Investment made in Equity Linked Savings Schemes (ELSS) and pension schemes are allowed a
deductions u/s 88 of the Income Tax Act, 1961. The act also provides opportunities to investors
to save capital gains u/s 54EA and 54EB by investing in Mutual Funds provides the capital has
been sold prior to April 1st 2000 and the amount is invested before September-30-2000.
Special schemes
1 Industry Specific Schemes
2 Industry specific schemes invest only in the industries specified in the offer document.
The investment of these funds is limited to specific industries like InfoTech. FMCG and
Pharmaceuticals etc.
3 Index Schemes
4 Index funds attempt to replicate the performance of a particular index such as the
5 Sectoral Schemes
Sectoral funds are those, which invest exclusively in a specified industry or a group of industry
or various segments such as "A'' Group shares or initial public offering.


The cumulative mobilization of resources by the Mutual Funds indicates an over-al increase
from Rs. 4,563.68 crore in 1986-87 (when only UTI operated) to Rs.81, 026, 52 crore in (1995-
The year -wise mobilization of resource up to march 1995 by Indian Mutual Fund indicates in
more less positive trend, except in the year 1993-94 and 995-96 when, as earlier noted, yearly
mobilization declined by 3.1% and 51.2% respectively.
The resource mobilized by Mutual Fund under different scheme. It is seen that more popular
scheme in India are the income and income -cum -growth schemes.

While the 62 income schemes (31.47% of the total mobilized 34.115 of the funds (of the total of
Rs. 81,026.52 crore), the 27 income -cum -growth scheme (13.7%) gained 40.79% of the total
funds. Although the growth schemes enter percent of the total funds.
Although the growth scheme entered the market relatively later, they made good progress. Up to
March 1996, 55 (25.92%) growth scheme had mobilized 18.41% of the total Funds. The tax
saving schemes, ELSS*(25.38) could only managed 6.43% of the total funds due to the
maximum limits (Rs. 10000) which is entitle for the tax benefit.
Resource mobilization under various schemes (up to 31 March 1996)
Item Income Growth Income Tax Saving Venture Total
Scheme Scheme Growth Scheme Capital

1 2 3 scheme
4 5 Scheme
6 7

No. of Scheme 62 55 27 50 3 197

Percentage of 31.47 27.92 13.71 25.38 1.52 . 100.00
Resources 27,640. 14,919.11 33,046.21 5,209.08 212.00 81,026.52
Mobilized 12
Percentage of 34.11 18.41 40.79 6.43 0.26 100


The end of millennium marks 36 years of existence of mutual funds in this country. The ride
through these 36 years is not been smooth. Investor opinion is still divided. While some are for
mutual funds and some are against it.
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 the period marked by great political and economic
uncertainty in India. With a war on borders and economic turmoil that depressed the financial
market, entrepreneurs were hesitant to enter the capital market. The already existing companies
found it difficult to raise fresh capital, as
investors did not respond adequately to new issues. Earnest efforts were required to canalize
savings of the community to productive uses in order to speed up the process of industrial
growth. The then finance minister, T.T. Krishnamachari set up the idea of unit trust that would
be "open to any person or institution to purchase the units offered by the trust. However, this
institution as we see, it is indented to cater to the needs of the individual investors, and even
among them as far as possible, to those whose means are small." His ideas took the form of Unit
Trust Of India, an intermediary that would help to full fill the twin objective of mobilizing retail
savings and investing those savings in the capital market and passing the benefits so accrued to
the small investors.
UTI commenced its operation from July 1964 "with a view to encouraging the savings and
investment and participation in the income, profits and gains accruing to the
corporation from the acquisition, holding, management and disposal of securities" Different
provisions of the UTI act laid down the structure of management, scope of business, powers and
function of the Trust as well as accounting, disclosures and regulatory requirement for the Trust.
One thing is certain- the fund industry is here to stay. The industry was one entity show till 1968
when the UTI monopoly was broken when SEBI and Canbank mutual fund entered the arena.
This was followed by the entry of others like BOI, LIC, GIC, etc. sponsored by public sector
banks. Starting with an asset base of Rs0.25bn in 1964 the industry has grown at a compounded
average growth rate of 26.34% to its current size of Rs1130bn.

The period 1986-1993 can be termed as the period of public sector mutual funds (PMFs).
From one player in 1985 the number increased to 8 in 1993. The party did not last long. When
the private sector made its debut in 1993-94, the stock market was booming.
The opening up of Asset Management Business to the private sector in 1993 saw international
players like Morgan Stanley, Jardine Fleming, JP Morgan, George Sors and Capital International
along with the host of domestic players joins the party. But for the equity funds, the period of
1994-96 was one of the worst in the history of Indian Mutual Funds.
1999-2000 Year of Mutual Fund
Mutual Funds have been around for a long period of time, to be precise for 36 years but the year
1999 saw immense future potential and developments in this sector. This year signaled the year
of resurgence of mutual funds and regaining of investors confidence in these mutual funds.
This time around all the participants are involved in the revival of the funds the mutual AMC's ,
the unit holders, the other related parties. However, the sole factor that gave lift to the revival of
the funds was the Union Budget. The budget brought about large changes in one stroke. An
insight of the Union Budget on mutual funds taxation benefits is provided later.
It provided center stage to the mutual funds, made them more attractive and provides
acceptability among the investors. The Union Budget exempted mutual funds dividend
given out by equity-oriented schemes from tax, both at the hands of the investors as well as the
mutual fund. No longer were the mutual funds interested in selling the concept of mutual funds
they wanted to take business, which would mean to increase asset base, and to get asset base and
investor base they had to be fully armed with a whole lot of scheme for every investor. So new
schemes for new IPO's were inevitable. The quest to attract investors extended beyond just new
schemes. The funds started to regulate themselves and were all out on winning the trust and
confidence of the investors under the aegis of the Association of Mutual Funds of India (AMFI).
One can say that the industry is moving from infancy to adolescence, the industry is maturing
and the investor and funds are frankly and openly discussing difficulties opportunities and


The Indian Mutual Fund industry is dominated by the Unit Trust Of India, which has a total
corpus of Rs700bn, collected from more than 20 million investors. The UTI has many
funds/schemes in all categories i.e., equity, balanced, income etc with some being open ended
and some being closed ended. The Unit Scheme 1964 commonly referred to as US 64, which is
a balanced fund, is the biggest scheme with a corpus of about Rs200bn. UTI was floated by
financial intuitions and is governed by a special act of parliament. Most of its investors believe
that the UTI is government owned and controlled, which, while legally incorrect, is true for all
practical purpose.
The second largest category of mutual funds is the ones floated by nationalized banks.
Canbank Asset Management floated by Canara bank and SBI Funds Management floated by the
State Bank of India are the largest of these. GIC AMC floated by General Insurance Corporation
and Jeevan Bima Sahayog AMC floated by L1C are some of the other prominent ones. The
aggregate corpus of funds managed by this category of AMC's is about Rsl5.

Some of the AMCs operating currently are:

Name of the AMC Nature of ownership
IDB1 Asset Management Company Limited Institution
Kotak Mahindra Asset Management Company Limited Private Indian
Reliance Capital Asset Management Company Limited Private Indian
State Bank of India Funds Management Limited Bank

Recent Trends in Mutual Fund Industry

The most important trend in the mutual fund industry is the aggressive expansion of the foreign
owned mutual fund companies and the decline of the companies floated by the nationalized
banks and smaller private sector players.
Many nationalized banks got into the mutual fund business in the early nineties and got off to a
good start due to the stock market boom prevailing then. Thesebanks did not really understand
the mutual fund business and they viewed it as another kind of banking activity. Few hired
specialized staff and generally choose to transfer staff from the parent organizations.
The performance of most of the schemes floated by these funds was not good. Some schemes
had offered guaranteed returns and their parent organizations had to bail out
these AMCs by paying large amount of money as the difference between guaranteed and actual
returns. The service levels were also very bad. Most of these AMCs have not had been able to
retain their staff float new schemes etc. and it is doubtful whether, barring a few exceptions,
they have serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by the private sector Indian companies was also
very similar. They quickly realized that the AMCs business is a business, which makes money in
the long term and requires deep-pocketed support in the intermediate years. Some have sold out
to the foreign owned companies, some have merged with others and there is general restructuring
going on.
The foreign owned companies have deep pockets and have come in here with expectations of
long haul. They can be credited with introducing many new practices such as new product
innovation, sharp in service standards and disclosure, usage of technology, broker education and
support etc. in fact, they have forced the industry to upgrade itself and the service levels of the
organizations like UTI have improved dramatically in the last few years in response to the
competition provided by these.
The Association of Mutual Funds in India (AMFI):
The AMFI was formed in August 1995 by the Indian Mutual Funds with a view of promoting the
interest of Mutual funds and their unit holders, increasing public awareness of mutual funds in
India and serving the investors interest by defining and maintaining high ethical and professional
standards in the mutual funds industry. To achieve this goal, AMFI has undertaken investor's
awareness programs and is also working to bring out a compressive code of ethics for mutual
funds. By the end of March 1996, 26 mutual funds were members of AMFI.


Professional Management
Mutual Funds provide the service of experienced and skilled professionals, backs by a dedicated
investment research team that analyses the performance and prospects of companies and selects
suitable investments to achieve the objectives of the scheme.
Mutual Funds invest in a number of companies across a broad cross-section of industries and
sectors. This diversification reduces the risk because seldom do all stocks decline at the same
time and in the same proportion. You achieve this diversification through a Mutual Fund with far
less money than you can do on your own.
Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad
deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save
your time and make investing easy and convenient.
Rent Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they
invest in a diversified basket of selected securities.

Low Costs
In open-end schemes, the investor gets the money back promptly at net asset value
related prices from the Mutual Fund. In close-end schemes, the units can be sold on a stock
exchange at the prevailing market price or the investor can avail of the facility of direct
repurchase at NAV related prices by the Mutual Fund.
You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and
the fund manager's investment strategy and outlook.
Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs and
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund
because of its large corpus allows even a small investor to take the benefit of its investment
Choice of Schemes
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI

Mutual fund in India invests in three broad kinds of instruments as follows:
1. Equity shares and equity-related instruments (convertible debentures and
2. Debt instruments (non-convertible debentures, public sector bonds and
government securities).
3. Money market instruments (certificate of deposits, treasury bills, commercial bills,
commercial papers and call money).

Risk Factors
1 Mutual fund security investments are subject to market risk and there is no assurance or
guarantee that the objective of the scheme will be achieved.
2 As with any security investment, the NAV of the units issued under he scheme can go up
and down depending on the factors effecting the capital markets.

3 Pas performance of the sponsors, AMC/ fund does not indicate the future performance of
the fund.
4 Investors in the scheme are not being offered any guarantee returns
5 Changes in government policies in general or change in tax benefits applicable to mutual
fund may impact the returns to the investors in the scheme.
How to choose a fund?
It is very important to carefully analyze a mutual fund before one chooses the right mutual fund
for himself. The following are the set of features to be looked into mutual fund:
1 Fund manager track record.
2 Portfolio quality
3 Number of retail investors and average holding size
4 Size of the fund
5 Weighted average maturity
6 Sudden change in the portfolio or NAV
7 Dividend frequency.

All investment whether in shares, debenture or deposits, involves some amount of risk. For
mutual fund investment, risk would include variability or period by period fluctuations in the
total return. The NAV of the growth funds, for instance, fluctuates in line with fluctuation of
shares held by them.
On the other hand, the Prices of the debt instruments fluctuate to a much lesser degree and
income or bond fund is relatively less likely to face the same volatility as growth funds. The
value of the scheme's investment may be affected by the factors affecting the capital markets
such as price and volume volatility in the stock market, interest rates, exchange rates, foreign
investment, changes in the government policy, political, economical, or other developments.
1. Market Risk:
At times the prices or yields of all securities in a particular market rise or fall due to broad
outside influences. When this happens, the stock pieces of both an outstanding, highly profitable
company and fledging corporation may be affected. This change in piece is due to "Market Risk"
2. Inflation Risk:
Sometimes referred to as "loss of purchasing power." whenever the rate of inflation exceeds the
earnings on your investment, you can run the risk that you actually be able to buy less, not more.

3. Credit Risk:
In short how stable is the company or entity to which you lend your money when you invest?
How certain are you that it will be able to pay out the interest that you are promised, or repay
your principal when the investment matures?
4. Interest Rate Risk:
Changing the interest rates affect both equities and bonds in many ways. Bond prices are
influenced by the movements in the interest rates in the financial system. Generally, when
interest rates rises, pieces of the securities fall and when interest rates fall, the prices increase.
Interest rates movement in the Indian debt markets can be volatile leading to the possibility of
large price movements up or down in the debt and money market securities and thereby to
possibly large movements in the NAV.
5. Investment Risk:
The sectoral fund schemes, investments will be predominantly in equities of select companies in
the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance
of such companies and may be more volatile than a more diversified portfolio of equities.
6. Liquidity Risk:
Thinly traded securities carry the danger of not being easily saleable at or near their real values.
The fund manager may therefore be unable to quickly sell an illiquid bond and this might affect
the price of the fund unfavorably. Liquidity risk is characteristic of the Indian fixed income
7. Changes in the Government Policy:
Changes in government Policy especially in regard to the ax benefits may impact he business
prospects of the companies leading to an impact on the investments made by the fund.
Listing, Trading and Transfers of Mutual Funds
The unit or shares of close-end schemes are required, to be listed on the stock exchange after the
prescribed statutory period often weeks (for the tax planning schemes, however, this period is
three years).
The listing agreement with the stock exchange, inter alia, enjoys the mutual fund to: -

1 Provide facilities for transfer, registration, subdivision and consolidation of shares free
of cost.
2 Notified the proposed changes in the general character and nature of its business.

Once a scheme is listed, its units or shares are traded like any other listed securities, and the
same transfer procedure applied.
It is just that mutual funds are going to change the way banks do business in the future.
Banks v/s Mutual Funds
Returns Low Better
Administrative Expenses High Low
Risk Low Moderate
Investment Options Less More
Network High Penetration Low but improving
Liquidity At a Cost Better
Quality of Assets Not Transparent Transparent
Interest Calculation Minimum balance between 1 01 Every Day
and 30th of every month
Guarantee Maximum Rs.l Lakh on deposit None


The Net Asset Value of the fund is the cumulative market value of the asset fund net of its
liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the
fund, this is the amount that the shareholders would collectively own. This gives rise to the
concept of net asset value per unit, which is the value, represented by the ownership of one unit
in the fund. It is calculated simply by dividing the net asset value of the fund by the number of
units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit".
We also abide by the same convention.
Calculation of NAV
The most important part of the calculation is the valuation of the assets owned by the funds.
Once it is calculated, the NAV is simply the net value of the asset divided by the number of units
outstanding. The detailed methodology for the calculation of the asset value is given below.

Asset value is equal to:

Sum of market value of shares/debentures
+ Liquid assets/cash held, if any
+ Dividend /interest accrued Amount due on unpaid assets Expenses accrued but not paid
Details on the above items: -
For liquid shares/debentures, valuation is done on the basis of the last or Closing market price on
the principal exchange where the security is traded. For illiquid and unlisted and / or thinly
traded shares/debentures, the value has to be estimated. For shares, this could be the book value
per share or an estimated market price if suitable benchmarks are available. For debentures and
bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting for
illiquidity. The value of fixed interest bearing securities moves in a direction opposite to interest
rate changes Valuation of debentures and bonds is a big problem since most of them are unlisted
and thinly traded. This gives considerable leeway to the AMCs on valuation and some of the
AMCs are believed to take advantage of this and adopt flexible valuation polices depending on
the situation.
Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, with every
passing day, interest is said to be accrued, at the daily interest rate, which is calculated by
dividing the periodic interest payment with the number of days in each period. Thus, accrued
interest on a particular day is equal to the daily interest rate
multiplied by the number of days since the last interest payment date. Usually, dividends are
proposed at the time of the Annual General Meeting and become due on the record date.
There is a gap between the dates on which it becomes due and the actual payment date. In the
intermediate period, it is deemed to be "accrued' Expenses including management fees, custody
charges etc. is calculated on a daily basis.
2. NAV Concept
NAV refer to the Net Asset Value of mutual fund. It is the actual value of the investment made by
the mutual fund for each unit issued by it .It Changes almost on a daily basis if the market price
of individual securities in the portfolio fluctuates. It is computed by the formula given below: -
NAV = Asset - Liabilities
Number of Units Outstanding Alternatively,
NAV + [(Value of investment +Receivables Accrued Incomes + Other Current Assets)
(Liabilities =Accrued Expenses)]/Number of units Outstanding Simply stated, NAV represented
the fair value of a unit in a mutual Funds. Usually, the funds units at the time of application are
sold at a public offering price (POP).That difference between NAV and POP is the sales charges
recovered by the asset management company from the scheme to cover cost of raising funds on a
continuous basis.
The POP is generally calculated as follows POP -NAV/(l-Sales Charges)
The Data related top a mutual fund trust is as follows:
Scheme Name : ABC
Scheme Size : Rs.20 Lakhs
Face Value Of the Units : Rs. 10 Lakhs
Value of the investments : Rs. 10 Lakhs
Receivables : Rs.70. 000
Accrued Income : Rs.40, 000
Other Current Asset : Rs.2.9Lakhs
Liabilities : Rs.2.1 Lakhs
Accrued Expenses : Rs.40,000

Calculate NAV of the above Mutual Fund: -Solution:

NAV = [(Value of investment +Receivables Accrued Incomes + Other Current Assets)
(Liabilities =Accrued Expenses)]/Number of units Outstanding
NAV=[(10,00,000+70,000+40,000+2,90,000)- (2,10,0000+40,000)]/[|20,00,000/10]
NAV=RS. 5.75

Research Gap
The project's idea is to project Mutual Fund as a better avenue for investment on a long-
term or short-term basis. Mutual Fund is a productive package for a lay-investor with limited
finances, this project creates an awareness that the Mutual Fund is a worthy investment practice.
Mutual Fund is a globally proven instrument. Mutual Funds are "Unit Trust" as it is called in
some parts of the world has a long and successful history, of late Mutual Funds have become a
hot favorite of millions of people all over the world. The driving force of Mutual Funds is the
'safety of the principal' guaranteed, plus the added advantage of capital appreciation together
with the income earned in the form of interest or dividend. Mutual Funds offers an investor to
invest even a small amount of money, each Mutual Fund has a defined investment objective and
strategy. Mutual Funds schemes are managed by respective asset managed companies sponsored
by financial institutions, banks, private companies or international firms. A Mutual Fund is the
ideal investment vehicle for today's complex and modern financial scenario.

Research Aim:

The aim of this research is to empirically investigate the investors attitude toward mutual fund

Research Objective:

Objective 1: To study and analyze the impact of various demographic factors on investors
attitude towards mutual fund.

Objective 2: To study about the factors responsible for the selection of mutual funds as an
investment option.

Objective 3: To study the people in which age and income group prefer mutual funds over
other investment options

The main purpose of this study is to find out what is the attitude of investors towards mutual
fund as an investment option. To be able to fulfill the purpose of this research we find it
appropriate to test the perception of investors towards mutual fund. This led into generating the
following hypotheses to test accordingly:

Hypothesis 1:
The demographic factors like gender, income and level of education have significantly influence
the investors attitude towards mutual funds.

Hypothesis 2:
The individual investors having lack of knowledge about mutual fund and hence they are not
considering mutual fund as an investment option

Over the past few decades, much research has already been done over legal requirements of a
mutual fund, SEBI Norms and role of AMFI. The main reason for choosing this topic is based on
the fact that so far no study has been conducted in order to understand the attitude of Investors
towards mutual fund as an investment tool.

Academically, this research project will be helpful in understanding the perception and attitude
of Indian Investors towards mutual fund which may reveal some interesting insights and
directions for future research.

It is observed that the level of income also influences the investment decisions. As far as the
demographic factors are concerned, gender, income and level of education have significantly
influence the investors attitude towards mutual funds.

Later after reading and studying various literatures, I came to know about various problems
regarding mutual fund industry and its complex procedure. Additionally, we believe that
conducting this research project will enhance the valuable personal knowledge about the subject
and experience for future career applications.

Period of the study

The duration of the project is 45days

Data Source:
This report is based on primary as well as secondary data. The study aims at finding out the
attitude of the investors towards Mutual fund in Hyderabad and Secunderabad. This study was
based mainly on primary sources. The primary data was collected from the investors of mutual
funds with help of the questionnaire which are supplied among the investors of Hyderabad &
Secunderabad Cities. The secondary data were collected from the books, records and journals.
The essential data were collected with the help of questionnaire.

Duration of Study:
The study was carried out for a period of 45days only.

Sampling procedure:
By adopting convenience sampling, approximately 50 respondents were selected for this study.
The essential data were collected with the help of questionnaire. It was collected through filling
up the questionnaire prepared. The data has been analyzed by using Statistical tool.

Sample size:
The sample size of our project is limited to 50 people only.

Sample design:
Data has been presented with the help of bar graph, pie charts, line graphs etc.