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INTRODUCTION TO MUTUAL FUNDS

Meaning and features of Mutual Fund


Mutual funds are investment products available to investors through which they can invest in an asset class
of their choice such as equity, debt, gold or real estate. Investors who may not want to invest directly in
financial markets may instead get exposure to the same securities through a mutual fund. Similarly,
investors can diversify their portfolio holdings even with small amounts, by investing in gold and real estate
through mutual funds. Each product offered by a mutual fund is called a scheme or fund. A mutual fund may
offer multiple schemes or funds, each catering to a different investment need of the investor.

An investor may choose to invest through a mutual fund to be able to use the services of the fund manager
who will make the investment decisions relating to selection of securities, timing of investments, reviewing
and rebalancing the portfolio periodically and executing the operational decisions related to the portfolio.
These services are provided to the investor by charging a fee.

There are multiple entities involved in the activities of a mutual fund business. All these entities are
regulated by SEBI for their eligibility in terms of experience and financial soundness, range of
responsibilities and accountability. A mutual fund is set up by a sponsor, who is its promoter. Trustees are
appointed to take care of the interests of the investors in the various schemes launched by the mutual fund.
An asset management company (AMC) is appointed to manage the activities related to launching a scheme,
marketing it, collecting funds, investing the funds according to the scheme’s investment objectives and
enabling investor transactions. In this, they are assisted by other entities such as banks, registrars to an issue
and transfer agents, investor service centres (ISC), brokers or members of stock exchanges, custodians,
among others.

Concepts and Terms Related to Mutual Funds


Investment Objective:
An investor’s decision to invest in a mutual fund scheme should be determined by the suitability of the
scheme to their needs. A mutual fund scheme is defined by its investment objective. The investment
objective will state what the scheme intends to achieve. The asset class that the fund will invest in, the type
of securities that will be selected and the way the fund will be managed will depend upon the investment
objective. The features of the portfolio in terms of the level and type of returns and the risks involved in the
fund will also depend upon its investment objective.

Units:
Just as an investors investments in equity of a company is represented in number of shares, or investments in
debt is represented in number of bonds or debentures, each investor’s holding in a mutual fund is
represented in terms of units that is derived from the amount invested. Each unit represents one share of the
fund. For example, A &B invests in GTX Equity fund when the price of each unit isRs.10. A invests
Rs.5000 and B Rs.10000. The number of units allotted is calculated as amount invested/price per units
A: Rs.5000/Rs.10 = 500 units
B: Rs.10000/Rs.10= 1000 units
The units are first offered to the investors at the time the scheme is launched through a new fund offer
(NFO). Subsequently, depending upon the structure of the scheme, the fund may or may not issue fresh units
to investors.

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Net Assets:
The assets of a mutual fund scheme are the current value of the portfolio of securities held by it. There may
be some current assets such as cash and receivables. Together they form the total assets of the scheme. From
this, the fees and expenses related to managing the fund such as fund manager’s fees, charges paid to
constituents, regulatory expenses on advertisements and such are deducted to arrive at the net assets of the
scheme. This belongs to the investors in the fund who have been allotted units and no other entity has a
claim to it.
The Net assets of a scheme will go up whenever investors buy additional units in the scheme and bring in
funds, or when the value of the investments held in the portfolio goes up, or when the securities held in the
portfolio earns income such as dividends from shares or interest on bonds held. Similarly, the net assets of
the scheme will go down if investors take out their investments from the scheme by redeeming their units or
if the securities held in the portfolio fall in value or when expenses related to the scheme are accounted for.
The net assets of the scheme are therefore not a fixed value but keep changing with a change in any of the
above factors.

Net Asset Value (NAV):


The net asset per unit of a scheme is calculated as Net assets/Number of outstanding units of the scheme.
This is the Net asset value (NAV). The NAV of the scheme will change with every change in the Net Assets
of the scheme. All investor transactions are conducted at the current NAV of the scheme.
For example, NUM Equity Fund collects Rs. 100000 from investors and allots 10000 units. The funds are
invested in a portfolio of securities.
The value of a mutual fund investor’s investment is calculated using the NAV. If an investor has invested
1000 units in the scheme at Rs. 10, the value of the investment is Rs. 10000.
When the NAV goes up to Rs. 12, the value of the investment also goes up to Rs. 12000 and when the NAV
goes down to Rs. 11.11 the value of the investment comes down to Rs. 11110.
A redemption or additional investment will not directly affect the NAV since the transactions are conducted
at the NAV. In the above example, consider the impact if the investor buying 1000 units when the NAV is
Rs. 11.11 is allotted units at the face value of Rs. 10. The investor will bring in Rs. 10000 (100* Rs. 10).
The net assets will go up by this Rs. 10000 to Rs. 110000.
The number of units outstanding will go up by 1000 to 10000 units. The NAV post this transaction will be
Rs.11. The NAV of the scheme has come down because the units were allotted at a price different from the
NAV and will have an impact on all the investors in the scheme. The NAV of a scheme is calculated every
business day so that investors can value their portfolio holdings and conduct transactions on this basis.

ADVANTAGES OF MUTUAL FUND

 Portfolio Diversification
 Professional management
 Reduction / Diversification of Risk
 Liquidity
 Flexibility & Convenience
 Reduction in Transaction cost
 Safety of regulated environment
 Choice of schemes

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 Transparency

DISADVANTAGE OF MUTUAL FUND

 No control over Cost in the Hands of an Investor


 No tailor-made Portfolios
 Managing a Portfolio Funds
 Difficulty in selecting a Suitable Fund Scheme

CATEGORIES OF MUTUAL FUND:

INVESTMENT STRATEGIES

1. Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of
a month. Payment is made through postdated cheques or direct debit facilities. The investor gets fewer
units when the NAV is high and more units when the NAV is low. This is called as the benefit of
Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt oriented fund and give
instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund.
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3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he
can withdraw a fixed amount each month.

RISK-RETURN HIERARCHY OF EQUITY FUNDS

RISK-RETURN HIERARCHY OF DEBT FUNDS:

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OBJECTIVES OF THE STUDY

1. To understand customer’s preference of mutual funds in terms of: AMC selection, types
of mutual funds.
2. To gain insight into the most preferred channel of investment.
3. To understand the reasons for the selection of mutual funds.

SCOPE OF THE STUDY

A big boom has been witnessed in Mutual Fund Industry in recent times. A large number of
new players have entered the market and trying to gain market share in this rapidly improving market.

The study will help to know:

1. The preferences of the customers towards mutual fund investment,


2. Their expectations towards real rate of return,
3. The impact of inflation on real returns on any investment,
4. Mode of investment, and understanding of different alternative channels for investment.

RESEARCH METHODOLOGY

This report is based on primary as well secondary data, however primary data collection was given
more importance since it is overhearing factor in attitude studies. One of the most important users of
research methodology is that it helps in identifying the problem, collecting, analyzing the required
information data and providing an alternative solution to the problem .It also helps in collecting the
vital information that is required by the top management to assist them for the better decision making
both day to day decision and critical ones.

DATA SOURCES:

Research is based both on primary and secondary data. The primary data has been collected by
interacting with various people and the secondary data is collected by various online website and
journals.

SAMPLING:

Sampling procedure: The sample was selected irrespective of them being investors or not or availing
the services or not. It was also collected through personal visits to persons, by formal talks and through
filling up the questionnaire prepared. The data has been analyzed by using mathematical/Statistical
tool.

Sample size: The sample size of the fund is limited to 100 people only. Out of which only 62 people
had invested in mutual funds and 38 people didn’t invest in mutual funds.

Sample design: Data has been presented with the help of pie charts etc.

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LIMITATIONS OF THE STUDY:

1) Some of the respondents were not forthcoming with their personal references.
2) Accuracy of responses might not be there for all responses.
3) Some respondents were reluctant to divulge personal information which can affect the validity
of all responses.
4) The sample size is limited to 100 people and the research is confined to certain parts of
Visakhapatnam.

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MUTUAL FUND INDUSTRY IN INDIA
The first introduction of a mutual fund in India occurred in 1963, when the Government of India
launched Unit Trust of India (UTI). UTI enjoyed a monopoly in the Indian mutual fund market until
1987, when a host of other government-controlled Indian financial companies established their own
funds, including State Bank of India, Canara Bank, and Punjab National Bank. This market was made
open to private players in 1993, as a result of the historic constitutional amendments brought forward
by the then Congress-led government under the existing regime of Liberalization, Privatization and
Globalization (LPG). The first private sector fund to operate in India was Kothari Pioneer, which later
merged with Franklin Templeton. In 1996, SEBI, the regulator of mutual funds in India, formulated
the Mutual Fund Regulation which is a comprehensive regulatory framework.

Mutual funds are an under tapped market in India


Deposit being available in the market less than 10% of Indian households have invested in mutual funds. A
recent report on Mutual Fund Investments in India published by research and analytics firm, Boston
Analytics, suggests investors are holding back from putting their money into mutual funds due to their
perceived high risk and a lack of information on how mutual funds work. There are 46 Mutual Funds as of
June 2013.
The primary reason for not investing appears to be correlated with city size. Among respondents with a high
savings rate, close to 40% of those who live in metros and Tier I cities considered such investments to be
very risky, whereas 33% of those in Tier II cities said they did not know how or where to invest in such
assets.
Distribution
Mutual fund investments are sourced both from institutions (companies) and individuals. Since January
2013, institutional investors have moved to investing directly with the mutual funds since doing so saves on
the expense ratio incurred. Individual investors are, however, served mostly by Investment advisor and
banks. Since 2009, online platforms for investing in Mutual funds have also evolved.
Servicing
Larger Indian Mutual Fund Industry has benefited from outsourcing the activity of servicing their investors
to two of the leading Registrar and Transfer Agents (RTAs) in India namely CAMS and Karvy. While
CAMS commands close to 65% of the Assets servicing, rest is with Karvy. Franklin Templeton Mutual
Fund services its investors through its own in-house RTA set up.
Both the RTAs have vibrant network of their local offices which enable the Mutual Fund Investors to
transact locally. These touch points (or) Customer Service Centers (CSCs), provide a wide range of
servicing including, financial transaction acceptance & processing, non financial changes, KYC fulfillment
formalities, nomination registration, transmission of units apart from providing statement of accounts etc.
Average assets under management
Assets under management (AUM) is a financial term denoting the market value of all the funds being
managed by a financial institution (a mutual fund, hedge fund, private equity firm, venture capital firm, or
brokerage house) on behalf of its clients, investors, partners, depositors, etc.

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The average assets under management of all mutual funds in India for the quarter Dec 2015 to Mar 2016 (in
₹ Lakh) is given below:

Sr Total QAAUM AUM Prev QAAUM (₹ Inc/Dec (₹


Mutual Fund Name Percentage
No Schemes (₹ Lakh.) Lakh.) Lakh.)

1 Axis Asset Management Company 263 3776454.37 3456348.88 320105 9%

Baroda Pioneer Asset Management


2 111 965630.33 925542.12 40132 4%
Company

Birla Sun Life Asset Management


3 806 13678510.7 13684493.34 5312 0%
Company

BNP Paribas Asset Management


4 114 509706.79 500795.21 9209 2%
Company

BOI AXA Asset Management


5 76 238501.41 242767.91 2887 1%
Company

Canara Robeco Asset Management


6 142 804326.86 751779.86 52627 7%
Company

Deutsche Asset Management


7 8 27698 17194 10504 61%
Company

DHFL Pramerica Asset


8 491 2598683.24 216345 -80979 -37%
Management Company

DSP BlackRock Asset Management


9 398 4015131.25 3918267.17 96865 2%
Company

Edelweiss Asset Management


10 70 167774.29 163236.28 4538 3%
Company

Escorts Asset Management


11 60 28559.18 29222.27 -663 -2%
Company

Franklin Templeton Asset


12 200 6784076.49 7172216.54 -384257 -5%
Management Company

Goldman Sachs Asset Management


13 18 610139.99 685179.35 -75039 -11%
Company

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Sr Total QAAUM AUM Prev QAAUM (₹ Inc/Dec (₹
Mutual Fund Name Percentage
No Schemes (₹ Lakh.) Lakh.) Lakh.)

HDFC Asset Management


14 1173 17608456.44 17866622.24 -256390 -1%
Company

HSBC Global Asset Management


15 155 790382.19 837762.82 -47151 -6%
Company

ICICI Prudential Asset


16 1529 17596397.6 17223699 390751 2%
Management Company

17 IDBI Asset Management Company 92 689266.37 756428.17 -67162 -9%

18 IDFC Asset Management Company 453 5228379.46 5486421.83 -249600 -5%

19 IIFCL Asset Management Asset 1 35797.56 34293.89 1504 4%

20 IIFL Asset Management Company 18 48543.76 42203.84 6340 15%

IL & FS Infra Asset Management


21 12 92296.34 90029.5 2267 3%
Company

Indiabulls Asset Management


22 56 528955.04 491675.45 37279 8%
Company

23 JM Financial Asset Management 179 1616090.42 1586776.74 29313 2%

J.P. Morgan Asset Management


24 141 641451.9 750109.43 -107986 -14%
Company

Kotak Mahindra Asset Management


25 431 5873108.27 5513383.02 362464 7%
Company

26 L&T Asset Management Company 246 2594480.1 2505850.82 89990 4%

LIC Nomura Mutual Fund Asset


27 176 1315562.4 1238408.04 92942 8%
Management Company

28 Mirae Asset Management Company 55 313272.14 280239.04 33101 12%

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Sr Total QAAUM AUM Prev QAAUM (₹ Inc/Dec (₹
Mutual Fund Name Percentage
No Schemes (₹ Lakh.) Lakh.) Lakh.)

Motilal Oswal Asset Management


29 31 468921.13 455222.64 14103 3%
Company

Peerless Asset Management


30 57 98524.1 102441.7 -3917 -4%
Company

PPFAS Asset Management


31 1 61357.1 62931.88 -1575 -3%
Company

Principal Asset Management


32 123 528106.02 587875.66 -59770 -10%
Company

Quantum Asset Management


33 15 66093.04 65531.63 561 1%
Company

Reliance Asset Management


34 1015 15936949.34 15787817.36 152561 1%
Company

Religare Global Asset Management


35 267 1959617.91 1988459.31 -28622 -1%
Company

Sahara Asset Management


36 68 9929.16 11002.32 -758 -7%
Company

37 SBI Asset Management Company 652 10732737.36 10058453.69 672760 7%

Shriram Asset Management


38 4 3716.98 3711.53 5 0%
Company

Sundaram Asset Management


39 479 2366370.94 2187696.57 185302 8%
Company

40 Tata Asset Management Company 324 3186223.17 3155590.09 26752 1%

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Sr Total QAAUM AUM Prev QAAUM (₹ Inc/Dec (₹
Mutual Fund Name Percentage
No Schemes (₹ Lakh.) Lakh.) Lakh.)

Taurus Asset Management


41 65 394858.04 350334.19 44524 13%
Company

Union KBC Asset Management


42 60 290228.21 273213.25 17015 6%
Compay

43 UTI Asset Management Company 1220 10630921.82 10612903.52 16124 0%

Gross 11856 135912187.2 132170477.1

RECENT DEVELOPMENT IN MUTUAL FUNDS INDUSTRY:

1. Average Assets Under Management (AAUM) of Indian Mutual Fund Industry for the month of
February 2017 has crossed a landmark of ₹ 18 lakh crore and stood at ₹ 18.48 lakh crore.
Assets Under Management (AUM) as on February 28, 2017 stood at ₹17.89 lakh crore.

2. The AUM of the Indian MF Industry has grown from ₹ 3.26 trillion as on 31st March 2007 to ₹
17.89 trillion as on 28th February, 2017, a five-fold increase in a span of less than 10 years.

3. The MF Industry’s AUM has more doubled in the last 4 years from ₹ 5.87 trillion as on 31st
March, 2012 to ₹ 12.33 trillion as on 31st March, 2016.

4. The Industry’s AUM had crossed the milestone of ₹10 Trillion (₹10 Lakh Crore) for the first
time in May 2014 and in a short span of two years and nine months, the AUM size has crossed
₹17.89 lakh crore last month.

5. The total number of accounts (or folios as per mutual fund parlance) as on February 28, 2017
stood at 5.44 crore (54.4 million), while the number of folios under Equity, ELSS and
Balanced schemes, wherein the maximum investment is from retail segment stood at 4.35 crore
(43.5 million).

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6. The contribution of the country’s smaller towns — known as beyond-15 cities (B15) — to
mutual funds’ asset base surged around 44 per cent to over Rs 3 lakh crore due to investor-
friendly initiatives by Sebi.

7. B15 cities are those which are beyond these top 15 cities — New Delhi (including NCR)
Mumbai (including Thane & Navi Mumbai), Kolkata, Chennai, Bangalore, Ahmedabad,
Baroda, Chandigarh, Hyderabad, Jaipur, Kanpur, Lucknow, Panjim, Pune and Surat.

8. In 41-member MF industry, 38 players witnessed an increase in AUM, while two saw a


decline. Besides, Mahindra MF was the new entrant, while JP Morgan MF exited the club.

9. ICICI Prudential MF is the top fund house with an asset base of Rs 2,42,961 crore (excluding
fund of funds) followed by HDFC MF (Rs 2,37,177 crore) Reliance MF (Rs 2,10,890 crore),
Birla Sun Life MF (Rs 1,95,049 crore) and SBI MF (Rs 1,57,025 crore). These top 5 players
account for more than 50 per cent of the Rs 18.3 lakh crore AUM.

10. Industry experts attributed growing participation from retail investors, especially from small
towns, huge inflows into equity schemes and several measures taken by markets regulator Sebi
as well as campaigns by asset management companies (AMCs).

RECENT MAJOR ACQUISITION IN THE MUTUAL FUND INDUSTRY:

S. No Seller Acquired By Year


1 Alliance Capital MF Birla Sunlife 2005
2 Standard Chartered IDFC 2008
3 AIG Global Investment Group MF PineBridge MF 2011
4 Benchmark Mutual Fund Goldman Sachs 2011
5 Fidelity L&T Finance 2012
6 Morgan Stanley's HDFC 2013
7 PineBridge MF Kotak MF 2014
8 ING Mutual Fund Birla Sunlife 2014
9 Daiwa AMC SBI MF 2013
10 Goldman Sachs Reliance MF 2015
11 Deutsche Pramerica 2015
12 JP Morgan Edelweiss 2016

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HISTORY OF MUTUAL FUNDS IN INDIA
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India (UTI) at the
initiative of the Reserve Bank of India (RBI) and the Government of India. The objective then was to attract
small investors and introduce them to market investments. Since then, the history of mutual funds in India
can be broadly divided into six distinct phases.

Phase I (1964-87): Growth Of UTI:

In 1963, UTI was established by an Act of Parliament. As it was the only entity offering mutual funds in
India, it had a monopoly. Operationally, UTI was set up by the Reserve Bank of India (RBI), but was later
delinked from the RBI. The first scheme, and for long one of the largest launched by UTI, was Unit Scheme
1964.

Later in the 1970s and 80s, UTI started innovating and offering different schemes to suit the needs of
different classes of investors. Unit Linked Insurance Plan (ULIP) was launched in 1971. The first Indian
offshore fund, India Fund was launched in August 1986. In absolute terms, the investible funds corpus of
UTI was about Rs 600 crores in 1984. By 1987-88, the assets under management (AUM) of UTI had grown
10 times to Rs 6,700 crores.

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

The year 1987 marked the entry of other public sector mutual funds. With the opening up of the economy,
many public sector banks and institutions were allowed to establish mutual funds. The State Bank of India
established the first non-UTI Mutual Fund, SBI Mutual Fund in November 1987. This was followed by
Canbank Mutual Fund,LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC
Mutual Fund and PNB Mutual Fund. From 1987-88 to 1992-93, the AUM increased from Rs 6,700 crores to
Rs 47,004 crores, nearly seven times. During this period, investors showed a marked interest in mutual
funds, allocating a larger part of their savings to investments in the funds.

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

A new era in the mutual fund industry began in 1993 with the permission granted for the entry of private
sector funds. This gave the Indian investors a broader choice of 'fund families' and increasing competition to
the existing public sector funds. Quite significantly foreign fund management companies were also allowed
to operate mutual funds, most of them coming into India through their joint ventures with Indian promoters.

The private funds have brought in with them latest product innovations, investment management techniques
and investor-servicing technologies. During the year 1993-94, five private sector fund houses launched their
schemes followed by six others in 1994-95.

Phase IV (1996-99): Growth And SEBI Regulation:

Since 1996, the mutual fund industry scaled newer heights in terms of mobilization of funds and number of
players. Deregulation and liberalization of the Indian economy had introduced competition and provided
impetus to the growth of the industry. A comprehensive set of regulations for all mutual funds operating in
India was introduced with SEBI (Mutual Fund) Regulations, 1996. These regulations set uniform standards
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for all funds. Erstwhile UTI voluntarily adopted SEBI guidelines for its new schemes. Similarly, the budget
of the Union government in 1999 took a big step in exempting all mutual fund dividends from income tax in
the hands of the investors. During this phase, both SEBI and Association of Mutual Funds of India (AMFI)
launched Investor Awareness Programme aimed at educating the investors about investing through MFs.

Phase V (1999-2004): Emergence of a Large and Uniform Industry:

The year 1999 marked 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 amount mobilized from investors and assets under management.
In February 2003, the UTI Act was repealed. UTI no longer has a special legal status as a trust established
by an act of Parliament. Instead it has adopted the same structure as any other fund in India - a trust and an
AMC.

UTI Mutual Fund is the present name of the erstwhile Unit Trust of India (UTI). While UTI functioned
under a separate law of the Indian Parliament earlier, UTI Mutual Fund is now under the SEBI's (Mutual
Funds) Regulations, 1996 like all other mutual funds in India.

The emergence of a uniform industry with the same structure, operations and regulations make it easier for
distributors and investors to deal with any fund house. Between 1999 and 2005 the size of the industry has
doubled in terms of AUM which have gone from above Rs 68,000 crores to over Rs 1,50,000 crores.

Phase VI (From 2004 Onwards): Consolidation and Growth:

The industry has lately witnessed a spate of mergers and acquisitions, most recent ones being the acquisition
of schemes of Allianz Mutual Fund by Birla Sun Life, PNB Mutual Fund by Principal, among others. At the
same time, more international players continue to enter India including Fidelity, one of the largest funds in
the world.

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MUTUAL FUNDS
Mutual funds are institutions that collect money from several sources -individuals or institutions by issuing
'units', invest them on their behalf with predetermined investment objectives and manage the same all for a
fee. They invest the money across a range of financial instruments falling into two broad categories – equity
and debt. Individual people and institutions no doubt, can and do invest in equity and debt instruments by
themselves but this requires time and skill on both of which there are constraints. Mutual funds emerged as
professional financial intermediaries bridging the time and skill constraint. They have a team of skilled
people who identify the right stocks and debt instruments and construct a portfolio that promises to deliver
the best possible 'constrained' returns at the minimum possible cost. In effect, it involves outsourcing the
management of money. More explicitly, the benefits of investing in equities and debt instruments are
supposedly much better if done through mutual funds. This is because of the following reasons: Firstly, fund
managers are more skilled.

They are trained to identify the best investment options and to assess the portfolio on a continual basis;
secondly, they are able to invest in a diversified portfolio consisting of 15-20 different stocks or bonds or a
combination of them. For an individual such diversification reduces the risk but can demand a lot of effort
and cost. Each purchase or sale invites a cost in terms of brokerage or transactional charges such as demat
account fees in India. The need to possibly sell 'poor' stocks/bonds and buy 'good' stocks/bonds demands
constant tracking of news and performance of each company they have invested in.

Mutual funds are able to maintain and track a diversified portfolio on a constant basis with lesser costs. This
is because of the pecuniary economies that they enjoy when it comes to trading and other transaction costs;
thirdly, funds also provide good liquidity. An investor can sell her/his mutual fund investments and receive
payment on the same day with minimal transaction costs as compared to dealing with individual securities,
this totals to superior portfolio returns with minimal cost and better liquidity.

How do mutual funds work?

4 Mutual Fund Products


The primary way of categorizing mutual fund products is on the basis of the asset class in which the scheme
will invest. Equity funds, debt funds, hybrid funds, gold funds and real estate funds are types of funds based
on this categorization.

Equity Funds:
Equity funds invest in a portfolio of equity shares and equity related instruments. Since the portfolio
comprises of the equity instruments, the risk and return from the scheme will be similar to directly investing
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in equity markets. Equity funds can be further categorized on the basis of the strategy adopted by the fund
managers to manage the fund.

1) Passive & Active Funds


Passive funds invest the money in the companies represented in an index such as Nifty or Sensex in the
same proportion as the company’s representation in the index. There is no selection of securities or
investment decisions taken by the fund manager as to when to invest or how much to invest in each security.
Active funds select stocks for the portfolio based on a strategy that is intended to generate higher return than
the index. Active funds can be further categorized based on the way the securities for the portfolio are
selected.

2) Diversified Equity funds


Diversified equity funds invest across segments, sectors and sizes of companies. Since the portfolio takes
exposure to different stocks across sectors and market segments, there is a lower risk in such funds of poor
performance of few stocks or sectors.

Based on the segment of the market


Equity funds may focus on a particular size of companies to benefit from the features of such companies.
Equity stocks may be segmented based on market capitalization as large- cap, mid-cap and small-cap stocks.
1) Large- cap funds invest in stocks of large, liquid blue-chip companies with stable performance and
returns.

2) Mid-cap funds invest in mid-cap companies that have the potential for faster growth and higher returns.
These companies are more susceptible to economic downturns and evaluating and selecting the right
companies becomes important. Funds that invest in such companies have a higher risk of the companies
selected not being able to withstand the slowdown in revenues and profits. Similarly, the price of the stocks
also fall more when markets fall.

3) Small-cap funds invest in companies with small market capitalisation with intent of benefitting from the
higher gains in the price of stocks. The risks are also higher.

Based on Sectors and Industries


Sector funds invest in companies that belong to a particular sector such as technology or banking. The risk is
higher because of lesser diversification since such funds are concentrated in a particular sector. Sector
performances tend to be cyclical and the return from investing in a sector is never the same across time. For
example, Auto sector, does well, when the economy is doing well and more cars, trucks and bikes are
bought. It does not do well, when demand goes down. Banking sector does well, when interest rates are low
in the market; they don’t do well when rates are high. Investments in sector funds have to be timed well.
Investment in sector funds should be made when the fund manager expects the related sectors, to do well.
They could out-perform the market, if the call on sector performance plays out. In case it doesn’t, such funds
could underperform the broad market. Reliance Banking Fund, SBI Magnum Sector Funds are examples of
sector funds.

e. Based on Themes
Theme-based funds invest in multiple sectors and stocks that form part of a theme. For example, if the theme
is infrastructure then companies in the infrastructure sector, construction, cement, banking and logistics will

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all form part of the theme and be eligible for inclusion in the portfolio. They are more diversified than sector
funds but still have a high concentration risks.

f. Based on Investment Style


The strategy adopted by the fund manager to create and manage the fund’s portfolio is a basis for
categorizing funds. The investment style and strategy adopted can significantly impact the nature of risk and
return in the portfolio. Passive fund invests only in the securities included in an index and does not feature
selection risks. However, the returns from the fund will also be only in line with the market index. On the
other hand, active funds use selection and timing strategies to create portfolios that are expected to generate
returns better than the market returns. The risk is higher too since the fund’s performance will be affected
negatively if the selected stocks do not perform as expected. The type of funds based on strategies and styles
for selection of securities include:

1) Growth Funds portfolios feature companies whose earnings are expected to grow at a rate higher
than the average rate. These funds aim at providing capital appreciation to the investors and provide
above average returns in bullish markets. The volatility in returns is higher in such funds.

2) Value Funds seek to identify companies that are trading at prices below their inherent value with the
expectation of benefiting from an increase in price as the market recognizes the true value. Such
funds have lower risk. They require a longer investment horizon for the strategy to play out.

3) Dividend yield Funds invest in stocks that have a high dividend yield. These stocks pay a large
portion of their profits as dividend and these appeals to investors looking for income from their
equity investments. The companies typically have high level of stable earnings but do not have much
potential for growth or expansion. They therefore pay high dividends while the stock prices remain
stable. The stocks are bought for their dividend payout rather than for the potential for capital
appreciation.

Equity Linked Savings Schemes (ELSS)


ELSS is a special type of equity fund investment which gives the investor tax deduction benefits under
section 80C of the Income Tax Act up to a limit of Rs. 1,50,000 per year. An ELSS must hold at least 80%
of the portfolio in equity securities. The investment made by the investor is locked-in for a period of three
years during which it cannot be redeemed transferred or pledged.

Debt Funds
Debt funds invest in a portfolio of debt instruments such as government bonds, corporate bonds and money
market securities. Debt instruments have a pre-defined coupon or income stream. Fund managers have to
manage credit risk, i.e. the risk of default by the issuers of the debt instrument in paying the periodic interest
or repayment of principal. The credit rating of the instrument is used to assess the credit risk and higher the
credit rating, lower is the perceived risk of default. Debt instruments may also see a change in prices or
values in response to changes in interest rates in the market. Debt funds can be categorized based on the type
of securities they hold in the portfolio.

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Short Term Debt Funds
1) Money Market or Liquid Funds are very short term maturity. They invest in debt securities with
less than 91 days to maturity. However, there is no mark to market for securities less than 60 days to
maturity and this reduces the volatility in these funds.

2) Ultra short-term plans are also known as treasury management funds, or cash management funds.
They invest in money market and other short term securities of maturity up to 365 days. The
objective is to generate a steady return, mostly coming from accrual of interest income, with minimal
NAV volatility.

3) Short Term Plans combines short term debt securities with a small allocation to longer term debt
securities. Short term plans earn interest from short term securities and interest and capital gains
from long term securities. Short term funds may provide a higher level of return than liquid funds
and ultra-short term funds, but will be exposed to higher mark to market risks.

Long Term Debt Funds


Long term debt funds are structured to generate total returns made up of both interest income and capital
appreciation from the securities held. Since the price of securities may go up or down resulting in gains or
losses, the total returns tend to be more volatile than short term debt funds that focus primarily on earning
coupon income.
The value of bond held in a long term portfolio, changes with change in interest rates. Since market interest
rates and value of a bond are inversely related, any fall in the interest rates causes a mark-to-market gain in a
bond portfolio and vice versa. Therefore in a falling interest rate scenario, when investors in most fixed
income products face a reduced rate of interest income, long term debt funds post higher returns. This is
because the interest income is augmented by capital gains and result in a higher total return.

An income fund is a debt fund which invests in both short and long term debt securities of the Government,
public sector and private sector companies with a view to generate income.

In the corporate bond market, an income fund tries to manage interest income from buying bonds at a
spread to Government securities and manages capital gains by taking a view on the interest rate movements
and credit spread. Thus, income funds feature both interest rate risk and credit risk.

Gilt Funds invest in government securities of medium and long-term maturities. There is no risk of default
and liquidity is considerably higher in case of government securities. However, prices of government
securities are very sensitive to interest rate changes. Long term gilt funds have a longer maturity and
therefore, higher interest rate risk as compared to short term gilt funds.

Dynamic debt funds seek flexible and dynamic management of interest rate risk and credit risk. That is,
these funds have no restrictions with respect to security types or maturity profiles that they invest in.

Floating rate funds invest primarily in floating rate debt instruments. In these instruments the coupon is not
fixed for the term of the instrument but is periodically revised with reference to the market rate. If interest
rates in the markets go up, the coupon for these instruments are also revised upwards and vice versa.

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These funds give the benefit of higher coupon income when interest rates are on the rise, without the risk of
falling bond prices.

Fixed maturity plans (FMPs) are closed-end funds that invest in debt securities with maturities that match
the term of the scheme. The debt securities are redeemed on maturity and paid to investors. FMPs are issued
for various maturity periods ranging from 3 months to 5 years.

An income fund is a debt fund which invests in both short and long term debt securities of the Government,
public sector and private sector companies with a view to generate income.

Fixed maturity plans (FMPs) are closed-end funds that invest in debt securities with maturities that match
the term of the scheme. The debt securities are redeemed on maturity and paid to investors. FMPs are issued
for various maturity periods ranging from 3 months to 5 years. equity funds and to this maintain at least a
65% exposure to equity markets at all times.

Asset Allocation Funds invest in both equity and debt but without a pre-specified allocation as in the case
of other hybrid funds. The fund manager takes a view on which type of investment is expected to do well
and will tilt the allocation towards either asset class. Such funds can even hold 100% in equity or debt.

Capital Protection Funds are closed-end hybrids funds. In these types of funds the exposure to equity is
typically taken through the equity derivatives market. The portfolio is structured such that a portion of the
principal amount is invested in debt instruments so that it grows to the principal amount over the term of the
fund.

SYSTEMATIC INVESTMENT PLANNING (SIP)

SIP is similar to a Recurring Deposit. Every month on a specified date an amount you choose is invested in a
mutual fund scheme of your choice. The dates currently available for SIPs are the 5th, 10th, 15th, 20th and
the 25th of a month. There are many benefits of investing through SIP.

Advantages of SIP:
•Encourages Regular and Disciplined Investments
•A Convenient way to invest regularly
•Long term perspective
•Rupee Cost Averaging Benefit to counter volatility
•Compounding Benefits
•simple & convenient
•A larger target segment due to lower initial investment

SIP – Easy Pay Facility

•Opt for the SIP EASY PAY Auto debit Facility

•Choose the Amount (minimum Rs 500/- p.m.)

•Choose one Day of the month (5th / 10th /15th / 20th / 25th/ 30th )

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•Make First Investment by Cheque drawn in favor of the scheme. E.g. SBIMF -

Magnum Tax Gain Scheme

And Relax…….. Every month the said amount will be debited from your bank

account and units will allocated to you.

Register for Statement Of Account (SOA) by mail.

IDENTIFYING THE INVESTMENT PROCEDURE IN MUTUAL FUNDS:

STEP ONE - IDENTIFY YOUR INVESTMENT NEEDS.

Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments,
level of income and expenses among many other factors. Therefore, the first step is to assess your needs.
Begin by asking yourself these questions:

1. What are my investment objectives and needs?

2. How much risk am I willing to take?

3. What are my cash flow requirements?

STEP TWO - CHOOSE THE RIGHT MUTUAL FUND.

Once you have a clear strategy in mind, you now have to choose which Mutual
Fund and scheme you want to invest in. The offer document of the scheme tells you its objectives and
provides supplementary details like the track record of other schemes managed by the same Fund Manager.
1) The track record of performance over the last few years in relation to the appropriate yardstick and
similar funds in the same category.
2) How well the Mutual Fund is organized to provide efficient, prompt and personalized service.
3) Degree of transparency as reflected in frequency and quality of their communications.

STEP THREE - SELECT THE IDEAL MIX OF SCHEMES.

Investing in just one Mutual Fund scheme may not meet all your investment needs. You may consider
investing in a combination of schemes to achieve your specific goals.

STEP FOUR - INVEST REGULARLY

For most of us, the approach that works best is to invest a fixed amount at specific intervals, say every
month. By investing a fixed sum each month, you get fewer units when the price is high and more units
when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and
is a disciplined investment strategy followed by investors all over the world. With many open-ended
schemes offering systematic investment plans, this regular investing habit is made easy for you.

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STEP FIVE - KEEP YOUR TAXES IN MIND

As per the current tax laws, Dividend/Income Distribution made by mutual funds is exempt from Income
Tax in the hands of investor. However, in case of debt schemes Dividend/Income Distribution is subject to
Dividend Distribution Tax. Further, there are other benefits available for investment in Mutual Funds under
the provisions of the prevailing tax laws. You may therefore consult your tax advisor or Chartered
Accountant for specific advice to achieve maximum tax efficiency by investing in mutual funds.

STEP SIX - START EARLY

It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make
more than if you wait and invest later. The power of compounding lets you earn income on income and your
money multiplies at a compounded rate of return.

STEP SEVEN - THE FINAL STEP


All you need to do now is to get in touch with a Mutual Fund or your advisor and start investing. Reap the
rewards in the years to come. Mutual Funds are suitable for every kind of investor whether starting a career
or retiring, conservative or risk taking, growth oriented or income seeking.

THE POWER OF COMPOUNDING:

Compounding is the ability of an asset to generate earnings, which are then reinvested in order to generate
their own earnings. In other words, compounding refers to generating earnings from previous earnings.

The wonder of compounding (sometimes called "compound interest") transforms your working money into a
highly powerful income-generating tool. Compounding is the process of generating earnings on an asset's
reinvested earnings. To work, it requires two things: the reinvestment of earnings and time. The more time
you give your investments, the more you are able to accelerate the income potential of your original
investment.

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e.g.,

Sip of rs.1000 invested per month @ 8% pa till the age of 60, the following are the return:

starting age total amount saved value at 60

25 420000 ₹ 23,09,175.03

30 360000 ₹ 15,00,295.18

35 300000 ₹ 9,57,366.57

40 240000 ₹ 5,92,947.22

ORGANIZATION STRUCTURE OF A MUTUAL FUND

The important terms of the figure are explained as follows:

FUND SPONSOR:

A ‟sponsor” is any person who, acting alone or in combination with another body corporate, establishes a
MF. The sponsor of a fund is similar to the promoter of a company. In accordance with SEBI Regulations,
the sponsor forms a trust and appoints a Board of Trustees, and also generally appoints an AMC as fund
manager. In addition, the sponsor also appoints a custodian to hold the fund assets. The sponsor must
contribute at least 40% of the net worth of the AMC and possess a sound financial track record over five
years prior to registration.

TRUSTEES:

The MF or trust can either be managed by the Board of Trustees, which is a body of individuals, or by a
Trust Company, which is a corporate body. Most of the funds in India are managed by Board of Trustees.
The trustee being the primary guardian of the unit holders‟ funds and assets has to be a person of high repute
and integrity. The trustees, however, do not directly manage the portfolio securities. The portfolio is
managed by the AMC as per the defined objectives, accordance with Trust Deed and SEBI (Mutual Funds)
Regulations.

ASSET MANAGEMENT COMPANY (AMC):

The AMC, which is appointed by the sponsor or the trustees and approved by SEBI, acts like the investment
manager of the trust. The AMC functions under the supervision of its own Board of Directors, and also
under the direction of the trustees and SEBI. AMC, in the name of the trust, floats and manages the different
investment ‟schemes‟ as per the SEBI Regulations and as per the Investment Management Agreement
signed with the Trustees.

OTHERS:

Apart from these, the Mutual Fund has some other fund constituents, such as custodians and depositories,
banks, transfer agents and distributors.

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The CUSTODIAN is appointed for safe keeping of securities and participating in the clearing system
through approved depository. The bankers handle the financial dealings of the fund. Transfer agents are
responsible for issue and redemption of units of Mutual Fund.

REGULATORY FRAMEWORK

Securities and Exchange Board of India (SEBI)

The Government of India constituted Securities and Exchange Board of India, by an Act of Parliament in
1992, the apex regulator of all entities that either raise funds in the capital markets or invest in capital market
securities such as shares and debentures listed on stock exchanges. Mutual funds have emerged as an
important institutional investor in capital market securities. Hence they come under the purview of SEBI.
SEBI requires all mutual funds to be registered with them. It issues guidelines for all mutual fund operations
including where they can invest, what investment limits and restrictions must be complied with, how they
should account for income and expenses, how they should make disclosures of information to the investors
and generally act in the interest of investor protection. To protect the interest of the investors, SEBI
formulates policies and regulates the mutual funds. MF either promoted by public or by private sector
entities including one promoted by foreign entities are 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.

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

With the increase in mutual fund players in India, a need for mutual fund association in India was generated
to function as a non-profit organization.

Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI.
Till date all the AMCs are that have launched mutual fund schemes are its member. It functions under the
supervision and guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and
healthy market with ethical line enhancing and maintaining standards. It follows the principle of both
protecting and promoting the interests of mutual funds as well as their unit holders.

THE OBJECTIVES OF ASSOCIATION OF MUTUAL FUNDS IN INDIA:

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has certain
defined objectives which juxtaposes the guidelines of its Board of Directors. The objectives are as follows:

1) This mutual fund association of India maintains high professional and ethical standards in all areas
of operation of the industry.

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2) It also recommends and promotes the top class business practices and code of conduct which is
followed by members and related people engaged in the activities of mutual fund and asset
management. The agencies who are by any means connected or involved in the field of capital
markets and financial services also involved in this code of conduct of the association.

3) AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.

4) Associations of Mutual Fund of India do represent the Government of India, the Reserve Bank of
India and other related bodies on matters relating to the Mutual Fund Industry.

5) It develops a team of well qualified and trained Agent distributors. It implements a program of
training and certification for all intermediaries and other engaged in the mutual fund industry.

6) AMFI undertakes all India awareness program for investors in order to promote proper
understanding of the concept and working of mutual funds.

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RETURNS FROM VARIOUS ASSEST MANAGEMENT COMPANIES:
Assets under management
(Rs.Cr)
Mutual Funds Jan-03 December Change %
2016 Change
ICICI Prudential Mutual 10,645 2,27,989 2,17,344 2041.75
Fund
HDFC Mutual Fund 7,534 2,21,825 2,14,291 2844.31
Reliance Mutual Fund 3,231 1,95,845 1,92,614 5961.45
Birla Sun Life Mutual Fund 6,349 1,80,808 1,74,459 2747.82
SBI Mutual Fund 4,082 1,40,997 1,36,915 3354.11
UTI Mutual Fund 44,541 1,29,389 84,848 190.5
Kotak Mahindra Mutual 3,373 82,135 78,762 2335.07
Fund
Franklin Templeton Mutual 9,748 75,783 66,035 677.42
Fund
DSP BlackRock Mutual 2,916 58,357 55,441 1901.27
Fund
IDFC Mutual Fund 5,202 57,998 52,796 1014.91
Tata Mutual Fund 1,446 38,271 36,825 2546.66
L&T Investment 962 35,191 34,229 3558.11
Management Limited
Sundaram Mutual Fund 1,185 27,013 25,828 2179.58
LIC Mutual Fund 3,139 18,022 14,883 474.13
Canara Robeco Mutual 1135 9,411 8,276 729.17
Fund
HSBC Mutual Fund 744 8,670 7,926 1065.33
PRINCIPAL Mutual Fund 1,939 4,868 2,929 151.04
TOTAL 1,08,171 15,12,572 14,04,401 1298.316

INTERPRETATION:
1. The total AUM saw a growth of 1298.31% since January (2003) the reasons are:

a) Evaluation of e-commerce platforms to sell mutual funds.


b) More clarity on E-KYC and its subsequent adoption.
c) The recently approved payment banks, with permission to sell third-party mutual fund products
are expected to improve the reach.
d) Improving the financial literacy and awareness among retail investors, AMCs have been
conducting investor awareness programmes to educate the investors about the impact of inflation
and other factors that are affecting their expected returns.

2. ICICI Prudential MF is the top fund house with an asset base of Rs 2,27,989 crore (excluding fund of
funds) followed by HDFC MF (Rs 2,21,825 crore) Reliance MF (Rs 1,95,845 crore), Birla Sun Life
MF (Rs 1,80,808 crore) and SBI MF (Rs 1,40,997 crore). These top 5 players account for more than
50 per cent of the Rs 18.3 lakh crore AUM.

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RETURNS FROM DIFFERENT CATEGORIES OF MUTUAL FUNDS (AVERAGE BASIS) BEFORE
INFLATION RATE:

Investment periods
FUNDS NAME (2015- (2014-2016) (2013-2016) (2010-
2016) 2016)
LARGE CAP 18.8 5.9 14.5 12
SMALL AND MID CAP 28.9 10.9 19.3 13.1
DIVERSIFIED EQUITY 22.2 7.3 13.2 9.2
ELSS 23.4 7.3 15.4 12
SECTOR(PHARMA & HEALTHCARE) 2 -1.4 12.7 15
SECTOR(BANKING &FINANCE) 35.2 8.8 13.9 8.2
SECTOR(FMCG) 24.7 11.7 16.1 8.7
SECTOR(TECHNOLOGY) -3.8 -1 6.5 7.7
INDEX 20.1 5.1 8.2 6.7
RGESS 13.6 5.3 3.7 0
BALANCED 17.9 6.7 12.8 10.7
DEBT LONG TERM 9.4 7.6 8.7 6.9
DEBT SHORT TERM 8.9 8.1 8.2 7.2
LIQUID 6.3 6.8 7.2 7.3
GOLD ETF -1.4 3 -0.5 -0.7
CAPITAL PROTECTION FUNDS 6.6 5.9 5.3 0.3
DEBT ORIENTED HYBRID SPECIALITY FUNDS 9.5 7.2 8.5 5
EQUITY ORIENTED HYBRID SPECIALITY FUNDS 14.1 6 11.6 9

RETURNS FROM DIFFERENT CATEGORIES OF MUTUAL FUNDS (AVERAGE BASIS) AFTER


INFLATION RATE:
INVESTMENT PERIODS
FUNDS NAME (2015- (2014-2016) (2013-2016) (2010-
2016) 2016)
LARGE CAP 13.27 0.89 9.08 6.70
SMALL AND MID CAP 22.80 5.65 13.65 7.75
DIVERSIFIED EQUITY 16.41 2.22 7.84 4.03
ELSS 17.56 2.22 9.94 6.69
SECTOR(PHARMA & HEALTHCARE) -2.83 -196.60 7.36 9.56
SECTOR(BANKING &FINANCE) 28.80 3.65 8.51 3.08
SECTOR(FMCG) 18.80 6.41 10.60 3.55
SECTOR(TECHNOLOGY) -198.89 -196.22 1.46 2.60
INDEX -214.41 0.12 3.08 1.65
RGESS 8.22 0.31 -1.21
BALANCED 12.32 1.65 7.46 5.46
DEBT LONG TERM 4.22 2.51 3.55 1.84
DEBT SHORT TERM -203.74 2.98 3.08 2.12
LIQUID 1.27 1.74 2.12 2.22
GOLD ETF -196.60 -1.88 -195.74 -195.93
CAPITAL PROTECTION FUNDS 1.55 0.89 0.31 -4.45
DEBT ORIENTED HYBRID SPECIALITY FUNDS 4.32 2.12 3.36 0.03
EQUITY ORIENTED HYBRID SPECIALITY FUNDS 8.70 0.98 6.32 3.84

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ALTERNATIVE INVESTMENT CHANNELS:
1. STOCK MARKETS:
It is a place where shares of pubic listed companies are traded. The primary market is where companies float
shares to the general public in an initial public offering (IPO) to raise capital.
Once new securities have been sold in the primary market, they are traded in the secondary market—where
one investor buys shares from another investor at the prevailing market price or at whatever price both the
buyer and seller agree upon. The secondary market or the stock exchanges are regulated by the regulatory
authority. In India, the secondary and primary markets are governed by the Security and Exchange Board of
India (SEBI).
A stock exchange facilitates stock brokers to trade company stocks and other securities. A stock may be
bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the stock buyers and
sellers. India's premier stock exchanges are the Bombay Stock Exchange and the National Stock Exchange.
RETURNS FROM STOCK MARKETS BEFORE INFLATION RATE:
(2015- (2014- (2013- (2010-
2016) 2016) 2016) 2016)
Sensex 16.9 2.9 9.8 11.1
Nifty 18.5 3.9 11 11.5
S&P BSE Auto 22.3 6.9 18.3 16.8
S&P BSE BANKEX 32.8 8.2 18.8 15.5
S&P BSE CD 32.9 21 32.7 18.1
S&P BSE FMCG 20.5 0 0 0
S&P BSE HEALTHCARE 1.1 0 0 0
S&P BSE IT -9 0 0 0
S&P BSE PSU 40.8 6.3 10.6 3.1
S&P BSE MIDCAP 32.7 0 0 0
S&P BSE TECk -5.5 -4 5.6 10
NIFTY BANK 32.8 8.5 18.9 15.8
S&P BSE SMALLCAP 36.9 0 0 0
Nifty MID100 Free 34.9 15 25.9 17.2
NIFTY 100 20.9 5.4 12.8 12.6
S&P BSE REALTY 30.3 -2 2.9 -2.4
S&P BSE POWER 28.1 3.4 9.7 1.3
NIFTY MIDCAP 50 37 14 21.2 13.6
S&P BSE Oil & Gas 48 20.7 12.7 11
S&P BSE Metal 56.5 11.7 5.5 0.8
S&P BSE 200 22.5 6.2 14.2 12.9
NIFTY NEXT 50 33.9 13.7 23.1 19
NIFTY 500 23.9 7 15.2 13.5
Nifty50 USD 2.3 -9.1 -3.9 -3.3
S&P BSE 500 24 6.9 15 13.2
S&P BSE CAP GOODS 27.9 -2.5 11 10
S&P BSE 100 21.2 5 12.3 12.2
NIFTY IT -5.4 -5.9 4.8 10.3

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RETURNS FROM STOCK MARKET AFTER INFLATION RATE:
NOMINAL RATE OF RETURN
(2015-2016) (2014-2016) (2013-2016) (2010-2016)
Sensex 11.37 -1.97 4.60 5.84
Nifty 12.89 -1.02 5.74 6.22
S&P BSE Auto 16.51 1.36 12.70 11.27
S&P BSE BANKEX 26.68 3.08 12.70 10.03
S&P BSE CD 26.61 15.27 26.42 12.51
S&P BSE FMCG 14.79
S&P BSE HEALTHCARE -3.69
S&P BSE IT -203.84
S&P BSE PSU 34.13 1.27 5.36 -1.78
S&P BSE MIDCAP 26.42
S&P BSE TECk -200.50 -199.08 0.60 4.79
NIFTY BANK 26.51 3.36 13.27 10.32
S&P BSE SMALLCAP 30.42
Nifty MID100 Free 28.51 9.56 19.94 11.65
NIFTY 100 15.18 0.41 7.46 7.27
S&P BSE REALTY 24.13 -197.17 -1.97 -197.55
S&P BSE POWER 22.03 -1.50 4.51 -3.50
NIFTY MIDCAP 50 30.51 8.60 15.27 8.22
S&P BSE Oil & Gas 40.99 14.99 7.36 5.74
S&P BSE Metal 49.09 6.41 0.50 -3.97
S&P BSE 200 16.70 1.17 8.79 7.55
NIFTY NEXT 50 27.56 8.32 17.27 13.37
NIFTY 500 18.03 1.93 9.75 8.13
Nifty50 USD -2.54 -203.93 -198.98 -198.41
S&P BSE 500 18.13 1.84 9.56 7.84
S&P BSE CAP GOODS 21.84 -197.65 5.74 4.79
S&P BSE 100 15.46 0.03 6.98 6.89
NIFTY IT -200.41 -200.89 -0.16 5.08

28
2. GOLD:
Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way
of diversifying risk, especially through the use of futures contracts and derivatives. The gold market is
subject to speculation and volatility as are other markets. Compared to other precious metals used for
investment, gold has the most effective safe haven and hedging properties across a number of countries.
RETURNS FROM GOLD INVESTMENT OVER THE PERIOD (1991-2016):
Year Price difference in returns(%) inflation nominal rate of
prices rate(%) return(%)
1991 3,466.00
1992 4,334.00 868.00 25.04 11.88 12.2
1993 4,140.00 -194.00 -4.48 6.31 -198.3
1994 4,598.00 458.00 11.06 10.24 0.7
1995 4,680.00 82.00 1.78 10.22 -7.7
1996 5,160.00 480.00 10.26 8.98 1.2
1997 4,725.00 -435.00 -8.43 7.25 -201.1
1998 4,045.00 -680.00 -14.39 13.17 -201.1
1999 4,234.00 189.00 4.67 4.84 -0.2
2000 4,400.00 166.00 3.92 4.02 -0.1
2001 4,300.00 -100.00 -2.27 3.77 -198.6
2002 4,990.00 690.00 16.05 4.31 11.3
2003 5,600.00 610.00 12.22 3.81 8.1
2004 5,850.00 250.00 4.46 3.77 0.7
2005 7,000.00 1,150.00 19.66 4.25 14.8
2006 8,400.00 1,400.00 20.00 5.79 13.4
2007 10,800.00 2,400.00 28.57 6.39 20.8
2008 12,500.00 1,700.00 15.74 8.32 6.9
2009 14,500.00 2,000.00 16.00 10.83 4.7
2010 18,500.00 4,000.00 27.59 12.11 13.8
2011 26,400.00 7,900.00 42.70 8.87 31.1
2012 31,050.00 4,650.00 17.61 9.3 7.6
2013 29,600.00 -1,450.00 -4.67 10.92 -194.4
2014 28,006.50 -1,593.50 -5.38 6.37 -199.1
2015 26,343.50 -1,663.00 -5.94 5.88 -200.1
2016 28,623.50 2,280.00 8.65 4.97 3.5

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3. FIXED DEPOSITS:
A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate
of interest than a regular savings account, until the given maturity date. It may or may not require the
creation of a separate account.
Fixed deposits are a high-interest -yielding Term deposit and offered by banks in India. The most popular
form of Term deposits are Fixed Deposits, while other forms of term Deposits are Recurring Deposit and
Flexi Fixed Deposits (the latter is actually a combination of Demand deposit and Fixed deposit).
To compensate for the low liquidity, FDs offer higher rates of interest than saving accounts. The longest
permissible term for FDs is 10 years. Generally, the longer the term of deposit, higher is the rate of interest
but a bank may offer lower rate of interest for a longer period if it expects interest rates, at which the Central
Bank of a nation lends to banks ("repo rates"), will dip in the future.
Returns from bank deposits offered by different banks across india over a period of five years:
Banks 5 INFLATION NOMINAL RATE OF
YEARS RATE RETURN
Allahabad Bank 6.50% 4.97% 1.46
Andhra Bank 6.50% 4.97% 1.46
Axis Bank 6.75% 4.97% 1.70
Bandhan Bank 6.90% 4.97% 1.84
Bank of Baroda 6.50% 4.97% 1.46
Bank of India 6.70% 4.97% 1.65
Bank of Maharashtra 6.00% 4.97% 0.98
Canara Bank 6.90% 4.97% 1.84
Catholic Syrian Bank 6.50% 4.97% 1.46
Central Bank of India 6.90% 4.97% 1.84

City Union Bank 6.85% 4.97% 1.79


Corporation Bank 6.80% 4.97% 1.74
DCB Bank 7.25% 4.97% 2.17
Dena Bank 7.00% 4.97% 1.93
Deutsche Bank 8.00% 4.97% 2.89
Dhanalakshmi Bank 6.50% 4.97% 1.46
Federal Bank 6.50% 4.97% 1.46
HDFC Bank 6.00% 4.97% 0.98
ICICI Bank 6.75% 4.97% 1.70
IDBI Bank 6.90% 4.97% 1.84
IDFC Bank 6.75% 4.97% 1.70
Indian Bank 6.00% 4.97% 0.98
Indian Overseas Bank 6.00% 4.97% 0.98
Indus Ind Bank 6.75% 4.97% 1.70
J&K Bank 6.75% 4.97% 1.70
Karnataka Bank 6.50% 4.97% 1.46
Karur Vysya Bank 7.00% 4.97% 1.93
Kotak Mahindra Bank 6.25% 4.97% 1.22
Lakshmi Vilas Bank 7.00% 4.97% 1.93
Oriental Bank of Commerce 6.50% 4.97% 1.46
Post Office Term Deposit 7.70% 4.97% 2.60
Punjab and Sind Bank 7.00% 4.97% 1.93
Punjab National Bank 6.90% 4.97% 1.84

30
Repco Bank 7.25% 4.97% 2.17
South Indian Bank 6.50% 4.97% 1.46
Standard Charted Bank 7.00% 4.97% 1.93
State Bank of India 6.50% 4.97% 1.46
Syndicate Bank 6.00% 4.97% 0.98
Tamilnad Mercantile Bank 7.00% 4.97% 1.93
Ltd
The Ratnakar Bank 7.50% 4.97% 2.41
UCO Bank 6.75% 4.97% 1.70
Union Bank of India 6.80% 4.97% 1.74
United Bank of India 6.25% 4.97% 1.22
Vijaya Bank 6.50% 4.97% 1.46
Yes Bank 7.10% 4.97% 2.03

Change in the aggregate deposits (2003-2016) month wises:


time period aggregate deposits(rs. In billions) change in deposits % change
17-Mar-17 (P) 105420.47 -7.07 -0.01
03-Mar-17 (P) 105427.54 5834.24 5.53
24-Feb-17 (P) 99593.3 -5273.88 -5.30
17-Feb-17 (P) 104867.18 -757.13 -0.72
03-Feb-17 (P) 105624.31 463.11 0.44
27-Jan-17 (P) 105161.2 710.08 0.68
20-01-2017 104451.12 -246.95 -0.24
23-Dec-16 104698.07 -148.55 -0.14
25-Nov-16 104846.62 5528.73 5.27
28-Oct-16 99317.89 -1618.58 -1.63
30-Sep-16 100936.47 4153.96 4.12
19-Aug-16 96782.51 563.44 0.58
22-Jul-16 96219.07 783.85 0.81
24-Jun-16 95435.22 294.35 0.31
27-May-16 95140.87 -112.37 -0.12
29-Apr-16 95253.24 1980.34 2.08
18-Mar-16 93272.9 278.81 0.30
19-Feb-16 92994.09 811.36 0.87
22-Jan-16 92182.73 858.9 0.93
25-Dec-15 91323.83 596.61 0.65
27-Nov-15 90727.22 -184.09 -0.20
30-Oct-15 90911.31 1827.44 2.01
18-Sep-15 89083.87 8.03 0.01
21-Aug-15 89075.84 763.58 0.86
24-Jul-15 88312.26 854.76 0.97
26-Jun-15 87457.5 73.31 0.08
29-May-15 87384.19 694.02 0.79
17-Apr-15 86690.17 1357.32 1.57
20-Mar-15 85332.85 1108.89 1.30
20-Feb-15 84223.96 813.03 0.97
23-Jan-15 83410.93 577.5 0.69
26-Dec-14 82833.43 197.55 0.24
28-Nov-14 82635.88 394.58 0.48
31-Oct-14 82241.3 1705.74 2.07
19-Sep-14 80535.56 476.89 0.59
22-Aug-14 80058.67 566.38 0.71
25-Jul-14 79492.29 498.92 0.63

31
27-Jun-14 78993.37 157.51 0.20
30-May-14 78835.86 550.88 0.70
18-Apr-14 78284.98 1229.38 1.57
21-Mar-14 77055.6 1289.51 1.67
21-Feb-14 75766.09 520.99 0.69
24-Jan-14 75245.1 496.54 0.66
27-Dec-13 74748.56 293.12 0.39
29-Nov-13 74455.44 1506.83 2.02
18-Oct-13 72948.61 1444.87 1.98
20-Sep-13 71503.74 636.56 0.89
23-Aug-13 70867.18 188.91 0.27
26-Jul-13 70678.27 -43.12 -0.06
28-Jun-13 70721.39 1226.12 1.73
31-May-13 69495.27 1244.51 1.79
19-Apr-13 68250.76 746.22 1.09
22-Mar-13 67504.54 1853.17 2.75
22-Feb-13 65651.37 363.35 0.55
25-Jan-13 65288.02 539.8 0.83
28-Dec-12 64748.22 347.94 0.54
30-Nov-12 64400.28 519.06 0.81
19-Oct-12 63881.22 959.5 1.50
21-Sep-12 62921.72 -29.89 -0.05
24-Aug-12 62951.61 480.17 0.76
27-Jul-12 62471.44 143.42 0.23
29-Jun-12 62328.02 1695.25 2.72
18-May-12 60632.77 263.7 0.43
20-Apr-12 60369.07 1278.25 2.12
23-Mar-12 59090.82 891.67 1.51
24-Feb-12 58199.15 479.67 0.82
27-Jan-12 57719.48 -605.65 -1.05
30-Dec-11 58325.13 1813.19 3.11
18-Nov-11 56511.94 280.29 0.50
21-Oct-11 56231.65 883.18 1.57
23-Sep-11 55348.47 213.81 0.39
26-Aug-11 55134.66 280.89 0.51
29-Jul-11 54853.77 1372.57 2.50
17-Jun-11 53481.2 254.94 0.48
20-May-11 53226.26 -9.53 -0.02
22-Apr-11 53235.79 1156.1 2.17
25-Mar-11 52079.69 1199.75 2.30
25-Feb-11 50879.94 1005.78 1.98
28-Jan-11 49874.16 16.27 0.03
31-Dec-10 49857.89 1330.67 2.67
19-Nov-10 48527.22 -248.7 -0.51
22-Oct-10 48775.92 1663.17 3.41
24-Sep-10 47112.75 371.58 0.79
27-Aug-10 46741.17 -6.26 -0.01
30-Jul-10 46747.43 1533.91 3.28
18-Jun-10 45213.52 -105.37 -0.23
21-May-10 45318.89 210.4 0.46
23-Apr-10 45108.49 180.23 0.40
26-Mar-10 44928.26 1254.77 2.79
26-Feb-10 43673.49 679.42 1.56
29-Jan-10 42994.07 1150.49 2.68

32
18-Dec-09 41843.58 -41.13 -0.10
20-Nov-09 41884.71 330.66 0.79
23-Oct-09 41554.05 368.02 0.89
25-Sep-09 41186.03 378.92 0.92
28-Aug-09 40807.11 102.53 0.25
31-Jul-09 40704.58 1049.94 2.58
19-Jun-09 39654.64 6.64 0.02
22-May-09 39648 451.29 1.14
24-Apr-09 39196.71 855.61 2.18
27-Mar-09 38341.1 993.71 2.59
27-Feb-09 37347.39 663.64 1.78
30-Jan-09 36683.75 1199 3.27
19-Dec-08 35484.75 319.78 0.90
21-Nov-08 35164.97 273.71 0.78
24-Oct-08 34891.26 497.99 1.43
26-Sep-08 34393.27 524.91 1.53
29-Aug-08 33868.36 940.88 2.78
18-Jul-08 32927.48 406.06 1.23
20-Jun-08 32521.42 147.12 0.45
23-May-08 32374.3 360.57 1.11
25-Apr-08 32013.73 44.34 0.14
28-Mar-08 31969.39 1086.84 3.40
29-Feb-08 30882.55 639.92 2.07
18-Jan-08 30242.63 864.74 2.86
21-Dec-07 29377.89 157.89 0.54
23-Nov-07 29220 418.37 1.43
26-Oct-07 28801.63 64.28 0.22
28-Sep-07 28737.35 968.85 3.37
31-Aug-07 27768.5 433.57 1.56
20-Jul-07 27334.93 667.69 2.44
22-Jun-07 26667.24 561.53 2.11
25-May-07 26105.71 174.06 0.67
27-Apr-07 25931.65 -187.68 -0.72
30-Mar-07 26119.33 1592.9 6.10
16-Feb-07 24526.43 612.08 2.50
19-Jan-07 23914.35 470.23 1.97
22-Dec-06 23444.12 131.39 0.56
24-Nov-06 23312.73 443.75 1.90
27-Oct-06 22868.98 -248.12 -1.08
29-Sep-06 23117.1 776.99 3.36
18-Aug-06 22340.11 393.15 1.76
21-Jul-06 21946.96 510.53 2.33
23-Jun-06 21436.43 66.34 0.31
26-May-06 21370.09 22.71 0.11
28-Apr-06 21347.38 256.89 1.20
31-Mar-06 21090.49 1387.7 6.58
17-Feb-06 19702.79 247.26 1.25
20-Jan-06 19455.53 77.64 0.40
23-Dec-05 19377.89 172.57 0.89
25-Nov-05 19205.32 67.44 0.35
28-Oct-05 19137.88 -90.8 -0.47
30-Sep-05 19228.68 859.38 4.47
19-Aug-05 18369.3 255.21 1.39
22-Jul-05 18114.09 183.25 1.01

33
24-Jun-05 17930.84 142.15 0.79
27-May-05 17788.69 56.58 0.32
29-Apr-05 17732.11 730.13 4.12
18-Mar-05 17001.98 155.93 0.92
18-Feb-05 16846.05 226.13 1.34
21-Jan-05 16619.92 407.36 2.45
24-Dec-04 16212.56 94.84 0.58
26-Nov-04 16117.72 -59.54 -0.37
29-Oct-04 16177.26 342.63 2.12
17-Sep-04 15834.63 -105.45 -0.67
20-Aug-04 15940.08 217.57 1.36
23-Jul-04 15722.51 98.31 0.63
25-Jun-04 15624.2 130.33 0.83
28-May-04 15493.87 2.2 0.01
30-Apr-04 15491.67 447.51 2.89
19-Mar-04 15044.16 335.79 2.23
20-Feb-04 14708.37 292.36 1.99
23-Jan-04 14416.01 197.05 1.37
26-Dec-03 14218.96 160.78 1.13
28-Nov-03 14058.18 97.58 0.69
31-Oct-03 13960.6 204.03 1.46
19-Sep-03 13756.57 127.88 0.93
22-Aug-03 13628.69 118.84 0.87
25-Jul-03 13509.85 65.1 0.48
27-Jun-03 13444.75 131.93 0.98
30-May-03 13312.82 107.28 0.81
18-Apr-03 13205.54 397.01 3.01
21-Mar-03 12808.53 79.12 0.62
21-Feb-03 12729.41 68.05 0.53
24-Jan-03 12661.36 12661.36

34
4. POST OFFICE SAVING SCHEME:
The Post Office small savings scheme provides a secure, risk free and attractive investment option for the
small investors and offers the savings products across its 1,55,000 Post offices.
The Post Office savings bank is the oldest and by far the largest banking system in the country, serving the
investment need of both urban and rural clientele. These services are offered as an agency service for the
Ministry of Finance, Government of India. Several products on offer serve various investment requirements
of the customers.
RETURN FROM POST OFFICE SAVINGS SCHEME:
post office scheme returns INFALTION NOMINAL RATE OF
RATE RETURN
post office saving scheme 4% 4.97% -0.92

5 years post office recurring 7.30% 4.97% 2.22


deposit a/c

post office monthly income 7.70% 4.97% 2.60


scheme a/c
senior citizen scheme 8.50% 4.97% 3.36

public provident fund 8% 4.97% 2.89

national saving certificate 8% 4.97% 2.89

kisan vikas patra double the amount in (9 years 4 4.97%


months)
sukanya samriddhi a/c 8.50% 4.97% 3.36

post office time deposit a/c 1 year-7% 4.97% 1.93

2 years-7.1% 4.97% 2.03

3 years-7.2% 4.97% 2.12

5 years-7.8% 4.97% 2.70

35
DATA ANALYSIS:
1) Do you invest in mutual fund? No of
responses
1)yes 62% 62
2)no 38% 38
TOTAL 100

38%
1)yes
2)no

62%

INTREPRETATION:
From the above survey, 62% of people invest in mutual funds and 38% of people didn’t invest.
The common reasons cited during discussion are:
1. Lack of knowledge.
2. Capacity to understand different risks.
3. The impact of inflation on real returns.

36
2) If, not where do you like to invest? No of
responses
1)bank deposits 44.74% 17
2)gold and other jewellery 21.05% 8
3)insurance products 13.16% 5
4)land 21.05% 8
5)others
TOTAL 38

21.05%

1)bank deposits
44.74% 2)gold and other jewellery
13.16% 3)insurance products
4)land

21.05%

INTREPRETATION:
From the above survey,
1. 44.7% of people prefer bank deposits (as they feel it provides the highest level of safest and
guaranteed returns).
2. 21.05% prefer to invest in gold (because of its growing demand).
3. 13.16% prefer to invest in insurance products.
4. 21.05% prefer to invest in land (advice from family and friends, realty appreciation in future).

37
3) What prevent you from investing in mutual funds No of
responses
1)bitter past experience 5.26% 2
2)lack of knowledge 28.95% 11
3)lack of service being provided 31.58% 12
4)difficulty in selection of schemes 21.05% 8
5)inefficient financial advisors 13.16% 5
6) others
TOTAL 38

5.26%

13.16%

1)bitter past experience


28.95% 2)lack of knowledge
21.05% 3)lack of service being provided
4)difficulty in selection of schemes
5)inefficient financial advisors

31.58%

INTREPRETATION:
From the above survey,
From the above survey,

1. 5.26% have bitter past experience ( selecting of wrong fund, not able get expected return etc).
2. 28.95% don’t know the benefits of mutual funds investment( not clear on how they function).
3. 31.58% feel their lack of service being provided( not getting proper response from the amc, not able
to get update any new information etc),
4. 21.05% have difficulty in selection of funds( difficulty in understanding the fund process).
5. 13.16% feel the advice given by the financial advisors is not up to the mark.

38
4) If yes which mutual fund scheme do you consider the best? No of
responses
1)balanced scheme 48.39% 30
2)debt scheme 29.03% 18
3)equity scheme 22.58% 14
4)others
TOTAL 62

22.58%

1)balanced scheme
48.39%
2)debt scheme
3)equity scheme

29.03%

INTREPRETATION:
From the above survey,
1. 48.39% want to invest in balanced fund (as it creates exposure to both the debt and equity markets).
2. 22.58% want to invest in equity fund ( growth appreciation).
3. 29.03% want to invest in debt fund (regular income).

39
5) How long would you like to hold your investments in mutual fund? No of
responses
1)1 to 3 years 36.40% 24
2)4 to 6 years 31.80% 19
3)7 to 10 years 13.60% 8
more than 10 years 18.20% 11
TOTAL 62

18.20%

36.40% 1)1 to 3 years


2)4 to 6 years
13.60%
3)7 to 10 years
more than 10 years

31.80%

INTREPRETATION:
From the above survey:
1. 36.40% want to stay invested for 1 to 3 years in mutual funds( short term goals).
2. 31.80% want to stay invested for 4 to 6 years.
3. 13.60% wanted to stay invested for 7 to 10 years.
4. 18.20% wanted to stay for more than 10 years( long term goals like- retirement corpus, education
for children etc).

40
6) WHICH ARE THE PRIMARY SOURCES OF YOUR KNOWLEDGE ABOUT No of
MUTUAL FUNDS AS AN INVESTMENT OPTION? responses
1)own research 60% 37
2)mutual fund rating agency 13% 8
3)financial advisor/planner 19% 12
4)friends or relatives 5% 3
5)media reports or advertisements 3% 2
TOTAL 62

5% 3%

1)own research
19%
2)mutual fund rating agency
3)financial advisor/planner
4)friends or relatives
60%
13% 5)media reports or advertisements

INTREPRETATION:
From the above survey,
1. 60% people prefer to do their own research ( online website, reviewing fund factsheet etc).
2. 13% prefer to go with the mutual fund rating agency( based on the ranks etc provide by rating
agency like crisil etc),
3. 19% prefer to take advice from financial advisor( invest as per as the financial plan requires)
4. 5% prefer to take advice from friends and relatives(influence of peoples and valuing their
experience),
5. 3% prefer to view media reports or advertisements (no time to do own research and other factors
etc).

41
7) what is the objective of investing in mutual funds? No of
responses
1)wealth creation 52% 32
2)retirement corpus 21% 13
3)saving tax 3% 2
4)buying of commercial property 6% 4
5)education or marriage 16% 10
6)others 2% 1
TOTAL 62

2%

16%
1)wealth creation
2)retirement corpus
6%
3)saving tax
3% 4)buying of commerical property
52%
5)education or marriage

21% 6)others

INTREPRETATION:
From the above survey,
1. 52% of the people want to invest in mutual funds for wealth creation,
2. 21% for retirement corpus
3. 3% for saving tax (investing in schemes like ELSS ,RGESS etc).
4. 6% for buying of commercial property( house, land etc)
5. 16% for higher education purpose ( children’s future education).

42
8) What is your mode of investment in mutual funds? No of
responses
1)systematic investment plan(SIP) 76% 47
2)lump sum 21% 13
3)mix of both 3% 2
TOTAL 62

3%

21%

1)systematic investment paln(SIP)


2)lumpsum
3)mix of both

76%

INTERPRETATION:
From the above survey,
1. 76% have invested through sip ( allotment to wealth creation in disciplined manner).
2. 21% prefer to invest in lump sum .
3. 3% in mix of both (sip & lump sum).

43
9) WHICH AMONG THE FOLLOWING PRINCIPLES DO YOU CONSIDER No of
WHILE SELECTING A MUTUAL FUND? responses
1)finding about its past performance 56.50% 35
2)identifying your own objective 34.80% 21
3)enquiring about fund manager 7.70% 6
4)others
TOTAL 62

7.70%

1)finding about its past performance

34.80% 2)identifying your own objective


56.50% 3)enquiring about fund manager

INTREPRETATION:
From the above survey,
1. 56.5% want to find the past performance of the funds ( return under different market situation)
2. 34.8% want to invest based on their objectives and goals.
3. 7.70% want to know about the fund manager.( to understand the investment strategies used etc).

44
10) Which channel do you prefer for investing in mutal fund? No of
responses
1)banks 55% 34
2)AMC 10% 6
3)financial advisor or distributor 35% 22
TOTAL 62

35%
1)banks
2)AMC
55% 3)financial adivisor or distributor

10%

INTREPRETATION:
From the above survey,
1. 55% prefer to invest through bank channel ( based on personal relationship and trust with the banks).
2. 10% through amc (prefer to invest directly based on their individual research).
3. 30% prefer to go with the advice from financial advisor.

45
11) What portion of your savings is being used for investing in mutual fund? No of
responses
1)5-10% 46.77% 29
2)10-20% 38.71% 24
3)>20% 15% 9
TOTAL 62

15%

1)5-10%
46.77%
2)10-20%
3)>20%
38.71%

INTREPRETATION:
From the above survey,
1. 46.77% people want to invest (5-10%) of their savings towards mutual funds due to various reasons-
(commitment to other investment, lifestyle expenses, loans etc.)
2. 38.71% want to invest (10-20%) of their savings towards mutual funds (short term goals).
3. 15% want to invest (>20%) towards mutual funds (long term goals, invested in more than two
mutual funds).

46
FINDINGS:
1) The returns from other alternate investment options are much lower than the return from the various
mutual funds and the total asset under management saw a growth of 1298.31% (since 2003).

2) Reliance mutual fund saw a high growth of 5961.45% in its AUM (since 2003) as compared to other
AUM.

3) The returns from stock market are less than the return from the mutual funds, as they concentrate on
particular market or sector various mutual funds have diversified investment strategy.

4) Most of the people still feel the alternate channels (bank deposits, gold, land etc., as best investment
because of assured expected return and provide liquidity.

5) Of the sample sizes of 100 only 62% have invested in mutual fund and some of the reasons cited for
investing are lack of knowledge, capacity to risks etc.

6) People not investing in mutual funds still prefer the bank deposits as safest route for investment
because of the safety of their investment and liquidity.

7) 48.39% of the people invested in mutual funds want to invest in balanced schemes with the intention
of creating growth and value for the fund.

8) 60% of the people who have invested in the mutual funds still prefer to do their own research
regarding investment towards mutual funds, as they don’t have faith in the advice of other sources
(financial advisors, rating agency).

9) 52% of the people want to invest in mutual funds for wealth creation.

10) 76% have invested in mutual funds through systematic investment plan.(allotment to wealth creation
in a disciplined manner.

11) 56.5% of the people who have invested in mutual funds want to check the past performance before
investing in any mutual funds ( their returns in different market situation etc).

12) 55% of the people have invested in mutual funds through the bank channel (due to the personal
relationship and trust with the bank).

47
CONCLUSIONS:
Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian
Stock Market and also the psyche of the small investors. This study has made an attempt to
understand the financial behaviour of Mutual Fund investors in connection with the preferences of
Brand (AMC), Products, Channels etc. I observed that many of people have fear of Mutual Fund.
They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund
and its related terms. Many of people do not have invested in mutual fund due to lack of awareness
although they have money to invest. As the awareness and income is growing the number of mutual
fund investors are also growing.
“Brand” plays important role for the investment. People invest in those Companies where they have
faith or they are well known with them.

48