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A PROJECT REPORT
ON
“STUDY OF MUTUAL FUND INDUSTRY”
Submitted in partial fulfillment for
MASTER OF BUSINESS ADMIMISTRATION
Programme of
THE NIS ACADEMY, AURANGABAD
Batch2008-10
Submitted by :- Under Guidance :-
RUSHENDRA TARTE Mr KETAN NANIVADEKAR

RUSHENDRA TARTE Mr. KETAN NANIVADEKAR
RelatedMBA(
titles

Two Year Programme) SMART MONEY
Batch (2009-2010) FINANCIAL SERVICES,
Enrolment No-474800850 AURANGABAD.

The NIS Academy, Aurangabad.
Project Mutual MBA Project file Literature Review project on mutual Comparative3
Fund in india for Finance… on Mutual Funds funds Analysis of…
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ACKNOWLEDGEMENT
With regard to my Project with Mutual Fund I would like to thank each and every
one who offered help, guideline and support whenever required.
I am extremely grateful to my guide, Mr. KETAN NANIVADEKAR for
their valuable guidance and timely suggestions. I would like to thank all faculty
members of THE NIS ACADEMY, AURANGABAD for the valuable guidance&
support.
I would also like to extend my thanks to my members and friends for their
support.
RUSHENDRA TARTE
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Project Mutual MBA Project file Literature Review project on mutual Comparative
Fund in india for Finance…
The NIS Academy, Aurangabad. on Mutual Funds funds Analysis of…
CERTIFICATE
This is to certify that Mr. RUSHENDRA
S.TARTE (Enrolment No-474800850) a student of The NIS
Academy, Aurangabad has completed project work on “STUDY OF
MUTUAL FUND INDUSTRY ” under my guidance and supervision.
I certify that this is an original work and has not been copied from
any source.
Signature of Guide
Name of Project Guide: Mr. KETAN NANIWADEKAR
Date- 10,Aug 2009

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DECLERATION
I hereby declare that this Project Report entitled “STUDY OF MUTUAL FUND
INDUSTRY” in the partial fulfillment of the requirement of Master of Business
Administration (MBA) of THE INS ACADEMY, AURANGABAD is based on primary
& secondary data found by me in various departments, books, magazines and
websites & Collected by me in under guidance of s Mr. KETAN NANIVADEKAR.
DATE: RUSHENDRA TARTE
Enrollment No.4740800850
EXECUTIVE SUMMARY
3

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In few years Mutual Fund has emerged as a tool for ensuring one’s financia

Mutual Funds have not only contributed to the India growth story but have
Project Mutual MBA Project

families file theLiterature
tap into success Review project
of Indian on mutualAsComparative
Industry. information and awaren
more and more people are enjoying the benefits of investing in mutual fund
reason the number of retail mutual fund investors remains small is tha
people with incomes in India do not know that mutual funds exist. But once
aware of mutual fund investment opportunities, the number who decide
mutual funds increases to as many as one in five people. The trick for c
person with no knowledge of mutual funds to a new Mutual Fund cus
understand which of the potential investors are more likely to buy mutual
use the right arguments in the sales process that customers will accept
and relevant to their decision.
This Project gave me a great learning experience and at the same time
enough scope to implement my analytical ability. The analysis and advice
this Project Report is based on market research on the saving and
practices of the investors and preferences of the investors for investme
Funds. This Report will help to know about the investors’ Preferences in
means Are they prefer any particular Asset Management Company (AMC)
of Product they prefer, Which Option (Growth or Dividend) they pref
Investment Strategy they follow (Systematic Investment Plan or One time
Project as a whole can be divided into two parts.
The second part of the Project consists of data and its analysis collec
The first part gives an insight about Mutual Fund and its various aspects, th
survey For the collection of Primary data I made a questionnaire and s
survey. For the collection of Primary data I made a questionnaire and s
Profile, Objectives of the study, Research Methodology. One can h
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Project covers the topic “STUDY OF MUTUAL FUND INDUSTRY.” The d
knowledge about Mutual Fund and its basics through the Project.
has been well organized and presented. I hope the research findings and
will be of use.
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CONTENTS


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ACKNOWLEDGEMENT
1 2
DECLARATION
2  4
Project Mutual 3MBA Project file EXECUTIVE

Literature Review project on mutual Comparative
SUMMARY 5
4 INTRODUCTION 8
5 COMPANY PROFILE 31
6 OBJECTIVES AND SCOPE 35
7 RESEARCH METHODOLOGY 37
8 DATA ANALYSIS AND INTERPRETATION 43
9 FINDINGS AND CONCLUSIONS 55
SUGGESTIONS & RECOMMENDATIONS 60

10

11 BIBLIOGRAPHY 62
Introduction
The NIS Academy Aurangabad
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Definition
SEBI (Mutual Fund) Regulations 1993 defines Mutual Fund as “a fund established in
the form of a trust by a sponsor to raise money by the trustees through the sale of units
to the public under one or more schemes for investing securities in accordance with
these regulations” The rationale behind a mutual fund is that there a large number of
investors who lack the time and or the skills to manage their money.
Hence, professional fund managers, acting on behalf of the Mutual Fund, manage the
investments (investor’s money) for their benefit in return for a management fee. The
organization that manages the investment is called the Asset Management Company
(AMC). Thus, a Mutual Fund is the most suitable investment for the common person as
it offers an opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost. Anybody with an investible surplus of as little as a few
thousand rupees can invest in mutual fund .Each mutual fund scheme has defined
investment objective and strategy.
A Draft offer documents is to be prepared for launching a fund. Typically, it specifies

A Draft offer documents is to be prepared for launching a fund. Typically, it specifies
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investment objectives of the fund, the risk associated, the cost involved in the
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process and the broad rules for entry into and exit from funds and others areas of
operation. As you probably know, mutual funds have become extremely popular over
the last couple of decades what was once just another obscure instrument is now part
of daily lives. More than 80 million people or one half of the household in America

invest in mutual funds. That means that, in the United States alone, trillions of dollars
alone are invested in mutual fund. In fact, too many people, investing means buying
mutual funds After all, its common knowledge that investing in mutual fund is (or at
least should be) better than simply letting cash waste away in a saving account but for
most people, that’s where the understanding of fund ends.
Mutual fund is a mechanism for pooling the resources by issuing unit to the investors
and investing funds in securities in accordance with the objective as disclosed in offer
document. Investment in securities is spread across a wide section of industry and
sector and the risk is reduced. Diversification reduces the risk because all stock may or
may not move in the same direction in the same proportion to their proportion at the
same time. Mutual fund issues units to the investors in accordance with quantum of
money invested by them. Investor of mutual are called unit holders.The profit or losses
are shared by the investors in proportion to their investment. The mutual fund usually
comes 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 the SEBI,
which regulates securities markets before it can collect fund from the public.
A mutual fund is nothing more than a collective stock and /or bonds. You can think of a
mutual fund as a company that brings together a group of people and invests their
money in stock, bonds and other securities Each investors owns shares which
represent a portion of holding of the fund.
In India, SEBI (Mutual Fund) Regulations, 1996 regulates the structure of mutual funds.
Mutual funds in India are constituted in the form of a Public Trust created under The
Indian Trusts Act, 1882.
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INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS ASPECTS.
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3
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. 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 is an investment tool that allows small investors access to a well-
diversified portfolio of equities, bonds and other securities. Each shareholder
participates in the gain or loss of the fund. Units are issued and can be redeemed as
needed. The funds Net Asset value (NAV) is determined each day.
Investments in securities are spread across a wide cross-section of industries and
sectors and thus the risk is reduced. Diversification reduces the risk because all stocks
may not move in the same direction in the same proportion at the same time. Mutual
fund issues units to the investors in accordance with quantum of money invested by
them. Investors of mutual funds are known as unit holders.
When an investor subscribes for the units of a mutual fund, he becomes part owner of
the assets of the fund in the same proportion as his contribution amount put up with the
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(the total amount of the fund). Mutual Fund investor is also known as a mutual fund
shareholder or a unit holder.
Any change in the value of the investments made into capital market instruments (such
as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme.
NAV is defined as the market value of the Mutual Fund scheme's assets net of its
liabilities. NAV of a scheme is calculated by dividing the market value of scheme's
assets by the total number of units issued to the investors.

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ADVANTAGES OF MUTUAL FUND
3
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• Portfolio Diversification
•
Professional management
• Reduction / Diversification of Risk
• Liquidity
• Flexibility & Convenience
• Reduction in Transaction cost
• Safety of regulated environment
• Choice of schemes
• Transparency.
3
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DISADVANTAGE OF MUTUAL FUND
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• 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
HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
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India, at the initiative of the Government of India and Reserve Bank. Though the growth
was slow, but it accelerated from the year 1987 when non-UTI players entered the
Industry.
In the past decade, Indian mutual fund industry had seen a dramatic improvement,
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both qualities wise as well as quantity wise. Before, the monopoly of the market had
seen an ending phase; the Assets Under Management (AUM) was Rs67 billion. The
Project Mutual MBA

private sector Project
entry to thefile Literature
fund family Review
raised the Aum to project
Rs. 470on mutual
billion Comparative
in March 1993
and till April 2004; it reached the height if Rs. 1540 billion.
The Mutual Fund Industry is obviously growing at a tremendous space with the mutual
fund industry can be broadly put into four phases according to the development of the
sector. Each phase is briefly described as under.
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the
Reserve Bank of India and functioned under the Regulatory and administrative control
of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in
place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of
1988 UTI had Rs.6,700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National
Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),
Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989
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while GIC had set up its mutual fund in December 1990.At the end of 1993, the mutual
fund industry had assets under management of Rs.47,004 crores.
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Third Phase – 1993-2003 (Entry of Private Sector Funds)
1993 was the year in which the first Mutual Fund Regulations came into being, under
which all mutual funds, except UTIon Mutual
were to beFunds
registeredfunds Analysis of…
and governed. The erstwhile
Kothari Pioneer (now merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996. The industry now functions under the
SEBI (Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33
mutual funds with total assets of Rs. 1,21,805 crores.
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Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust
of India with assets under management of Rs.29,835 crores as at the end of January
2003, representing broadly, the assets of US 64 scheme, assured return and certain
other schemes
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The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. consolidation
and growth. As at the end of September, 2004, there were 29 funds, which manage
assets of Rs.153108 crores under 421 schemes.

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Structure of the Indian mutual fund industry:
The Indian mutual fund industry is dominated by the Unit Trust of India and which has a
total corpus of Rs 700bn collected from more than 20 million investors .The UTI has
many fund /schemes in all categories i.e. equity, balanced, income etc with some being
open ended and some being closed ended. The United Scheme 1964 commonly
referred to as US64, which is a balanced fund, is the biggest scheme with a corpus of
about Rs 200bn URI was floated by financial institution and is governed by a special
act of the parliament. Most of its investors believe that the UTI is government owned
and controlled, which, while legally incorrect, is true for all practical purposes.
The second largest categories of mutual funds are the ones floated by nationalized
banks. Can bank 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
the LIC are some of the prominent ones. The aggregate corpus of funds managed by
this category of AMC’s is about Rs 150 billion

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third largest categories of the mutual funds are the once floated by the private
sector and by the foreign asset management companies. The largest of these are
Prudential ICICI AMC and Birla SUN LIFE AMC. The aggregate corpus of the asset
managed by this category of AMC s is in excess of Rs 250bn.
Recent trends in the mutual fund industry:
The most important 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 bank and smaller private sector players. Many nationalized banks got into
the mutual fund business in the early nineties and go off to a good start due to the
stock market boom prevailing then. These banks did not really understand the mutual
fund business and they just viewed it as another kind of banking activity. Few hired
specialized staff and generally choose to transfer staff from the parent organization.
Some schemes had offered guaranteed returns and their patent organization had to
bail out these AMCs by paying large amount of money the difference between the
guaranteed and actual returns. The service level was also bad. Most of these AMCs
have not been able to retain staffs, float, and new schemes etc. and it is doubtful
whether barring a few expectations, they have serious plans of continuing the activity in
a major way.
The experience of some of the AMCs floated by 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 foreign owned companies, some have merged with the
others and there is general restructuring going on.
The foreign owned companies have deep pockets and have come in here with the
expectation of a long haul. They can be credited with introducing many new practices
such as new product innovation, sharp improvement in the service standards and
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disclosure, usage of technology, broker education etc. In fact, they have forced the
industry to upgrade itself and service levels of the organization like UTI have improved
dramatically in the last few years in response to the competition provided by these.
The NIS Academy, Aurangabad. on Mutual Funds funds Analysis of…
Future scenario:
The asset base will continue to grow at an annual rate of about 30 to 35% over the next
few years as investor’s shift their asset from banks and other traditional avenues.
Some of the older public and private sector players will either close or be taken
over.Out of ten public sectors players five will sell out, close down or merge with strong
players in three to four years. In the private sector this trend has already started with
two mergers and one takeover. Here too some of them will down their shutter in the
near future to come.
But this does not mean there is no room for other players. The market will witness a
flurry of new players entering the area. There will be a large number of offers from
various asset management companies in times to come. Some big names like Fidelity,
Principal and Old Mutual etc. are looking at Indian market seriously.
The mutual fund industry is awaiting the derivation in India as this would enable it to
hedge its risk and this in turn would be reflected in its Net Asset Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund scheme to trade in
derivatives. Importantly, many market players have called on the Regulator to initiate
the process immediately, so that the mutual funds can implement the changes that are
required to trade in derivates.

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Role of SEBI in mutual fund:
In the year 1992 SEBI act was passed. The objectives of SEBI are – to protect the
interest of investors in securities, to promote the development of, and to regulate the
securities market. As far as mutual are concerned, SEBI formulates policies and
regulation the mutual fund to protect the interest of the investors. SEBI notified
regulation for mutual funds in 1993. Thereafter mutual fund sponsored by private sector
entities were allowed to enter the capital market. The regulations were fully revised in
1996 and been amended. Therefore, from time to time SEBI has also issued guidelines
to the mutual fund from time to time to protect the interest of the investors.
All mutual funds whether promoted by public sector or private sector entities including
those promoted by foreign entities are governed by the same set of regulation. There is
no distinction in regulatory requirement of the mutual fund and all are subject to
monitoring and inspecting by SEBI. The risks associated with the scheme launched by
mutual funds sponsored by these entities are of similar type.
3
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