PROJECT

ON
“MUTAL FUND IS THE BETTER
INVESTMENT PLAN”

Submitted for partial fulfillment of the

Requirement the Award of the degree of bachelor of commerce

SUBMITTED BY
KANHEYA MAHANANDA
UBC17COM355
UNDER THE GUIDANCE OF

MUKESH KUMAR SHARMA

Assistant Professor
SCHOOL OF COMMERCE

GANGADHAR MEHER UNIVERSITY

AMRUT VIHAR, SAMBALPUR

SESSION 2017-2020
 ACKNOWLEDGEMENT

working on this project ha spresented many inside and challenge. this project would not have
been the same without the dedicated guiudance of my project guide Mr. MUKESH KUMAR
SHARMA, lecture Department of Commerce, GM UNIVERSITY OF SAMBALPUR . I thank her for
her support and patience

this project is a synergistic product of many minds.Therein, I take this opportunity to express
my profound appreciation to everyone who has directly or indirectly helped me in the
successful completion of this project

.The project would not been completed without their support and guidance. Thanking them is a
small gesture for the generosity they showed. It was a great learning experience to work on
such a project

Place
Date Signature of the student
 DECLARATION

I hereby declare that the dissertation

“ MUTAL FUND IS THE BETTER INVESTMENT PLAN” submitted for the Degree of BCOM at
Gangadhar meher university Department of commerce is my original work and the dissertation
has not formed the basis for the award of any degree, associate ship, fellowship or any other
similar titles

Place

Date Signature of the student

 CERTIFICATE
This is to certify that the project title ” MUTAL FUND IS THE BETTER INVESTMENT PLAN”
submitted to Gangadhar meher university sambalpur .by kanheya mahananda award of B.com
is a record of confidance original research work carried out by him hunder my guidance and
supervision

Place

Date Signature of the student

CHAPTER TITLE PAGE
NO

1 INTRODUCTION
2 COMPANY PROFILE
3 THEORETICAL CONCEPT
4 OBJECTIVES AND SCOPE OF STUDY
5 RESEARCH METHODOLOGY
6 DATA ANALYSIS AND INTERPRETATION
7 FINDINGS AND CONCLUSIONS
8 RECOMMENDATION AND SUGGESTION
Bibliography
CONTENTS
 CHAPTER 1

INTRODUCTION
INTRODUCTION TO MUTUAL FUNDS AND ITS VARIOUS ASPECTS

1.1 MUTUAL FUNDS

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 fund‘s 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.

Mutual funds are considered as one of the best available investments as compare to others they
are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund,
investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on
their own.

1.2 HISTORY OF MUTUAL FUND

In 1774, a Dutch merchant invited subscriptions from investors to set up an investment
trust by the name of Eendragt Maakt Magt (translated into English, it means, Unity
Creates Strength‗), with the objective of providing diversification at low cost to small
investors. Its success caught on, and more investment trust was
 launched, with verbose and quirky names that when translated read profitable and
prudent or small maters grow by consent. The foreign and colonial Govt. trust formed in
London in 1868, promised start the investor of modest means the same advantages as the
large capitalist by spreading the investment over a number of stocks.

When three Boston securities executives pooled their money together in 1924 to create
the first mutual fund, they had no idea how popular mutual funds would become. The idea
of pooling money together for investing purposes started in Europe in the mid-1800s. The
first pooled fund in the U.S. was created in 1893 for the faculty and staff of Harvard
University. On March 21st, 1924 the first official mutual fund was born. It was called the
Massachusetts Investors Trust.

THE EVOLUTION
The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in
the year 1963. The primary objective at that time was to attract the small investors and it was
made possible through the collective efforts of the Government of India and the Reserve Bank
of India. The history of mutual fund industry in India can be better understood divided into
following phases:

Phase I. Establishment and Growth of Unit Trust of India (1964-87)

Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by an
act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate
under the regulatory control of the RBI until the two were delinked in 1978 and the entire
control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI
launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the
largest number of investors in any single investment scheme over the years. UTI launched more
innovative schemes in 1970s and 80s to suit the needs of different investors. It launched ULIP in
1971, six more schemes between 1981-84, Children's Gift
Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare (India‘s first
equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns)
during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700
crores.

Phase II. Entry of Public Sector Funds (1987-1993):

The Indian mutual fund industry witnessed a number of public sector players entering the
market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India
became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Can bank
Mutual fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC
Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry
increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about
80% market share.

Mobilizatio
Assets n as % of
1992- Amount
Under Gross
93 Mobilized Management Domestic
Savings

UTI 11,057 38,247 5.2%

Public
1,964 8,757 0.9%
Sector

Total 13,021 47,004 6.1%

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

The permission given to private sector funds including foreign fund management companies
(most of them entering through joint ventures with Indian promoters) to enter the mutual fund
industry in 1993, provided a wide range of choice to investors and more competition in the
industry. Private funds introduced innovative products, investment techniques and investor-
servicing technology. By 1994-95, about 11 private sector funds had launched their schemes.

Phase IV. Growth and SEBI Regulation (1996-2004):

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after
the year 1996. The mobilization of funds and the number of players operating in the industry
reached new heights as investors started showing more interest in mutual funds. Investors'
interests were safeguarded by SEBI and the Government offered tax benefits to the investors in
order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that
set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted all
dividend incomes in the hands of investors from income tax. Various Investor Awareness
Programmes were launched during this phase, both by SEBI and AMFI, with an objective to
educate investors and make them informed about the mutual fund industry. In February 2003,
the UTI Act was repealed and UTI was stripped of its Special legal status as a trust formed by an
Act of Parliament. The primary objective behind this was to bring all mutual fund players on the
same level.

UTI was re-organized into two parts

: 1.The Specified Undertaking,

2. The UTI Mutual Fund

Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past schemes
(like US-64, Assured Return Schemes) are being gradually wound up. However, UTI Mutual Fund
is still the largest player in the industry. In 1999, there was a significant
Phase V. Growth and Consolidation - 2004 Onwards:

The industry has also witnessed several mergers and acquisitions recently, examples of which
are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and
PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutual fund
players have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29
funds as at the end of March 2006. This is a continuing phase of growth of the industry through
consolidation and entry of new international and private sector players
1.3 Emerging Issues of the Mutual Fund Industry in India:

 By end of 2012, Indian mutual fund industry reached more than Rs. 8 trillion which is a
very smart turnover.
 100% growth in last 8 years
 Number of foreign AMC's are in the queue to enter the Indian markets
 Our saving rate is over 34%, highest in the world. Only channelizing these savings in
mutual funds sector is required
 We have approximately 45 mutual funds which are much less than US having more
than 800. There is a big scope for expansion
 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities.
 Soon they will find scope in the growing cities. Mutual fund can penetrate rural like the
Indian insurance industry with simple and limited products
 SEBI allowing the MF's to launch commodity mutual funds
 Emphasis on better corporate governance
 Trying to curb the late trading practices

PRESENT POSITION

Mutual funds play vital role in resource mobilization and their efficient allocation in a
transitional economy like India. Economic transition is usually marked by changes in the
financial mechanism, institutional integration, market regulation, re-allocation of savings
and investments, and changes in the intersector relationships. These changes often imply
negativity which shakes investor‗s confidence in the capital market. Mutual funds
perform a crucial task as efficient alligators of resources in such a transitional period.

Throughout the world, mutual funds have worked as reliable instruments of change in
financial intermediation, development of the capital market, and growth of the corporate
sector. The active involvement of mutual funds in promoting economic development can
also be seen in their dominant presence in the money and capital markets. Mutual funds
make a significant contribution in vibrating both the markets.
The spread of equity cult has further increased reliance of the corporate sector on equity
financing. The role of mutual funds in the financing of corporate has substantially increased
after the SEBI allowed the corporate sector to reserve 20% of their public issues for Indian
mutual funds

The percentage share of corporate equity and debentures in the household investors, together
with UTI units, have increased from 3.7% in 1980-81 to 17.2% in 1992-93, while the share of
less liquid assets like LIC, PF, and pension have shown a marginal increase from 25.1% to 27.2%
during the same period. Mutual funds have been the fastest growing institution during this
period in the household savings sector. Growing market complications and investment risk in
the stock market with high inflation have pushed households further towards mutual funds.

INVESTMENT STRATEGIES

Systematic Investment Plan: under this a fixed sum is invested each month on a fixed date of a
month. Payment is made through post dated 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)

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.

Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can
withdraw a fixed amount each month.
1.4 Advantages of Investing Mutual Funds:
1.Professional Management - The basic advantage of funds is that, they are professional
managed, by well qualified professional. Investors purchase funds because they do not have the
time or the expertise to manage their own portfolio. A mutual fund is considered to be
relatively less expensive way to make and monitor their investments

2.Diversification - Purchasing units in a mutual fund instead of buying individual stocks or

bonds, the investors risk is spread out and minimized up to certain extent. The idea behind
diversification is to invest in a large number of assets so that a loss in any particular investment
is minimized by gains in others

3.Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus
help to reducing transaction costs, and help to bring down the average cost of the unit for their
investors.

4.Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their
holdings as and when they want.

5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available

instruments in the market, and the minimum investment is small. Most AMC also have
automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per
month basis.
1.4 Disadvantages of Investing Mutual Funds

1.Professional Management – Some funds doesn‘t performs in neither the market, as their
management is not dynamic enough to explore the available opportunity in the market, thus
many investors debate over whether or not the so-called professionals are any better than
mutual fund or investor himself, for picking up stocks.

2.Costs - The biggest source of AMC income is generally from the entry & exit load which they
charge from investors, at the time of purchase. The mutual fund industries are thus charging
extra cost under layers of jargon

3.Dilution - Because funds have small holdings across different companies, high returns from a
few investments often don't make much difference on the overall return. Dilution is also the
result of a successful fund getting too big. When money pours into funds that have had strong
success, the manager often has trouble finding a good investment for all the new money.

4.Taxes - when making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is
triggered, which affects how profitable the individual is from the sale. It might have been more
advantageous for the individual to defer the capital gains liability.
1.5 CLASSIFICATION OF MUTUAL FUNDS
1. Money market funds
These funds invest in short-term fixed income securities such as government bonds, treasury
bills, bankers’ acceptances, commercial paper and certificates of deposit. They are generally a
safer investment, but with a lower potential return then other types of mutual funds. Canadian
money market funds try to keep their net asset value (NAV) stable at $10 per security.

2. Fixed income funds

These funds buy investments that pay a fixed rate of return like government bonds,
investment-grade corporate bonds and high-yield corporate bonds. They aim to have money
coming into the fund on a regular basis, mostly through interest that the fund earns. High-yield
corporate bond funds are generally riskier than funds that hold government and investment-
grade bonds.

3. Equity funds
These funds invest in stocks. These funds aim to grow faster than money market or fixed
income funds, so there is usually a higher risk that you could lose money. You can choose from
different types of equity funds including those that specialize in growth stocks (which don’t
usually pay dividends), income funds (which hold stocks that pay large dividends), value stocks,
large-cap stocks, mid-cap stocks, small-cap stocks, or combinations of these.

4. Balanced funds
These funds invest in a mix of equities and fixed income securities. They try to balance the aim
of achieving higher returns against the risk of losing money. Most of these funds follow a
formula to split money among the different types of investments. They tend to have more risk
than fixed income funds, but less risk than pure equity funds. Aggressive funds hold more
equities and fewer bonds, while conservative funds hold fewer equities relative to bonds.

5. Index funds

These funds aim to track the performance of a specific index such as the S&P/TSX Composite
Index. The value of the mutual fund will go up or down as the index goes
up or down. Index funds typically have lower costs than actively managed mutual funds
because the portfolio manager doesn’t have to do as much research or make as many
investment decisions.
OPEN-ENDED FUNDS
. Investor Enter or Exit at Anytime
. Existing Investors buy additional Units or new investors buy new units
, which is referred as purchase transaction. It happens at NAV. Return of any units to the
scheme and getting back their equivalent values
 is called a Re-purchase transaction. Repurchase price is also linked to NAV. Some unit-
holders may exit from the scheme, wholly or partly, the
 scheme continues operation with remaining investors. The scheme does not have a
definite time-frame
. The on-going entry and exit of investor implies that the unit capital in an Open-Ended
fund would keep changing on a regular basis

CLOSE-ENDED FUNDS

. Investor can buy units from funds only during its NFO
. Units are traded, post-NFO in a stock exchange. This is done through
 listing of the scheme in a stock exchange, such listing is compulsory for Close-Ended
funds. Since post-NFO, sale and purchase of units happen to or from a counter
 party in stock exchange and not to or the mutual fund, the unit capital of the scheme
remains stable.
INTERVAL FUNDS

Combine features of both the Open-Ended and Close-Ended schemes

. They are largely Close-Ended, but become Open-Ended at pre-specified intervals.
Interval funds can be bought/sold to the mutual fund (not completely
 dependent on stock exchanges). Compulsorily listed on stock exchanges
. Minimum duration of interval – 15 days
. No Redemption/Repurchase of units is allowed except during specified
 transaction period. The specified transaction period will be minimum 2 day3
 CHAPTER 2

COMPANY PROFILE

2.1 COMPANY PROFILE

 Bombay Stock Exchange Limited is the oldest stock exchange of Asia and one of the oldest in
World with a rich heritage. As the first stock exchange in India, the Bombay Stock Exchange
Limited is considered to have played a very important role in the development of county‘s
capital market. The BSE is the largest stock exchange of 24 exchanges in India, with over 6000
listed companies. It is also the fifth largest exchange in the world with a market capitalization of
$466 billion.

The Bombay Stock Exchange Limited uses BSE SENSEX, an index of 30 large, developed BSE
stocks. This index gives a measure of overall performance of BSE and is tracked worldwide.

In addition to individual stocks the Bombay Stock Exchange Limited also a market for
derivatives, which was first introduced in India. Listed derivatives on the exchange include stock
futures and options, Index futures and options and weekly options. The Bombay Stock
exchange is also actively involved with the development of retail debt market

. The Exchange has a nationwide reach with its presence in 417 cities and towns of India. The
systems and processes of the exchange are designed to safeguard market integrity and enhance
transparency in the operations. The Exchange provides an efficient and transparent market for
trading in equity, debt and derivative instruments. The BSE provides online trading with the
BSE‘s Online trading System (BOLT), which is a proprietary system of the exchange and is BS
7799-2-2002 certified. The Surveillance and Clearing Settlement function of the Exchange are
ISO 9001:2000 certified.

VISION ―Emerge as the premier Indian stock exchange by establishing global benchmark
2.2 HISTORY

One of the oldest stock exchanges of the world and the first in the country to be granted
permanent recognition under the Securities Contract (Regulation) Act, 1956, Bombay Stock
Exchange Limited has had an interesting rise to prominence over the past 133 year.

The Bombay Stock Exchange Limited traces its history to the 1850s, when four Gujarati and one
Parsi stock broker would gather under the banyan tree in front of the Town Hall, where the
Horniman Circle is now situated. A decade later, the brokers moved their venue to another set
of foliage, this time under banyan trees at the junction of Meadows Street and Mahatma
Gandhi Road. As the number of brokers increased, they had to shift from place to place and
wherever they went, through sheer habit, they overflowed to the streets. At last, in 1874,
found a permanent place. The new place was, aptly, called Dalal Street.

This group of brokers in 1875 formed an official organization known as ―The Native Share and
Stock Brokers Association‖. In 1956, BSE became the first stock exchange to be recognized by
the Indian Government under the Securities Contract (Regulation) Act, 1956. In 1979, BSE
introduced its Index SENSEX and from that time it achieved many milestones in the capital
market. In 2002, the name ―The Exchange, Mumbai‖ was changed to Bombay Stock Exchange.
Subsequently on August 5, 2005, the exchange turned into a corporate entity from an
Association of Persons (AOP), under the provision of Companies Act, 1956, pursuant To BSE
(Corporatization and Demutualization) Scheme, 2005 notified by Securities and Exchange Board
of India (SEBI). Then it is renamed as the ―Bombay Stock Exchange Limited‖.

2.3 PROMINENT POSITION

The journey of BSE is as eventful and interesting as the history of securities markets of India.
India‘s biggest bourse, in terms of listed companies and market capitalization, BSE has played a
pioneering role in Indian securities market. Much before the actual legislations were enacted,
BSE had formulated
comprehensive set of rules and regulations for Indian capital markets. It also laid down best
practices adopted by Indian capital market after India gained its independence. Perhaps, there
would not be any leading corporate in India, which has not sourced BSE‘s services in resource
mobilization.

2.4 A PIONEER BSE

as brand is synonymous with the capital markets in India. The BSE SENSEX is the benchmark
equity index that reflects the robustness of the economy and finance. At par with international
standards, BSE has been a pioneer in several areas. It has a several firsts to its credit ,

First in India to introduce Equity Derivatives

 First in India to launch a Free Float Index
 First in India to launch US$ version of BSE SENSEX.
 First in India to launch Exchange Enable Internet Trading Platform
 First in India to obtain ISO certification for Surveillance, Clearing and
 Settlement. First to have exclusive facility for financial training
 ―BSE On-Line Trading System‖ (BOLT) has awarded with the global
 recognized Information Security Management System Standard BS7799- 2-2002.
Moved from Open Outcry to Electronic Trading within just 50 days

An equal important accomplishment of BSE is the launch of a nationwide investor

awareness campaign – Safe Investing in the Stock Market – under which nationwide
awareness campaigns and dissemination of information through print and electronic
medium was undertaken. BSE also actively promoted the securities market awareness
campaign of the Securities and Exchange Board of India (SEBI).
2.5 AWARDS

Bombay Stock Exchange Limited has many awards to its name for its excellence in several fields,
these are

The World Council of Corporate Governance has awarded the Golden

 Peacock Global CSR Award for BSE‘s initiatives in Corporate Social Responsibility
(CSR). The Annual Reports and Accounts of BSE for the year ended March
 31, 2006 and March 31, 2007 have been awarded the ICAI Awards for excellence in
financial reporting. The Human Resource Management at BSE has won the Asia –
 Pacific HRM Award for its efforts in employer branding through talent management
at work, health management at work and excellence in HR through technology.

2.6 BSE SWOT

STRENGTHS:
 BSE has inherent advantages: its history, larger scrip base and a stronger
 brand. The SENSEX (BSE‘s 30-share sensitive index) is one of the most
 recognized indexes and tracked worldwide. Apart from lager base of listed
companies, BSE also has a historical
 perspective. Its online trending system (BOLT) has awarded with the global
recognized
 Information Security Management System Standard BS7799-2-2002. It got the ISO
certification for its surveillance and clearing and settlement
WEAKNESS

 The BSE SENSEX, which delivers inferior hedging effectiveness

 and higher impact cost. At present BSE has fewer than 12% share across the cash and

 derivative market of equity markets.

OPPORTUNITIES

 Corporatization will improve internal management systems and investor relations, and benefit
companies that are listed on BSE. Derivatives market is growing at exponential rate and BSE
with

 its large infrastructure and long presence in the capital market has the capability to expand its
market share in this segment. If large a private sector bank picks up a strategic stake in BSE, it

 could give the exchange access to a large distribution network and promote new products like
derivatives. The strategic investor could also be a market maker (providing buy and sell quotes
at any given time). 30 to 40 percent of the income of exchange like NASDAQ and

 NYSE is from vending data. For BSE, it‘s measly 4 percent. The potential for growth then, is
immense.

THREATS

 Aggressive competitor like NSE poses major threat to BSE‘s future

. NSE‘s top 100 stocks alone account for nearly 80 percent of its cash segment‘s turnover,
indicating that NSE is clearly the preferred destination for trading in the top stocks.
 CHAPTER 3

THEORETICAL CONCEPT
3.1 WORKING OF MUTUAL FUND

A Mutual Fund is a collection of stocks, bonds, or other securities owned by a group of Investors
and managed by a professional investment company. For an individual investor to have a
diversified portfolio is difficult. But he can approach to such company and can invest into
shares. Mutual funds have become very popular since they make individual investors to
invest in equity and debt securities easy. When investors invest a particular amount in
mutual funds, he becomes the unit holder of corresponding units. In turn, mutual funds
invest unit holder‘s money in stocks, bonds or other securities that earn interest or
dividend. This money is distributed to unit holders. If the fund gets money by selling some
stocks at higher price the unit holders also are liable to get capital gain.

selling some stocks at higher price the unit holders also are liable to get capital gain
MUTUAL FUND OPERATION FLOWCHART