INDUSTRY PROFILE

 Mutual funds are regulated by Securities and Exchange Board of India(SEBI)

 Mutual fund companies need a net-worth of 50Cr. tosetup.
 Each mutual fund investment that the mutual fund company brings to investors is
approved bySEBI
 Mutual fund Companies are regularly subject toaudits.

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned in
these investments and the capital appreciation realized by the scheme is shared by its
unit holders in proportion to 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 portfolio at a relatively low cost.
Anybody with an invest able surplus of a few thousand rupees can invest in Mutual
Funds, each Mutual Fund scheme has a defined investment objective and strategy.

A mutual fund is a professionally-managed form of collective investments that pools money

from many investors and invests it in stocks, bonds, short-term money market instruments,
and/or other securities. In a mutual fund, the fund manager, who is also known as the
portfolio manager, trades the fund's underlying securities, realizing capital gains or losses,
and collects the dividend or interest income. The investment proceeds are then passed along
to the individual investors. The value of a share of the mutual fund, known as the net asset
value per share (NAV) is calculated daily based on the total value of the fund divided by the
number of shares currently issued and outstanding.

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 corpus
(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 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.

GROWTH OF MUTUAL FUNDS IN INDIA

The Indian Mutual Fund has passed through three phases. The first phase was between 1964
and 1987 and the only player was the Unit Trust of India, which had a total asset of Rs. 6,700
crores at the end of 1988. The second phase is between 1987 and 1993 during which period 8
Funds were established (6 by banks and one each by LIC and GIC). The total assets under
management had grown to 61,028 crores at the end of 1994 and the number of schemes was
167.
The third phase began with the entry of private and foreign sectors in the Mutual Fund
industry in 1993. Kothari Pioneer Mutual Fund was the first Fund to be established by the
private sector in association with a foreign Fund. As at the end of financial year 2000(31st
march) 32 Funds were functioning with Rs. 1, 13,005 crores as total assets under
management. As on august end 2000, there were 33 Funds with 391 schemes and assets
under management with Rs 1, 02,849 crores.
The securities and Exchange Board of India (SEBI) came out with comprehensive regulation
in 1993 which defined the structure of Mutual Fund and Asset Management Companies for
the first time. Several private sectors Mutual Funds were launched in 1993 and 1994. The
share of the private players has risen rapidly since then. Currently there are 34 Mutual Fund
organizations in India managing 1,02,000 crores.

History of Mutual Fund in India

The origin of Mutual Fund industry in India is with the introduction of the concept of mutual
fund by UTI in the year 1963. 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 dramatic improvements, both quality wise as well as quantity wise. Before,
the Monopoly of the Market had seen an ending phase; the Assets Under Management
(AUM) was Rs. 67bn. The private sector entry to the fund family raised the AUM to Rs. 470
bn in March 1993 and till April 2004; it reached the height of 1,540 bn. Putting the AUM of
the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of
SBI alone, constitute less than 11% of the total deposits held by the Indian banking industry.

The main reason of its poor growth is that the Mutual Fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the concept.
Hence, it is the prime responsibility of all mutual fund companies, to market the product
correctly abreast of selling. 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. It was set up 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)

Entry of non-UTI mutual funds. SBI Mutual Fund was the first 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 in 1989 and
GIC in 1990. The end of 1993 marked Rs.47, 004 as assets under management

Third Phase - 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year
in which the first Mutual Fund Regulations came into being, under which all mutual funds,
except UTI were to be registered 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. The number of mutual fund houses went on increasing,
with many foreign mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds
with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of
assets under management was way ahead of other mutual funds.

Fourth Phase - since February 2003

This phase brought bitter experience for UTI. It was bifurcated into two separate entities. One
is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29, 835 crores (as on
January 2003). The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come under the
purview of the Mutual Fund Regulations. 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. With the bifurcation of the erstwhile UTI which had in March 2000 more than
Rs.76,000 crores of AUM and with the setting up of a UTI Mutual Fund, conforming to the SEBI
Mutual Fund Regulations, and with recent mergers taking place among different private sector
funds, the mutual fund industry has entered its current phase of consolidation and growth. Asat
the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under
421 schemes

List of the Companies offer Mutual Fund in INDIA

 Axis Asset Management CompanyLtd.

 Baroda Pioneer Asset Management CompanyLtd
 Birla Sun Life Asset Management CompanyLtd
 BNP Paribas Asset Management India PvtLtd
 BOI AXA Investment Managers PvtLtd
 Canara Robeco Asset Management CompanyLtd
 Daiwa Asset Management (India) PvtLtd
 Deutsche Asset Management (India) Pvt.Ltd.
 DSP BlackRock Investment Managers Pvt.Ltd.
 Edelweiss Asset ManagementLtd
 Escorts Asset ManagementLtd
 FIL Fund Management PrivateLtd
 Franklin Templeton Asset Management (India) PvtLtd.
 Goldman Sachs Asset Management (India) PvtLtd.
 HDFC Asset Management CompanyLtd
 HSBC Asset Management (India) Pvt.Ltd.
 ICICI Prudential Asset Management CompanyLtd
 IDBI Asset ManagementLtd.
 IDFC Asset Management CompanyLtd
 India Infoline Asset Management Co.Ltd.
 Indiabulls Asset Management CompanyLtd.
 ING Investment Management (India) Pvt.Ltd.
 JM Financial Asset Management Pvt Limited
 JPMorgan Asset Management India Pvt.Ltd.
 Kotak Mahindra Asset Management CompanyLtd.
 L&T Investment ManagementLtd.
 LIC NOMURA Mutual Fund Asset Management CompanyLtd.
 Mirae Asset Global Investments (India) Pvt.Ltd.
 Morgan Stanley Investment ManagementPvt.Ltd.
 Motilal Oswal Asset Management CompanyLtd.
 Peerless Funds Management Co.Ltd.
 Pine Bridge Investments Asset Management Company (India) Pvt.Ltd.
 Pramerica Asset Managers PrivateLtd
 Principal PNB Asset Management Co. Pvt.Ltd.
 Quantum Asset Management Company PrivateLtd.
 Reliance Capital Asset ManagementLtd.
 Religare Asset Management Company PrivateLtd.
 Sahara Asset Management Company PrivateLtd
 SBI Funds Management PrivateLtd.
 Sundaram Asset Management CompanyLtd
 Tata Asset ManagementLtd
 Taurus Asset Management CompanyLtd
 Union KBC Asset Management Company PvtLtd
 UTI Asset Management CompanyLtd
 Introduction to Concept of Mutual fund

When an investor subscribes to a mutual fund, he or she buys a part of the

assets or the pool of funds that are outstanding at that time. It is no different from
buying “shares” of joint stock Company, in which case the purchase makes the
investor a part owner of the company and its assets. However, whether the investor
gets fund shares or units is only a matter of legal distinction

A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested in capital
market instruments such as shares, debentures and other securities. The income earned
through these investments and the capital appreciation realized is shared by its unit
holders in proportion to the number of units owned by them. Thus Mutual fund is 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.
Operation Flow Chart of Mutual Fund

From the above chart, it can be observed that how the money from the
investors flow and they get returns out of it. With a small amount of fund, investors
pool their money with the fund’s managers. Taking into consideration the market
strategy the fund’s managers invest this pool of money into reliable securities. With ups
and downs in market returns are generated and they are passed on to the investors. The
above cycle should be very clear and alsoeffective.

The fund manager while investing on behalf of investors takes into

consideration various factors like time, risk, return, etc. so that he can make proper
 investment decision.

Organization of Mutual Fund

 Mutual Fund Shareholders: The Mutual Fund Shareholders, like the other share holders
have the right to vote. The voting rights include, the right to elect directors during the
directorial elections, voting right to approve the alterations investment advisory contract
pertaining to the fund and provide approval for changing investment objectives orpolicies.

 Board of directors: The Board of directors supervise the functional activities, which
include approval of the contract Asset Management Company and other various service
providers.

 Investment management company or Asset Management Company: This body handles

the mutual fund portfolio as per the objectives and policies mentioned in the prospectus of
the mutualfunds.

 Custodians: The custodians protect the portfolio securities. Mostly qualified bank
custodians are used for mutualfunds.

 Transfer Agents: The transfer agent for the purpose of maintaining records and similar
functions. The maintenance of the shareholder's accounts, calculation of dividends to the be
disbursed, sending information to the shareholders about the account statements, notices,
and income tax information. Some of the transfer agent sends information to the share
holders about the shareholder transactions and account balances. They also maintain
customer service departments in order the cater to the queries of theshareholders.

 SEBI: The primary aim of the Securities Exchange Board of India is to protect the interest
of the mutual fund investors. The SEBI has formulated several policies for better
functioning and controls the mutual funds. In the year 1993, SEBI issued guidelines
pertaining to the mutual funds. All mutual funds, private sector and public sector are
regulated by the guidelines of the SEBI. The Asset Management Company managing the
funds has to be approved by the SEBI.
 Advantages of Mutual Funds-Overview

 Professional Investment Management. By pooling the funds of thousands of

investors, mutual funds provide full-time, high-level professional management that
few individual investors can afford to obtain independently. Such management is
vital to achieving results in today's complex markets. Your fund managers' interests
are tied to yours, because their compensation is based not on sales commissions, but
on how well the fund performs. These managers have instantaneous access to crucial
market information and are able to execute trades on the largest and most cost-
effective scale. In short, managing investments is a full-time job forprofessionals.

 Diversification. Mutual funds invest in a broad range of securities. This limits

investment risk by reducing the effect of a possible decline in the value of any one
security. Mutual fund shareowners can benefit from diversification techniques usually
available only to investors wealthy enough to buy significant positions in a wide
variety of securities

 Low Cost. If you tried to create your own diversified portfolio of 50 stocks, you'd need
at least $100,000 and you'd pay thousands of dollars in commissions to assemble your
portfolio. A mutual fund lets you participate in a diversified portfolio for as littleas
$1,000 and sometimes less. And if you buy a no-load fund, you pay no sales charges to
own them.
 Convenience and Flexibility. You own just one security rather than many, yet enjoy the
benefits of a diversified portfolio and a wide range of services. Fund managers decide
what securities to trade, clip the bond coupons, collect the interest payments and see
that your dividends on portfolio securities are received and your rights exercised. It's
easy to purchase and redeem mutual fund shares, either directly online or with a
phone call.
  Quick, Personalized Service- Most funds now offer extensive websites with a host
of shareholder services for immediate access to information about your fund account.
Or a phone call puts you in touch with a trained investment specialist at a mutual fund
company who can provide information you can use to make your own investment
choices, assist you with buying and selling your fund shares, and answer questions
about your accountstatus.

 Ease of Investing You may open or add to your account and conduct transactions or
business with the fund by mail, telephone or bank wire. You can even arrange for
automatic monthly investments by authorizing electronic fund transfers from your
checking account in any amount and on a date you choose. Also, many of the
companies featured at this site allow account transactions online.

Disadvantage of Mutual Fund

1. ProfessionalManagement.
Did you notice how we qualified the advantage of professional management with the word
"theoretically"? Many investors debate whether or not the so-called professionals are any
better than you or I at picking stocks. Management is by no means infallible, and, even if the
fund loses money, the manager still takes his/her cut. We'll talk about this in detail in a later
section.

2. Costs.
Mutual funds don't exist solely to make your life easier - all funds are in it for a profit. The
mutual fund industry is masterful at burying costs under layers of jargon. These costs are so
complicated that in this tutorial we have devoted an entire section to the subject.

3. Dilution.
It's possible to have too much diversification. Because funds have small holdings in so many
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-gains 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.
 Types of Mutual funds

MUTUAL FUNDS BASED ON ASSETS INVESTD IN:

There three kinds of mutual funds based on the assets invested in. These are as follows:
 EQUITY FUNDS:

These are funds that invest only in stocks. As a result, they are usually considered high risk,
high return funds. Most growth funds – the ones that promise high returns over a long-term –
are equity funds.
 These funds have less tax liability in the long-run as compared to debt funds. Equity funds
can be further classified into types based on the investment objective into index funds, sector
funds, tax-saving schemes and so on. We shall go through these in detail later.

 HYBRID FUNDS:

These are funds which invest in both equities as well as debt instruments. For this reason,
they are less risky than equity funds, but more than debt funds. Similarly, they are likely to
give you higher returns than debt funds, but lower than equity funds. As a result, they are
often called ‘balanced funds’.

 DEBTFUNDS:

These funds invest in debt-market instruments like bonds, government securities, debentures
and so on. These are called debt instruments because they are a kind of borrowing mechanism
for companies, banks as well as the government.

Simply put, you give them money, which the company returns with interest over a period of
time. After which, it matures. Since the interest payments are fixed as well as the return of the
principle amount, debt instruments are considered low-risk, low-return financial assets. For
the same reason, debt funds are relatively safer.

They are usually preferred for the regular interest payments. Debt funds are further classified
on the basis of the maturity period of the underlying assets – long-term and short-term. Some
debt funds also invest in just a single type of debt instrument. Gilt funds are an example of
such a fund.

MUTUAL FUNDS BASED ON INVESTMENT OBJECTIVE:

Every investor has a different reason for investing in financial instruments. Some do so for
making profits and increasing wealth, while some others do so for a regular secondary source
of income. Some others invest in mutual funds for a bit of both. Keeping these requirements
in mind, there are three key kinds of mutual funds based on the investment objective.

 GROWTHFUNDS:

These are schemes that promise capital returns in the long-term. They usually invest in
equities. As a result, growth funds are usually high risk schemes. This is because the values
of assets are subject to lot of fluctuations.
 Also, unlike fixed-income schemes, growth funds usually pay lower dividends. They may
also prefer to reinvest the dividend money into increasing the assets under management.

 BALANCED FUNDS:

As the name suggests, these schemes try to strike a balance between risk and return. They do
so by investing in both equities and debt instruments. As a result, they are a kind of hybrid
fund. Their risk is lower than equity or growth funds, but higher than debt or fixed-income
funds.

 FIXED-INCOMEFUNDS:

These are schemes that promise regular income for a period of time. For this reason, fixed-
income funds are usually a kind of debt fund. This makes fixed-income funds low-risk
schemes, which are unlikely to give you a large amount of profit in the long-run.

They pay higher dividends than growth funds. As with debt funds, they may be further
classified on the basis of the specific assets invested in or on the basis of maturity.

SOME SPECIAL FUNDS:

These are funds which invest in a specific kind of assets. They may be a kind of equity or
debt fund.

 INDEX SCHEMES:

Indices serve as a benchmark to measure the performance of the market as a whole. Indices
are also formed to monitor performance of companies in a specific sector. Every index is
formed of stock participants. The value of the index has a direct relation to the value of the
stocks. However, you cannot invest in an index directly. It is merely an arbitrary number. So,
to earn as much returns as the index, investors prefer to invest in an Index fund. The fund
invests in the index stock participants in the same proportion as the index.

For example, if a stock had a weightage of 10% in an index, the scheme will also invest 10%
of its funds in the stock. Thus, it recreates the index to help the investors earn money. Such
schemes are generally passive funds as the managers need not research much for asset
allocation. As a result, the fees are lower. They are also a kind of equity fund.

 REAL ESTATEFUNDS:
 These are not a sector-specific fund which invests in realty company shares. Instead, these
funds invest directly in real estate. This may be by buying property or funding real estate
developers.

That said, they can also buy shares of housing finance companies or their securitized assets.
Risk depends on where the fund is investing the money.

 GILTFUNDS:

These schemes primarily invest in government securities. Government debt is usually credit-
risk free. Hence, the investor usually does not have to worry about credit risk.

 INTERVALSCHEMES:

These schemes combine the features of open-ended and closed-ended schemes. They may be
traded on the stock exchange or may be open for sale or redemption during pre-determined
intervals at NAV based prices.

 SECTORFUNDS:

These are a kind of equity scheme restrict their investing to one or more pre-defined sectors,
e.g. technology sector.

Since they depend upon the performance of select sectors only, these schemes are inherently
more risky than general schemes. They are best suited for informed investors, who wish to
bet on a single sector.

 TAX-SAVINGSCHEMES:

Investors are now encouraged to invest in the equity markets through the Equity Linked
Savings Scheme (ELSS) by offering them a tax rebate. When you invest in such schemes,
your total taxable income falls. However, there is a limit of Rs 1 lakh for tax purposes. The
crutch is that the units purchased cannot be redeemed, sold or transferred for a period of three
years.

However, in comparison with other tax-saving financial instruments like Public Provident
Funds (PPF) and Employee Provident Funds (EPF), ELSS funds have the lowest lock-in
period. An example of ELSS scheme is the Kotak ELSS scheme.

 MONEY MARKETSCHEMES:
These schemes – a kind of debt fund – invest in short-term instruments such as
commercial paper (CP), certificates of deposit (CD), treasury bills (T-Bill) and overnight
money (Call).

The schemes are the least volatile of all the types of schemes because of the short-term
maturities of the money-market instruments. These schemes have become popular
with institutional investors and high-net worth individuals having short-term surplus
funds.

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 post dated cheques or direct debit
22
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 ofthe
same mutualfund.
3. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund
then he can withdraw a fixed amount eachmonth.

WHY INVESTOR NEEDS MUTUAL FUND :-

Mutual funds offer benefits, which are too significant to miss out. Any investment
has to be judged on the yardstick of return, liquidity and safety. Convenience and tax
efficiency are the other benchmarks relevant in mutual fund investment. In the wonderful
game of financial safety and returns are the tows opposite goals and investors cannot be
nearer to both at the same time. The crux of mutual fund investing is averaging the risk.
Many investors possibly don’t know that considering returns alone, many mutual
funds have outperformed a host of other investment products. Mutual funds have
historically delivered yields averaging between 9% to 25% over a medium to long
time frame. The duration is important because like wise, mutual funds return taste
bitter with the passage of time. Investors should be prepared to lock in their
investments preferably for 3 years in an income fund and 5 years in an equity funds.
Liquid funds of course, generate returns even in a shortterm.
MUTUAL FUND RISK:-

Mutual funds face risks based on the investments they hold. For example, a bond
fund faces interest rate risk and income risk. Bond values are inversely related to
interest rates. If interest rates go up, bond values will go down and vice versa. Bond
income is also affected by the changes in interest rates. Bond yields are directly related
to interest rates falling as interest rates fall and rising as interest rates.
Similarly, a sector stock fund is at risk that its price will decline due to
developments in its industry. A stock fund that invests across many industries is more
sheltered from this risk defined as industry risk.
Followings are glossary of some risks to consider when investing in mutual funds:-
  COUNTRYRISK:-
The possibility that political events (a war, national election), financial problems
(rising inflation, government default), or natural disasters will weaken a country’s
economy and cause investments in that country to decline.
 INCOME RISK:-
The possibility that political events (a war, national election), financial problems
(rising inflation, government default), or natural disasters will weaken a country’s
economy and cause investments in that country to decline.
 MARKET RISK:-
The possibility that stock fund or bond fund prices overall will decline over short or
even extended periods. Stock and bond markets tend to move in cycles, with periods
when prices rise and other periods when prices fall.

The Mutual fund investment in schemes should be done by assessing one’srisk profile. The
risk profile would make an assessment of most aspects of the individual. Above this one
needs to understand the intended holding period. To give a basic understanding of how risk
changes with various mutual fund schemes.
How do undertake risk?

Risk can crudely be equated with the holding period, so like with the above graph,
moneymarket fundsmay have a very short holding period. (from a couple of days to a
month), whereas equity fund would need to have a holding period of more than 3- 5 years. If
one assesses their holding period well then a relevant scheme can be chosen with the limited
downside in the long run! For e.g. the below table is for mutual fund investment in equity,
taking the BSE Sensex as a proxy, one sees with longer holding periods the chance of making
a lossdecreases.

Systematicrisk
The systematic risk affects the entire market. The economic conditional, political situations,
sociological changes affect the entire market in turn affecting the company and even the stock
market. These situations are uncontrollable by the corporate and investor.
Unsystematic risk
The unsystematic risk is unique to industries. It differs from industry to industry.
Unsystematic risk stems from managerial inefficiency, technological change in the
production process, availability of raw materials, changes in the consumer preference, and
labour problems. The nature and magnitude of above mentioned factors differ from industry
to industry and company to company.
In a general view, the risk for any investor would be the probable loss for investing money in
any mutual fund. But when we look at the technical side of it , we can’t just say that these
schemes/fund carry risk without any proof. They are certain set of formulas to say the
percentage of risk associated with it.
There are certain tools or formulas used to calculate the risk associated with the schemes.
These tools help us to understand the risk associated with the schemes. These schemes are
compared with the benchmark BSE 100.
Systematic Investment Plans

In SIP(Systematic Investment Plans), a fixed amount of money is debited by the investors in

bank accounts periodically and invested in a specified mutual fund. The investor is allocated
a number of units according to the current Net asset value. Every time a sum is invested,
more units are added to the investors account.

The strategy claims to free the investors from speculating in volatile markets by Dollar
costaveraging. As the investor is getting more units when the price is low and less units when
the price is high, in the long run, the average cost per unit is supposed to be lower

SIP claims to encourage disciplined investment. SIP's are flexible, the investors may stop
investing a plan anytime or may choose to increase or decrease the investment amount. SIP is
usually recommended to retail investors who do not have the resources to pursue active
investment.

SIP investment is a good choice for those investors who do not possess enough understanding
of financial markets. The benefits of SIP is it reduces the average cost of units purchased, as
well as consistent investment, ensures that no opportunity is missed arising out of themarket

SIP, also known as Regular Savings Plan (RSP) in some countries, allows you to invest a
fixed amount at pre defined frequencies in mutual funds. A bank / post office recurring
deposit is the only other investment option that is similar to SIP. There are basically two
options that an investor could take when they are making investments, one would be to invest
lump sum into mutual funds and the other would be to invest using an SIP. The following are
some of the benefits associated with investing in an SIP: SIP is actually a Systematic
Investment Plan of investing in Mutual Fund. It is specially designed for those who aim to
build wealth over a long period and want a better future for him and their dependants. The
investment in a Mutual fund can be done in two ways. First way is one time payment i.e.
making payment to a fund at once and gets the units of the fund as per the Net Asset Value
(NAV) of the fund on that day. A person wishes to invest in a fund Rs. 24,000/- . On theday
of Investment, the NAV of the fund was Rs. 10/-. He gets 2400 units @ Rs. 10/- per unit. The
other way of investment is making payment to the fund periodically, which is termed as
Mutual Fund SIP. When you commit to invest a fixed amount monthly in a fund, it is called
as Systematic Investment. It is actually beneficial for those investors who wish to invest a
large amount in a fund and wishes to create a large chunk of wealth for long term but due to
financial constraints are able to do so. The SIP provides them a way to invest in the fund of
their choice in installments. Eg. A person wishes to invest Rs. 24000/- in a fund but due to
other obligations, it is not possible for him to invest such an amount in a fund. He takes the
SIP route and contributes to the fund Rs. 2000/- monthly for a year. At the end of the year,
he’ll have invested Rs. 24,000/- in the fund. When the NAV is high, he will get the fewer
units and when the NAV is low, he’ll get the more units. So, he’ll get the benefit of averaging
through the SIP route. The NAV in the first month was Rs. 10/-, he’ll get 200 units in the first
month. The NAV in the second month was Rs. 9.50/-, he’ll get 210.52 units in second month
The NAV for the following month was Rs. 10, he’ll get 200 units in the next month So, at the
end of the year he may get more units as compared to the units he’ll get through single
investment. Systematic investment plans are a systematic and disciplined approach to
investment and wealth creation. Instead of making a large investment at one time, in SIP you
can invest small sums at regular intervals thus creating a habit of regular savings. If you are a
big spender and find your expenditures are more than your earnings then go for SIP mutual
funds. This will force you to spend at least some part of your earnings every month.Mutual

fundsareaverysafewayofinvestingmoneyandSIP mutualfundsareevenbetter.Theseare perfect

solutions to most of us who cannot afford to make a large investment at one go. This is a
good way to save for your child's education, marriage or comfortable retirement for you and
your spouse. The lowest start up investment amount is 500 rupees per month which is
affordable by mostpeople.
FACTORS TO BE CONSIDERED BEFORE
SELECTING A MUTUAL FUND
1. Making Risk adjusted returns comparison. By doing this the investor will knowwhether
the returns generated by the scheme have been adequately compensated for the extra risk
undertaken by thescheme.

2. The investor depending upon his risk appetite and preferences should sub-classify the
schemes on the basis of the characteristics of the schemes, which may be defensive or
aggressive innature.

3. Portfolio concentration is also an important factor to be considered. It is always advisable

to choose a scheme, which has a well-diversified portfolio rather than a concentrated
portfolio, as it carries lesserrisk.

4. Liquidity of the portfolio is also one of the criticalparameters.

5. The corpus size of the scheme is also of importance. A large corpus size firstly denotes
investor’s confidence in the scheme and its fund manger abilities over the years and, secondly
it allows the fund manager to diversify the portfolio, which reduces the overall marketrisk.

6. Other factors like turnover rates, low expense ratio, load structure etc of the schemes etc
should also be considered before finally zeroing down on a scheme of yourchoice.

7. The rankings undertaken by ICRA are an initiative to inform the investors- who doesnot
have the time or the expertise to undertake the analysis on their own- about the relative
performance of the schemes. It considers all important parameters to arrive at a
comprehensive rank with a view to help investors decide the scheme which may suit their
investmentprofile.
8. Although much neglected, the due diligence in selection of the right mutual fund scheme is
of utmost importance as an investor cannot move in and out of a particular scheme on a
regular basis, because of the high costs involved, and investments made into a particular
scheme should be looked on a long-term basis as a wealth creationtool.

COMPANY PROFILE
Tata Mutual Fund
Tata Asset Management Ltd. (TAML) is part of the Tata Group that manages  Tata Mutual Fund.
The company was established in 1994 and offers diverse investment options to investors based
on their risk appetite, financial objectives, and income.

According to the company, their business is based on the 3 most significant aspects –
performance, service, and trust. Its vision is to deliver a better quality of life to their investors
by securing their financial future.

Tata Asset Management Ltd. currently offers hybrid funds, equity funds, and fixed income
funds. Tata Asset Management Ltd. is registered as a mutual fund with SEBI under the
registration code MF/023/95/9. The company registered itself as a portfolio manager in 14
September 2004 with the registration code INP000001058. It also operates a Foreign
Institutional Investor (FII) - Tata Asset Management (Mauritius) Private Ltd., registered with
SEBI under the registration code INMUFD161207.

While Tata Sons Ltd. holds 67.91% shares in TAML, 32.09% shares are held by Tata
Investment Corporation Ltd.

The company reported a total revenue of Rs. 2.12 billion, a profit before tax of Rs. 585 million,
and a profit after tax of Rs. 386 million for the year ended March 2018.

As of 31 March 2019, Tata Asset Management Ltd. offers 202 schemes and has an asset under
management (AuM) of Rs. 54,193 Crore.

AWARDS:
The funds have received various awards over the years some of which include –

 CNBC TV 18 Mutual Fund Awards awarded the Tata Equity P/E Fund as the Best
Value/Contra Fund.

 CNBC TV 18 Mutual Fund Awards also awarded the Tata Treasury Advantage Fund as
the Best Low Duration Debt Fund.

 Thomson Reuters Lipper India 2018 Fund Awards awarded the Tata Retirement Savings-
Moderate (3 years & 5 years) in the Mixed Asset INR Aggressive category.

 Business Today-Money Today Financial Awards awarded the Tata Balanced Fund as the
Best Long-Term Balanced Fund in its category.

COMPETITORS

Axis Asset Management Company Ltd.

Birla Sun Life Asset Management Company Ltd

HDFC Asset Management Company Ltd

ICICI Prudential Asset Management Company Ltd IDBI Asset

Management Ltd.

L&T Investment Management Ltd.

Reliance Capital Asset Management Ltd.

Sundaram Asset Management Company Ltd

UTI Asset Management CompanyLtd

Kotak Mahindra Asset Management Company Ltd

 SETUP 30 June 1995

Incorporation date 15 March 1994

Sponsor Tata Sons Ltd.

Tata Investment Corp. Ltd

Tata Trustee Company Private Ltd.

Trustee

Chairman
Mr. Rajiv Sabharwal

CEO / MD Mr. Prathit Bhobe

CIO Mr. Rahul Singh

Compliance Officer Mr. Upesh Shah

Ms. Kashmira Kalwachwala

Investor Service Officer

Assets Managed Rs. 54,193 Crore.

Top Performing Tata Mutual Funds:

Fund
1Y
Fund Name Category Risk Rating Size(in
Returns
Cr)

Tata Retirement
Savings Fund -
Solution Moderately
13.1%
5st ₹728
Progressive Plan
Oriented High
ar

Tata Multicap
Equity
Moderately
13.0%
5st ₹1,736
Fund High
ar

Tata India Tax

Equity
Moderately
14.9%
5st ₹2,063
Savings Fund High
ar

Tata Retirement
Savings Fund -
Solution Moderately
10.0%
5st ₹1,151
Moderate Plan
Oriented High
ar

Tata Retirement
Savings Fund - Solution Moderately
8.7%
5st ₹135
Conservative
Plan
Oriented High
ar
 Fund
1Y
Fund Name Category Risk Rating Size(in
Returns
Cr)

Tata Equity P/E

Equity
Moderately
7.0%
4st ₹5,336
Fund High
ar

Tata India
Equity High -2.9%
4st ₹1,337
Consumer Fund
ar

Tata Balanced
Hybrid
Moderately
N.A
4st ₹1,088
Advantage Fund High
ar

Tata Banking And

Financial Services Equity High 27.6%
4st ₹413
Fund ar

Tata Digital India

Equity High 9.7%
4st ₹389
Fund
ar

Tata Arbitrage
Hybrid
Moderately
7.3%
4st ₹394
Fund - Direct Plan Low
ar
 Fund
1Y
Fund Name Category Risk Rating Size(in
Returns
Cr)

Tata Liquid Fund Debt Low 6.8%

3st ₹22,180
ar

Tata Treasury
Debt
Moderately
2.5%
3st ₹697
Advantage Fund Low
ar

Tata Large and

Equity
Moderately
15.0%
3st ₹1,542
Midcap Fund High
ar

Tata Small Cap

Equity
Moderately
3.7%
3st ₹573
Fund High
ar
 Funds Offered by Tata Asset Management Company
The Tata Asset Management philosophy is centered on provision of best mutual funds that seek
consistent, long-term results and high mutual fund returns. It provides diverse mutual fund
schemes for wealth creation and manages it across the entire risk return spectrum.

Tata Equity Fund

An Equity Mutual Fund invests its assets in equities i.e. listed stock market securities. Tata AMC
offers a number of funds investing in stocks of large, mid, small and multi capitalization
companies. It comes with plans for various tenures ranging from long term to short term schemes
to suit the financial goals and status of different investors. Below are the 5 best Equity Funds by
Tata Asset Management Company:
Fund Size
Fund Name 3 Year (%) 5 Year (%) NAV
(Cr)
Tata India Tax Savings Fund 10 14.13 19.23 1873.4
Tata Banking and Financial Services
16.31 – 20.89 309.73
Fund
Tata Large Cap & Mid Cap Fund 8.75 11.82 223.63 1423.9
Tata Midcap Growth Fund 6.28 11.27 20.89 692.48
Tata Large Cap Fund 5.97 7.57 209.73 817.46
Tata Debt Fund
Debt Funds invest a majority of its assets in fixed-income securities such as corporate bonds,
sovereign securities, certificates of deposit (CDs), commercial papers and various other debt and
money market instruments. Tata Mutual Funds has plenty of funds invested in debt and other
related instruments. Some of these are short term funds, beneficial for short term goals like
buying a car or so, as these may provide better tax adjusted returns along with capital
preservation. While some of the debt funds offer long term financial benefits. Debt funds could
also help retirees in providing tax efficient regular cash flows via systematic withdrawal plans.
Some of the best Debt Funds by Tata AMC are:
Fund Size
Fund Name 3 Year (%) 5 Year (%) NAV
(Cr)
Tata Dynamic Bond Fund 6.54 8.81 31.09 378.15
Tata Short Term Bond Fund 5.63 7.39 35.92 2103.82
Tata Liquid Fund 7.07 7.55 3052.29 24727.58
Tata Treasury Advantage Fund 5.72 7 1799.17 1192.72
Tata Gilt Securities Fund 7.4 9.51 60.17 237.8
Tata Hybrid Fund
Hybrid Mutual Funds diversify its portfolio by investing in a mix of shares and bonds.
Conservative Hybrid Fund reduces the overall risk of investment portfolio by its limited exposure
to equities while Aggressive Hybrid Fund caters to the requirements of risk takers who expect
high returns. Below are some of the Hybrid Funds offered by Tata:
3 Year Fund Size
Fund Name 5 Year (%) NAV
(%) (Cr)
Tata Retirement Savings Fund –
8.01 10.19 22.35 131.03
Conservative
Tata Retirement Savings Fund –
10.29 13.67 33.06 1100.88
Moderate
Tata Hybrid Equity Funds 5.38 9.16 223.38 4697.13
Tata Equity Savings Fund 5.53 6.86 35.46 145.99
Tata Balanced Advantage Fund – – 10.64 844.48

OBJECTIVES OF THE STUDY

 To know about TATA Mutual Fund.

 To know why one has invested in TATA Mutual Funds.
 To find out the most preference channel.
 To find out what should do to boost Mutual Fund Industry.

SCOPE OF STUDY
After going through this study we will be able to understand the Mutual Fund of TATA.
 Literature Review
Mutual funds attracted the interests of academicians, researchers and financial analysts
mostly since 1986. A number of articles have been published in financial dailies like
economic times, business line and financial express, periodicals like capital market, Business
India etc., and in professional and research journals. Literature Review on performance
evaluation of mutual fund is enormous. Various studies have been carried out in India and
abroad to evaluate the performance of mutual funds schemes from time to time. A few
research studies that have influenced substantially in preparing the thesis are discussed below
in this chapter.

Jack Treynor (1965) developed a methodology for performance evaluation of a mutual fund
that is referred to as reward to volatility measure, which is defined as average excess return
on the portfolio. This is followed by Sharpe (1966) reward to variability measure, which is
average excess return on the portfolio divided by the standard deviation of the portfolio.

Sharpe (1966) developed a composite measure of performance evaluation and imported

superior performance of 11 funds out of 34 during the period 1944-63. Michael C. Jensen
(1967) conducted an empirical study of mutual funds in the period of 1954-64 for 115 mutual
funds. The results indicate that these funds are not able to predict security prices well enough
tooutperform a buy the market and hold policy. The study ignored the gross management
expenses to be free. There was very little evidence that any individual fund was able to do
significantly better than which investors expected from mere random chance.

Jensen (1968) developed a classic study; an absolute measure of performance based upon
the Capital Asset Pricing Model and reported that mutual funds did not appear to achieve
abnormal performance when transaction costs were taken into account.

Carlsen (1970) evaluated the risk-adjusted performance and emphasized that the
conclusions drawn from calculations of return depend on the time period, type of fund and
the choice of benchmark. Carlsen essentially recalculated the Jensen and Shape results using
annual data for 82 common stock funds over the 1948-67 periods. The results contradicted
both Sharpe and Jensen measures.
Fama (1972) developed a methodology for evaluating investment performance of managed
portfolios and suggested that the overall performance could be broken down into several
components.

John McDonald (1974) examined the relationship between the stated fund objectives and
their risks and return attributes. The study concludes that, on an average the fund managers
appeared to keep their portfolios within the stated risk. Some funds in the lower risk group
possessed higher risk than funds in the most risky group.

James R.F. Guy (1978) evaluated the risk-adjusted performance of UK investment trusts
through the application of Sharpe and Jensen measures. The study concludes that no trust had
exhibited superior performance compared to the London Stock Exchange Index.

Henriksson (1984) reported that mutual fund managers were not able to follow an
investment strategy that successfully times the return on the market portfolio. Again
Henriksson (1984) conclude there is strong evidence that the funds market risk exposures
change in response to the market indicated. But the fund managers were not successful in
timing the market.

Grinblatt and Titman (1989) concludes that some mutual funds consistently realize
abnormal returns by systematically picking stocks that realize positive excessreturns.
RichardA.

Ippolito (1989) concluded that mutual funds on an aggregate offer superior returns. But
expenses and load charges offset them. This characterizes the efficient market hypothesis.
Ariff and Johnson (1990) made an important study in Singapore and found that the
performance of Singapore unit trusts spread around the market performance with
approximately half of the funds performing below the market and another half performing
above the market on a risk-adjusted basis. Cole and IP (1993) investigated the performance of
Australian equity trusts. The study found evidence that portfolio managers were unable to
earn overall positive excess risk-adjusted returns.
Vincent A. Warther(1995) in the article entitled “aggregate mutual fund flows and security
returns” concluded that aggregate security returns are highly correlated with concurrent
unexpected cash flows into MFs but unrelated to concurrent expected flows. The study
resulted in an unexpected flow equal to 1 percent of total stock fund assets corresponds to a
5.7 percent increase in stock price index. Fund flows are correlated with the returns of the
securities held by the funds, but not the returns of other types of securities. The study found
an evidence of positive relation between flows and subsequent returns and evidence of a
negative relation between returns & subsequent flows.

Bansal’s book (1996) “mutual fund management & working” included a descriptive study of
concept of mutual funds, Management of mutual funds, accounting & disclosure standards,
Mutual fund schemes etc.

Sujit sudhakar and Amrit pal singh (1996) of Gawahati University studied the “Investment
in Equity and Mutual Funds”. The study attempted to highlight the investment decision vis. –
a vis. (1) income earning (2) capital appreciation and (3) tax benefits. The largest population
of the survey was mainly urban investing in corporate scrip’s and mutual funds. The period
chosen was 1992-94. It is gathered that the major investors of mutual funds are salaried &
self employed people. This was presumably due to tax concessions. The self employed
professionally qualified practicing persons have a higher investible surplus and they could
take the risk of investing in stock market. It was found that investors are very much conscious
of diversification of their portfolios and they preferred combination of mutual funds and
equity shares. Another noteworthy finding is that majority of the investors have become,
interested in capital Market instruments only after 1985.Further 80 percent of the respondents
have preferred either UTI & SBI mutual fund schemes. Other mutual funds have not proved
to be hit among the investing public in that part of the country. Another important finding
was that middle class investors being first generation investors tend to hold their portfolio of
comparatively longer period for tax benefits and capital appreciation.

Sadhak’s book (1997) “Mutual funds in India, Marketing strategies and investment
practices” is highly analytical & thought provoking. Much research has gone into writing of
this book and hence highly useful to researchers. An attempt is made of the first time in
presenting Marketing strategies of Mutual funds. Verma’s book (1997) ‘Guide to mutual
funds & Investment portfolios of Indian mutual funds with some statistical data guidelines
to the investors in selection of schemes etc.
RESEARCH AND METHODOLOGY

METHODS OF DATA COLLECTION

Two types of data were taken into consideration i.e. Primary Data & Secondary Data. My major
emphasis was on gathering the Primary Data. The Secondary Data has been used to make things
more clear.

Primary Data:

Primary data is the core of the study. The Primary data required for this study has been collected
through questionnaire.

Secondary Data:

The Secondary data has been collected from various sources like reports, articles & internet.

TOOLS AND TECHNIQUES USED :

 Questionnaire
 Reports, articles & internet.

FINDINGS & CONCLUSION

The project that I undertook in my MUTUAL FUND provided me a good experience of

Investment Avenues like Mutual Funds, Insurance, Fixed Deposits and related activities. It
was a good experience for me as it helped me enhance my knowledge as well as gave a good
industry exposure for the period which would definitely prove to be very useful at the time of
placements. The complete project helped me gain knowledge and at the same time it was very
beneficial for the company.

The study performed using the historical data will help the company in two ways. Firstly, it
would let the company know which of the funds under the given category works well and
which does not. It can design certain strategies for the funds which are still underperforming
and are in their nascent stages. Secondly, it would help the organization, the financial
consultants and the marketing team to provide a strategy for the investors who can now easily
decide where to invest and where not to.

Summing up, I am thankful to the Company and the Project that gave me an opportunity
where I could learn new things, enhance my knowledge, gain some industry exposure and at
the same time, do something that could be beneficial for the company and the investors
 RECOMMENDATION&SUGGESTION

a. To regulate entry and exit loads effectively as it creates a lot of confusion during
actual settlement of costs and bills.

b. To better operations management so as to reduce the time lag and improve customer
feedback.

c. To improve market penetration by targeting not only metros but mini-metros and
smaller towns more effectively.

d. To come up with more innovative schemes and products so as to expand over the
largest customer base as possible.

e. The most vital problem spotted is of ignorance. Investors should be made aware of
the benefits. Nobody will invest until and unless he is fully convinced. Investors
should be made to realize that ignorance is no longer bliss and what they are losing
by not investing.

f. Mutual funds offer a lot of benefit which no other single option could offer. But
most of the people are not even aware of what actually a mutual fund is? They only
see it as just another investment option. So the advisors should try to change their
mindsets. The advisors should target for more and more young investors. Young
investors as well as persons at the height of their career would like to go for advisors
due to lack of expertise and time.

g. Mutual Fund Company needs to give the training of the Individual Financial
Advisors about the Fund/Scheme and its objective, because they are the main source
to influence the investors.
h. Before making any investment Financial Advisors should first enquire about the
risk tolerance of the investors/customers, their need and time (how long they want
to invest). By considering these three things they can take the customers into
consideration.

i. Younger people aged under 35 will be a key new customer group into the future, so
making greater efforts with younger customers who show some interest in investing
should payoff.
 BIBLIOGRAPHY

 http://www.moneycontrol.com
 https://www.paisabazaar.com/mutual-funds/tata-mutual-fund/
 https://www.tatamutualfund.com/

 https://groww.in/mutual-funds/amc/tata-mutual-funds
 ANNEXURE
What kind of investment you prefer the most?
Saving ac
Mutual fund
Fd
Real estate
Gold
Shares/debentures

While investing which factor you prefer the most?

High return
Low risk
Liquidity
Company reputation

Do you have any knowledge about mutual fund?

Yes
No

How do you know about mutual fund?

Advertising
Peer group
Bank
Financial advisor

Have you ever invested your money in mutual fund?

Yes
No

Where do you find yourself as a mutual fund investor?

Partial knowledge
Totally ignorant
Fully aware
Aware of specific schemes

What is the reason behind not investing in mutual fund?

High risk
Not aware of mutual fund
Not interested
Other

While investing in mutual fund which type of investment you prefer more?
One time investment
Sip

Do you have any knowledge about tata mutual fund?

Yes
No

Do you think mutual fund as a best investment option?

Yes
no